Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — D.A. Davidson 2014 Annual Financial Services Conference
27 slides from Heritage Financial's conference presentation, May 13, 2014
Slide 1: D.A. Davidson Annual Financial Services Conference
Exhibit 99.1 D.A. 13 May Brian BryanDavidson Vance, McDonald, & 14,CEO 2014 Annual Executive of HFWA Financial Vice and Services Heritage PresidentConference Bank and CLO Jeff Deuel, of Heritage President Bankand COO of Heritage Bank Don Hinson, Executive Vice President and CFO of HFWA
Slide 2: Forward-Looking Statements
Forward-Looking This and general Fluctuations Risks inability Changes These The then or 2could circumstances costs expected ability Company actually presentation negatively associated and economic of in orother to key legislative accounting difficulties in known revenues, recruit cautions demand thi
Slide 3: Company Overview
Company Overview 3WBCO Merger Overview Financial Review Strategic Initiatives
Slide 4: Our Company Overview
Our Company NASDAQ Overview 4Data as of May Symbol 1, 2014 HFWA Market Capitalization $480 million Headquarters Olympia, WA Branches 67
Slide 5: Our Company: Year in Review
OurClosed 2013 Q1 Q2 Q3 Core Valley Q4 Consolidated 5Announced Central Merger Company System Year Bankin 3with and Valley WBCO Conversion Heritage Review Conversion 4 of Conversion Valley 8Bank Merger Valley Bank Community Subsidiary Bank with Branches Northwest Branches Consolidation Bancshares, Co
Slide 6: Resulting Performance Metrics
Resulting As March 2013 Total Deposits Number Assets Non-Interest 3.63% Average *Dollars 6conjunction Excludes of Assets 2013 Deposits and 3.65% 31, per inof Earning per Performance for thousands Dec Employee 2014 Branches FTE expenses with $1,447,080 Branch Expense the 3.38% $1,225,112 31, 349 Chan
Slide 7: WBCO Merger Overview
Company WBCO Financial 7Strategic Merger Initiatives Review Overview
Slide 8: Strategic Merger Rationale
(1) Strategic Compelling Shareholder $3.4 Logical Combination Approximately Effective and Low Conservative markets fill-in billion(1) Risk risk 8(2) Mean geographic and Pro Merger profile, use Profile opportunities EPSStrategic Value business forma of approach in 24% two capital Rationale considerab
Slide 9: Compelling Combination, Logical Fit
Compelling HFWA WBCO Combination Logical Doubles #3 Strength Larger (1) Includes deposit Pro scale, Branches forma Branches geographic the all from ofmarket both institutions Pro branch deeper creates includes theForma franchises (36) (31) North share fit footprint resources, $3.4 preliminary Footpr
Slide 10: Merger Summary
(1) Merger Name Heritage Capital Will Olympia, 8HFWA: Fixed Pro 10directors forma doexchange Headquarters Summary business Brian Based Financial Washington shares company from Vance on ratio HFWA as outstanding HFWA’s Corporation “Whidbey will Management (CEO), of 0.8900x /maintain 7 directors 10-da
Slide 11: Financially Compelling EPS Impact
Financial Financially EPS incremental position Source: (1) period HFWA 11 Mean accretion based shares SNL –EPS Impact TCE Compelling earnings on Financial, outstanding of estimate ratio the approximately number and method(3) for financial leverage (4) 2014 ofPayback years 13% Payback per data ratio
Slide 12: Summary Pro Forma Financials
Summary Pro Total Number Tangible Leverage Risk ROAA ROATCE (1) gross 12 Pro Forma(1) Based Assets Loans(2) Deposits loans (FY forma of Common Ratio(4) Pro (FY Branches(3) purchased Capital 2013) $ includes Forma 1.7B 2013) $$ 1.4B 1.2B 0.62% 11.3% Equity Ratio(4) $ 5.20% Financials 1.7B $in $prelim
Slide 13: Diversified Loan Portfolio and Strong Deposit Base
Diversified $1.2B 5.53% $1.1B 6.14% Commercial Consumer Construction 1-4 $2.3B 5.81% Strong HFWA $1.4B 0.25% WBCO $1.5B 0.31% Pro Noninterest-Bearing NOW MMDA Savings CDs $2.9B 0.28% Source: (1) Total Family Forma Forma(2) 21.2% 23.7% 22.4% & Loans Deposits Yield Cost Core SNL 12.0% 8.8% 10.4% 16.8%
Slide 14: Strong Pro Forma Washington-Based Market Position
Strong Pro Washington-Based #Washington 987654321Rank 10 11 12 13 14 15 16 17 18 19 20 Total Source: (2) Yakima W.T.B. Wells Washington PRO HomeStreet Banner Heritage Peoples of Bank U.S. JPMorgan KeyCorp Umpqua Columbia Mitsubishi First PRO Banner Yakima Timberland W.T.B. Washington Skagit Olympia
Slide 15: Complementary Washington Footprint
Complementary Washington Pro Year Community Footprint North Foothold North-South Consumer Fee Mortgage SBA (1) Source: Forma Income Established Rankings of King in Concentration: Banking Lending SBA Portland, Generation: Banking I-5County (1) Corridor Business Lender (Bank) #2 SBA Auto Company Focus
Slide 16: Benefits to All Stakeholders
Benefitsretail Enhance Employees Customers Shareholders Strengthens Increased Similar Broader Larger Retention Tenured 16 strategy product board for shareholder liquidity ofAll position footprint key ofStakeholders and offering management directors and commitment of value tomarket the service for co
Slide 17: Financial Review
Company Overview WBCO Financial Strategic 17 Merger Initiatives Review Overview
Slide 18: Earnings: Financial Statistics
Three Mar Earnings: originated Provision purchased Noninterest Diluted Financial Return Efficiency Net 18 income interest 31, Months on EPS 2014 Statistics Ratios: for average loans ratio Income 2,543 margin income expense 0.16 loan Dec Ended 77.59% 0.04 710 losses 31, assets equity 4.48% 2,307 $14,
Slide 19: Balance Sheet and Credit Quality Statistics
As of Balance Loans, Investment Total Financial Tang Net Deposits Assets Credit ALLL Nonperforming loans 19 assets loans book common assets equity Period Quality on per including Sheet: 1,404,214 per Statistics Measures: orig toFTE value securities $216,417 deposits branch End 1,662,473 loans equity
Slide 20: Net Loan Trends
Net 2010 $720.0 $Originated Non- Purchased Total Loans Covered Dollars 20131.0 Loan 2011 $ $815.6 979.8 in $83.5 $Trends millions 128.7 2012 $1,004.5 $59.0 $855.4 2013 $105.4 $185.4 CAGR $960.1 $998.4 $84.0 $176.4 $976.4 $1,203.1 $57.67.72% $54.9 7.91% $1,207.7 -19.18% 5.37%
Slide 21: Total Regulatory Capital Measures
(1) Capital Total 20.7% 21.4% 25% 19.9% 16.8% 14.90% 2009 0% 5% 10% Regulatory Forma 2010 Risk 20.3% 20% 16.5% Tangible 13.9% 16% 12.2% 9.1% 6% 21 4%8%Measures 15% Pro Based 2011 13.9% 11.4% 2% Minimum Forma Common 2012 12%Capital 13.9%includes 201310% Q1’14 preliminary Equity/Tangible 11.4% 14% Pro
Slide 22: Cash Dividends
Cash 2011 Q1 -Quarterly *Special Dividend was 22 -$.03 The -Q2 $.25 declared 2012 Dividends dividends $.05 Q3- $.20 Q4 2013 $.05 one Q1 -$.06 for 2014 $.30 month Q2Q1 $.08 Q3 - $.10 2014 inQ4 $.08 advance -Q1 consist - $.08 - Q2as $.08 Q3 ofaaQ4 result $.08 regular Q1$.08 of quarterly the$.08 antici
Slide 23: Strategic Initiatives
CompanyInitiatives Overview Strategic 23 Overview WBCO Merger Financial Review
Slide 24: 2014/2015 Priorities: Organic Growth
•• Organic 2014/2015 Priorities Continue Assets Growth We provided per 2014 loan Efficiency Employee Non-Interest growth Improvements Expense/Average guidance Assets of 5 - 7%. Successful forRevised 2015 toof7WBCO Conversion - 10% for 2014 Focus on SBA Lending Non-interest income growth for 2014/201
Slide 25: 2014/2015 Priorities: Drive Growth
• Drive 2014/2015 growth Dividend Will Priorities Loanconsider growth synergies and Seattle/Bellevue payout may as aOrigination “up-market” Mortgage exceed opportunistic result 35-40% stock of the WBCO relationships Wealth payout buybacks combination Management ratio Capital until capital Merger/Acq
Slide 26: Investment Summary
•26 Investment As • aAn Aresult An enhanced of Value company the expanded Sufficient ofWBCO and stronger scale merger, that management product capital for balance can Heritage drive team offering further and growth sheet hasorganic greater structure created: formidable growth and I-5 delivery effici
Slide 27: Questions and Answers
Questions and Answers 27
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