Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Q4 2019 Earnings Presentation
24 slides from Heritage Financial's earnings presentation, Jan 29, 2020
Slide 1: Investor Presentation Q4 2019
Investor Presentation Q4 2019 Jeff Deuel, 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 $1.01 billion Institutional Ownership 82.4% Total Assets $5.55 billion Headquarters Olympia, WA # of Branches 62 Year Established 1927 HFWA Branch Note: Totals assets as of December 31, 2019. Market ca
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 Ÿ Successful hiring of individuals and team
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 29 branches B: 155 Funds Under Management = Loans + Deposits* R: 105 $5,000 G: 149 $4,020 B: 253 $4,000 $3,845 ) s $2,941 n $2,770 $3,000 $1,995 $2,111 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 • $907 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 $907 G: 149 $856 B: 253 $800 ) $498 s $477 n $600 o i l l i M ( $400 $ $200 $409 $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 – 11 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 – Q4 2019
R: 20 Financial Update – Q4 2019 G: 80 B: 155 • Diluted earnings per share were $0.47 for the quarter ended December 31, 2019 compared to $0.48 for the linked-quarter ended September 30, 2019 and $0.45 for the quarter ended December 31, 2018. R: 105 • Diluted earnings per share were $1.83 for the ye
Slide 15: Loans
R: 20 Loans G: 80 (1) B: 155 Loan Portfolio Loan balances and loan yields* $4,000 6.00% $3,737 $3,773 Owner-Occupied $3,651 $3,656 $3,699 $3,722 CRE 21.4% $3,500 * s 5.30% 5.28% 5.00% d R: 105 5.25% 5.23% l n 5.16% e a 5.00% i o Y L $3,000 n G: 149 Commercial l a a t o & Industrial o 4.00% L T B: 25
Slide 16: Deposits
R: 20 Deposits G: 80 B: 155 Deposit Base Deposit balances and cost to total deposits $5,000 $4,562 $4,583 0.50% $4,398 $4,432 $4,394 $4,348 s t i 0.40% s o Savings accounts s $4,000 Money market t p i 0.39% e s 0.38% R: 105 accounts 11.2% 0.37% o 0.30% D l Certificates of p 0.33% 16.4% a e deposit $
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 4.1% R: 105 11.4% Securities 17.1% 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% 0.09% 0.19% 4.02% 0.16% 4.00% 0.08% Loans, net* 67
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% 1.22% 12.89% 12.94% 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
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 $27.70 Market Cap. (in billions) $1.01 G: 149 Dividend Yield (Regular Div. Only) 2.74% B: 253 Average Daily Volume (3 Mo.) Avg. Daily Volume (Shares) 146,017 Please
Slide 21: 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 21
Slide 22: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 2018 2019 B: 155 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (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 $ 17,126 R: 105 Exclude amortization of intangible G: 149 assets 795 796 1
Slide 23: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 B: 155 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 (Dollars in thousands) Net Interest Margin: R: 105 Net interest income (GAAP) $ 40,837 $ 43,741 $ 51,126 $ 51,289 $ 49,788 $ 50,536 $ 50,243 $ 49,115 Exclude incremental accretion on G: 149 purchased loans (1,632) (1,99
Slide 24: Heritage Financial Corporation
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