Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Q3 2019 Earnings Presentation
26 slides from Heritage Financial's earnings presentation, Oct 31, 2019
Slide 1: Investor Presentation Q3 2019
Investor Presentation Q3 2019 Jeff Deuel, President and Chief Executive Officer Bryan McDonald, Chief Operating Officer Don Hinson, Chief Financial Officer 1
Slide 2: Forward-Looking Statement
R: 20 Forward – Looking Statement G: 80 This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: B: 155 • The expected revenues, cost savings, synergies and other benefits from our other merger and acquisition activities might
Slide 3: Company Overview
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Company Overview 3
Slide 4: Overview
R: 20 Overview G: 80 B: 155 R: 105 G: 149 B: 253 Overview NASDAQ Symbol HFWA Market Capitalization $1.00 billion Institutional Ownership 82.4% Total Assets $5.52 billion Headquarters Olympia, WA # of Branches 62 Year Established 1927 HFWA Branch Note: Totals assets as of September 30, 2019. Market c
Slide 5: Historical Growth – Organic and Acquisitive
R: 20 Historical Growth – Organic and Acquisitive G: 80 B: 155 • In addition to organic growth, HFWA has completed 5 whole bank mergers and 2 FDIC-assisted transactions since 2008. Completed acquisition of Puget $6,000 Sound Bancorp and Premier Commercial Bancorp with $639M and $440M in assets, resp
Slide 6: Deposit Market Share
R: 20 Deposit Market Share G: 80 B: 155 R: 105 G: 149 B: 253 Source: S&P Global Market Intelligence, deposit data as of June 30 of each year Note: All dollars in thousands 6
Slide 7: Company Strategy
R: 20 Company Strategy G: 80 Ÿ Be the "acquirer of choice" in the Pacific Northwest B: 155 Active and disciplined in M&A Ÿ Most acquisitive bank in Oregon and Washington since 2012 with 5 acquisitions Ÿ Target Metrics = IRR of >15% with earnbacks < 3 years R: 105 Ÿ Successful hiring of individuals a
Slide 8: Strong and Diverse Economic Landscape
R: 20 Strong and Diverse Economic Landscape G: 80 • The Seattle and Portland MSAs are thriving local economies with Companies Headquartered in Pacific Northwest B: 155 major Fortune 500 companies which include Alaska Air, Amazon, Costco, Expedia, Microsoft, Nike, Nordstrom, Starbucks and Weyerhaeuse
Slide 9: Seattle-Portland Metro Markets
R: 20 Seattle-Portland Metro Markets G: 80 • The Seattle-Tacoma-Bellevue and Portland-Vancouver-Hillsboro MSAs among the fastest growing metro markets nationwide B: 155 • Annual population growth for both Seattle and Portland MSAs have exceeded the average growth rate for the top 15 largest MSAs sin
Slide 10: Seattle MSA Funds Under Management
R: 20 Seattle MSA Funds Under Management G: 80 • $4.0 billion in total funds under management in the Seattle MSA market at 28 branches B: 155 Funds Under Management = Loans + Deposits* R: 105 $5,000 G: 149 $4,006 B: 253 $4,000 $3,845 ) s $2,941 n $2,770 $3,000 $1,995 $2,137 o $2,544 i l l i M ( $1,5
Slide 11: Portland MSA Funds Under Management
R: 20 Portland MSA Funds Under Management G: 80 • $892 million in total funds under management in the Portland MSA market at 9 branches B: 155 Funds Under Management = Loans + Deposits R: 105 $1,000 $892 G: 149 $856 B: 253 $800 ) $476 s $477 n $600 o i l l i M ( $400 $ $200 $416 $112 $379 $53 $43 $0
Slide 12: Future Growth and Opportunities
R: 20 Future Growth and Opportunities G: 80 B: 155 Pacific Northwest Banking Landscape Expected Consolidation and Future Opportunities • Significant number of banks remaining in HFWA footprint, further consolidation is expected R: 105 – 12 banks between $150 and $500 million in assets G: 149 – 5 ban
Slide 13: Financial Update
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Financial Update 13
Slide 14: Financial Update – Q3 2019
R: 20 Financial Update – Q3 2019 G: 80 B: 155 • Diluted earnings per share were $0.48 for the quarter compared to $0.43 for the linked-quarter and $0.42 for the quarter ended September 30, 2018. R: 105 • Heritage declared a regular cash dividend of $0.19 per share and declared a special dividend of
Slide 15: Loans
R: 20 Loans G: 80 (1) B: 155 Loan Portfolio Loan balances and loan yields* $4,000 6.00% $3,737 Owner-Occupied $3,651 $3,656 $3,699 $3,722 CRE 21.1% $3,500 * s 5.30% 5.28% 5.00% d R: 105 5.25% 5.23% l n 5.16% e a i o Y L $3,000 n G: 149 Commercial l a a t & Industrial o o 4.00% L T B: 253 22.9% $2,50
Slide 16: Deposits
R: 20 Deposits G: 80 B: 155 Deposit Base Deposit balances and cost to total deposits $5,000 $4,562 0.50% $4,398 $4,432 $4,394 $4,348 s t i 0.40% s o Savings accounts s $4,000 t p Money market i e R: 105 11.2% s 0.37% 0.38% o accounts 0.30% D Certificates of l p 0.33% a 17.0% e deposit $3,000 0.29% t
Slide 17: Net Interest Margin and Total Asset Mix
R: 20 Net Interest Margin G: 80 B: 155 Total Asset Mix Net Interest Margin (Core vs. Accretion)* Cash and Cash Equivalents 5.00% Other 4.3% R: 105 11.1% Securities 17.5% 4.41% G: 149 4.37% 4.34% 4.33% 4.22% 0.23% 0.15% 0.12% 0.12% 4.21% B: 253 4.12% 0.19% 0.09% 4.00% 0.16% Loans, net* 67.1% 4.18% 4.
Slide 18: Profitability Trends
R: 20 Profitability Trends G: 80 B: 155 ROAA ROATCE* 1.60% 17.50% 1.31% 14.22% 1.40% 1.24% 1.26% 15.00% 13.49% 13.94% 13.66% R: 105 1.17% 1.20% 12.89% 1.20% 1.01% 12.50% 11.57% G: 149 1.00% 9.30% 0.81% 10.00% 0.80% B: 253 7.50% 0.60% 5.00% 0.40% 0.20% 2.50% 0.00% 0.00% Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1
Slide 19: Shareholder Return
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Shareholder Return 19
Slide 20: Total Shareholder Return
R: 20 Total Shareholder Return G: 80 B: 155 Stock Summary Total Return* – Last 36 Months Ticker HFWA Exchange NASDAQ R: 105 Stock Price $27.32 Market Cap. (in billions) $1.00 G: 149 Dividend Yield (Regular Div. Only) 2.64% B: 253 Average Daily Volume (3 Mo.) Avg. Daily Volume (Shares) 167,735 Please
Slide 21: Superior Market Performance
R: 20 Superior Market Performance G: 80 • HFWA has outperformed the broader market since its last 4 acquisitions – in each case, the shareholders of the acquired bank B: 155 received better returns owning HFWA stock vs. the KBW Regional Bank Index. R: 105 G: 149 B: 253 Valley Community Bancshares, I
Slide 22: Superior Market Performance
R: 20 Superior Market Performance G: 80 • HFWA has outperformed the broader market since its last 4 acquisitions – in each case, the shareholders of the acquired bank B: 155 received better returns owning HFWA stock vs. the KBW Regional Bank Index. R: 105 G: 149 B: 253 Source: S&P Global Market Inte
Slide 23: Appendix - Reconciliations of non-GAAP Financial Measures
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Appendix - Reconciliations of non-GAAP Financial Measures 23
Slide 24: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 2018 2019 B: 155 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (Dollars in thousands) Return on Average Tangible Common Equity: Net Income (GAAP) $ 9,087 $ 11,857 $ 15,504 $ 16,609 $ 16,552 $ 15,984 $ 17,895 R: 105 Exclude amortization of intangible assets 795 796 1,114 1,114 1,025 1,
Slide 25: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 2018 2019 B: 155 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (Dollars in thousands) Net Interest Margin: Net interest income (GAAP) $ 40,837 $ 43,741 $ 51,126 $ 51,289 $ 49,788 $ 50,536 $ 50,243 R: 105 Exclude incremental accretion on purchased loans (1,632) (1,992) (2,637) (1,703)
Slide 26: Questions and Answers
Questions and Answers Jeff Deuel, President and Chief Executive Officer Bryan McDonald, Chief Operating Officer Don Hinson, Chief Financial Officer 26