HERITAGE FINANCIAL CORPORATION OLYMPIA, Wash., Jan. 29, 2015 /PRNewswire/ -- HERITAGE FINANCIAL CORPORATION (NASDAQ GS: HFWA) Brian L. Vance, President and CEO of Heritage Financial Corporation ("Company" or "Heritage"), today reported that the Company had net income of $7.3 million for the quarter ended December 31, 2014 compared to net income of $710,000 for the quarter ended December 31, 2013 and $7.1 million for the linked-quarter ended September 30, 2014. Net income for the quarter ended December 31, 2014 was $0.24 per diluted common share compared to $0.04 per diluted common share for the quarter ended December 31, 2013 and $0.23 per diluted common share for the linked-quarter ended September 30, 2014.
Net income for the year ended December 31, 2014 was $21.0 million, or $0.82 per diluted common share, compared to $9.6 million, or $0.61 per diluted common share, for the year ended December 31, 2013.
Mr. Vance commented, "As we have finished our second full quarter following our merger with Washington Banking Company, we are pleased with our overall performance. We completed a successful systems conversion early in the quarter and also posted strong loan and core deposit growth. We believe the fourth quarter loan and core deposit growth, especially still early in the consolidation process, is evidence our merger is progressing nicely."
"Although the fourth quarter continued to show merger related expenses, we believe we continue to make significant improvement in cost savings, efficiencies and overall economies of scale. For the quarter ended December 31, 2014, our earnings per share, return on average assets and return on average equity are all improved over the past five quarters. In addition, we continue to see improvement in our overall loan quality as evidenced by the reduction of nonperforming noncovered loans to only 0.29% of total noncovered assets."
"Finally, we are also pleased to announce a regular cash dividend of $0.10, which is an 11% increase from the prior quarter regular dividend and a 25% increase from the regular dividend declared a year ago in January 2014."
Merger with Washington Banking Company
Effective May 1, 2014, Heritage completed the strategic merger with Washington Banking Company and its wholly owned subsidiary, Whidbey Island Bank ("Washington Banking Merger"). The merger was accounted for using the acquisition method of accounting. Accordingly, Heritage's cost to acquire Washington Banking was allocated to the assets (including identifiable intangible assets) and the liabilities of Washington Banking at their respective estimated fair values as of the merger date. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. The fair value on the merger date represents management's best estimates based on available information and facts and circumstances in existence on the merger date. The allocation of the purchase price is subject to adjustment within the one year re-measurement period.
The amount of goodwill recognized from the merger was $90.2 million at December 31, 2014. The following table provides detail of the fair value of the assets acquired and liabilities assumed:
At May 1, 2014
--------------
(in thousands)
Total merger consideration $270,107
========
Fair value of assets acquired:
Cash and cash equivalents $74,947
Investment securities available for
sale 458,312
Federal Home Loan Bank stock 7,064
Noncovered loans 895,978
Covered loans 107,050
Premises and equipment 31,776
Bank owned life insurance 32,519
Federal Deposit Insurance Corporation
("FDIC") indemnification asset 7,174
Other real estate owned ($5,122
covered by FDIC shared-loss
agreements) 7,121
Other intangible assets 11,194
Prepaid expenses and other assets 23,718
------
Total assets and identifiable
intangible assets acquired 1,656,853
Fair value of liabilities assumed:
Deposits 1,433,894
Junior subordinated debentures 18,937
Accrued expenses and other
liabilities 24,068
------
Total liabilities and identifiable
liabilities assumed 1,476,899
---------
Fair value of net assets and
identifiable intangible assets
acquired 179,954
Excess consideration paid over the
fair value of net assets and
identifiable intangible assets
acquired $90,153
=======
Impact of 2013 Initiatives
In addition to the merger with Washington Banking, the following other 2013 initiatives had an impact on the Company's 2014 and 2013 operating results:
-- On January 9, 2013, the Company acquired Northwest Commercial Bank
("NCB") and merged it into Heritage Bank, the Company's subsidiary bank
(the "NCB Acquisition"). NCB was a full service commercial bank with
branches in Lakewood and Auburn, Washington. In March 2013, the Company
consolidated the operations of the former NCB Lakewood branch with the
Lakewood branch of Heritage Bank.
-- On June 19, 2013, the Company completed the merger of its subsidiary,
Central Valley Bank ("CVB"), with and into Heritage Bank (the "CVB
Merger"). CVB is now operated as a division of Heritage Bank.
-- On July 15, 2013, the Company completed the acquisition of Valley
Community Bancshares, Inc. ("Valley"), the holding company for Valley
Bank, both of Puyallup, Washington (the "Valley Acquisition"). As of
the acquisition date, Valley merged into Heritage and Valley Bank merged
into Heritage Bank. During the quarter ended December 31, 2013, four
former Valley Bank branches were consolidated into existing Heritage
Bank branches.
-- During the quarter ended December 31, 2013, the Company completed a core
system conversion of Heritage Bank.
-- Also during the quarter ended December 31, 2013, the Company
consolidated three Heritage Bank branches into existing Heritage Bank
branches.
Balance Sheet
The Company's total assets increased $8.6 million to $3.46 billion at December 31, 2014 from $3.45 billion at September 30, 2014. Although total assets increased only modestly, there was a change in the mix of assets during the quarter ended December 31, 2014. As a percentage of total assets, total loans receivable, net of allowance for loan losses, and investment securities increased to 64.3% and 22.5%, respectively at December 31, 2014 from 63.0% and 20.9%, respectively, at September 30, 2014 while interest earning deposits decreased to 1.4% of total assets at December 31, 2014 from 4.2% at September 30, 2014.
Total loans receivable, net of allowance for loan losses, increased $48.8 million to $2.22 billion at December 31, 2014 from $2.17 billion at September 30, 2014. The increase was due to an increase of $60.9 million in noncovered loans receivable, net of allowance for loan losses, to $2.10 billion at December 31, 2014 from $2.04 billion at September 30, 2014. Noncovered loans include loans originated by Heritage Bank as well as other noncovered loans obtained in mergers and acquisitions. This increase was partially offset by a decrease of $12.1 million in covered loans receivable, net of allowance for loan losses, to $120.6 million at December 31, 2014 from $132.7 million at September 30, 2014. Covered loans are loans acquired through FDIC-assisted transactions which are covered by FDIC shared-loss agreements. These balances are expected to continue to decline substantially over the next few quarters.
Jeffrey J. Deuel, President & Chief Operating Officer of Heritage Bank, commented, "As anticipated we saw much stronger loan production in the fourth quarter with a large portion of new loans closing in December. New loan production occurred across a broad cross section of loan classes and also included some larger transactions. We are also seeing a continuing positive trend in noninterest bearing demand deposits which offsets the decline in certificates of deposit. Now that the most difficult aspects of the October 2014 system conversion are behind us we are now focused on refining processes and finding ways to leverage our footprint and the combined product lines."
Total deposits increased $3.3 million to $2.91 billion at December 31, 2014 from $2.90 billion at September 30, 2014. Non-maturity deposits as a percentage of total deposits increased to 81.9% at December 31, 2014 from 80.1% at September 30, 2014, which included noninterest bearing demand deposits that increased to 24.4% of total deposits at December 31, 2014 from 23.9% of total deposits at September 30, 2014. The increases in these ratios were primarily due to a $52.5 million decrease in certificates of deposits to $525.4 million as of December 31, 2014 from $577.9 million as of September 30, 2014.
Total stockholders' equity increased $3.3 million to $455.0 million at December 31, 2014 from $451.7 million at September 30, 2014. This increase was due to net income of $7.3 million and an increase of $3.4 million in accumulated other comprehensive income, net for the quarter ended December 31, 2014, partially offset by cash dividends of $7.5 million. The Company and Heritage Bank continue to maintain capital levels significantly in excess of the applicable regulatory requirements for them to be categorized as "well-capitalized". The Company had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at December 31, 2014 of 10.3%, 13.9% and 15.1%, respectively, as compared to 10.3%, 14.7%, and 15.9%, respectively, at September 30, 2014.
Credit Quality
The allowance for loan losses on noncovered loans decreased $67,000 to $22.15 million at December 31, 2014 from $22.22 million at September 30, 2014 as a result of $1.4 million in net charge-offs recognized during the quarter ended December 31, 2014 partially offset by $1.3 million in provision for loan losses. Nonperforming noncovered loans to total noncovered loans decreased to 0.35% at December 31, 2014 from 0.57% at September 30, 2014. Nonaccrual noncovered loans decreased $4.2 million to $7.5 million ($1.6 million guaranteed by government agencies) at December 31, 2014 from $11.7 million ($1.8 million guaranteed by government agencies) at September 30, 2014. The decrease was due to $5.6 million of net principal reductions, $640,000 of charge-offs and $322,000 of transfers to accrual status, offset partially by $2.4 million of additions to nonaccrual noncovered loans.
The allowance for loan losses to nonperforming noncovered loans was 294.98% at December 31, 2014 compared to 190.35% at September 30, 2014. Potential problem noncovered loans were $117.3 million at December 31, 2014 compared to $125.4 million at September 30, 2014. The $8.2 million decrease was primarily due to net loan payments of $23.7 million and net transfers of $690,000 to nonaccrual status, offset partially by the addition of $16.2 million of loans graded as potential problem loans during the period.
The allowance for loan losses on noncovered loans to total noncovered loans, net was 1.04% at December 31, 2014 and 1.08% at September 30, 2014. The Company believes that its allowance for loan losses is appropriate to provide for probable incurred credit losses based on an evaluation of known and inherent risks in the loan portfolio at December 31, 2014. Included in the carrying value of noncovered loans are net discounts remaining from mergers and acquisitions which would be utilized if there were principal losses on related loans. The remaining net discounts on noncovered loans at December 31, 2014 were $24.0 million.
Nonperforming noncovered assets were $9.7 million ($1.6 million guaranteed by government agencies), or 0.29% of total noncovered assets, at December 31, 2014, compared to $15.8 million ($1.8 million guaranteed by government agencies), or 0.48% of total noncovered assets, at September 30, 2014. Other real estate owned decreased $3.5 to $3.4 million at December 31, 2014 (of which $1.2 million was covered by FDIC shared-loss agreements) from $6.9 million at September 30, 2014 (of which $2.8 million was covered by FDIC shared-loss agreements). During the quarter ended December 31, 2014, the Company sold 10 properties resulting in proceeds of $4.7 million and a net gain of $335,000.
Operating Results
Net interest income increased $19.1 million to $36.8 million for the quarter ended December 31, 2014 compared to $17.6 million for the same period in 2013. Net interest income increased $47.7 million to $115.4 million for the year ended December 31, 2014 compared to $67.7 million for the prior year. The increases in net interest income are primarily due to the Washington Banking Merger.
Heritage's net interest margin for the quarter ended December 31, 2014 increased 16 basis points to 4.74% from 4.58% for the same period in 2013 and increased 42 basis points from 4.32% in the linked-quarter ended September 30, 2014. The increase in net interest margin from prior periods is primarily due to the increase in incremental interest income as a result of the Washington Banking loans during the quarter ended December 31, 2014. Heritage's net interest margin for the year ended December 31, 2014 decreased 27 basis points to 4.53% from 4.80% for the prior year due primarily to lower contractual interest rates on loans and a change in the mix of interest earning assets.
The following table presents the net interest margin and effect of the incremental accretion on purchased loans for the periods presented below:
Three Months Ended Year Ended
------------------ ----------
December September December December December
31, 2014 30, 2014 31, 2013 31, 2014 31, 2013
--------- ---------- --------- --------- ---------
Net interest
margin,
excluding
incremental
accretion on
purchased
loans (1) 3.86% 3.83% 4.20% 3.97% 4.32%
Impact on net
interest
margin from
incremental
accretion on
purchased
loans (1) 0.88% 0.49% 0.38% 0.56% 0.48%
Net interest
margin 4.74% 4.32% 4.58% 4.53% 4.80%
==== ==== ==== ==== ====
(1) The incremental accretion
income represents the amount
of income recorded on the
purchased loans in excess of
the contractual stated
interest rate in the
individual loan notes. This
income results from the
discount established at the
time these loan portfolios
were acquired and modified
quarterly as a result of cash
flow re-estimation.
The net interest margin, excluding incremental accretion on purchased loans, decreased to 3.86% for the quarter ended December 31, 2014 from 4.20% for the same period in 2013 and increased slightly from 3.83% from the linked-quarter ended September 30, 2014. For the year ended December 31, 2014, the net interest margin, excluding incremental accretion on purchased loans, decreased to 3.97% from 4.32% for the prior year. The increase from the linked-quarter is due to the change in the earnings asset mix (higher ratio of loans and investments to earning assets and a lower ratio of interest earning deposits to earning assets) partially offset by lower contractual loan note rates. Yields on loans, excluding incremental accretion on purchased loans, decreased to 5.03% for the quarter ended December 31, 2014 from 5.07% for the linked-quarter ended September 30, 2014.
The provision for loan losses for noncovered loans was $1.3 million for the quarter ended December 31, 2014 compared to $200,000 for the quarter ended December 31, 2013 and $567,000 for the linked-quarter ended September 30, 2014. For the year ended December 31, 2014, the provision for loan losses for noncovered loans was $2.2 million compared to $1.8 million for the prior year.
The provision for loan losses for covered loans totaled $1.5 million for the quarter ended December 31, 2014 compared to $228,000 for the same period in the prior year and $27,000 for the linked-quarter ended September 30, 2014. For the year ended December 31, 2014, the provision for loan losses for covered loans was $2.4 million compared to $1.9 million for the prior year.
As of the dates of the completion of each of the mergers and acquisitions, acquired loans were recorded at their estimated fair value, including our estimate of future expected cash flows until the ultimate resolution of these credits. As reflected in the table below, incremental accretion income from acquired loans was $6.8 million for the quarter ended December 31, 2014 compared to $1.5 million for the quarter ended December 31, 2013 and $3.8 million for the linked-quarter ended September 30, 2014. The increase for the quarter ended December 31, 2014 was due to the increase in incremental accretion income from the Washington Banking Merger. For the year ended December 31, 2014, incremental accretion income was $14.3 million compared to $6.7 million for the prior year.
For the quarter ended December 31, 2014, the Company recognized $(2.0) million of change in the FDIC indemnification asset compared to $(647,000) and $155,000 for the quarters ended September 30, 2014 and December 31, 2013, respectively.
The following table illustrates the earnings impact associated with the Company's acquired loan portfolios:
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
------------- -------------- ------------- ------------- -------------
(in thousands)
Incremental accretion
income over stated
note rate(1) $6,839 $3,800 $1,464 14,308 $6,706
Change in FDIC
indemnification asset (1,968) (647) 155 (2,543) (181)
Provision for loan
losses (1,951) (194) (528) (2,794) (2,782)
Pre-tax earnings
impact $2,920 $2,959 $1,091 $8,971 $3,743
====== ====== ====== ====== ======
(1) The incremental accretion
income represents the amount
of income recorded on the
purchased loans in excess of
the contractual stated
interest rate in the
individual loan notes. This
income is a result of the
discount established at the
time these loan portfolios
were acquired and modified
quarterly as a result of cash
flow re-estimation.
Donald J. Hinson, Executive Vice President and Chief Financial Officer, commented, "The incremental accretion income increased from the prior quarter due to a significant amount of payoffs and workouts, as well as some quarter-end adjustments to prior accretion estimates, relating to loans obtained in the Washington Banking Merger. Many of these loans had discounts that were fully recognized at the time of the payoff or workout. We are estimating that discount accretion over the next couple of quarters will be in the range of $2 million to $3 million depending on loan prepayments. The net interest margin before incremental accretion income continues to experience downward pressure due to the low rate environment. The Company will continue to focus on balance sheet growth and leverage in order to mitigate the effects of the current rate environment."
Noninterest income was $3.9 million for the quarter ended December 31, 2014 compared to $2.4 million for the same period in 2013 and $5.5 million for the linked-quarter ended September 30, 2014. For the year ended December 31, 2014, noninterest income was $16.5 million compared to $9.7 million for the year ended December 31, 2013. The increase compared to the same periods in the prior year was primarily due to the Washington Banking Merger. The decrease from the linked-quarter was primarily the result of the negative impact from the change in the indemnification asset. The FDIC indemnification asset decreased $4.0 million to $1.1 million at December 31, 2014 from $5.1 million at September 30, 2014. Of this decrease, $2.1 million was related to claims made for losses under the shared-loss agreements and $1.6 million was related to valuation adjustments made to the asset. The shared-loss agreements on non-single family loans covering $107.4 million of covered loans at December 31, 2014 will expire in 2015. Therefore, a valuation adjustment was recognized for previously estimated losses for which claims are not expected to be made prior to the expiration of the shared-loss agreements.
Mr. Hinson added, "Subsequent to year-end, the Company sold the legacy Heritage Bank merchant card portfolio which will impact future non-interest income. The total consideration of the sale was $2.2 million. Of this amount, $1.65 million was received by the Company at time of sale and $550,000 is held in escrow and is contingent on the performance of the portfolio in 2015. If certain performance thresholds are met, the payment will range between $440,000 and $550,000. If the thresholds are not met, no contingent payment will be made. The contingent payment is to be paid on or before December 31, 2015. With the exception of recognizing the gain on sale of the portfolio, the effects of this sale will lower future merchant visa income to approximately half of the income prior to the sale."
In addition to the Washington Banking Merger, prior year initiatives had a significant impact on noninterest expense during 2013, and increased 2014 expense levels. The following tables illustrate the expenses related to implementing these initiatives. The amounts reported represent identifiable costs paid to third-party providers as well as any retention bonuses or severance payments made in conjunction with these initiatives. The amounts do not include costs of additional staffing levels required to complete the initiatives nor do they include future expected cost savings from the Washington Banking Merger. The first table reports these expenses by initiative and the second table reports these expenses by expense category.
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Initiative (in thousands)
----------
NCB Acquisition $ - $ - $8 $ - $794
CVB Merger - - 89 - 220
Valley Acquisition - - 1,532 443 2,118
Core system
conversion - - 703 40 842
Consolidation of
existing branches - - 215 11 238
Washington Banking
Merger 1,743 1,334 657 9,094 890
Total expense $1,743 $1,334 $3,204 $9,588 $5,102
====== ====== ====== ====== ======
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Expense Category (in thousands)
----------------
Compensation and
employee benefits $1,125 $299 $310 $1,522 $475
Occupancy and
equipment 62 111 1,173 602 1,328
Data processing 212 241 771 3,038 1,291
Marketing 3 137 1 140 34
Professional services 430 921 3,751 1,876
Other expense 341 116 28 535 98
Total expense $1,743 $1,334 $3,204 $9,588 $5,102
====== ====== ====== ====== ======
The types of expenses associated with the significant expense categories in the table above are summarized as follows:
-- Compensation and employee benefits expense consisted substantially of
retention bonus and severance packages paid to transitional employees.
-- Occupancy and equipment expense consisted primarily of lease termination
costs.
-- Data processing expense consisted of costs relating to the Company's
core system conversion as well as data conversions of NCB, Valley Bank
and Whidbey Island Bank to the Company's core system.
-- Professional services expense includes fees paid to financial advisors,
attorneys, and accountants, and consultant fees related to mergers and
acquisitions and to the core system conversion.
Noninterest expense was $29.2 million for the quarter ended December 31, 2014 compared to $18.5 million for the quarter ended December 31, 2013 and $28.4 million for the linked-quarter ended September 30, 2014. Noninterest expense was $99.4 million for the year ended December 31, 2014 compared to $59.5 million for the year ended December 31, 2013. The increases are primarily due to the Washington Banking Merger and additional ongoing operating costs from mergers and acquisitions as well as specific costs identified in the table above.
Income tax expense was $1.3 million for the quarter ended December 31, 2014 compared to $432,000 for the comparable quarter in 2013 and $2.8 million for the linked-quarter ended September 30, 2014. The increase in income tax expense for the quarter ended December 31, 2014 from the prior year end was due to the increase in pre-tax income and was partially offset by tax credits and a $728,000 income tax benefit related to the resolution of a tax position previously taken by Washington Banking Company. The decrease in income tax expense from the linked-quarter was due to additional tax credits recognized during the quarter and the $728,000 income tax benefit previously mentioned.
Dividend
On January 28, 2015, the Company's Board of Directors declared a quarterly cash dividend of $0.10 per common share payable on February 24, 2015 to shareholders of record on February 10, 2015.
Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on January 29, 2015 at 11:00 a.m. Pacific time. To access the call, please dial (800) 230-1059 a few minutes prior to 11:00 a.m. Pacific time. The call will be available for replay through February 12, 2015, by dialing (800) 475-6701 -- access code 349969.
About Heritage Financial
Heritage Financial Corporation is an Olympia-based bank holding company with Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary. Heritage Bank has a branching network of 66 banking offices in Washington and Oregon. Heritage Bank also does business under the Central Valley Bank name in the Yakima and Kittitas counties of Washington and under the Whidbey Island Bank name on Whidbey Island. Heritage's stock is traded on the NASDAQ Global Select Market under the symbol "HFWA". More information about Heritage Financial Corporation can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.
Non-GAAP Financial Measures
This news release contains certain non-GAAP (Generally Accepted Accounting Principles) financial measures in addition to results presented in accordance with GAAP. These measures include tangible common stockholders' equity, tangible book value per share and tangible common stockholders' equity to tangible assets. Tangible common stockholders' equity (tangible book value) excludes goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. Management has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company's capital reflected in the current quarter and year-to-date results and facilitate our performance with the performance of our peers. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures. Reconciliations of the GAAP and non-GAAP financial measures are presented below.
December 31, September 30, December 31,
2014 2014 2013
---- ---- ----
(in thousands)
Stockholders' equity $454,995 $451,651 $215,762
Less: goodwill and
other intangible
assets 130,407 130,472 30,980
------- ------- ------
Tangible common
stockholders' equity $324,588 $321,179 $184,782
======== ======== ========
Total assets $3,459,916 $3,451,320 $1,659,038
Less: goodwill and
other intangible
assets 130,407 130,472 30,980
------- ------- ------
Tangible assets $3,329,509 $3,320,848 $1,628,058
========== ========== ==========
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated, including: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets, which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to increase our allowance for loan losses; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System and of our bank subsidiary by the Federal Deposit Insurance Corporation, the Washington State Department of Financial Institutions, Division of Banks or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules as a result of Basel III; the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations; further increases in premiums for deposit insurance; our ability to control operating costs and expenses; the use of estimates in determining the fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our consolidated statements of financial condition; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; failure or security breach of computer systems on which we depend; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our expansion strategy of pursuing acquisitions and denovo branching; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired including those from the Cowlitz Bank, Pierce Commercial Bank, Northwest Commercial Bank. Valley Community Bancshares and Washington Banking Company transactions, or may in the future acquire into our operations, and our ability to realize related revenue synergies and cost savings within expected time frames, or at all, and any goodwill charges related thereto and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, which might be greater than expected; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; and other risks detailed from time to time in our filings with the Securities and Exchange Commission including our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.
The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for future periods to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company's operating and stock price performance.
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands; unaudited)
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Assets
------
Cash on hand and in banks $74,028 $64,609 $40,162
Interest earning deposits 47,608 145,541 90,238
------ ------- ------
Cash and cash equivalents 121,636 210,150 130,400
Other interest earning deposits 10,126 13,129 15,662
Investment securities available for sale 742,846 682,651 163,134
Investment securities held to maturity 35,814 38,213 36,154
Loans held for sale 5,582 4,641 -
Noncovered loans receivable, net 2,124,877 2,064,050 1,168,166
Allowance for loan losses for noncovered
loans (22,153) (22,220) (22,657)
Noncovered loans receivable, net of
allowance for loan losses 2,102,724 2,041,830 1,145,509
--------- --------- ---------
Covered loans receivable, net 126,200 138,833 63,754
Allowance for loan losses for covered
loans (5,576) (6,122) (6,167)
Covered loans receivable, net of allowance
for loan losses 120,624 132,711 57,587
Total loans receivable, net 2,223,348 2,174,541 1,203,096
FDIC indemnification asset 1,116 5,138 4,382
Other real estate owned ($1,177, $2,784
and $182 covered by FDIC shared-loss
agreements, respectively) 3,355 6,872 4,559
Premises and equipment, net 64,938 65,787 34,348
Federal Home Loan Bank stock, at cost 12,188 12,363 5,741
Bank owned life insurance 32,909 32,760 -
Accrued interest receivable 9,836 9,987 5,462
Prepaid expenses and other assets 65,815 64,616 25,120
Other intangible assets, net 10,889 11,561 1,615
Goodwill 119,518 118,911 29,365
------- -------
Total assets $3,459,916 $3,451,320 $1,659,038
========== ========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Deposits $2,906,331 $2,903,069 $1,399,189
Junior subordinated debentures 19,082 19,027 -
Securities sold under agreement to
repurchase 32,181 35,390 29,420
Accrued expenses and other liabilities 47,327 42,183 14,667
------ ------
Total liabilities 3,004,921 2,999,669 1,443,276
--------- --------- ---------
Common stock 365,230 365,006 138,659
Retained earnings 86,387 86,699 78,265
Accumulated other comprehensive income
(loss), net 3,378 (54) (1,162)
----- --- ------
Total stockholders' equity 454,995 451,651 215,762
Total liabilities and stockholders' equity $3,459,916 $3,451,320 $1,659,038
========== ========== ==========
Common stock, shares outstanding 30,259,838 30,252,114 16,210,747
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share amounts; unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, 2014 December 31,
2014 2014 2013 2013
------------- -------------- ------------- ----------------- -------------
Interest income:
Interest and fees on loans $34,698 $31,841 $17,378 $110,437 $67,630
Taxable interest on investment securities 2,665 2,212 618 7,328 1,918
Nontaxable interest on investment
securities 958 855 436 2,886 1,539
Interest and dividends on other interest
earning assets 118 123 120 455 341
--- --- --- --- ---
Total interest income 38,439 35,031 18,552 121,106 71,428
------ ------ ------ ------- ------
Interest expense:
Deposits 1,465 1,534 888 5,150 3,673
Junior subordinated debentures 173 171 - 458 -
Other borrowings 21 19 18 73 51
--- --- --- --- ---
Total interest expense 1,659 1,724 906 5,681 3,724
----- ----- --- ----- -----
Net interest income 36,780 33,307 17,646 115,425 67,704
Provision for loan losses for noncovered
loans 1,316 567 200 2,232 1,784
Provision for loan losses for covered
loans 1,535 27 228 2,362 1,888
----- --- --- ----- -----
Total provision for loan losses 2,851 594 428 4,594 3,672
----- --- --- ----- -----
Net interest income after provision for
loan losses 33,929 32,713 17,218 110,831 64,032
------ ------ ------ ------- ------
Noninterest income:
Bargain purchase gain on bank acquisition - - - - 399
Service charges and other fees 3,443 3,524 1,542 11,143 5,936
Merchant Visa income, net 237 278 219 1,076 862
Change in FDIC indemnification asset (1,968) (647) 155 (2,543) (181)
Gain (loss) on sale of investment
securities, net 33 (13) - 287 -
Gain on sale of loans, net 543 742 - 1,518 142
Other income 1,609 1,599 513 4,986 2,493
Total noninterest income 3,897 5,483 2,429 16,467 9,651
----- ----- ----- ------ -----
Noninterest expense:
Compensation and employee benefits 16,265 15,579 8,392 52,634 31,612
Occupancy and equipment 3,994 3,978 3,619 13,406 9,724
Data processing 2,266 1,978 1,997 9,243 4,806
Marketing 659 841 410 2,502 1,598
Professional services 1,013 1,113 1,404 6,185 3,936
State and local taxes 597 576 274 1,976 1,150
Impairment loss on investment securities,
net - - 11 45 38
Federal deposit insurance premium 603 403 257 1,718 1,001
Other real estate owned, net (277) 650 570 638 309
Amortization of intangible assets 672 603 157 1,920 542
Other expense 3,451 2,642 1,414 9,112 4,799
----- ----- ----- ----- -----
Total noninterest expense 29,243 28,363 18,505 99,379 59,515
------ ------ ------ ------ ------
Income before income taxes 8,583 9,833 1,142 27,919 14,168
Income tax expense 1,328 2,765 432 6,905 4,593
----- ----- --- ----- -----
Net income $7,255 $7,068 $710 $21,014 $9,575
====== ====== ==== ======= ======
Basic earnings per common share $0.24 $0.23 $0.04 $0.82 $0.61
Diluted earnings per common share $0.24 $0.23 $0.04 $0.82 $0.61
Dividends declared per common share $0.25 $0.09 $0.08 $0.50 0.42
Average number of common shares
outstanding 30,021,298 30,063,425 16,007,330 25,430,539 15,476,235
Average number of diluted common shares
outstanding 30,056,311 30,100,096 16,017,109 25,477,289 15,487,715
HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS
(Dollar amounts in thousands; unaudited)
Three Months Ended Year Ended
------------------ ----------
December September December December December
31, 2014 30, 2014 31, 2013 31, 2014 31, 2013
--------- ---------- --------- --------- ---------
Performance Ratios:
-------------------
Efficiency ratio 71.89% 73.12% 92.18% 75.35% 76.94%
Noninterest expense
to average assets,
annualized 3.36% 3.27% 4.38% 3.49% 3.86%
Return on average
assets, annualized 0.83% 0.82% 0.17% 0.74% 0.62%
Return on average
equity, annualized 6.32% 6.20% 1.30% 5.61% 4.58%
Return on average
tangible common
equity, annualized 8.85% 8.70% 1.51% 7.58% 5.12%
Net charge-offs on
noncovered loans
to average
noncovered loans,
annualized 0.27% 0.13% 0.11% 0.15% 0.32%
As of Period End
----------------
December 31, September 30, December 31,
2014 2014 2013
------------- -------------- -------------
Financial
Measures:
----------
Book value per
common share $15.04 $14.93 $13.31
Tangible book
value per common
share 10.73 10.62 11.40
Stockholders'
equity to total
assets 13.2% 13.1% 13.0%
Tangible common
equity to
tangible assets 9.7% 9.7% 11.3%
Tier 1 leverage
capital to
average assets 10.3% 10.3% 11.3%
Tier 1 capital to
risk-weighted
assets 13.9% 14.7% 15.5%
Total capital to
risk-weighted
assets 15.1% 15.9% 16.8%
Net loans to
deposits ratio 76.7% 75.1% 86.0%
Deposits per
branch $44,035 $43,329 $39,977
Assets per full-
time equivalent
employees $4,626 $4,352 $4,448
Three Months Ended Year Ended
------------------ ----------
December 31, 2014 September 30, December 31, 2013 December 31, 2014 December 31,
2014 2013
----------------- -------------- ----------------- ----------------- -------------
Allowance for Noncovered Loan
Losses:
-----------------------------
Allowance balance, beginning of
period $22,220 $22,369 $22,783 $22,657 $24,242
Provision for loan losses 1,316 567 200 2,232 1,784
Net (charge-offs) recoveries:
Commercial business (1,009) (453) (300) (1,589) (2,488)
One-to-four family residential - - - - (52)
Real estate construction (24) - - (326) (533)
Consumer (350) (263) (26) (821) (296)
---- ---- --- ---- ----
Total net charge-offs (1,383) (716) (326) (2,736) (3,369)
------ ---- ------ ------
Allowance balance, end of
period $22,153 $22,220 $22,657 $22,153 $22,657
======= ======= ======= ======= =======
Three Months Ended Year Ended
------------------ ----------
December 31, 2014 September 30, December 31, 2013 December 31, 2014 December 31,
2014 2013
----------------- -------------- ----------------- ----------------- -------------
Allowance for Covered Loan
Losses:
--------------------------
Allowance balance, beginning of
period $6,122 $6,114 $5,972 $6,167 $4,352
Provision for loan losses 1,535 27 228 2,362 1,888
Net charge-offs (2,081) (19) (33) (2,953) (73)
------ --- --- ------ ---
Allowance balance, end of
period $5,576 $6,122 $6,167 $5,576 $6,167
====== ====== ====== ====== ======
Three Months Ended Year Ended
------------------ ----------
December 31, 2014 September 30, December 31, 2013 December 31, 2014 December 31,
2014 2013
----------------- -------------- ----------------- ----------------- -------------
Other Real Estate Owned:
------------------------
Balance, beginning of period $6,872 $8,106 $4,129 $4,559 $5,666
Additions 889 459 1,234 1,566 2,974
Additions from acquisitions - - - 7,121 2,279
Proceeds from dispositions (4,741) (1,315) (413) (9,914) (6,253)
Gain (loss) on sales, net 335 (378) (43) 23 264
Valuation adjustments - - (348) - (371)
--- --- ---- ---
Balance, end of period $3,355 $6,872 $4,559 $3,355 $4,559
====== ====== ====== ====== ======
As of Period End
----------------
December 31, September 30, December 31,
2014 2014 2013
------------- -------------- -------------
Nonperforming Noncovered Assets:
--------------------------------
Nonaccrual noncovered loans by type:
Commercial business $4,719 $7,263 $5,675
One-to-four family residential - 322 340
Real estate construction and land development 2,652 3,359 1,045
Consumer 139 729 678
Total nonaccrual noncovered loans(1)(2) 7,510 11,673 7,738
Other real estate owned, noncovered 2,178 4,088 4,377
----- -----
Nonperforming noncovered assets $9,688 $15,761 $12,115
====== ======= =======
Restructured noncovered performing loans(3) $18,646 $20,276 $22,131
Accruing noncovered loans past due 90 days or
more(4) - 104 6
Potential problem noncovered loans(5) 117,250 125,437 52,814
Allowance for loan losses on noncovered loans
to:
Total noncovered loans, net 1.04% 1.08% 1.94%
Nonperforming noncovered loans 294.98% 190.35% 292.80%
Nonperforming noncovered loans to total
noncovered loans 0.35% 0.57% 0.66%
Nonperforming noncovered assets to total
noncovered assets 0.29% 0.48% 0.76%
(1) At December 31, 2014, September 30,
2014 and December 31, 2013, $4.1
million, $3.7 million and $2.6
million of noncovered nonaccrual
loans were considered troubled debt
restructured loans, respectively.
(2) At December 31, 2014, September 30,
2014 and December 31, 2013, $1.6
million, $1.8 million and $1.7
million of noncovered nonaccrual
loans were guaranteed by government
agencies, respectively.
(3) At December 31, 2014, September 30,
2014 and December 31, 2013,
$751,000, $682,000 and $1.2 million
of noncovered performing
restructured loans were guaranteed
by government agencies,
respectively.
(4) There were no accruing noncovered
loans past due 90 days or more that
were guaranteed by government
agencies at December 31, 2014,
September 30, 2014 or December 31,
2013.
(5) Potential problem noncovered loans
are those loans that are currently
accruing interest and are not
considered impaired, but which are
being monitored because the
financial information of the
borrower causes the Company concern
as to their ability to comply with
their loan repayment terms. At
December 31, 2014, September 30,
2014 and December 31, 2013, $2.0
million, $2.0 million and $1.8
million of noncovered potential
problem loans were guaranteed by
government agencies, respectively.
The amount of noncovered potential
problem loans related to the
Washington Banking Merger was $77.7
million and $82.3 million at
December 31, 2014 and September 30,
2014, respectively. There were no
Washington Banking loans at
December 31, 2013 as the merger
occurred on May 1, 2014.
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Balance % of Balance % of Balance % of
Total Total Total
----- ----- -----
Loan Composition
----------------
Noncovered loans:
Commercial business:
Commercial and industrial $534,163 25.2% $533,752 25.9% $336,540 28.8%
Owner-occupied commercial real estate 535,742 25.2 537,968 26.0 281,309 24.1
Non-owner occupied commercial real estate 563,693 26.5 552,336 26.8 399,979 34.2
------- ---- ------- ---- ------- ----
Total commercial business 1,633,598 76.9 1,624,056 78.7 1,017,828 87.1
One-to-four family residential 63,540 3.0 63,890 3.1 43,082 3.7
Real estate construction and land
development:
One-to-four family residential 46,749 2.2 44,681 2.2 19,724 1.7
Five or more family residential and
commercial properties 61,360 2.9 44,404 2.1 48,655 4.2
------ --- ------ --- ------ ---
Total real estate construction and land
development 108,109 5.1 89,085 4.3 68,379 5.9
Consumer 320,567 15.1 288,489 14.0 41,547 3.5
------- ---- ------- ---- ------ ---
Gross noncovered loans 2,125,814 100.1 2,065,520 100.1 1,170,836 100.2
Deferred loan fees, net (937) (0.1) (1,470) (0.1) (2,670) (0.2)
---- ------ ------
Noncovered loans, net of deferred fees 2,124,877 100.0% 2,064,050 100.0% 1,168,166 100.0%
--------- ===== --------- ===== --------- =====
Covered loans 126,200 138,833 63,754
------- ------- ------
Total loans, net of deferred fees $2,251,077 $2,202,883 $1,231,920
========== ========== ==========
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Balance % of Balance % of Balance % of
Total Total Total
----- ----- -----
Deposit
Composition
------------
Noninterest
bearing demand
deposits $709,673 24.4% $694,370 23.9% $349,902 25.0%
NOW accounts 793,362 27.3 745,832 25.7 352,051 25.2
Money market
accounts 520,065 17.9 527,276 18.2 232,016 16.6
Savings accounts 357,834 12.3 357,674 12.3 155,790 11.1
------- ---- ------- ---- ------- ----
Total non-
maturity
deposits 2,380,934 81.9 2,325,152 80.1 1,089,759 77.9
Certificates of
deposit 525,397 18.1 577,917 19.9 309,430 22.1
------- ---- ------- ----
Total deposits $2,906,331 100.0% $2,903,069 100.0% $1,399,189 100.0%
========== ===== ========== ===== ========== =====
Three Months Ended
------------------
December 31, 2014 December 31, 2013
Average Interest Average Average Interest Average
Balance Earned/ Yield/ Balance Earned/ Yield/
Paid Rate Paid Rate
---- ---- ---- ----
(Dollars in thousands; yields annualized)
Interest Earning Assets:
------------------------
Loans, net $2,194,003 $34,698 6.27% $1,198,464 $17,378 5.75%
Taxable securities 545,180 2,665 1.94 127,941 618 1.92
Nontaxable securities 191,673 958 1.98 74,074 436 2.33
Other interest earning assets 149,474 118 0.31 128,101 120 0.37
------- --- ------- ---
Total interest earning assets 3,080,330 $38,439 4.95% 1,528,580 $18,552 4.82%
Noninterest earning assets 375,405 148,221
Total assets $3,455,735 $1,676,801
========== ==========
Interest Bearing Liabilities:
-----------------------------
Certificates of deposit $549,857 $765 0.55% $313,385 $593 0.75%
Savings accounts 357,971 101 0.11 157,590 40 0.10
Interest bearing demand and money
market accounts 1,294,924 599 0.18 584,581 255 0.17
--------- --- ------- ---
Total interest bearing deposits 2,202,752 1,465 0.26 1,055,556 888 0.33
Junior subordinated debentures 19,047 173 3.60 - - -
Securities sold under agreement
to repurchase 31,268 21 0.27 28,090 18 0.26
FHLB advances and other
borrowings 3 - - - - -
--- ---
Total interest bearing
liabilities 2,253,070 1,659 0.29% 1,083,646 906 0.33%
----- ---
Demand and other noninterest
bearing deposits 708,268 363,031
Other noninterest bearing
liabilities 39,055 12,518
Stockholders' equity 455,342 217,606
Total liabilities and
stockholders' equity $3,455,735 $1,676,801
========== ==========
Net interest income $36,780 $17,646
======= =======
Net interest spread 4.66% 4.49%
Net interest margin 4.74% 4.58%
Years Ended December 31,
------------------------
2014 2013
---- ----
Average Interest Average Average Interest Average
Balance Earned/ Yield/ Balance Earned/ Yield/
Paid Rate Paid Rate
---- ---- ---- ----
(Dollars in thousands)
Interest Earning Assets:
Loans, net $1,871,696 $110,437 5.90% $1,124,828 $67,630 6.01%
Taxable securities 383,626 7,328 1.91 117,132 1,918 1.64
Nontaxable securities 145,113 2,886 1.99 64,018 1,539 2.40
Other interest earning
assets 150,189 455 0.30 104,770 341 0.33
------- --- ------- ---
Total interest earning
assets $2,550,624 $121,106 4.75% $1,410,748 $71,428 5.06%
Noninterest earning assets 295,666 129,324
------- -------
Total assets $2,846,290 $1,540,072
========== ==========
Interest Bearing
Liabilities:
Certificates of deposit $494,948 $2,991 0.60% $307,464 $2,478 0.81%
Savings accounts 282,150 252 0.09 143,412 164 0.11
Interest bearing demand and
money market accounts 1,049,078 1,907 0.18 541,793 1,031 0.19
--------- ----- ------- -----
Total interest bearing
deposits 1,826,176 5,150 0.28 992,669 3,673 0.37
Junior subordinated
debentures 12,751 458 3.59% - - -
Securities sold under
agreement to repurchase 27,984 73 0.26 19,102 51 0.27
FHLB advances and other
borrowings 111 - - % - - - %
--- --- ---
Total interest bearing
liabilities $1,867,022 $5,681 0.30% $1,011,771 $3,724 0.37%
------ ------
Demand and other noninterest
bearing deposits 574,692 308,582
Other noninterest bearing
liabilities 29,669 10,543
Stockholders' equity 374,907 209,176
------- -------
Total liabilities and
stockholders' equity $2,846,290 $1,540,072
========== ==========
Net interest income $115,425 $67,704
======== =======
Net interest spread 4.45% 4.69%
Net interest margin 4.53% 4.80%
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS
(Dollar amounts in thousands, except per share amounts; unaudited)
Three Months Ended
------------------
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
---- ---- ---- ---- ----
Earnings:
---------
Net interest
income $36,780 $33,307 $28,596 $16,741 $17,646
Provision for
(recapture of)
loan losses
for noncovered
loans 1,316 567 370 (21) 200
Provision for
loan losses
for covered
loans 1,535 27 321 479 228
Noninterest
income 3,897 5,483 4,780 2,307 2,429
Noninterest
expense 29,243 28,363 26,993 14,779 18,505
Net income 7,255 7,068 4,148 2,543 710
Basic earnings
per common
share $0.24 $0.23 $0.16 $0.16 $0.04
Diluted
earnings per
common share $0.24 $0.23 $0.16 $0.16 $0.04
Average Balances:
-----------------
Total loans
receivable $2,194,003 $2,194,460 $1,878,496 $1,205,416 $1,198,464
Investment
securities 736,853 694,629 474,801 200,959 202,015
Total interest
earning assets 3,080,330 3,059,796 2,523,384 1,516,201 1,528,580
Total assets 3,455,735 3,436,797 2,813,432 1,652,894 1,676,801
Interest
bearing
deposits 2,202,752 2,214,097 1,821,683 1,049,228 1,055,556
Noninterest
bearing demand
deposits 708,268 688,140 553,284 343,826 363,031
Total equity 455,342 452,439 370,664 217,721 217,606
Financial Ratios:
-----------------
Return on
average
assets,
annualized 0.83% 0.82% 0.59% 0.62% 0.17%
Return on
average
equity,
annualized 6.32% 6.20% 4.49% 4.74% 1.30%
Efficiency
ratio 71.89% 73.12% 80.88% 77.59% 92.18%
Noninterest
expense to
average total
assets,
annualized 3.36% 3.27% 3.85% 3.63% 4.38%
Net interest
margin 4.74% 4.32% 4.55% 4.48% 4.58%
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS
(Dollar amounts in thousands, except per share amounts; unaudited)
As of Period End
----------------
December 31, 2014 September 30, 2014 June 30, March 31, 2014 December 31, 2013
2014
---
Balance Sheet:
--------------
Total assets $3,459,916 $3,451,320 $3,391,579 $1,662,473 $1,659,038
Total loans receivable, net 2,223,348 2,174,541 2,200,711 1,207,650 1,203,096
Investment securities 778,660 720,864 691,245 178,002 199,288
Deposits 2,906,331 2,903,069 2,866,542 1,404,214 1,399,189
Noninterest bearing demand
deposits 709,673 694,370 669,017 353,043 349,902
Total equity 454,995 451,651 449,829 216,417 215,762
Financial Measures:
-------------------
Book value per common share $15.04 $14.93 $14.89 $13.35 $13.31
Tangible book value per common
share $10.73 $10.62 $10.57 $11.45 $11.40
Tangible common equity to
tangible assets 9.7% 9.7% 9.8% 11.5% 11.3%
Net loans to deposits 76.7% 75.1% 77.0% 86.0% 86.0%
Deposits per branch $44,035 $43,329 $42,784 $39,006 $39,977
Assets per full-time
equivalent employees $4,626 $4,352 $4,192 $4,644 $4,448
Credit Quality Metrics:
-----------------------
Allowance for loan losses on noncovered loans
to:
Total noncovered loans, net 1.04% 1.08% 1.08% 1.94% 1.94%
Nonperforming noncovered loans 294.98% 190.35% 164.62% 197.75% 292.80%
Nonperforming noncovered loans
to total noncovered loans 0.35% 0.57% 0.66% 0.98% 0.66%
Nonperforming noncovered assets
to total noncovered assets 0.29% 0.48% 0.58% 0.97% 0.76%
Other Metrics:
--------------
Branches 66 67 67 36 35
Full-time equivalent employees 748 793 809 358 373
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SOURCE Heritage Financial Corporation
