W.t.b. Financial Corp. · OTC:WTBFA
W.t.b. Financial — Shareholder Meeting (2022)
34 slides from W.t.b. Financial's shareholder meeting presentation, May 16, 2022
Slide 1: W.T.B. Financial Corporation Annual Shareholders' Meeting
2022 W.T.B. Financial Corporation Annual Shareholders’ Meeting Presented by: Larry Sorensen Chief Financial Officer
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,” “expe
Slide 3: Company Overview
W.T.B. Financial Corporation Company Overview
Slide 4: Mission and Geographic Footprint
MISSION AND GEOGRAPHIC FOOTPRINT Our Mission Markets Served 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 relationships with
Slide 5: Core Identity
CORE IDENTITY • Pacific Northwest regional community bank • Business model: Relationship banking • 120 years of heritage • High value customer relationships • 4th generation Chairman and CEO • Organic customer growth • Private ownership and family heritage • Broad product line and customer base • Co
Slide 6: Financial Management Principles
FINANCIAL MANAGEMENT PRINCIPLES Balance Sheet Strength: Shareholder Value / Capital Discipline: • Credit discipline…strong allowance position • Maintain capital adequacy • Disciplined capital management • Internal capital generation for growth • Ample liquidity resources • Competitive return on capi
Slide 7: 2021 Big WTBFC Themes and Issues
2021 BIG WTBFC THEMES AND ISSUES Financial Themes: Operational Themes: ▪ Strong growth ▪ Strategic focus ▪ Deposits, assets, liquidity ▪ Customer experience, technology, delivery, scale ▪ Net interest revenue, expenses and earnings ▪ Technology focus ▪ Solid loan growth…obscured by PPP* portfolio ▪
Slide 8: Operating Environment
Operating Environment
Slide 9: Inflation Emerges to Dominate Rate Outlook
Inflation Emerges to Dominate Rate Outlook 60 years of history The Personal Consumption Expenditures Index (“PCE”) is rarely higher than Prime Rate In 2012…FOMC longer-run policy goal of 2.0% inflation In 2021…PCE breaks above 4.0% in June In 2022…PCE surges to 6.4% in February PCE rarely > Prime Ra
Slide 10: Rate Market Responds to Inflation and Hawkish FOMC
Rate Market Responds to Inflation and Hawkish FOMC UST Yield Curve YE 2020, YE 2021 and 4/19/2022 With emerging inflation and a more hawkish Fed ▪ Yield curve shifted up dramatically since YE 2021: ▪ 2-year UST up 188 bps ▪ 5-year UST up 165 bps ▪ 10-year UST up 141 bps ▪ The market anticipates futu
Slide 11: Industry Themes
Industry Themes
Slide 12: COVID Policy Response Drives Deposit Growth
COVID Policy Response Drives Deposit Growth Industry Loans and Deposits (in millions) $19,702 Policy response brings relief and flood of liquidity: ▪ Quantitative Easing ▪ PPP loan origination / forgiveness $14,536 $8.5T ▪ Fiscal stimulus ▪ Consumer relief programs Deposit growth > loan growth $4.0T
Slide 13: Flood of Liquidity into the Financial System
Flood of Liquidity into the Financial System Policy response to pandemic / recession: ▪ Flooded financial system with liquidity ▪ Liquidity is “inventory” available for loan growth and deposit dynamics ▪ Untapped resource of financial flexibility ▪ Available to deploy into higher yielding instrument
Slide 14: Industry Net Interest Margin
Industry Net Interest Margin Industry margin of 2.56% lowest in over 40 years: ▪ Down 175 basis points from modern peak ▪ Major drivers: ▪ Policy response to COVID brings ▪ Extraordinary low rates in 2020 / 2021 ▪ High levels of low yielding cash / bonds ▪ Rising rates should help margins ▪ But will
Slide 15: Industry: Significant Charge-Offs Never Materialized
Industry: Significant Charge-Offs Never Materialized Annual Industry Loan Charge-Offs Annual Industry Provision Expense (in millions) (in millions) Great Recession Great Recession $249,695 $208,295 $205,297 COVID $132,260 $176,218 $157,989 $134,920 $122,740 COVID $101,136 -$31,007 2000 2001 2002 200
Slide 16: WTB: Significant Charge-Offs Never Materialized
WTB: Significant Charge-Offs Never Materialized Annual WTB Loan Charge-Offs Annual WTB Provision Expense (in thousands) (in thousands) Great Recession $73,067 $78,800 $51,153 $49,838 COVID $48,524 $55,175 $46,925 $46,800 $9,000 $7,412 $33,000 2000 2001 2002 2004 2005 2006 2007 2009 2010 2011 2012 20
Slide 17: 2021 Major Industry Themes
2021 MAJOR INDUSTRY THEMES ▪ Balance Sheet Items: ▪ Deposits increased $1.9 trillion, or 10.5% to $19.7 trillion (deposits fund 83% of the balance sheet) ▪ Loans increased $383 billion, or 3.5% to $11.2 trillion…a record low of just 47% of assets ▪ Note that C&I loans declined $126 billion, or 5.2%
Slide 18: WTBFC 2021 Performance in Perspective
WTBFC 2021 Performance in Perspective
Slide 19: Total Assets and Mix
TOTAL ASSETS AND MIX ▪ Asset mix shifted towards cash and securities ▪ Asset growth accelerated in 2020 and continued in 2021 ▪ Investible cash totaled $2.0 billion, or 18% of assets ▪ Assets up $1.3 billion, or 13% in 2021 ▪ Securities total $3.3 billion, or 30% of assets ▪ Assets up $3.9 billion,
Slide 20: Investible Cash and Securities Trends
INVESTIBLE CASH AND SECURITIES TRENDS Investible Cash (upper) and Securities (lower) $5,313 ($ in millions) $4,041 $1,987 $1,463 $ $1.3 % $2,420 31% $2,136 $2,340 $524 Billion $751 $749 $3,326 $2,578 $ Growth over the % Growth over the $1,589 $1,896 Past Year Past Year $1,387 2017 2018 2019 2020 202
Slide 21: Focus on Capital
FOCUS ON CAPITAL Shareholders' Equity (in thousands) $806,518 $832,945 $695,904 $602,665 $530,791 $ $26 % 3.3% million $ Growth over the % Growth over the Past Year Past Year 2017 2018 2019 2020 2021 Shareholders’ equity up $302 million, or 57% since YE 2017 ▪ Rapid growth in average 5-Year Capital
Slide 22: Capital Perspective and Framework
CAPITAL PERSPECTIVE AND FRAMEWORK ▪ Capital levels are significantly above regulatory minimums ▪ “Tightest” $ cushion is $253 million above Total Risk Based Capital minimums ▪ “Tightest” % cushion is 264 basis points above Leverage Ratio minimums ▪ Capital quality is high ▪ No intangible assets ▪ No
Slide 23: Loan Portfolio Trends
LOAN PORTFOLIO TRENDS Total Loans ($ in millions) $5,592 $5,536 $4,543 $3,932 $4,047 $ $56 % 1.0% Million $ Change over the % Change over the Past Year Past Year 2017 2018 2019 2020 2021 Loan Portfolio Mix (YE 2021; $ in millions and % of total) Commercial real estate $1,903 35% ▪ Loan decline due t
Slide 24: Organic Loan Growth / PPP Loan Balances
Organic Loan Growth / PPP Loan Balances Loan Totals with PPP Loan Balances (in millions) $206 $971 $5,330 ▪ 2020: Loan growth was largely due to the PPP loan program $- ▪ Non-PPP loan growth = $78 million, or 2% $4,621 ▪ PPP loan growth = $971 million $4,543 ▪ 2021: Loan portfolio decline was entire
Slide 25: Credit Performance
CREDIT PERFORMANCE ▪ Credit performance has been solid, especially given challenging operating environment ▪ Noncurrent loans remain at moderate levels ($51 million at YE 2021) ▪ Classified loans remain at moderate levels and trending down ▪ $126 million at YE 2021 ▪ $140 million at YE 2020 ▪ Net ch
Slide 26: Credit Performance Metrics
CREDIT PERFORMANCE METRICS Noncurrent Loans ($'s in thousands) and ORE as % of Assets ▪ Noncurrent loans remain low by historical standards ▪ Increase to $51 million in 2021 due to a borrower bankruptcy ▪ Write-down taken in 2021 0.46% ▪ Offset by significant recoveries ▪ Nonaccrual loans < 0.50% of
Slide 27: Deposit Portfolio Trends
DEPOSIT PORTFOLIO TRENDS Total Deposits ($ in millions) $9,890 $8,699 $5,449 $5,639 $6,227 $ $1.2 % 13.7% Billion $ Growth over the % Growth over the Past Year Past Year 2017 2018 2019 2020 2021 Deposit Portfolio Mix ▪ Deposit growth extraordinary since YE 2019 (YE 2021; $ in millions and % of total
Slide 28: Wealth Management and Trust Division
WEALTH MANAGEMENT AND TRUST DIVISION Key business line…complements banking client book ▪ Wealth management, fiduciary, trust and investment services ▪ Competitive advantage for high value and affluent customers ▪ Long-term, relationship-based business line Attractive financial dynamics ▪ Stable, fee
Slide 29: Earnings Overview
EARNINGS OVERVIEW ▪ Net interest revenue up on growth in earning assets Years Ended December 31, ▪ Provision expense down on good credit performance Income Statement (000's) 2020 2021 $ Difference % Change ▪ Noninterest revenue steady Net interest revenue $ 272,257 $ 299,057 $ 26,799 9.8% ▪ Lower Yo
Slide 30: WTBFC Financial Performance Metrics
WTBFC FINANCIAL PERFORMANCE METRICS For the Year Performance Metric 2020 2021 Difference ▪ While net interest margin declined to record low of 2.95% Return on average assets 0.89% 0.96% 0.07% ▪ Industry net interest margin also hit a record low at 2.54% Return on shareholders’ equity 9.90% 12.34% 2.
Slide 31: WTBFC Shareholder Value Metrics
WTBFC SHAREHOLDER VALUE METRICS Years Ended December 31, Income (000's) and Per Share Data 2020 2021 $ Difference % Change ▪ Earnings hit record levels Net Income $ 76,312 $ 100,030 $ 23,718 31.1% ▪ Net income up 31% to $100 million Diluted Earnings per Common Share $ 30.06 $ 39.40 $ 9.34 31.1% ▪ EP
Slide 32: WTBFC Q1 2022 Highlights
WTBFC Q1 2022 HIGHLIGHTS ▪ Assets: Steady at $11.1 billion (down $5 million QoQ up $976 million YoY) ▪ Loans: Down $84 million, or 1.5% QoQ as $100 million in PPP loans are forgiven ▪ $106 million in PPP loans remained at end of Q1, from $1.7 billion in originations ▪ Deposits: Up $14.5 million, or
Slide 33: Closing Thoughts
CLOSING THOUGHTS ▪ 2021 was a record year, with some unusual elements to it: ▪ Record earnings of $100 million, supported by: ▪ Earnings from PPP loans (most PPP loans have now paid-off) ▪ One-time benefits from bond prepayments and loan recoveries ▪ Strong deposit growth (up 13.7%), but declining l
Slide 34: Thank you for your support!
Thank you for your support!