W.t.b. Financial Corp. · OTC:WTBFA
W.t.b. Financial — Shareholder Meeting (April 2023)
39 slides from W.t.b. Financial's shareholder meeting presentation, Apr 24, 2023
Slide 1: W.T.B. Financial Corporation Annual Shareholders' Meeting
2023 W.T.B. Financial Corporation Annual Shareholders’ Meeting Presented by: Larry Sorensen Chief Financial Officer
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expe
Slide 3: Company Overview
W.T.B. Financial Corporation Company Overview
Slide 4: Mission and Geographic Footprint
MISSION AND GEOGRAPHIC FOOTPRINT Our Mission Markets Served We will be the best at understanding and meeting the financial needs of our customers. We will focus our unique strengths as a community bank on serving those customers who perceive a distinct value in building long-term relationships with
Slide 5: Core Identity
CORE IDENTITY • Pacific Northwest regional community bank • Business model: Relationship banking • 120 years of heritage • High value customer relationships • 4th generation Chairman and CEO • Organic customer growth • Private ownership and family heritage • Broad product line and customer base • Co
Slide 6: Financial Management Principles
FINANCIAL MANAGEMENT PRINCIPLES Balance Sheet Strength: Shareholder Value / Capital Discipline: • Credit discipline…strong allowance position • Maintain capital adequacy • Disciplined capital management • Internal capital generation for growth • Ample liquidity resources • Competitive return on capi
Slide 7: 2022 Big WTBFC Themes and Issues
2022 BIG WTBFC THEMES AND ISSUES Financial Themes: Operational Themes: ▪ Record earnings of $114 million (up 14.0% YoY) ▪ Strategic focus ▪ Net interest revenue up $24 million, or 8.0% ▪ Customer experience, technology, delivery and scale ▪ Asset yields benefitted from rising rates ▪ Technology focu
Slide 8: Operating Environment Policy Influence
Operating Environment Policy Influence
Slide 9: Fiscal Stimulus from Deficit Spending
FISCAL STIMULUS FROM DEFICIT SPENDING Federal Budget Surplus / (Deficit) $5.1 trillion of $7.3 trillion of deficit spending deficit spending Tech bust Great 9/11 Recession COVID
Slide 10: Monetary Stimulus from Quantitative Easing
MONETARY STIMULUS FROM QUANTITATIVE EASING Size of Fed Balance Sheet (Total Assets) $8.9 Great QE 4 trillion Recession QE 3 $4.5 trillion QE 2 QE 1 Grand total $880 = $8.0 billion COVID trillion
Slide 11: 14 Years of Ultra-Low Rates
14 YEARS OF ULTRA-LOW RATES The Dynamic History of Prime Rate 10.00% 9.50% + 475 bps 8.25% In 14 months 8.00% 7.50% 14 Years of Ultra-Low Rates 5.50% 5.00% 7 Years of ZIRP 4.00% 3.25% 3.25% 2.50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 12: Stimulus Drives Deposits Above Trend
STIMULUS DRIVES DEPOSITS ABOVE TREND Above trend growth Industry Deposits $19,932 (2000 to 2022; $ in Billions) $19,215 $20,000 $14,536 $15,000 $10,000 $8,566 $4,590 $5,000 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 13: Prime Rate and Inflation (PCE) History
PRIME RATE AND INFLATION (“PCE”) HISTORY 60 years of history The Personal Consumption Expenditures Index (“PCE”) is rarely higher than Prime Rate Aug 1981 Prime = PCE + 1180 bps PCE peaks at 11.6% April 2021: PCE breaks above Prime ...twice ▪ First time in 50 years Inflation > 5.00% for nearly 10 ye
Slide 14: Inflation Dominates Fed Action
INFLATION DOMINATES FED ACTION 60 years of history The Personal Consumption Expenditures Index (“PCE”) is rarely higher than Prime Rate Mar 2021: PCE > 2.00% Fed Inflation Target Fed tightening Apr 2021: PCE breaks above Prime Jun 2022: PCE peaks at 7.0% 8.00% Oct 2022: Prime surges above PCE 7.0% C
Slide 15: Fed Raises Rates...Yield Curve Inverts
FED RAISES RATES…YIELD CURVE INVERTS Yield Curve Slope UST Yield Curve Comparison 10-Year Minus 3-Month UST 4.74% 4.85% 4.00% 5.00% 4.06% 4.00% 3.60% 3.48% 2.00% 3.00% Short term rates 2.00% 1.52% up 470 bps 0.00% -0.02% 1.00% -0.47% -0.38% -0.74% 0.06% 0.06% Yield curve significantly inverted -1.42
Slide 16: Industry Themes Historic Performance Rate Rise Drives Normalization
Industry Themes Historic Performance Rate Rise Drives Normalization
Slide 17: Industry Historical Earnings
INDUSTRY HISTORICAL EARNINGS Industry Earnings $300,000 $263,029 Full Year 2022 Results: $250,000 ▪ Earnings at historic levels ▪ $263 billion $200,000 ▪ Net interest revenue hits record ▪ $633 billion $150,000 ▪ Net interest margin ▪ 3.37% $100,000 ▪ Up from 2.50% (Q2 2021) ▪ Asset quality superb $
Slide 18: Deposits Surge with Government Stimulus
DEPOSITS SURGE WITH GOVERNMENT STIMULUS Industry Industry Deposits Time Period Deposits (2000 to 2022; $ in Billions) $19,932 2000 $ 4,914,760 $20,000 1984 2,697,459 Total Difference $ 2,217,301 Annual Difference $ 138,581 $19,358 $15,000 Industry Time Period Deposits $14,536 2019 14,535,915 2000 $
Slide 19: Wholesale Funding Down to Historic Lows
WHOLESALE FUNDING DOWN TO HISTORIC LOWS Wholesale Funding as a % of Total Funding (FF's Purchased, FHLB, Borrowings and Brokered CD's) 30.0% 28.8% Reliance on Wholesale Funding: 20.0% ▪ Borrowings drop to historic low 20.0% ▪ 6.9% in Q1 2022 40-year average = 19% ▪ Rising rates drive deposit outflow
Slide 20: Deposits Drive L/D Ratio to Historic Lows
DEPOSITS DRIVE L/D RATIO TO HISTORIC LOWS Industry Net Loans to Deposits (%) 100% 95% 94% Policy moves bring flood of liquidity: 90% ▪ Deposit growth > loan growth ▪ Drives L/D ratio to historic lows 80% ▪ Funds large liquidity Position 40-year average = 79% 72% ▪ Cash and bonds = 75% ▪ 39% of asset
Slide 21: 2022 Major Industry Themes
2022 MAJOR INDUSTRY THEMES ▪ Financial performance: ▪ Earnings of $263 billion near record set in 2021 ▪ Net interest revenue hits record level of $633 billion, up $105 billion, or 20% ▪ Net interest margin widened 41 bps to 2.95% ▪ Balance Sheet Items: ▪ Total assets decreased $120 billion, or 0.5%
Slide 22: WTBFC 2022 Performance in Perspective
WTBFC 2022 Performance in Perspective
Slide 23: Total Assets and Mix
TOTAL ASSETS AND MIX Total Assets ($ in millions) YE 2022 Asset Mix ($ in millions) $11,090 $10,423 Loans $6,042 58% $9,814 $7,165 Securities $3,759 36% $6,552 Investible Cash $274 3% Other Assets $348 3% 2018 2019 2020 2021 2022 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 ▪ Asset levels declined wi
Slide 24: Investible Cash and Securities Trends
INVESTIBLE CASH AND SECURITIES TRENDS Investible Cash (upper) and Securities (lower) $5,312 ($ in millions) $4,042 $1,987 $4,033 ▪ Cash levels declined to $274 million $274 ▪ Investible cash covered 2022 funding needs: $1,463 $2,341 $2,420 ▪ Bond growth of $433 million $524 ▪ Loan growth of $506 mil
Slide 25: Focus on Capital
FOCUS ON CAPITAL Shareholders' Equity (in thousands) $832,945 $867,129 $806,518 ▪ Shareholders’ equity: $695,904 ▪ Up $34 million, or 4.1% in 2022 $602,665 ▪ Up $264 million, or 44% since YE 2018 ▪ Growth in capital and the decline in assets drive Leverage Ratio 98 bps higher YoY ▪ Loan growth drove
Slide 26: Capital Perspective and Framework
CAPITAL PERSPECTIVE AND FRAMEWORK ▪ Capital levels are significantly above regulatory minimums ▪ “Tightest” $ cushion is $275 million above Total Risk Based Capital minimums ▪ “Tightest” % cushion is 262 basis points above Leverage Ratio minimums ▪ Capital quality is high ▪ No intangible assets ▪ Al
Slide 27: Loan Portfolio Trends
LOAN PORTFOLIO TRENDS Total Loans ($ in millions) $6,042 $5,592 $5,536 ▪ Loan growth strong over past year $4,543 $4,047 ▪ Up $506 million, or 9.1% ▪ Rising rates slowed loan growth throughout 2022 ▪ Q1 2023 growth slowed further (up $57 million) ▪ Loans predominantly relationship based, not transac
Slide 28: Credit Performance
CREDIT PERFORMANCE ▪ Credit performance has been solid, especially given challenging operating environment ▪ Noncurrent loans remain at minimal levels ($3.2 million at YE 2022) ▪ Classified loans remain at moderate levels and trending down ▪ $87 million at YE 2022, or 1.4% ▪ $126 million at YE 2021,
Slide 29: Credit Performance Metrics
CREDIT PERFORMANCE METRICS Noncurrent Loans ($'s in thousands) and ORE as % of Assets 0.46% ▪ Noncurrent loans remain exceptionally low ▪ Nonaccrual loans < 0.03% of assets $51,477 ▪ Allowance for loan losses released in 2022 0.03% 0.18% 0.20% ▪ Negative provision expense was $20.5 million 0.12% $3,
Slide 30: Deposit Portfolio Trends
DEPOSIT PORTFOLIO TRENDS Total Deposits ($ in millions) $9,890 $9,217 ▪ $1.8 billion in PPP contributed to growth (2019 to 2021) $8,699 ▪ Built-up excess balances began seeking yield in 2022 ▪ Deposits declined $673 million, or 6.8% for the year $5,639 $6,227 ▪ Over $600 million in deposits transfer
Slide 31: Deposit Focus: Diversification
DEPOSIT FOCUS: DIVERSIFICATION Deposits by Market Deposits Diversified by Account Type Spokane $3,473,094 49% Noninterest demand $3,978,868 46% Western WA $2,408,037 34% Savings and money… $2,891,196 34% Central WA $1,190,574 17% Interest checking $1,480,247 17% S. Idaho $689,859 10% TCDs $229,045 1
Slide 32: Deposit Focus: Diversified by Industry
DEPOSIT FOCUS: DIVERSIFIED BY INDUSTRY NAICS Code Total Percent of Top 20 Industries by Uninsured Balance Balances Total Deposits Commercial Client Diversification: As of 3/10/2023 Residential Property Managers $ 295,477,377 3.5% ▪ $5.7 billion in commercial deposits Commercial and Institutional Bui
Slide 33: Wealth Management and Trust Division
WEALTH MANAGEMENT AND TRUST DIVISION Key business line…complements banking client book ▪ Wealth management, fiduciary, trust and investment services ▪ Competitive advantage for high value and affluent customers ▪ Long-term, relationship-based business line Attractive financial dynamics ▪ Stable, fee
Slide 34: Earnings Overview
EARNINGS OVERVIEW Years Ended December 31, ▪ Net interest revenue up on rising rates Income Statement (000's) 2021 2022 $ Difference % Change ▪ Provision expense negative on solid credit performance Net interest revenue $ 299,057 $ 323,120 $ 24,063 8.0% ▪ Noninterest revenue down: Provision for loan
Slide 35: WTBFC Financial Performance Metrics
WTBFC FINANCIAL PERFORMANCE METRICS For the Year 2021 2022 ▪ Margin rebounds on higher rates Performance Metric Difference ▪ Up 13 bps to 3.08% Return on average assets 0.96% 1.06% 0.10% ▪ Industry margin in 2022 was 2.95 Return on shareholders’ equity 12.34% 13.45% 1.11% ▪ Stronger earnings brought
Slide 36: WTBFC Shareholder Value Metrics
WTBFC SHAREHOLDER VALUE METRICS Years Ended December 31, ▪ Earnings hit record levels Income (000's) and Per Share Data 2021 2022 $ Change % Change ▪ Net income up 14% to $114 million Net Income $ 100,030 $ 114,053 $ 14,023 14.0% ▪ EPS up 15% to $45.28 Diluted Earnings per Common Share $ 39.40 $ 45.
Slide 37: WTBFC Q1 2023 Highlights
WTBFC Q1 2023 HIGHLIGHTS ▪ Assets: Steady at $10.5 billion (up $92 million QoQ) ▪ Loans: Loan growth slows…Up $57 million, or 0.9 percent ▪ Deposits: Down $889 million, or 9.6%...largely rate driven ▪ $717 million, or 81% prior to SVB and SB failures ▪ Seasonality of deposits make first half of year
Slide 38: Closing Thoughts
CLOSING THOUGHTS 2022 was a record earnings year, with some unusual elements to it: ▪ Release of loss reserves (added $14 million to earnings) ▪ Rise in rates was sharp…positive for margin, but challenged deposit balances ▪ Excess deposits sought yields not seen in over a decade ▪ Some significant l
Slide 39: Thank you for your continued support!
Thank you for your continued support! We appreciate it!