Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Q2 2013 Earnings Presentation
28 slides from Heritage Financial's earnings presentation, Jul 31, 2013
Slide 1: Q2 Investor Presentation
Brian L. Vance CEO & President Q2 Investor Presentation Heritage Financial Corporation Exhibit 99.1
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: The credit and concentration risks of lending activities; Changes in general economic conditions, either nationally or in our market areas; Comp
Slide 3: Overview
Overview • Company Information • Financial Performance • Strategic Initiatives
Slide 4: Company Information
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Slide 5: Financial Highlights
Financial Highlights Our Company Financial Data as of and for the period ending June 30, 2013 • Effective July 15, 2013, acquired 8 Valley Bank branches and Valley Community Bancshares, Inc. pro-forma total assets of $234 million. Total Assets $1.43 billion Net Loans $1.09 billion Total Deposits $1.
Slide 6: Announcements
Announcements January 9, – Completed Merger with Northwest Commercial Bank • Results in an Auburn location, consolidation of Lakewood branches and $65 million in total assets. Completed systems conversion March 9, 2013. June 19, – Completed Bank Subsidiary Consolidation • Central Valley Bank has bee
Slide 7: Merger Activity Review
Merger Activity Review • CVB Charter Merger • Anticipated to reduce annualized expense by approximately $465,000 • Valley Bank Merger • Estimated cost saves between 45-50% • Will consolidate 4 of 8 branches by end of Q4 • Q3 & Q4 estimated expenses of $1.75 million • 2014 EPS accretion estimated at
Slide 8: Financial Performance
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Slide 9: Balance Sheet
Balance Sheet 80% 82% 84% 86% 88% 90% 92% 94% 96% 98% $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 Q1 '13 Q2 '13 % Loans to Deposits Deposits Total Assets Loans
Slide 10: Total Loan Portfolio
Total Loan Portfolio Financial data as of June 30, 2013 CRE Owner Occupied 22% Commercial & Industrial 30% CRE Non-Owner Occupied 34% Residential Construction 2% Commercial Construction 4% Estate 4% Consumer 4% Residential Real
Slide 11: Net Loan Trends
2009 2010 2011 2012 Q1 2013 Q2 2013 CAGR Net Loan Trends Originated Loans $746.1 $720.0 $815.6 $855.4 $869.2 $914.7 5.23% Purchased Covered Loans - $128.7 $105.4 $84.0 $81.4 $75.0 n/a Purchased Non- Covered Loans - $131.0 $83.5 $59.0 $104.9 $96.8 n/a Total $746.1 $979.8 $1,004.5 $998.4 $1,055.5 $1,0
Slide 12: Credit Quality
Credit Quality Regional Peer Group (10): Ticker Symbols – BANR, CACB, COLB, FFNW, HOME, NRIM, PCBK, RVSB, TSBK, WBCO Source: SNL Financial 0% 2% 3% 5% 6% Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 NPAs/Assets (%) HFWA Regional Peers 40% 80% 120% 160% Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12 Q1
Slide 13: Deposit Base
Deposit Base Financial data as of and for the quarter ending June 30, 2013. CDs 24% Non-Interest Demand 23% Interest Checking (NOW) 25% Money Market 17% Savings 11% Total Deposits Non-Maturity Deposits / Total Deposits $1.2 billion 76% Cost of Deposits Cost of Interest Bearing Deposits 0.30% 0.39%
Slide 14: Deposits
Deposits 10% 15% 20% 25% $- $200 $400 $600 $800 $1,000 $1,200 $1,400 Q1 '13 Q2 '13 Non-Interest Demand Deposits NOW/Savings/MMA Certificates of Deposit % of Non-Interest Interest Demand Deposits to Total Deposits
Slide 15: Equity
Equity *After the acquisition of Valley Bank, Tangible Common Equity/Tangible Assets is estimated to be 11.8% $113.1 $158.5 $202.3 $202.5 $198.9 $200.5 $200.5 5% 10% 15% $- $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 $220 Q1'13 Q2'13 Total Equity Tangible Common Equity/Tangible Assets
Slide 16: Earnings
Earnings Annual Net Income Quarterly Net Income *Includes after-tax gain of $7.7 million for FDIC-assisted bank acquisitions. Net Income Net Interest Margin $16 $14 $12 $10 $8 $6 $4 $2 $- 2010* 3% 4% 5% 6% $6.4 $0.6 $13.4 $6.5 $13.3 $5 $4 $3 $2 $1 $- Q1 ' 12 Q2 ' 12 Q3 ' 12 Q4 ' 12 Q1 ' 13 Q2 ' 13 $
Slide 17: Diluted Earnings Per Share
Diluted Earnings Per Share Annual Earnings/(Loss) Per Share Quarterly Earnings Per Share *Includes $0.69 earnings per share related to the after-tax gain on FDIC-assisted acquisitions. $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 $0.30 $0.10 -$0.10 2010* $0.93 ($0.09) $1.05 $0.42 $0.87 $0.40 $0.35 $0.30 $0.2
Slide 18: Operating Expenses
Operating Expenses *Includes acquisition/conversion expenses of $788,000 for Q1’13 and $455,000 for Q2’13, respectively. Salaries & Benefits Occupancy Other Efficiency Ratio $16 $14 $12 $10 $8 $6 $4 $2 $- Q1 '12 Q2 ' 12 Q3 ' 12 Q4 ' 12 Q1 ' 13* Q2 ' 13* 75% 70% 65%
Slide 19: Strategic Initiatives
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Slide 20: 2013 Strategic Initiatives: Acquisitions
• Acquisitions • Enhance Pacific Northwest footprint • Completed Northwest Commercial Bank and Valley Bank acquisitions • Balance Sheet Growth • 2013 projected originated loan growth of 3-5% • Actual YTD originated loan growth of 6.9% • Maintain loan to deposit ratio 85-90% • 06/30/13 loan to deposi
Slide 21: 2013 Strategic Initiatives: Branching
• Branching • De Novo branch - East Vancouver, WA • Groundbreaking was 07/16/13 • Re-locating branches – Tumwater and Kent, WA • Valley Bank branch consolidation • 4 branch consolidations scheduled for Q4 • Wealth Management • Continue growth focus on Trust, Brokerage, Advisory Management Services 2
Slide 22: Strategic Efficiency Initiatives
Strategic Efficiency Initiatives • Emphasis on improving: • Assets per employee (ApE) (in thousands) • HB 12/31/12 Actual: $3,707 ApE • NCB at conversion: 10 FTE + $65MM total assets = $6,500 ApE • Valley estimates: 33 FTE + $234MM total assets = $7,091 ApE • Deposits per branch (DpB) (in thousands)
Slide 23: Strategic Capital Management
2011 2012 2013 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 • Cash Dividends • Regular dividends in the 35% to 40% payout range • Special dividends as appropriate but dependent on acquisition activities • Stock buybacks on an opportunistic basis Quarterly Dividend $0.03 $0.05 $0.05 $0.06 $0.08 $0.08 $0.08 $0.08 $0.08
Slide 24: Capital Return
Capital Return Total Capital Returned* Since Q1 (% of Tg. Common Equity in Q1 2011) Source: SNL Financial, as of 12/31/2012 unless noted otherwise *Total capital returned includes all cash dividends and stock buybacks since Q1 HFWA has returned more capital to shareholders than most peers since Q1 2
Slide 25: Capital Return
Capital Return Source: SNL Financial, as of 12/31/2012 *Total capital returned includes all cash dividends and stock buybacks since Q1 HFWA has returned capital through both dividends and stock buybacks 68.3% through dividends and 31.7% through buybacks vs. peer median 93.3% through dividends and 6.
Slide 26: Investment Value
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Slide 27: Investment Value
Investment Value • Strong financial foundation • Positioned to take advantage of the right opportunities • Continued focus on building long-term franchise value • Disciplined approach to acquisitions
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