Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Keefe, Bruyette & Woods Community Bank Investor Conference 2014
23 slides from Heritage Financial's conference presentation, Aug 5, 2014
Slide 1: Keefe, Bruyette & Woods Community Bank Investor Conference
Keefe, Bruyette & Woods Community Bank Investor Conference July 29 th & 30 th , 2014 NASDAQ: HFWA Brian Vance, Chief Executive Officer Jeff Deuel, President and Chief Operating Officer Don Hinson, Executive Vice President and Chief Financial Officer Bryan McDonald, Executive Vice President and Chief
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: The expected revenues, cost savings, synergies and other benefits from the Washington Banking merger and our other merger and acquisition activ
Slide 3: Overview
Overview Company Overview WBCO Merger Financial Review Strategic Initiatives
Slide 4: Our Company
Overview Our Company NASDAQ Symbol HFWA Market Capitalization $486 million Total Assets $3.4 billion Headquarters Olympia, WA Branches Data as of June 30, 2014
Slide 5: Major Initiatives & Activities 2013-2014
2013 2014 Major Initiatives & Activities Q1 Merger and Conversion with Northwest Commercial Bank $65 million Q2 Central Valley Bank Subsidiary Consolidation Q3 Merger with Valley Community Bancshares, Inc. (Valley Bank) $237 million Q4 Core System Conversion Valley Bank Conversion Closed 3 Heritage
Slide 6: Washington State Economy
Major U.S. Industries Located in Washington Unemployment: Housing: Washington State Economy Microsoft, Amazon, Boeing, Starbucks, Costco, Nordstrom, Expeditors International, Weyerhaeuser, PACCAR, T-Mobile, Nintendo, Russell Investments Washington State at a 6 year low of 5.8% in June compared to na
Slide 7: Company Overview
Company Overview WBCO Merger Financial Review Strategic Initiatives
Slide 8: Merger Summary
Name Headquarters Management Closed Ownership Consideration Board Composition Shares Outstanding Merger Summary Heritage Financial Corporation / Heritage Bank Will do business as “Whidbey Island Bank” on Whidbey Island Olympia, Washington HFWA: Brian Vance (CEO), Jeff Deuel (COO), Don Hinson (CFO) a
Slide 9: Financial Impact & Key Assumptions at Announcement
Financially Compelling Key Assumptions Financial Impact & Key Assumptions at Announcement EPS accretion of approximately 13% in and approximately 24% in (1)(2) Tangible book value per share dilution of approximately 12.8% at closing Payback period of approximately 2.0 years based on incremental earn
Slide 10: Resulting Company
As of and for the Quarter Ending June 30, 2013 Dec 31, 2013 June 30, 2014 YOY % Change Total Assets $1,425,635 $1,659,038 $3,391,579 138% Total Deposits $1,196,531 $1,399,189 $2,866,542 140% Number of Branches 97% Deposits per Branch $35,192 $39,977 $42,784 22% Number of FTE 124% Tang. Common Equity
Slide 11: Adjusted Metrics
Three Months Ended Adjusted Metrics Mar 31, 2014 Adjusted* Mar 31, 2014 June 30, 2014 Adjusted* June 30, 2014 Diluted EPS $ 0.16 $ 0.21 $ 0.16 $ 0.31 Efficiency ratio 77.6% 73.4% 80.9% 64.9% Overhead Ratio** 3.58% 3.38% 3.84% 3.08% Return on Assets 0.62% 0.82% 0.59% 1.13% Return on Equity 4.74% 6.22
Slide 12: Overview
Overview Company Overview WBCO Merger Financial Review Strategic Initiatives
Slide 13: Financial Statistics: Earnings
Three Months Ended Financial Statistics Earnings: June 30, 2013 Sept 30, 2013 Dec 31, 2013 Mar 31, 2014 June 30, 2014 Net interest Income $ 15,940 $ 17,581 $ 17,646 $ 16,741 $ 28,596 Provision for (reversal of) loan losses on noncovered loans (21) Provision for loan losses on covered loans 1,099 Non
Slide 14: Financial Statistics: Balance Sheet
As of Period End Financial Statistics Balance Sheet: June 30, 2013 Sept 30, 2013 Dec 31, 2013 Mar 31, 2014 June 30, 2014 Total assets $ 1,425,635 $ 1,674,714 $ 1,659,038 $ 1 ,662,473 $ 3,391,579 Loans, including covered loans 1,086,453 1,208,082 1,203,096 1,207,650 2,200,711 Investment securities 15
Slide 15: Loan Composition
As of Period End Loan Composition March 31, 2014 June 30, 2014 Loan Composition: Balance % of Total Balance % of Total Noncovered Loans: Commercial business: Commercial and industrial $ 333,216 28.3% $ 534,458 25.8% Owner-occupied commercial real estate 277,652 23.6% 473,603 22.9% Non-owner occupied
Slide 16: Deposit Composition
As of Period End Deposit Composition March 31, 2014 June 30, 2014 Deposit Composition: Balance % of Total Balance % of Total Noninterest demand deposits $ 353,043 25.1% $ 669,017 23.3% NOW accounts 350,182 24.9% 723,889 25.3% Money market accounts 235,541 16.8% 510,374 17.8% Savings accounts 167,988
Slide 17: Capital Measures
Total Risk Based Capital Tangible Common Equity/Tangible Assets Capital Measures
Slide 18: Cash Dividends
2012 2013 2014 Cash Dividends Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Regular Dividend $.06 $.08 $.08 $.08 $.08 $.08 $.08 $.08 $.16* - $.09 Special Dividend - $.20 - $.30 - $.10 - - - - - * The dividends for Q1 2014 consist of a regular quarterly dividend declared on January 29 and another dividend declare
Slide 19: Overview
Overview Company Overview WBCO Merger Financial Review Strategic Initiatives
Slide 20: 2014/2015 Strategic Initiatives
2014/2015 Strategic Initiatives • Drive growth synergies as a result of the HFWA/WBCO combination • Loan growth and “up-market” relationships • Seattle/Bellevue • Mortgage Origination • SBA Lending • Consumer Lending • Wealth Management • Continue Efficiency Improvements • Assets per Employee • Effi
Slide 21: 2014/2015 Strategic Initiatives
2014/2015 Strategic Initiatives • Successful Conversion of WBCO Customers • Achieve announced cost saves and EPS accretion for 2015 • Capital • Dividend payout may exceed 35-40% payout ratio until capital is normalized. • Will consider opportunistic stock buybacks • Merger/Acquisitions • Priority is
Slide 22: Investment Value
Investment Value Heritage offers: • A company of scale that will drive greater organic growth and efficiency improvements • An experienced management team • A balance sheet poised for growth in the heart of a vibrant economic region • 9.8% TCE • 77% Loan to deposit ratio • High quality funding base
Slide 23: Questions and Answers
Questions and Answers
Heritage Financial — Keefe, Bruyette & Woods Community Bank Investor Conference 2014 on 6ix