Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Investor Presentation (February 2012)
36 slides from Heritage Financial's investor presentation, Feb 14, 2012
Slide 1: Investor Presentation 1st Quarter 2012
Brian L. Vance, President and CEO Donald J. Hinson, Senior Vice President & CFO Exhibit 99.1 Investor Presentation Investor Presentation st st Quarter 2012 Quarter 2012 Heritage Financial Corporation Heritage Financial Corporation
Slide 2: Safe Harbor statement
“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 in the level and trend of lo
Slide 3: Overview
• Company & Economic Information • Recent Growth Initiatives • Financial Performance • Core Strategies Overview
Slide 4: Company and Economic Information
Company and Economic Company and Economic Information Information
Slide 5: Financial Highlights
Financial Highlights Total assets: $1.20 billion Branches: 27 Total assets: $165.6 million Branches: 6 Total Assets $1.37 billion Net Loans $1.00 billion Total Deposits $1.14 billion Tangible Common Equity $188.0 million Loan/Deposit Ratio 88.6% Coverage Ratio (1) 103.5% Core Deposit Ratio (2) 93.7%
Slide 6: Our Market Area
• 33 Branches – 27 Heritage Bank branches along I-5 corridor – 6 Central Valley Bank branches in Central WA Our Market Area
Slide 7: Economic Outlook
• We have not yet achieved measurable and sustainable economic growth in the Pacific Northwest • Our local economy will continue to struggle until unemployment and real estate values improve • However, we are beginning to see signs of improvement in some areas Economic Outlook Economic Outlook
Slide 8: Economic Information: Kidder Mathews Q4 Industrial Report
Source: Kidder Mathews Q4 Industrial Report Economic Information
Slide 9: Economic Information
Source: Kidder Mathews Q4 Industrial Report Economic Information
Slide 10: Economic Information
Source: Kidder Mathews Q4 Industrial Report Economic Information
Slide 11: Economic Information
Source: Kidder Mathews Q4 Industrial Report Economic Information
Slide 12: Economic Outlook: Seattle real estate rankings
According to PwC and ULI “Emerging Trends in Real Estate 2012” survey, Seattle ranks as follows for investment opportunities among all metro areas in the Nation: Source: Urban Land Institute, in conjunction with Price Waterhouse Cooper, conducted an annual survey of commercial real estate metrics an
Slide 13: Single-family home prices continue to decline
Single-family home prices continue to decline Oct 2011: U.S. is down 3.4%; SEA is down 6.2% Source: S&P/Case-Shiller; data through October 2011 Economic Information
Slide 14: Washington employment recovery vs. U.S.
WA employment peaked 1 month after U.S. (Feb. 2008 vs. Jan. 2008) Both WA and the U.S. reached a trough in Feb. 2010 Both WA and the U.S. won’t reach their previous peak until after 2013 WA employment will recover slightly faster than the U.S. Economic Information Source: WA State Economic and Reven
Slide 15: Boeing has over 7 years of commercial orders
Excludes the military’s new refueling tanker Source: Boeing; data through December 2011 Boeing has over 7 years of commercial orders on its books Economic Information
Slide 16: Washington export growth is strong
Total exports were up 29% y/y in Q3 Source: Wiser Trade Data; through Q3 2011 WA export growth is strong, and will help state outperform in the recovery Economic Information
Slide 17: Recent Growth Initiatives
Recent Growth Initiatives Recent Growth Initiatives
Slide 18: Growth Strategies
• Organic Growth • FDIC Assisted Transactions • Open Bank M&A Activity Growth Strategies
Slide 19: Organic Growth: core deposits
• Core deposits showing strong growth – Non-maturity deposits (total deposits less CDs) • Increased $73.1 million, or 10.0%, during 2011 • Non-maturity deposits increased to 71.0% of total deposits • Demand deposits increased $36.4 million, or 18.7%, during 2011 • Demand deposits increased to 20.4%
Slide 20: Deposits at acquired branches growing
• Deposits at acquired branches reporting steady growth since acquisition – Former Cowlitz Bank branches (acquired in July 2010) increased deposits by 19.5% during 2011 Organic Growth
Slide 21: 2011 Lender Recruitment
• 2011 Lender Recruitment – During 2011 we hired 7 new Lenders and a Market Executive • 3 lenders in King County (Seattle/Bellevue/Kent) • 2 lenders in Pierce County (Tacoma) • 1 lender in Thurston County (Olympia) • 1 lender in Portland, OR • 1 Market Executive for Vancouver, WA / OR Organic Growth
Slide 22: Organic Loan Growth
• Q4 2011 Loan Growth – Originated loans • Increased $35 million, or 4.4% – Net loans (including acquired portfolios) • Increased $20.2 million, or 2.0% • 2011 Loan Growth – Originated loans • Increased $95.9 million, or 12.9% Organic Loan Growth
Slide 23: Acquisitions
• FDIC Acquisitions – Successfully completed two FDIC acquisitions – Continue to participate in FDIC bidding process – Expect less than five closures in WA/OR in 2012 • Open Bank – Opportunistically review deals Acquisitions
Slide 24: Financial Performance
Financial Performance Financial Performance
Slide 25: Loans and Deposits
7 HaLoans =ADeposits —sk-% Loans to Deposits ED $1,136 $1,136 10% ) $1,004) $980. : $1,000 400% 4 $824 $340 $793 $800 $769_ STIG. A $746 95% $600 90% $400 $200 | 85% s 80% 12/3107 12/31/08 12/31/09 12/31/10 1231/11
Slide 26: Diversified Loan Portfolio
Loan Portfolio Financial data as of December 31, 2011 CRE Owner Occupied 22% CRE Non- Owner Occupied 27% Commercial & Industrial 34% Residential Construction 3% Commercial Construction 5% Residential Real Estate 4% Consumer 5% Diversified Loan Portfolio
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Slide 29: Attractive Deposit Base
December 31, 2010 December 31, 2011 Deposit Composition Attractive Deposit Base CDs 36% Non- Interest Bearing Demand 17% Interest Checking (NOW) 25% Money Market 13% Savings 9% CDs 29% Non- Interest Bearing Demand 20% Interest Checking (NOW) 27% Money Market 15% Savings 9% Financial Data as of Decem
Slide 30: Quarterly and Annual Earnings
Annual Earnings Quarterly Earnings Annual Earnings
Slide 31: Credit Quality: Peer comparison
Peer Source: SNL Financial Regional Peer Group (12): Ticker Symbols – BANR, CACB, COLB, FFNW, HOME, NRIM, PCBK, PRWT, RVSB, TSBK, WBCO, WCBO Credit Quality
Slide 32: Capital Management Strategies
• Cash Dividends – Resumed quarterly cash dividend in Q2 2011 at $0.03 – Increased quarterly dividend to $0.05 for Q3 and Q4 2011 – Special dividend of $0.25 in Q4 2011 – Increased quarterly dividend to $0.06 for Q1 2012 • Stock Repurchases – Announced 5% repurchase program in Q3 2011 – During 2011,
Slide 33: Core Strategies
Core Strategies Core Strategies
Slide 34: Core Strategies
Maintain Core Quality Loan Growth Fill in PNW Footprint Leverage Capital Core Strategies
Slide 35: Investment Value
• Experienced management team supported by a strong Board of Directors • Disciplined approach to acquisitions • Well-positioned to take advantage of the right opportunities • Continuing focus on building long-term franchise value • Solid financial performance trends Investment Value
Slide 36: Thank You, Questions?
Thank You Thank You Questions? Questions? Heritage Financial Corporation Heritage Financial Corporation
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