Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Investor Presentation (June 2020)
29 slides from Heritage Financial's investor presentation, Jun 8, 2020
Slide 1: Investor Presentation Q1 2020
Investor Presentation Q1 2020 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 effect of the COVID-19 pandemic, including on Heritage’s credit quality and business operations, as well as its impac
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 $757.5 million Institutional Ownership 81.2% Total Assets $5.59 billion Headquarters Olympia, WA # of Branches 62 Year Established 1927 HFWA Branch Note: Totals assets as of March 31, 2020. Market capi
Slide 5: COVID-19 Response
R: 20 COVID-19 Response G: 80 Ÿ Activated our Business Continuity Plan B: 155 Employees Ÿ Approximately 60% have remote capabilities; 350 are fully remote Ÿ Revised policies on paid-leave and additional pay for front-line employees R: 105 Ÿ Lobbies closed; operate drive-thru or by appointment Facili
Slide 6: COVID-19 Response - PPP Loans Funded
R: 20 COVID-19 Response - PPP Loans G: 80 B: 155 Funded PPP Loans* PPP Loans* by Industry $100,000 to $350,000 Construction $191,070 23.6% R: 105 Health Care and Social Assistance $121,841 G: 149 Manufacturing $80,433 Less than Professional, Scientific, and Technical Services $79,649 B: 253 $100,000
Slide 7: COVID-19 Response - Modifications
R: 20 COVID-19 Response - Modifications G: 80 B: 155 % of Modifications* to Total Portfolio Commercial and Construction Loan COVID-19 Modifications* by Industry Modified 11.2% Real Estate and Rental and Leasing $105,964 R: 105 Accommodation and Food Services $85,707 G: 149 Health Care and Social Ass
Slide 8: 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 9: 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 9
Slide 10: 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 11: 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 12: 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 13: Seattle MSA Funds Under Management
R: 20 Seattle MSA Funds Under Management G: 80 • $4.1 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 $4,020 $4,097 B: 253 $4,000 $3,845 ) s $2,941 $2,130 n $2,770 $3,000 $1,995 $2,111 o $2,544 i
Slide 14: Portland MSA Funds Under Management
R: 20 Portland MSA Funds Under Management G: 80 • $912 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 $912 G: 149 $856 B: 253 $800 ) $498 $498 s $477 n $600 o i l l i M ( $400 $ $200 $409 $414 $112
Slide 15: 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 – 9 banks between $150 and $500 million in assets G: 149 – 6 bank
Slide 16: Financial Update
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Financial Update 16
Slide 17: Financial Update – Q1 2020
R: 20 Financial Update – Q1 2020 G: 80 B: 155 • Diluted earnings per share were $0.33 for the quarter ended March 31, 2020 compared to $0.47 for the linked-quarter ended December 31, 2019 and $0.45 for the quarter ended March 31, 2019. R: 105 • Heritage declared a regular cash dividend of $0.20 per
Slide 18: Loans
R: 20 Loans G: 80 (1) B: 155 Loan Portfolio Loan balances and loan yields* $4,000 $3,856 6.00% $3,737 $3,773 Owner-Occupied $3,656 $3,699 $3,722 CRE 20.9% $3,500 * s 5.28% 5.00% d R: 105 5.25% 5.23% l n 5.16% e a 5.00% 4.97% i o Y L $3,000 n G: 149 Commercial l a a t & Industrial o o 4.00% L T B: 25
Slide 19: COVID-19 Impacted Industries
R: 20 COVID-19 Impacted Industries G: 80 B: 155 Higher Risk of COVID-19 Impact Concentration of Industries in Higher Risk of COVID-19 Impact Offices of health R: 105 Healthcare $287,067 practitioners and health facilities Remaining G: 149 Portfolio B: 253 85.3% Hotels $132,923 Restaurants $92,326 Ea
Slide 20: CECL Adoption
R: 20 CECL Adoption G: 80 B: 155 Overall CECL Impact Allowance for Credit Losses on Loans $47,540 2.00% • Day 1 Impacts $50,000 $37,993 ◦ $3.4 million increase in reserves, $40,000 $36,171 s n 1.23% a e o R: 105 reduced by $1.6 million due to c $30,000 1.01% L n 0.96% l a a PCI to PCD transition, ne
Slide 21: Deposits
R: 20 Deposits G: 80 B: 155 Deposit Base Deposit balances and cost to total deposits $5,000 $4,562 $4,583 $4,618 0.50% $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 R: 105 accounts 9.3% s 0.37% 0.38% 0.37% o 0.30% D l 19.0% Certificates of p 0.33% a e depo
Slide 22: Net Interest Margin
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 2.9% R: 105 11.7% Securities 17.2% G: 149 4.37% 4.34% 4.33% 0.15% 0.12% 0.12% 4.21% B: 253 0.09% 4.02% 4.06% 4.00% 0.08% 0.08% Loans, net* 68.2% 4.22% 4.22% 4.21% 4.
Slide 23: 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% 13.94% 13.66% R: 105 1.20% 1.22% 12.89% 12.94% 1.20% 12.50% G: 149 1.00% 0.88% 9.46% 10.00% 0.80% B: 253 7.50% 0.60% 5.00% 0.40% 0.20% 2.50% 0.00% 0.00% Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q
Slide 24: Shareholder Return
R: 20 G: 80 B: 155 R: 105 G: 149 B: 253 Shareholder Return 24
Slide 25: 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 $21.12 Market Cap. (in millions) $757.5 G: 149 Dividend Yield (Regular Div. Only) 3.79% B: 253 Average Daily Volume (3 Mo.) Avg. Daily Volume (Shares) 205,961 Pleas
Slide 26: 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 26
Slide 27: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 2018 2019 2020 B: 155 Q4 Q1 Q2 Q3 Q4 Q1 (Dollars in thousands) Return on Average Tangible Common Equity: R: 105 Net Income (GAAP) $ 16,609 $ 16,552 $ 15,984 $ 17,895 $ 17,126 $ 12,191 Exclude amortization of intangible assets 1,114 1,025 1,026 975 975 903 G: 1
Slide 28: Non-GAAP Financial Measures
R: 20 Non-GAAP Financial Measures G: 80 B: 155 2018 2019 2020 Q4 Q1 Q2 Q3 Q4 Q1 (Dollars in thousands) Net Interest Margin: R: 105 Net interest income (GAAP) $ 51,289 $ 49,788 $ 50,536 $ 50,243 $ 49,115 $ 48,557 Exclude incremental accretion on purchased loans (1,703) (1,373) (1,416) (1,090) (997) (
Slide 29: Questions and Answers
Financial CORPORATION Questions and Answers Heritage 29
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