Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Investor Presentation (September 2010)
32 slides from Heritage Financial's investor presentation, Sep 21, 2010
Slide 1: Exhibit 99.1
Exhibit 99.1
Slide 2: Forward Looking Statements
Forward Looking Statements “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: the credit risks of lending activities, including changes i
Slide 3: Overview
Overview • Company & Financial Information • Credit Risk Management • Peer Group Analysis • Strategic Focus
Slide 4: Company & Financial Information
COMPANY & FINANCIAL INFORMATION
Slide 5: Corporate Structure
Corporate Structure Note: Numbers rounded for presentation purposes only Data as of June 30, 2010 Total assets: $154 million Branches: 6 Total assets: $855 million Branches: 14
Slide 6: Heritage Financial Corporation 2010 Growth Branch Locations
Heritage Financial Corporation 2010 Growth 30 Branch Locations Acquisition Growth FDIC Assisted Transaction: • Cowlitz Bank - July 30, 2010 • 9 Branches • Approximately $280 million in assets Organic Growth • Puyallup Branch, Pierce County – September 7, 2010 Blue = 15 Heritage Bank/6 Central Valley
Slide 7: Net Loans, Deposits and Loans to Deposits
Sma Net Loans Sail Deposits % Loans to Deposits $900 105% ae ees 3840 $829 77. 7 $800 STH $769 $746] $735) $700) +a ‘eal | 100% 637 8 $600 & 95% 9 $500 2 5 $400 S 90% 8 $300 $200 85% $100 $- 80% 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 6/30/10 q $ HERITAGE \- FINANCIAL LEC ORPORATION
Slide 8: Deposit Growth
Deposit Growth Total Avg. Deposits $616,634 $691,002 $755,252 $787,758 $840,204 $830,705 Compounded Annual Growth Rate since 2005: Certificate of Deposits: 2.9% Interest-Bearing Transaction Accounts: 11.0% Non-Interest Bearing Demand Deposits: 9.2%
Slide 9: Non-CD Deposit Growth
Non-CD Deposit Growth Source: SNL Financial Regional Peer Group (13) : All NASDAQ banks under $5 billion in AK, ID, OR, and WA Ticker Symbols – BANR, CACB, CASB, COLB, FFNW, HOME, NRIM, PCBK, PRWT, RVSB, TSBK, WBCO, WCBO
Slide 10: Top 20 Deposit Relationships
Top 20 Relationship Type # of Accounts Checking Deposits MMA Deposits Savings Deposits CD Deposits Deposit Balance Top 5 Sum 133 59,029 $ 3,146 $ 11,879 $ 3,293 $ 77,347 $ Top 10 Sum 221 65,143 $ 11,711 $ 18,492 $ 10,469 $ 105,815 $ Top 15 Sum 251 74,533 $ 11,759 $ 18,492 $ 17,498 $ 122,282 $ Top 20
Slide 11: Diversified Loan Portfolio
Diversified Loan Portfolio Financial data as of June 30, 2010 Total loans: $763 million Average yield on loans: 6.51%
Slide 12: Diversified Loan Portfolio
Diversified Loan Portfolio Commercial Loan Portfolio Commercial Real Estate Portfolio Financial data as of June 30, 2010 CRE owner occupied: $176 million CRE non-owner occupied: $214 million Commercial and industrial: $228 million Total Commercial Loans: $618 million CRE owner occupied: $176 million
Slide 13: Diversified Loan Portfolio
Diversified Loan Portfolio Loan Portfolio Construction Portfolio Financial data as of June 30, 2010 Total loans: $763 million Construction loans: $74 million Total construction portfolio reduced 43.5% since Dec. 31, 2008; represents 9.7% of total portfolio down from 16.1% at Dec. 31, 2008
Slide 14: Stable Net Interest Margin
Margins and Costs 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 Since 6/30/09 Stable Net Interest Margin Source: SNL Financial, All ratios based on most recent reported quarter Regional Peer Group (13) Annual Quarterly Yield on Loans 6.60% 6.56% 6.56% 6.68% 6.51% -0.09% Yield on Earning Assets 5.91% 5.79
Slide 15: Earnings
Earnings Quarterly Earnings Annual Earnings
Slide 16: Core Earnings
Core Earnings (1) Pre-tax, pre-provision return on average assets
Slide 17: Core Earnings
Core Earnings (1) Pre-tax, pre-provision return on average assets
Slide 18: Strong Capital Levels
Strong Capital Levels Source: SNL Financial Regional Peer Group (13) All ratios as of June 30, 2010
Slide 19: Credit Risk Management
CREDIT RISK MANAGEMENT HERITAGE FINANCIAL CORPORATION
Slide 20: Credit Risk Management
Credit Risk Management • 1-4 family residential construction portfolio decreased 51% since December 2009 and as of June 30, 2010 represented only 4.6% of total loan portfolio • Ongoing CRE loan evaluation and stress testing shows no measurable weakness • A focus to aggressively manage NPA levels low
Slide 21: Credit Quality
Loan Quality Snapshot 06/30/09 09/30/09 12/31/09 03/31/10 06/30/10 Other Real Estate Owned Nonperforming Assets Reserves, Chargeoffs, and Provisioning Credit Quality Financial data as of June 30, 2010 Note: Dollars in thousands (1) Does not include restructured loans (2) Includes restructured loans
Slide 22: Classified Loans by Category
Classified Loans by Category Financial data as of June 30, 2010 Classified Loans are the regulatory definition of special mention, substandard, or doubtful Note: Dollars in millions Total classified loans: $ 36.1 million Excludes nonperforming loans
Slide 23: Classified Loans by County
Classified Loans by County Notes: Includes nonperforming loans Financial data as of June 30, 2010
Slide 24: Nonaccrual Loan Composition
6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 Historical NA Loan Composition ($000s) Nonaccrual Loan Composition Commercial 2,970 $ 4,362 $ 7,266 $ 4,609 $ 5,251 $ Real Estate Mortgages $ $ - $ $ - Real Estate Construction 16,077 $ 30,644 $ 25,288 $ 23,760 $ 23,943 $ Consumer - $ - $ - $ - $ $ Total 19,5
Slide 25: Loan Provisioning
Source: SNL Financial Regional Peer Group (13) Loan Provisioning
Slide 26: Peer Group Analysis
PEER GROUP ANALYSIS
Slide 27: Selected Key Ratios
HFWA Regional Peer Group Median HFWA Regional Rank (out of 13) National Peer Group Median HFWA National Rank (out of 114) Selected Key Ratios Coverage Ratio (1) 88.4% 68.64% #3 57.3% #37 TCE/TA (2) 12.4% 9.66% #5 7.69% #13 PTPP ROAA (3) 1.76% 0.19% #5 1.26% #22 Efficiency Ratio 65.7% 71.6% #5 67.7%
Slide 28: Strategic Focus
STRATEGIC FOCUS
Slide 29: Strategic Initiatives
Strategic Initiatives • Organic Growth – New loan programs for medical professionals and selective CRE products – Continue focus on non-CD deposit growth – New lender recruitment – Acquire/Build 1-2 new branches per year • Continue to pursue FDIC assisted transactions • Begin to pursue open bank M&A
Slide 30: The FDIC Market Opportunity
Summary of Analysis Acquisition Considerations. The FDIC Market Opportunity *Texas Ratio: (NPA + 90 Days PD)/(Tangible Common Equity + Reserves) Washington banks with a Texas Ratio* greater than 100% 15 Washington banks with a Texas Ratio* greater than 100% and assets under $600 million 35 Washingto
Slide 31: Heritage Highlights
Heritage Highlights • Community leader with deep roots in the communities we serve since 1927 • Experienced and disciplined management team • Strong and diversified balance sheet with no borrowings • Solid loan loss coverage ratios and strong core earnings • Strong tangible capital levels • Historic
Slide 32: Thank You - Questions
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