Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — D.A. Davidson Financial Services Conference 2012
31 slides from Heritage Financial's conference presentation, May 11, 2012
Slide 1: D.A. Davidson Financial Services Conference
D.A. Davidson D.A. Davidson 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
Slide 2: Forward Looking Statement
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 facto
Slide 3: Overview
• Company Information • Financial Performance • Corporate Strategies Overview
Slide 4: Company Information
Company Information Company Information
Slide 5: Our Market Area
Total assets: $1.21 billion Total assets: $167.8 million Branches: 27 Branches: 6 Our Market Area Financial Data as of March 31, 2012
Slide 6: Company Overview
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 miss
Slide 7: Award Recognition
Award Recognition • 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 Se
Slide 8: Award Recognition
Award Recognition Publically Traded Pacific Northwest Companies - Debt Free for Washington State Financial Services Champion of the Year Seattle District of the US Small Business Administration for 2010 and Best Bank in the South Sound The Olympian - Heritage Bank for years 2011, 2010 & 2008 Best of
Slide 9: Financial Performance
Financial Performance Financial Performance
Slide 10: Balance Sheet Growth
Balance Sheet Growth 75% 80% 85% 90% 95% 100% 105% $ $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q1 2012 Loans Deposits Total Assets % Loans to Deposits
Slide 11: Diversified Loan Portfolio
Diversified Loan Portfolio 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%
Slide 12: Credit Quality
Credit Quality * 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 Q
Slide 13: Attractive Deposit Base
Attractive Deposit Base 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
Slide 14: Core Deposit Growth
Core Deposit Growth 10% 15% 20% 25% $- $200 $400 $600 $800 $1,000 $1,200 Q1 2012 Non-Interest Demand Deposits NOW/Savings/MMA Certificate of Deposit % of Non-Interest Demand Deposits to Total Deposits
Slide 15: Equity Growth
Equity Growth $85.0 $113.1 $158.5 $202.3 $202.5 5% 10% 15% $- $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 Q1 2012 Total Equity Tangible Common Equity/Tangible Assets $205.7
Slide 16: Earnings
Earnings Net Income Quarterly Net Income $10.7 $6.4 $0.6 $13.4 $6.5 $- $2 $4 $6 $8 $10 $12 $14 $16 $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
Slide 17: Net Interest Margin
Net Interest Margin Annual NIM Quarterly NIM 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 con
Slide 18: Operating Expenses
Operating Expenses 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
Slide 19: Corporate Strategies
Corporate Strategies Corporate Strategies
Slide 20: Growth Initiatives
Growth Initiatives • Organic Growth – Lender recruitment – Strategic branching – Develop Southwest Washington – Launch Wealth Management initiative • Targeted Acquisitions – Enhance Pacific Northwest footprint
Slide 21: Growth Initiatives
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
Slide 22: Growth Initiatives
Growth Initiatives • Originated Loan Growth – Increased $35 million, or 4.4%, in Q4 2011 – Increased net loans $20.2 million, or 2.0%, in – Increased originated loans $95.9 million, or 12.9%, in 2011 – Originated loan growth was flat in Q1 2012
Slide 23: Growth Initiatives
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
Slide 24: Growth Initiatives
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
Slide 25: Growth Initiatives
Growth Initiatives • 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 o
Slide 26: Leverage Capital
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
Slide 27: Capital Management Strategies
2011 2012 Q2 Q3 Q4 Q1 Q2 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) Quarterly Dividend $0.03 $0.05 $0.05 $0.06 $0.08 Special Dividend -
Slide 28: a | SS —
a | SS — nual th %: Auenettely Bun CLM. Sun
Slide 29: Core Strategies
Maintain Disciplined Approach Continue Growth Initiatives Leverage Capital Manage Core Business Core Strategies
Slide 30: Investment Value
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
Slide 31: Thank You
Thank You Thank You Questions? Questions? Heritage Financial Corporation Heritage Financial Corporation
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