Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Investor Presentation (February 2013)
30 slides from Heritage Financial's investor presentation, Feb 7, 2013
Slide 1: Q1 2013 Investor Presentation
Brian L. Vance, President and CEO Jeffrey J. Deuel, Executive Vice President Donald J. Hinson, Executive Vice President and CFO Exhibit 99.1 Q1 2013 Investor Presentation
Slide 2: 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; Competitive market pricing fac
Slide 3: Overview
Overview • Company Information • Financial Performance • Strategic Initiatives
Slide 4: Company Information
Company Information
Slide 5: Our Market Area
Total assets: $1.17 billion Branches: 27 Total assets: $170.1 million Branches: 6 Our Market Area Financial Data as of December 31, 2012 Auburn Branch added January 9, 2013
Slide 6: Award Recognition
Award Recognition Top Places to Work Washington Best Workplaces The 100 Best Companies to Work For • • • Large Company & Equity Award Puget Sound Business Journal – Gold Award 2011, Bronze Award 2010 and Silver Award 2009 The Seattle Business Magazine– 2nd Midsized Companies for 2010 Business Examin
Slide 7: Financial Performance
Financial Performance
Slide 8: Balance Sheet
$1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% Loans Deposits Total Assets % Loans to Deposits Balance Sheet
Slide 9: Total Loan Portfolio
Total Loan Portfolio Financial data as of December 31, 2012 CRE Owner Occupied 23% Consumer 4% Residential Real Estate 5% Commercial Construction 5% Residential Construction 3% Commercial & Industrial 32% CRE Non-Owner Occupied 28%
Slide 10: Loan Trends
2009 2010 2011 2012 CAGR Loan Trends Originated Loans $746.1 $720.0 $815.6 $855.4 4.7% Purchased Covered Loans - $128.7 $105.4 $84.0 n/a Purchased Non-Covered Loans - $131.0 $83.5 $59.0 n/a Total $746.1 $979.8 $1,004.5 $998.4 11.1% Dollars in millions Net Loan Balance
Slide 11: Credit Quality
Credit Quality * HFWA ratios relate to originated loan portfolios only. Regional Peer data not available for Q4’12 Regional Peer Group (12): Ticker Symbols – BANR, CACB, COLB, FFNW, HOME, NRIM, PCBK, PRWT, RVSB, TSBK, WBCO, WCBO Source: SNL Financial 9% 6% 3% 0% 160% 120% 40% 0% HFWA Regional Peers
Slide 12: Deposit Base
Deposit Base Financial data as of and for the quarter ending December 31, 2012. Non-Interest Demand 22% CDs 26% Savings 11% Money Market 14% Interest Checking (NOW) 27% Total Deposits Non-Maturity Deposits / Total Deposits $1.1 billion 74.2% Cost of Deposits Cost of Interest Bearing Deposits 0.34% 0
Slide 13: Core Deposit Growth
Core Deposit Growth 10% 15% 20% 25% $- $200 $400 $600 $800 $1,000 $1,200 Non- Interest Demand Deposits NOW/Savings/MMA Certificates of Deposit % of Non- Interest Demand Deposits to Total Deposits
Slide 14: Equity Growth
Equity Growth Total Equity Tangible Common Equity/Tangible Assets $220 $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $- $113.1 $158.5 $202.3 $202.5 $198.9 15% 10% 5%
Slide 15: Earnings
Annual Net Income Quarterly Net Income * Includes after-tax gain of $7.7 million for FDIC-assisted bank acquisitions. Earnings Net Income Net Interest Margin $6.4 $0.6 $13.4 $6.5 $13.3 $10 $8 $6 $4 $2 $- $12 $14 $16 2010* 3% 4% 5% 6% $3 $2 $1 $- $4 $5 Q4’11 Q1’12 Q2’12 Q3’12 Q4’12 $2.2 $4.2 $3.2 $2.
Slide 16: Annual and Quarterly 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* ($0.09) $0.93 $1.05 $0.42 $0.87 $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05
Slide 17: Net Interest Margin
Year Ended 12/31/2011 12/31/2012 NIM Loan Yields NIM Loan Yields Reported 5.41% 7.14% 5.17% 6.58% Effects of incremental accretion income over the stated note rate 0.62% 0.79% 0.50% 0.63% Before effects of incremental accretion 4.79% 6.35% 4.67% 5.95% Net Interest Margin
Slide 18: Net Interest Margin
Net Interest Margin Annual NIM Quarterly NIM Adjusted Net Interest Margin removes the effects of “incremental accretion income” from net interest income in the net interest margin calculation. “Incremental accretion income” represents the amount of income recorded on the acquired loans above the con
Slide 19: Operating Expenses
Operating Expenses Salaries & Benefits Occupancy Other Efficiency Ratio $16 $14 $12 $10 $8 $6 $4 $2 $- 75% 70% 65% 60% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 20: ‘Sérez Lh tn Comniunity Bin
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Slide 21: 2013 Strategic Initiatives
2013 Strategic Initiatives Loan Growth 2012 originated loan growth 4.4% Deposit Growth Manage to maintain loan to deposit ratio < 90% Lender Recruitment Manage to optimize assets per lender Wealth Management Continue growth focus on Trust, Brokerage, Advisory Management Services; Grow AUM
Slide 22: 2013 Strategic Initiatives
2013 Strategic Initiatives Branching De Novo branch- East Vancouver, WA Acquired branch – Auburn, WA Re-located branches – Tumwater and Kent, WA Acquisitions Northwest Commercial in Tacoma, WA - merger completed January 2013 Continue to aggressively seek acquisitions in our current geographic footpr
Slide 23: Strategic Efficiency Initiatives
Strategic Efficiency Initiatives Emphasis on improving: Assets per employee (ApE) Deposits per branch (DpB) Loan commitments per lender Efficiency Ratio
Slide 24: Strategic Capital Management: Cash Dividends
2011 2012 2013 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Cash Dividends Continued focus on Regular dividends in the 35% to 40% payout range Special dividend 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 $0.0
Slide 25: Total Capital Returned Since Q1 2011
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 2011 based on be
Slide 26: Capital Return
Capital Return 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 accumulated net income since Q1 Total Capital Returned* / Net Income (Since Q1 2011) 138.7
Slide 27: 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.
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Slide 29: Investment Value
Investment Value • Strong financial performance trends • Well-positioned to take advantage of the right opportunities • Continuing focus on building long-term franchise value • Disciplined approach to acquisitions • Experienced management team supported by a strong Board of Directors
Slide 30: Thank You
Thank You Questions? Heritage Financial Corporation
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