HERITAGE FINANCIAL CORPORATION OLYMPIA, Wash., Jan. 24, 2019 /PRNewswire/ -- Heritage Financial Corporation (NASDAQ GS: HFWA) (the "Company" or "Heritage"), the parent company of Heritage Bank, today reported that the Company had net income of $16.6 million for the quarter ended December 31, 2018 compared to $10.0 million for the quarter ended December 31, 2017 and $15.5 million for the linked-quarter ended September 30, 2018. Diluted earnings per common share for the quarter ended December 31, 2018 was $0.45 compared to $0.33 for the quarter ended December 31, 2017 and $0.42 for the linked-quarter ended September 30, 2018. The impact of one-time and merger-related expenses was $0.02 per share for the quarter ended December 31, 2018 compared to $0.01 per share for the quarter ended December 31, 2017 and $0.07 per share for the quarter ended September 30, 2018.
The Company had net income of $53.1 million for the year ended December 31, 2018, or $1.49 per diluted common share, compared to $41.8 million, or $1.39 per diluted common share, for the year ended December 31, 2017. The impact of one-time and merger-related expenses was $0.27 per share for year ended December 31, 2018 compared to $0.02 per share for the year ended December 31, 2017.
Brian L. Vance, Chief Executive Officer of Heritage, commented, "We are pleased with our overall growth in 2018. We achieved some important milestones during the year including surpassing the $5.0 billion mark in total assets with the acquisitions of Puget Sound Bancorp, Inc. and Premier Commercial Bancorp. It is significant to note that our year-over-year asset growth was 29.3%.
"As the year was coming to a close we also hired a new team of bankers in the Portland, Oregon market in addition to the team we hired in 2017. With the two acquisitions and the new teams we have hired, we have significantly increased our presence and market share in the largest two markets in the Pacific Northwest, which has been an important initiative of ours in the past few years.
"Even when including $0.27 of one-time and merger-related expenses in 2018, we were still able to report diluted earnings per share of $1.49 for the year, a 7.2% improvement over the prior year. We are pleased to declare a regular cash dividend of $0.18 per share which is a 5.9% increase from the $0.17 per common share declared in the fourth quarter of 2017. Our tangible common equity remains strong at 9.9% which will support our ongoing strategy of organic growth and growth from future acquisitions."
Jeffrey J. Deuel, President and Chief Executive Officer of Heritage Bank commented, "We are pleased with our overall financial performance. In spite of the fact that we did not see the loan growth we had expected due to historically high loan prepayments during the second half of the year, our loan pipeline and new loan originations remain quite strong. We also saw nice growth in overall deposits as a result of our long-term focus on growing deposits. Our 82.4% loan to deposit ratio provides us with the flexibility to successfully manage through the current competitive rate environment. We have also seen continuing improvement in our net interest margin due to disciplined loan and deposit pricing strategies.
"The combination of legacy Heritage, two acquisitions, two new teams we brought on in the Portland, Oregon market over the past 20 months, and some selective hiring in both the front and back office positions us well for the future."
Acquisition of Premier Commercial Bancorp
On July 2, 2018, the Company completed the acquisition of Premier Commercial Bancorp ("Premier Commercial"), the holding company for Premier Community Bank, both of Hillsboro, Oregon ("Premier Merger"). As of the acquisition date, Premier Commercial was merged with and into Heritage and Premier Community Bank was merged with and into Heritage Bank.
Pursuant to the terms of the merger agreement, Premier Commercial shareholders received 0.4863 shares of Heritage common stock in exchange for each share of Premier Commercial common stock based on the Heritage closing date per share price on June 29, 2018 of $34.85. Heritage issued an aggregate of 2,848,579 shares of its common stock and paid cash of $2,000 for fractional shares in the transaction for total consideration paid of $99.3 million.
Acquisition of Puget Sound Bancorp, Inc.
On January 16, 2018, the Company completed the acquisition of Puget Sound Bancorp, Inc. ("Puget Sound"), the holding company for Puget Sound Bank, both of Bellevue, Washington ("Puget Sound Merger"). As of the acquisition date, Puget Sound merged into Heritage and Puget Sound Bank merged into Heritage Bank.
Pursuant to the terms of the merger agreement, Puget Sound shareholders received 1.1688 shares of Heritage common stock in exchange for each share of Puget Sound stock. Heritage issued an aggregate of 4,112,258 shares of its common stock at the closing date per share price on January 12, 2018 of $31.80 and paid cash of $3,000 for fractional shares in the transaction for total consideration paid of $130.8 million.
Acquisition Accounting
The Premier Merger and Puget Sound Merger (collectively the "Premier and Puget Mergers") were accounted for using the acquisition method of accounting. Accordingly, Heritage's cost to acquire Premier Commercial and Puget Sound were allocated to the assets (including identifiable intangible assets) and the liabilities at their respective estimated fair values as of the acquisition dates. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. Fair values on the acquisition date are preliminary and represent management's best estimates based on available information and facts and circumstances in existence on the acquisition date. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. The Company recorded an adjustment to the Premier Commercial fair values of total loans receivable, prepaid expenses and other assets and accrued expenses and other liabilities during the quarter end December 31, 2018 with a net impact to goodwill acquired of $102,000.
The following table provides the estimated fair value of the assets acquired and liabilities assumed at the merger dates for each merger (in thousands):
Premier Merger | Puget Sound Merger | |||||||
Effective Dates | 7/2/2018 | 1/16/2018 | ||||||
Total merger consideration | $ | 99,275 | $ | 130,773 | ||||
Assets | ||||||||
Cash on hand and in banks | $ | 22,534 | $ | 25,889 | ||||
Interest earning deposits | 3,309 | 54,247 | ||||||
Investment securities available for sale | 4,493 | 80,353 | ||||||
Loans receivable | 330,158 | 388,462 | ||||||
Other real estate owned | 1,796 | — | ||||||
Premises and equipment, net | 3,053 | 732 | ||||||
Federal Home Loan Bank stock, at cost | 1,120 | 623 | ||||||
Bank owned life insurance | 10,852 | 6,264 | ||||||
Accrued interest receivable | 1,006 | 1,448 | ||||||
Prepaid expenses and other assets | 1,603 | 1,354 | ||||||
Other intangible assets | 7,075 | 11,270 | ||||||
Total assets | $ | 386,999 | $ | 570,642 | ||||
Liabilities and Stockholders' Equity | ||||||||
Deposits | $ | 318,717 | $ | 505,885 | ||||
Federal Home Loan Bank advances | 16,000 | — | ||||||
Securities sold under agreement to repurchase | 462 | — | ||||||
Accrued expenses and other liabilities | 5,935 | 2,504 | ||||||
Total liabilities | $ | 341,114 | $ | 508,389 | ||||
Fair value of net assets acquired | $ | 45,885 | $ | 62,253 | ||||
Goodwill acquired | 53,390 | 68,520 | ||||||
Balance Sheet
The Company's total assets increased $41.6 million, or 0.8%, to $5.32 billion at December 31, 2018 from $5.28 billion at September 30, 2018 and increased $1.20 billion, or 29.3%, from $4.11 billion at December 31, 2017.
Investment securities increased $55.4 million, or 6.0%, to $976.1 million at December 31, 2018 from $920.7 million at September 30, 2018 primarily as a result of deposit growth and earnings. Investment purchases of $78.8 million were partially offset by maturities, calls and payments of investment securities of $27.9 million and a decrease in unrealized losses of $9.1 million due to a decrease in interest rates during the fourth quarter that positively impacted the fair value of our bond portfolio. Investment securities at December 31, 2018 increased $165.6 million, or 20.43%, from $810.5 million at December 31, 2017.
Total loans receivable, net increased $4.5 million, or 0.1%, to $3.62 billion at December 31, 2018 from $3.61 billion at September 30, 2018. Total loans receivable, net, continued to be impacted by elevated prepayments during the fourth quarter. Total loans receivable, net increased $802.1 million, or 28.47%, from $2.82 billion at December 31, 2017 primarily as a result of loans acquired in the Premier and Puget Mergers totaling $718.6 million. The year-over-year loan growth included increases in non-owner occupied commercial real estate loans of $317.9 million, commercial and industrial loans of $208.2 million, and owner-occupied commercial real estate loans of $157.7 million.
Prepaid expenses and other assets decreased $9.3 million, or 8.5%, to $99.4 million at December 31, 2018 from $108.7 million at September 30, 2018 primarily as a result of a decrease in the outstanding interest rate swap balance with our customers of $2.6 million and a decrease in tax related accounts of $3.5 million.
Total deposits increased $34.3 million, or 0.8%, to $4.43 billion at December 31, 2018 from $4.40 billion at September 30, 2018. The quarter-over-quarter increase was due primarily to increases in noninterest bearing demand deposits of $50.4 million and interest bearing demand deposits of $23.4 million partially offset by a decrease in certificates of deposit of $36.7 million. The decrease in certificates of deposit was due primarily to a decrease in brokered certificates of deposit of $30.0 million.
Total deposits increased $1.04 billion, or 30.6%, from $3.39 billion at December 31, 2017. The year-over-year growth was primarily a result of deposits acquired in the Premier and Puget Mergers totaling $824.6 million. Non-maturity deposits as a percentage of total deposits increased to 89.5% as of December 31, 2018 from 88.5% as of September 30, 2018 and 88.3% as of December 31, 2017.
The increase in deposits for the year ended December 31, 2018, excluding the deposits acquired in the Premier and Puget Mergers, was primarily due to increases in interest bearing demand deposits of $188.6 million, or 5.6%, and noninterest bearing demand deposit accounts of $84.7 million, or 2.5%, offset partially by decreases in money market accounts of $55.8 million, or 1.6%, and certificates of deposit accounts of $19.2 million, or 0.6%.
The acquired deposits had the following composition at the merger dates (in thousands):
Acquired Balances | % of Total | |||||
Premier and Puget Mergers - Deposit Composition | ||||||
Noninterest bearing demand deposits | $ | 332,744 | 40.4 | % | ||
Interest bearing demand deposits | 77,198 | 9.4 | ||||
Money market accounts | 321,529 | 38.9 | ||||
Savings accounts | 5,452 | 0.7 | ||||
Total non-maturity deposits | 736,923 | 89.4 | ||||
Certificates of deposit | 87,679 | 10.6 | ||||
Total deposits acquired | $ | 824,602 | 100.0 | % | ||
The Company had no Federal Home Loan Bank advances at both December 31, 2018 and September 30, 2018 and $92.5 million outstanding at December 31, 2017. The Company was able to pay down the advances, including the $16.0 million acquired in the Premier Merger, during the year ended December 31, 2018 due to the deposit growth and earnings during the year.
Total stockholders' equity increased $14.6 million, or 2.0%, to $760.7 million at December 31, 2018 from $746.1 million at September 30, 2018. Total stockholders' equity increased $252.4 million, or 49.7%, from $508.3 million at December 31, 2017. Changes in stockholders' equity during the quarter and year ended December 31, 2018 were as follows (in thousands):
Three Months Ended | Year Ended | ||||||
December 31, 2018 | |||||||
Balance, beginning of period | $ | 746,133 | $ | 508,305 | |||
Common stock issued in the Premier and Puget Mergers | — | 230,043 | |||||
Net income | 16,609 | 53,057 | |||||
Dividends paid | (9,995) | (25,791) | |||||
Accumulated other comprehensive loss | 7,236 | (6,064) | |||||
Other | 740 | 1,173 | |||||
Balance, end of period | $ | 760,723 | $ | 760,723 | |||
The Company and Heritage Bank continue to maintain capital levels in excess of the applicable regulatory requirements for them to be categorized as "well-capitalized". The Company had common equity Tier 1 risk-based, Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of 11.6%, 10.5%, 12.1% and 12.9%, respectively, at December 31, 2018, compared to 11.4%, 10.4%, 11.8% and 12.6%, respectively, at September 30, 2018 and 11.3%, 10.2%, 11.8% and 12.8%, respectively, at December 31, 2017.
Credit Quality
The allowance for loan losses increased $567,000, or 1.6%, to $35.0 million at December 31, 2018 from $34.5 million at September 30, 2018. The increase was due to provision for loan losses of $1.2 million recorded during the quarter ended December 31, 2018, offset partially by net charge-offs of $595,000 recognized during the same period. The allowance for loan losses increased $3.0 million, or 9.2%, from $32.1 million at December 31, 2017 due to a provision for loan losses of $5.1 million, partially offset by net charge-offs of $2.2 million recognized during the year ended December 31, 2018.
Nonperforming loans to loans receivable, net, decreased to 0.37% at December 31, 2018 from 0.41% at September 30, 2018 due primarily to a decrease in nonaccrual loans of $1.1 million, or 7.3%, to $13.7 million at December 31, 2018 from $14.8 million at September 30, 2018. Nonperforming loans to loans receivable, net, decreased from 0.38% at December 31, 2017 due primarily to a proportionally higher increase in loans receivable, net of $805.1 million, or 28.3%, compared to an increase in nonaccrual loans of $3.0 million, or 28.0%, from $10.7 million at December 31, 2017.
Changes in nonaccrual loans during the quarter and year ended December 31, 2018 were as follows (in thousands):
Three Months Ended | Year Ended | ||||||
December 31, 2018 | |||||||
Nonaccrual loans | |||||||
Balance, beginning of period | $ | 14,780 | $ | 10,703 | |||
Addition of previously classified pass graded loans | 96 | 5,469 | |||||
Addition of previously classified potential problem loans | 983 | 5,319 | |||||
Addition of previously classified TDR loans | 786 | 786 | |||||
Acquired in Premier Merger | — | 130 | |||||
Charge-offs | (303) | (1,027) | |||||
Net principal payments | (2,639) | (7,677) | |||||
Balance, end of period | $ | 13,703 | $ | 13,703 | |||
The allowance for loan losses to nonperforming loans was 255.73% at December 31, 2018 compared to 233.25% at the linked-quarter ended September 30, 2018 and 299.79% at December 31, 2017. Nonperforming assets decreased to 0.29% of total assets at December 31, 2018 compared to 0.32% of total assets at September 30, 2018 due primarily to the decrease in nonaccrual loans discussed above. Nonperforming assets increased to 0.29% of total assets compared to 0.26% of total assets at December 31, 2017 based on the increase in nonaccrual loans discussed above and the increase in other real estate owned during the year ended December 31, 2018 primarily as a result of the Premier Merger.
Potential problem loans decreased $4.4 million, or 4.2%, to $101.3 million at December 31, 2018 compared to $105.7 million at September 30, 2018. Potential problem loans increased $17.8 million, or 21.3%, from $83.5 million at December 31, 2017 due primarily to potential problems loans acquired in the Premier and Puget Mergers. Changes in potential problem loans during the quarter and year ended December 31, 2018 were as follows (in thousands):
Three Months Ended | Year Ended | ||||||
December 31, 2018 | |||||||
Potential problem loans | |||||||
Balance, beginning of period | $ | 105,742 | $ | 83,543 | |||
Addition of previously classified pass graded loans | 14,562 | 63,477 | |||||
Acquired in Premier and Puget Mergers | — | 14,630 | |||||
Upgrades to pass graded loan status | (1,473) | (16,746) | |||||
Transfers of loans to nonaccrual and TDR status | (9,727) | (14,970) | |||||
Charge-offs | (101) | (401) | |||||
Net principal payments | (7,654) | (28,184) | |||||
Balance, end of period | $ | 101,349 | $ | 101,349 | |||
The allowance for loan losses to loans receivable, net, increased to 0.96% at December 31, 2018 from 0.94% at September 30, 2018. The allowance for loan losses to loans receivable, net decreased from 1.13% at December 31, 2017 primarily as a result of the Premier and Puget Mergers. Included in the carrying value of loans are net discounts on loans purchased in mergers and acquisitions which may reduce the need for an allowance for loan losses on these loans because they are carried at an amount below the outstanding principal balance. The remaining net discount on purchased loans was $11.8 million at December 31, 2018 compared to $13.4 million at September 30, 2018 and $10.1 million at December 31, 2017. 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, 2018.
Net charge-offs were $595,000 for the quarter ended December 31, 2018 compared to net charge-offs of $652,000 for the same quarter in 2017 and $562,000 for the linked-quarter ended September 30, 2018. The majority of the charge-offs recorded during the quarter ended December 31, 2018 relate to smaller charge-off balances on a large volume of consumer loans. Net charge-offs were $2.2 million for the year ended December 31, 2018 compared to net charge-offs of $3.2 million during the year ended December 31, 2017 due primarily to the closure of a purchased credit impaired ("PCI") pool of commercial real estate loans during the quarter ended September 30, 2017 of $1.5 million, representing past residual losses estimated and provided for in the pool's allocated allowance for loan loss. As the last loan in the PCI pool was resolved during the quarter ended September 30, 2017, the Company recognized these past losses as a charge-off to the allowance for loan losses.
Operating Results
Net interest income increased $174,000, or 0.3%, to $51.3 million for the quarter ended December 31, 2018 from $51.1 million for the linked-quarter ended September 30, 2018 primarily due to an increase in yield and average balance of taxable securities, offset partially by a decrease in loan yield primarily a result of lower incremental accretion on purchased loans.
Net interest income increased $14.1 million, or 38.0%, to $51.3 million for the quarter ended December 31, 2018 compared to $37.2 million for the same period in 2017. Net interest income increased $47.6 million, or 34.1%, to $186.9 million for the year ended December 31, 2018 compared to $139.4 million for the year ended December 31, 2017. The increases in net interest income compared to the prior year periods were primarily due to increases in average interest earning assets, which increased substantially as a result of the Premier and Puget Mergers. In addition, the yield on total interest earning assets increased 40 basis points to 4.68% for the quarter ended December 31, 2018 compared to 4.28% for the comparable period in 2017. Yield on total interest earning assets increased 41 basis points to 4.57% for the year ended December 31, 2018 compared to 4.16% for the year ended December 31, 2017. Yields on total interest earning assets increased primarily due to increasing market interest rates over the last year.
The increases in net interest income for all periods were offset partially by increases in the cost of total interest bearing liabilities primarily as a result of rising interest rates. The cost of total interest bearing liabilities increased eight basis points to 0.45% during the quarter ended December 31, 2018 compared to 0.37% for the quarter ended December 31, 2017 and increased one basis point from 0.44% for the linked-quarter ended September 30, 2018. The cost of total interest bearing liabilities increased nine basis points to 0.42% for the year ended December 31, 2018 compared to 0.33% for the same period in 2017.
Net interest margin decreased four basis points to 4.37% for the quarter ended December 31, 2018 from 4.41% for the linked-quarter ended September 30, 2018 due to lower incremental accretion on purchased loans. Net interest margin increased 34 basis points to 4.37% for the quarter ended December 31, 2018 from 4.03% for the same period in 2017 and increased 36 basis points for the year ended December 31, 2018 to 4.29% from 3.93% for 2017. Increases in net interest margin were due primarily to the increases in net interest income as discussed above with the primary contributor being the increases in both the average loan balance and loan yield.
The loan yield, excluding incremental accretion on purchased loans, increased 51 basis points to 5.06% for the quarter ended December 31, 2018 compared to 4.55% for the quarter ended December 31, 2017 and increased five basis points from 5.01% for the linked-quarter ended September 30, 2018. Loan yield, excluding incremental accretion on purchased loans, increased 36 basis points to 4.91% for the year ended December 31, 2018 compared to 4.55% for same period in 2017. The increases in loan yields, excluding incremental accretion of purchased loans, from all prior periods was due to a combination of higher contractual loan rates as a result of the increasing interest rate environment as well as an increase in loan yields from the loans acquired in the Premier and Puget Mergers as compared to legacy Heritage loans.
The impact on loan yield from incremental accretion on purchased loans decreased 10 basis points to 0.19% for the quarter ended December 31, 2018 from 0.29% for the linked-quarter ended September 30, 2018 primarily as a result of loans acquired in the Premier Merger. It is expected that incremental accretion on portfolios with heavy short-term or revolving loans will experience higher accretion in the first three to six months after merger date.
The impact on loan yield from incremental accretion on purchased loans decreased 19 basis points for the quarter ended December 31, 2018 compared to 0.38% for the quarter ended December 31, 2017 due to an usually high prepayment during the quarter ended December 31, 2017. The impact on loan yield from incremental accretion on purchased loans was 0.23% for both the years ended December 31, 2018 and 2017. The incremental accretion and the impact to loan yield will change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchased loans decreases.
The following table presents the net interest margin, loan yield and the effect of the incremental accretion on purchased loans on these ratios for the periods presented below:
Three Months Ended | Year Ended | ||||||||||||||||||
December | September | December | December | December | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Yield non-GAAP reconciliation: (2) | |||||||||||||||||||
Net interest margin (GAAP) | 4.37 | % | 4.41 | % | 4.03 | % | 4.29 | % | 3.93 | % | |||||||||
Exclude impact on net interest margin from incremental accretion on purchased loans(1) | 0.15 | % | 0.23 | % | 0.29 | % | 0.18 | % | 0.18 | % | |||||||||
Net interest margin, excluding incremental accretion on purchased loans (non-GAAP)(1) | 4.22 | % | 4.18 | % | 3.74 | % | 4.11 | % | 3.75 | % | |||||||||
Loan yield (GAAP) | 5.25 | % | 5.30 | % | 4.93 | % | 5.14 | % | 4.78 | % | |||||||||
Exclude impact on loan yield from incremental accretion on purchased loans(1) | 0.19 | % | 0.29 | % | 0.38 | % | 0.23 | % | 0.23 | % | |||||||||
Loan yield, excluding incremental accretion on purchased loans (non-GAAP)(1) | 5.06 | % | 5.01 | % | 4.55 | % | 4.91 | % | 4.55 | % | |||||||||
Incremental accretion on purchased loans(1) | $ | 1,703 | $ | 2,637 | $ | 2,634 | $ | 7,964 | $ | 6,320 | |||||||||
(1) | As of the date of completion of each merger and acquisition transaction, purchased loans were recorded at their estimated fair value, including our estimate of future expected cash flows until the ultimate resolution of these credits. The difference between the contractual loan balance and the fair value represents the purchased discount. The purchased discount is accreted into income over the estimated remaining life of the loan or pool of loans, based upon results of the quarterly cash flow re-estimation. 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. | |
(2) | See Non-GAAP Financial Measures section herein. |
In addition to loan yields, also impacting net interest margin were increases in the yields on investment securities. The yields on the aggregate investment portfolio increased 41 basis points to 2.70% for the quarter ended December 31, 2018 compared to 2.29% for the quarter ended December 31, 2017 and increased 12 basis points from 2.58% for the linked-quarter ended September 30, 2018. The yields on the aggregate investment portfolio increased 31 basis points to 2.56% for the year ended December 31, 2018 compared to 2.25% for the year ended December 31, 2017. The increases compared to the prior periods primarily reflect the effect of the rise in interest rates on our adjustable rate investment securities as well as higher rates on new purchases of investments.
The total cost of deposits increased nine basis points to 0.29% during the quarter ended December 31, 2018 compared to 0.20% during the same quarter in 2017 and increased two basis points from 0.27% during the linked-quarter ended September 30, 2018. The total cost of deposits increased seven basis points to 0.25% during the year ended December 31, 2018 compared to 0.18% during the same period in 2017. Increases in the cost of interest-bearing deposits reflecting higher market rates were offset partially by increases in the noninterest bearing deposit average balances.
Interest expense from other borrowings for the quarter ended December 31, 2018 of $3,000 reflects only the testing of borrowing capacity facilities compared to an expense of $357,000 for the quarter ended December 31, 2017 and $117,000 for the linked-quarter ended September 30, 2018. The Company paid off all the outstanding FHLB advances as of September 30, 2018.
Donald J. Hinson, Executive Vice President and Chief Financial Officer, commented, "Due to a decline in incremental accretion on purchase loans, net interest margin declined from the prior quarter. However, we are pleased with the continued improvement in our pre-accretion net interest margin. This has been accomplished primarily through increases in pre-accretion loan yield while experiencing only marginal increases in costs of total deposits. The weighted average note rate on new loans originated during quarter ended December 31, 2018 increased to 5.66% from 5.49% for the quarter ended September 30, 2018 and from 4.58% for the prior year quarter ended December 31, 2017. This, along with the impact of short-term rate increases on adjustable rate loans, has resulted in an increase of in pre-accretion loan yield of five basis points from the prior quarter and of 51 basis points from the fourth quarter of 2017.
"The ability to keep our costs of total deposits at lower levels has been partially due to our focus on growing our noninterest bearing demand deposits. Through both organic growth and acquisitions, noninterest bearing demand deposits increased to 30.7% of total deposits at December 31, 2018 from 27.8% at December 31, 2017. This increase demonstrates our success in growing full customer relationships which favorably impacts our net interest margin."
The provision for loan losses decreased $176,000, or 13.2%, to $1.2 million for the quarter ended December 31, 2018 compared to $1.3 million for the quarter ended December 31, 2017 and increased $97,000, or 9.1%, from the linked-quarter ended September 30, 2018. The provision for loan losses increased $909,000, or 21.5%, to $5.1 million for the year ended December 31, 2018 compared to $4.2 million for the year ended December 31, 2017. The amount of provision for loan losses was necessary to increase the allowance for loan losses to an amount that management determined to be appropriate at December 31, 2018 based on the use of a consistent methodology. The increase in the provision for loan losses compared to the 2017 periods was primarily as a result of increases in total loan balances.
Noninterest income decreased $600,000, or 6.6%, to $8.5 million for the quarter ended December 31, 2018 compared to $9.1 million for the quarter ended December 31, 2017 and decreased $3.9 million, or 11.0%, to $31.7 million for the year ended December 31, 2018 compared to $35.6 million for the same period in 2017. These decreases were due primarily to lower gain on sale of loans, net, due to lower originations of loans held for sale. In addition, for the year ended December 31, 2018, the decrease in gain on sale of loans reflects a $3.0 million gain on the sale of a previously classified purchased credit impaired loan during the quarter ended June 30, 2017. These decreases in noninterest income were offset partially by increases in service charges and other fees due primarily to changes in fee structures on business deposit accounts completed during the quarter ended June 30, 2017 in addition to increases in deposit balances. Noninterest income increased $384,000, or 4.8%, compared to linked-quarter ended September 30, 2018 primarily due to interest rate swap fees of $204,000 compared to none in the linked-quarter.
Noninterest expense increased $9.8 million, or 35.4%, to $37.3 million for the quarter ended December 31, 2018 compared to $27.6 million for the same period in 2017. Noninterest expense increased $38.8 million, or 35.1%, to $149.4 million for the year ended December 31, 2018 compared to $110.6 million for the same period in 2017. The increases were primarily due to expenses from the Premier and Puget Mergers, including increases related to compensation and employee benefits due to additional employees, occupancy and equipment expense primarily due to additional rent expense, and additional data processing expense due to an increase in transactional accounts and balances. Noninterest expense also increased during the year ended December 31, 2018 compared to 2017 due to increases of $4.9 million in professional services and $2.5 million in amortization of intangible assets. Professional services increased during the year ended December 31, 2018 primarily due to acquisition-related expenses and the buy-out of a third party contract in the amount $1.7 million during the quarter ended June 30, 2018. The third party assisted the Company in its deposit product realignment and was compensated based on success factors over three years subsequent to implementation. The Company assessed the contract and determined that it was advantageous to buy-out the contract prior to the system conversions relating to the Premier and Puget Mergers. The Company expects the accumulated savings in future professional services expenses to fully offset the cost of the buy-out by the end of 2019. Amortization of intangible assets increased during the year ended December 31, 2018 due to additional amortization relating to the Premier and Puget Mergers.
Noninterest expense decreased $2.3 million, or 5.7%, from $39.6 million for the linked-quarter ended September 30, 2018 primarily due to lower non-recurring acquisition related expenses recorded in compensation and employee benefits expense of $1.3 million and professional services expenses of $1.1 million, offset partially by higher other expenses of $341,000.
Acquisition-related expenses incurred as a result of the Premier and Puget Mergers were approximately $1.3 million during the quarter ended December 31, 2018 compared to $423,000 during the quarter ended December 31, 2017 and $3.4 million during the linked-quarter ended September 30, 2018. Acquisition-related expenses incurred during the year ended December 31, 2018 and 2017 totaled $10.4 million and $810,000, respectively. Acquisition costs are primarily included in compensation and employee benefits, professional services and data processing expenses.
The ratio of noninterest expense to average assets (annualized) was 2.78% for the quarter ended December 31, 2018 compared to 2.66% for the same period in 2017 and was 3.00% for year ended December 31, 2018 compared to 2.78% for 2017. These increases were due primarily to acquisition-related expenses and increases in amortization of intangible assets. The ratio of noninterest expense to average assets (annualized) decreased from 2.98% for the linked-quarter ended September 30, 2018 primarily based on the decrease in noninterest expense, discussed above.
Income tax expense was $4.6 million for the quarter ended December 31, 2018 compared to $7.3 million for the quarter ended December 31, 2017 and $3.0 million for the linked-quarter ended September 30, 2018. The effective tax rate was 21.8% for the quarter ended December 31, 2018 compared to 42.0% for the comparable quarter in 2017 and 16.3% for the linked-quarter ended September 30, 2018. Income tax expense was $11.0 million for the year ended December 31, 2018 compared to $18.4 million for the year ended December 31, 2017. The effective tax rate was 17.2% for the year ended December 31, 2018 compared to 30.5% for the year ended December 31, 2017. The decrease in the income tax expense and the effective tax rate compared to the same periods in 2017 was due primarily to the impact of the Tax Cuts and Jobs Act enacted in December 2017 which lowered the corporate income tax rate from 35% to 21%. The increase in the effective tax rate for the quarter ended December 31, 2018 from the prior quarter ended September 30, 2018 was primarily due to a change in the estimated current tax benefits from certain low income housing tax credit projects in the amount of $898,000. Although long-term tax benefits from the projects is still expected to occur, the timing of some of the benefits was extended to future periods.
Dividends
On January 23, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.18 per common share. The dividend is payable on February 21, 2019 to shareholders of record as of the close of business on February 7, 2019.
Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on January 24, 2019 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 7, 2019, by dialing (800) 475-6701 -- access code 461313.
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 64 banking offices in Washington and Oregon. Heritage Bank does business 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. 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 comparison of our performance with the performance of our peers. Where applicable, the Company has also presented comparable earnings information using GAAP financial measures. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for total stockholders' equity or operating results determined in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies.
Reconciliations of the GAAP and non-GAAP financial measures are presented below.
December 31, | September 30, | June 30, 2018 | March 31, 2018 | December 31, | |||||||||||||||
(dollar in thousands, except per share amounts) | |||||||||||||||||||
Tangible common shareholders' equity and tangible assets: | |||||||||||||||||||
Stockholders' equity (GAAP) | $ | 760,723 | $ | 746,133 | $ | 639,523 | $ | 634,708 | $ | 508,305 | |||||||||
Exclude goodwill and other intangible assets | 261,553 | 262,565 | 203,316 | 204,112 | 125,117 | ||||||||||||||
Tangible common stockholders' equity (non-GAAP) | $ | 499,170 | $ | 483,568 | $ | 436,207 | $ | 430,596 | $ | 383,188 | |||||||||
Total assets (GAAP) | $ | 5,317,852 | $ | 5,276,214 | $ | 4,789,488 | $ | 4,676,250 | $ | 4,113,270 | |||||||||
Exclude goodwill and other intangible assets | 261,553 | 262,565 | 203,316 | 204,112 | 125,117 | ||||||||||||||
Tangible assets (non-GAAP) | $ | 5,056,299 | $ | 5,013,649 | $ | 4,586,172 | $ | 4,472,138 | $ | 3,988,153 | |||||||||
Common equity to assets (GAAP) | 14.3 | % | 14.1 | % | 13.4 | % | 13.6 | % | 12.4 | % | |||||||||
Tangible common equity to tangible assets (non-GAAP) | 9.9 | % | 9.6 | % | 9.5 | % | 9.6 | % | 9.6 | % | |||||||||
Common stock shares outstanding | 36,874,055 | 36,873,123 | 34,021,094 | 34,018,280 | 29,927,746 | ||||||||||||||
Book value per common share (GAAP) | $ | 20.63 | $ | 20.24 | $ | 18.80 | $ | 18.66 | $ | 16.98 | |||||||||
Tangible book value per common share (non-GAAP) | $ | 13.54 | $ | 13.11 | $ | 12.82 | $ | 12.66 | $ | 12.80 | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
(dollar in thousands, except per share amounts) | |||||||||||||||||||
Adjusted return on average tangible common stockholders' equity: | |||||||||||||||||||
Net income (GAAP) | $ | 16,609 | $ | 15,504 | $ | 10,023 | $ | 53,057 | $ | 41,791 | |||||||||
Exclude merger-related expenses | 1,301 | 3,402 | 423 | 10,391 | 810 | ||||||||||||||
Exclude consultant agreement buyout | — | — | — | 1,693 | — | ||||||||||||||
Exclude amortization of intangible assets | 1,114 | 1,114 | 320 | 3,819 | 1,286 | ||||||||||||||
Exclude tax effect of adjustments | (507) | (948) | (260) | (3,340) | (734) | ||||||||||||||
Adjusted tangible net income (non-GAAP) | $ | 18,517 | $ | 19,072 | $ | 10,506 | $ | 65,620 | $ | 43,153 | |||||||||
Average stockholders' equity (GAAP) | $ | 750,165 | $ | 744,389 | $ | 510,581 | $ | 687,094 | $ | 499,776 | |||||||||
Exclude average intangible assets | 262,177 | 262,644 | 125,303 | 230,282 | 125,774 | ||||||||||||||
Average tangible common stockholders' equity (non-GAAP) | $ | 487,988 | $ | 481,745 | $ | 385,278 | $ | 456,812 | $ | 374,002 | |||||||||
Return on average common equity, annualized (GAAP) | 8.78 | % | 8.26 | % | 7.79 | % | 7.72 | % | 8.36 | % | |||||||||
Return on average tangible common equity, annualized (non-GAAP) | 13.50 | % | 12.77 | % | 10.32 | % | 11.61 | % | 11.17 | % | |||||||||
Adjusted return on average tangible common equity, annualized (non-GAAP) | 15.05 | % | 15.71 | % | 10.82 | % | 14.36 | % | 11.54 | % | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
(dollar in thousands, except per share amounts) | |||||||||||||||||||
Earnings from core operations: | |||||||||||||||||||
Net income (GAAP) | $ | 16,609 | $ | 15,504 | $ | 10,023 | $ | 53,057 | $ | 41,791 | |||||||||
Exclude merger-related expense | 1,301 | 3,402 | 423 | 10,391 | 810 | ||||||||||||||
Exclude consultant agreement buyout | — | — | — | 1,693 | — | ||||||||||||||
Exclude tax effect of adjustments | (273) | (714) | (148) | (2,538) | (284) | ||||||||||||||
Adjusted net income (non-GAAP) | $ | 17,637 | $ | 18,192 | $ | 10,298 | $ | 62,603 | $ | 42,317 | |||||||||
Exclude dividends and undistributed earnings allocated to participating securities | (69) | (48) | (70) | (321) | (293) | ||||||||||||||
Adjusted net income allocated to common shareholders (non-GAAP) | $ | 17,568 | $ | 18,144 | $ | 10,228 | $ | 62,282 | $ | 42,024 | |||||||||
Diluted weighted average common shares | 36,998,880 | 36,963,244 | 29,894,494 | 35,371,590 | 29,849,331 | ||||||||||||||
Diluted earnings per share (GAAP) | $ | 0.45 | $ | 0.42 | $ | 0.33 | $ | 1.49 | $ | 1.39 | |||||||||
Adjusted diluted earnings per share (non-GAAP) | $ | 0.47 | $ | 0.49 | $ | 0.34 | $ | 1.76 | $ | 1.41 | |||||||||
Average assets | $ | 5,325,376 | $ | 5,278,565 | $ | 4,112,516 | $ | 4,974,018 | $ | 3,981,352 | |||||||||
Return on average assets, annualized (GAAP) | 1.24 | % | 1.17 | % | 0.97 | % | 1.07 | % | 1.05 | % | |||||||||
Adjusted return on average assets, annualized (non-GAAP) | 1.38 | % | 1.43 | % | 1.01 | % | 1.32 | % | 1.08 | % | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
(dollar in thousands, except per share amounts) | |||||||||||||||||||
Adjusted noninterest expense: | |||||||||||||||||||
Noninterest expense (GAAP) | $ | 37,345 | $ | 39,597 | $ | 27,588 | $ | 149,395 | $ | 110,575 | |||||||||
Exclude merger-related expense | 1,301 | 3,402 | 423 | 10,391 | 810 | ||||||||||||||
Exclude amortization of intangible assets | 1,114 | 1,114 | 320 | 3,819 | 1,286 | ||||||||||||||
Exclude consultant agreement buyout | — | — | — | 1,693 | — | ||||||||||||||
Adjusted noninterest expense (non-GAAP) | $ | 34,930 | $ | 35,081 | $ | 26,845 | $ | 133,492 | $ | 108,479 | |||||||||
Average Assets | $ | 5,325,376 | $ | 5,278,565 | $ | 4,112,516 | $ | 4,974,018 | $ | 3,981,352 | |||||||||
Noninterest expense to average assets, annualized (GAAP) | 2.78 | % | 2.98 | % | 2.66 | % | 3.00 | % | 2.78 | % | |||||||||
Adjusted noninterest expense to average assets, annualized (non-GAAP) | 2.60 | % | 2.64 | % | 2.59 | % | 2.68 | % | 2.72 | % | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Net interest income and interest and fees on loans: | |||||||||||||||||||
Net interest income (GAAP) | $ | 51,270 | $ | 51,096 | $ | 37,155 | $ | 186,946 | $ | 139,363 | |||||||||
Exclude incremental accretion on purchased loans | 1,703 | 2,637 | 2,634 | 7,964 | 6,320 | ||||||||||||||
Adjusted net interest income (non-GAAP) | $ | 49,567 | $ | 48,459 | $ | 34,521 | $ | 178,982 | $ | 133,043 | |||||||||
Average total interest earning assets, net | $ | 4,653,215 | $ | 4,596,734 | $ | 3,661,425 | $ | 4,358,643 | $ | 3,547,786 | |||||||||
Net interest margin, annualized (GAAP) | 4.37 | % | 4.41 | % | 4.03 | % | 4.29 | % | 3.93 | % | |||||||||
Net interest margin, excluding incremental accretion on purchased loans, annualized (non-GAAP) | 4.22 | % | 4.18 | % | 3.74 | % | 4.11 | % | 3.75 | % | |||||||||
Interest and fees on loans (GAAP) | $ | 47,865 | $ | 48,301 | $ | 34,633 | $ | 175,466 | $ | 129,213 | |||||||||
Exclude incremental accretion on purchased loans | 1,703 | 2,637 | 2,634 | 7,964 | 6,320 | ||||||||||||||
Adjusted interest and fees on loans (non-GAAP) | $ | 46,162 | $ | 45,664 | $ | 31,999 | $ | 167,502 | $ | 122,893 | |||||||||
Average total loans receivable, net | $ | 3,615,362 | $ | 3,618,031 | $ | 2,786,370 | $ | 3,414,424 | $ | 2,703,934 | |||||||||
Loan yield, annualized (GAAP) | 5.25 | % | 5.30 | % | 4.93 | % | 5.14 | % | 4.78 | % | |||||||||
Loan yield, excluding incremental accretion on purchased loans, annualized (non-GAAP) | 5.06 | % | 5.01 | % | 4.55 | % | 4.91 | % | 4.55 | % | |||||||||
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements, include the expected revenues, cost savings, synergies and other benefits from the Premier and Puget Mergers might not be realized within the expected time frames or at all, and costs or difficulties relating to integration matters, including but not limited to, customer and employee retention might be greater than expected; increased competitive pressures; changes in the interest rate environment; changes in general economic conditions and conditions within the securities markets; legislative and regulatory changes; and other factors described in Heritage's latest annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission-which are available on our website at www.heritagebanknw.com and on the SEC's website at www.sec.gov. The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based only on information then actually known to the Company and upon management's beliefs and assumptions at the time they are made which may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. 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 2019 and beyond 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 (Unaudited) | |||||||||||
(In thousands, except shares) | |||||||||||
December 31, | September 30, | December 31, | |||||||||
Assets | |||||||||||
Cash on hand and in banks | $ | 92,704 | $ | 120,833 | $ | 78,293 | |||||
Interest earning deposits | 69,206 | 49,310 | 24,722 | ||||||||
Cash and cash equivalents | 161,910 | 170,143 | 103,015 | ||||||||
Investment securities available for sale | 976,095 | 920,737 | 810,530 | ||||||||
Loans held for sale | 1,555 | 1,882 | 2,288 | ||||||||
Loans receivable, net | 3,654,160 | 3,649,054 | 2,849,071 | ||||||||
Allowance for loan losses | (35,042) | (34,475) | (32,086) | ||||||||
Total loans receivable, net | 3,619,118 | 3,614,579 | 2,816,985 | ||||||||
Other real estate owned | 1,983 | 2,032 | — | ||||||||
Premises and equipment, net | 81,100 | 80,439 | 60,325 | ||||||||
Federal Home Loan Bank stock, at cost | 6,076 | 6,076 | 8,347 | ||||||||
Bank owned life insurance | 93,612 | 93,296 | 75,091 | ||||||||
Accrued interest receivable | 15,403 | 15,735 | 12,244 | ||||||||
Prepaid expenses and other assets | 99,447 | 108,730 | 99,328 | ||||||||
Other intangible assets, net | 20,614 | 21,728 | 6,088 | ||||||||
Goodwill | 240,939 | 240,837 | 119,029 | ||||||||
Total assets | $ | 5,317,852 | $ | 5,276,214 | $ | 4,113,270 | |||||
Liabilities and Stockholders' Equity | |||||||||||
Deposits | $ | 4,432,402 | $ | 4,398,127 | $ | 3,393,060 | |||||
Federal Home Loan Bank advances | — | — | 92,500 | ||||||||
Junior subordinated debentures | 20,302 | 20,229 | 20,009 | ||||||||
Securities sold under agreement to repurchase | 31,487 | 32,233 | 31,821 | ||||||||
Accrued expenses and other liabilities | 72,938 | 79,492 | 67,575 | ||||||||
Total liabilities | 4,557,129 | 4,530,081 | 3,604,965 | ||||||||
Common stock | 591,806 | 591,065 | 360,590 | ||||||||
Retained earnings | 176,372 | 169,758 | 149,013 | ||||||||
Accumulated other comprehensive loss, net | (7,455) | (14,690) | (1,298) | ||||||||
Total stockholders' equity | 760,723 | 746,133 | 508,305 | ||||||||
Total liabilities and stockholders' equity | $ | 5,317,852 | $ | 5,276,214 | $ | 4,113,270 | |||||
Common stock shares outstanding | 36,874,055 | 36,873,123 | 29,927,746 | ||||||||
HERITAGE FINANCIAL CORPORATION | |||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | |||||||||||||||||||
(Dollar amounts in thousands, except per share amounts) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
Interest income: | |||||||||||||||||||
Interest and fees on loans | $ | 47,865 | $ | 48,301 | $ | 34,633 | $ | 175,466 | $ | 129,213 | |||||||||
Taxable interest on investment securities | 5,343 | 4,662 | 3,381 | 17,602 | 12,688 | ||||||||||||||
Nontaxable interest on investment securities | 1,003 | 1,085 | 1,343 | 4,649 | 5,269 | ||||||||||||||
Interest on other interest earning assets | 654 | 528 | 187 | 1,642 | 539 | ||||||||||||||
Total interest income | 54,865 | 54,576 | 39,544 | 199,359 | 147,709 | ||||||||||||||
Interest expense: | |||||||||||||||||||
Deposits | 3,228 | 3,014 | 1,748 | 10,397 | 6,049 | ||||||||||||||
Junior subordinated debentures | 335 | 330 | 266 | 1,263 | 1,014 | ||||||||||||||
Other borrowings | 32 | 136 | 375 | 753 | 1,283 | ||||||||||||||
Total interest expense | 3,595 | 3,480 | 2,389 | 12,413 | 8,346 | ||||||||||||||
Net interest income | 51,270 | 51,096 | 37,155 | 186,946 | 139,363 | ||||||||||||||
Provision for loan losses | 1,162 | 1,065 | 1,338 | 5,129 | 4,220 | ||||||||||||||
Net interest income after provision for loan losses | 50,108 | 50,031 | 35,817 | 181,817 | 135,143 | ||||||||||||||
Noninterest income: | |||||||||||||||||||
Service charges and other fees | 4,852 | 4,824 | 4,596 | 18,914 | 18,004 | ||||||||||||||
Gain (loss) on sale of investment securities, net | 2 | 82 | (155) | 137 | 6 | ||||||||||||||
Gain on sale of loans, net | 473 | 706 | 1,134 | 2,759 | 7,696 | ||||||||||||||
Interest rate swap fees | 204 | — | 302 | 564 | 1,045 | ||||||||||||||
Other income | 2,933 | 2,468 | 3,187 | 9,291 | 8,828 | ||||||||||||||
Total noninterest income | 8,464 | 8,080 | 9,064 | 31,665 | 35,579 | ||||||||||||||
Noninterest expense: | |||||||||||||||||||
Compensation and employee benefits | 22,338 | 23,804 | 16,149 | 86,830 | 64,268 | ||||||||||||||
Occupancy and equipment | 5,322 | 5,020 | 3,789 | 19,779 | 15,396 | ||||||||||||||
Data processing | 2,433 | 2,343 | 2,169 | 9,888 | 8,176 | ||||||||||||||
Marketing | 721 | 876 | 398 | 3,228 | 2,943 | ||||||||||||||
Professional services | 1,185 | 2,119 | 1,262 | 9,670 | 4,777 | ||||||||||||||
State and local taxes | 875 | 931 | 633 | 3,210 | 2,461 | ||||||||||||||
Federal deposit insurance premium | 375 | 375 | 345 | 1,480 | 1,435 | ||||||||||||||
Other real estate owned, net | 88 | 18 | (34) | 106 | (70) | ||||||||||||||
Amortization of intangible assets | 1,114 | 1,114 | 320 | 3,819 | 1,286 | ||||||||||||||
Other expense | 2,894 | 2,997 | 2,557 | 11,385 | 9,903 | ||||||||||||||
Total noninterest expense | 37,345 | 39,597 | 27,588 | 149,395 | 110,575 | ||||||||||||||
Income before income taxes | 21,227 | 18,514 | 17,293 | 64,087 | 60,147 | ||||||||||||||
Income tax expense | 4,618 | 3,010 | 7,270 | 11,030 | 18,356 | ||||||||||||||
Net income | $ | 16,609 | $ | 15,504 | $ | 10,023 | $ | 53,057 | $ | 41,791 | |||||||||
Basic earnings per common share | $ | 0.45 | $ | 0.42 | $ | 0.33 | $ | 1.49 | $ | 1.39 | |||||||||
Diluted earnings per common share | $ | 0.45 | $ | 0.42 | $ | 0.33 | $ | 1.49 | $ | 1.39 | |||||||||
Dividends declared per common share | $ | 0.27 | $ | 0.15 | $ | 0.23 | $ | 0.72 | $ | 0.61 | |||||||||
Average number of basic common shares outstanding | 36,806,946 | 36,771,946 | 29,786,691 | 35,194,003 | 29,757,819 | ||||||||||||||
Average number of diluted common shares outstanding | 36,998,880 | 36,963,244 | 29,894,494 | 35,371,590 | 29,849,331 | ||||||||||||||
HERITAGE FINANCIAL CORPORATION | ||||||||||||||
FINANCIAL STATISTICS (Unaudited) | ||||||||||||||
(Dollar amounts in thousands, except per share amounts) | ||||||||||||||
Three Months Ended | Year Ended | |||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||
Performance Ratios: | ||||||||||||||
Efficiency ratio | 62.52 | % | 66.91 | % | 59.69 | % | 68.34 | % | 63.21 | % | ||||
Noninterest expense to average assets, annualized | 2.78 | % | 2.98 | % | 2.66 | % | 3.00 | % | 2.78 | % | ||||
Return on average assets, annualized | 1.24 | % | 1.17 | % | 0.97 | % | 1.07 | % | 1.05 | % | ||||
Return on average equity, annualized | 8.78 | % | 8.26 | % | 7.79 | % | 7.72 | % | 8.36 | % | ||||
Return on average tangible common equity, annualized | 13.50 | % | 12.77 | % | 10.32 | % | 11.61 | % | 11.17 | % | ||||
Net charge-offs on loans to average loans, annualized | 0.07 | % | 0.06 | % | 0.09 | % | 0.06 | % | 0.12 | % | ||||
As of Period End | |||||||||||
December 31, | September 30, | December 31, | |||||||||
Financial Measures: | |||||||||||
Book value per common share | $ | 20.63 | $ | 20.24 | $ | 16.98 | |||||
Tangible book value per common share | $ | 13.54 | $ | 13.11 | $ | 12.80 | |||||
Stockholders' equity to total assets | 14.3 | % | 14.1 | % | 12.4 | % | |||||
Tangible common equity to tangible assets | 9.9 | % | 9.6 | % | 9.6 | % | |||||
Common equity Tier 1 capital to risk-weighted assets | 11.6 | % | 11.4 | % | 11.3 | % | |||||
Tier 1 leverage capital to average quarterly assets | 10.5 | % | 10.4 | % | 10.2 | % | |||||
Tier 1 capital to risk-weighted assets | 12.1 | % | 11.8 | % | 11.8 | % | |||||
Total capital to risk-weighted assets | 12.9 | % | 12.6 | % | 12.8 | % | |||||
Loans to deposits ratio (1) | 82.4 | % | 83.0 | % | 84.0 | % | |||||
Deposits per branch | $ | 69,256 | $ | 68,721 | $ | 57,509 | |||||
(1) | Loans receivable, net of deferred costs divided by deposits |
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
Allowance for Loan Losses: | |||||||||||||||||||
Balance, beginning of period | $ | 34,475 | $ | 33,972 | $ | 31,400 | $ | 32,086 | $ | 31,083 | |||||||||
Provision for loan losses | 1,162 | 1,065 | 1,338 | 5,129 | 4,220 | ||||||||||||||
Net (charge-offs) recoveries: | |||||||||||||||||||
Commercial business | (259) | (179) | (385) | (492) | (1,491) | ||||||||||||||
One-to-four family residential | (15) | (15) | (14) | (45) | (28) | ||||||||||||||
Real estate construction and land development | 6 | 3 | 1 | 11 | (354) | ||||||||||||||
Consumer | (327) | (371) | (254) | (1,647) | (1,344) | ||||||||||||||
Total net charge-offs | (595) | (562) | (652) | (2,173) | (3,217) | ||||||||||||||
Balance, end of period | $ | 35,042 | $ | 34,475 | $ | 32,086 | $ | 35,042 | $ | 32,086 | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
Other Real Estate Owned: | |||||||||||||||||||
Balance, beginning of period | $ | 2,032 | $ | 434 | $ | 523 | $ | — | $ | 754 | |||||||||
Additions from transfer of loan | — | — | — | 434 | 32 | ||||||||||||||
Additions from acquisitions | — | 1,796 | — | 1,796 | — | ||||||||||||||
Proceeds from dispositions | — | (198) | (556) | (198) | (930) | ||||||||||||||
Gain on sales, net | — | — | 33 | — | 144 | ||||||||||||||
Valuation adjustments | (49) | — | — | (49) | — | ||||||||||||||
Balance, end of period | $ | 1,983 | $ | 2,032 | $ | — | $ | 1,983 | $ | — | |||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | |||||||||||||||
Gain on Sale of Loans, net: | |||||||||||||||||||
Mortgage loans | $ | 473 | $ | 706 | $ | 897 | $ | 2,403 | $ | 3,412 | |||||||||
SBA loans | — | — | 237 | 356 | 1,286 | ||||||||||||||
Other loans | — | — | — | — | 2,998 | ||||||||||||||
Total gain on sale of loans, net | $ | 473 | $ | 706 | $ | 1,134 | $ | 2,759 | $ | 7,696 | |||||||||
As of Period End | |||||||||||
December 31, | September 30, | December 31, | |||||||||
Nonperforming Assets: | |||||||||||
Nonaccrual loans by type: | |||||||||||
Commercial business | $ | 12,564 | $ | 13,487 | $ | 9,098 | |||||
One-to-four family residential | 71 | 74 | 81 | ||||||||
Real estate construction and land development | 899 | 1,076 | 1,247 | ||||||||
Consumer | 169 | 143 | 277 | ||||||||
Total nonaccrual loans(1) | 13,703 | 14,780 | 10,703 | ||||||||
Other real estate owned | 1,983 | 2,032 | — | ||||||||
Nonperforming assets | $ | 15,686 | $ | 16,812 | $ | 10,703 | |||||
Restructured performing loans | $ | 22,736 | $ | 24,449 | $ | 26,757 | |||||
Accruing loans past due 90 days or more | — | — | — | ||||||||
Potential problem loans(2) | 101,349 | 105,742 | 83,543 | ||||||||
Allowance for loan losses to: | |||||||||||
Loans receivable, net | 0.96 | % | 0.94 | % | 1.13 | % | |||||
Nonaccrual loans | 255.73 | % | 233.25 | % | 299.79 | % | |||||
Nonperforming loans to loans receivable, net | 0.37 | % | 0.41 | % | 0.38 | % | |||||
Nonperforming assets to total assets | 0.29 | % | 0.32 | % | 0.26 | % | |||||
(1) | At December 31, 2018, September 30, 2018 and December 31, 2017, $6.9 million, $6.5 million and $5.2 million of nonaccrual loans were also considered troubled debt restructured loans, respectively. | |
(2) | Potential problem 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. |
As of Period End | ||||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||
Balance | % of | Balance | % of | Balance | % of | |||||||||||||||
Loan Composition | ||||||||||||||||||||
Commercial business: | ||||||||||||||||||||
Commercial and industrial | $ | 853,606 | 23.4 | % | $ | 861,530 | 23.6 | % | $ | 645,396 | 22.7 | % | ||||||||
Owner-occupied commercial real estate | 779,814 | 21.3 | 785,416 | 21.5 | 622,150 | 21.8 | ||||||||||||||
Non-owner occupied commercial real estate | 1,304,463 | 35.7 | 1,283,160 | 35.2 | 986,594 | 34.6 | ||||||||||||||
Total commercial business | 2,937,883 | 80.4 | 2,930,106 | 80.3 | 2,254,140 | 79.1 | ||||||||||||||
One-to-four family residential | 101,763 | 2.8 | 96,333 | 2.7 | 86,997 | 3.1 | ||||||||||||||
Real estate construction and land development: | ||||||||||||||||||||
One-to-four family residential | 102,730 | 2.8 | 107,148 | 2.9 | 51,985 | 1.8 | ||||||||||||||
Five or more family residential and commercial properties | 112,730 | 3.1 | 120,787 | 3.3 | 97,499 | 3.4 | ||||||||||||||
Total real estate construction and land development | 215,460 | 5.9 | 227,935 | 6.2 | 149,484 | 5.2 | ||||||||||||||
Consumer | 395,545 | 10.8 | 391,283 | 10.7 | 355,091 | 12.5 | ||||||||||||||
Gross loans receivable | 3,650,651 | 99.9 | 3,645,657 | 99.9 | 2,845,712 | 99.9 | ||||||||||||||
Deferred loan costs, net | 3,509 | 0.1 | 3,397 | 0.1 | 3,359 | 0.1 | ||||||||||||||
Loans receivable, net | $ | 3,654,160 | 100.0 | % | $ | 3,649,054 | 100.0 | % | $ | 2,849,071 | 100.0 | % | ||||||||
As of Period End | ||||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||
Balance | % of | Balance | % of | Balance | % of | |||||||||||||||
Deposit Composition | ||||||||||||||||||||
Noninterest bearing demand deposits | $ | 1,362,268 | 30.7 | % | $ | 1,311,825 | 29.8 | % | $ | 944,791 | 27.8 | % | ||||||||
Interest bearing demand deposits | 1,317,513 | 29.7 | 1,294,105 | 29.4 | 1,051,752 | 31.1 | ||||||||||||||
Money market accounts | 765,316 | 17.3 | 768,998 | 17.5 | 499,618 | 14.7 | ||||||||||||||
Savings accounts | 520,413 | 11.8 | 519,596 | 11.8 | 498,501 | 14.7 | ||||||||||||||
Total non-maturity deposits | 3,965,510 | 89.5 | 3,894,524 | 88.5 | 2,994,662 | 88.3 | ||||||||||||||
Certificates of deposit | 466,892 | 10.5 | 503,603 | 11.5 | 398,398 | 11.7 | ||||||||||||||
Total deposits | $ | 4,432,402 | 100.0 | % | $ | 4,398,127 | 100.0 | % | $ | 3,393,060 | 100.0 | % | ||||||||
Three Months Ended | ||||||||||||||||||||||||||||||||
December 31, 2018 | September 30, 2018 | December 31, 2017 | ||||||||||||||||||||||||||||||
Average | Interest | Average | Average | Interest | Average | Average | Interest | Average | ||||||||||||||||||||||||
Interest Earning Assets: | ||||||||||||||||||||||||||||||||
Total loans receivable, net (2) (3) | $ | 3,615,362 | $ | 47,865 | 5.25 | % | $ | 3,618,031 | $ | 48,301 | 5.30 | % | $ | 2,786,370 | $ | 34,633 | 4.93 | % | ||||||||||||||
Taxable securities | 772,925 | 5,343 | 2.74 | 707,597 | 4,662 | 2.61 | 587,116 | 3,381 | 2.28 | |||||||||||||||||||||||
Nontaxable securities (3) | 160,626 | 1,003 | 2.48 | 176,322 | 1,085 | 2.44 | 230,942 | 1,343 | 2.31 | |||||||||||||||||||||||
Other interest earning assets | 104,302 | 654 | 2.49 | 94,784 | 528 | 2.21 | 56,997 | 187 | 1.30 | |||||||||||||||||||||||
Total interest earning assets | 4,653,215 | 54,865 | 4.68 | 4,596,734 | 54,576 | 4.71 | 3,661,425 | 39,544 | 4.28 | |||||||||||||||||||||||
Noninterest earning assets | 672,161 | 681,831 | 451,091 | |||||||||||||||||||||||||||||
Total assets | $ | 5,325,376 | $ | 5,278,565 | $ | 4,112,516 | ||||||||||||||||||||||||||
Interest Bearing Liabilities: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 496,903 | $ | 1,218 | 0.97 | % | $ | 512,547 | $ | 1,184 | 0.92 | % | $ | 402,735 | $ | 717 | 0.71 | % | ||||||||||||||
Savings accounts | 516,620 | 613 | 0.47 | 518,937 | 541 | 0.41 | 499,677 | 370 | 0.29 | |||||||||||||||||||||||
Interest bearing demand and money market accounts | 2,074,138 | 1,397 | 0.27 | 2,044,236 | 1,289 | 0.25 | 1,526,717 | 661 | 0.17 | |||||||||||||||||||||||
Total interest bearing deposits | 3,087,661 | 3,228 | 0.41 | 3,075,720 | 3,014 | 0.39 | 2,429,129 | 1,748 | 0.29 | |||||||||||||||||||||||
Junior subordinated debentures | 20,255 | 335 | 6.56 | 20,181 | 330 | 6.49 | 19,967 | 266 | 5.29 | |||||||||||||||||||||||
Securities sold under agreement to repurchase | 34,046 | 29 | 0.34 | 33,394 | 19 | 0.23 | 30,697 | 18 | 0.23 | |||||||||||||||||||||||
Federal Home Loan Bank advances and other borrowings | 440 | 3 | 2.71 | 20,892 | 117 | 2.22 | 102,954 | 357 | 1.38 | |||||||||||||||||||||||
Total interest bearing liabilities | 3,142,402 | 3,595 | 0.45 | 3,150,187 | 3,480 | 0.44 | 2,582,747 | 2,389 | 0.37 | |||||||||||||||||||||||
Noninterest bearing deposits | 1,356,186 | 1,314,203 | 953,902 | |||||||||||||||||||||||||||||
Other noninterest bearing liabilities | 76,623 | 69,786 | 65,286 | |||||||||||||||||||||||||||||
Stockholders' equity | 750,165 | 744,389 | 510,581 | |||||||||||||||||||||||||||||
Total liabilities and stockholders' equity | $ | 5,325,376 | $ | 5,278,565 | $ | 4,112,516 | ||||||||||||||||||||||||||
Net interest income | $ | 51,270 | $ | 51,096 | $ | 37,155 | ||||||||||||||||||||||||||
Net interest spread | 4.23 | % | 4.27 | % | 3.91 | % | ||||||||||||||||||||||||||
Net interest margin | 4.37 | % | 4.41 | % | 4.03 | % | ||||||||||||||||||||||||||
(1) | Annualized. | |
(2) | The average loan balances presented in the table are net of allowances for loan losses. Nonaccrual loans have been included in the table as loans carrying a zero yield. | |
(3) | Yields on tax-exempt securities and loans have not been stated on a tax-equivalent basis. |
Year Ended | |||||||||||||||||||||
December 31, 2018 | December 31, 2017 | ||||||||||||||||||||
Average | Interest | Average | Average | Interest | Average | ||||||||||||||||
Interest Earning Assets: | |||||||||||||||||||||
Total loans receivable, net (2) (3) | $ | 3,414,424 | $ | 175,466 | 5.14 | % | $ | 2,703,934 | $ | 129,213 | 4.78 | % | |||||||||
Taxable securities | 677,893 | 17,602 | 2.60 | 570,969 | 12,688 | 2.22 | |||||||||||||||
Nontaxable securities (3) | 190,209 | 4,649 | 2.44 | 226,934 | 5,269 | 2.32 | |||||||||||||||
Other interest earning assets | 76,117 | 1,642 | 2.16 | 45,949 | 539 | 1.17 | |||||||||||||||
Total interest earning assets | 4,358,643 | 199,359 | 4.57 | % | 3,547,786 | 147,709 | 4.16 | % | |||||||||||||
Noninterest earning assets | 615,375 | 433,566 | |||||||||||||||||||
Total assets | $ | 4,974,018 | $ | 3,981,352 | |||||||||||||||||
Interest Bearing Liabilities: | |||||||||||||||||||||
Certificates of deposit | $ | 463,124 | $ | 3,959 | 0.85 | $ | 378,044 | $ | 2,244 | 0.59 | |||||||||||
Savings accounts | 513,680 | 2,056 | 0.40 | 499,435 | 1,311 | 0.26 | |||||||||||||||
Interest bearing demand and money market accounts | 1,916,319 | 4,382 | 0.23 | 1,498,619 | 2,494 | 0.17 | |||||||||||||||
Total interest bearing deposits | 2,893,123 | 10,397 | 0.36 | 2,376,098 | 6,049 | 0.25 | |||||||||||||||
Junior subordinated debentures | 20,145 | 1,263 | 6.27 | 19,860 | 1,014 | 5.11 | |||||||||||||||
Securities sold under agreement to repurchase | 31,426 | 82 | 0.26 | 25,434 | 57 | 0.22 | |||||||||||||||
Federal Home Loan Bank advances and other borrowings | 33,914 | 671 | 1.98 | 105,648 | 1,226 | 1.16 | |||||||||||||||
Total interest bearing liabilities | 2,978,608 | 12,413 | 0.42 | 2,527,040 | 8,346 | 0.33 | |||||||||||||||
Noninterest bearing deposits | 1,240,621 | 902,716 | |||||||||||||||||||
Other noninterest bearing liabilities | 67,695 | 51,820 | |||||||||||||||||||
Stockholders' equity | 687,094 | 499,776 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 4,974,018 | $ | 3,981,352 | |||||||||||||||||
Net interest income | $ | 186,946 | $ | 139,363 | |||||||||||||||||
Net interest spread | 4.15 | % | 3.83 | % | |||||||||||||||||
Net interest margin | 4.29 | % | 3.93 | % | |||||||||||||||||
(1) | Year to date. | |
(2) | The average loan balances presented in the table are net of allowances for loan losses. Nonaccrual loans have been included in the table as loans carrying a zero yield. | |
(3) | Yields on tax-exempt securities and loans have not been stated on a tax-equivalent basis. |
HERITAGE FINANCIAL CORPORATION | |||||||||||||||||||
QUARTERLY FINANCIAL STATISTICS (Unaudited) | |||||||||||||||||||
(Dollar amounts in thousands, except per share amounts) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
Earnings: | |||||||||||||||||||
Net interest income | $ | 51,270 | $ | 51,096 | $ | 43,743 | $ | 40,837 | $ | 37,155 | |||||||||
Provision for loan losses | 1,162 | 1,065 | 1,750 | 1,152 | 1,338 | ||||||||||||||
Noninterest income | 8,464 | 8,080 | 7,573 | 7,548 | 9,064 | ||||||||||||||
Noninterest expense | 37,345 | 39,597 | 35,706 | 36,747 | 27,588 | ||||||||||||||
Net income | 16,609 | 15,504 | 11,857 | 9,087 | 10,023 | ||||||||||||||
Basic earnings per common share | $ | 0.45 | $ | 0.42 | $ | 0.35 | $ | 0.27 | $ | 0.33 | |||||||||
Diluted earnings per common share | $ | 0.45 | $ | 0.42 | $ | 0.35 | $ | 0.27 | $ | 0.33 | |||||||||
Average Balances: | |||||||||||||||||||
Total loans receivable, net | $ | 3,615,362 | $ | 3,618,031 | $ | 3,266,092 | $ | 3,150,869 | $ | 2,786,370 | |||||||||
Investment securities | 933,551 | 883,919 | 839,196 | 814,254 | 818,058 | ||||||||||||||
Total interest earning assets | 4,653,215 | 4,596,734 | 4,156,310 | 4,018,720 | 3,661,425 | ||||||||||||||
Total assets | 5,325,376 | 5,278,565 | 4,726,719 | 4,553,585 | 4,112,516 | ||||||||||||||
Total interest bearing deposits | 3,087,661 | 3,075,720 | 2,727,056 | 2,675,522 | 2,429,129 | ||||||||||||||
Total noninterest bearing deposits | 1,356,186 | 1,314,203 | 1,175,331 | 1,113,286 | 953,902 | ||||||||||||||
Stockholders' equity | 750,165 | 744,389 | 636,735 | 614,974 | 510,581 | ||||||||||||||
Financial Ratios: | |||||||||||||||||||
Return on average assets, annualized | 1.24 | % | 1.17 | % | 1.01 | % | 0.81 | % | 0.97 | % | |||||||||
Return on average equity, annualized | 8.78 | 8.26 | 7.47 | 5.99 | 7.79 | ||||||||||||||
Return on average tangible common equity, annualized | 13.50 | 12.77 | 10.99 | 8.70 | 10.32 | ||||||||||||||
Efficiency ratio | 62.52 | 66.91 | 69.58 | 75.95 | 59.69 | ||||||||||||||
Noninterest expense to average total assets, annualized | 2.78 | 2.98 | 3.03 | 3.27 | 2.66 | ||||||||||||||
Net interest margin | 4.37 | 4.41 | 4.22 | 4.12 | 4.03 | ||||||||||||||
Net interest spread | 4.23 | 4.27 | 4.09 | 4.01 | 3.91 | ||||||||||||||
As of Period End or for the Three Month Periods Ended | |||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
Select Balance Sheet: | |||||||||||||||||||
Total assets | $ | 5,317,852 | $ | 5,276,214 | $ | 4,789,488 | $ | 4,676,250 | $ | 4,113,270 | |||||||||
Total loans receivable, net | 3,619,118 | 3,614,579 | 3,294,316 | 3,248,654 | 2,816,985 | ||||||||||||||
Investment securities | 976,095 | 920,737 | 873,670 | 821,567 | 810,530 | ||||||||||||||
Deposits | 4,432,402 | 4,398,127 | 3,968,935 | 3,904,741 | 3,393,060 | ||||||||||||||
Noninterest bearing demand deposits | 1,362,268 | 1,311,825 | 1,157,630 | 1,178,202 | 944,791 | ||||||||||||||
Stockholders' equity | 760,723 | 746,133 | 639,523 | 634,708 | 508,305 | ||||||||||||||
Financial Measures: | |||||||||||||||||||
Book value per common share | $ | 20.63 | $ | 20.24 | $ | 18.80 | $ | 18.66 | $ | 16.98 | |||||||||
Tangible book value per common share | 13.54 | 13.11 | 12.82 | 12.66 | 12.80 | ||||||||||||||
Stockholders' equity to assets | 14.3 | % | 14.1 | % | 13.4 | % | 13.6 | % | 12.4 | % | |||||||||
Tangible common equity to tangible assets | 9.9 | 9.6 | 9.5 | 9.6 | 9.6 | ||||||||||||||
Loans to deposits ratio | 82.4 | 83.0 | 83.9 | 84.0 | 84.0 | ||||||||||||||
Credit Quality Metrics: | |||||||||||||||||||
Allowance for loan losses to: | |||||||||||||||||||
Loans receivable, net | 0.96 | % | 0.94 | % | 1.02 | % | 1.01 | % | 1.13 | % | |||||||||
Nonperforming loans | 255.73 | 233.25 | 205.60 | 211.48 | 299.79 | ||||||||||||||
Nonperforming loans to loans receivable, net | 0.37 | 0.41 | 0.50 | 0.48 | 0.38 | ||||||||||||||
Nonperforming assets to total assets | 0.29 | 0.32 | 0.35 | 0.34 | 0.26 | ||||||||||||||
Net charge-offs on loans to average loans receivable, net | 0.07 | 0.06 | 0.13 | — | 0.09 | ||||||||||||||
Other Metrics: | |||||||||||||||||||
Number of banking offices | 64 | 64 | 59 | 60 | 59 | ||||||||||||||
Average number of full-time equivalent employees | 867 | 878 | 819 | 796 | 736 | ||||||||||||||
Deposits per branch | $ | 69,256 | $ | 68,721 | $ | 67,270 | $ | 65,079 | $ | 57,509 | |||||||||
Average assets per full-time equivalent employee | $ | 6,142 | $ | 6,014 | $ | 5,770 | $ | 5,720 | $ | 5,587 | |||||||||
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SOURCE Heritage Financial Corporation
