Heritage Financial Corp. (HFWA, Financial) filed Quarterly Report for the period ended 2010-03-31.
Heritage Financial Corp. has a market cap of $170.4 million; its shares were traded at around $15.35 with and P/S ratio of 2.7. HFWA is in the portfolios of Chuck Royce of Royce& Associates.
The Banks have established comprehensive methodologies for determining the provisions for loan losses. On a quarterly basis the Banks perform an analysis taking into consideration pertinent factors underlying the quality of the loan portfolio. These factors include changes in the amount and composition of the loan portfolio, historical loss experience for various loan segments, changes in economic conditions, delinquency rates, a detailed analysis of individual loans on nonaccrual status, and other factors to determine the level of the allowance for loan losses. The allowance for loan losses decreased by $1.4 million to $24.8 million at March 31, 2010 from $26.2 million at December 31, 2009. The decreased level of the allowance for loan losses was primarily attributable to decrease in impaired loans, and a decrease in the level of performing loans classified as potential problem loans. As of March 31, 2010, we had identified $28.8 million of impaired loans, including $13.4 million of restructured loans. Of those impaired loans, $13.3 million have no allowances for credit losses as their estimated collateral value is equal to or exceeds their carrying costs. The remaining $15.5 million have related allowances for credit losses totaling $5.0 million.
Non-interest expense increased $195,000 or 2.5% to $8.1 million during the quarter ended March 31, 2010 compared to $7.9 million for the quarter ended March 31, 2009. The increase was due to increased FDIC assessment rates resulting in an increase in FDIC assessments in the amount of $209,000, increased salaries and benefits expense in the amount of $184,000 resulting primarily from increased full-time employees, and increased professional services in the amount of $145,000 resulting from additional consultant expenses. These increases were partially offset by a $402,000 decline in other expense as a result of a net gain of $92,000 on sale of other real estate owned during the quarter ended March 31, 2010 compared to a net loss of $85,000 during the quarter ended March 31, 2009 and an assessment during the quarter ended March 31, 2009 in the amount of $239,000 from the Washington Public Deposit Protection Commission due to uncollateralized public deposits of a failed bank. The $190,000 impairment loss on investment securities recorded during the quarter ended March 31, 2010 was the result of other-than-temporary impairment charge on the private residential collateralized mortgage obligations received in the redemption-in-kind of the AMF Ultra Short Mortgage Fund. The $175,000 net impairment loss on investment securities during the quarter ended March 31, 2009 was also due to the private residential collateralized mortgage obligations received in the redemption.
Total assets decreased $3.0 million or 0.3%, to $1.012 billion as of March 31, 2010 from the December 31, 2009 balance of $1.015 billion. Deposits decreased $4.2 million or 0.5%, to $835.9 million as of March 31, 2010 from the December 31, 2009 balance of $840.1 million. For the same period, net loans, which exclude loans held for sale but are net of the allowance for loan losses, decreased $13.5 million or 1.8%, to $732.6 million as of March 31, 2010 from $746.1 million at December 31, 2009 as a result of a decline in new originations and continuing payoffs on existing loans, transfers to other real estate own and charge offs.
Total stockholders equity increased by $1.1 million or 0.7%, to $159.6 million as of March 31, 2010 from the December 31, 2009 balance of $158.5 million as a result of net income of $696,000, change in fair value of securities available for sale, net of tax, in amount of $299,000 and exercise of stock options in the amount of $201,000. The Companys capital position remains strong at 15.8% of total assets as of March 31, 2010, an increase from 15.6% at December 31, 2009.
As indicated in the table below, total loans (including loans held for sale) decreased $15.1 million to $758.0 million at March 31, 2010 from $773.1 million at December 31, 2009. This decrease was due substantially to a $12.4 million decline in real estate construction loans. The largest declines in our loan portfolio occurred in the real estate construction portfolio as a result of a combination of charge offs in the amount of $2.2 million, transfers to other real estate owned of $1.3 million and loan payoffs. Commercial loan balances decreased $3.1 million due substantially to charge-offs in the amounts of $2.9 million during the quarter ended March 31, 2010.
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Heritage Financial Corp. has a market cap of $170.4 million; its shares were traded at around $15.35 with and P/S ratio of 2.7. HFWA is in the portfolios of Chuck Royce of Royce& Associates.
Highlight of Business Operations:
Total interest expense decreased by $1.2 million, or 35.1%, to $2.2 million for the quarter ended March 31, 2010 from $3.4 million for the quarter ended March 31, 2009 as the average rate paid on interest bearing liabilities decreased to 1.22% for the quarter ended March 31, 2010 from 1.90% for the quarter ended March 31, 2009. Total average interest bearing liabilities increased by $7.2 million to $724.2 million at March 31, 2010 from $717.0 million at March 31, 2009. Deposit interest expense decreased $1.2 million, or 36%, to $2.2 million for the quarter ended March 31, 2010 compared to $3.4 million for the same quarter last year as a result of a 67 basis point decrease in the average cost of interest-bearing deposits reflecting the relatively low interest rate environment.The Banks have established comprehensive methodologies for determining the provisions for loan losses. On a quarterly basis the Banks perform an analysis taking into consideration pertinent factors underlying the quality of the loan portfolio. These factors include changes in the amount and composition of the loan portfolio, historical loss experience for various loan segments, changes in economic conditions, delinquency rates, a detailed analysis of individual loans on nonaccrual status, and other factors to determine the level of the allowance for loan losses. The allowance for loan losses decreased by $1.4 million to $24.8 million at March 31, 2010 from $26.2 million at December 31, 2009. The decreased level of the allowance for loan losses was primarily attributable to decrease in impaired loans, and a decrease in the level of performing loans classified as potential problem loans. As of March 31, 2010, we had identified $28.8 million of impaired loans, including $13.4 million of restructured loans. Of those impaired loans, $13.3 million have no allowances for credit losses as their estimated collateral value is equal to or exceeds their carrying costs. The remaining $15.5 million have related allowances for credit losses totaling $5.0 million.
Non-interest expense increased $195,000 or 2.5% to $8.1 million during the quarter ended March 31, 2010 compared to $7.9 million for the quarter ended March 31, 2009. The increase was due to increased FDIC assessment rates resulting in an increase in FDIC assessments in the amount of $209,000, increased salaries and benefits expense in the amount of $184,000 resulting primarily from increased full-time employees, and increased professional services in the amount of $145,000 resulting from additional consultant expenses. These increases were partially offset by a $402,000 decline in other expense as a result of a net gain of $92,000 on sale of other real estate owned during the quarter ended March 31, 2010 compared to a net loss of $85,000 during the quarter ended March 31, 2009 and an assessment during the quarter ended March 31, 2009 in the amount of $239,000 from the Washington Public Deposit Protection Commission due to uncollateralized public deposits of a failed bank. The $190,000 impairment loss on investment securities recorded during the quarter ended March 31, 2010 was the result of other-than-temporary impairment charge on the private residential collateralized mortgage obligations received in the redemption-in-kind of the AMF Ultra Short Mortgage Fund. The $175,000 net impairment loss on investment securities during the quarter ended March 31, 2009 was also due to the private residential collateralized mortgage obligations received in the redemption.
Total assets decreased $3.0 million or 0.3%, to $1.012 billion as of March 31, 2010 from the December 31, 2009 balance of $1.015 billion. Deposits decreased $4.2 million or 0.5%, to $835.9 million as of March 31, 2010 from the December 31, 2009 balance of $840.1 million. For the same period, net loans, which exclude loans held for sale but are net of the allowance for loan losses, decreased $13.5 million or 1.8%, to $732.6 million as of March 31, 2010 from $746.1 million at December 31, 2009 as a result of a decline in new originations and continuing payoffs on existing loans, transfers to other real estate own and charge offs.
Total stockholders equity increased by $1.1 million or 0.7%, to $159.6 million as of March 31, 2010 from the December 31, 2009 balance of $158.5 million as a result of net income of $696,000, change in fair value of securities available for sale, net of tax, in amount of $299,000 and exercise of stock options in the amount of $201,000. The Companys capital position remains strong at 15.8% of total assets as of March 31, 2010, an increase from 15.6% at December 31, 2009.
As indicated in the table below, total loans (including loans held for sale) decreased $15.1 million to $758.0 million at March 31, 2010 from $773.1 million at December 31, 2009. This decrease was due substantially to a $12.4 million decline in real estate construction loans. The largest declines in our loan portfolio occurred in the real estate construction portfolio as a result of a combination of charge offs in the amount of $2.2 million, transfers to other real estate owned of $1.3 million and loan payoffs. Commercial loan balances decreased $3.1 million due substantially to charge-offs in the amounts of $2.9 million during the quarter ended March 31, 2010.
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