(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices) | (Zip Code) |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading symbol | Name of each exchange on which registered |
HERITAGE FINANCIAL CORPORATION | ||
Date: | ||
April 30, 2020 | /S/ JEFFREY J. DEUEL | |
Jeffrey J. Deuel | ||
President and Chief Executive Officer | ||
(Duly Authorized Officer) |
• | Diluted earnings per share were $0.33 for the quarter ended March 31, 2020 compared to $0.47 for the linked-quarter ended December 31, 2019 and $0.45 for the quarter ended March 31, 2019. |
• | Heritage declared a regular cash dividend of $0.20 per common share on April 29, 2020. |
• | Loans receivable, net, increased $73.1 million, or 2.0%, to $3.80 billion at March 31, 2020 from $3.73 billion at December 31, 2019. |
• | Total deposits increased $35.3 million, or 0.8%, to $4.62 billion at March 31, 2020 from $4.58 billion at December 31, 2019. |
• | Non-maturity deposits as a percentage of total deposits were 88.6% at March 31, 2020, which is unchanged compared to December 31, 2019. |
• | Net interest margin increased to 4.06% for the quarter ended March 31, 2020 compared to 4.02% for the linked-quarter ended December 31, 2019. |
• | Adopted the Current Expected Credit Losses (“CECL”) accounting standard effective January 1, 2020. |
As of Period End or for the Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(Dollars in thousands, except per share amounts) | |||||||||||
Net income | $ | 12,191 | $ | 17,126 | $ | 16,552 | |||||
Diluted earnings per share | $ | 0.33 | $ | 0.47 | $ | 0.45 | |||||
Return on average assets (1) | 0.88 | % | 1.22 | % | 1.26 | % | |||||
Return on average equity (1) | 6.08 | % | 8.42 | % | 8.76 | % | |||||
Return on average tangible common equity (1) | 9.46 | % | 12.94 | % | 13.94 | % | |||||
Net interest margin | 4.06 | % | 4.02 | % | 4.34 | % | |||||
Cost of total deposits (1) | 0.37 | % | 0.39 | % | 0.33 | % | |||||
Efficiency ratio | 64.20 | % | 61.93 | % | 63.84 | % | |||||
Noninterest expense to average total assets (1) | 2.70 | % | 2.57 | % | 2.79 | % | |||||
Total assets | $ | 5,587,300 | $ | 5,552,970 | $ | 5,342,099 | |||||
Loans receivable, net | $ | 3,804,836 | $ | 3,731,708 | $ | 3,660,279 | |||||
Total deposits | $ | 4,617,948 | $ | 4,582,676 | $ | 4,393,715 | |||||
Loan to deposit ratio (2) | 83.4 | % | 82.2 | % | 84.1 | % | |||||
Book value per share | $ | 22.25 | $ | 22.10 | $ | 21.09 | |||||
Tangible book value per share | $ | 15.10 | $ | 15.07 | $ | 14.03 |
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||
Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Commercial business: | ||||||||||||||||||||
Commercial and industrial | $ | 889,685 | 23.1 | % | $ | 852,220 | 22.6 | % | $ | 841,456 | 22.7 | % | ||||||||
Owner-occupied commercial real estate | 805,636 | 20.9 | 805,234 | 21.4 | 784,291 | 21.2 | ||||||||||||||
Non-owner occupied commercial real estate | 1,312,308 | 34.1 | 1,288,779 | 34.2 | 1,333,895 | 36.1 | ||||||||||||||
Total commercial business | 3,007,629 | 78.1 | 2,946,233 | 78.2 | 2,959,642 | 80.0 | ||||||||||||||
One-to-four family residential | 136,782 | 3.5 | 131,660 | 3.5 | 106,076 | 2.9 | ||||||||||||||
Real estate construction and land development: | ||||||||||||||||||||
One-to-four family residential | 98,730 | 2.6 | 104,296 | 2.8 | 109,906 | 3.0 | ||||||||||||||
Five or more family residential and commercial properties | 188,304 | 4.9 | 170,350 | 4.5 | 125,948 | 3.4 |
Total real estate construction and land development | 287,034 | 7.5 | 274,646 | 7.3 | 235,854 | 6.4 | ||||||||||||||
Consumer | 420,931 | 10.9 | 415,340 | 11.0 | 397,652 | 10.7 | ||||||||||||||
Loans receivable | 3,852,376 | 100.0 | % | 3,767,879 | 100.0 | % | 3,699,224 | 100.0 | % | |||||||||||
Allowance for credit losses on loans | (47,540 | ) | (36,171 | ) | (36,152 | ) | ||||||||||||||
Loans receivable, net | $ | 3,804,836 | $ | 3,731,708 | $ | 3,663,072 |
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||
Balance | % of Total | Balance | % of Total | Balance | % of Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Noninterest bearing demand deposits | $ | 1,415,177 | 30.6 | % | $ | 1,446,502 | 31.6 | % | $ | 1,338,675 | 30.5 | % | ||||||||
Interest bearing demand deposits | 1,373,091 | 29.7 | 1,348,817 | 29.4 | 1,293,828 | 29.4 | ||||||||||||||
Money market accounts | 878,075 | 19.0 | 753,684 | 16.4 | 740,518 | 16.9 | ||||||||||||||
Savings accounts | 425,616 | 9.3 | 509,095 | 11.2 | 499,568 | 11.3 | ||||||||||||||
Total non-maturity deposits | 4,091,959 | 88.6 | 4,058,098 | 88.6 | 3,872,589 | 88.1 | ||||||||||||||
Certificates of deposit | 525,989 | 11.4 | 524,578 | 11.4 | 521,126 | 11.9 | ||||||||||||||
Total deposits | $ | 4,617,948 | 100.0 | % | $ | 4,582,676 | 100.0 | % | $ | 4,393,715 | 100.0 | % |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 809,311 | $ | 804,127 | $ | 760,723 | |||||
Cumulative effect from change in accounting policy (1) | (5,615 | ) | — | (399 | ) | ||||||
Net income | 12,191 | 17,126 | 16,552 | ||||||||
Accumulated other comprehensive gain (loss), net | 7,914 | (2,147 | ) | 8,016 | |||||||
Dividends paid | (7,343 | ) | (10,673 | ) | (6,662 | ) | |||||
Shares repurchased | (19,060 | ) | (1 | ) | (802 | ) | |||||
Other | 1,040 | 879 | 763 | ||||||||
Balance, end of period | $ | 798,438 | $ | 809,311 | $ | 778,191 |
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||
Capital Ratios: | ||||||||
Stockholders' equity to total assets | 14.3 | % | 14.6 | % | 14.6 | % | ||
Tangible common equity to tangible assets | 10.2 | % | 10.4 | % | 10.2 | % | ||
Common equity Tier 1 capital to risk-weighted assets (1) | 11.2 | % | 11.5 | % | 11.8 | % | ||
Tier 1 leverage capital to average quarterly assets (1) | 10.4 | % | 10.6 | % | 10.7 | % | ||
Tier 1 capital to risk-weighted assets (1) | 11.6 | % | 12.0 | % | 12.2 | % | ||
Total capital to risk-weighted assets (1) | 12.5 | % | 12.8 | % | 13.0 | % |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 44,525 | $ | 41,497 | $ | 13,696 | |||||
Addition of previously classified pass graded loans | 255 | 764 | — | ||||||||
Addition of previously classified potential problem loans (1) | 2,579 | 1,043 | 6,189 | ||||||||
Addition of previously classified TDR loans | — | 4,686 | — | ||||||||
Net principal payments, transfer to OREO, and transfer to accruing status | (12,570 | ) | (2,216 | ) | (2,393 | ) | |||||
Charge-offs | (626 | ) | (1,249 | ) | (39 | ) | |||||
Balance, end of period | $ | 34,163 | $ | 44,525 | $ | 17,453 |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(In thousands) | |||||||||||
Balance, beginning of period | $ | 87,788 | $ | 85,314 | $ | 101,320 | |||||
Addition of previously classified pass graded loans | 29,919 | 23,498 | 9,779 | ||||||||
Upgrades to pass graded loan status | (476 | ) | (8,367 | ) | — | ||||||
Net principal payments | (9,825 | ) | (10,537 | ) | (13,521 | ) | |||||
Transfers of loans to nonaccrual and TDR status | (5,239 | ) | (2,120 | ) | (3,303 | ) | |||||
Charge-offs | — | — | (187 | ) | |||||||
Balance, end of period | $ | 102,167 | $ | 87,788 | $ | 94,088 |
Change Date | Rate (%) | Rate Change (%) | ||
December 31, 2018 | 2.25 - 2.50% | N/A | ||
July 31, 2019 | 2.00 - 2.25% | -0.25% | ||
September 18, 2019 | 1.75 - 2.00% | -0.25% | ||
October 30, 2019 | 1.50 - 1.75% | -0.25% | ||
March 3, 2020 | 1.00 - 1.25% | -0.50% | ||
March 15, 2020 | 0.00 - 0.25% | -1.00% |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(Dollars in thousands) | |||||||||||
Yield non-GAAP reconciliations:(2) | |||||||||||
Net interest margin (GAAP) | 4.06 | % | 4.02 | % | 4.34 | % | |||||
Exclude impact on net interest margin from incremental accretion on purchased loans(1) | (0.08 | )% | (0.08 | )% | (0.12 | )% | |||||
Net interest margin, excluding incremental accretion on purchased loans (non- GAAP)(1) | 3.98 | % | 3.94 | % | 4.22 | % | |||||
Loan yield (GAAP) | 4.97 | % | 5.00 | % | 5.23 | % | |||||
Exclude impact on loan yield from incremental accretion on purchased loans(1) | (0.11 | )% | (0.11 | )% | (0.15 | )% | |||||
Loan yield, excluding incremental accretion on purchased loans (non-GAAP)(1) | 4.86 | % | 4.89 | % | 5.08 | % | |||||
Incremental accretion on purchased loans(1) | $ | 1,012 | $ | 997 | $ | 1,373 |
(1) | Represents the amount of interest income recorded on purchased loans in excess of the contractual stated interest rate in the individual loan notes due to incremental accretion of purchased discount or premium. Purchased discount or premium is the difference between the contractual loan balance and the fair value of acquired loans at the acquisition date, or as modified under ASU 2016-13 adoption. The purchased discount is accreted into income over the remaining life of the loan. |
(2) | See Non-GAAP Financial Measures section herein. |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(In thousands) | |||||||||||
Provision for Credit Losses | |||||||||||
Provision for credit losses on loans | $ | 9,964 | $ | 1,558 | $ | 920 | |||||
Reversal of provision for credit losses on unfunded commitments | (2,018 | ) | — | — | |||||||
Total | $ | 7,946 | $ | 1,558 | $ | 920 |
March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | |||||||||||||||
(Dollar amounts in thousands, except per share amounts) | |||||||||||||||||||
Tangible common equity to tangible assets and tangible book value per share: | |||||||||||||||||||
Total stockholders' equity (GAAP) | $ | 798,438 | $ | 809,311 | $ | 804,127 | $ | 796,625 | $ | 778,191 | |||||||||
Exclude intangible assets | (256,649 | ) | (257,552 | ) | (258,527 | ) | (259,502 | ) | (260,528 | ) | |||||||||
Tangible common equity (non-GAAP) | $ | 541,789 | $ | 551,759 | $ | 545,600 | $ | 537,123 | $ | 517,663 | |||||||||
Total assets (GAAP) | $ | 5,587,300 | $ | 5,552,970 | $ | 5,515,185 | $ | 5,376,686 | $ | 5,342,099 | |||||||||
Exclude intangible assets | (256,649 | ) | (257,552 | ) | (258,527 | ) | (259,502 | ) | (260,528 | ) | |||||||||
Tangible assets (non-GAAP) | $ | 5,330,651 | $ | 5,295,418 | $ | 5,256,658 | $ | 5,117,184 | $ | 5,081,571 | |||||||||
Stockholders' equity to total assets (GAAP) | 14.3 | % | 14.6 | % | 14.6 | % | 14.8 | % | 14.6 | % | |||||||||
Tangible common equity to tangible assets (non-GAAP) | 10.2 | % | 10.4 | % | 10.4 | % | 10.5 | % | 10.2 | % | |||||||||
Shares outstanding | 35,888,494 | 36,618,729 | 36,618,381 | 36,882,771 | 36,899,138 | ||||||||||||||
Book value per share (GAAP) | $ | 22.25 | $ | 22.10 | $ | 21.96 | $ | 21.60 | $ | 21.09 | |||||||||
Tangible book value per share (non-GAAP) | $ | 15.10 | $ | 15.07 | $ | 14.90 | $ | 14.56 | $ | 14.03 |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(Dollar amounts in thousands) | |||||||||||
Return on average tangible common equity, annualized: | |||||||||||
Net income (GAAP) | $ | 12,191 | $ | 17,126 | $ | 16,552 | |||||
Exclude amortization of intangible assets | 903 | 975 | 1,025 | ||||||||
Exclude tax effect of adjustment | (190 | ) | (205 | ) | (215 | ) | |||||
Tangible net income (non-GAAP) | $ | 12,904 | $ | 17,896 | $ | 17,362 | |||||
Average stockholders' equity (GAAP) | $ | 806,071 | $ | 806,868 | $ | 766,451 | |||||
Exclude average intangible assets | (257,234 | ) | (258,177 | ) | (261,194 | ) | |||||
Average tangible common stockholders' equity (non-GAAP) | $ | 548,837 | $ | 548,691 | $ | 505,257 | |||||
Return on average equity, annualized (GAAP) | 6.08 | % | 8.42 | % | 8.76 | % | |||||
Return on average tangible common equity, annualized (non-GAAP) | 9.46 | % | 12.94 | % | 13.94 | % |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
(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) | $ | 48,557 | $ | 49,115 | $ | 49,788 | |||||
Exclude incremental accretion on purchased loans | (1,012 | ) | (997 | ) | (1,373 | ) | |||||
Adjusted net interest income (non-GAAP) | $ | 47,545 | $ | 48,118 | $ | 48,415 | |||||
Average total interest earning assets, net | $ | 4,811,769 | $ | 4,849,708 | $ | 4,649,259 | |||||
Net interest margin, annualized (GAAP) | 4.06 | % | 4.02 | % | 4.34 | % | |||||
Net interest margin, excluding incremental accretion on purchased loans, annualized (non-GAAP) | 3.98 | % | 3.94 | % | 4.22 | % | |||||
Interest and fees on loans (GAAP) | $ | 46,277 | $ | 46,864 | $ | 46,699 | |||||
Exclude incremental accretion on purchased loans | (1,012 | ) | (997 | ) | (1,373 | ) | |||||
Adjusted interest and fees on loans (non-GAAP) | $ | 45,265 | $ | 45,867 | $ | 45,326 | |||||
Average loans receivable, net | $ | 3,748,573 | $ | 3,719,128 | $ | 3,622,494 | |||||
Loan yield, annualized (GAAP) | 4.97 | % | 5.00 | % | 5.23 | % | |||||
Loan yield, excluding incremental accretion on purchased loans, annualized (non-GAAP) | 4.86 | % | 4.89 | % | 5.08 | % |
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Cash on hand and in banks | $ | 105,097 | $ | 95,039 | |||
Interest earning deposits | 57,816 | 133,529 | |||||
Cash and cash equivalents | 162,913 | 228,568 | |||||
Investment securities available for sale, at fair value, net (amortized cost of $937,828 and $939,160 at March 31, 2020 and December 31, 2019) | 961,092 | 952,312 | |||||
Loans held for sale | 3,808 | 5,533 | |||||
Loans receivable | 3,852,376 | 3,767,879 | |||||
Allowance for credit losses on loans | (47,540 | ) | (36,171 | ) | |||
Loans receivable, net | 3,804,836 | 3,731,708 | |||||
Other real estate owned | 841 | 841 | |||||
Premises and equipment, net | 87,958 | 87,888 | |||||
Federal Home Loan Bank stock, at cost | 6,661 | 6,377 | |||||
Bank owned life insurance | 106,756 | 103,616 | |||||
Accrued interest receivable | 14,940 | 14,446 | |||||
Prepaid expenses and other assets | 180,846 | 164,129 | |||||
Other intangible assets, net | 15,710 | 16,613 | |||||
Goodwill | 240,939 | 240,939 | |||||
Total assets | $ | 5,587,300 | $ | 5,552,970 | |||
Liabilities and Stockholders' Equity | |||||||
Deposits | $ | 4,617,948 | $ | 4,582,676 | |||
Junior subordinated debentures | 20,668 | 20,595 | |||||
Securities sold under agreement to repurchase | 11,792 | 20,169 | |||||
Accrued expenses and other liabilities | 138,454 | 120,219 | |||||
Total liabilities | 4,788,862 | 4,743,659 | |||||
Common stock | 568,439 | 586,459 | |||||
Retained earnings | 211,707 | 212,474 | |||||
Accumulated other comprehensive gain, net | 18,292 | 10,378 | |||||
Total stockholders' equity | 798,438 | 809,311 | |||||
Total liabilities and stockholders' equity | $ | 5,587,300 | $ | 5,552,970 | |||
Shares outstanding | 35,888,494 | 36,618,729 |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
Interest income: | |||||||||||
Interest and fees on loans | $ | 46,277 | $ | 46,864 | $ | 46,699 | |||||
Taxable interest on investment securities | 5,639 | 5,585 | 5,823 | ||||||||
Nontaxable interest on investment securities | 756 | 755 | 950 | ||||||||
Interest on other interest earning assets | 420 | 739 | 335 | ||||||||
Total interest income | 53,092 | 53,943 | 53,807 | ||||||||
Interest expense: | |||||||||||
Deposits | 4,216 | 4,479 | 3,603 | ||||||||
Junior subordinated debentures | 285 | 313 | 354 | ||||||||
Other borrowings | 34 | 36 | 62 | ||||||||
Total interest expense | 4,535 | 4,828 | 4,019 | ||||||||
Net interest income | 48,557 | 49,115 | 49,788 | ||||||||
Provision for credit losses | 7,946 | 1,558 | 920 | ||||||||
Net interest income after provision for credit losses | 40,611 | 47,557 | 48,868 | ||||||||
Noninterest income: | |||||||||||
Service charges and other fees | 4,376 | 4,603 | 4,485 | ||||||||
Gain on sale of investment securities, net | 1,014 | 1 | 15 | ||||||||
Gain on sale of loans, net | 547 | 811 | 252 | ||||||||
Interest rate swap fees | 296 | 919 | — | ||||||||
Other income | 3,247 | 2,677 | 2,677 | ||||||||
Total noninterest income | 9,480 | 9,011 | 7,429 | ||||||||
Noninterest expense: | |||||||||||
Compensation and employee benefits | 22,506 | 21,939 | 21,914 | ||||||||
Occupancy and equipment | 5,731 | 5,513 | 5,458 | ||||||||
Data processing | 2,360 | 2,361 | 2,173 | ||||||||
Marketing | 866 | 461 | 1,098 | ||||||||
Professional services | 1,377 | 1,280 | 1,173 | ||||||||
State/municipal business and use taxes | 757 | 777 | 798 | ||||||||
Federal deposit insurance premium | — | 5 | 285 | ||||||||
Other real estate owned, net | 25 | 12 | 86 | ||||||||
Amortization of intangible assets | 903 | 975 | 1,025 | ||||||||
Other expense | 2,735 | 2,674 | 2,515 | ||||||||
Total noninterest expense | 37,260 | 35,997 | 36,525 | ||||||||
Income before income taxes | 12,831 | 20,571 | 19,772 | ||||||||
Income tax expense | 640 | 3,445 | 3,220 | ||||||||
Net income | $ | 12,191 | $ | 17,126 | $ | 16,552 | |||||
Basic earnings per share | $ | 0.34 | $ | 0.47 | $ | 0.45 | |||||
Diluted earnings per share | $ | 0.33 | $ | 0.47 | $ | 0.45 | |||||
Dividends declared per share | $ | 0.20 | $ | 0.29 | $ | 0.18 | |||||
Average number of basic shares outstanding | 36,342,090 | 36,597,048 | 36,825,532 | ||||||||
Average number of diluted shares outstanding | 36,596,641 | 36,824,470 | 37,010,640 |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
Other Real Estate Owned: | |||||||||||
Balance, beginning of period | $ | 841 | $ | 841 | $ | 1,983 | |||||
Additions from transfer of loan | 270 | — | — | ||||||||
Proceeds from dispositions | (266 | ) | — | (79 | ) | ||||||
Loss on sales, net | (4 | ) | — | — | |||||||
Balance, end of period | $ | 841 | $ | 841 | $ | 1,904 |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
Allowance for Credit Losses on Loans: | |||||||||||
Balance, beginning of period | $ | 36,171 | $ | 36,518 | $ | 35,042 | |||||
Impact of CECL adoption | 1,822 | — | — | ||||||||
Adjusted balance, beginning of period | 37,993 | 36,518 | 35,042 | ||||||||
Provision for credit losses on loans | 9,964 | 1,558 | 920 | ||||||||
Charge-offs: | |||||||||||
Commercial business | (1,222 | ) | (1,509 | ) | (103 | ) | |||||
One-to-four family residential | — | (15 | ) | (15 | ) | ||||||
Real estate construction and land development | — | (133 | ) | — | |||||||
Consumer | (375 | ) | (451 | ) | (586 | ) | |||||
Total charge-offs | (1,597 | ) | (2,108 | ) | (704 | ) | |||||
Recoveries: | |||||||||||
Commercial business | 1,069 | 55 | 159 | ||||||||
One-to-four family residential | 3 | — | — | ||||||||
Real estate construction and land development | 14 | 9 | 618 | ||||||||
Consumer | 94 | 139 | 117 | ||||||||
Total recoveries | 1,180 | 203 | 894 | ||||||||
Net (charge-offs) recoveries | (417 | ) | (1,905 | ) | 190 | ||||||
Balance, end of period | $ | 47,540 | $ | 36,171 | $ | 36,152 | |||||
Net charge-offs on loans to average loans, annualized | 0.04 | % | 0.20 | % | (0.02 | )% |
Three Months Ended | |||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||
Allowance for Credit Losses on Unfunded Commitments: | |||||||||||
Balance, beginning of period | $ | 306 | $ | 306 | $ | 306 | |||||
Impact of CECL adoption | 3,702 | — | — | ||||||||
Adjusted balance, beginning of period | 4,008 | 306 | 306 | ||||||||
Reversal of provision for credit losses on unfunded commitments | (2,018 | ) | — | — | |||||||
Balance, end of period | $ | 1,990 | $ | 306 | $ | 306 |
March 31, 2020 | December 31, 2019 | ||||||
Nonperforming Assets: | |||||||
Nonaccrual loans (1): | |||||||
Commercial business | $ | 33,908 | $ | 44,320 | |||
One-to-four family residential | 163 | 19 | |||||
Consumer | 92 | 186 | |||||
Total nonaccrual loans | 34,163 | 44,525 | |||||
Other real estate owned | 841 | 841 | |||||
Nonperforming assets | $ | 35,004 | $ | 45,366 | |||
Restructured performing loans | $ | 19,309 | $ | 14,469 | |||
Accruing loans past due 90 days or more | — | — | |||||
Potential problem loans (2) | 102,167 | 87,788 | |||||
ACL on loans to: | |||||||
Loans receivable | 1.23 | % | 0.96 | % | |||
Nonaccrual loans | 139.16 | % | 81.24 | % | |||
Nonperforming loans to loans receivable | 0.89 | % | 1.18 | % | |||
Nonperforming assets to total assets | 0.63 | % | 0.82 | % |
(1) | At March 31, 2020 and December 31, 2019, $20.0 million and $26.3 million of nonaccrual loans were also considered troubled debt restructured loans, respectively. |
(2) | Potential problem loans are loans classified as Special Mention or worse that are not classified as a TDR or nonaccrual loan and are not individually evaluated for credit loss, but which management is closely monitoring because the financial information of the borrower causes concern as to their ability to meet their loan repayment terms. |
Three Months Ended | ||||||||||||||||||||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||||||||||||||||||||||
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) | ||||||||||||||||||||||||
Interest Earning Assets: | ||||||||||||||||||||||||||||||||
Loans receivable, net (2) (3) | $ | 3,748,573 | $ | 46,277 | 4.97 | % | $ | 3,719,128 | $ | 46,864 | 5.00 | % | $ | 3,622,494 | $ | 46,699 | 5.23 | % | ||||||||||||||
Taxable securities | 815,686 | 5,639 | 2.78 | 826,541 | 5,585 | 2.68 | 820,981 | 5,823 | 2.88 | |||||||||||||||||||||||
Nontaxable securities (3) | 122,153 | 756 | 2.49 | 123,177 | 755 | 2.43 | 149,825 | 950 | 2.57 | |||||||||||||||||||||||
Interest earning deposits | 125,357 | 420 | 1.35 | 180,862 | 739 | 1.62 | 55,959 | 335 | 2.43 | |||||||||||||||||||||||
Total interest earning assets | 4,811,769 | 53,092 | 4.44 | % | 4,849,708 | 53,943 | 4.41 | % | 4,649,259 | 53,807 | 4.69 | % | ||||||||||||||||||||
Noninterest earning assets | 748,443 | 707,390 | 668,066 | |||||||||||||||||||||||||||||
Total assets | $ | 5,560,212 | $ | 5,557,098 | $ | 5,317,325 | ||||||||||||||||||||||||||
Interest Bearing Liabilities: | ||||||||||||||||||||||||||||||||
Certificates of deposit | $ | 528,009 | $ | 2,012 | 1.53 | % | $ | 526,247 | $ | 2,027 | 1.53 | % | $ | 502,153 | $ | 1,440 | 1.16 | % | ||||||||||||||
Savings accounts | 434,459 | 188 | 0.17 | 508,924 | 572 | 0.45 | 507,670 | 674 | 0.54 | |||||||||||||||||||||||
Interest bearing demand and money market accounts | 2,201,921 | 2,016 | 0.37 | 2,101,001 | 1,880 | 0.36 | 2,051,046 | 1,489 | 0.29 | |||||||||||||||||||||||
Total interest bearing deposits | 3,164,389 | 4,216 | 0.54 | 3,136,172 | 4,479 | 0.57 | 3,060,869 | 3,603 | 0.48 | |||||||||||||||||||||||
Junior subordinated debentures | 20,620 | 285 | 5.56 | 20,548 | 313 | 6.04 | 20,328 | 354 | 7.06 | |||||||||||||||||||||||
Securities sold under agreement to repurchase | 19,246 | 33 | 0.69 | 22,360 | 36 | 0.64 | 33,055 | 47 | 0.58 | |||||||||||||||||||||||
FHLB advances and other borrowings | 989 | 1 | 0.41 | — | — | — | 1,849 | 15 | 3.29 | |||||||||||||||||||||||
Total interest bearing liabilities | 3,205,244 | 4,535 | 0.57 | % | 3,179,080 | 4,828 | 0.60 | % | 3,116,101 | 4,019 | 0.52 | % | ||||||||||||||||||||
Demand and other noninterest bearing deposits | 1,420,247 | 1,462,683 | 1,332,223 | |||||||||||||||||||||||||||||
Other noninterest bearing liabilities | 128,650 | 108,467 | 102,550 | |||||||||||||||||||||||||||||
Stockholders’ equity | 806,071 | 806,868 | 766,451 | |||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 5,560,212 | $ | 5,557,098 | $ | 5,317,325 | ||||||||||||||||||||||||||
Net interest income | $ | 48,557 | $ | 49,115 | $ | 49,788 | ||||||||||||||||||||||||||
Net interest spread | 3.87 | % | 3.81 | % | 4.17 | % | ||||||||||||||||||||||||||
Net interest margin | 4.06 | % | 4.02 | % | 4.34 | % | ||||||||||||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 150.12 | % | 152.55 | % | 149.20 | % |
(1) | Annualized. |
(2) | The average loan balances presented in the table are net of allowances for credit losses on loans 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. |
Three Months Ended | |||||||||||||||||||
March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | |||||||||||||||
Earnings: | |||||||||||||||||||
Net interest income | $ | 48,557 | $ | 49,115 | $ | 50,243 | $ | 50,536 | $ | 49,788 | |||||||||
Provision for credit losses | 7,946 | 1,558 | 466 | 1,367 | 920 | ||||||||||||||
Noninterest income | 9,480 | 9,011 | 8,458 | 7,564 | 7,429 | ||||||||||||||
Noninterest expense | 37,260 | 35,997 | 36,719 | 37,547 | 36,525 | ||||||||||||||
Net income | 12,191 | 17,126 | 17,895 | 15,984 | 16,552 | ||||||||||||||
Basic earnings per share | $ | 0.34 | $ | 0.47 | $ | 0.49 | $ | 0.43 | $ | 0.45 | |||||||||
Diluted earnings per share | $ | 0.33 | $ | 0.47 | $ | 0.48 | $ | 0.43 | $ | 0.45 | |||||||||
Average Balances: | |||||||||||||||||||
Loans receivable, net | $ | 3,748,573 | $ | 3,719,128 | $ | 3,677,405 | $ | 3,654,475 | $ | 3,622,494 | |||||||||
Investment securities | 937,839 | 949,718 | 952,559 | 979,532 | 970,806 | ||||||||||||||
Total interest earning assets | 4,811,769 | 4,849,708 | 4,736,704 | 4,681,588 | 4,649,259 | ||||||||||||||
Total assets | 5,560,212 | 5,557,098 | 5,416,391 | 5,350,805 | 5,317,325 | ||||||||||||||
Total interest bearing deposits | 3,164,389 | 3,136,172 | 3,056,551 | 3,031,256 | 3,060,869 | ||||||||||||||
Total noninterest bearing deposits | 1,420,247 | 1,462,683 | 1,416,336 | 1,345,917 | 1,332,223 | ||||||||||||||
Stockholders' equity | 806,071 | 806,868 | 801,393 | 782,719 | 766,451 | ||||||||||||||
Financial Ratios: | |||||||||||||||||||
Return on average assets (1) | 0.88 | % | 1.22 | % | 1.31 | % | 1.20 | % | 1.26 | % | |||||||||
Return on average common equity (1) | 6.08 | 8.42 | 8.86 | 8.19 | 8.76 | ||||||||||||||
Return on average tangible common equity (1) | 9.46 | 12.94 | 13.66 | 12.89 | 13.94 | ||||||||||||||
Efficiency ratio | 64.20 | 61.93 | 62.55 | 64.62 | 63.84 | ||||||||||||||
Noninterest expense to average total assets (1) | 2.70 | 2.57 | 2.69 | 2.81 | 2.79 | ||||||||||||||
Net interest margin | 4.06 | 4.02 | 4.21 | 4.33 | 4.34 | ||||||||||||||
Net interest spread | 3.87 | 3.81 | 4.01 | 4.13 | 4.17 |
As of Period End or for the Three Months Ended | |||||||||||||||||||
March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | |||||||||||||||
Select Balance Sheet: | |||||||||||||||||||
Total assets | $ | 5,587,300 | $ | 5,552,970 | $ | 5,515,185 | $ | 5,376,686 | $ | 5,342,099 | |||||||||
Loans receivable, net | 3,804,836 | 3,731,708 | 3,694,825 | 3,681,920 | 3,660,279 | ||||||||||||||
Investment securities | 961,092 | 952,312 | 966,102 | 960,680 | 985,009 | ||||||||||||||
Deposits | 4,617,948 | 4,582,676 | 4,562,257 | 4,347,708 | 4,393,715 | ||||||||||||||
Noninterest bearing demand deposits | 1,415,177 | 1,446,502 | 1,429,435 | 1,320,743 | 1,338,675 | ||||||||||||||
Stockholders' equity | 798,438 | 809,311 | 804,127 | 796,625 | 778,191 | ||||||||||||||
Financial Measures: | |||||||||||||||||||
Book value per share | $ | 22.25 | $ | 22.10 | $ | 21.96 | $ | 21.60 | $ | 21.09 | |||||||||
Tangible book value per share | 15.10 | 15.07 | 14.90 | 14.56 | 14.03 | ||||||||||||||
Stockholders' equity to total assets | 14.3 | % | 14.6 | % | 14.6 | % | 14.8 | % | 14.6 | % | |||||||||
Tangible common equity to tangible assets | 10.2 | 10.4 | 10.4 | 10.5 | 10.2 | ||||||||||||||
Loans to deposits ratio | 83.4 | 82.2 | 81.8 | 85.5 | 84.1 | ||||||||||||||
Credit Quality Metrics: | |||||||||||||||||||
ACL on loans to: | |||||||||||||||||||
Loans receivable | 1.23 | % | 0.96 | % | 0.98 | % | 0.98 | % | 0.98 | % | |||||||||
Nonperforming loans | 139.16 | 81.24 | 88.00 | 188.51 | 207.14 | ||||||||||||||
Nonperforming loans to loans receivable | 0.89 | 1.18 | 1.11 | 0.52 | 0.47 | ||||||||||||||
Nonperforming assets to total assets | 0.63 | 0.82 | 0.77 | 0.38 | 0.36 | ||||||||||||||
Net charge-offs (recoveries) on loans to average loans receivable, net | 0.04 | 0.20 | 0.03 | 0.13 | (0.02 | ) | |||||||||||||
Criticized Loans by Credit Quality Rating: | |||||||||||||||||||
Special mention | $ | 61,968 | $ | 48,859 | $ | 51,267 | $ | 64,634 | $ | 49,330 | |||||||||
Substandard | 89,510 | 93,413 | 90,204 | 89,274 | 78,329 | ||||||||||||||
Doubtful/Loss | — | 524 | 524 | 524 | 524 | ||||||||||||||
Other Metrics: | |||||||||||||||||||
Number of banking offices | 62 | 62 | 62 | 62 | 63 | ||||||||||||||
Average number of full-time equivalent employees | 877 | 889 | 877 | 880 | 878 | ||||||||||||||
Deposits per branch | $ | 74,483 | $ | 73,914 | $ | 73,585 | $ | 70,124 | $ | 69,742 | |||||||||
Average assets per full-time equivalent employee | $ | 6,342 | $ | 6,253 | $ | 6,176 | $ | 6,082 | $ | 6,054 |
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Cover Page Cover Page |
3 Months Ended | ||
---|---|---|---|
Apr. 30, 2020 |
Jan. 23, 2020 |
Mar. 31, 2020 |
|
Document Information [Line Items] | |||
Document Type | 8-K | ||
Document Period End Date | Apr. 30, 2020 | ||
Entity Registrant Name | HERITAGE FINANCIAL CORP | ||
Entity File Number | 000-29480 | ||
Entity Incorporation, State or Country Code | WA | ||
Entity Tax Identification Number | 91-1857900 | ||
Entity Address, Address Line One | 201 Fifth Avenue SW, | ||
Entity Address, City or Town | Olympia | ||
Entity Address, State or Province | WA | ||
Entity Address, Postal Zip Code | 98501 | ||
City Area Code | (360) | ||
Local Phone Number | 943-1500 | ||
Written Communications | false | ||
Soliciting Material | false | ||
Pre-commencement Tender Offer | false | ||
Pre-commencement Issuer Tender Offer | false | ||
Title of 12(b) Security | Common stock, no par value | ||
Trading Symbol | HFWA | ||
Security Exchange Name | NASDAQ | ||
Entity Emerging Growth Company | false | ||
Entity Central Index Key | 0001046025 | ||
Amendment Flag | false |
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