Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Investor Presentation (May 2010)
37 slides from Heritage Financial's investor presentation, May 13, 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 & Economic Information • Financial Performance • Credit Risk Management • Peer Group Analysis • Strategic Focus
Slide 4: Company & Economic Information
COMPANY & ECONOMIC INFORMATION
Slide 5: Financial Highlights
Total assets: $856 million Branches: 14 Total assets: $155 million Branches: 6 Financial Highlights Corporate Structure Total Assets $1.01 billion Net Loans $733 million Total Deposits $836 million Tangible Common Equity $123 million TARP Preferred $ 24 million Loan/Deposit Ratio 87.7% Coverage Rati
Slide 6: Market Share with Significant Growth Potential
WA State County # of Branches Deposits (in millions) Market Share % Market Rank Market Share with Significant Growth Potential Thurston (Olympia) $370 12.43% Pierce ( Tacoma) $243 2.48% Mason $ 68 17.76% King (Seattle) $ 36 0.07% Yakima $115 4.91% Kittitas $ 19 3.42% Source: SNL Financial
Slide 7: Economic Outlook
Economic Outlook • We have not yet achieved measurable and sustainable growth in the Pacific Northwest • Our local economy will continue to struggle until unemployment and real estate values improve • However, we are seeing signs of improvement
Slide 8: Slide 8
Slide 9: Loan and Deposit Growth
Loan and Deposit Growth Note: Of the $60 million decrease in loans since 12/31/08, $43 million were in the construction loan portfolio
Slide 10: Diversified Loan Portfolio
Total loans: $758 million Average yield on loans: 6.58% Diversified Loan Portfolio Financial data as of March 31, 2010
Slide 11: Diversified Loan Portfolio: Commercial and CRE
CRE owner occupied: $187 million CRE non-owner occupied: $219 million Total CRE portfolio: $406 million CRE owner occupied: $187 million CRE non-owner occupied: $219 million Commercial and industrial: $197 million Total Commercial Loans: $603 million Diversified Loan Portfolio Commercial Loan Portfo
Slide 12: Diversified Loan Portfolio: Construction
Construction loans: $83 million Total loans: $758 million Diversified Loan Portfolio Loan Portfolio Construction Portfolio Total construction portfolio reduced 36.2% since Dec. 31, 2008; represents 11.0% of total portfolio down from 16.1% at Dec. 31, Financial data as of March 31, 2010
Slide 13: Deposit Growth
Deposit Growth Total Avg. Deposits $616,634 $691,002 $755,252 $787,758 $840,204 $837,719 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 14: Non-CD Deposit Growth
Non-CD Deposit Growth Source: SNL Financial Regional Peer Group (14) : All NASDAQ banks under $5 billion in AK, ID, OR, and WA Ticker Symbols – BANR, CACB, CASB, COLB, CWLZ, FFNW, HOME, NRIM, PCBK, PRWT, RVSB, TSBK, WBCO, WCBO
Slide 15: Stable Net Interest Margin
Stable Net Interest Margin Source: SNL Financial Regional Peer Group (14) All ratios based on most recent reported quarter Annual Quarterly
Slide 16: Earnings
Earnings Quarterly Earnings Annual Earnings
Slide 17: Core Earnings
Core Earnings (1) Pre-tax, pre-provision return on average assets
Slide 18: Core Earnings
Core Earnings (1) Pre-tax, pre-provision return on average assets
Slide 19: Equity Growth
Equity Growth Note: 2008: TARP $24 million preferred securities sold 2009: $46.6 million net common equity raised
Slide 20: Strong Capital Levels
Strong Capital Levels Source: SNL Financial Regional Peer Group (14) All ratios as of December 31, 2009
Slide 21: Quality Securities Portfolio
Total investment securities: $109 million 89% of portfolio is guaranteed by US Gov't or Agencies Quality Securities Portfolio Financial data as of March 31, 2010
Slide 22: Management
MANAGEMENT sy HERITAGE \— FINANCIAL LE ORFORATION
Slide 23: Credit Risk Management
Credit Risk Management • Residential construction portfolio decreased 49% since January 2008 and today represents only 5.5% of total loan portfolio • Ongoing CRE loan evaluation and stress testing shows no measurable weakness • A focus to aggressively manage NPA levels lower as we move through what
Slide 24: Non-Performing Assets Composition
Total nonperforming assets: $30.4 million Nonperforming assets/total assets: 3.01% Non-Performing Assets Composition Financial data as of March 31, 2010 Note: Dollars in millions
Slide 25: Classified Loans by Category
Total classified loans: $ 43.7 million Excludes nonperforming loans Classified Loans by Category Financial data as of March 31, 2010 Classified Loans are the regulatory definition of special mention, substandard, or doubtful Note: Dollars in millions
Slide 26: Classified Loans by County
Classified Loans by County Notes: Includes nonperforming loans Financial data as of March 31, 2010
Slide 27: Loan Provisioning
Source: SNL Financial Regional Peer Group (14) Loan Provisioning
Slide 28: Credit Cycle Risk Profile
Credit Quality Ratios 3/31/2010 Pre-Tax, Pre-Provision Earnings Q1’10 Credit Cycle Risk Profile Loan loss allowance 3.27% Coverage ratio 86.0% Nonperforming loans to total loans 3.81% Nonperforming assets to total assets 3.01% Pre-tax, pre-provision ROAA % / $ 1.90% / $4,746
Slide 29: Peer Group Analysis
PEER GROUP ANALYSIS
Slide 30: Selected Key Ratios
HFWA Regional Peer Group Median HFWA Regional Rank (out of 14) National Peer Group Median HFWA National Rank (out of 114) Selected Key Ratios Coverage Ratio (1) 79.3% 43.2% #4 65.3% #38 TCE/TA (2) 12.2% 9.19% #4 7.43% #5 PTPP ROAA (3) 1.99% 1.06% #3 1.24% #10 Efficiency Ratio 61.3% 64.0% #4 69.1% #1
Slide 31: Total Return Performance
Total Return Performance The above chart assumes that the value of the investment in Heritage’s common stock and each of the two indices was $100 on December 31, 2004, and that all dividends were reinvested.
Slide 32: Strategic Focus
STRATEGIC FOCUS
Slide 33: Strategic Initiatives
Strategic Initiatives • Organic Growth – Renewed effort for organic loan growth – Continue focus on Non-CD deposit growth – New lender recruitment – Acquire/Build 1-2 new branches per year • Resume cash dividend payments • Continue to pursue FDIC assisted transactions
Slide 34: 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% 14 Washington banks with a Texas Ratio* greater than 100% and assets under $600 million 39 Washingto
Slide 35: TARP
TARP • We have previously communicated: – We sold preferred securities to Treasury as a precautionary strategy – We currently have the ability to repurchase these securities today – We are hopeful, we will see sufficient local economic improvement necessary to repurchase our preferred securities yet
Slide 36: 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 37: Thank You / Questions
Heritage Financial — Investor Presentation (May 2010) on 6ix