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| 8-K - FORM 8-K - HERITAGE FINANCIAL CORP /WA/ | d348198d8k.htm |
 D.A. Davidson
D.A. Davidson
14
14
Financial Services Conference
Financial Services Conference
May 2012
May 2012
Brian L. Vance, President and CEO
Jeffrey J. Deuel, Executive Vice President and COO
Donald J. Hinson, Senior Vice President and CFO
Exhibit 99.1
th
th |
 2
This presentation contains forward-looking statements that are subject to
risks and uncertainties, including, but not limited to: The credit and
concentration risks of lending activities Changes in general economic
conditions, either nationally or in our market areas Competitive market
pricing factors and interest rate risks Market interest rate
volatility Balance sheet (for example, loans) concentrations
Fluctuations in demand for loans and other financial services in our market
areas Changes in legislative or regulatory requirements or the results
of regulatory examinations The ability to recruit and retain key
management and staff Risks associated with our ability to implement our
expansion strategy and merger integration Stability of funding sources
and continued availability of borrowings Adverse changes in the
securities markets The inability of key third-party providers to
perform their obligations to us Changes in accounting policies and
practices and the use of estimates in determining fair value of certain of our
assets, which estimates may prove to be incorrect and result in significant
declines in valuation; and These and other risks as may be detailed from
time to time in our filings with the Securities and Exchange
Commission.
The Company cautions readers not to place undue reliance on any
forward-looking statements. Moreover, you should treat these
statements as speaking only as of the date they are made and based only on information then actually known to the
Company. The Company does not undertake and specifically disclaims any
obligation to revise any forward-looking statements to reflect the
occurrence of anticipated or unanticipated events or circumstances after
the date of such statements. These risks could cause our actual results
for 2012 and beyond to differ materially from those expressed in any forward-looking
statements by, or on behalf of, us, and could negatively affect the
Company’s operating and stock price performance. Forward Looking
Statement |
 •
Company Information
•
Financial Performance
•
Corporate Strategies
3
Overview |
 Company Information
Company Information
4 |
 Our Market Area
5
Financial Data as of March 31, 2012
Total assets: $1.21 billion
Total assets: $167.8 million
Branches: 27
Branches: 6 |
 Company Overview
•
Providing financial services for the region since 1927
•
Commercial bank with strong ties to the communities
we serve
•
A full range of services for businesses and consumers
•
Positioned for future growth in the Seattle/Bellevue
and Vancouver/Portland markets
•
Focused on our mission of customer satisfaction,
employee empowerment, and shareholder value
6 |
 Award Recognition
7
•
Top Places to Work
•
Washington Best Workplaces
•
The 100 Best Companies to Work For
Business Examiner –
2012 -
Large Company & Appreciation Awards and
2009 Large Company & Equity Award
Puget Sound Business Journal –
Gold Award 2011, Bronze Award 2010 and
Silver Award 2009
The
Seattle
Business
Magazine –
2nd
Midsized
Companies
for
2010 |
 Award Recognition
8
Publically
Traded
Pacific
Northwest
Companies
-
Debt
Free
for
2009
Washington State Financial Services Champion of the Year
Seattle District of the US Small Business Administration for 2010 and
2009 Best Bank in the South Sound
The Olympian -
Heritage Bank for years 2011, 2010 & 2008
Best of the Northwest
The Seattle Times -
Top 20 Companies of the Decade for 2009
Business Excellence Award
The
Greater
Yakima
Chamber
of
Commerce
-
Central
Valley
Bank
in
2009
Business of the Year Award
The
Greater
Yakima
Chamber
of
Commerce
-
Central
Valley
Bank
in
2010 |
 Financial Performance
Financial Performance
9 |
 Balance Sheet Growth
10
75%
80%
85%
90%
95%
100%
105%
$
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2007
2008
2009
2010
2011
Q1 2012
Loans
Deposits
Total Assets
% Loans to Deposits |
 Diversified Loan Portfolio
11
Financial data as of March 31, 2012
CRE Owner
Occupied
23%
Consumer
5%
Residential
Real Estate
5%
Commercial
Construction
5%
Residential
Construction
3%
CRE Non-Owner
Occupied
27%
Commercial &
Industrial
32% |
 Credit Quality
12
* HFWA ratios relate to originated loan portfolios only. Regional Peer data not
available for Q1’12 Regional
Peer
Group
(12):
Ticker
Symbols
–
BANR,
CACB,
COLB,
FFNW,
HOME,
NRIM,
PCBK,
PRWT,
RVSB,
TSBK,
WBCO,
WCBO
Source: SNL Financial
0%
3%
6%
9%
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
HFWA
Regional Peers
NPAs/Assets (%)
0%
40%
80%
120%
160%
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Reserves/NPLs (%)
HFWA
Regional Peers |
 Attractive Deposit Base
13
Financial data as of March 31, 2012
Non-Maturity
Deposits
/
Total
Deposits
CDs
27.6%
Non-
Interest
Demand
20.6%
Interest
Checking
(NOW)
26.3%
Money Market
15.3%
Savings
10.2%
Total
Deposits
0.46%
72.4%
Cost
of
Interest
Bearing
Deposits
0.57%
Cost
of
Deposits
$1.1
billion |
 Core Deposit Growth
14
10%
15%
20%
25%
$-
$200
$400
$600
$800
$1,000
$1,200
2007
2008
2009
2010
2011
Q1 2012
Non-Interest Demand Deposits
NOW/Savings/MMA
Certificate of Deposit
% of Non-Interest Demand Deposits to Total Deposits
|
 Equity Growth
15
$85.0
$113.1
$158.5
$202.3
$202.5
5%
10%
15%
$-
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
$220
2007
2008
2009
2010
2011
Q1 2012
Total Equity
Tangible Common Equity/Tangible Assets
$205.7 |
 Earnings
Net Income
Quarterly Net Income
16
$10.7
$6.4
$0.6
$13.4
$6.5
$-
$2
$4
$6
$8
$10
$12
$14
$16
2007
2008
2009
2010
2011
$0.8
$1.7
$1.8
$2.2
$4.2
$-
$1.0
$2.0
$3.0
$4.0
$5.0
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12 |
 Net Interest Margin
Annual NIM
Quarterly NIM
17
Adjusted
Net
Interest
Margin
removes
the
effects
of
“incremental
accretion
income”
from
net
interest
income
in
the
net
interest
margin
calculation.
“Incremental
accretion
income”
represents
the
amount
of
income
recorded
on
the
acquired
loans
above
the
contractual
stated
interest
rate of the individual loan notes.
This income stems from the discount established at the time these loan
portfolios were acquired and modified as a result of quarterly cash flow
re-estimations. 4.0%
4.5%
5.0%
5.5%
6.0%
2007
2008
2009
2010
2011
Net
Interest
Margin
Adjusted
Net
Interest
Margin
4.0%
4.5%
5.0%
5.5%
6.0%
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Net
Interest
Margin
Adjusted
Net
Interest
Margin |
 Operating Expenses
18
60%
65%
70%
75%
$-
$2
$4
$6
$8
$10
$12
$14
$16
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Salaries & Benefits
Occupancy
Other
Efficiency Ratio |
 Corporate Strategies
Corporate Strategies
19 |
 Growth Initiatives
•
Organic Growth
–
Lender recruitment
–
Strategic branching
–
Develop Southwest Washington
–
Launch Wealth Management initiative
•
Targeted Acquisitions
–
Enhance Pacific Northwest footprint
20 |
 Growth Initiatives
•
Lender Recruitment
–
During 2011 we hired 7 new Lenders and a
Market Executive
•
3 lenders in King County (Seattle/Bellevue/Kent)
•
2 lenders in Pierce County (Tacoma)
•
1 lender in Thurston County (Olympia)
•
1 lender in Portland, OR
•
1 Market Executive for Vancouver, WA / OR
–
Continue to recruit Lenders
21 |
 Growth Initiatives
•
Originated Loan Growth
–
Increased $35 million, or 4.4%, in Q4 2011
–
Increased
net
loans
$20.2
million,
or
2.0%,
in
2011
–
Increased originated loans $95.9 million, or 12.9%,
in 2011
–
Originated loan growth was flat in Q1 2012
22 |
 Growth Initiatives
•
Core deposits
–
Non-maturity deposits (total deposits less CDs)
•
Increased $73.1 million, or 10.0%, during 2011
•
Non-maturity deposits increased to 71.0% of total
deposits
•
Demand deposits increased $36.4 million, or 18.7%,
during 2011
•
Demand deposits increased to 20.4% of total deposits,
as of 12/31/11
•
Trends continue in 2012
23 |
 Growth Initiatives
•
Deposits at acquired branches reporting
steady growth since acquisition
–
Former Cowlitz Bank branches (acquired in
July 2010) increased deposits by 19.5%
during 2011
24 |
 Growth Initiatives
25
•
Wealth Management
–
Trust services added in Cowlitz Bank transaction
–
Wealth Management leader joined team in 2011
–
Goal to align existing Trust and Brokerage Services with
new Investment Management Services to create
integrated Wealth Management platform
–
Serve the clients on both sides of their balance sheet
with responsive credit products as well as
comprehensive asset management services
–
Relatively low capital requirements, fee income from
organic growth, and growth through acquisitions |
 Leverage Capital
•
FDIC Acquisitions
–
Successfully completed two FDIC acquisitions
–
Continue to consider future FDIC assisted
transactions
–
Expect very few closures in WA/OR in 2012
•
Bank Mergers and Acquisitions
–
Actively seeking M&A opportunities
26 |
 Capital Management Strategies
Cash Dividends
Stock Repurchases
Announced 5% repurchase program in Q3 2011
Since inception, repurchased 210,205 shares (27%
of repurchase program at an average price of $11.68)
27
2011
2012
Q2
Q3
Q4
Q1
Q2
Quarterly
Dividend
$0.03
$0.05
$0.05
$0.06
$0.08
Special
Dividend
-
-
$0.25
-
- |
 Conclusion
Conclusion
28 |
 Core Strategies
29
Maintain
Disciplined
Approach
Continue
Growth
Initiatives
Leverage
Capital
Manage Core
Business |
 Investment Value
•
Strong financial performance trends
•
Well-positioned to take advantage of the right
opportunities
•
Continuing focus on building long-term
franchise value
•
Disciplined approach to acquisitions
•
Experienced management team supported by
a strong Board of Directors
30 |
 Thank You
Thank You
Questions?
Questions?
Heritage Financial Corporation
Heritage Financial Corporation |