Press Release

Heritage Financial Announces Second Quarter 2019 Results And Declares Regular Cash Dividend

- Earnings per share were $0.43 for the quarter ended June 30, 2019 compared to $0.35 for the quarter ended June 30, 2018 and $0.45 for the linked-quarter ended March 31, 2019.

- Heritage declared a regular cash dividend of $0.19 per share, an increase of 5.6% from the $0.18 regular cash dividend per share declared during the second quarter 2019.

- Net interest margin increased 11 basis points to 4.33% for the quarter ended June 30, 2019 from 4.22% for the quarter ended June 30, 2018.

- Return on average assets was 1.20% and return on average tangible common equity was 12.27% for the quarter ended June 30, 2019.

- Jeffrey J. Deuel succeeded Brian L. Vance as Chief Executive Officer of Heritage Financial Corporation and joins the Board effective July 1, 2019.

- Brian L. Vance was named the Executive Board Chair and former Chair Brian Charneski named Lead Independent Director effective July 1, 2019.

Company Release - 7/25/2019 8:00 AM ET

OLYMPIA, Wash., July 25, 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 $16.0 million for the quarter ended June 30, 2019 compared to $11.9 million for the quarter ended June 30, 2018 and $16.6 million for the linked-quarter ended March 31, 2019. Basic and diluted earnings per share for the quarter ended June 30, 2019 were both $0.43 compared to $0.35 for the quarter ended June 30, 2018 and $0.45 for the linked-quarter ended March 31, 2019.

The Company had net income of $32.5 million for the six months ended June 30, 2019, or $0.88 per share, compared to $20.9 million, or $0.62 per share, for the six months ended June 30, 2018. There were no acquisition-related expenses for the six months ended June 30, 2019 compared to acquisition-related expenses of $0.17 per share for the six months ended June 30, 2018.

Jeffrey J. Deuel, President and Chief Executive Officer of Heritage commented, "We are pleased with our progress in the first half of the year as we see the benefits of our last two mergers and recent hiring initiatives in Seattle and Portland. We saw mid-single digit annualized loan growth despite elevated pay-offs. In addition, we are pleased to see our new teams in Seattle and Portland emerging from the integration stage as high performing production teams with strong pipeline growth in all of our markets. We have also made good progress improving efficiencies across the organization while also managing staffing levels."

"Further, we are proud that Heritage Bank provided project funding to support the Tacoma Housing Authority's 1800 Hillside Terrace construction project which added 64 affordable apartments to the Hilltop area of Tacoma, and that we have been selected to provide project funding for Plymouth Housing Group's 2nd & Mercer construction project adding 93 units of affordable family housing to Seattle's Lower Queen Anne neighborhood. We are pleased to be able to partner with these great organizations to make a difference in our local communities."

Balance Sheet

The Company's total assets increased $34.6 million, or 0.6%, to $5.38 billion at June 30, 2019 from $5.34 billion at March 31, 2019.

Total investment securities available for sale decreased $24.3 million, or 2.5%, to $960.7 million at June 30, 2019 from $985.0 million at March 31, 2019. Changes in investment securities available for sale during the three and six months ended June 30, 2019 were as follows:


Three Months
Ended


Six Months
Ended


June 30, 2019


(In thousands)

Balance, beginning of period

$

985,009



$

976,095


   Purchases

46,718



104,324


   Maturities, calls, principal payments, and sales

(82,729)



(141,594)


   Gain on sale of investment securities, net

33



48


   Change in fair value of investment securities available for sale

11,649



21,807


Balance, end of period

$

960,680



$

960,680


Total loans receivable, net increased $21.6 million, or 0.6%, to $3.68 billion at June 30, 2019 from $3.66 billion at March 31, 2019 due primarily to an increase in total real estate construction and land development loans of $17.6 million, one-to-four family residential loans of $10.9 million, and commercial and industrial loans of $6.6 million, offset partially by a decrease in owner-occupied commercial real estate loans of $12.8 million.

Total deposits decreased $46.0 million, or 1.0%, to $4.35 billion at June 30, 2019 from $4.39 billion at March 31, 2019 due to a decrease in total non-maturity deposits of $28.6 million, or 0.7%, and a decrease of $17.4 million, or 3.3%, in certificate of deposit accounts due primarily to maturities of brokered certificates of deposit of $55.7 million.  Certificate of deposit accounts, excluding brokered deposits, increased $38.3 million, or 8.2%, during the second quarter in 2019. Non-maturity deposits as a percentage of total deposits increased to 88.4% as of June 30, 2019 from 88.1% as of March 31, 2019 due to the proportionally higher decrease in certificate of deposit accounts.

Federal Home Loan Bank advances increased $65.7 million, or 262.80%, to $90.7 million at June 30, 2019 from $25.0 million at March 31, 2019 to fund loan growth and the decrease in total deposits discussed above.

Total stockholders' equity increased $18.4 million, or 2.4%, to $796.6 million at June 30, 2019 from $778.2 million at March 31, 2019 due primarily to net income of $16.0 million and an increase in accumulated other comprehensive gain of $9.2 million primarily due to higher fair values of our fixed interest rate investment securities available for sale. Changes in stockholders' equity during the three and six months ended June 30, 2019 were as follows:


Three Months
Ended


Six Months
Ended


June 30, 2019


(In thousands)

Balance, beginning of period

$

778,191



$

760,723


   Net income

15,984



32,536


   Accumulated other comprehensive gain

9,193



17,209


   Dividends paid

(6,679)



(13,341)


   ASU 2016-02 implementation



(399)


   Other

(64)



(103)


Balance, end of period

$

796,625



$

796,625


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 11.8%, 10.8%, 12.2% and 13.0%, respectively, at June 30, 2019, compared to 11.8%, 10.7%, 12.2% and 13.0%, respectively, at March 31, 2019 and 11.2%, 10.4%, 11.7%, and 12.6%, respectively, at June 30, 2018.

Credit Quality

The allowance for loan losses increased $211,000, or 0.6%, to $36.4 million at June 30, 2019 from $36.2 million at March 31, 2019. The increase was due to provision for loan losses of $1.4 million recorded during the quarter ended June 30, 2019 partially offset by net charge-offs of $1.2 million recognized during the same period.

Nonperforming loans to loans receivable, net, increased to 0.52% at June 30, 2019 from 0.47% at March 31, 2019 due primarily to an increase in nonaccrual loans of $1.8 million, or 10.5%, to $19.3 million at June 30, 2019 from $17.5 million at March 31, 2019. The increase was primarily related to the addition of three commercial lending relationships totaling $3.5 million which showed increased signs of cash flow deterioration, including one agricultural business relationship of $657,000. Management has allocated a specific reserve at June 30, 2019 of $159,000 for these three lending relationships.

Changes in nonaccrual loans during the periods indicated were as follows:


Three Months Ended


June 30, 2019


March 31,
2019


June 30, 2018


(In thousands)

Nonaccrual loans






Balance, beginning of period

$

17,461



$

13,703



$

15,728


   Addition of previously classified pass graded loans

3,583





130


Addition of previously classified potential problem loans

164



6,189



1,367


   Net principal payments

(1,554)



(2,392)



(264)


   Charge-offs

(361)



(39)



(438)


Balance, end of period

$

19,293



$

17,461



$

16,523


The allowance for loan losses to nonperforming loans was 188.48% at June 30, 2019 compared to 207.04% at the linked-quarter ended March 31, 2019. Nonperforming assets increased to 0.38% of total assets at June 30, 2019 compared to 0.36% of total assets at March 31, 2019. The change from the prior period in both ratios is due primarily to the increase in nonaccrual loans discussed above.  The increase to nonperforming assets to total assets was partially offset by decrease in other real estate owned of $680,000 to $1.2 million at June 30, 2019 from $1.9 million at March 31, 2019. This decrease was due primarily to the sale of a property which occurred during the quarter ended June 30, 2019.

Potential problem loans increased $20.0 million, or 21.2%, to $114.1 million at June 30, 2019 compared to $94.1 million at March 31, 2019. The increase was primarily attributed to seven commercial lending relationships totaling $27.3 million at June 30, 2019 that experienced cash flow deterioration as a result of customer-specific events. Of these seven relationships, six relationships totaling $23.1 million were downgraded to Other Assets Especially Mentioned while one relationship totaling $4.2 million was downgraded to Substandard. The risk rating downgrade of these relationships will enhance the Company's monitoring of these credits.

Changes in potential problem loans during the periods indicated were as follows:


Three Months Ended


June 30, 2019


March 31,
2019


June 30, 2018


(In thousands)

Potential problem loans


Balance, beginning of period

$

94,116



$

101,349



$

93,253


Addition of previously classified pass graded loans

30,911



9,766



19,829


Upgrades to pass graded loan status

(2,858)





(5,407)


Net principal payments

(3,091)



(10,535)



(4,233)


Transfers of loans to nonaccrual and TDR status

(4,743)



(6,277)



(1,839)


Charge-offs

(240)



(187)



(112)


Balance, end of period

$

114,095



$

94,116



$

101,491


The allowance for loan losses to loans receivable, net, was 0.98% at both June 30, 2019 and March 31, 2019. 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 $10.0 million at June 30, 2019 compared to $11.2 million at March 31, 2019. 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 June 30, 2019.

Net charge-offs were $1.2 million for the quarter ended June 30, 2019 compared to $1.0 million for the same quarter in 2018 and net recoveries of $190,000 for the linked-quarter ended March 31, 2019. The net charge-off recorded during the quarter ended June 30, 2019 was due primarily to charge-offs on three commercial lending relationships totaling $632,000, including one agricultural business relationship charge-off of $278,000, and net charge-offs totaling $436,000 on a large volume of consumer loans.

Operating Results

Net interest income increased $6.8 million, or 15.5%, to $50.5 million for the quarter ended June 30, 2019 compared to $43.7 million for the same period in 2018. Net interest income increased $15.7 million, or 18.6%, to $100.3 million for the six months ended June 30, 2019 compared to $84.6 million for the six months ended June 30, 2018. The increases compared to the prior periods in 2018 are due primarily to an increase in the yield and average balance of total loans receivable, net as a result of our merger with Premier Commercial Bancorp on July 2, 2018 ("Premier Merger"). Net interest income increased $748,000, or 1.5%, from $49.8 million for the linked-quarter ended March 31, 2019 due primarily to an increase in the yield and average balance of total loans receivable, net, offset partially by an increase in the average balance and in the cost of total interest bearing deposits primarily as a result of rising interest rates.

Net interest margin increased 11 basis points to 4.33% for the quarter ended June 30, 2019 from 4.22% for the quarter ended June 30, 2018 and increased 17 basis points to 4.34% for the six months ended June 30, 2019 from 4.17% for the same period in 2018 due to the same reasons underlying the increase in net interest income, as described above. Net interest margin decreased one basis point from 4.34% for the linked-quarter ended March 31, 2019 primarily due to an increase in the cost of interest bearing liabilities during the quarter ended June 30, 2019.

The loan yield, excluding incremental accretion on purchased loans, increased 31 basis points to 5.12% for the quarter ended June 30, 2019 compared to 4.81% for the quarter ended June 30, 2018 and increased 35 basis points to 5.10% for the six months ended June 30, 2019 compared to 4.75% for same period in 2018. Loan yield, excluding incremental accretion on purchased loans, increased four basis points from 5.08% for the linked-quarter ended March 31, 2019.  The increases in loan yield, excluding incremental accretion of purchased loans, from all prior periods was due to a combination of higher contractual loan rates as well as an increase in loan yields from the loans acquired in the Premier Merger as compared to legacy Heritage loans during 2018.

The impact on loan yield from incremental accretion on purchased loans decreased eight basis points to 0.16% for the quarter ended June 30, 2019 compared to 0.24% for the quarter end June 30, 2018 and decreased eight basis points to 0.15% for the six months ended June 30, 2019 from 0.23% for the same period in 2018. The decreases from the prior periods in 2018 were primarily a result of the decrease in the balances of loans acquired in the Premier Merger and our merger with Puget Sound Bancorp, Inc. 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 impact on loan yield from incremental accretion on purchased loans for the quarter ended June 30, 2019 increased one basis point from 0.15% for the linked-quarter ended March 31, 2019 due to prepayments of loans with larger discount balances during the quarter ended June 30, 2019.

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


Six Months Ended


June 30, 2019


March 31,
2019


June 30, 2018


June 30, 2019


June 30, 2018


(Dollars in thousands)

Yield non-GAAP reconciliation: (2)

Net interest margin (GAAP)

4.33

%


4.34

%


4.22

%


4.34

%


4.17

%

Exclude impact on net interest margin from incremental accretion on purchased loans(1)

0.12

%


0.12

%


0.19

%


0.12

%


0.18

%

Net interest margin, excluding incremental accretion on purchased loans (non-GAAP)(1)

4.21

%


4.22

%


4.03

%


4.22

%


3.99

%











Loan yield (GAAP)

5.28

%


5.23

%


5.05

%


5.25

%


4.98

%

Exclude impact on loan yield from incremental accretion on purchased loans(1)

0.16

%


0.15

%


0.24

%


0.15

%


0.23

%

Loan yield, excluding incremental accretion on purchased loans (non-GAAP)(1)

5.12

%


5.08

%


4.81

%


5.10

%


4.75

%











Incremental accretion on purchased loans(1)

$

1,416



$

1,373



$

1,992



$

2,789



$

3,624






















(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 changes in the yields on investment securities. The yields on the aggregate investment portfolio increased 27 basis points to 2.80% for the quarter ended June 30, 2019 compared to 2.53% for the quarter ended June 30, 2018 and increased 33 basis points to 2.81% for the six months ended June 30, 2019 compared to 2.48% for the six months ended June 30, 2018. The increases compared to the same periods in 2018 primarily reflect the effect of the rise in interest rates on our adjustable rate investment securities as well as higher yielding interest rates on new purchases of investments. The yield on the aggregate investment portfolio decreased three basis points from 2.83% for the linked-quarter ended March 31, 2019 due to decrease in market interest rates impacting adjustable rate securities and calls during the second quarter 2019 of higher yielding bonds.

The total cost of deposits increased four basis points from 0.33% during the linked-quarter ended March 31, 2019 and  increased 14 basis points to 0.37% during the quarter ended June 30, 2019 compared to 0.23% during the same quarter in 2018. The total cost of deposits increased 13 basis points to 0.35% during the six months ended June 30, 2019 compared to 0.22% during the same period in 2018. The cost of deposits increased from all prior periods due to rising market rates and competitive pressures in addition to the purchase of $60.0 million in brokered certificates of deposit during the first quarter 2019 to supplement seasonal deposit runoff. Of the brokered certificates purchased in the first quarter, $40.0 million had matured as of June 30, 2019.

Donald J. Hinson, Executive Vice President and Chief Financial Officer, commented, "Our net interest margin decreased one basis point to 4.33% as a result of an eight basis point increase in the total cost of funds and a three basis decrease in yield on investments offsetting a five basis point increase in the loan portfolio. The cost of funds increased due to a higher reliance on overnight borrowings in the second quarter as well as an increase in the cost of deposits. The current shape of the yield curve and competitive pricing pressures has been and will continue to impact our ability to maintain our net interest margin at current levels."

The provision for loan losses decreased $383,000, or 21.9%, to $1.4 million for the quarter ended June 30, 2019 compared to $1.8 million for the quarter ended June 30, 2018 and decreased $615,000, or 21.2%, to $2.3 million for the six months ended June 30, 2019 compared to $2.9 million for the six months ended June 30, 2018. The decrease in the provision for loan losses was primarily a result of lower growth in total loans receivable, net during 2019. The provision for loan losses increased $447,000, or 48.6%, from the linked-quarter ended March 31, 2019 due primarily to an increase in net-charge-offs to $1.2 million during the quarter ended June 30, 2019 compared to net recoveries of $190,000 during the linked-quarter ended March 31, 2019. 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 June 30, 2019 based on the use of a consistent methodology.

Noninterest income remained constant at $7.6 million for the quarters ended June 30, 2019 and 2018 and decreased $130,000, or 0.9%, to $15.0 million for the six months ended June 30, 2019 compared to $15.1 million for the same period in 2018. The decrease from the six months ended 2018 was due primarily due to a decrease in gain on sale of loans due to lower mortgage origination volume and the Company's decision to continue to portfolio originated Small Business Administration ("SBA") loans amidst a lower gain environment, offset partially by an increase in other income, including recoveries of zero-balance purchased loan notes which were charged-off prior to the consummation of the related acquisition or merger. These recoveries were primarily from our merger with Washington Banking Company which was effective May 1, 2014. Noninterest income increased $135,000, or 1.8%, from the linked-quarter ended March 31, 2019 primarily due to an increase in interchange revenue included in service charges and other fees and an increase in contract income due to higher volume of interest rate swap transactions, offset partially by a decrease in other income primarily due to a decrease in the recoveries on zero balance purchased loan notes, primarily from our merger with Washington Banking Company, and a decrease in merchant fees recognized.

Noninterest expense increased $1.8 million, or 5.2%, to $37.5 million for the quarter ended June 30, 2019 compared to $35.7 million for the quarter ended June 30, 2018 and increased $1.6 million, or 2.2%, to $74.1 million for the six months ended June 30, 2019 compared to $72.5 million for the same period in 2018. Acquisition-related expenses incurred were approximately $880,000 during the quarter ended June 30, 2018, of which $425,000 and $337,000 were due to data processing expense and professional services expense, respectively. There were no acquisition-related costs incurred during the quarter ended June 30, 2019. Without the effects of the acquisition-related expenses, the Company incurred an increase in compensation and employee benefits due to additional employees acquired in the Premier Merger and the expansion of the commercial banking team in greater Portland, Oregon, and an increase in occupancy and equipment expense primarily due to additional expense from properties acquired in the Premier Merger, offset partially by the buy-out of a third party contract in the amount $1.7 million during the quarter ended June 30, 2018. 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.

Noninterest expense increased $1.0 million, or 2.8%, from $36.5 million for the linked-quarter ended March 31, 2019 due primarily to increases in professional services and federal deposit premiums as well as a $279,000 loss on disposition of other real estate owned property during the quarter that was acquired in the Premier Merger.

The ratio of noninterest expense to average total assets (annualized) decreased to 2.81% for the quarter ended June 30, 2019 compared to 3.03% for the same period in 2018 primarily due to acquisition-related expenses recognized in 2018. The ratio increased from 2.79% for the linked-quarter ended March 31, 2019 primarily due to higher noninterest expense during the quarter ended June 30, 2019.

Income tax expense was $3.2 million for the quarter ended June 30, 2019 compared to $2.0 million for the quarter ended June 30, 2018 and $3.2 million for the linked-quarter ended March 31, 2019. The effective tax rate was 16.7% for the quarter ended June 30, 2019 compared to 14.5% for the comparable quarter in 2018 and 16.3% for the linked-quarter ended March 31, 2019. Income tax expense was $6.4 million for the six months ended June 30, 2019 compared to $3.4 million for the six months ended June 30, 2018.The effective tax rate was 16.5% for the six months ended June 30, 2019 compared to 14.0% for the six months ended June 30, 2018. The increases in the effective tax rate for both periods in 2019 compared to the same periods in 2018 were due primarily to a decrease in tax exempt securities, the impact of stock-based compensation activity, an increased Oregon presence, and higher pre-tax income. The increase in the effective tax rate from the linked-quarter ended March 31, 2019 was due primarily to higher discrete tax items relating to stock-based compensation which was recognized during the quarter ended March 31, 2019, reducing the effective tax rate for that quarter.

Dividends

On July 24, 2019, the Company's Board of Directors declared a quarterly cash dividend of $0.19 per share. The dividend is payable on August 22, 2019 to shareholders of record as of the close of business on August 8, 2019.

Earnings Conference Call

The Company will hold a telephone conference call to discuss this earnings release on July 25, 2019 at 11:00 a.m. Pacific time. To access the call, please dial (800) 230-1085 a few minutes prior to 11:00 a.m. Pacific time. The call will be available for replay through August 8, 2019, by dialing (800) 475-6701 -- access code 469443.

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:


June 30,
2019


March 31,
2019


December 31,
2018


September 30,
2018


June 30,
2018


(Dollar amounts in thousands, except per share amounts)

Tangible common shareholders' equity and tangible assets:

Stockholders' equity (GAAP)

$

796,625



$

778,191



$

760,723



$

746,133



$

639,523


Exclude goodwill and other intangible assets

259,502



260,528



261,553



262,565



203,316


Tangible common stockholders' equity (non-GAAP)

$

537,123



$

517,663



$

499,170



$

483,568



$

436,207












Total assets (GAAP)

$

5,376,686



$

5,342,099



$

5,316,927



$

5,276,214



$

4,789,488


Exclude goodwill and other intangible assets

259,502



260,528



261,553



262,565



203,316


Tangible assets (non-GAAP)

$

5,117,184



$

5,081,571



$

5,055,374



$

5,013,649



$

4,586,172












Common equity to assets (GAAP)

14.8

%


14.6

%


14.3

%


14.1

%


13.4

%

Tangible common equity to tangible assets (non-GAAP)

10.5

%


10.2

%


9.9

%


9.6

%


9.5

%











Shares outstanding

36,882,771



36,899,138



36,874,055



36,873,123



34,021,094


Book value per share (GAAP)

$

21.60



$

21.09



$

20.63



$

20.24



$

18.80


Tangible book value per share (non-GAAP)

$

14.56



$

14.03



$

13.54



$

13.11



$

12.82






















 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018


(Dollar amounts in thousands)

Adjusted return on average tangible common stockholders' equity:

Net income (GAAP)

15,984



$

16,552



$

11,857



$

32,536



$

20,944


Exclude acquisition-related expenses



132



880



132



5,688


Exclude consultant agreement buyout





1,693





1,693


Exclude amortization of intangible assets

1,026



1,025



796



2,051



1,591


Exclude tax effect of adjustments

(215)



(243)



(707)



(458)



(1,884)


Adjusted tangible net income (non-GAAP)

$

16,795



$

17,466



$

14,519



$

34,261



$

28,032












Average stockholders' equity (GAAP)

$

782,719



$

766,451



$

636,735



$

774,630



$

625,914


Exclude average intangible assets

(260,167)



(261,194)



(203,838)



(260,678)



(197,621)


Average tangible common stockholders' equity (non-GAAP)

$

522,552



$

505,257



$

432,897



$

513,952



$

428,293












Return on average common equity, annualized (GAAP)

8.19

%


8.76

%


7.47

%


8.47

%


6.75

%

Return on average tangible common equity, annualized (non-GAAP)

12.27

%


13.29

%


10.99

%


12.77

%


9.86

%

Adjusted return on average tangible common equity, annualized (non-GAAP)

12.89

%


14.02

%


13.45

%


13.44

%


13.20

%
















 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018


(Dollar amounts in thousands, except per share amounts)

Earnings from core operations:

Net income (GAAP)

$

15,984



$

16,552



$

11,857



$

32,536



$

20,944


Exclude acquisition-related expenses



132



880



132



5,688


Exclude consultant agreement buyout





1,693





1,693


Exclude tax effect of adjustments



(28)



(540)



(28)



(1,550)


Adjusted net income (non-GAAP)

$

15,984



$

16,656



$

13,890



$

32,640



$

26,775


Exclude dividends and undistributed earnings allocated to participating securities

(48)



(52)



(57)



(100)



(110)


Adjusted net income allocated to common shareholders (non-GAAP)

$

15,936



$

16,604



$

13,833



$

32,540



$

26,665












Diluted weighted average shares

37,014,872



37,010,640



34,107,292



37,011,735



33,729,936


Diluted earnings per share (GAAP)

$

0.43



$

0.45



$

0.35



$

0.88



$

0.62


Adjusted diluted earnings per share (non-GAAP)

$

0.43



$

0.45



$

0.41



$

0.88



$

0.79












Average assets

$

5,350,805



$

5,317,325



$

4,726,719



$

5,334,157



$

4,640,630












Return on average assets, annualized (GAAP)

1.20

%


1.26

%


1.01

%


1.23

%


0.91

%

Adjusted return on average assets, annualized (non-GAAP)

1.20

%


1.27

%


1.18

%


1.23

%


1.16

%
















 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018


(Dollar amounts in thousands)

Adjusted noninterest expense:

Noninterest expense (GAAP)

$

37,547



$

36,525



$

35,706



$

74,072



$

72,453


Exclude acquisition-related expenses



(132)



(880)



(132)



(5,688)


Exclude amortization of intangible assets

(1,026)



(1,025)



(796)



(2,051)



(1,591)


Exclude consultant agreement buyout





(1,693)





(1,693)


Adjusted noninterest expense (non-GAAP)

$

36,521



$

35,368



$

32,337



$

71,889



$

63,481












Average Assets

$

5,350,805



$

5,317,325



$

4,726,719



$

5,334,157



$

4,640,630












Noninterest expense to average assets, annualized (GAAP)

2.81

%


2.79

%


3.03

%


2.80

%


3.15

%

Adjusted noninterest expense to average assets, annualized (non-GAAP)

2.74

%


2.70

%


2.74

%


2.72

%


2.76

%
















 


Three Months Ended


Six Months Ended


June 30, 2019


March 31,
2019


June 30, 2018


June 30, 2019


June 30, 2018


(Dollars in thousands)

Net interest income and interest and fees on loans:

Net interest income (GAAP)

$

50,536



$

49,788



$

43,741



$

100,324



$

84,578


Exclude incremental accretion on purchased loans

1,416



1,373



1,992



2,789



3,624


Adjusted net interest income (non-GAAP)

$

49,120



$

48,415



$

41,749



$

97,535



$

80,954












Average total interest earning assets, net

$

4,681,588



$

4,649,259



$

4,156,310



$

4,665,513



$

4,087,894


Net interest margin, annualized (GAAP)

4.33

%


4.34

%


4.22

%


4.34

%


4.17

%

Net interest margin, excluding incremental accretion on purchased loans, annualized (non-GAAP)

4.21

%


4.22

%


4.03

%


4.22

%


3.99

%











Interest and fees on loans (GAAP)

$

48,107



$

46,699



$

41,141



$

94,806



$

79,300


Exclude incremental accretion on purchased loans

1,416



1,373



1,992



2,789



3,624


Adjusted interest and fees on loans (non-GAAP)

$

46,691



$

45,326



$

39,149



$

92,017



$

75,676












Average total loans receivable, net

$

3,654,475



$

3,622,494



$

3,266,092



$

3,638,573



$

3,208,799


Loan yield, annualized (GAAP)

5.28

%


5.23

%


5.05

%


5.25

%


4.98

%

Loan yield, excluding incremental accretion on purchased loans, annualized (non-GAAP)

5.12

%


5.08

%


4.81

%


5.10

%


4.75

%

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 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)

(Dollar amounts in thousands, except shares)



June 30,
 2019


March 31,
 2019


December 31,
 2018

Assets






Cash on hand and in banks

$

95,878



$

71,252



$

92,704


Interest earning deposits

43,412



39,918



69,206


Cash and cash equivalents

139,290



111,170



161,910


Investment securities available for sale

960,680



985,009



976,095


Loans held for sale

3,692



2,956



1,555


Loans receivable, net

3,718,283



3,696,431



3,654,160


Allowance for loan losses

(36,363)



(36,152)



(35,042)


Total loans receivable, net

3,681,920



3,660,279



3,619,118


Other real estate owned

1,224



1,904



1,983


Premises and equipment, net

84,296



80,130



81,100


Federal Home Loan Bank stock, at cost

10,005



7,377



6,076


Bank owned life insurance

94,417



94,099



93,612


Accrued interest receivable

15,401



15,621



15,403


Prepaid expenses and other assets

126,259



123,026



98,522


Other intangible assets, net

18,563



19,589



20,614


Goodwill

240,939



240,939



240,939


Total assets

$

5,376,686



$

5,342,099



$

5,316,927








Liabilities and Stockholders' Equity






Deposits

$

4,347,708



$

4,393,715



$

4,432,402


Federal Home Loan Bank advances

90,700



25,000




Junior subordinated debentures

20,448



20,375



20,302


Securities sold under agreement to repurchase

23,141



24,923



31,487


Accrued expenses and other liabilities

98,064



99,895



72,013


Total liabilities

4,580,061



4,563,908



4,556,204








Common stock

591,703



591,767



591,806


Retained earnings

195,168



185,863



176,372


Accumulated other comprehensive gain (loss), net

9,754



561



(7,455)


Total stockholders' equity

796,625



778,191



760,723


Total liabilities and stockholders' equity

$

5,376,686



$

5,342,099



$

5,316,927








Shares outstanding

36,882,771



36,899,138



36,874,055



 

HERITAGE FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollar amounts in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018

Interest income:










Interest and fees on loans

$

48,107



$

46,699



$

41,141



$

94,806



$

79,300


Taxable interest on investment securities

5,933



5,823



4,068



11,756



7,597


Nontaxable interest on investment securities

893



950



1,220



1,843



2,561


Interest on other interest earning assets

283



335



240



618



458


Total interest income

55,216



53,807



46,669



109,023



89,916


Interest expense:










Deposits

4,017



3,603



2,195



7,620



4,155


Junior subordinated debentures

340



354



315



694



598


Other borrowings

323



62



418



385



585


Total interest expense

4,680



4,019



2,928



8,699



5,338


Net interest income

50,536



49,788



43,741



100,324



84,578


Provision for loan losses

1,367



920



1,750



2,287



2,902


Net interest income after provision for loan losses

49,169



48,868



41,991



98,037



81,676


Noninterest income:










Service charges and other fees

4,845



4,485



4,695



9,330



9,238


Gain on sale of investment securities, net

33



15



18



48



53


Gain on sale of loans, net

368



252



706



620



1,580


Interest rate swap fees

161





309



161



360


Other income

2,157



2,677



1,847



4,834



3,892


Total noninterest income

7,564



7,429



7,575



14,993



15,123


Noninterest expense:










Compensation and employee benefits

21,982



21,914



19,321



43,896



40,688


Occupancy and equipment

5,451



5,458



4,810



10,909



9,437


Data processing

2,109



2,173



2,507



4,282



5,112


Marketing

1,106



1,098



823



2,204



1,631


Professional services

1,305



1,173



3,529



2,478



6,366


State/municipal business and use taxes

809



798



716



1,607



1,404


Federal deposit insurance premium

426



285



375



711



730


Other real estate owned, net

289



86





375




Amortization of intangible assets

1,026



1,025



796



2,051



1,591


Other expense

3,044



2,515



2,829



5,559



5,494


Total noninterest expense

37,547



36,525



35,706



74,072



72,453


Income before income taxes

19,186



19,772



13,860



38,958



24,346


Income tax expense

3,202



3,220



2,003



6,422



3,402


Net income

$

15,984



$

16,552



$

11,857



$

32,536



$

20,944












Basic earnings per share

$

0.43



$

0.45



$

0.35



$

0.88



$

0.62


Diluted earnings per share

$

0.43



$

0.45



$

0.35



$

0.88



$

0.62


Dividends declared per share

$

0.18



$

0.18



$

0.15



$

0.36



$

0.30












Average number of basic shares outstanding

36,870,159



36,825,532



33,934,661



36,847,969



33,572,117


Average number of diluted shares outstanding

37,014,872



37,010,640



34,107,292



37,011,735



33,729,936



 

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS (Unaudited)

(Dollar amounts in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018

Performance Ratios:










Efficiency ratio

64.62

%


63.84

%


69.58

%


64.23

%


72.67

%

Noninterest expense to average assets, annualized

2.81

%


2.79

%


3.03

%


2.80

%


3.15

%

Return on average assets, annualized

1.20

%


1.26

%


1.01

%


1.23

%


0.91

%

Return on average equity, annualized

8.19

%


8.76

%


7.47

%


8.47

%


6.75

%

Return on average tangible common equity, annualized

12.27

%


13.29

%


10.99

%


12.77

%


9.86

%

Net charge-offs (recoveries) on loans to average loans, annualized

0.13

%


(0.02)

%


0.13

%


0.05

%


0.06

%
















 


As of Period End


June 30,
 2019


March 31,
 2019


December 31,
 2018

Financial Measures:






Book value per share

$

21.60



$

21.09



$

20.63


Tangible book value per share

$

14.56



$

14.03



$

13.54


Stockholders' equity to total assets

14.8

%


14.6

%


14.3

%

Tangible common equity to tangible assets

10.5

%


10.2

%


9.9

%

Common equity Tier 1 capital to risk-weighted assets

11.8

%


11.8

%


11.7

%

Tier 1 leverage capital to average quarterly assets

10.8

%


10.7

%


10.5

%

Tier 1 capital to risk-weighted assets

12.2

%


12.2

%


12.1

%

Total capital to risk-weighted assets

13.0

%


13.0

%


12.9

%

Loans to deposits ratio (1)

85.5

%


84.1

%


82.4

%

Deposits per branch

$

70,124



$

69,742



$

69,256



      (1) Loans receivable, net of deferred costs divided by deposits

 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018

Allowance for Loan Losses:










Balance, beginning of period

$

36,152



$

35,042



$

33,261



$

35,042



$

32,086


Provision for loan losses

1,367



920



1,750



2,287



2,902


Net (charge-offs) recoveries:










Commercial business

(712)



56



(474)



(656)



(54)


One-to-four family residential

(15)



(15)



(15)



(30)



(15)


Real estate construction and land development

7



618



2



625



2


Consumer

(436)



(469)



(552)



(905)



(949)


Total net (charge-offs) recoveries

(1,156)



190



(1,039)



(966)



(1,016)


Balance, end of period

$

36,363



$

36,152



$

33,972



$

36,363



$

33,972


 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018

Other Real Estate Owned:










Balance, beginning of period

$

1,904



$

1,983



$



$

1,983



$


Additions from transfer of loan





434





434


Proceeds from dispositions

(350)



(79)





(429)




Loss on sales, net

(279)







(279)




Valuation adjustments

(51)







(51)




Balance, end of period

$

1,224



$

1,904



$

434



$

1,224



$

434


 


Three Months Ended


Six Months Ended


June 30,
 2019


March 31,
 2019


June 30,
 2018


June 30,
 2019


June 30,
 2018

Gain on Sale of Loans, net:










Mortgage loans

$

368



$

252



$

572



$

620



$

1,224


SBA loans





134





356


Total gain on sale of loans, net

$

368



$

252



$

706



$

620



$

1,580


 


As of Period End


June 30,
 2019


March 31,
 2019


December 31,
 2018

Nonperforming Assets:






Nonaccrual loans by type:






Commercial business

$

18,287



$

16,304



$

12,564


One-to-four family residential

19



68



71


Real estate construction and land development

793



923



899


Consumer

194



166



169


Total nonaccrual loans(1)

19,293



17,461



13,703


Other real estate owned

1,224



1,904



1,983


Nonperforming assets

$

20,517



$

19,365



$

15,686








Restructured performing loans

$

25,925



$

19,986



$

22,736


Accruing loans past due 90 days or more






Potential problem loans(2)

114,095



94,116



101,349


Allowance for loan losses to:






Loans receivable, net

0.98

%


0.98

%


0.96

%

Nonaccrual loans

188.48

%


207.04

%


255.73

%

Nonperforming loans to loans receivable, net

0.52

%


0.47

%


0.37

%

Nonperforming assets to total assets

0.38

%


0.36

%


0.30

%



(1) 

At June 30, 2019 and December 31, 2018, $8.1 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.

 


As of Period End


June 30, 2019


March 31, 2019


December 31, 2018


Balance


% of
Total


Balance


% of
Total


Balance


% of
Total

Loan Composition












Commercial business:












Commercial and industrial

$

845,046



22.7

%


$

838,403



22.7

%


$

853,606



23.4

%

Owner-occupied commercial real estate

772,499



20.8



785,316



21.2



779,814



21.3


Non-owner occupied commercial real estate

1,333,047



35.8



1,335,596



36.1



1,304,463



35.7


Total commercial business

2,950,592



79.3



2,959,315



80.0



2,937,883



80.4


One-to-four family residential

117,425



3.2



106,502



2.9



101,763



2.8


Real estate construction and land development:












One-to-four family residential

111,319



3.0



110,699



3.0



102,730



2.8


Five or more family residential and commercial properties

143,341



3.8



126,379



3.4



112,730



3.1


Total real estate construction and land development

254,660



6.8



237,078



6.4



215,460



5.9


Consumer

392,926



10.6



390,303



10.6



395,545



10.8


Gross loans receivable

3,715,603



99.9



3,693,198



99.9



3,650,651



99.9


Deferred loan costs, net

2,680



0.1



3,233



0.1



3,509



0.1


Loans receivable, net

$

3,718,283



100.0

%


$

3,696,431



100.0

%


$

3,654,160



100.0

%

 


As of Period End


June 30, 2019


March 31, 2019


December 31, 2018


Balance


% of
Total


Balance


% of
Total


Balance


% of
Total

Deposit Composition












Noninterest bearing demand deposits

$

1,320,743



30.3

%


$

1,338,675



30.5

%


$

1,362,268



30.7

%

Interest bearing demand deposits

1,263,843



29.1



1,293,828



29.4



1,317,513



29.7


Money market accounts

757,156



17.4



740,518



16.9



765,316



17.3


Savings accounts

502,198



11.6



499,568



11.3



520,413



11.8


Total non-maturity deposits

3,843,940



88.4



3,872,589



88.1



3,965,510



89.5


Certificates of deposit

503,768



11.6



521,126



11.9



466,892



10.5


Total deposits

$

4,347,708



100.0

%


$

4,393,715



100.0

%


$

4,432,402



100.0

%

 


Three Months Ended


June 30, 2019


March 31, 2019


June 30, 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)

Interest Earning Assets:


















Total loans receivable, net (2) (3)

$

3,654,475



$

48,107



5.28

%


$

3,622,494



$

46,699



5.23

%


$

3,266,092



$

41,141



5.05

%

Taxable securities

840,254



5,933



2.83



820,981



5,823



2.88



638,092



4,068



2.56


Nontaxable securities (3)

139,278



893



2.57



149,825



950



2.57



201,104



1,220



2.43


Other interest earning assets

47,581



283



2.39



55,959



335



2.43



51,022



240



1.89


Total interest earning assets

4,681,588



55,216



4.73

%


4,649,259



53,807



4.69

%


4,156,310



46,669



4.50

%

Noninterest earning assets

669,217







668,066







570,409






Total assets

$

5,350,805







$

5,317,325







$

4,726,719






Interest Bearing Liabilities:


















Certificates of deposit

$

514,220



$

1,694



1.32

%


$

502,153



$

1,440



1.16

%


$

418,129



$

797



0.76

%

Savings accounts

500,135



707



0.57



507,670



674



0.54



512,832



487



0.38


Interest bearing demand and money market accounts

2,016,901



1,616



0.32



2,051,046



1,489



0.29



1,796,095



911



0.20


Total interest bearing deposits

3,031,256



4,017



0.53



3,060,869



3,603



0.48



2,727,056



2,195



0.32


Junior subordinated debentures

20,400



340



6.68



20,328



354



7.06



20,108



315



6.28


Securities sold under agreement to repurchase

29,265



45



0.62



33,055



47



0.58



27,935



16



0.23


Federal Home Loan Bank advances and other borrowings

42,101



278



2.65



1,849



15



3.29



79,120



402



2.04


Total interest bearing liabilities

3,123,022



4,680



0.60

%


3,116,101



4,019



0.52

%


2,854,219



2,928



0.41

%

Noninterest bearing deposits

1,345,917







1,332,223







1,175,331






Other noninterest bearing liabilities

99,147







102,550







60,434






Stockholders' equity

782,719







766,451







636,735






Total liabilities and stockholders' equity

$

5,350,805







$

5,317,325







$

4,726,719






Net interest income



$

50,536







$

49,788







$

43,741




Net interest spread





4.13

%






4.17

%






4.09

%

Net interest margin





4.33

%






4.34

%






4.22

%

 


Six Months Ended


June 30, 2019


June 30, 2018


Average
Balance


Interest
Earned/
Paid


Average
Yield/
Rate (1)


Average
Balance


Interest
Earned/
Paid


Average
Yield/
Rate (1)

Interest Earning Assets:












Total loans receivable, net (2) (3)

$

3,638,573



$

94,806



5.25

%


$

3,208,799



$

79,300



4.98

%

Taxable securities

830,671



11,756



2.85



614,488



7,597



2.49


Nontaxable securities (3)

144,522



1,843



2.57



212,305



2,561



2.43


Other interest earning assets

51,747



618



2.41



52,302



458



1.77


Total interest earning assets

4,665,513



109,023



4.71

%


4,087,894



89,916



4.44

%

Noninterest earning assets

668,644







552,736






Total assets

$

5,334,157







$

4,640,630






Interest Bearing Liabilities:












Certificates of deposit

$

508,220



$

3,133



1.24

%


$

420,834



$

1,557



0.75

%

Savings accounts

503,882



1,381



0.55



509,514



902



0.36


Interest bearing demand and money market accounts

2,033,878



3,106



0.31



1,771,084



1,696



0.19


Total interest bearing deposits

3,045,980



7,620



0.50



2,701,432



4,155



0.31


Junior subordinated debentures

20,364



694



6.87



20,071



598



6.01


Securities sold under agreement to repurchase

31,149



91



0.59



29,094



33



0.23


Federal Home Loan Bank advances and other borrowings

22,086



294



2.68



57,546



552



1.93


Total interest bearing liabilities

3,119,579



8,699



0.56

%


2,808,143



5,338



0.38

%

Noninterest bearing deposits

1,339,108







1,144,479






Other noninterest bearing liabilities

100,840







62,094






Stockholders' equity

774,630







625,914






Total liabilities and stockholders' equity

$

5,334,157







$

4,640,630






Net interest income



$

100,324







$

84,578




Net interest spread





4.15

%






4.06

%

Net interest margin





4.34

%






4.17

%



(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.

 

HERITAGE FINANCIAL CORPORATION

QUARTERLY FINANCIAL STATISTICS (Unaudited)

(Dollar amounts in thousands, except per share amounts)



Three Months Ended


June 30,
 2019


March 31,
 2019


December 31,
 2018


September 30,
 2018


June 30,
 2018

Earnings:










Net interest income

$

50,536



$

49,788



$

51,288



$

51,125



$

43,741


Provision for loan losses

1,367



920



1,162



1,065



1,750


Noninterest income

7,564



7,429



8,446



8,051



7,575


Noninterest expense

37,547



36,525



37,273



39,461



35,706


Net income

15,984



16,552



16,681



15,640



11,857


Basic earnings per share

$

0.43



$

0.45



$

0.45



$

0.42



$

0.35


Diluted earnings per share

$

0.43



$

0.45



$

0.45



$

0.42



$

0.35


Average Balances:










Total loans receivable, net

$

3,654,475



$

3,622,494



$

3,615,362



$

3,618,031



$

3,266,092


Investment securities

979,532



970,806



933,551



883,919



839,196


Total interest earning assets

4,681,588



4,649,259



4,653,215



4,596,734



4,156,310


Total assets

5,350,805



5,317,325



5,323,366



5,278,565



4,726,719


Total interest bearing deposits

3,031,256



3,060,869



3,087,661



3,075,720



2,727,056


Total noninterest bearing deposits

1,345,917



1,332,223



1,356,186



1,314,203



1,175,331


Stockholders' equity

782,719



766,451



750,165



744,389



636,735


Financial Ratios:










Return on average assets, annualized

1.20

%


1.26

%


1.24

%


1.17

%


1.01

%

Return on average common equity, annualized

8.19



8.76



8.78



8.26



7.47


Return on average tangible common equity, annualized

12.27



13.29



13.50



12.77



10.99


Efficiency ratio

64.62



63.84



62.40



66.68



69.58


Noninterest expense to average total assets, annualized

2.81



2.79



2.78



2.98



3.03


Net interest margin

4.33



4.34



4.37



4.41



4.22


Net interest spread

4.13



4.17



4.23



4.27



4.09

















 


As of Period End or for the Three Months Ended


June 30,
 2019


March 31,
 2019


December 31,
 2018


September 30,
 2018


June 30,
 2018

Select Balance Sheet:










Total assets

$

5,376,686



$

5,342,099



$

5,316,927



$

5,276,214



$

4,789,488


Total loans receivable, net

3,681,920



3,660,279



3,619,118



3,614,579



3,294,316


Investment securities

960,680



985,009



976,095



920,737



873,670


Deposits

4,347,708



4,393,715



4,432,402



4,398,127



3,968,935


Noninterest bearing demand deposits

1,320,743



1,338,675



1,362,268



1,311,825



1,157,630


Stockholders' equity

796,625



778,191



760,723



746,133



639,523


Financial Measures:










Book value per share

$

21.60



$

21.09



$

20.63



$

20.24



$

18.80


Tangible book value per share

14.56



14.03



13.54



13.11



12.82


Stockholders' equity to assets

14.8

%


14.6

%


14.3

%


14.1

%


13.4

%

Tangible common equity to tangible assets

10.5



10.2



9.9



9.6



9.5


Loans to deposits ratio

85.5



84.1



82.4



83.0



83.9


Credit Quality Metrics:










Allowance for loan losses to:










Loans receivable, net

0.98

%


0.98

%


0.96

%


0.94

%


1.02

%

Nonperforming loans

188.48



207.04



255.73



233.25



205.60


Nonperforming loans to loans receivable, net

0.52



0.47



0.37



0.41



0.50


Nonperforming assets to total assets

0.38



0.36



0.30



0.32



0.35


Net charge-offs (recoveries) on loans to average loans receivable, net

0.13



(0.02)



0.07



0.06



0.13


Other Metrics:










Number of banking offices

62



63



64



64



59


Average number of full-time equivalent employees

880



878



867



878



819


Deposits per branch

$

70,124



$

69,742



$

69,256



$

68,721



$

67,270


Average assets per full-time equivalent employee

$

6,082



$

6,054



$

6,142



$

6,014



$

5,770


 

Cision View original content:http://www.prnewswire.com/news-releases/heritage-financial-announces-second-quarter-2019-results-and-declares-regular-cash-dividend-300890788.html

SOURCE Heritage Financial Corporation

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