W.T.B. Financial Corp. · OTC:WTBFA
W.T.B. Financial — Shareholder Meeting (2018)
36 slides from W.T.B. Financial's shareholder meeting presentation, 2018
Slide 1: 2018 Annual Shareholders' Meeting
2018 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 community bank • Over 100 years of heritage • 4th generation Chairman of the Board and CEO • Relationship banking • High value customer relationships • Organic customer growth • Broad product line and customer base • Commercial banking customer focus • Retail and pr
Slide 4: Business Model
BUSINESS MODEL • Relationship banking requires… • A high degree of customer focus • High caliber professional bankers • Empowered employees • Decentralized decision-making • First-rate financial solutions • Customized to meet client needs • Standardized to be efficient and scalable • Customers that
Slide 5: Financial Management Principles
FINANCIAL MANAGEMENT PRINCIPLES • Balance Sheet Strength: • Credit discipline • Capital management • Allowance for loan losses • Liquidity resources • Risk Adjusted Performance: • Recurring earning power: • Earning assets = 97% of total assets • Interest rate risk positioning • Durability across the
Slide 6: Major Industry Themes
MAJOR INDUSTRY THEMES • Credit quality across the industry is excellent • Industry NPA’s to assets = 0.72% (lowest in 10 years) • Number of problem institutions = 95 (recent peak of 884 in 2010) • Industry ALLL to loans = 1.27% (also lowest in 10 years) • Tax reform weighed on profitability (favorab
Slide 7: 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 Pink Marketplace: www.otc markets.com WTBFA -- Class A shares (Voting) WTBFB -- Class B shares (Non-Voting) Over 100
Slide 8: 2017 Performance Summary
2017 PERFORMANCE SUMMARY 2017 FINANCIAL POSITION AND PERFORMANCE Deposit growth of $525 million, or 10.7% drove strong asset growth Assets finished the year at $6.2 billion, up 10.2%, or $577 million Balance Sheet Loans grew $147 million, or 3.9% to $3.9 billion Common shareholders' equity increased
Slide 9: 2017 Industry Performance
2017 INDUSTRY PERFORMANCE Industry Earnings: • Industry earnings = $165 billion, down $6 billion, or 3.5% YoY • Net interest revenue increased 8.2% on growth and wider margins • Provision for loan loss expense increased $3 billion, or 6.2% • Q4 noninterest expense up $9.4 billion, or 8.6% from Q4 20
Slide 10: Industry Consolidation Continues
INDUSTRY CONSOLIDATION CONTINUES… 17,886 Number of FDIC Insitutions The number of FDIC insured institutions has declined by over 12,000, or 68% to 5,670 since 1984… 5,670 Total Industry Assets $17,416,262 (000's) 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 20
Slide 11: Impacting the Smallest Banks
IMPACTING THE SMALLEST BANKS 18,000 Number of Institutions by Asset Size • All of the consolidation in the industry has 16,000 come from the smallest banks 14,000 • While banks with assets from $1 billion to $10 billion have grown 48% to 627 12,000 10,000 8,000 6,000 4,000 2,000 0 1984 1985 1986 198
Slide 12: Problem Bank Levels
PROBLEM BANK LEVELS Peak Normalized Source: FDIC website as of 4/10/2018 12
Slide 13: Industry Asset Quality Is Excellent
INDUSTRY ASSET QUALITY IS EXCELLENT Industry Noncurrent Assets and OREO to Assets 4.00% 3.48% 3.50% Problem assets peak for the 3.45% 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% 0.72% 0.00% 1984 1985 1986 1987 1988 1989 1990 1991 1992
Slide 14: But Profitability Hasn't Yet…
BUT PROFITABILITY HASN’T YET… Historical Quarterly Industry Return on Assets (Q) Average ROA of 1.50% 1.39% 1.03% (2011 to 2017) Average ROA of 1.20% 0.59% (1993 to 2006) Tax reform impact Q4 2017 0.00% -1.10% -1.10% -1.50% 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1
Slide 15: …And Won't Until Rates Normalize
…AND WON’T UNTIL RATES “NORMALIZE” 10.00% 10-Year UST Treasury Rates 9.04% (1990 to 2017) 8.01% 7.50% 6.73% 5.20% 5.00% 5.53% 5.19% 4.16% 3.00% 3.13% 2.79% 2.50% 2.08% 1.43% 1.37% 0.00% Source: United States Treasury website as of 4/10/2018 15
Slide 16: Industry Performance Comparison
INDUSTRY PERFORMANCE COMPARISON Washington FDIC DATA Trust Bank All COMPARATIVE METRIC: (2017) Insured Institutions Community Banks FINANCIAL PERFORMANCE Actual 4-Quarter Average (2017) Net Interest Margin (NIR/Earning Assets) 3.66% 3.25% 3.62% Cost of Funding Earning Assets 0.08% 0.48% 0.52% Operat
Slide 17: FinTech Revolution Well Underway
FINTECH REVOLUTION WELL UNDERWAY 17
Slide 18: Focus on WTBFC Company 2017 Performance in Perspective
FOCUS ON WTBFC COMPANY 2017 PERFORMANCE IN PERSPECTIVE 18
Slide 19: Assets and Capital
ASSETS AND CAPITAL Total Assets (in thousands) $6,246,000 • Assets increased $1.8 billion, or 41% over $5,669,000 $5,305,000 past five years $4,772,000 $4,436,000 • Common shareholders’ equity increased $137 million, or 35% over past five years • Common equity to assets declined 37 bps to 8.50% due
Slide 20: Investable Cash and Securities Trends
INVESTABLE CASH AND SECURITIES TRENDS SECURITIES AND INVESTABLE CASH (in millions) $2,136 $1,711 $749 $1,601 $326 $1,251 $439 $1,086 $277 $344 $ $425 % 24.8% $1,162 $1,385 $1,387 Million $809 $907 $ Growth over the % Growth over the Past Year Past Year 2013 2014 2015 2016 2017 Securities Investable
Slide 21: Deposit Trends
DEPOSIT TRENDS TOTAL DEPOSITS (in millions) $5,449 $4,924 $4,541 $4,083 $3,793 $ $525 % 10.7% Million $ Growth over the % Growth over the Past Year Past Year 2013 2014 2015 2016 2017 Noninterest Bearing Demand $2,358 43% • Deposit growth has been consistently strong (5 year CAGR of 7.5%) • Low rate
Slide 22: Loan Trends
LOAN TRENDS TOTAL LOANS (in millions) $3,785 $3,932 $3,557 $3,351 $3,176 $ $147 % 3.9% Million $ Growth over the % Growth over the Past Year Past Year 2013 2014 2015 2016 2017 Commercial Real Estate $1,259 32% • Mix of 1/3 CRE and 1/3 C&I reflects 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 • Up $0.31 per share, or 37% to $1.15 • Risk profile moderate • Capital quality is high (zero intangible ass
Slide 24: Capital Trends
CAPITAL TRENDS SHAREHOLDERS' EQUITY (in thousands) Common Shareholders’ Equity $530,791 $496,286 $441,598 $464,407 $438,069 $44,571 $496,286 $530,791 $ $34.5 % 7.0% $464,407 $393,498 $422,027 Million $ Growth over the % Growth over the Past Year Past Year 2013 2014 2015 2016 2017 Common Shareholders
Slide 25: Asset Quality Is High
ASSET QUALITY IS HIGH $50,000 1.50% $36,712 The Bank’s asset quality is high In thousands $29,358 with problem assets 0.83% $18,782 declining significantly $15,146 0.62% $11,534 to historically low levels 0.35% 0.27% 0.18% $- 0.00% 2013 2014 2015 2016 2017 Nonaccrual loans and ORE Nonaccrual loans a
Slide 26: WMAS and Trust: Key Business Line
WMAS AND TRUST: KEY BUSINESS LINE Wealth Management and Advisory Services, including Trust Powers • $5.6 billion portfolio of assets • Managed asset growth of $471 million, or 16.5% • Total asset growth of $811 million, or 17.1% • Fee income based business • Recurring revenue stream • Diversifies re
Slide 27: Income Statement Trends
INCOME STATEMENT TRENDS Years Ended December 31, Income Statement (000's) 2016 2017 $ Difference % Change Net interest revenue $ 181,561 $ 206,769 $ 25,208 13.9% Provision for loan losses 2,250 - (2,250) -100.0% Noninterest revenue 48,541 49,137 596 1.2% Noninterest expense 148,429 167,832 19,403 13
Slide 28: Overview of Tax Reform Act
OVERVIEW OF TAX REFORM ACT • Tax rate change • From 35% in 2017 to 21% effective in 2018 and beyond • Revaluation of deferred tax assets • DTA’s arise from timing differences • Recognized for financial statements, but delayed for tax • Tax rate change increased income tax expense by $16.8 million •
Slide 29: Overview of Tax Reform Act
OVERVIEW OF TAX REFORM ACT W.T.B. Financial Corporation Comparative Summary of the Impact of Tax Reform and Tax Planning on 2017 Performance 2017 Reporting Comparison Actual Tax Reform Results w/o (Dollars in Thousands) Results Impact Tax Reform Comments Earnings Net interest revenue $ 206,769 - $ 2
Slide 30: WTBFC Financial Performance Metrics
WTBFC FINANCIAL PERFORMANCE METRICS For the Year Performance Metric 2016 2017 Difference Return on average assets 0.98% 0.72% -0.26% Return on shareholders’ equity 10.53% 7.93% -2.60% Margin on average earning assets 3.53% 3.66% 0.13% Noninterest expense to average assets 2.81% 2.89% 0.08% Nonintere
Slide 31: Key Shareholder Value Metrics
KEY SHAREHOLDER VALUE METRICS Years Ended December 31, Income (000's) and Per Share Data 2016 2017 $ Difference % Change Net Income $ 51,727 $ 41,798 $ (9,929) -19.2% Diluted Earnings per Common Share $ 20.29 $ 16.36 $ (3.93) -19.4% Dividends per Common Share $ 3.00 $ 3.36 $ 0.36 12.0% Book Value pe
Slide 32: WTBFB Historical Returns
WTBFB HISTORICAL RETURNS WTBFC Class B Common Stock Returns 1 Year Returns Valuation Valuation Change Method: YE 2016 YE 2017 Total $/Share CAGR % Book Value $ 193.66 $ 206.48 $ 12.82 6.6% Market Close $ 255.00 $ 354.00 $ 99.00 38.8% 3 Year Returns Valuation Valuation Change Method: YE 2014 YE 2017
Slide 33: Q1 2018 Highlights (YoY Comparison)
Q1 2018 HIGHLIGHTS (YoY COMPARISON) • Favorable earnings trends continued • Net interest revenue up $6.3 million, or 13.0% to $54.8 million • Noninterest revenue up $1.1 million, or 9.3% to $12.5 million • Noninterest expense up $2.7 million, or 6.7% to $42.6 million • Performance enhanced by tax re
Slide 34: Outlook ~ 2018 and Beyond
OUTLOOK ~ 2018 AND BEYOND • Economic recovery accelerating • Tax reform contributing to renewed optimism • Capital market volatility a source of concern • Year 9 of expansion…cautious of late cycle risks • Fed signaling further rate increases in the future • Rising rates bring liquidity risk managem
Slide 35: Key Priorities
KEY PRIORITIES • 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 relationship
Slide 36: Your Time Is Valuable to Us
YOUR TIME IS VALUABLE TO US WE APPRECIATE YOUR SUPPORT AND ALWAYS WELCOME CUSTOMER REFERRALS