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| 8-K - FORM 8-K - HERITAGE FINANCIAL CORP /WA/ | d479781d8k.htm |
 Brian
L.
Vance,
President
and
CEO
Jeffrey J. Deuel, Executive Vice President
Donald J. Hinson, Executive Vice President and CFO
Exhibit 99.1
Q1 2013 Investor Presentation |
 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 2013 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 |
 Overview
•
Company Information
•
Financial Performance
•
Strategic Initiatives
3 |
 Company Information
4 |
 Our Market Area
5
Total assets: $1.17 billion
Branches: 27
Total assets: $170.1 million
Branches: 6
Financial Data as of December 31, 2012
Auburn Branch added January 9, 2013 |
 Award Recognition
Top Places to Work
Washington Best Workplaces
The 100 Best Companies to Work For
•
•
•
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
Business Examiner –
2012 -
Large Company & Appreciation Awards and 2009
6 |
 7
Financial Performance |
 8
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$-
2008
2009
2010
2011
2012
98%
96%
94%
92%
90%
88%
86%
84%
82%
80%
Loans
Deposits
Total Assets
% Loans to Deposits
Balance Sheet |
 Total Loan Portfolio
9
Financial data as of December 31, 2012
CRE Owner
Occupied
23%
Consumer
4%
Residential
Real Estate
5%
Commercial
Construction
5%
Residential
Construction
3%
Commercial &
Industrial
32%
CRE Non-Owner
Occupied
28% |
 Loan Trends
10
2009
2010
2011
2012
CAGR
Originated
Loans
$746.1
$720.0
$815.6
$855.4
4.7%
Purchased
Covered Loans
-
$128.7
$105.4
$84.0
n/a
Purchased
Non-Covered
Loans
-
$131.0
$83.5
$59.0
n/a
Total
$746.1
$979.8
$1,004.5
$998.4
11.1%
Dollars in millions
Net Loan Balance |
 Credit Quality
11
* HFWA ratios relate to originated loan portfolios only. Regional Peer data not
available for Q4’12 Regional
Peer
Group
(12):
Ticker
Symbols
–
BANR,
CACB,
COLB,
FFNW,
HOME,
NRIM,
PCBK,
PRWT,
RVSB,
TSBK,
WBCO,
WCBO
Source: SNL Financial
9%
6%
3%
0%
160%
120%
40%
0%
HFWA
Regional Peers
HFWA
Regional Peers
NPAs/Assets (%)
Reserves/NPLs (%)
80% |
 Deposit Base
12
Financial data as of and for the quarter ending December 31, 2012.
Non-Interest
Demand
22%
CDs
26%
Savings
11%
Money Market
14%
Interest
Checking
(NOW)
27%
Total Deposits
Non-Maturity Deposits / Total Deposits
$1.1 billion
74.2%
Cost of Deposits
Cost of Interest Bearing Deposits
0.34%
0.44% |
 Core Deposit Growth
13
10%
15%
20%
25%
$-
$200
$400
$600
$800
$1,000
$1,200
2008
2009
2010
2011
2012
Non-
Interest Demand Deposits
NOW/Savings/MMA
Certificates of Deposit
% of Non-
Interest Demand Deposits to Total Deposits |
 Equity Growth
14
Total Equity
Tangible Common Equity/Tangible Assets
$220
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$-
$113.1
$158.5
$202.3
$202.5
$198.9
15%
10%
5%
2008
2009
2010
2011
2012 |
 Annual
Net Income Quarterly Net Income
15
* Includes after-tax gain of $7.7 million for FDIC-assisted bank
acquisitions. Earnings
Net Income
Net Interest Margin
$6.4
$0.6
$13.4
$6.5
$13.3
$10
$8
$6
$4
$2
$-
$12
$14
$16
2008
2009
2010*
2011
2012
3%
4%
5%
6%
$3
$2
$1
$-
$4
$5
Q4’11
Q1’12
Q2’12
Q3’12
Q4’12
$2.2
$4.2
$3.2
$2.9
$3.0 |
 Annual Earnings/(Loss) Per Share
Quarterly Earnings Per Share
16
* Includes $0.69 earnings per share related to the after-tax gain on
FDIC-assisted acquisitions. $1.50
$1.30
$1.10
$0.90
$0.70
$0.50
$0.30
$0.10
-$0.10
2008
2009
2010*
2011
2012
($0.09)
$0.93
$1.05
$0.42
$0.87
$0.40
$0.35
$0.30
$0.25
$0.20
$0.15
$0.10
$0.05
$0.00
$0.14
$0.27
$0.21
$0.19
$0.20
Q4'11
Q1'12
Q2'12
Q3'12
Q4'12
Diluted Earnings Per Share |
 17
Year Ended
12/31/2011
12/31/2012
NIM
Loan
Yields
NIM
Loan
Yields
Reported
5.41%
7.14%
5.17%
6.58%
Effects of incremental
accretion income over the
stated note rate
0.62%
0.79%
0.50%
0.63%
Before effects of incremental
accretion
4.79%
6.35%
4.67%
5.95%
Net Interest Margin |
 Net Interest Margin
Annual NIM
Quarterly NIM
18
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.
6.0%
5.5%
5.0%
4.5%
4.0%
2008
2009
2010
2011
2012
Net
Interest
Margin
Adjusted
Net
Interest
Margin
6.0%
5.5%
5.0%
4.5%
4.0%
Net
Interest
Margin
Adjusted
Net
Interest
Margin |
 Operating Expenses
19
Salaries & Benefits
Occupancy
Other
Efficiency Ratio
$16
$14
$12
$10
$8
$6
$4
$2
$-
75%
70%
65%
60%
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2011
2011
2011
2011
2012
2012
2012
2012 |
 Strategic Initiatives
20 |
 2013 Strategic Initiatives
Loan
Growth
2012 originated loan growth 4.4%
Deposit Growth
Manage to maintain loan to deposit ratio < 90%
Lender Recruitment
Manage to optimize assets per lender
Wealth Management
Continue growth focus on Trust, Brokerage, Advisory
Management Services; Grow AUM
21 |
 2013 Strategic Initiatives
Branching
De Novo branch-
East Vancouver, WA
Acquired branch –
Auburn, WA
Re-located branches –
Tumwater and Kent, WA
Acquisitions
Northwest
Commercial
in
Tacoma,
WA
-
merger
completed January 2013
Continue to aggressively seek acquisitions in our
current geographic footprint
22 |
 Strategic Efficiency Initiatives
23
Emphasis on improving:
Assets per employee (ApE)
Deposits per branch (DpB)
Loan commitments per lender
Efficiency Ratio |
 Cash Dividends
Continued focus on
Regular dividends in the 35% to 40% payout range
Special dividend as appropriate but dependent on acquisition
activities
Stock buybacks on an opportunistic basis
24
2011
2012
2013
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Quarterly
Dividend
$0.03
$0.05
$0.05
$0.06
$0.08
$0.08
$0.08
$0.08
Special
Dividend
-
-
$0.25
-
$0.20
-
$0.30
Strategic Capital Management |
 25
Total
Capital
Returned*
Since
Q1
2011
(%
of
Tg.
Common
Equity
in
Q1
2011)
Source: SNL Financial, as of 12/31/2012 unless noted otherwise
*Total capital returned includes all cash dividends and stock buybacks since Q1
2011 HFWA has returned
more capital to
shareholders than
most peers since Q1
2011 based on
beginning balance of
tangible common
equity
14.0%
5.1%
8.2%
12.7%
7.3%
9.7%
8.1%
9.4%
6.9%
9.9%
6.6%
12.1%
8.2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
HFWA
BMRC
COLB
CVBF
FIBK
GBCI
PCBK
PACW
TCBK
UMPQ
WBCO
WAFD
Median
Capital Return |
 Capital Return
26
Source: SNL Financial, as of 12/31/2012 unless noted otherwise
*Total capital returned includes all cash dividends and stock buybacks since Q1
2011 HFWA has
returned more
capital to
shareholders
than
accumulated net
income since Q1
2011
Total Capital Returned* / Net Income (Since Q1 2011)
138.7%
22.1%
54.7%
52.6%
39.0%
80.0%
74.4%
40.9%
37.0%
59.2%
34.9%
81.8%
52.6%
0%
20%
40%
60%
80%
100%
120%
140%
160%
HFWA
BMRC
COLB
CVBF
FIBK
GBCI
PCBK
PACW
TCBK
UMPQ
WBCO
WAFD
Median |
 Capital Return
27
Source: SNL Financial, as of 12/31/2012
*Total capital returned includes all cash dividends and stock buybacks since Q1
2011 HFWA has returned capital through both dividends and stock
buybacks 68.3% through dividends and 31.7% through buybacks
vs. peer median 93.3% through dividends and 6.7% through buybacks
More advantageous for shareholders from a tax perspective for stock buybacks
vs. dividends None of the selected companies had a buyback program in
place without a dividend program as well Mix of Capital Returned* (Since Q1 2011)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
HFWA
BMRC
COLB
CVBF
FIBK
GBCI
PCBK
PACW
TCBK
UMPQ
WBCO
WAFD
Median
Buyback
Dividends |
 Conclusion
28 |
 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
29 |
 Thank You
Questions?
Heritage Financial Corporation |