W.T.B. Financial Corp. · OTC:WTBFA
W.T.B. Financial — Shareholder Meeting (2020)
34 slides from W.T.B. Financial's shareholder meeting presentation, 2020
Slide 1: 2020 Annual Shareholders' Meeting
2020 ANNUAL SHAREHOLDERS’ MEETING W.T.B. Financial Corporation Our Mission “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 rel
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,” “exp
Slide 3: 2019 and Q1 2020 Overview
2019 AND Q1 2020 OVERVIEW • 2019 performance • Earnings were solid • Excellent asset quality • Balance sheet strength considerable • Q1 2020 performance • Earnings were good, helped by $2 million in bond gains • Provision expense increased due to unknowns of COVID-19 • Credit quality intact • Impact
Slide 4: Core Identity
CORE IDENTITY • Pacific Northwest regional community bank • Over 100 years of heritage • 4th generation Chairman of the Board and CEO • Business model: Relationship banking • High value customer relationships • Organic customer growth • Broad product line and customer base • Commercial banking custo
Slide 5: Financial Management Principles
FINANCIAL MANAGEMENT PRINCIPLES • Balance sheet strength: • Credit discipline • Capital management • Allowance for loan losses • Liquidity resources • Interest rate risk positioning • Protects against the unforeseen stress events • Consistent risk adjusted performance: • Operate within established r
Slide 6: Company Overview
COMPANY OVERVIEW W.T.B. FINANCIAL CORPORATION W.T.B. Financial Corporation is the parent company Washington Trust Bank is the primary subsidiary Demographics Shares listed on the OTC Marketplace: www.otcmarkets.com WTBFA -- Class A shares (Voting) WTBFB -- Class B shares (Non-Voting) Over 100 years
Slide 7: 2019 Performance Summary
2019 PERFORMANCE SUMMARY 2019 FINANCIAL POSITION AND PERFORMANCE Assets grew $612 million, or 9.3% to nearly $7.2 billion Shareholders' equity increased $93 million, or 15.5% to $696 million Balance Sheet Loans grew $495 million, or 12.2% to $4.5 billion Investible cash and bonds totaled over $2.4 b
Slide 8: 2019 Major Industry Themes
2019 MAJOR INDUSTRY THEMES • Credit performance across the industry was excellent • Industry NPA’s to assets = 0.55% • Note: Payment performance is a trailing credit indicator • Number of problem institutions = 51 (recent peak of 884 in 2010) • Tax reform adding to higher Industry profitability • In
Slide 9: 2019 Industry Performance
2019 INDUSTRY PERFORMANCE Industry Earnings and Performance Metrics (YoY): • Industry earnings = $233 billion, down $4 billion, or 1.5% • Net Interest Margin = 3.36%, down 4 bps • Return on assets = 1.29%, down 6 bps • Return on equity = 11.40%, down 58 bps Industry Balance Sheet (YoY): • Deposits =
Slide 10: Industry Consolidation Continues
INDUSTRY CONSOLIDATION CONTINUES… 17,886 Number of FDIC Insitutions The number of FDIC insured institutions has declined by over 12,000, or 71% to 5,177 since 1984… 5,177 Total Industry Assets $18,645,348 (000's) 1984 1985 1986 1987 1989 1990 1991 1992 1993 1995 1996 1997 1998 2000 2001 2002 2003 20
Slide 11: Problem Bank Levels...Normalized
PROBLEM BANK LEVELS…NORMALIZED Financial Crisis peak “Normal” Source: FDIC website as of 4/15/2020 11
Slide 12: Credit Performance Is Excellent
CREDIT PERFORMANCE IS EXCELLENT Note: Expect credit conditions to worsen as a result of COVID-19 Industry Noncurrent Loans to Loans 6% 5.46% Problem loans peak for the 4.28% industry in 1987 and 2010 Industry credit performance at YE 2019 was excellent 2.73% Average Noncurrent Loan % = 1.07% (1995 t
Slide 13: Industry ALLL to Loans %
INDUSTRY ALLL to LOANS % Industry ALLL to Loans % 4.00% 3.51% ALLL levels generally track with problem loan levels 2.27% 2.38% 1.18% 1.07% 0.91% Industry Allowance for loan losses back down to late cycle levels 0.00% 1984 1986 1987 1989 1990 1992 1993 1995 1996 1998 1999 2001 2002 2004 2005 2007 200
Slide 14: Industry Capital Levels
INDUSTRY CAPITAL LEVELS Industry Leverage Ratio % 9.66% 9.00% 8.29% 7.47% Impressive multi-decade capital build 5.73% 5.00% 1984 1985 1986 1987 1992 1993 1994 1995 1996 2001 2002 2003 2004 2005 2010 2011 2012 2013 2014 2019 1988 1989 1990 1991 1997 1998 1999 2000 2006 2007 2008 2009 2015 2016 2017 2
Slide 15: Profitability at Historic Levels
PROFITABILITY AT HISTORIC LEVELS Lower Industry Quarterly Return on Assets Average ROA Corporate Tax of 1.00% rate in 2018 1.50% (2011 to 2016) 1.17% 1.22% 1.00% 1.20% 0.98% Average ROA of 1.20% 0.50% (1993 to 2006) 0.58% Tax reform impact Q4 2017 0.00% 1985 1987 1989 1990 1992 1994 1996 1997 1999 2
Slide 16: Lower Highs and Lower Lows
LOWER HIGHS AND LOWER LOWS 10.00% 10-Year UST Treasury Rates 9.09% (1990 to 2020) 7.89% 7.50% 6.58% 5.23% 5.00% 5.23% 3.20% 4.16% 3.04% 2.50% 3.20% 2.08% 1.43% 0.62% 0.00% Source: United States Treasury website as of 4/10/2018 16
Slide 17: Rates Lower in 2019 and Q1 2020
RATES LOWER IN 2019 AND Q1 2020 UST Rates YE 2018 and YE 2019 3.50% YE 2018 to YE 2019: 3.02% 2.51% 2.69% • UST rates drifted lower by 60 to 100 bps 2.44% • Yield curve steepened 2.39% • Lower rates: 1.92% • Increased pressure on loan yields 1.48% 1.69% • Relieved pressure on funding costs • Acceler
Slide 18: Industry Performance Comparison
INDUSTRY PERFORMANCE COMPARISON FDIC INDUSTRY DATA Washington Entire Community Key Risk Metric: Trust Bank Industry Banks Asset Quality: Noncurrent Loan to Loans 0.32% 0.91% 0.75% Allowance for Loan Losses to Loans 2.12% 1.18% 1.12% Coverage Ratio (ALLL to Noncurrent Loans) 671% 130% 148% Regulatory
Slide 19: Fintech Sector Map
FINTECH SECTOR MAP Disrupters, Partners, Dependencies and Complexity 19
Slide 20: Focus on WTBFC: Company 2019 Performance in Perspective
FOCUS ON WTBFC COMPANY 2019 PERFORMANCE IN PERSPECTIVE 20
Slide 21: Assets and Capital
ASSETS AND CAPITAL Total Assets (in thousands) $7,165,000 $6,552,000 $6,246,000 $5,669,000 • Assets + $1.9 billion, or 35% over 5 years $5,305,000 • Shareholders’ equity + $231 million, or 50% over 5 years • Common equity to assets increased 96 bps to 9.71% due to strong earnings growth • Capital qu
Slide 22: Investable Cash and Securities Trends
INVESTABLE CASH AND SECURITIES TRENDS Securities and Investible Cash (in millions) $2,340 $2,420 $2,136 $524 $1,711 $751 $1,601 $749 $326 $439 $ $79 % 3.4% $1,385 $1,387 $1,589 $1,896 Million $1,162 $ Growth over the % Growth over the Past Year Past Year 2015 2016 2017 2018 2019 Securities Investabl
Slide 23: Deposit Trends
DEPOSIT TRENDS Total Deposits (in millions) $6,227 $5,449 $5,639 $4,924 $4,541 $ $588 % 10.4% Million $ Growth over the % Growth over the Past Year Past Year 2015 2016 2017 2018 2019 Deposit Mix (millions) • Deposit growth has been strong (5 year growth = $1.7 billion, or 37%) Noninterest-bearing de
Slide 24: Loan Trends
LOAN TRENDS Total Loans(in millions) $4,543 $3,932 $4,047 $3,785 $3,557 $ $496 % 12.3% Million $ Growth over the % Growth over the Past Year Past Year 2015 2016 2017 2018 2019 Loan Mix (millions) $1,485 • Mix of 1/3 CRE and 1/3 C&I reflects Commercial Real Estate 33% commercial client focus Commerci
Slide 25: Focus on Capital
FOCUS ON CAPITAL • Capital levels and ratios are strong • Equity to assets = 9.71% • Regulatory capital well above regulatory minimums • Total Risk Based Capital = 14.28% (+428 and +233 million) • Capital quality is high • No intangible assets • Profitability levels sufficient to: • Fund growth (equ
Slide 26: Capital Trends
CAPITAL TRENDS Shareholders' Equity (in thousands) $695,904 Common Shareholders’ Equity $602,665 $530,791 $496,286 $464,407 $ $93.2 % 15.5% Million $ Growth over the % Growth over the Past Year Past Year 2015 2016 2017 2018 2019 WTBFC Regulatory Capital Position (000's) WTBFC Regulatory Capital Rati
Slide 27: Credit Performance Was Strong
CREDIT PERFORMANCE WAS STRONG $30,000 0.75% $18,782 The loan portfolio’s credit $15,146 performance is high with In thousands $11,534 $13,506 problem assets $10,671 0.35% at historically 0.27% low levels 0.18% 0.19% 0.16% $- 0.00% $96,415 3.00% 2015 2016 2017 2018 2019 Nonaccrual loans and ORE $90,7
Slide 28: Wealth Management and Trust
WEALTH MANAGEMENT AND TRUST Wealth Management and Advisory Services, including Trust Powers • Key business line…attractive compliment to banking book • Nearly $7.0 billion portfolio of assets • 24% growth YoY • Fee income based business • Recurring revenue stream • Diversifies revenue base • Off-bal
Slide 29: Income Statement Trends
INCOME STATEMENT TRENDS Years Ended December 31, Income Statement (000's) 2018 2019 $ Difference % Change Net interest revenue $ 236,252 $ 255,058 $ 18,806 8.0% Provision for loan losses 2,700 3,200 500 18.5% Noninterest revenue 52,926 48,297 (4,629) -8.7% Noninterest expense 182,042 193,416 11,374
Slide 30: WTBFC Financial Performance Metrics
WTBFC FINANCIAL PERFORMANCE METRICS For the Year Performance Metric 2018 2019 Difference Return on average assets 1.30% 1.26% -0.04% Return on shareholders’ equity 14.94% 12.70% -2.24% Margin on average earning assets 3.77% 3.97% 0.20% Noninterest expense to average assets 2.86% 2.93% 0.07% Noninter
Slide 31: Key Shareholder Value Metrics
KEY SHAREHOLDER VALUE METRICS Years Ended December 31, Income (000's) and Per Share Data 2018 2019 $ Difference % Change Net Income $ 83,056 $ 83,284 $ 228 0.3% Diluted Earnings per Common Share $ 32.42 $ 32.56 $ 0.14 0.4% Dividends per Common Share $ 4.60 $ 7.00 $ 2.40 52.2% Book Value per Common S
Slide 32: Q1 2020 Highlights (YoY Comparison)
Q1 2020 HIGHLIGHTS (YoY COMPARISON) • Q1 2020 performance began to show COVID-19 impact • Net income down $1.6 million, or 8.2% to $18.5 million • Net interest revenue growth modest due to margin compression • Average earning assets up $640.4 million, or 10.1% • Net interest margin down 27 bps to 3.
Slide 33: COVID-19 Update
COVID-19 UPDATE • This global pandemic is a true Black Swan event • Low probability, but high impact • Society, government, economy and industry impacted • Fed’s forceful drop in rates: • Will negatively impact margin and profitability • Favorable to bond portfolio valuations, GAAP equity and BV/sha
Slide 34: Thank You
YOUR TIME IS VALUABLE TO US Thank You WE APPRECIATE YOUR SUPPORT AND ALWAYS WELCOME CUSTOMER REFERRALS