W.T.B. Financial Corp. · OTC:WTBFA
W.T.B. Financial — Shareholder Meeting (2019)
34 slides from W.T.B. Financial's shareholder meeting presentation, 2019
Slide 1: 2019 Annual Shareholders' Meeting
2019 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: 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 4: Financial Management Principles
FINANCIAL MANAGEMENT PRINCIPLES • Balance Sheet Strength: • Credit discipline • Capital management • Allowance for loan losses • Liquidity resources • Interest rate risk positioning • Consistent Risk Adjusted Performance: • Operate within established risk limits • Recurring earning power : Earning a
Slide 5: Major Industry Themes
MAJOR INDUSTRY THEMES • Credit performance across the industry is excellent • Industry NPA’s to assets = 0.60% • Note: Credit performance tends to be a trailing recessionary indicator • Number of problem institutions = 60 (recent peak of 884 in 2010) • Tax reform adding to higher Industry profitabil
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: 2018 Performance Summary
2018 PERFORMANCE SUMMARY 2018 FINANCIAL POSITION AND PERFORMANCE Assets grew $306 million, or 4.9% to nearly $6.6 billion Shareholders' equity increased $72 million, or 13.5% to $603 million Balance Sheet Loans grew $115 million, or 2.9% to $4.0 billion Investible cash and bonds totaled over $2.3 bi
Slide 8: 2018 Industry Performance
2018 INDUSTRY PERFORMANCE Industry Earnings and Performance Metrics: • Industry earnings = $237 billion, up $72 billion, or 44% YoY • Net Interest Margin = 3.40%, up 15 bps • Return on assets = 1.35%, up 38 bps YoY • Return on equity = 11.98%, up 337 bps Industry Balance Sheet: • Deposits = $13.9 tr
Slide 9: Industry Consolidation Continues
INDUSTRY CONSOLIDATION CONTINUES… 17,886 The number of FDIC insured Number of FDIC Insitutions institutions has declined by over 12,000, or 70% to 5,406 since 1984… 5,406 Total Industry Assets $17,943,122 (000's) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 20
Slide 10: Impacting the Smallest Banks
IMPACTING THE SMALLEST BANKS 18,000 Number of Institutions by Asset Size 16,000 • All of the consolidation in the industry has 14,000 come from the smallest banks • While banks with assets from $1 billion to 12,000 $10 billion have grown 50% to 638 10,000 8,000 6,000 4,000 2,000 0 1984 1985 1986 198
Slide 11: Problem Bank Levels...Normalized
PROBLEM BANK LEVELS…NORMALIZED Number of FDIC-Insured "Problem" Institutions 2008-2018 Number of Institutions 1000 884 Financial crisis peak 900 813 800 702 700 651 600 500 467 400 291 300 252 "Normal" 183 200 123 95 92 82 71 100 60 0 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 3/18
Slide 12: Credit Performance Is Excellent
CREDIT PERFORMANCE IS EXCELLENT Industry Noncurrent Assets and OREO to Assets 4.00% 3.48% 3.45% 3.50% Problem assets peak for the industry in 1991 and 2010 3.00% 2.50% 2.00% 1.50% Average NPA’s to Assets 1.00% = 0.73% (1995 to 2007) 0.50% 0.64% 0.00% 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Slide 13: Profitability at Historic Levels
PROFITABILITY AT HISTORIC LEVELS Historical Industry Return on Assets (Q) Lower 2.00% Average ROA of Corporate Tax 1.00% rate in 2018 (2011 to 2016) 1.33% Average ROA of 1.20% Tax reform (1993 to 2006) impact Q4 2017 0.00% -1.10% -1.10% -2.00% 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1
Slide 14: Turn in Rates Reverses 30 Year Trend
TURN IN RATES REVERSES 30 YEAR TREND 10.00% 10-Year UST Treasury Rates 9.04% (1990 to 2018) 8.01% 7.50% 6.89% 6.79% 5.19% 5.00% 5.53% 5.19% 4.16% 3.00% 2.84% 3.13% 2.50% 2.08% 1.43% 1.37% 0.00% Source: United States Treasury website as of 4/10/2018 14
Slide 15: ...But Rate Tightening Flattens the Curve
…BUT RATE TIGHTENING FLATTENS THE CURVE US Treasury Yield Curve 3.00% 2.56% 2.47% 2.38% 2.41% Long end of the curve increases 50 bps 2.06% Yield curve shape "flattens" Short end of the curve increases 241 bps 0.00% 0.00% 1 Mo 3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 9/30/2015 4/12/2019 Source: U.S.
Slide 16: Industry Performance Comparison
INDUSTRY PERFORMANCE COMPARISON FDIC DATA Washington Trust Bank COMPARATIVE METRIC: (2018) All Insured Instituitions Community Banks FINANCIAL PERFORMANCE Actual 4 Quarter Average (2018) Net Interest Margin (NIR/Earning Assets) 3.77% 3.41% 3.71% Cost of Funding Earning Assets 0.19% 0.75% 0.71% Opera
Slide 17: Fintech Revolution Well Underway
FINTECH REVOLUTION WELL UNDERWAY 17
Slide 18: Focus on WTBFC Company 2018 Performance in Perspective
FOCUS ON WTBFC COMPANY 2018 PERFORMANCE IN PERSPECTIVE 18
Slide 19: Assets and Capital
ASSETS AND CAPITAL Total Assets (in thousands) $6,552,000 $6,246,000 $5,669,000 • Assets + $1.8 billion, or 37% over past 5 $5,305,000 years $4,772,000 • Common shareholders’ equity + $180 million, or 43% over past 5 years • Common equity to assets up 70 bps in 2018 to 9.20% due to strong earnings •
Slide 20: Investable Cash and Securities Trends
INVESTABLE CASH AND SECURITIES TRENDS Securities and Investible Cash (in millions) $2,340 $2,136 $751 $1,711 $1,601 $749 $326 $1,251 $344 $439 $ $204 % 9.6% $1,385 $1,387 $1,589 Million $1,162 $907 $ Growth over the % Growth over the Past Year Past Year 2014 2015 2016 2017 2018 Securities Investable
Slide 21: Deposit Trends
DEPOSIT TRENDS TOTAL DEPOSITS (in millions) $5,449 $5,639 $4,924 $4,541 $4,083 $ $190 % 3.5% Million $ Growth over the % Growth over the Past Year Past Year 2014 2015 2016 2017 2018 • Deposit growth has been strong (5 year Noninterest Bearing Demand $2,414 43% CAGR of 8.3%) • Low rate environment: •
Slide 22: Loan Trends
LOAN TRENDS TOTAL LOANS (in millions) $3,932 $4,047 $3,785 $3,557 $3,351 $ $115 % 2.9% Million $ Growth over the % Growth over the Past Year Past Year 2014 2015 2016 2017 2018 • Mix of 1/3 CRE and 1/3 C&I reflects Commercial Real Estate $1,304 32% commercial banking focus Commercial & Industrial $1,
Slide 23: Focus on Capital
FOCUS ON CAPITAL • Capital levels well above regulatory minimums • Profitability levels sufficient to fund growth • Tax Reform favorable to capital formation • Quarterly dividend raised in Q1 2018 • Up $0.31 per share, or 37% to $1.15 ($4.60 annualized) • Quarterly dividend raised in Q1 2019 • Up $0
Slide 24: Capital Trends
CAPITAL TRENDS SHAREHOLDERS' EQUITY (in thousands) Common Shareholders’ Equity $602,665 $496,286 $530,791 $ $71.9 % 13.5% $464,407 $441,598 Million $ Growth over the % Growth over the Past Year Past Year 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 WTBFC Regulatory Capital Position WTBFC Regula
Slide 25: Credit Performance Is High
CREDIT PERFORMANCE IS HIGH $29,358 0.62% $18,782 The loan portfolio’s credit performance is high with In thousands $15,146 $11,534 problem assets $10,671 0.35% declining significantly 0.27% to historically low levels 0.18% 0.16% 2014 2015 2016 2017 2018 Nonaccrual loans and ORE Nonaccrual loans and
Slide 26: Wealth Management and Trust
WEALTH MANAGEMENT AND TRUST Wealth Management and Advisory Services, including Trust Powers • Key business line…attractive complement to banking book • $5.6 billion portfolio of assets • Fee income based business • Recurring revenue stream • Diversifies revenue base • Off-balance sheet business line
Slide 27: Income Statement Trends
INCOME STATEMENT TRENDS Years Ended December 31, Income Statement (000's) 2017 2018 $ Difference % Change Net interest revenue $ 206,769 $ 236,252 $ 29,483 14.3% Provision for loan losses - 2,700 2,700 NM Noninterest revenue 49,137 51,008 1,871 3.8% Noninterest expense 167,832 180,124 12,292 7.3% Pr
Slide 28: WTBFC Financial Performance Metrics
WTBFC FINANCIAL PERFORMANCE METRICS For the Year Performance Metric 2017 2018 Difference Return on average assets 0.72% 1.30% 0.58% Return on shareholders’ equity 7.93% 14.94% 7.01% Margin on average earning assets 3.66% 3.77% 0.11% Noninterest expense to average assets 2.89% 2.82% -0.07% Noninteres
Slide 29: Key Shareholder Value Metrics
KEY SHAREHOLDER VALUE METRICS Years Ended December 31, Income (000's) and Per Share Data 2017 2018 $ Difference % Change Net Income $ 41,798 $ 83,056 $ 41,258 98.7% Diluted Earnings per Common Share $ 16.36 $ 32.42 $ 16.06 98.1% Dividends per Common Share $ 3.36 $ 4.60 $ 1.24 36.9% Book Value per Co
Slide 30: WTBFB Historical Returns
WTBFB HISTORICAL RETURNS WTBFC Class B Common Stock Returns 1 Year Returns Valuation Valuation Change Method: YE 2017 YE 2018 Total $/Share CAGR % Book Value $ 206.48 $ 234.45 $ 27.97 13.5% Market Close $ 354.00 $ 314.85 $ (39.15) -11.1% 3 Year Returns Valuation Valuation Change Method: YE 2015 YE 2
Slide 31: Q1 2019 Highlights (YoY Comparison)
Q1 2019 HIGHLIGHTS (YoY COMPARISON) • Favorable YoY earnings trends continued • Net interest revenue up $6.6 million, or 12.1% to $61.4 million • Net interest margin widened 29 bps to 3.94% • Net income up $1.3 million, or 7.0% to $20.2 million • Credit performance remains strong • Noncurrent loans
Slide 32: Major Technology Initiatives
MAJOR TECHNOLOGY INITIATIVES • Key Themes • Digital strategy • Data management, business intelligence and decision making • Payment systems • Customer experience and capabilities • Mobile banking • Continuous improvement, agile and lean • Work-flow process improvement • Simplicity, operating leverag
Slide 33: Consistent Guiding Themes
CONSISTENT GUIDING THEMES • Strength • Maintain balance sheet strength and conservative risk profile • Position for Fed policy shifts/macro events • Adapt and evolve • Shifting “FinTech” landscape • Enhance the customer experience • Execute on electronic/mobile delivery • Discipline • Stay true to r
Slide 34: Thank You
YOUR TIME IS VALUABLE TO US Thank You WE APPRECIATE YOUR SUPPORT AND ALWAYS WELCOME CUSTOMER REFERRALS