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Employee Benefits
12 Months Ended
Dec. 31, 2014
Employee Benefits and Share-based Compensation [Abstract]  
Employee Benefits
Employee Benefit Plans
(a) 401(k) Plan
Effective October 1, 1999, the Company combined three retirement plans, a money purchase pension plan, a 401(k) plan, and an employee stock ownership plan ("ESOP") at Heritage Bank, and the 401(k) plan at Central Valley Bank into one plan called the "Heritage Financial Corporation 401(k) Employee Stock Ownership Plan" (the “Plan”). In 2010, the Company amended the Plan to provide certain service credit for vesting and/or contribution purposes to employees of Cowlitz Bank and Pierce Commercial Bank at the time of each acquisition. Effective January 1, 2014, the Plan converted from an ESOP to a profit sharing plan and changed its name to "Heritage Financial Corporation 401(k) Profit Sharing Plan and Trust."
The profit sharing portion of the Plan is a defined contribution retirement plan. Effective January 1, 2014, the Company changed the contribution formula to make all profit sharing and discretionary contributions completely discretionary. For the year ended December 31, 2014, the Company contributed 1.5% of employees' eligible compensation. For the Plan years 2013 and 2012, the Company was required to contribute 2% of the participants’ eligible compensation and it could also provide discretionary profit sharing contributions beyond the required 2% contribution. For the years ended December 31, 2013 and 2012, the Company contributed 3% of employees' eligible compensation. Participants were eligible for profit sharing contributions upon credit of 1,000 hours of service during the plan year, the attainment of 18 years of age, and employment on the last day of the year. It was the Company’s policy to fund plan costs as accrued. Historically, employee vesting in the profit sharing contribution occurred over a period of six years, at which time they became fully vested. All participants employed at May 1, 2014 became 100% vested in all employer contributions. All participants hired after May 1, 2014 are 100% vested in all accounts at all times. Employer profit sharing contributions were $475,000, $600,000 and $631,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
The Plan also includes the Company’s salary savings 401(k) plan for its employees. All persons employed as of July 1, 1984 automatically participate in the plan. All employees hired after that date who are at least 18 years of age may participate in the plan the first of the month following thirty days of service. Employees who participate may contribute a portion of their salary, which is matched by the employer at 50%, not to be greater than 3% of eligible compensation, up to certain Internal Revenue Service limits. Employee vesting in employer matching is consistent with the vesting periods discussed in the profit sharing portion above. Employer matching contributions for the years ended December 31, 2014, 2013 and 2012 were $852,000, $497,000 and $444,000, respectively.
The third portion of the Plan was the ESOP. Heritage Bank established the ESOP and related trust for eligible employees effective July 1, 1994, which became active upon the former mutual holding company’s conversion to a stock-based holding company in January 1995. The ESOP provided a contribution to all eligible participants upon completion of one year of service, the attainment of 18 years of age, and employment on the last day of the year. Employee vesting in the ESOP is consistent with the vesting periods discussed in the profit sharing portion above. The ESOP was funded by employer contributions in cash or common stock. During the year ended December 31, 2012, the loan related to the ESOP was paid in full; therefore, there was no ESOP compensation expense for the years ended December 31, 2014 and 2013. ESOP compensation expense was $139,000 for the year ended December 31, 2012. As of December 31, 2014 and 2013, the Company had no allocated or committed shares to be released to the ESOP, and the Company has no unearned, restricted shares remaining to be released as of December 31, 2014.
(b) Employment Agreements
The Company has entered into contracts with certain senior officers that provide benefits under certain conditions following termination without cause, and/or following a change in control of the Company.
(c) Deferred Compensation Plan
During 2012, the Company adopted a Deferred Compensation Plan, which provides its directors and select executive officers with the opportunity to defer current compensation. Under the Plan, participants are permitted to elect to defer compensation and the Company has the discretion to make additional contributions to the Plan on behalf of any participant based on a number of factors. Compensation expense under the Deferred Compensation Plan totaled $343,000, $445,000 and $312,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The Company’s contributions totaled $414,000, $155,000 and $150,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
(d) Split-Dollar Life Insurance Benefit Plan
In conjunction with the Washington Banking Merger, the Company assumed the split-dollar life insurance benefit plan previously maintained by Washington Banking. Life insurance policies are maintained for current officers of the Bank or former Washington Banking officers that are subject to split-dollar life insurance agreements, which continue after the participant's employment and retirement. All participants are fully vested in their split-dollar life insurance benefits. The accrued benefit liability for the split-dollar life insurance agreements represents the present value of the future death benefits payable to the participants' beneficiaries.
The split-dollar life insurance projected benefit obligation is included in accrued expenses and other liabilities on the Company's Consolidated Statements of Financial Condition. As of December 31, 2014, the carrying value of the obligation was $1.2 million. The Company had no obligation at December 31, 2013.