W.t.b. Financial Corp. · OTC:WTBFA

W.t.b. Financial — Shareholder Meeting (April 2024)

41 slides from W.t.b. Financial's shareholder meeting presentation, Apr 22, 2024

  1. Slide 1: W.T.B. Financial Corporation Annual Shareholders' Meeting

    2024 W.T.B. Financial Corporation Annual Shareholders’ Meeting Presented by: Larry Sorensen Chief Financial Officer

  2. Slide 2: Forward Looking Statements

    FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expe

  3. Slide 3: Presentation Outline

    PRESENTION OUTLINE  Company Overview  High Level Perspective on 2023  Operating Environment  Inflation, Rates, Economy and Disruption  Industry Trends  WTBFC 2023 Positioning and Performance  Q1 2024 Performance Highlights  Strategic Initiatives  Closing Thoughts

  4. Slide 4: Company Overview

    W.T.B. Financial Corporation Company Overview

  5. Slide 5: Mission and Geographic Footprint

    MISSION AND GEOGRAPHIC FOOTPRINT Our Mission Markets Served We will be the best at understanding and meeting the financial needs of our customers. We will focus our unique strengths as a community bank on serving those customers who perceive a distinct value in building long-term relationships with

  6. Slide 6: Core Identity: WTBFC | WTB

    CORE IDENTITY: WTBFC | WTB  Pacific Northwest regional community bank  Relationship banking business model  120 + years of heritage  High value customer relationships  4th generation Chairman of the Board  Organic customer growth  Private ownership and family heritage  Broad customer base an

  7. Slide 7: Financial Management Principles

    FINANCIAL MANAGEMENT PRINCIPLES Balance Sheet Strength: Shareholder Value / Capital Discipline:  Credit discipline…strong allowance position  Maintain capital adequacy  Disciplined capital management  Internal capital generation for growth  Ample liquidity resources  Competitive returns (divid

  8. Slide 8: High Level Perspective on 2023

    High Level Perspective on 2023

  9. Slide 9: 2023 Big WTBFC Themes and Issues

    2023 BIG WTBFC THEMES AND ISSUES Strategic Themes: Financial Themes:  A Challenging Year:  2023 earnings of $56 million, down from $114 million  Adapting to rising rates  Two key factors:  Disintermediation of excess/idle deposits  Net interest revenue down $38 million YoY  Industry disruptio

  10. Slide 10: Leadership Changes

    LEADERSHIP CHANGES Key Succession Objectives:  Leadership continuity  Seamless transition  Experienced leaders  Intact vision, culture, business model and strategy Leadership Changes:  Kevin Blair:  Promoted to President of Washington Trust Bank  20+ years on Commercial/Private Banking team 

  11. Slide 11: Operating Environment

    Operating Environment Inflation, Rates, Economy and Disruption

  12. Slide 12: Operating Environment: Key Factors

    OPERATING ENVIRONMENT: KEY FACTORS FOMC raises rates to control inflation:  Inflation emerges post COVID  PCE Peaks at 40-year high of 5.6% in February of 2022  FOMC forces rates sharply higher (March 2022 to July 2023) Sharp increase in rates drove industry disruption  Deposit disintermediation

  13. Slide 13: Inflation (PCE) Emerges After 40 Years

    INFLATION (PCE) EMERGES AFTER 40 YEARS 10.2% 9.8% Feb ‘75 Nov ‘80 5.6% 5.6% Mar 1983 Inflation surges to 40-year high Feb 2022 FOMC policy goal of 2.0% inflation (PCE) 2.8%  1973 Arab  1979 Iranian Thrift 9/11 Great COVID Israeli War Revolution Crisis Tech Bust Recession  Arab Oil  Oil Price Emb

  14. Slide 14: FOMC Pushes Rates Hard to Fight Inflation

    FOMC PUSHES RATES HARD TO FIGHT INFLATION FOMC Target Fed Funds Rate 8.00% Up 300 bps Up 175 bps 7.00% in 12 months In 12 months Up 525 bps 6.00% Up 425 bps In 16 months In 24 months 5.00% 4.00% Up 225 bps In 36 months 3.00% 2.00% 1.00% 0.00% 1990 1991 1991 1992 1993 1993 1994 1994 1995 1996 1996 19

  15. Slide 15: Inflation (PCE) Remains Above Fed Target

    INFLATION (PCE) REMAINS ABOVE FED TARGET 5.6% Feb 2022 2.8% FOMC policy goal of 2.0% inflation (established in 2012) PCE still > 2.0% goal PCE < policy goal…deflation worries lead to aggressive monetary stimulus 0.9% Jun 2020 Great COVID Recession

  16. Slide 16: Rate Shock Disrupts Banking Industry

    RATE SHOCK DISRUPTS BANKING INDUSTRY Industry Deposits (billions) $19,336 $20,000 $17,466 Deposit Flows:  Balances grew above trend (up $6 trillion) $13,430 $15,000  Rising rates caused outflows (down $1.9 trillion)  Noninterest balances declined by $1.5 trillion $10,000 Wholesale funding helped

  17. Slide 17: Liquidity Pressure Hurts Exposed Banks

    LIQUIDITY PRESSURE HURTS EXPOSED BANKS

  18. Slide 18: Yield Curve Inversion

    YIELD CURVE INVERSION UST Yield Curve 6.00% 10Y – 3M  Positively sloped curve is “normal” 111 bps inverted  Yield Curve Inverted: 5.49% 5.47% 5.44%  10-year minus 2-year 5.41% 5.36% 10Y – 2Y  Inverted since July 2022 (21 months) 5.00% 5.06% 39 bps inverted  Maximum inversion was 108 bps  Curre

  19. Slide 19: But GDP and Unemployment Remain Solid

    BUT GDP AND UNEMPLOYMENT REMAIN SOLID Up 11.9% Up 3.1% GDP Quarterly Change (% YoY) Q4 2023 Q4 2023 Down 7.5% Q2 2020 14.8% 3.8% Unemployment Rate (U3) April 2020 March 2024 10.0% Oct 2009

  20. Slide 20: FOMC Monetary Policy Path

    FOMC MONETARY POLICY PATH Case for Lower Rates...Current Policy Stance is Restrictive:  Sharp rate increase should slow economy  Inverted yield curve signals recession  Fed Funds futures implies 2 rate cuts of 25 bps (to just less than 5.00% by YE 2024)  Election year Case for Steady Rates…Curre

  21. Slide 21: WTBFC 2023 Positioning and Performance

    WTBFC 2023 Positioning and Performance

  22. Slide 22: Total Assets and Mix

    TOTAL ASSETS AND MIX Total Assets ($ in millions) YE 2023 Asset Mix ($ in millions) $11,090 $11,446 $10,939 Loans $6,364 56% $10,423 $9,814 $7,165 Securities $3,419 30% Investible Cash $1,007 9% Other Assets $656 6% 2019 2020 2021 2022 2023 Q1 2024 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000

  23. Slide 23: Cash/Investment Portfolio Positioning

    CASH/INVESTMENT PORTFOLIO POSITIONING Investment Portfolio Composition ($ in millions) 26% $1,183 22% 21% $1,007 18% $951 $809 14% $619 0% Investment Portfolio Key Points: $4  Cash of $1.0 billion available for reinvestment Agency Debt Investible Agency MBS UST Bonds Agency MBS Municipal  Yield on

  24. Slide 24: Credit Performance

    CREDIT PERFORMANCE  Credit performance has been solid, especially given challenging rate environment  Noncurrent loans remain at minimal levels ($31 million at YE 2023)  Classified loans remain at moderate levels  $97 million at YE 2023, or 1.5% of total loans  $89 million at Q1 2024, or 1.3% o

  25. Slide 25: Loan Portfolio Positioning

    LOAN PORTFOLIO POSITIONING Total Loans ($ in millions) $6,510 $6,042 $5,592 $5,536 $4,543  Loan growth strong in 2023  Up $468 million, or 7.7%  Elevated rates may slow loan growth in 2024  Q1 2024 growth moderate (up $74 million)  Loans predominantly relationship based 2019 2020 2021 2022 2023

  26. Slide 26: Credit Performance Metrics

    CREDIT PERFORMANCE METRICS Noncurrent Loans and OREO ($ in thousands) as a % of Assets  Noncurrent loans remain low 0.46%  Nonaccrual loans (0.28% of assets)  Allowance for Credit Losses (“ACL”) substantial  Released reserves in 2022 (negative provision expense) $51,477 0.28%  Negative provisio

  27. Slide 27: Funding Rises to Prominence

    FUNDING RISES TO PROMINENCE  Deposit portfolio stabilizing  Balances bottomed in Q2 2023  Deposits grew in 2H 2023 (up $237 million)  Despite noninterest bearing balances declining $201 million  Deposit pricing/cost of funds seems to be cresting  Borrowings beginning to decline  $350 million

  28. Slide 28: Deposits, Borrowings and Equity

    DEPOSITS, BORROWINGS AND EQUITY Deposits, Borrowings and Equity ($ in millions) YE 2023 Funding Mix ($ in millions) Interest-bearing $4,801 43% Deposits $4,801 $5,297 $4,880 $4,548 $4,971 Non-Interest- $3,317 29% Bearing Deposits $3,410 $3,317 $3,087 N Borrowings $1,915 17% $4,151 $4,593 $4,246 C N

  29. Slide 29: Capital Perspective and Framework

    CAPITAL PERSPECTIVE AND FRAMEWORK  Capital levels are significantly above regulatory minimums  “Tightest” $ cushion is $276 million above Total Risk Based Capital minimums  “Tightest” % cushion is 332 basis points above Leverage Ratio minimums  Capital quality is high  No goodwill  All common

  30. Slide 30: Focus on Capital

    FOCUS ON CAPITAL Shareholders' Equity (in thousands) $867,129 $897,443 $806,518 $832,945  Shareholders’ equity: $695,904  Up $30 million, or 3.5% in 2023  Up $202 million, or 29% since YE 2019  Capital levels above regulatory minimums  Significant capital buffers  > 332 bps for Leverage Capita

  31. Slide 31: Wealth Management and Trust Division

    WEALTH MANAGEMENT AND TRUST DIVISION Key business line…complements banking client book  Wealth management, fiduciary, trust and investment services  Competitive advantage for high value and affluent customers  Long-term, relationship-based business line Attractive financial dynamics  Stable, fee

  32. Slide 32: Earnings Overview

    EARNINGS OVERVIEW Years Ended December 31, Earnings lower YoY to $55.9 million Income Statement 2022 2023 $ Difference % Change  Two drivers of lower YoY earnings Net interest revenue $ 323,120 $ 285,093 $ (38,027) -11.8%  Net interest revenue down $38 million Provision for loan losses (20,500) 10

  33. Slide 33: WTBFC Financial Performance Metrics

    WTBFC FINANCIAL PERFORMANCE METRICS For the Year  A challenging year reflected in challenging metrics Performance Metric 2022 2023 Difference  Performance lower year-over-year Return on average assets 1.06% 0.52% -0.54%  Narrowed Net Interest Margin drives performance Return on shareholders’ equi

  34. Slide 34: WTBFC Shareholder Value Metrics

    WTBFC SHAREHOLDER VALUE METRICS Years Ended December 31,  Earnings decline on higher rates Income (000's) and Per Share Data 2022 2023 $ Change % Change Net Income $ 114,053 $ 55,851 $(58,203) -51.0%  Regular dividends steady at $7.40 Diluted Earnings per Common Share $ 45.28 $ 22.29 $ (22.99) -50

  35. Slide 35: WTBFC Q1 2024 Performance Highlights

    WTBFC Q1 2024 PERFORMANCE HIGHLIGHTS  Net income increased $653,000 to $11.4 million QoQ  Net interest margin: Narrowed 7 bps QoQ to 2.35%  Loan yields rise (up 9 bps to 5.69%; origination yields 7.00% +/-)  Cost of interest-bearing deposits up 11 bps to 2.61%  Assets:  Down on lower borrowing

  36. Slide 36: WTBFC 2023 Strategic Initiatives

    WTBFC 2023 Strategic Initiatives

  37. Slide 37: Strategic Initiatives: Key Projects

    Strategic Initiatives: Key Projects Consumer Digital Enhanced Instant Upgrade Loan Credit Card Banking Card Issuance Origination System Rewards Enhanced user interface. Implemented ability to Enhanced loan Launched clearly cash Enabled card fraud issue tap to pay / swipe / origination process for ba

  38. Slide 38: Strategic Initiatives: Operational Enhancements

    Strategic Initiatives: Operational Enhancements Consumer Fee Enterprise Compliance Enterprise Risk Realignment Management System Management (CMS) Identified opportunities to Completed initial development of In Process: Development of realign a number of fees CMS including business lines, enterprise

  39. Slide 39: Strategic Initiatives: Locations

    Strategic Initiatives: Locations Market Moves Central Washington:  Opened new location in Ephrata Western Washington  Southwest Washington: Entered Vancouver market with temporary location (Permanent location to open Q3 2024)  Downtown Seattle: Moving teams to 31st floor with additional meeting s

  40. Slide 40: Closing Thoughts

    CLOSING THOUGHTS 2024 Should be a Year of Transition and Normalization:  Funding is most prominent issue:  Deposit balances stabilized in Q2 2023  Deposit costs seem to be cresting  Borrowings reduced:  Cash used to pay-off $850 million in BTFP borrowings in March  Expect further pay-downs as

  41. Slide 41: Thank you for your continued support!

    Thank you for your continued support! We appreciate it!

W.T.B. Financial — Shareholder Meeting (April 2024) on 6ix