Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Merger or Acquisition (March 2013)
14 slides from Heritage Financial's merger presentation, Mar 12, 2013
Slide 1: Acquisition of Valley Community Bancshares, Inc.
Heritage Financial Corporation Acquisition of Valley Community Bancshares, Inc. March 12, 2013 INVESTOR PRESENTATION
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as “may,” “expected,” “anticipate,” “continue,” or other comparablewords. In addition, all statements oth
Slide 3: Transaction Highlights
Transaction Highlights • Effective use of capital • In line with 2013 strategic objective to seek acquisitions within the current footprint • Furtherenhancesthe franchisebranch network in the PugetSoundRegion – Complements recent Northwest Commercial Bank acquisition – Notable increase in Pierce and
Slide 4: Expanding Pacific Northwest Franchise
Expanding Pacific Northwest Franchise *1 location is a drive-up facility only Source: Company documents, SNL Financial & Microsoft MapPoint. 4
Slide 5: Transaction Overview
Transaction Overview Transaction Value: Approximately $44.2 million (including cash out of stock options) Offer Price Per Share: $39.00 50% of Valley shares exchanged for $19.50 cash Consideration Mix: 50% of Valley shares exchanged for 1.3611 HFWA shares Stock Option Treatment: In-the-money stock o
Slide 6: Transaction Financial Impact
Transaction Financial Impact PurchaseAccountingAdjustments(pre-tax): • Estimated credit mark of 2.0% or ~$279 thousand • Estimated $1.5 million mark-up on real estate and other assets (1) • Estimated core deposit intangible equaling 1.0% of Valley’s core deposits Other Financial Impacts: • Estimated
Slide 7: Overview of Valley Bank
Overview of Valley Bank Overview: Profitability (FYE 2012) Headquarters: Puyallup, WA ROAA: 0.78% Year Established (BHC / Bank): 1998 / 1972 ROAE: 6.57% Number of Branches: 9* Net Interest Margin: 3.68% FTE: 67 Cost of Interest-Bearing Deposits: 0.25% Assets / FTE ($000s): $3,615 Efficiency Ratio: 6
Slide 8: Strong Asset Quality
Strong Asset Quality Valley Net Charge-Off History $600 $500 $400 Cumulative net charge-offs since 2008 $300 total $1.1 million $200 $100 $0 2008 2009 2010 2011 2012 Net Charge-Offs per Year • Valley has maintained strong asset quality throughout the economic downturn, despite being located in a reg
Slide 9: In-Market Deposit Franchise Expansion
In-Market Deposit Franchise Expansion Pierce County King County 2012 2012 2012 2012 Total Total Total Total 2012 Deposits in Market 2012 Deposits in Market 2012 Number of Market Share 2012 Number of Market Share Rank Institution (ST) Branches ($000) (%) Rank Institution (ST) Branches ($000) (%) 1 Co
Slide 10: Pro Forma Deposit Composition
Pro Forma Deposit Composition HFWA Valley Pro Forma Deposit Composition ($000) Amount % of Total Deposit Composition ($000) Amount % of Total Deposit Composition ($000) Amount % of Total Noninterest Demand $247,048 22.1 % Noninterest Demand (1) $20,104 9.5 % Noninterest Demand $267,152 20.1 % NOW Ac
Slide 11: Pro Forma Loan Composition
Pro Forma Loan Composition HFWA Valley Pro Forma Loan Composition ($000) Amount Loan Composition ($000) Amount Loan Composition ($000) Amount Commercial & Industrial $247,429 24.1 % Commercial & Industrial $22,239 17.8 % Commercial & Industrial $269,668 23.4 % Commercial Real Estate 535,397 52.1 Com
Slide 12: Pro Forma Financial Impact
Pro Forma Financial Impact (1) Earnings Accretion & Return : 2014 EPS Accretion: > 19% 2015 EPS Accretion: > 24% IRR: > 16% Tangible Book Value Earnback Period: <4.5 years, using incremental earnings (2) <1.5 years, on static basis(3) Capital Ratios: Pro Forma TCE / TA: 13.9% 11.7% 11.7% Leverage Ra
Slide 13: Investment Value
Investment Value • Accretive to earnings in the first full year after closing • A continuing and consistent execution of our growth and acquisition strategies within existing geographic footprint • Drives growth, efficiency and scale strategies • A continuation of our capital leveraging strategies •
Slide 14: Heritage Financial Corporation
Heritage Financial Corporation
Heritage Financial — Merger or Acquisition (March 2013) on 6ix