OLYMPIA, Wash., Jan. 23, 2020 /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 $17.1 million for
the quarter ended December 31, 2019
compared to $17.9 million for the
linked-quarter ended September 30,
2019 and $16.6 million for the
quarter ended December 31, 2018.
Diluted earnings per share for the quarter ended December 31, 2019 was $0.47 compared to $0.48 for the linked-quarter ended September 30, 2019 and $0.45 for the quarter ended December 31, 2018.
Jeffrey J. Deuel, President
and Chief Executive Officer of Heritage commented, "We are pleased
with our progress as we continue to benefit from low deposit costs
which have been steady for the past three quarters. In
addition, our focus on expense management is visible in our
improved efficiency and overhead ratios. We also continue to
benefit from the solid foundation provided by our strong balance
sheet including robust liquidity and capital positions."
Financial Highlights
The following table provides financial highlights for the
dates indicated:
|
As of Period End or for the Three Months
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
(Dollars in thousands, except per share
amounts)
|
Net income
|
$
|
17,126
|
|
|
$
|
17,895
|
|
|
$
|
16,609
|
|
Diluted earnings per
share
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
0.45
|
|
Return on average
assets (2)
|
1.22
|
%
|
|
1.31
|
%
|
|
1.24
|
%
|
Return on average
equity (2)
|
8.42
|
%
|
|
8.86
|
%
|
|
8.78
|
%
|
Return on average
tangible common equity (2)
|
12.94
|
%
|
|
13.66
|
%
|
|
14.22
|
%
|
Net interest
margin
|
4.02
|
%
|
|
4.21
|
%
|
|
4.37
|
%
|
Cost of total
deposits (2)
|
0.39
|
%
|
|
0.38
|
%
|
|
0.29
|
%
|
Efficiency
ratio
|
61.93
|
%
|
|
62.55
|
%
|
|
62.40
|
%
|
Noninterest expense
to average total assets (2)
|
2.57
|
%
|
|
2.69
|
%
|
|
2.78
|
%
|
Total
assets
|
$
|
5,552,929
|
|
|
$
|
5,515,185
|
|
|
$
|
5,316,927
|
|
Total loans
receivable, net
|
$
|
3,731,708
|
|
|
$
|
3,694,825
|
|
|
$
|
3,619,118
|
|
Total
deposits
|
$
|
4,582,676
|
|
|
$
|
4,562,257
|
|
|
$
|
4,432,402
|
|
Loan to deposit ratio
(1)
|
82.2
|
%
|
|
81.8
|
%
|
|
82.4
|
%
|
Book value per
share
|
$
|
22.10
|
|
|
$
|
21.96
|
|
|
$
|
20.63
|
|
Tangible book value
per share
|
$
|
15.07
|
|
|
$
|
14.90
|
|
|
$
|
13.54
|
|
|
(1) Loans receivable, net of deferred
costs divided by deposits
|
(2) Annualized
|
Total loans receivable, net increased $36.9 million, or 1.0%, to $3.73 billion at December 31, 2019 from
$3.69 billion at September 30,
2019 due primarily to increases in total real estate construction
and land development loans of $31.0
million, one-to-four family residential loans of
$10.9 million and consumer loans of
$3.1 million, offset partially by a
decrease in total commercial business loans of $8.5 million.
The following table summarizes the Company's loan
portfolio by type of loan at the dates indicated:
|
December 31, 2019
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
(Dollars in thousands)
|
Commercial
business:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
industrial
|
$
|
851,834
|
|
|
22.6
|
%
|
|
$
|
853,995
|
|
|
22.9
|
%
|
|
$
|
853,606
|
|
|
23.4
|
%
|
Owner-occupied
commercial real estate
|
806,609
|
|
|
21.4
|
|
|
787,591
|
|
|
21.1
|
|
|
779,814
|
|
|
21.3
|
|
Non-owner occupied
commercial real estate
|
1,291,592
|
|
|
34.3
|
|
|
1,316,992
|
|
|
35.3
|
|
|
1,304,463
|
|
|
35.7
|
|
Total commercial
business
|
2,950,035
|
|
|
78.3
|
|
|
2,958,578
|
|
|
79.3
|
|
|
2,937,883
|
|
|
80.4
|
|
One-to-four family
residential
|
132,088
|
|
|
3.5
|
|
|
121,174
|
|
|
3.2
|
|
|
101,763
|
|
|
2.8
|
|
Real estate
construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
One-to-four family
residential
|
104,910
|
|
|
2.8
|
|
|
98,034
|
|
|
2.6
|
|
|
102,730
|
|
|
2.8
|
|
Five or more family
residential and commercial properties
|
171,777
|
|
|
4.5
|
|
|
147,686
|
|
|
4.0
|
|
|
112,730
|
|
|
3.1
|
|
Total real estate
construction and land development
|
276,687
|
|
|
7.3
|
|
|
245,720
|
|
|
6.6
|
|
|
215,460
|
|
|
5.9
|
|
Consumer
|
406,628
|
|
|
10.8
|
|
|
403,485
|
|
|
10.8
|
|
|
395,545
|
|
|
10.8
|
|
Gross loans
receivable
|
3,765,438
|
|
|
99.9
|
|
|
3,728,957
|
|
|
99.9
|
|
|
3,650,651
|
|
|
99.9
|
|
Deferred loan costs,
net
|
2,441
|
|
|
0.1
|
|
|
2,386
|
|
|
0.1
|
|
|
3,509
|
|
|
0.1
|
|
Loans receivable,
net
|
3,767,879
|
|
|
100.0
|
%
|
|
3,731,343
|
|
|
100.0
|
%
|
|
3,654,160
|
|
|
100.0
|
%
|
Allowance for loan
losses
|
(36,171)
|
|
|
|
|
(36,518)
|
|
|
|
|
(35,042)
|
|
|
|
Total Loans
receivable, net
|
$
|
3,731,708
|
|
|
|
|
$
|
3,694,825
|
|
|
|
|
$
|
3,619,118
|
|
|
|
Total deposits increased $20.4
million, or 0.4%, to $4.58
billion at December 31, 2019 from $4.56 billion at September 30, 2019 due
primarily to an increase in noninterest demand deposits of
$17.1 million, or 1.2%, to
$1.45 billion, or 31.6% of total
deposits, at December 31, 2019 from $1.43 billion, or 31.3% of total deposits, at
September 30, 2019.
The following table summarizes the Company's deposits at
the dates indicated:
|
December 31, 2019
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
(Dollars in thousands)
|
Noninterest bearing
demand deposits
|
$
|
1,446,502
|
|
|
31.6
|
%
|
|
$
|
1,429,435
|
|
|
31.3
|
%
|
|
$
|
1,362,268
|
|
|
30.7
|
%
|
Interest bearing
demand deposits
|
1,348,817
|
|
|
29.4
|
|
|
1,324,177
|
|
|
29.0
|
|
|
1,317,513
|
|
|
29.7
|
|
Money market
accounts
|
753,684
|
|
|
16.4
|
|
|
776,107
|
|
|
17.0
|
|
|
765,316
|
|
|
17.3
|
|
Savings
accounts
|
509,095
|
|
|
11.2
|
|
|
508,228
|
|
|
11.2
|
|
|
520,413
|
|
|
11.8
|
|
Total non-maturity
deposits
|
4,058,098
|
|
|
88.6
|
|
|
4,037,947
|
|
|
88.5
|
|
|
3,965,510
|
|
|
89.5
|
|
Certificates of
deposit
|
524,578
|
|
|
11.4
|
|
|
524,310
|
|
|
11.5
|
|
|
466,892
|
|
|
10.5
|
|
Total
deposits
|
$
|
4,582,676
|
|
|
100.0
|
%
|
|
$
|
4,562,257
|
|
|
100.0
|
%
|
|
$
|
4,432,402
|
|
|
100.0
|
%
|
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 following table
summarizes capital ratios for the Company at the dates
indicated:
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
Capital Ratios:
|
|
|
|
|
|
Stockholders' equity
to total assets
|
14.6
|
%
|
|
14.6
|
%
|
|
14.3
|
%
|
Tangible common
equity to tangible assets
|
10.4
|
%
|
|
10.4
|
%
|
|
9.9
|
%
|
Common equity Tier 1
capital to risk-weighted assets
|
11.5
|
%
|
|
11.6
|
%
|
|
11.7
|
%
|
Tier 1 leverage
capital to average quarterly assets
|
10.6
|
%
|
|
10.8
|
%
|
|
10.5
|
%
|
Tier 1 capital to
risk-weighted assets
|
12.0
|
%
|
|
12.1
|
%
|
|
12.1
|
%
|
Total capital to
risk-weighted assets
|
12.7
|
%
|
|
12.9
|
%
|
|
12.9
|
%
|
Donald J. Hinson, Executive
Vice President and Chief Financial Officer, commented, "As a result
of our strong capital position and earnings performance, we
increased our regular dividend to $0.20 per share, which is an 11% increase from
the first quarter 2019 dividend of $0.18 and a 33% increase from the first quarter
2018 dividend of $0.15. Although we
did not repurchase any Company stock in the fourth quarter, we did
repurchase 293,000 shares during 2019 and have approximately
640,000 shares remaining in the current stock repurchase plan. Our
capital position gives us great flexibility in our organic growth,
acquisition and capital management strategies."
Credit Quality
The allowance for loan losses decreased $347,000, or 1.0%, to $36.2 million at December 31, 2019 from
$36.5 million at September 30,
2019. The decrease was due to net charge-offs of $1.9 million recognized during the quarter ended
December 31, 2019, partially offset by provision for loan
losses of $1.6 million. Net
charge-offs include commercial and industrial loan charge-offs of
$1.3 million related to the
agricultural industry, including $963,000 related to a significant lending
relationship transferred to nonaccrual status during the quarter
ended September 30, 2019. Net
charge-offs were $311,000 for the
linked-quarter ended September 30, 2019 and $595,000 for the same quarter in 2018.
Nonperforming assets increased to 0.82% of total assets at
December 31, 2019 compared to 0.77% of total assets at
September 30, 2019. The increase was due primarily to an
increase in nonaccrual loans as a result of the addition of three
commercial lending relationships totaling $6.5 million which showed increased signs of cash
flow deterioration during the quarter ended December 31,
2019. One of the relationships is an agricultural business
relationship of $4.7 million that was
previously classified as a performing troubled debt restructuring
("TDR"). The increase in nonaccrual loans was partially offset by
net charge-offs related to nonaccrual loans of $1.2 million, including $963,000 due to the significant agricultural
relationship discussed above.
Changes in nonaccrual loans during the periods indicated
were as follows:
|
Three Months Ended
|
|
December 31, 2019
|
|
September 30, 2019
|
|
December 31, 2018
|
|
(Dollars in thousands)
|
Balance, beginning of
period
|
$
|
41,511
|
|
|
$
|
19,293
|
|
|
$
|
14,780
|
|
Addition of previously
classified pass graded loans
|
763
|
|
|
275
|
|
|
96
|
|
Addition of previously
classified potential problem loans
|
1,043
|
|
|
15,645
|
|
|
983
|
|
Addition of previously
classified TDR loans
|
4,686
|
|
|
7,051
|
|
|
786
|
|
Net principal
payments
|
(2,218)
|
|
|
(454)
|
|
|
(2,639)
|
|
Charge-offs
|
(1,249)
|
|
|
(299)
|
|
|
(303)
|
|
Balance, end of
period
|
$
|
44,536
|
|
|
$
|
41,511
|
|
|
$
|
13,703
|
|
The increase in the ratio of nonperforming assets to total
assets was unaffected by other real estate owned as the balance was
$841,000 at both December 31,
2019 and September 30, 2019.
Potential problem loans increased $2.5 million, or 2.9%, to $87.8 million at December 31, 2019 compared
to $85.3 million at
September 30, 2019. The increase was primarily attributed to
the addition of seven commercial business relationships totaling
$18.2 million which the Company
downgraded to increase oversight of these credits. Of these
relationships, one is a commercial and industrial agricultural
lending relationship of $6.9 million
that experienced cash flow shortfalls due to weather-related
issues. The activity for the quarter ended December 31,
2019 also includes payment in full of three commercial and
industrial relationships totaling $7.2
million.
Changes in potential problem loans during the periods
indicated were as follows:
|
Three Months Ended
|
|
December 31, 2019
|
|
September 30, 2019
|
|
December 31, 2018
|
|
(Dollars in thousands)
|
Balance, beginning of
period
|
$
|
85,339
|
|
|
$
|
114,095
|
|
|
$
|
105,742
|
|
Addition of
previously classified pass graded loans
|
23,502
|
|
|
5,566
|
|
|
14,562
|
|
Upgrades to pass
graded loan status
|
(8,368)
|
|
|
(5,958)
|
|
|
(1,473)
|
|
Net principal
payments
|
(10,529)
|
|
|
(8,962)
|
|
|
(7,654)
|
|
Transfers of loans to
nonaccrual and TDR status
|
(2,119)
|
|
|
(19,319)
|
|
|
(9,727)
|
|
Charge-offs
|
—
|
|
|
(83)
|
|
|
(101)
|
|
Balance, end of
period
|
$
|
87,825
|
|
|
$
|
85,339
|
|
|
$
|
101,349
|
|
The allowance for loan losses to loans receivable, net,
decreased to 0.96% at December 31, 2019 from 0.98% at
September 30, 2019. Included in the carrying value of loans
are net discounts on loans purchased in mergers and acquisitions.
The remaining net discount on purchased loans was $8.4 million at December 31, 2019 compared
to $9.1 million at September 30,
2019 and $11.8 million at
December 31, 2018.
The allowance for loan losses to nonaccrual loans
decreased to 81.22% at December 31, 2019 compared to 87.97% at
September 30, 2019. The decrease was the result of additions
to nonaccrual loans during the quarter ended December 31, 2019
which did not require a proportional increase in the specific
reserve based on the specific impairment analysis. 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, 2019.
Operating Results
Net interest income decreased $1.1
million, or 2.2%, to $49.1
million for the quarter ended December 31, 2019 from
$50.2 million for the linked-quarter
ended September 30, 2019 due primarily to a decrease in the
yield of interest earning assets as interest rates on adjustable
rate instruments decreased following 50 and 25 basis point
decreases in short-term market rates during the quarters ended
September 30, 2019 and
December 31, 2019, respectively. Net interest income decreased
$2.2 million, or 4.2%, compared to
$51.3 million for the same period in
2018 due to a decrease in the yield of interest earning assets,
primarily as a result of a downward shift in the yield curve since
the fourth quarter of 2018 and a lagging increase in the cost of
total interest bearing deposits.
Net interest margin decreased 19 basis points to 4.02% for
the quarter ended December 31, 2019 from 4.21% for the
linked-quarter ended September 30, 2019 due primarily to
decreases in loan yields. Net interest margin decreased 35 basis
points from 4.37% for the quarter ended December 31, 2018 due
primarily to decreases in loan yields and secondarily due to a
change in the mix of earning assets and increases in the cost of
total interest bearing deposits. The change in the mix of earning
assets (a lower ratio of higher yielding loans and investment
securities as a percentage of total earning assets) had an
unfavorable impact of four basis points on the net interest margin
from the prior quarter.
Loan yield decreased 16 basis points to 5.00% for the
quarter ended December 31, 2019 from 5.16% for the
linked-quarter ended September 30, 2019 due primarily to
decreases in short-term market rates during the quarter ended
December 31, 2019. Of this decrease, two basis points was due
to a change in impact of nonaccrual loan activity from the prior
quarter. Loan yield was also impacted by higher than historical
loan activity, both originations and prepayments, which occurred
during the lower rate environment of the quarter ended December 31, 2019.
Loan yield decreased 25 basis points from 5.25% for the
quarter ended December 31, 2018 due primarily to lower
short-term market rates during the quarter ended December 31, 2019 compared to the same period in
2018. Of this decrease, six basis points was due to a change in
impact of nonaccrual loan activity from the same quarter in the
prior year.
The impact on loan yield from incremental accretion on
purchased loans decreased one basis point to 0.11% for the quarter
ended December 31, 2019 from 0.12% for the linked-quarter
ended September 30, 2019 and decreased eight
basis points from 0.19% for the quarter ended December 31,
2018. The decreases were primarily a result of the decrease in the
balances of loans acquired in the mergers with Puget Sound Bancorp,
Inc. and Premier Commercial Bancorp (the "Premier and Puget
Mergers") both of which occurred in 2018. 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
|
|
December 31, 2019
|
|
September 30, 2019
|
|
December 31, 2018
|
|
(Dollars in thousands)
|
Yield non-GAAP
reconciliations:(2)
|
Net interest margin
(GAAP)
|
4.02
|
%
|
|
4.21
|
%
|
|
4.37
|
%
|
Exclude impact on net
interest margin from incremental accretion on purchased
loans(1)
|
(0.08)
|
%
|
|
(0.09)
|
%
|
|
(0.15)
|
%
|
Net interest margin,
excluding incremental accretion on purchased loans (non-
GAAP)(1)
|
3.94
|
%
|
|
4.12
|
%
|
|
4.22
|
%
|
|
|
|
|
|
|
Loan yield
(GAAP)
|
5.00
|
%
|
|
5.16
|
%
|
|
5.25
|
%
|
Exclude impact on
loan yield from incremental accretion on purchased
loans(1)
|
(0.11)
|
%
|
|
(0.12)
|
%
|
|
(0.19)
|
%
|
Loan yield, excluding
incremental accretion on purchased loans
(non-GAAP)(1)
|
4.89
|
%
|
|
5.04
|
%
|
|
5.06
|
%
|
|
|
|
|
|
|
Incremental accretion
on purchased loans(1)
|
$
|
997
|
|
|
$
|
1,090
|
|
|
$
|
1,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
The yield on the aggregate investment portfolio decreased
six basis points to 2.65% for the quarter ended December 31,
2019 from 2.71% for the linked-quarter ended September 30,
2019 and decreased five basis points from 2.70% for the quarter
ended December 31, 2018 due to a decrease in market interest
rates impacting adjustable rate securities.
The cost of total deposits increased one basis point to
0.39% during the quarter ended December 31, 2019 from 0.38%
during the linked-quarter ended September 30, 2019 and
increased 10 basis points from 0.29% during the same quarter in
2018 due to competitive pressures.
The provision for loan losses increased $1.1 million, or 234.3%, to $1.6 million for the quarter ended
December 31, 2019 from $466,000
for the linked-quarter ended September 30, 2019 due primarily
to an increase in net charge-offs of $1.6
million to $1.9 million during
the quarter ended December 31, 2019 compared to
net-charge-offs of $311,000 during
the linked-quarter ended September 30, 2019. The provision for
loan losses increased $396,000, or
34.1%, compared to $1.2 million for
the quarter ended December 31, 2018 due primarily to an
increase in net charge-offs of $1.3
million, compared to net-charge-offs of $595,000 during the quarter ended
December 31, 2018. The amount of provision for loan losses
during the quarter ended December 31, 2019 was necessary to
increase the allowance for loan losses to an amount that management
determined to be appropriate at December 31, 2019 based on the
use of a consistent methodology.
Noninterest income increased $553,000, or 6.5%, to $9.0
million for the quarter ended December 31, 2019 from
$8.5 million for the linked-quarter
ended September 30, 2019 due primarily to an increase in
interest rate swap fees. The Company also recognized other income
in the amount of $230,000 related to
the sale of of two branch properties and other fixed assets during
the quarter ended December 31, 2019.
The increase in noninterest income was offset partially by
decreases in gain on sale of investments and gain on sale of loans,
net during the quarter ended December 31,
2019. Noninterest income increased $566,000, or 6.7%, from $8.4 million for the same period in 2018 due
primarily to increases in interest rate swap fees and gain on sale
of loans, net, partially offset by a decrease in service charges
and other fees.
Noninterest expense decreased $722,000, or 2.0%, to $36.0 million for the quarter ended
December 31, 2019 from $36.7
million for the linked-quarter ended September 30, 2019
due primarily to a decrease in state/municipal business and use
taxes expense as a result of an assessment recognized during the
linked-quarter in the amount of $537,000 from a Washington State Department of Revenue
Business and Occupation audit.
Noninterest expense decreased $1.3
million, or 3.4%, compared to $37.3
million for the quarter ended December 31, 2018.
Acquisition-related expenses incurred during the quarter ended
December 31, 2018 were approximately $1.3 million, of which $657,000 was due to compensation and employee
benefits expense. There were no acquisition-related expenses
incurred during the quarter ended December 31, 2019. The
decrease in noninterest expense was also due to a decrease in
federal deposit insurance premium expense as a result of a small
bank credit awarded by the Federal Deposit Insurance Corporation
("FDIC") recognized during the quarter ended December 31,
2019. The Bank has $518,000 in small
bank credits on future assessments remaining as of
December 31, 2019, which may be recognized in future periods
when allowed for by the FDIC upon insurance fund levels being
met.
Income tax expense was $3.4
million for the quarter ended December 31, 2019
compared to $3.6 million for the
linked-quarter ended September 30, 2019 and $4.7 million for the quarter ended
December 31, 2018. The effective tax rate was 16.7% for the
quarter ended December 31, 2019 compared to 16.8% for the
linked-quarter ended September 30, 2019 and 22.0% for the
quarter ended December 31, 2018. The decrease in the effective
tax rate from the quarter ended December 31,
2018 was primarily due to a change in the estimated current
tax benefits from certain low income housing tax credit projects
during the quarter ended December 31,
2018.
Dividends
On January 22, 2020, the Company's Board of Directors
declared a quarterly cash dividend of $0.20 per share. The dividends are payable on
February 20, 2020 to shareholders of record as of the close of
business on February 6, 2020.
Earnings Conference Call
The Company will hold a telephone conference call to
discuss this earnings release on January 23, 2020 at
11:00 a.m. Pacific time. To access
the call, please dial (844) 291-6360 -- access code 337461 a few
minutes prior to 11:00 a.m. Pacific
time. The call will be available for replay through
February 6, 2019, by dialing (866)
207-1041 -- access code 9685662.
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 62 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,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
|
December 31,
2018
|
|
(Dollar amounts in
thousands, except per share amounts)
|
|
Tangible common equity to tangible assets and
tangible book value per share:
|
Total stockholders'
equity (GAAP)
|
$
|
809,311
|
|
|
$
|
804,127
|
|
|
$
|
796,625
|
|
|
$
|
778,191
|
|
|
$
|
760,723
|
|
Exclude intangible
assets
|
(257,552)
|
|
|
(258,527)
|
|
|
(259,502)
|
|
|
(260,528)
|
|
|
(261,553)
|
|
Tangible common
equity (non-GAAP)
|
$
|
551,759
|
|
|
$
|
545,600
|
|
|
$
|
537,123
|
|
|
$
|
517,663
|
|
|
$
|
499,170
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
(GAAP)
|
$
|
5,552,929
|
|
|
$
|
5,515,185
|
|
|
$
|
5,376,686
|
|
|
$
|
5,342,099
|
|
|
$
|
5,316,927
|
|
Exclude intangible
assets
|
(257,552)
|
|
|
(258,527)
|
|
|
(259,502)
|
|
|
(260,528)
|
|
|
(261,553)
|
|
Tangible assets
(non-GAAP)
|
$
|
5,295,377
|
|
|
$
|
5,256,658
|
|
|
$
|
5,117,184
|
|
|
$
|
5,081,571
|
|
|
$
|
5,055,374
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity
to total assets (GAAP)
|
14.6
|
%
|
|
14.6
|
%
|
|
14.8
|
%
|
|
14.6
|
%
|
|
14.3
|
%
|
Tangible common
equity to tangible assets (non-GAAP)
|
10.4
|
%
|
|
10.4
|
%
|
|
10.5
|
%
|
|
10.2
|
%
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
36,618,729
|
|
|
36,618,381
|
|
|
36,882,771
|
|
|
36,899,138
|
|
|
36,874,055
|
|
Book value per share
(GAAP)
|
$
|
22.10
|
|
|
$
|
21.96
|
|
|
$
|
21.60
|
|
|
$
|
21.09
|
|
|
$
|
20.63
|
|
Tangible book value
per share (non-GAAP)
|
$
|
15.07
|
|
|
$
|
14.90
|
|
|
$
|
14.56
|
|
|
$
|
14.03
|
|
|
$
|
13.54
|
|
|
|
|
|
|
Three Months Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December
31,
2018
|
|
(Dollar amounts in thousands)
|
Return on average tangible common equity,
annualized:
|
Net income
(GAAP)
|
$
|
17,126
|
|
|
$
|
17,895
|
|
|
$
|
16,609
|
|
Exclude amortization
of intangible assets
|
975
|
|
|
975
|
|
|
1,114
|
|
Exclude tax effect of
adjustment
|
(205)
|
|
|
(205)
|
|
|
(234)
|
|
Tangible net income
(non-GAAP)
|
$
|
17,896
|
|
|
$
|
18,665
|
|
|
$
|
17,489
|
|
|
|
|
|
|
|
Average stockholders'
equity (GAAP)
|
$
|
806,868
|
|
|
$
|
801,393
|
|
|
$
|
750,165
|
|
Exclude average
intangible assets
|
(258,177)
|
|
|
(259,166)
|
|
|
(262,177)
|
|
Average tangible
common stockholders' equity (non-GAAP)
|
$
|
548,691
|
|
|
$
|
542,227
|
|
|
$
|
487,988
|
|
|
|
|
|
|
|
Return on average
equity, annualized (GAAP)
|
8.42
|
%
|
|
8.86
|
%
|
|
8.78
|
%
|
Return on average
tangible common equity, annualized (non-GAAP)
|
12.94
|
%
|
|
13.66
|
%
|
|
14.22
|
%
|
|
|
|
|
|
Three Months Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
(Dollars in thousands)
|
Net interest margin, excluding incremental accretion
on purchased loans, annualized and loan yield, excluding
incremental accretion on purchased loans,
annualized:
|
Net interest income
(GAAP)
|
$
|
49,115
|
|
|
$
|
50,243
|
|
|
$
|
51,289
|
|
Exclude incremental
accretion on purchased loans
|
(997)
|
|
|
(1,090)
|
|
|
(1,703)
|
|
Adjusted net interest
income (non-GAAP)
|
$
|
48,118
|
|
|
$
|
49,153
|
|
|
$
|
49,586
|
|
|
|
|
|
|
|
Average total
interest earning assets, net
|
$
|
4,849,708
|
|
|
$
|
4,736,704
|
|
|
$
|
4,653,215
|
|
Net interest margin,
annualized (GAAP)
|
4.02
|
%
|
|
4.21
|
%
|
|
4.37
|
%
|
Net interest margin,
excluding incremental accretion on purchased loans, annualized
(non-GAAP)
|
3.94
|
%
|
|
4.12
|
%
|
|
4.22
|
%
|
|
|
|
|
|
|
Interest and fees on
loans (GAAP)
|
$
|
46,864
|
|
|
$
|
47,845
|
|
|
$
|
47,865
|
|
Exclude incremental
accretion on purchased loans
|
(997)
|
|
|
(1,090)
|
|
|
(1,703)
|
|
Adjusted interest and
fees on loans (non-GAAP)
|
$
|
45,867
|
|
|
$
|
46,755
|
|
|
$
|
46,162
|
|
|
|
|
|
|
|
Average total loans
receivable, net
|
$
|
3,719,128
|
|
|
$
|
3,677,405
|
|
|
$
|
3,615,362
|
|
Loan yield,
annualized (GAAP)
|
5.00
|
%
|
|
5.16
|
%
|
|
5.25
|
%
|
Loan yield, excluding
incremental accretion on purchased loans, annualized
(non-GAAP)
|
4.89
|
%
|
|
5.04
|
%
|
|
5.06
|
%
|
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 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 2020 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) (Dollar amounts in thousands, except
shares)
|
|
|
|
|
|
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December
31,
2018
|
Assets
|
|
|
|
|
|
Cash on hand and in
banks
|
$
|
95,039
|
|
|
$
|
115,500
|
|
|
$
|
92,704
|
|
Interest earning
deposits
|
133,529
|
|
|
121,468
|
|
|
69,206
|
|
Cash and cash
equivalents
|
228,568
|
|
|
236,968
|
|
|
161,910
|
|
Investment securities
available for sale
|
952,312
|
|
|
966,102
|
|
|
976,095
|
|
Loans held for
sale
|
5,533
|
|
|
5,211
|
|
|
1,555
|
|
Loans receivable,
net
|
3,767,879
|
|
|
3,731,343
|
|
|
3,654,160
|
|
Allowance for loan
losses
|
(36,171)
|
|
|
(36,518)
|
|
|
(35,042)
|
|
Total loans
receivable, net
|
3,731,708
|
|
|
3,694,825
|
|
|
3,619,118
|
|
Other real estate
owned
|
841
|
|
|
841
|
|
|
1,983
|
|
Premises and
equipment, net
|
87,888
|
|
|
86,563
|
|
|
81,100
|
|
Federal Home Loan
Bank stock, at cost
|
6,377
|
|
|
6,377
|
|
|
6,076
|
|
Bank owned life
insurance
|
103,616
|
|
|
102,981
|
|
|
93,612
|
|
Accrued interest
receivable
|
14,446
|
|
|
14,722
|
|
|
15,403
|
|
Prepaid expenses and
other assets
|
164,088
|
|
|
142,068
|
|
|
98,522
|
|
Other intangible
assets, net
|
16,613
|
|
|
17,588
|
|
|
20,614
|
|
Goodwill
|
240,939
|
|
|
240,939
|
|
|
240,939
|
|
Total
assets
|
$
|
5,552,929
|
|
|
$
|
5,515,185
|
|
|
$
|
5,316,927
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Equity
|
|
|
|
|
|
Deposits
|
$
|
4,582,676
|
|
|
$
|
4,562,257
|
|
|
$
|
4,432,402
|
|
Junior subordinated
debentures
|
20,595
|
|
|
20,522
|
|
|
20,302
|
|
Securities sold under
agreement to repurchase
|
20,169
|
|
|
25,883
|
|
|
31,487
|
|
Accrued expenses and
other liabilities
|
120,178
|
|
|
102,396
|
|
|
72,013
|
|
Total
liabilities
|
4,743,618
|
|
|
4,711,058
|
|
|
4,556,204
|
|
|
|
|
|
|
|
Common
stock
|
586,459
|
|
|
585,581
|
|
|
591,806
|
|
Retained
earnings
|
212,474
|
|
|
206,021
|
|
|
176,372
|
|
Accumulated other
comprehensive gain (loss), net
|
10,378
|
|
|
12,525
|
|
|
(7,455)
|
|
Total stockholders'
equity
|
809,311
|
|
|
804,127
|
|
|
760,723
|
|
Total liabilities and
stockholders' equity
|
$
|
5,552,929
|
|
|
$
|
5,515,185
|
|
|
$
|
5,316,927
|
|
|
|
|
|
|
|
Shares
outstanding
|
36,618,729
|
|
|
36,618,381
|
|
|
36,874,055
|
|
HERITAGE FINANCIAL
CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) (Dollar amounts in thousands, except per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Interest and fees on
loans
|
$
|
46,864
|
|
|
$
|
47,845
|
|
|
$
|
47,865
|
|
|
$
|
189,515
|
|
|
$
|
175,466
|
|
Taxable interest on
investment securities
|
5,585
|
|
|
5,704
|
|
|
5,343
|
|
|
23,045
|
|
|
17,602
|
|
Nontaxable interest on
investment securities
|
755
|
|
|
798
|
|
|
1,003
|
|
|
3,396
|
|
|
4,649
|
|
Interest on other
interest earning assets
|
739
|
|
|
537
|
|
|
673
|
|
|
1,894
|
|
|
1,689
|
|
Total interest
income
|
53,943
|
|
|
54,884
|
|
|
54,884
|
|
|
217,850
|
|
|
199,406
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
Deposits
|
4,479
|
|
|
4,250
|
|
|
3,228
|
|
|
16,349
|
|
|
10,397
|
|
Junior subordinated
debentures
|
313
|
|
|
332
|
|
|
335
|
|
|
1,339
|
|
|
1,263
|
|
Other
borrowings
|
36
|
|
|
59
|
|
|
32
|
|
|
480
|
|
|
753
|
|
Total interest
expense
|
4,828
|
|
|
4,641
|
|
|
3,595
|
|
|
18,168
|
|
|
12,413
|
|
Net interest
income
|
49,115
|
|
|
50,243
|
|
|
51,289
|
|
|
199,682
|
|
|
186,993
|
|
Provision for loan
losses
|
1,558
|
|
|
466
|
|
|
1,162
|
|
|
4,311
|
|
|
5,129
|
|
Net interest income
after provision for loan losses
|
47,557
|
|
|
49,777
|
|
|
50,127
|
|
|
195,371
|
|
|
181,864
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
Service charges and
other fees
|
4,603
|
|
|
4,779
|
|
|
4,852
|
|
|
18,712
|
|
|
18,914
|
|
Gain on sale of
investment securities, net
|
1
|
|
|
281
|
|
|
2
|
|
|
330
|
|
|
137
|
|
Gain on
sale of loans, net
|
811
|
|
|
993
|
|
|
473
|
|
|
2,424
|
|
|
2,759
|
|
Interest rate swap
fees
|
919
|
|
|
152
|
|
|
204
|
|
|
1,232
|
|
|
564
|
|
Other
income
|
2,677
|
|
|
2,253
|
|
|
2,914
|
|
|
9,764
|
|
|
9,244
|
|
Total noninterest
income
|
9,011
|
|
|
8,458
|
|
|
8,445
|
|
|
32,462
|
|
|
31,618
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
Compensation and
employee benefits
|
21,939
|
|
|
21,733
|
|
|
22,338
|
|
|
87,568
|
|
|
86,830
|
|
Occupancy and
equipment
|
5,513
|
|
|
5,268
|
|
|
5,322
|
|
|
21,690
|
|
|
19,779
|
|
Data
processing
|
2,361
|
|
|
2,333
|
|
|
2,433
|
|
|
8,976
|
|
|
9,888
|
|
Marketing
|
461
|
|
|
816
|
|
|
721
|
|
|
3,481
|
|
|
3,228
|
|
Professional
services
|
1,280
|
|
|
1,434
|
|
|
1,185
|
|
|
5,192
|
|
|
9,670
|
|
State/municipal
business and use taxes
|
777
|
|
|
1,370
|
|
|
803
|
|
|
3,754
|
|
|
3,002
|
|
Federal deposit
insurance premium
|
5
|
|
|
9
|
|
|
375
|
|
|
725
|
|
|
1,480
|
|
Other real estate
owned, net
|
12
|
|
|
(35)
|
|
|
88
|
|
|
352
|
|
|
106
|
|
Amortization of
intangible assets
|
975
|
|
|
975
|
|
|
1,114
|
|
|
4,001
|
|
|
3,819
|
|
Other
expense
|
2,674
|
|
|
2,816
|
|
|
2,894
|
|
|
11,049
|
|
|
11,385
|
|
Total noninterest expense
|
35,997
|
|
|
36,719
|
|
|
37,273
|
|
|
146,788
|
|
|
149,187
|
|
Income before income taxes
|
20,571
|
|
|
21,516
|
|
|
21,299
|
|
|
81,045
|
|
|
64,295
|
|
Income tax
expense
|
3,445
|
|
|
3,621
|
|
|
4,690
|
|
|
13,488
|
|
|
11,238
|
|
Net income
|
$
|
17,126
|
|
|
$
|
17,895
|
|
|
$
|
16,609
|
|
|
$
|
67,557
|
|
|
$
|
53,057
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
0.45
|
|
|
$
|
1.84
|
|
|
$
|
1.49
|
|
Diluted earnings per
share
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
0.45
|
|
|
$
|
1.83
|
|
|
$
|
1.49
|
|
Dividends declared
per share
|
$
|
0.29
|
|
|
$
|
0.19
|
|
|
$
|
0.27
|
|
|
$
|
0.84
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
Average number of
basic shares outstanding
|
36,597,048
|
|
|
36,742,862
|
|
|
36,806,946
|
|
|
36,758,230
|
|
|
35,194,003
|
|
Average number of
diluted shares outstanding
|
36,824,470
|
|
|
36,876,548
|
|
|
36,998,808
|
|
|
36,985,766
|
|
|
35,371,590
|
|
HERITAGE FINANCIAL
CORPORATION
FINANCIAL STATISTICS
(Unaudited) (Dollar
amounts in thousands, except per share
amounts)
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December
31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Other Real Estate Owned:
|
|
|
|
|
|
|
|
|
|
Balance, beginning of
period
|
$
|
841
|
|
|
$
|
1,224
|
|
|
$
|
2,032
|
|
|
$
|
1,983
|
|
|
$
|
—
|
|
Additions from
transfer of loan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
434
|
|
Additions from
acquisitions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,796
|
|
Proceeds from
dispositions
|
—
|
|
|
(435)
|
|
|
—
|
|
|
(864)
|
|
|
(198)
|
|
Gain (loss) on sales,
net
|
—
|
|
|
52
|
|
|
—
|
|
|
(227)
|
|
|
—
|
|
Valuation
adjustments
|
—
|
|
|
—
|
|
|
(49)
|
|
|
(51)
|
|
|
(49)
|
|
Balance, end of
period
|
$
|
841
|
|
|
$
|
841
|
|
|
$
|
1,983
|
|
|
$
|
841
|
|
|
$
|
1,983
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Allowance for Loan Losses:
|
|
Balance, beginning of
period
|
$
|
36,518
|
|
|
$
|
36,363
|
|
|
$
|
34,475
|
|
|
$
|
35,042
|
|
|
$
|
32,086
|
|
Provision for loan
losses
|
1,558
|
|
|
466
|
|
|
1,162
|
|
|
4,311
|
|
|
5,129
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
(1,509)
|
|
|
(306)
|
|
|
(477)
|
|
|
(2,692)
|
|
|
(1,400)
|
|
One-to-four family
residential
|
(15)
|
|
|
(15)
|
|
|
(15)
|
|
|
(60)
|
|
|
(45)
|
|
Real estate
construction and land development
|
(133)
|
|
|
—
|
|
|
—
|
|
|
(133)
|
|
|
—
|
|
Consumer
|
(451)
|
|
|
(501)
|
|
|
(451)
|
|
|
(2,104)
|
|
|
(2,160)
|
|
Total
charge-offs
|
(2,108)
|
|
|
(822)
|
|
|
(943)
|
|
|
(4,989)
|
|
|
(3,605)
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
Commercial
business
|
55
|
|
|
381
|
|
|
218
|
|
|
657
|
|
|
908
|
|
Real estate
construction and land development
|
9
|
|
|
3
|
|
|
6
|
|
|
637
|
|
|
11
|
|
Consumer
|
139
|
|
|
127
|
|
|
124
|
|
|
513
|
|
|
513
|
|
Total
recoveries
|
203
|
|
|
511
|
|
|
348
|
|
|
1,807
|
|
|
1,432
|
|
Net
charge-offs
|
(1,905)
|
|
|
(311)
|
|
|
(595)
|
|
|
(3,182)
|
|
|
(2,173)
|
|
Balance, end of
period
|
$
|
36,171
|
|
|
$
|
36,518
|
|
|
$
|
35,042
|
|
|
$
|
36,171
|
|
|
$
|
35,042
|
|
Net charge-offs on
loans to average loans, annualized
|
0.20
|
%
|
|
0.03
|
%
|
|
0.07
|
%
|
|
0.09
|
%
|
|
0.06
|
%
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
Nonperforming Assets:
|
|
|
|
|
|
Nonaccrual loans by
type:
|
|
|
|
|
|
Commercial
business
|
$
|
44,331
|
|
|
$
|
40,742
|
|
|
$
|
12,564
|
|
One-to-four family
residential
|
19
|
|
|
19
|
|
|
71
|
|
Real estate
construction and land development
|
—
|
|
|
560
|
|
|
899
|
|
Consumer
|
186
|
|
|
190
|
|
|
169
|
|
Total nonaccrual
loans(1)
|
44,536
|
|
|
41,511
|
|
|
13,703
|
|
Other real estate
owned
|
841
|
|
|
841
|
|
|
1,983
|
|
Nonperforming
assets
|
$
|
45,377
|
|
|
$
|
42,352
|
|
|
$
|
15,686
|
|
|
|
|
|
|
|
Restructured
performing loans
|
$
|
14,466
|
|
|
$
|
19,416
|
|
|
$
|
22,736
|
|
Accruing loans past
due 90 days or more
|
—
|
|
|
—
|
|
|
—
|
|
Potential problem
loans(2)
|
87,825
|
|
|
85,339
|
|
|
101,349
|
|
Allowance for loan
losses to:
|
|
|
|
|
|
Loans receivable,
net
|
0.96
|
%
|
|
0.98
|
%
|
|
0.96
|
%
|
Nonaccrual
loans
|
81.22
|
%
|
|
87.97
|
%
|
|
255.73
|
%
|
Nonperforming loans
to loans receivable, net
|
1.18
|
%
|
|
1.11
|
%
|
|
0.37
|
%
|
Nonperforming assets
to total assets
|
0.82
|
%
|
|
0.77
|
%
|
|
0.30
|
%
|
(1)
|
At December 31,
2019, September 30, 2019 and December 31, 2018, $26.3
million, $17.5 million and $6.9 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.
|
|
Three Months Ended
|
|
Year Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Gain on Sale of Loans, net:
|
|
|
|
|
|
|
|
|
|
Mortgage
loans
|
$
|
811
|
|
|
$
|
728
|
|
|
$
|
473
|
|
|
$
|
2,159
|
|
|
$
|
2,403
|
|
SBA loans
|
—
|
|
|
265
|
|
|
—
|
|
|
265
|
|
|
356
|
|
Total gain on sale of
loans, net
|
$
|
811
|
|
|
$
|
993
|
|
|
$
|
473
|
|
|
$
|
2,424
|
|
|
$
|
2,759
|
|
|
Three Months
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
December 31,
2018
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
(Dollars in thousands)
|
Interest Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
receivable, net (2) (3)
|
$
|
3,719,128
|
|
|
$
|
46,864
|
|
|
5.00
|
%
|
|
$
|
3,677,405
|
|
|
$
|
47,845
|
|
|
5.16
|
%
|
|
$
|
3,615,362
|
|
|
$
|
47,865
|
|
|
5.25
|
%
|
Taxable
securities
|
826,541
|
|
|
5,585
|
|
|
2.68
|
|
|
823,498
|
|
|
5,704
|
|
|
2.75
|
|
|
772,925
|
|
|
5,343
|
|
|
2.74
|
|
Nontaxable securities
(3)
|
123,177
|
|
|
755
|
|
|
2.43
|
|
|
129,061
|
|
|
798
|
|
|
2.45
|
|
|
160,626
|
|
|
1,003
|
|
|
2.48
|
|
Other interest
earning assets
|
180,862
|
|
|
739
|
|
|
1.62
|
|
|
106,740
|
|
|
537
|
|
|
2.00
|
|
|
104,302
|
|
|
673
|
|
|
2.56
|
|
Total interest
earning assets
|
4,849,708
|
|
|
53,943
|
|
|
4.41
|
%
|
|
4,736,704
|
|
|
54,884
|
|
|
4.60
|
%
|
|
4,653,215
|
|
|
54,884
|
|
|
4.68
|
%
|
Noninterest earning
assets
|
707,389
|
|
|
|
|
|
|
679,687
|
|
|
|
|
|
|
672,161
|
|
|
|
|
|
Total
assets
|
$
|
5,557,097
|
|
|
|
|
|
|
$
|
5,416,391
|
|
|
|
|
|
|
$
|
5,325,376
|
|
|
|
|
|
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
$
|
526,247
|
|
|
$
|
2,027
|
|
|
1.53
|
%
|
|
$
|
508,092
|
|
|
$
|
1,861
|
|
|
1.45
|
%
|
|
$
|
496,903
|
|
|
$
|
1,218
|
|
|
0.97
|
%
|
Savings
accounts
|
508,924
|
|
|
572
|
|
|
0.45
|
|
|
507,533
|
|
|
680
|
|
|
0.53
|
|
|
516,620
|
|
|
613
|
|
|
0.47
|
|
Interest bearing
demand and money market accounts
|
2,101,001
|
|
|
1,880
|
|
|
0.36
|
|
|
2,040,926
|
|
|
1,709
|
|
|
0.33
|
|
|
2,074,138
|
|
|
1,397
|
|
|
0.27
|
|
Total interest bearing
deposits
|
3,136,172
|
|
|
4,479
|
|
|
0.57
|
|
|
3,056,551
|
|
|
4,250
|
|
|
0.55
|
|
|
3,087,661
|
|
|
3,228
|
|
|
0.41
|
|
Junior subordinated
debentures
|
20,548
|
|
|
313
|
|
|
6.04
|
|
|
20,474
|
|
|
332
|
|
|
6.43
|
|
|
20,255
|
|
|
335
|
|
|
6.56
|
|
Securities sold under
agreement to repurchase
|
22,360
|
|
|
36
|
|
|
0.64
|
|
|
29,258
|
|
|
48
|
|
|
0.65
|
|
|
34,046
|
|
|
29
|
|
|
0.34
|
|
FHLB advances and
other borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
3,755
|
|
|
11
|
|
|
1.16
|
|
|
440
|
|
|
3
|
|
|
2.71
|
|
Total interest
bearing liabilities
|
3,179,080
|
|
|
4,828
|
|
|
0.60
|
%
|
|
3,110,038
|
|
|
4,641
|
|
|
0.59
|
%
|
|
3,142,402
|
|
|
3,595
|
|
|
0.45
|
%
|
Demand and other
noninterest bearing deposits
|
1,462,683
|
|
|
|
|
|
|
1,416,336
|
|
|
|
|
|
|
1,356,186
|
|
|
|
|
|
Other noninterest
bearing liabilities
|
108,466
|
|
|
|
|
|
|
88,624
|
|
|
|
|
|
|
76,623
|
|
|
|
|
|
Stockholders'
equity
|
806,868
|
|
|
|
|
|
|
801,393
|
|
|
|
|
|
|
750,165
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
5,557,097
|
|
|
|
|
|
|
$
|
5,416,391
|
|
|
|
|
|
|
$
|
5,325,376
|
|
|
|
|
|
Net interest
income
|
|
|
$
|
49,115
|
|
|
|
|
|
|
$
|
50,243
|
|
|
|
|
|
|
$
|
51,289
|
|
|
|
Net interest
spread
|
|
|
|
|
3.81
|
%
|
|
|
|
|
|
4.01
|
%
|
|
|
|
|
|
4.23
|
%
|
Net interest
margin
|
|
|
|
|
4.02
|
%
|
|
|
|
|
|
4.21
|
%
|
|
|
|
|
|
4.37
|
%
|
Average interest
earning assets to average interest bearing liabilities
|
|
|
|
|
152.55
|
%
|
|
|
|
|
|
152.30
|
%
|
|
|
|
|
|
148.08
|
%
|
|
|
(1)
|
Annualized.
|
(2)
|
The average loan
balances presented in the table are net of allowances for loan
losses and include loans held for sale. 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, 2019
|
|
December 31, 2018
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
Interest Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
receivable, net (1) (2)
|
$
|
3,668,665
|
|
|
$
|
189,515
|
|
|
5.17
|
%
|
|
$
|
3,414,424
|
|
|
$
|
175,466
|
|
|
5.14
|
%
|
Taxable
securities
|
827,822
|
|
|
23,045
|
|
|
2.78
|
|
|
677,893
|
|
|
17,602
|
|
|
2.60
|
|
Nontaxable securities
(2)
|
135,245
|
|
|
3,396
|
|
|
2.51
|
|
|
190,209
|
|
|
4,649
|
|
|
2.44
|
|
Other interest
earning assets
|
98,153
|
|
|
1,894
|
|
|
1.93
|
|
|
76,117
|
|
|
1,689
|
|
|
2.22
|
|
Total interest earning
assets
|
4,729,885
|
|
|
217,850
|
|
|
4.61
|
%
|
|
4,358,643
|
|
|
199,406
|
|
|
4.57
|
%
|
Noninterest earning
assets
|
681,193
|
|
|
|
|
|
|
615,372
|
|
|
|
|
|
Total
assets
|
$
|
5,411,078
|
|
|
|
|
|
|
$
|
4,974,015
|
|
|
|
|
|
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
$
|
512,732
|
|
|
$
|
7,021
|
|
|
1.37
|
%
|
|
$
|
463,124
|
|
|
$
|
3,959
|
|
|
0.85
|
%
|
Savings
accounts
|
506,073
|
|
|
2,633
|
|
|
0.52
|
|
|
513,680
|
|
|
2,056
|
|
|
0.40
|
|
Interest bearing
demand and money market accounts
|
2,052,573
|
|
|
6,695
|
|
|
0.33
|
|
|
1,916,319
|
|
|
4,382
|
|
|
0.23
|
|
Total interest bearing
deposits
|
3,071,378
|
|
|
16,349
|
|
|
0.53
|
|
|
2,893,123
|
|
|
10,397
|
|
|
0.36
|
|
Junior subordinated
debentures
|
20,438
|
|
|
1,339
|
|
|
6.55
|
|
|
20,145
|
|
|
1,263
|
|
|
6.27
|
|
Securities sold under
agreement to repurchase
|
28,457
|
|
|
175
|
|
|
0.61
|
|
|
31,426
|
|
|
82
|
|
|
0.26
|
|
Federal Home Loan
Bank advances and other borrowings
|
11,899
|
|
|
305
|
|
|
2.56
|
|
|
33,914
|
|
|
671
|
|
|
1.98
|
|
Total interest bearing
liabilities
|
3,132,172
|
|
|
18,168
|
|
|
0.58
|
%
|
|
2,978,608
|
|
|
12,413
|
|
|
0.42
|
%
|
Noninterest bearing
deposits
|
1,389,721
|
|
|
|
|
|
|
1,240,621
|
|
|
|
|
|
Demand and other
noninterest bearing liabilities
|
99,683
|
|
|
|
|
|
|
67,692
|
|
|
|
|
|
Stockholders'
equity
|
789,502
|
|
|
|
|
|
|
687,094
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$
|
5,411,078
|
|
|
|
|
|
|
$
|
4,974,015
|
|
|
|
|
|
Net interest
income
|
|
|
$
|
199,682
|
|
|
|
|
|
|
$
|
186,993
|
|
|
|
Net interest
spread
|
|
|
|
|
4.03
|
%
|
|
|
|
|
|
4.15
|
%
|
Net interest
margin
|
|
|
|
|
4.22
|
%
|
|
|
|
|
|
4.29
|
%
|
Average interest
earning assets to average interest bearing liabilities
|
|
|
|
|
151.01
|
%
|
|
|
|
|
|
146.33
|
%
|
|
|
(1)
|
The average loan
balances presented in the table are net of allowances for loan
losses and include loans held for sale. Nonaccrual loans have been
included in the table as loans carrying a zero yield.
|
(2)
|
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,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
|
December 31,
2018
|
Earnings:
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
|
49,115
|
|
|
$
|
50,243
|
|
|
$
|
50,536
|
|
|
$
|
49,788
|
|
|
$
|
51,289
|
|
Provision for loan
losses
|
1,558
|
|
|
466
|
|
|
1,367
|
|
|
920
|
|
|
1,162
|
|
Noninterest
income
|
9,011
|
|
|
8,458
|
|
|
7,564
|
|
|
7,429
|
|
|
8,445
|
|
Noninterest
expense
|
35,997
|
|
|
36,719
|
|
|
37,547
|
|
|
36,525
|
|
|
37,273
|
|
Net income
|
17,126
|
|
|
17,895
|
|
|
15,984
|
|
|
16,552
|
|
|
16,609
|
|
Basic earnings per
share
|
$
|
0.47
|
|
|
$
|
0.49
|
|
|
$
|
0.43
|
|
|
$
|
0.45
|
|
|
$
|
0.45
|
|
Diluted earnings per
share
|
$
|
0.47
|
|
|
$
|
0.48
|
|
|
$
|
0.43
|
|
|
$
|
0.45
|
|
|
$
|
0.45
|
|
Average Balances:
|
|
|
|
|
|
|
|
|
|
Total loans
receivable, net
|
$
|
3,719,128
|
|
|
$
|
3,677,405
|
|
|
$
|
3,654,475
|
|
|
$
|
3,622,494
|
|
|
$
|
3,615,362
|
|
Investment
securities
|
949,718
|
|
|
952,559
|
|
|
979,532
|
|
|
970,806
|
|
|
933,551
|
|
Total interest
earning assets
|
4,849,708
|
|
|
4,736,704
|
|
|
4,681,588
|
|
|
4,649,259
|
|
|
4,653,215
|
|
Total
assets
|
5,557,097
|
|
|
5,416,391
|
|
|
5,350,805
|
|
|
5,317,325
|
|
|
5,325,376
|
|
Total interest
bearing deposits
|
3,136,172
|
|
|
3,056,551
|
|
|
3,031,256
|
|
|
3,060,869
|
|
|
3,087,661
|
|
Total noninterest
bearing deposits
|
1,462,683
|
|
|
1,416,336
|
|
|
1,345,917
|
|
|
1,332,223
|
|
|
1,356,186
|
|
Stockholders'
equity
|
806,868
|
|
|
801,393
|
|
|
782,719
|
|
|
766,451
|
|
|
750,165
|
|
Financial Ratios:
|
|
|
|
|
|
|
|
|
|
Return on average
assets (1)
|
1.22
|
%
|
|
1.31
|
%
|
|
1.20
|
%
|
|
1.26
|
%
|
|
1.24
|
%
|
Return on average
common equity (1)
|
8.42
|
|
|
8.86
|
|
|
8.19
|
|
|
8.76
|
|
|
8.78
|
|
Return on average
tangible common equity (1)
|
12.94
|
|
|
13.66
|
|
|
12.89
|
|
|
13.94
|
|
|
14.22
|
|
Efficiency
ratio
|
61.93
|
|
|
62.55
|
|
|
64.62
|
|
|
63.84
|
|
|
62.40
|
|
Noninterest expense
to average total assets (1)
|
2.57
|
|
|
2.69
|
|
|
2.81
|
|
|
2.79
|
|
|
2.78
|
|
Net interest
margin
|
4.02
|
|
|
4.21
|
|
|
4.33
|
|
|
4.34
|
|
|
4.37
|
|
Net interest
spread
|
3.81
|
|
|
4.01
|
|
|
4.13
|
|
|
4.17
|
|
|
4.23
|
|
|
As of Period End or for the Three Months
Ended
|
|
December 31,
2019
|
|
September 30,
2019
|
|
June 30,
2019
|
|
March 31,
2019
|
|
December 31,
2018
|
Select Balance Sheet:
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
5,552,929
|
|
|
$
|
5,515,185
|
|
|
$
|
5,376,686
|
|
|
$
|
5,342,099
|
|
|
$
|
5,316,927
|
|
Total loans
receivable, net
|
3,731,708
|
|
|
3,694,825
|
|
|
3,681,920
|
|
|
3,660,279
|
|
|
3,619,118
|
|
Investment
securities
|
952,312
|
|
|
966,102
|
|
|
960,680
|
|
|
985,009
|
|
|
976,095
|
|
Deposits
|
4,582,676
|
|
|
4,562,257
|
|
|
4,347,708
|
|
|
4,393,715
|
|
|
4,432,402
|
|
Noninterest bearing
demand deposits
|
1,446,502
|
|
|
1,429,435
|
|
|
1,320,743
|
|
|
1,338,675
|
|
|
1,362,286
|
|
Stockholders'
equity
|
809,311
|
|
|
804,127
|
|
|
796,625
|
|
|
778,191
|
|
|
760,723
|
|
Financial Measures:
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
$
|
22.10
|
|
|
$
|
21.96
|
|
|
$
|
21.60
|
|
|
$
|
21.09
|
|
|
$
|
20.63
|
|
Tangible book value
per share
|
15.07
|
|
|
14.90
|
|
|
14.56
|
|
|
14.03
|
|
|
13.54
|
|
Stockholders' equity
to total assets
|
14.6
|
%
|
|
14.6
|
%
|
|
14.8
|
%
|
|
14.6
|
%
|
|
14.3
|
%
|
Tangible common
equity to tangible assets
|
10.4
|
|
|
10.4
|
|
|
10.5
|
|
|
10.2
|
|
|
9.9
|
|
Loans to deposits
ratio
|
82.2
|
|
|
81.8
|
|
|
85.5
|
|
|
84.1
|
|
|
82.4
|
|
Credit Quality Metrics:
|
|
|
|
|
|
|
|
|
|
Allowance for loan
losses to:
|
|
|
|
|
|
|
|
|
|
Loans receivable,
net
|
0.96
|
%
|
|
0.98
|
%
|
|
0.98
|
%
|
|
0.98
|
%
|
|
0.96
|
%
|
Nonperforming
loans
|
81.22
|
|
|
87.97
|
|
|
188.48
|
|
|
207.04
|
|
|
255.73
|
|
Nonperforming loans
to loans receivable, net
|
1.18
|
|
|
1.11
|
|
|
0.52
|
|
|
0.47
|
|
|
0.37
|
|
Nonperforming assets
to total assets
|
0.82
|
|
|
0.77
|
|
|
0.38
|
|
|
0.36
|
|
|
0.30
|
|
Net charge-offs
(recoveries) on loans to average loans receivable, net
|
0.20
|
|
|
0.03
|
|
|
0.13
|
|
|
(0.02)
|
|
|
0.07
|
|
Criticized Loans by Credit Quality
Rating:
|
|
|
|
|
|
|
|
|
|
Special
mention
|
$
|
48,895
|
|
|
$
|
51,306
|
|
|
$
|
64,667
|
|
|
$
|
49,368
|
|
|
$
|
53,640
|
|
Substandard
|
93,423
|
|
|
90,202
|
|
|
89,267
|
|
|
78,323
|
|
|
78,382
|
|
Doubtful/Loss
|
524
|
|
|
524
|
|
|
524
|
|
|
524
|
|
|
524
|
|
Other Metrics:
|
|
|
|
|
|
|
|
|
|
Number of banking
offices
|
62
|
|
|
62
|
|
|
62
|
|
|
63
|
|
|
64
|
|
Average number of
full-time equivalent employees
|
889
|
|
|
877
|
|
|
880
|
|
|
878
|
|
|
867
|
|
Deposits per
branch
|
$
|
73,914
|
|
|
$
|
73,585
|
|
|
$
|
70,124
|
|
|
$
|
69,742
|
|
|
$
|
69,256
|
|
Average assets per
full-time equivalent employee
|
$
|
6,253
|
|
|
$
|
6,176
|
|
|
$
|
6,082
|
|
|
$
|
6,054
|
|
|
$
|
6,142
|
|
View original
content:http://www.prnewswire.com/news-releases/heritage-financial-announces-fourth-quarter-and-annual-2019-results-and-declares-regular-cash-dividend-300992015.html
SOURCE Heritage Financial Corporation