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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Washington
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91-1857900
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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201 Fifth Avenue SW, Olympia, WA
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98501
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock
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NASDAQ Stock Market LLC
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Page
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ITEM 1.
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ITEM 1A.
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ITEM 1B.
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ITEM 2.
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ITEM 3.
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ITEM 4.
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ITEM 5.
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ITEM 6.
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ITEM 7.
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ITEM 7A.
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ITEM 8.
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ITEM 9.
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ITEM 9A.
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ITEM 9B.
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ITEM 10.
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ITEM 11.
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ITEM 12.
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ITEM 13.
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ITEM 14.
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ITEM 15.
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December 31,
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|||||||||||||||||||||||||||||||||
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2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|||||||||||||||||||||||||
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Balance
|
|
% of Total
(4)
|
|
Balance
|
|
% of Total
(4)
|
|
Balance
|
|
% of Total
(4)
|
|
Balance
|
|
% of Total
(4)
|
|
Balance
|
|
% of Total
(4)
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|||||||||||||||
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(Dollars in thousands)
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|||||||||||||||||||||||||||||||||
Noncovered loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|||||||||||||||
Commercial and industrial(1)
|
$
|
1,087,085
|
|
|
51.2
|
%
|
|
$
|
617,849
|
|
|
52.9
|
%
|
|
$
|
503,708
|
|
|
53.7
|
%
|
|
$
|
493,130
|
|
|
53.3
|
%
|
|
$
|
470,116
|
|
|
53.9
|
%
|
Non-owner occupied commercial real estate
|
616,757
|
|
|
29.0
|
|
|
399,979
|
|
|
34.2
|
|
|
276,854
|
|
|
29.5
|
|
|
263,882
|
|
|
28.5
|
|
|
240,174
|
|
|
27.5
|
|
|||||
Total commercial business
|
1,703,842
|
|
|
80.2
|
|
|
1,017,828
|
|
|
87.1
|
|
|
780,562
|
|
|
83.2
|
|
|
757,012
|
|
|
81.8
|
|
|
710,290
|
|
|
81.4
|
|
|||||
One-to-four family residential(2)
|
63,540
|
|
|
3.0
|
|
|
43,082
|
|
|
3.7
|
|
|
41,888
|
|
|
4.5
|
|
|
40,703
|
|
|
4.4
|
|
|
52,491
|
|
|
6.0
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|||||||||||||||
One-to-four family residential
|
46,749
|
|
|
2.2
|
|
|
19,724
|
|
|
1.7
|
|
|
25,688
|
|
|
2.7
|
|
|
23,750
|
|
|
2.5
|
|
|
33,193
|
|
|
3.8
|
|
|||||
Five or more family residential and commercial properties
|
61,360
|
|
|
2.9
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|
|
48,655
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|
|
4.2
|
|
|
52,939
|
|
|
5.6
|
|
|
56,032
|
|
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6.1
|
|
|
29,832
|
|
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3.4
|
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|||||
Total real estate construction and land development(3)
|
108,109
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|
|
5.1
|
|
|
68,379
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|
|
5.9
|
|
|
78,627
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|
|
8.3
|
|
|
79,782
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|
|
8.6
|
|
|
63,025
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|
|
7.2
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|||||
Consumer
|
250,323
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|
|
11.8
|
|
|
41,547
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|
|
3.5
|
|
|
39,627
|
|
|
4.2
|
|
|
50,401
|
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5.4
|
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|
48,585
|
|
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5.6
|
|
|||||
Gross noncovered loans
|
2,125,814
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|
|
100.1
|
|
|
1,170,836
|
|
|
100.2
|
|
|
940,704
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|
|
100.2
|
|
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927,898
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|
100.2
|
|
|
874,391
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|
|
100.2
|
|
|||||
Less: deferred loan fees
|
(937
|
)
|
|
(0.1
|
)
|
|
(2,670
|
)
|
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(0.2
|
)
|
|
(2,096
|
)
|
|
(0.2
|
)
|
|
(1,860
|
)
|
|
(0.2
|
)
|
|
(1,323
|
)
|
|
(0.2
|
)
|
|||||
Total noncovered loans
|
$
|
2,124,877
|
|
|
100.0
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%
|
|
$
|
1,168,166
|
|
|
100.0
|
%
|
|
$
|
938,608
|
|
|
100.0
|
%
|
|
$
|
926,038
|
|
|
100.0
|
%
|
|
$
|
873,068
|
|
|
100.0
|
%
|
(1)
|
Commercial and industrial loans include owner-occupied commercial real estate loans.
|
(2)
|
Excludes loans held for sale of
$5.6 million
, $1.7 million, $1.8 million and $764,000 as of
December 31, 2014
,
2012
,
2011
and
2010
, respectively. There were no loans held for sale at December 31, 2013.
|
(3)
|
Balances are net of undisbursed loan proceeds.
|
(4)
|
Percent of total noncovered loans.
|
|
December 31,
|
||||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||||||||||||||||
|
Balance
|
|
% of Total
(3)
|
|
Balance
|
|
% of Total
(3)
|
|
Balance
|
|
% of Total
(3)
|
|
Balance
|
|
% of Total
(3)
|
|
Balance
|
|
% of Total
(3) |
||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
Covered loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Commercial and industrial(1)
|
$
|
78,354
|
|
|
62.1
|
%
|
|
$
|
39,056
|
|
|
61.3
|
%
|
|
$
|
60,577
|
|
|
68.6
|
%
|
|
$
|
76,674
|
|
|
70.1
|
%
|
|
92,265
|
|
|
71.7
|
%
|
Non-owner occupied commercial real estate
|
26,879
|
|
|
21.3
|
|
|
14,625
|
|
|
22.9
|
|
|
13,028
|
|
|
14.7
|
|
|
15,753
|
|
|
14.4
|
|
|
17,576
|
|
|
13.6
|
|
||||
Total commercial business
|
105,233
|
|
|
83.4
|
|
|
53,681
|
|
|
84.2
|
|
|
73,605
|
|
|
83.3
|
|
|
92,427
|
|
|
84.5
|
|
|
109,841
|
|
|
85.3
|
|
||||
One-to-four family residential
|
5,990
|
|
|
4.7
|
|
|
4,777
|
|
|
7.5
|
|
|
5,027
|
|
|
5.7
|
|
|
5,197
|
|
|
4.8
|
|
|
6,224
|
|
|
4.8
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
One-to-four family residential
|
2,446
|
|
|
2.0
|
|
|
1,556
|
|
|
2.4
|
|
|
4,433
|
|
|
5.0
|
|
|
5,786
|
|
|
5.3
|
|
|
5,876
|
|
|
4.6
|
|
||||
Five or more family residential and commercial properties
|
3,560
|
|
|
2.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total real estate construction and land development(2)
|
6,006
|
|
|
4.8
|
|
|
1,556
|
|
|
2.4
|
|
|
4,433
|
|
|
5.0
|
|
|
5,786
|
|
|
5.3
|
|
|
5,876
|
|
|
4.6
|
|
||||
Consumer
|
8,971
|
|
|
7.1
|
|
|
3,740
|
|
|
5.9
|
|
|
5,265
|
|
|
6.0
|
|
|
5,947
|
|
|
5.4
|
|
|
6,774
|
|
|
5.3
|
|
||||
Gross purchased covered loans
|
$
|
126,200
|
|
|
100.0
|
%
|
|
$
|
63,754
|
|
|
100.0
|
%
|
|
$
|
88,330
|
|
|
100.0
|
%
|
|
$
|
109,357
|
|
|
100.0
|
%
|
|
128,715
|
|
|
100.0
|
%
|
|
|
Maturing
|
||||||||||||||
|
|
Within
1 year
|
|
Over 1-5
years
|
|
After
5 years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Commercial business
|
|
$
|
230,085
|
|
|
$
|
407,886
|
|
|
$
|
1,065,871
|
|
|
$
|
1,703,842
|
|
Real estate construction and land development
|
|
42,411
|
|
|
34,692
|
|
|
31,006
|
|
|
108,109
|
|
||||
Total
|
|
$
|
272,496
|
|
|
$
|
442,578
|
|
|
$
|
1,096,877
|
|
|
$
|
1,811,951
|
|
Fixed rate loans, due after 1 year
|
|
|
|
$
|
236,357
|
|
|
$
|
217,816
|
|
|
$
|
454,173
|
|
||
Variable or adjustable rate loans, due after 1 year
|
|
|
|
206,221
|
|
|
879,061
|
|
|
1,085,282
|
|
|||||
Total
|
|
|
|
$
|
442,578
|
|
|
$
|
1,096,877
|
|
|
$
|
1,539,455
|
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(In thousands)
|
||||||||||||||||||
One-to-four family residential loans:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Originated (1)
|
|
$
|
75,500
|
|
|
$
|
18,867
|
|
|
$
|
35,730
|
|
|
$
|
23,865
|
|
|
$
|
18,605
|
|
Sold
|
|
55,997
|
|
|
8,460
|
|
|
21,187
|
|
|
15,888
|
|
|
16,187
|
|
|||||
Gains on sales of loans, net (2)
|
|
1,080
|
|
|
142
|
|
|
295
|
|
|
285
|
|
|
226
|
|
(1)
|
Includes loans originated for our loan portfolio or for sale in the secondary market.
|
(2)
|
Excludes net gains on sales of SBA loans.
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
|
||||
Commercial and industrial
|
|
$
|
288,930
|
|
|
$
|
169,079
|
|
Owner-occupied commercial real estate
|
|
2,648
|
|
|
2,812
|
|
||
Non-owner occupied commercial real estate
|
|
20,240
|
|
|
2,405
|
|
||
Total commercial business
|
|
311,818
|
|
|
174,296
|
|
||
One-to-four family residential
|
|
—
|
|
|
45
|
|
||
Real estate construction and land development:
|
|
|
|
|
||||
One-to-four family residential
|
|
24,028
|
|
|
12,236
|
|
||
Five or more family residential and commercial properties
|
|
32,653
|
|
|
20,720
|
|
||
Total real estate construction and land development
|
|
56,681
|
|
|
32,956
|
|
||
Consumer
|
|
122,633
|
|
|
27,480
|
|
||
Total outstanding commitments
|
|
$
|
491,132
|
|
|
$
|
234,777
|
|
|
|
December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Nonaccrual noncovered loans:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
$
|
4,719
|
|
|
$
|
5,675
|
|
|
$
|
6,068
|
|
|
$
|
8,266
|
|
|
$
|
10,839
|
|
One-to-four family residential
|
|
—
|
|
|
340
|
|
|
450
|
|
|
—
|
|
|
2
|
|
|||||
Real estate construction and land development
|
|
2,652
|
|
|
1,045
|
|
|
6,420
|
|
|
14,947
|
|
|
15,642
|
|
|||||
Consumer
|
|
139
|
|
|
678
|
|
|
281
|
|
|
615
|
|
|
—
|
|
|||||
Total nonaccrual noncovered loans(1)(2)
|
|
7,510
|
|
|
7,738
|
|
|
13,219
|
|
|
23,828
|
|
|
26,483
|
|
|||||
Noncovered other real estate owned
|
|
2,178
|
|
|
4,377
|
|
|
5,406
|
|
|
3,710
|
|
|
3,030
|
|
|||||
Total nonperforming noncovered assets
|
|
$
|
9,688
|
|
|
$
|
12,115
|
|
|
$
|
18,625
|
|
|
$
|
27,538
|
|
|
$
|
29,513
|
|
Accruing noncovered loans past due 90 days or more(3)
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
214
|
|
|
$
|
1,328
|
|
|
$
|
1,313
|
|
Potential problem noncovered loans(4)
|
|
117,250
|
|
|
52,814
|
|
|
29,183
|
|
|
31,925
|
|
|
53,086
|
|
|||||
Allowance for loan losses on noncovered loans
|
|
22,153
|
|
|
22,657
|
|
|
24,242
|
|
|
26,952
|
|
|
22,062
|
|
|||||
Nonperforming noncovered loans to total noncovered loans
|
|
0.35
|
%
|
|
0.66
|
%
|
|
1.41
|
%
|
|
2.57
|
%
|
|
3.03
|
%
|
|||||
Allowance for loan losses on noncovered loans to total noncovered loans
|
|
1.04
|
%
|
|
1.94
|
%
|
|
2.58
|
%
|
|
2.91
|
%
|
|
2.53
|
%
|
|||||
Allowance for loan losses on noncovered loans to nonperforming noncovered loans
|
|
294.98
|
%
|
|
292.80
|
%
|
|
183.39
|
%
|
|
113.11
|
%
|
|
83.31
|
%
|
|||||
Nonperforming noncovered assets to total noncovered assets
|
|
0.29
|
%
|
|
0.76
|
%
|
|
1.48
|
%
|
|
2.19
|
%
|
|
2.38
|
%
|
|||||
Restructured performing noncovered loans:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
$
|
14,408
|
|
|
$
|
15,735
|
|
|
$
|
15,227
|
|
|
$
|
12,606
|
|
|
$
|
394
|
|
One-to-four family residential
|
|
245
|
|
|
252
|
|
|
888
|
|
|
835
|
|
|
—
|
|
|||||
Real estate construction and land development
|
|
3,927
|
|
|
6,043
|
|
|
361
|
|
|
364
|
|
|
—
|
|
|||||
Consumer
|
|
184
|
|
|
101
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total restructured performing noncovered loans(5)
|
|
$
|
18,764
|
|
|
$
|
22,131
|
|
|
$
|
16,476
|
|
|
$
|
13,805
|
|
|
$
|
394
|
|
(1)
|
At
December 31, 2014
,
2013
,
2012
,
2011
and
2010
,
$4.1 million
,
$2.6 million
, $9.3 million, $11.7 million and $8.7 million of nonaccrual noncovered loans were considered troubled debt restructured loans, respectively.
|
(2)
|
At
December 31, 2014
,
2013
,
2012
,
2011
and
2010
,
$1.6 million
,
$1.7 million
, $1.2 million, $1.8 million and $2.3 million of noncovered nonaccrual loans were guaranteed by government agencies, respectively.
|
(3)
|
There were
no
accruing noncovered loans past due 90 days or more that were guaranteed by government agencies at
December 31, 2014
,
2013
, and 2012. There were accruing noncovered loans past due 90 days or more of $6,000 and $92,000 guaranteed by government agencies at December 31, 2011 and 2010, respectively.
|
(4)
|
At
December 31, 2014
,
2013
,
2012
,
2011
and
2010
,
$2.0 million
,
$1.8 million
, $2.9 million, $2.8 million and $5.4 million of potential problem noncovered loans were guaranteed by government agencies, respectively.
|
(5)
|
At
December 31, 2014
,
2013
,
2012
and 2011, $751,000, $1.2 million, $965,000 and $592,000 of restructured performing noncovered loans were guaranteed by government agencies . There were no restructured performing noncovered loans guaranteed by government agencies at
December 31,
2010
.
|
•
|
Historical loss experience in a number of homogeneous segments of the loan portfolio;
|
•
|
The impact of environmental factors, including:
|
▪
|
Levels of and trends in delinquencies and impaired loans;
|
▪
|
Levels and trends in charge-offs and recoveries;
|
▪
|
Effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices;
|
▪
|
Experience, ability, and depth of lending management and other relevant staff;
|
▪
|
National and local economic trends and conditions;
|
▪
|
External factors such as competition, legal, and regulatory requirements; and
|
▪
|
Effects of changes in credit concentrations.
|
|
|
At or For the Years Ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Allowance for loan losses on noncovered loans at beginning of the year
|
|
$
|
22,657
|
|
|
$
|
24,242
|
|
|
$
|
26,952
|
|
|
$
|
22,062
|
|
|
$
|
26,164
|
|
Provision for loan losses for noncovered loans
|
|
2,232
|
|
|
1,784
|
|
|
1,570
|
|
|
10,032
|
|
|
11,990
|
|
|||||
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
(2,305
|
)
|
|
(3,295
|
)
|
|
(3,726
|
)
|
|
(2,972
|
)
|
|
(8,106
|
)
|
|||||
One-to-four family residential
|
|
—
|
|
|
(52
|
)
|
|
(391
|
)
|
|
(53
|
)
|
|
(169
|
)
|
|||||
Real estate construction and land development
|
|
(376
|
)
|
|
(565
|
)
|
|
(1,280
|
)
|
|
(2,513
|
)
|
|
(8,344
|
)
|
|||||
Consumer
|
|
(962
|
)
|
|
(386
|
)
|
|
(620
|
)
|
|
(648
|
)
|
|
(73
|
)
|
|||||
Total charge-offs on noncovered loans
|
|
(3,643
|
)
|
|
(4,298
|
)
|
|
(6,017
|
)
|
|
(6,186
|
)
|
|
(16,692
|
)
|
|||||
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
716
|
|
|
807
|
|
|
1,579
|
|
|
821
|
|
|
243
|
|
|||||
One-to-four family residential
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||
Real estate construction and land development
|
|
50
|
|
|
32
|
|
|
125
|
|
|
201
|
|
|
285
|
|
|||||
Consumer
|
|
141
|
|
|
90
|
|
|
33
|
|
|
22
|
|
|
57
|
|
|||||
Total recoveries on noncovered loans
|
|
907
|
|
|
929
|
|
|
1,737
|
|
|
1,044
|
|
|
600
|
|
|||||
Net charge-offs on noncovered loans
|
|
(2,736
|
)
|
|
(3,369
|
)
|
|
(4,280
|
)
|
|
(5,142
|
)
|
|
(16,092
|
)
|
|||||
Allowance for loan losses on noncovered loans at end of the year
|
|
$
|
22,153
|
|
|
$
|
22,657
|
|
|
$
|
24,242
|
|
|
$
|
26,952
|
|
|
$
|
22,062
|
|
Noncovered loans outstanding at end of the year(1)(2)
|
|
$
|
2,125,814
|
|
|
$
|
1,170,836
|
|
|
$
|
940,704
|
|
|
$
|
927,898
|
|
|
$
|
874,391
|
|
Average noncovered loans receivable during the year(2)
|
|
1,767,821
|
|
|
1,052,552
|
|
|
897,342
|
|
|
862,812
|
|
|
745,819
|
|
|||||
Ratio of net charge-offs on noncovered loans to average noncovered loans receivable
|
|
(0.15
|
)%
|
|
(0.32
|
)%
|
|
(0.48
|
)%
|
|
(0.60
|
)%
|
|
(2.16
|
)%
|
(1)
|
Gross loan balances.
|
(2)
|
Excludes loans held for sale.
|
|
December 31,
|
|||||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|||||||||||||||||||||||||
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||||
Commercial business
|
$
|
15,967
|
|
|
80.1
|
%
|
|
$
|
18,020
|
|
|
86.9
|
%
|
|
$
|
16,044
|
|
|
83.0
|
%
|
|
$
|
16,167
|
|
|
81.6
|
%
|
|
$
|
14,350
|
|
|
82.5
|
%
|
One-to-four family residential
|
812
|
|
|
3.0
|
|
|
786
|
|
|
3.7
|
|
|
944
|
|
|
4.4
|
|
|
650
|
|
|
4.4
|
|
|
500
|
|
|
6.5
|
|
|||||
Real estate construction
|
1,954
|
|
|
5.1
|
|
|
1,884
|
|
|
5.8
|
|
|
4,801
|
|
|
8.4
|
|
|
7,978
|
|
|
8.6
|
|
|
5,435
|
|
|
7.8
|
|
|||||
Consumer
|
2,604
|
|
|
11.8
|
|
|
1,366
|
|
|
3.6
|
|
|
1,583
|
|
|
4.2
|
|
|
1,247
|
|
|
5.4
|
|
|
846
|
|
|
3.2
|
|
|||||
Unallocated
|
816
|
|
|
—
|
|
|
601
|
|
|
—
|
|
|
870
|
|
|
—
|
|
|
910
|
|
|
—
|
|
|
931
|
|
|
—
|
|
|||||
Total allowance for loan losses on
noncovered
loans (1)
|
$
|
22,153
|
|
|
100.0
|
%
|
|
$
|
22,657
|
|
|
100.0
|
%
|
|
$
|
24,242
|
|
|
100.0
|
%
|
|
$
|
26,952
|
|
|
100.0
|
%
|
|
$
|
22,062
|
|
|
100.0
|
%
|
(1)
|
Represents total noncovered loans outstanding in each category as a percent of gross noncovered loans.
|
|
December 31,
|
|||||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010 (2)
|
|||||||||||||||||||||||||
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|
Allowance
for Loan
Losses
|
|
% of
Total
(1)
|
|||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||||
Commercial business
|
$
|
4,219
|
|
|
83.4
|
%
|
|
$
|
4,833
|
|
|
84.2
|
%
|
|
$
|
3,258
|
|
|
83.3
|
%
|
|
$
|
3,011
|
|
|
84.5
|
%
|
|
$
|
—
|
|
|
85.3
|
%
|
One-to-four family residential
|
388
|
|
|
4.7
|
|
|
314
|
|
|
7.5
|
|
|
277
|
|
|
5.7
|
|
|
144
|
|
|
4.8
|
|
|
—
|
|
|
4.8
|
|
|||||
Real estate construction
|
804
|
|
|
4.8
|
|
|
789
|
|
|
2.4
|
|
|
639
|
|
|
5.0
|
|
|
645
|
|
|
5.3
|
|
|
—
|
|
|
4.6
|
|
|||||
Consumer
|
165
|
|
|
7.1
|
|
|
231
|
|
|
5.9
|
|
|
178
|
|
|
6.0
|
|
|
163
|
|
|
5.4
|
|
|
—
|
|
|
5.3
|
|
|||||
Unallocated
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total allowance for loan losses on covered loans (1)
|
$
|
5,576
|
|
|
100.0
|
%
|
|
$
|
6,167
|
|
|
100.0
|
%
|
|
$
|
4,352
|
|
|
100.0
|
%
|
|
$
|
3,963
|
|
|
100.0
|
%
|
|
$
|
—
|
|
|
100.0
|
%
|
(1)
|
Represents total covered loans outstanding in each category as a percent of gross covered loans.
|
(2)
|
The Company did not have an allowance for loan losses on covered loans at December 31, 2010 as the covered portfolio was acquired in July 2010 and fair value discounts on covered loans established at acquisition date were determined sufficient to absorb known and inherent loan losses at December 31, 2010.
|
|
December 31, 2014
|
|
December 31, 2013
|
|
December 31, 2012
|
|||||||||||||||
|
Fair Value
|
|
% of
Total
Investments
|
|
Fair Value
|
|
% of
Total
Investments
|
|
Fair Value
|
|
% of
Total
Investments
|
|||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
21,427
|
|
|
2.9
|
%
|
|
$
|
6,039
|
|
|
3.7
|
%
|
|
$
|
11,035
|
|
|
7.7
|
%
|
Municipal securities
|
173,037
|
|
|
23.3
|
|
|
49,060
|
|
|
30.1
|
|
|
47,360
|
|
|
32.8
|
|
|||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
U.S. Government-sponsored agencies
|
542,399
|
|
|
73.0
|
|
|
108,035
|
|
|
66.2
|
|
|
85,898
|
|
|
59.5
|
|
|||
Corporate obligations
|
4,010
|
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Mutual funds and other equities
|
1,973
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
742,846
|
|
|
100.0
|
%
|
|
$
|
163,134
|
|
|
100.0
|
%
|
|
$
|
144,293
|
|
|
100.0
|
%
|
|
Less Than One
Year
|
|
Over One to Five
Years
|
|
Over Five to Ten
Years
|
|
Over Ten Years
|
||||||||||||||||||||
|
Fair
Value
|
|
Weighted
Average
Yield(1)
|
|
Fair
Value
|
|
Weighted
Average
Yield(1)
|
|
Fair
Value
|
|
Weighted
Average
Yield(1)
|
|
Fair
Value
|
|
Weighted
Average
Yield(1)
|
||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
—
|
|
|
—
|
%
|
|
$
|
20,836
|
|
|
1.04
|
%
|
|
$
|
591
|
|
|
1.95
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Municipal securities
|
4,171
|
|
|
1.93
|
|
|
26,360
|
|
|
2.50
|
|
|
65,805
|
|
|
3.26
|
|
|
76,701
|
|
|
3.76
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
—
|
|
|
—
|
|
|
8,601
|
|
|
2.40
|
|
|
81,540
|
|
|
1.81
|
|
|
452,258
|
|
|
2.09
|
|
||||
Corporate obligations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,010
|
|
|
1.15
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
4,171
|
|
|
1.93
|
%
|
|
$
|
55,797
|
|
|
1.91
|
%
|
|
$
|
151,946
|
|
|
2.42
|
%
|
|
$
|
528,959
|
|
|
2.32
|
%
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
December 31, 2012
|
|||||||||||||||
|
|
Amortized
Cost
|
|
% of
Total
Investments
|
|
Amortized
Cost
|
|
% of
Total
Investments
|
|
Amortized
Cost
|
|
% of
Total
Investments
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
|
$
|
1,591
|
|
|
4.4
|
%
|
|
$
|
1,687
|
|
|
4.7
|
%
|
|
$
|
1,740
|
|
|
17.2
|
%
|
Municipal securities
|
|
22,486
|
|
|
62.8
|
|
|
24,290
|
|
|
67.2
|
|
|
2,946
|
|
|
29.2
|
|
|||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
U.S. Government-sponsored agencies
|
|
10,866
|
|
|
30.4
|
|
|
9,129
|
|
|
25.2
|
|
|
4,245
|
|
|
42.0
|
|
|||
Private residential collateralized mortgage obligations
|
|
871
|
|
|
2.4
|
|
|
1,048
|
|
|
2.9
|
|
|
1,168
|
|
|
11.6
|
|
|||
Total
|
|
$
|
35,814
|
|
|
100.0
|
%
|
|
$
|
36,154
|
|
|
100.0
|
%
|
|
$
|
10,099
|
|
|
100.0
|
%
|
|
Less Than One
Year
|
|
Over One to Five
Years
|
|
Over Five to Ten
Years
|
|
Over Ten Years
|
||||||||||||||||||||
|
Amortized
Cost |
|
Weighted
Average
Yield(1)
|
|
Amortized
Cost |
|
Weighted
Average
Yield(1)
|
|
Amortized
Cost |
|
Weighted
Average
Yield(1)
|
|
Amortized
Cost |
|
Weighted
Average
Yield(1)
|
||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
—
|
|
|
—
|
%
|
|
$
|
492
|
|
|
3.76
|
%
|
|
$
|
1,099
|
|
|
3.91
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Municipal securities
|
2,895
|
|
|
2.53
|
|
|
8,826
|
|
|
3.05
|
|
|
10,557
|
|
|
3.88
|
|
|
208
|
|
|
5.61
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
—
|
|
|
—
|
|
|
508
|
|
|
2.56
|
|
|
6,902
|
|
|
3.25
|
|
|
3,456
|
|
|
2.88
|
|
||||
Private residential collateralized mortgage obligations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
871
|
|
|
5.95
|
|
||||
Total
|
$
|
2,895
|
|
|
2.53
|
%
|
|
$
|
9,826
|
|
|
3.06
|
%
|
|
$
|
18,558
|
|
|
3.64
|
%
|
|
$
|
4,535
|
|
|
3.59
|
%
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
December 31, 2012
|
|||||||||||||||
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||
Noninterest demand deposits
|
|
$
|
709,673
|
|
|
24.4
|
%
|
|
$
|
349,902
|
|
|
25.0
|
%
|
|
$
|
247,048
|
|
|
22.1
|
%
|
NOW accounts
|
|
793,362
|
|
|
27.3
|
|
|
352,051
|
|
|
25.2
|
|
|
303,487
|
|
|
27.2
|
|
|||
Money market accounts
|
|
520,065
|
|
|
17.9
|
|
|
232,016
|
|
|
16.6
|
|
|
157,728
|
|
|
14.1
|
|
|||
Savings accounts
|
|
357,834
|
|
|
12.3
|
|
|
155,790
|
|
|
11.1
|
|
|
120,781
|
|
|
10.8
|
|
|||
Total non-maturity deposits
|
|
2,380,934
|
|
|
81.9
|
|
|
1,089,759
|
|
|
77.9
|
|
|
829,044
|
|
|
74.2
|
|
|||
CDs
|
|
525,397
|
|
|
18.1
|
|
|
309,430
|
|
|
22.1
|
|
|
288,927
|
|
|
25.8
|
|
|||
Total deposits
|
|
$
|
2,906,331
|
|
|
100.0
|
%
|
|
$
|
1,399,189
|
|
|
100.0
|
%
|
|
$
|
1,117,971
|
|
|
100.0
|
%
|
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||
NOW accounts and money market accounts
|
|
$
|
1,049,078
|
|
|
0.18
|
%
|
|
$
|
541,793
|
|
|
0.19
|
%
|
|
$
|
466,268
|
|
|
0.27
|
%
|
Savings accounts
|
|
282,150
|
|
|
0.09
|
|
|
143,412
|
|
|
0.11
|
|
|
113,119
|
|
|
0.18
|
|
|||
CDs
|
|
494,948
|
|
|
0.60
|
|
|
307,464
|
|
|
0.81
|
|
|
306,772
|
|
|
0.98
|
|
|||
Total interest bearing deposits
|
|
1,826,176
|
|
|
0.28
|
|
|
992,669
|
|
|
0.37
|
|
|
886,159
|
|
|
0.50
|
|
|||
Noninterest demand deposits
|
|
574,692
|
|
|
—
|
|
|
308,582
|
|
|
—
|
|
|
237,888
|
|
|
—
|
|
|||
Total deposits
|
|
$
|
2,400,868
|
|
|
0.21
|
%
|
|
$
|
1,301,251
|
|
|
0.28
|
%
|
|
$
|
1,124,047
|
|
|
0.40
|
%
|
|
December 31, 2014
|
||
|
(In thousands)
|
||
Remaining maturity:
|
|
||
Three months or less
|
$
|
1,441
|
|
Over three months through twelve months
|
167,863
|
|
|
Over twelve months through three years
|
79,922
|
|
|
Over three years
|
17,356
|
|
|
Total
|
$
|
266,582
|
|
Name
|
|
Age as of
December 31,
2014
|
|
Position
|
|
Has Served the
Company or Heritage Bank Since
|
|
Brian L. Vance
|
|
60
|
|
|
President and Chief Executive Officer of Heritage; Chief Executive Officer of Heritage Bank
|
|
1996
|
Jeffrey J. Deuel
|
|
56
|
|
|
Executive Vice President, Heritage; President and Chief Operating Officer of Heritage Bank
|
|
2010
|
Donald J. Hinson
|
|
53
|
|
|
Executive Vice President and Chief Financial Officer of Heritage and Heritage Bank
|
|
2005
|
David A. Spurling
|
|
61
|
|
|
Executive Vice President and Chief Credit Officer of Heritage and Heritage Bank
|
|
1999
|
Bryan McDonald (1)
|
|
43
|
|
|
Executive Vice President and Chief Lending Officer of Heritage Bank
|
|
2014
|
(1)
|
Former executive officer of Washington Banking Company.
|
•
|
we may be exposed to potential asset quality issues or unknown or contingent liabilities of the banks, businesses, assets and liabilities we acquire. If these issues or liabilities exceed our estimates, our results of operations and financial condition may be materially negatively affected;
|
•
|
prices at which acquisitions can be made fluctuate with market conditions. We have experienced times during which acquisitions could not be made in specific markets at prices we considered acceptable and expect that we may continue to experience this condition in the future;
|
•
|
the acquisition of other entities generally requires integration of systems, procedures and personnel of the acquired entity into our company to make the transaction economically successful. This integration process is complicated and time consuming and can also be disruptive to the customers of the acquired business. If the integration process is not conducted successfully and with minimal effect on the acquired business and its customers, we may not realize the anticipated economic benefits of an acquisition within the expected time frame, and we may lose customers or employees of the acquired business. We may also experience greater than anticipated customer losses even if the integration process is successful. These risks are present in our completed FDIC-assisted transactions involving our assumption of deposits and the acquisition of assets of Cowlitz Bank and Pierce Commercial Bank in July 2010 and November 2010, respectively; and in the completed open-bank acquisitions of NCB and Valley Community Bancshares in January 2013 and July 2013, respectively, and in the merger of Washington Banking Company in May 2014;
|
•
|
to finance an acquisition, we may borrow funds, thereby increasing our leverage and diminishing our liquidity, or raise additional capital, which could dilute the interests of our existing shareholders;
|
•
|
we completed two acquisitions during 2010, two acquisitions during 2013 and one merger in 2014 that enhanced our rate of growth. We may not be able to continue to sustain our past rate of growth or to grow at all in the future;
|
•
|
we expect our net income will increase following our acquisitions, however, we also expect our general and administrative expenses and consequently our efficiency ratios will also increase. Ultimately, we would expect our efficiency ratio to improve; however, if we are not successful in our integration
|
•
|
the purchase and assumption agreement and the shared-loss agreements we entered into with the FDIC in connection with the Cowlitz Acquisition and the Pierce Acquisition, have specific, detailed and cumbersome compliance, servicing, notification and reporting requirements. Our failure to comply with the terms of the agreements or to properly service the loans and real estate owned under the requirements of the shared-loss agreements may cause individual loans or large pools of loans to lose eligibility for shared-loss payments from the FDIC. This could result in material losses that are currently not anticipated.
|
•
|
excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans);
|
•
|
interest-only payments;
|
•
|
negative-amortization; and
|
•
|
terms longer than 30 years.
|
•
|
cash flow of the borrower and/or the project being financed;
|
•
|
the changes and uncertainties as to the future value of the collateral, in the case of a collateralized loan;
|
•
|
the character and creditworthiness of a particular borrower;
|
•
|
changes in economic and industry conditions; and
|
•
|
the duration of the loan.
|
•
|
our general reserve, based on our historical default and loss experience;
|
•
|
our specific reserve, based on our evaluation of nonperforming loans and their underlying collateral or discounted cash flows; and
|
•
|
current macroeconomic factors and management’s expectation of future events.
|
•
|
loan delinquencies, problem assets and foreclosures may increase;
|
•
|
we may increase our provision for loan losses;
|
•
|
demand for our products and services may decline possibly resulting in a decrease in our total loans;
|
•
|
collateral for loans made may decline further in value, exposing us to increased risk of loss on existing loans;
|
•
|
the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; and
|
•
|
the amount of our deposits may decrease and the composition of our deposits may be adversely affected.
|
|
|
|
|
|
|
Occupancy Type
|
|||||
County
|
|
State
|
|
Number of Branches
|
|
Owned
|
|
Leased
|
|||
Clark
|
|
WA
|
|
2
|
|
|
1
|
|
|
1
|
|
Cowlitz
|
|
WA
|
|
2
|
|
|
2
|
|
|
—
|
|
Island
|
|
WA
|
|
7
|
|
|
5
|
|
|
2
|
|
Kittitas
|
|
WA
|
|
1
|
|
|
—
|
|
|
1
|
|
King
|
|
WA
|
|
8
|
|
|
3
|
|
|
5
|
|
Mason
|
|
WA
|
|
1
|
|
|
1
|
|
|
—
|
|
Multnomah
|
|
OR
|
|
1
|
|
|
—
|
|
|
1
|
|
Pierce
|
|
WA
|
|
13
|
|
|
8
|
|
|
5
|
|
San Juan
|
|
WA
|
|
1
|
|
|
—
|
|
|
1
|
|
Skagit
|
|
WA
|
|
4
|
|
|
3
|
|
|
1
|
|
Snohomish
|
|
WA
|
|
12
|
|
|
6
|
|
|
6
|
|
Thurston
|
|
WA
|
|
5
|
|
|
3
|
|
|
2
|
|
Whatcom
|
|
WA
|
|
4
|
|
|
3
|
|
|
1
|
|
Yakima
|
|
WA
|
|
5
|
|
|
5
|
|
|
—
|
|
Total
|
|
|
|
66
|
|
|
40
|
|
|
26
|
|
ITEM 5.
|
MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
2014 Quarter ended,
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
High
|
|
$
|
18.48
|
|
|
$
|
17.86
|
|
|
$
|
16.96
|
|
|
$
|
17.97
|
|
Low
|
|
$
|
16.18
|
|
|
$
|
15.44
|
|
|
$
|
15.59
|
|
|
$
|
15.80
|
|
|
|
2013 Quarter ended,
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
High
|
|
$
|
15.22
|
|
|
$
|
14.65
|
|
|
$
|
16.45
|
|
|
$
|
17.48
|
|
Low
|
|
$
|
13.84
|
|
|
$
|
13.25
|
|
|
$
|
14.75
|
|
|
$
|
15.01
|
|
Declared
|
|
Cash
Dividend per Share
|
|
Record Date
|
|
Paid
|
January 30, 2013
|
|
$0.08
|
|
February 8, 2013
|
|
February 22, 2013
|
April 24, 2013
|
|
$0.08
|
|
May 10, 2013
|
|
May 24, 2013
|
July 23, 2013
|
|
$0.18
|
|
August 6, 2013
|
|
August 15, 2013
|
October 23, 2013
|
|
$0.08
|
|
November 5, 2013
|
|
November 15, 2013
|
January 29, 2014
|
|
$0.08
|
|
February 10, 2014
|
|
February 24, 2014
|
March 27, 2014
|
|
$0.08
|
|
April 8, 2014
|
|
April 23, 2014
|
July 24, 2014
|
|
$0.09
|
|
August 7, 2014
|
|
August 21, 2014
|
October 23, 2014
|
|
$0.09
|
|
November 6, 2014
|
|
November 20, 2014
|
November 11, 2014
|
|
$0.16
|
|
December 2, 2014
|
|
December 12, 2014
|
January 28, 2015
|
|
$0.10
|
|
February 10, 2015
|
|
February 24, 2015
|
|
Years Ended December 31,
|
|
|
||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
Plan Total
|
||||||||
Ninth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
389,627
|
|
|
590,832
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.45
|
|
|
$
|
12.83
|
|
|
|
|
|
|
|
|
|
||||||||
Tenth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
108,075
|
|
|
544,000
|
|
|
52,900
|
|
|
704,975
|
|
||||
Stock repurchase average share price
|
$
|
16.68
|
|
|
$
|
15.88
|
|
|
$
|
13.88
|
|
|
$
|
15.85
|
|
|
|
|
|
|
|
|
|
||||||||
Eleventh Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Period
|
|
Total Number of
Shares
Purchased(1)
|
|
Average Price
Paid Per Share(1)
|
|
Total Number of Shares Purchased as
Part of Publicly
Announced Plans or Programs
|
|
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs
|
||||
October 1, 2014—
October 30, 2014
|
|
277
|
|
|
$16.79
|
|
7,313,423
|
|
|
1,513,000
|
|
|
November 1, 2014—November 30, 2014
|
|
—
|
|
|
—
|
|
|
7,313,423
|
|
|
1,513,000
|
|
December 1, 2014—December 31, 2014
|
|
2,695
|
|
|
16.97
|
|
7,313,423
|
|
|
1,513,000
|
|
|
Total
|
|
2,972
|
|
|
$16.95
|
|
7,313,423
|
|
|
1,513,000
|
|
(1)
|
Common shares repurchased by the Company between October 1, 2014 and
December 31, 2014
included solely the cancellation of
2,972
shares of restricted stock to pay withholding taxes at an average price per share of
$16.95
.
|
|
|
Years Ended December 31,
|
||||||||||||||||||||||
Index
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
||||||||||||
Heritage Financial Corporation
|
|
$
|
100.00
|
|
|
$
|
101.02
|
|
|
$
|
94.13
|
|
|
$
|
116.47
|
|
|
$
|
139.38
|
|
|
$
|
147.38
|
|
NASDAQ Composite
|
|
100.00
|
|
|
118.15
|
|
|
117.22
|
|
|
138.02
|
|
|
193.47
|
|
|
222.16
|
|
||||||
NASDAQ Bank
|
|
100.00
|
|
|
114.16
|
|
|
102.17
|
|
|
121.26
|
|
|
171.86
|
|
|
180.31
|
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||||||
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income
|
|
$
|
121,106
|
|
|
71,428
|
|
|
$
|
69,109
|
|
|
$
|
74,120
|
|
|
$
|
59,522
|
|
|
Interest expense
|
|
5,681
|
|
|
3,724
|
|
|
4,534
|
|
|
6,582
|
|
|
8,511
|
|
|||||
Net interest income
|
|
115,425
|
|
|
67,704
|
|
|
64,575
|
|
|
67,538
|
|
|
51,011
|
|
|||||
Provision for loan losses
|
|
4,594
|
|
|
3,672
|
|
|
2,016
|
|
|
14,430
|
|
|
11,990
|
|
|||||
Noninterest income
|
|
16,467
|
|
|
9,651
|
|
|
7,272
|
|
|
5,746
|
|
|
18,779
|
|
|||||
Noninterest expense
|
|
99,379
|
|
|
59,515
|
|
|
50,392
|
|
|
49,703
|
|
|
38,011
|
|
|||||
Income tax expense
|
|
6,905
|
|
|
4,593
|
|
|
6,178
|
|
|
2,633
|
|
|
6,435
|
|
|||||
Net income
|
|
21,014
|
|
|
9,575
|
|
|
13,261
|
|
|
6,518
|
|
|
13,354
|
|
|||||
Net income applicable to common shareholders
|
|
21,014
|
|
|
9,575
|
|
|
13,261
|
|
|
6,518
|
|
|
11,668
|
|
|||||
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
$
|
0.82
|
|
|
$
|
0.61
|
|
|
$
|
0.87
|
|
|
$
|
0.42
|
|
|
$
|
1.05
|
|
Diluted
|
|
0.82
|
|
|
0.61
|
|
|
0.87
|
|
|
0.42
|
|
|
1.04
|
|
|||||
Dividend payout ratio to common shareholders(1)
|
|
60.98
|
%
|
|
68.90
|
%
|
|
92.00
|
%
|
|
90.50
|
%
|
|
—
|
%
|
|||||
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net interest spread(2)
|
|
4.45
|
%
|
|
4.69
|
%
|
|
5.03
|
%
|
|
5.23
|
%
|
|
4.56
|
%
|
|||||
Net interest margin(3)
|
|
4.53
|
|
|
4.80
|
|
|
5.17
|
|
|
5.41
|
|
|
4.78
|
|
|||||
Efficiency ratio(4)
|
|
75.35
|
|
|
76.94
|
|
|
70.14
|
|
|
67.82
|
|
|
54.46
|
|
|||||
Return on average assets
|
|
0.74
|
|
|
0.62
|
|
|
0.98
|
|
|
0.48
|
|
|
1.16
|
|
|||||
Return on average common equity
|
|
5.61
|
|
|
4.58
|
|
|
6.52
|
|
|
3.17
|
|
|
8.15
|
|
(1)
|
Dividend payout ratio is declared dividends per common share divided by basic earnings per common share.
|
(2)
|
Net interest spread is the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities.
|
(3)
|
Net interest margin is net interest income divided by average interest earning assets.
|
(4)
|
The efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.
|
|
|
December 31,
|
||||||||||||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
|
$
|
3,457,750
|
|
|
$
|
1,659,038
|
|
|
$
|
1,345,540
|
|
|
$
|
1,368,985
|
|
|
$
|
1,367,684
|
|
Noncovered loans receivable, net
|
|
2,102,724
|
|
|
1,145,509
|
|
|
914,366
|
|
|
899,086
|
|
|
851,006
|
|
|||||
Covered loans receivable, net
|
|
120,624
|
|
|
57,587
|
|
|
83,978
|
|
|
105,394
|
|
|
128,715
|
|
|||||
Total loans receivable, net
|
|
2,223,348
|
|
|
1,203,096
|
|
|
998,344
|
|
|
1,004,480
|
|
|
979,721
|
|
|||||
Investment securities
|
|
778,660
|
|
|
199,288
|
|
|
154,392
|
|
|
156,695
|
|
|
138,943
|
|
|||||
FDIC indemnification asset
|
|
1,116
|
|
|
4,382
|
|
|
7,100
|
|
|
10,350
|
|
|
16,071
|
|
|||||
Goodwill and other intangible assets
|
|
129,918
|
|
|
30,980
|
|
|
14,098
|
|
|
14,525
|
|
|
14,965
|
|
|||||
Deposits
|
|
2,906,331
|
|
|
1,399,189
|
|
|
1,117,971
|
|
|
1,136,044
|
|
|
1,136,276
|
|
|||||
Junior subordinated debentures
|
|
19,082
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Securities sold under agreement to repurchase
|
|
32,181
|
|
|
29,420
|
|
|
16,021
|
|
|
23,091
|
|
|
19,027
|
|
|||||
Stockholders’ equity
|
|
454,506
|
|
|
215,762
|
|
|
198,938
|
|
|
202,520
|
|
|
202,279
|
|
|||||
Book value per common share
|
|
$
|
15.02
|
|
|
$
|
13.31
|
|
|
$
|
13.16
|
|
|
$
|
13.10
|
|
|
$
|
12.99
|
|
Equity to assets ratio
|
|
13.1
|
%
|
|
13.0
|
%
|
|
14.8
|
%
|
|
14.8
|
%
|
|
14.8
|
%
|
|||||
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total risk-based capital ratio
|
|
15.1
|
%
|
|
16.8
|
%
|
|
19.9
|
%
|
|
20.3
|
%
|
|
21.5
|
%
|
|||||
Tier 1 risk-based capital ratio
|
|
13.9
|
|
|
15.5
|
|
|
18.7
|
|
|
19.0
|
|
|
20.2
|
|
|||||
Leverage ratio
|
|
10.2
|
|
|
11.3
|
|
|
13.6
|
|
|
13.8
|
|
|
13.9
|
|
|||||
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nonperforming noncovered loans to total noncovered loans (1)
|
|
0.35
|
%
|
|
0.66
|
%
|
|
1.41
|
%
|
|
2.57
|
%
|
|
3.03
|
%
|
|||||
Allowance for loan losses on noncovered loans to total noncovered loans (1)
|
|
1.04
|
|
|
1.94
|
|
|
2.58
|
|
|
2.91
|
|
|
2.53
|
|
|||||
Allowance for loan losses on noncovered loans to nonperforming noncovered loans (1)
|
|
294.98
|
|
|
292.80
|
|
|
183.39
|
|
|
113.11
|
|
|
83.31
|
|
|||||
Nonperforming noncovered assets to total noncovered assets (1)
|
|
0.29
|
|
|
0.76
|
|
|
1.48
|
|
|
2.19
|
|
|
2.38
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of banking offices
|
|
66
|
|
|
35
|
|
|
33
|
|
|
33
|
|
|
31
|
|
|||||
Number of full-time equivalent employees
|
|
748
|
|
|
373
|
|
|
363
|
|
|
354
|
|
|
321
|
|
(1)
|
Nonperforming noncovered loan balances include portions guaranteed by governmental agencies of
$1.6 million
,
$1.7 million
, $1.2 million, $1.8 million and $2.3 million as of December 31, 2014, 2013, 2012, 2011 and 2010, respectively.
|
ITEM 7.
|
MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired, including those from Cowlitz Bank, Pierce Commercial Bank, Northwest Commercial Bank, Valley Community Bancshares and Washington Banking Company, or may in the future acquire, into our operations and our ability to realize related revenue synergies and cost savings within expected time frames or at all, and any goodwill charges related thereto and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, which might be greater than expected;
|
•
|
the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets, which may lead to increased losses and non-performing assets in our loan portfolio, and may result in our allowance for loan losses not being adequate to cover actual losses, and require us to increase our allowance for loan losses and increase our provision for loan losses;
|
•
|
changes in general economic conditions, either nationally or in our market areas;
|
•
|
changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;
|
•
|
risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar;
|
•
|
fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas;
|
•
|
results of examinations of us by the bank regulators, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings;
|
•
|
legislative or regulatory changes that adversely affect our business including but not limited to, the Dodd-Frank Act and implementing regulations, changes in regulatory policies and principles, or the interpretation of regulatory capital or other rules as a result of Basel III;
|
•
|
our ability to control operating costs and expenses;
|
•
|
increases in premiums for deposit insurance;
|
•
|
the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;
|
•
|
difficulties in reducing risk associated with the loans on our consolidated statement of financial condition;
|
•
|
staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges;
|
•
|
failure or security breach of computer systems on which we depend;
|
•
|
our ability to retain key members of our senior management team;
|
•
|
costs and effects of litigation, including settlements and judgments;
|
•
|
our ability to implement our growth strategies;
|
•
|
increased competitive pressures among financial service companies;
|
•
|
changes in consumer spending, borrowing and savings habits;
|
•
|
the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;
|
•
|
adverse changes in the securities markets;
|
•
|
inability of key third-party providers to perform their obligations to us;
|
•
|
changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the FASB, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and
|
•
|
other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services and the other risks described elsewhere in this Form 10-K.
|
•
|
historical loss experience in the portfolio;
|
•
|
levels of and trends in delinquencies and impaired loans;
|
•
|
levels and trends in charge-offs and recoveries;
|
•
|
effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices;
|
•
|
experience, ability, and depth of lending management and other relevant staff;
|
•
|
national and local economic trends and conditions;
|
•
|
external factors such as competition, legal, and regulatory; and
|
•
|
effects of changes in credit concentrations.
|
|
Years Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||||||||||||||
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||
Interest Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Loans, net
|
$
|
1,871,696
|
|
|
$
|
110,437
|
|
|
5.90
|
%
|
|
$
|
1,124,828
|
|
|
$
|
67,630
|
|
|
6.01
|
%
|
|
$
|
996,186
|
|
|
$
|
65,588
|
|
|
6.58
|
%
|
Taxable securities
|
383,626
|
|
|
7,328
|
|
|
1.91
|
|
|
117,132
|
|
|
1,918
|
|
|
1.64
|
|
|
118,124
|
|
|
2,195
|
|
|
1.86
|
|
||||||
Nontaxable securities
|
145,113
|
|
|
2,886
|
|
|
1.99
|
|
|
64,018
|
|
|
1,539
|
|
|
2.40
|
|
|
42,272
|
|
|
1,097
|
|
|
2.60
|
|
||||||
Other interest earning assets
|
150,189
|
|
|
455
|
|
|
0.30
|
|
|
104,770
|
|
|
341
|
|
|
0.33
|
|
|
92,324
|
|
|
229
|
|
|
0.25
|
|
||||||
Total interest earning assets
|
2,550,624
|
|
|
121,106
|
|
|
4.75
|
|
|
1,410,748
|
|
|
71,428
|
|
|
5.06
|
|
|
1,248,906
|
|
|
69,109
|
|
|
5.53
|
|
||||||
Noninterest earning assets
|
295,666
|
|
|
|
|
|
|
129,324
|
|
|
|
|
|
|
105,166
|
|
|
|
|
|
||||||||||||
Total assets
|
$
|
2,846,290
|
|
|
|
|
|
|
$
|
1,540,072
|
|
|
|
|
|
|
$
|
1,354,072
|
|
|
|
|
|
|||||||||
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Certificates of deposit
|
$
|
494,948
|
|
|
$
|
2,991
|
|
|
0.60
|
%
|
|
$
|
307,464
|
|
|
$
|
2,478
|
|
|
0.81
|
%
|
|
$
|
306,772
|
|
|
$
|
3,016
|
|
|
0.98
|
%
|
Savings accounts
|
282,150
|
|
|
252
|
|
|
0.09
|
|
|
143,412
|
|
|
164
|
|
|
0.11
|
|
|
113,119
|
|
|
204
|
|
|
0.18
|
|
||||||
Interest bearing demand and money market accounts
|
1,049,078
|
|
|
1,907
|
|
|
0.18
|
|
|
541,793
|
|
|
1,031
|
|
|
0.19
|
|
|
466,268
|
|
|
1,249
|
|
|
0.27
|
|
||||||
Total interest bearing deposits
|
1,826,176
|
|
|
5,150
|
|
|
0.28
|
|
|
992,669
|
|
|
3,673
|
|
|
0.37
|
|
|
886,159
|
|
|
4,469
|
|
|
0.50
|
|
||||||
Junior subordinated debentures
|
12,751
|
|
|
458
|
|
|
3.59
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
FHLB advances and other borrowings
|
111
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Securities sold under agreement to repurchase
|
27,984
|
|
|
73
|
|
|
0.26
|
|
|
19,102
|
|
|
51
|
|
|
0.27
|
|
|
18,314
|
|
|
65
|
|
|
0.35
|
|
||||||
Total interest bearing liabilities
|
1,867,022
|
|
|
5,681
|
|
|
0.30
|
|
|
1,011,771
|
|
|
3,724
|
|
|
0.37
|
|
|
904,473
|
|
|
4,534
|
|
|
0.50
|
|
|
Years Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||||||||||||||
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate
|
|||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||
Demand and other noninterest bearing deposits
|
574,692
|
|
|
|
|
|
|
308,582
|
|
|
|
|
|
|
237,888
|
|
|
|
|
|
||||||||||||
Other noninterest bearing liabilities
|
29,669
|
|
|
|
|
|
|
10,543
|
|
|
|
|
|
|
8,310
|
|
|
|
|
|
||||||||||||
Stockholders’ equity
|
374,907
|
|
|
|
|
|
|
209,176
|
|
|
|
|
|
|
203,401
|
|
|
|
|
|
||||||||||||
Total liabilities and stock-holders’ equity
|
$
|
2,846,290
|
|
|
|
|
|
|
$
|
1,540,072
|
|
|
|
|
|
|
$
|
1,354,072
|
|
|
|
|
|
|||||||||
Net interest income
|
|
|
$
|
115,425
|
|
|
|
|
|
|
$
|
67,704
|
|
|
|
|
|
|
$
|
64,575
|
|
|
|
|||||||||
Net interest spread
|
|
|
|
|
4.45
|
%
|
|
|
|
|
|
4.69
|
%
|
|
|
|
|
|
5.03
|
%
|
||||||||||||
Net interest margin
|
|
|
|
|
4.53
|
%
|
|
|
|
|
|
4.80
|
%
|
|
|
|
|
|
5.17
|
%
|
||||||||||||
Average interest earning assets to average interest bearing liabilities
|
|
|
|
|
136.61
|
%
|
|
|
|
|
|
139.43
|
%
|
|
|
|
|
|
138.08
|
%
|
|
|
Years Ended December 31,
|
||||||||||||||||||||||
|
|
2014 Compared to 2013
Increase (Decrease) Due to
|
|
2013 Compared to 2012
Increase (Decrease) Due to
|
||||||||||||||||||||
|
|
Volume
|
|
Rate
|
|
Total
|
|
Volume
|
|
Rate
|
|
Total
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Interest Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans
|
|
$
|
44,068
|
|
|
$
|
(1,261
|
)
|
|
$
|
42,807
|
|
|
$
|
7,735
|
|
|
$
|
(5,693
|
)
|
|
$
|
2,042
|
|
Taxable securities
|
|
5,090
|
|
|
320
|
|
|
5,410
|
|
|
(16
|
)
|
|
(261
|
)
|
|
(277
|
)
|
||||||
Nontaxable securities
|
|
1,613
|
|
|
(266
|
)
|
|
1,347
|
|
|
523
|
|
|
(81
|
)
|
|
442
|
|
||||||
Other interest earning assets
|
|
138
|
|
|
(24
|
)
|
|
114
|
|
|
40
|
|
|
72
|
|
|
112
|
|
||||||
Interest income
|
|
$
|
50,909
|
|
|
$
|
(1,231
|
)
|
|
$
|
49,678
|
|
|
$
|
8,282
|
|
|
$
|
(5,963
|
)
|
|
$
|
2,319
|
|
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
|
$
|
1,133
|
|
|
$
|
(620
|
)
|
|
$
|
513
|
|
|
$
|
5
|
|
|
$
|
(543
|
)
|
|
$
|
(538
|
)
|
Savings accounts
|
|
124
|
|
|
(36
|
)
|
|
88
|
|
|
35
|
|
|
(75
|
)
|
|
(40
|
)
|
||||||
Interest bearing demand and money market accounts
|
|
922
|
|
|
(46
|
)
|
|
876
|
|
|
144
|
|
|
(362
|
)
|
|
(218
|
)
|
||||||
Total interest bearing deposits
|
|
2,179
|
|
|
(702
|
)
|
|
1,477
|
|
|
184
|
|
|
(980
|
)
|
|
(796
|
)
|
||||||
Junior subordinated debentures
|
|
458
|
|
|
—
|
|
|
458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
FHLB advances and other borrowings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Securities sold under agreement to repurchase
|
|
23
|
|
|
(1
|
)
|
|
22
|
|
|
2
|
|
|
(16
|
)
|
|
(14
|
)
|
||||||
Interest expense
|
|
$
|
2,660
|
|
|
$
|
(703
|
)
|
|
$
|
1,957
|
|
|
$
|
186
|
|
|
$
|
(996
|
)
|
|
$
|
(810
|
)
|
Net Interest Income
|
|
$
|
48,249
|
|
|
$
|
(528
|
)
|
|
$
|
47,721
|
|
|
$
|
8,096
|
|
|
$
|
(4,967
|
)
|
|
$
|
3,129
|
|
|
Years Ended December 31,
|
||||
|
2014
|
|
2013
|
||
Net interest margin, excluding incremental accretion on purchased loans (1)
|
3.97
|
%
|
|
4.32
|
%
|
Impact on net interest margin from incremental accretion on purchased loans (1)
|
0.56
|
|
|
0.48
|
|
Net interest margin
|
4.53
|
%
|
|
4.80
|
%
|
(1)
|
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. This income results from the discount established at the time these loan portfolios were acquired and modified quarterly as a result of cash flow re-estimation.
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
(Dollars in thousands)
|
||||||
General Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
18,918
|
|
|
$
|
18,618
|
|
Gross noncovered loan balance of non-impaired loans
|
2,099,658
|
|
|
1,140,967
|
|
||
Percentage
|
0.90
|
%
|
|
1.63
|
%
|
||
|
|
|
|
||||
Specific Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
3,235
|
|
|
$
|
4,039
|
|
Gross noncovered loan balance of impaired loans
|
26,156
|
|
|
29,869
|
|
||
Percentage
|
12.37
|
%
|
|
13.52
|
%
|
||
|
|
|
|
||||
Total Allowance for Loan Losses on noncovered loans:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
22,153
|
|
|
$
|
22,657
|
|
Gross noncovered loan balance
|
2,125,814
|
|
|
1,170,836
|
|
||
Percentage
|
1.04
|
%
|
|
1.94
|
%
|
|
Years Ended December 31,
|
|
|
|
|
|||||||||
|
2014
|
|
2013
|
|
Change 2014 vs. 2013
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Bargain purchase gain on bank acquisition
|
$
|
—
|
|
|
$
|
399
|
|
|
$
|
(399
|
)
|
|
100.0
|
%
|
Service charges and other fees
|
11,143
|
|
|
5,936
|
|
|
5,207
|
|
|
87.7
|
|
|||
Merchant Visa income, net
|
1,076
|
|
|
862
|
|
|
214
|
|
|
24.8
|
|
|||
Change in FDIC indemnification asset
|
(2,543
|
)
|
|
(181
|
)
|
|
(2,362
|
)
|
|
(1,305.0
|
)
|
|||
Gain on sale of investment securities, net
|
287
|
|
|
—
|
|
|
287
|
|
|
100.0
|
|
|||
Gain on sale of loans, net
|
1,518
|
|
|
142
|
|
|
1,376
|
|
|
969.0
|
|
|||
Other income
|
4,986
|
|
|
2,493
|
|
|
2,493
|
|
|
100.0
|
|
|||
Total noninterest income
|
$
|
16,467
|
|
|
$
|
9,651
|
|
|
$
|
6,816
|
|
|
70.6
|
%
|
|
Years Ended December 31,
|
|
|
|
|
|||||||||
|
2014
|
|
2013
|
|
Change 2014 vs. 2013
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Compensation and employee benefits
|
$
|
52,634
|
|
|
$
|
31,612
|
|
|
$
|
21,022
|
|
|
66.5
|
%
|
Occupancy and equipment
|
13,406
|
|
|
9,724
|
|
|
3,682
|
|
|
37.9
|
|
|||
Data processing
|
9,243
|
|
|
4,806
|
|
|
4,437
|
|
|
92.3
|
|
|||
Marketing
|
2,502
|
|
|
1,598
|
|
|
904
|
|
|
56.6
|
|
|||
Professional services
|
6,185
|
|
|
3,936
|
|
|
2,249
|
|
|
57.1
|
|
|||
State and local taxes
|
1,976
|
|
|
1,150
|
|
|
826
|
|
|
71.8
|
|
|||
Impairment loss on investment securities, net
|
45
|
|
|
38
|
|
|
7
|
|
|
18.4
|
|
|||
Federal deposit insurance premium
|
1,718
|
|
|
1,001
|
|
|
717
|
|
|
71.6
|
|
|||
Other real estate owned, net
|
638
|
|
|
309
|
|
|
329
|
|
|
106.5
|
|
|||
Amortization of intangible assets
|
1,920
|
|
|
543
|
|
|
1,377
|
|
|
253.6
|
|
|||
Other expense
|
9,112
|
|
|
4,798
|
|
|
4,314
|
|
|
89.9
|
|
|||
Total noninterest expense
|
$
|
99,379
|
|
|
$
|
59,515
|
|
|
$
|
39,864
|
|
|
67.0
|
%
|
|
|
Years Ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(In thousands)
|
||||||
Company Initiatives:
|
|
|
|
|
||||
NCB Acquisition
|
|
$
|
—
|
|
|
$
|
794
|
|
CVB Merger
|
|
—
|
|
|
220
|
|
||
Valley Acquisition
|
|
443
|
|
|
2,118
|
|
||
Core system conversion
|
|
40
|
|
|
842
|
|
||
Consolidation of existing branches
|
|
11
|
|
|
238
|
|
||
Washington Banking Merger
|
|
9,094
|
|
|
890
|
|
||
Total expense
|
|
$
|
9,588
|
|
|
$
|
5,102
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(In thousands)
|
||||||
Expense Caption:
|
|
|
|
|
||||
Compensation and employee benefits
|
|
$
|
1,522
|
|
|
$
|
475
|
|
Occupancy and equipment
|
|
602
|
|
|
1,328
|
|
||
Data processing
|
|
3,038
|
|
|
1,291
|
|
||
Marketing
|
|
140
|
|
|
34
|
|
||
Professional services
|
|
3,751
|
|
|
1,876
|
|
||
Other expense
|
|
535
|
|
|
98
|
|
||
Total expense
|
|
$
|
9,588
|
|
|
$
|
5,102
|
|
•
|
Compensation and employee benefits expense consisted substantially of retention bonus and severances packages paid to transition employees.
|
•
|
Occupancy and equipment expense consisted primarily of lease termination costs.
|
•
|
Data processing expense consisted of costs relating to the Company’s core system conversion as well as data conversions of the NCB, Valley Bank and Whidbey Island Bank information to the Heritage core system.
|
•
|
Professional services expense related to fees paid to: (1) financial advisors for the NCB Acquisition, Valley Acquisition and Washington Banking Merger, (2) attorney, accountant and consultant fees related to mergers and acquisitions, and (3) consultant fees relating to the Company's core system conversion.
|
|
Years Ended
December 31, |
||||
|
2013
|
|
2012
|
||
Net interest margin, excluding incremental accretion on purchased loans (1)
|
4.32
|
%
|
|
4.67
|
%
|
Impact on net interest margin from incremental accretion on purchased loans (1)
|
0.48
|
|
|
0.50
|
|
Net interest margin
|
4.80
|
%
|
|
5.17
|
%
|
(1)
|
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. This income results from the discount established at the time these loan portfolios were acquired and modified quarterly as a result of cash flow re-estimation.
|
|
December 31, 2013
|
|
December 31, 2012
|
||||
|
(Dollars in thousands)
|
||||||
General Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
18,618
|
|
|
$
|
19,558
|
|
Gross noncovered loan balance of non-impaired loans
|
1,140,967
|
|
|
927,485
|
|
||
Percentage
|
1.63
|
%
|
|
2.11
|
%
|
||
|
|
|
|
||||
Specific Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
4,039
|
|
|
$
|
4,684
|
|
Gross noncovered loan balance of impaired loans
|
29,869
|
|
|
13,219
|
|
||
Percentage
|
13.52
|
%
|
|
35.43
|
%
|
||
|
|
|
|
||||
Total Allowance for Loan Losses on noncovered loans:
|
|
|
|
||||
Allowance for loan losses on noncovered loans
|
$
|
22,657
|
|
|
$
|
24,242
|
|
Gross noncovered loan balance
|
1,170,836
|
|
|
940,704
|
|
||
Percentage
|
1.94
|
%
|
|
2.58
|
%
|
|
Years Ended December 31,
|
|
|
|
|
|||||||||
|
2013
|
|
2012
|
|
Change 2013 vs. 2012
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Bargain purchase gain on bank acquisition
|
$
|
399
|
|
|
$
|
—
|
|
|
$
|
399
|
|
|
100.0
|
%
|
Service charges and other fees
|
5,936
|
|
|
5,516
|
|
|
420
|
|
|
7.6
|
|
|||
Merchant Visa income, net
|
862
|
|
|
685
|
|
|
177
|
|
|
25.8
|
|
|||
Change in FDIC indemnification asset
|
(181
|
)
|
|
(1,033
|
)
|
|
852
|
|
|
82.5
|
|
|||
Gain on sale of loans
|
142
|
|
|
295
|
|
|
(153
|
)
|
|
(51.9
|
)
|
|||
Other income
|
2,493
|
|
|
1,809
|
|
|
684
|
|
|
37.8
|
|
|||
Total noninterest income
|
$
|
9,651
|
|
|
$
|
7,272
|
|
|
$
|
2,379
|
|
|
32.7
|
%
|
|
Years Ended December 31,
|
|
|
|
|
|||||||||
|
2013
|
|
2012
|
|
Change 2013 vs. 2012
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Compensation and employee benefits
|
$
|
31,612
|
|
|
$
|
29,020
|
|
|
$
|
2,592
|
|
|
8.9
|
%
|
Occupancy and equipment
|
9,724
|
|
|
7,365
|
|
|
2,359
|
|
|
32.0
|
|
|||
Data processing
|
4,806
|
|
|
2,555
|
|
|
2,251
|
|
|
88.1
|
|
|||
Marketing
|
1,598
|
|
|
1,517
|
|
|
81
|
|
|
5.3
|
|
|||
Professional services
|
3,936
|
|
|
2,543
|
|
|
1,393
|
|
|
54.8
|
|
|||
State and local taxes
|
1,150
|
|
|
1,226
|
|
|
(76
|
)
|
|
(6.2
|
)
|
|||
Impairment loss on investment securities, net
|
38
|
|
|
78
|
|
|
(40
|
)
|
|
(51.3
|
)
|
|||
Federal deposit insurance premium
|
1,001
|
|
|
1,002
|
|
|
(1
|
)
|
|
(0.1
|
)
|
|||
Other real estate owned, net
|
309
|
|
|
316
|
|
|
(7
|
)
|
|
(2.2
|
)
|
|||
Amortization of intangible assets
|
543
|
|
|
427
|
|
|
116
|
|
|
27.2
|
|
|||
Other expense
|
4,798
|
|
|
4,343
|
|
|
455
|
|
|
10.5
|
|
|||
Total noninterest expense
|
$
|
59,515
|
|
|
$
|
50,392
|
|
|
$
|
9,123
|
|
|
18.1
|
%
|
|
|
Years Ended December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Company Initiatives:
|
|
|
|
|
||||
NCB Acquisition
|
|
$
|
794
|
|
|
$
|
616
|
|
CVB Merger
|
|
220
|
|
|
—
|
|
||
Valley Acquisition
|
|
2,118
|
|
|
—
|
|
||
Core system conversion
|
|
842
|
|
|
—
|
|
||
Consolidation of existing branches
|
|
238
|
|
|
—
|
|
||
Washington Banking Merger
|
|
890
|
|
|
—
|
|
||
Total expense
|
|
$
|
5,102
|
|
|
$
|
616
|
|
|
|
Years Ended December 31,
|
||||||
|
|
2013
|
|
2012
|
||||
|
|
(In thousands)
|
||||||
Expense Caption:
|
|
|
|
|
||||
Compensation and employee benefits
|
|
$
|
475
|
|
|
$
|
—
|
|
Occupancy and equipment
|
|
1,328
|
|
|
—
|
|
||
Data processing
|
|
1,291
|
|
|
—
|
|
||
Marketing
|
|
34
|
|
|
—
|
|
||
Professional services
|
|
1,876
|
|
|
610
|
|
||
Other expense
|
|
98
|
|
|
6
|
|
||
Total expense
|
|
$
|
5,102
|
|
|
$
|
616
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|
Change 2014 vs. 2013
|
|
Fair Value of Washington Banking at Merger Date
|
||||||||
|
(Dollars in thousands)
|
||||||||||||||
Cash and cash equivalents
|
$
|
121,636
|
|
|
$
|
130,400
|
|
|
$
|
(8,764
|
)
|
|
$
|
74,947
|
|
Other interest earning deposits
|
10,126
|
|
|
15,662
|
|
|
(5,536
|
)
|
|
—
|
|
||||
Investment securities available for sale
|
742,846
|
|
|
163,134
|
|
|
579,712
|
|
|
458,312
|
|
||||
Investment securities held to maturity
|
35,814
|
|
|
36,154
|
|
|
(340
|
)
|
|
—
|
|
||||
Loans held for sale
|
5,582
|
|
|
—
|
|
|
5,582
|
|
|
3,923
|
|
||||
Noncovered loans receivable, net of allowance for loan losses
|
2,102,724
|
|
|
1,145,509
|
|
|
957,215
|
|
|
895,978
|
|
||||
Covered loans receivable, net of allowance for loan losses
|
120,624
|
|
|
57,587
|
|
|
63,037
|
|
|
107,050
|
|
||||
FDIC indemnification asset
|
1,116
|
|
|
4,382
|
|
|
(3,266
|
)
|
|
7,174
|
|
||||
Other real estate owned
|
3,355
|
|
|
4,559
|
|
|
(1,204
|
)
|
|
7,121
|
|
||||
Premises and equipment, net
|
64,938
|
|
|
34,348
|
|
|
30,590
|
|
|
31,776
|
|
||||
FHLB stock, at cost
|
12,188
|
|
|
5,741
|
|
|
6,447
|
|
|
7,064
|
|
||||
Bank owned life insurance
|
35,176
|
|
|
2,193
|
|
|
32,983
|
|
|
32,519
|
|
||||
Accrued interest receivable
|
9,836
|
|
|
5,462
|
|
|
4,374
|
|
|
4,943
|
|
||||
Prepaid expenses and other assets
|
61,871
|
|
|
22,927
|
|
|
38,944
|
|
|
14,852
|
|
||||
Other intangible assets, net
|
10,889
|
|
|
1,615
|
|
|
9,274
|
|
|
11,194
|
|
||||
Goodwill
|
119,029
|
|
|
29,365
|
|
|
89,664
|
|
|
89,664
|
|
||||
Total assets
|
$
|
3,457,750
|
|
|
$
|
1,659,038
|
|
|
$
|
1,798,712
|
|
|
$
|
1,746,517
|
|
|
|
December 31, 2014
|
||||||||||||||||||||||
|
|
Up to
1 year
|
|
Over 1-3
years
|
|
Over 3-5
years
|
|
More
than
5 years
|
|
Other (1)
|
|
Total
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Contractual payments by period:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Deposits
|
|
$
|
347,895
|
|
|
$
|
143,103
|
|
|
$
|
33,770
|
|
|
$
|
629
|
|
|
$
|
2,380,934
|
|
|
$
|
2,906,331
|
|
Operating leases
|
|
3,307
|
|
|
5,725
|
|
|
3,780
|
|
|
3,723
|
|
|
—
|
|
|
16,535
|
|
||||||
Total contractual obligations
|
|
$
|
351,202
|
|
|
$
|
148,828
|
|
|
$
|
37,550
|
|
|
$
|
4,352
|
|
|
$
|
2,380,934
|
|
|
$
|
2,922,866
|
|
(1)
|
Represents interest bearing and noninterest bearing checking, money market and checking accounts which can generally be withdrawn on demand and thereby have an undefined maturity.
|
|
|
December 31, 2014
|
||||||||||||||||||||||
|
|
Estimated Maturity or Repricing Within
|
||||||||||||||||||||||
|
|
0-3
months
|
|
Over 3
months-12
months
|
|
1-5
years
|
|
Over 5
years -15
years
|
|
Over
15 years
|
|
Total
|
||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
Interest Earnings Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans Receivable (1)
|
|
$
|
1,077,856
|
|
|
$
|
87,449
|
|
|
$
|
919,891
|
|
|
$
|
165,551
|
|
|
$
|
1,267
|
|
|
$
|
2,252,014
|
|
Investment securities (2)
|
|
34,000
|
|
|
27,075
|
|
|
136,295
|
|
|
384,953
|
|
|
196,337
|
|
|
778,660
|
|
||||||
FHLB stock
|
|
12,188
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,188
|
|
||||||
Interest earning deposits
|
|
47,608
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47,608
|
|
||||||
Other interest earning deposits
|
|
818
|
|
|
6,572
|
|
|
2,736
|
|
|
—
|
|
|
—
|
|
|
10,126
|
|
||||||
Total interest earning assets
|
|
$
|
1,172,470
|
|
|
$
|
121,096
|
|
|
$
|
1,058,922
|
|
|
$
|
550,504
|
|
|
$
|
197,604
|
|
|
$
|
3,100,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Percentage of interest earning assets
|
|
37.8
|
%
|
|
3.9
|
%
|
|
34.2
|
%
|
|
17.7
|
%
|
|
6.4
|
%
|
|
100.0
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total interest bearing deposits(3)
|
|
$
|
1,797,371
|
|
|
$
|
225,216
|
|
|
$
|
173,442
|
|
|
$
|
629
|
|
|
$
|
—
|
|
|
$
|
2,196,658
|
|
Junior subordinated debentures
|
|
19,082
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,082
|
|
||||||
Securities sold under agreement to repurchase
|
|
32,181
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,181
|
|
||||||
Total interest bearing liabilities
|
|
$
|
1,848,634
|
|
|
$
|
225,216
|
|
|
$
|
173,442
|
|
|
$
|
629
|
|
|
$
|
—
|
|
|
$
|
2,247,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest bearing liabilities, as a percentage of total interest earning assets
|
|
59.6
|
%
|
|
7.3
|
%
|
|
5.6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
72.5
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate sensitivity gap
|
|
$
|
(676,164
|
)
|
|
$
|
(104,120
|
)
|
|
$
|
885,480
|
|
|
$
|
549,875
|
|
|
$
|
197,604
|
|
|
$
|
852,675
|
|
Interest rate sensitivity gap, as a percentage of total interest earning assets
|
|
(21.8
|
)%
|
|
(3.4
|
)%
|
|
28.6
|
%
|
|
17.7
|
%
|
|
6.4
|
%
|
|
27.5
|
%
|
||||||
Cumulative interest rate sensitivity gap
|
|
$
|
(676,164
|
)
|
|
$
|
(780,284
|
)
|
|
$
|
105,196
|
|
|
$
|
655,071
|
|
|
$
|
852,675
|
|
|
|
||
Cumulative interest rate sensitivity gap, as a percentage of total interest earning assets
|
|
(21.8
|
)%
|
|
(25.2
|
)%
|
|
3.4
|
%
|
|
21.1
|
%
|
|
27.5
|
%
|
|
|
(1)
|
Excludes deferred loan fees and allowance for loan losses.
|
(2)
|
Interest earning investment securities with no stated maturity date are included in 0-3 months as prices may adjust immediately.
|
(3)
|
Adjustable-rate liabilities are included in the period in which interest rates are next scheduled to adjust rather than in the period they are due to mature. Although regular savings, demand, NOW, and money market deposit accounts are subject to immediate withdrawal, based on historical experience management considers a substantial amount of such accounts to be core deposits having significantly longer maturities.
|
|
|
By Expected Maturity Date
|
||||||||||||||||||||||||||
|
|
Year Ended December 31,
|
||||||||||||||||||||||||||
|
|
0-3
months
|
|
Over 3
months-
12
months
|
|
1-5
years
|
|
Over 5
years -15
years
|
|
Over
15 years
|
|
Total
|
|
Fair Value
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
Investment Securities(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
—
|
|
|
$
|
7,066
|
|
|
$
|
65,612
|
|
|
$
|
404,540
|
|
|
$
|
221,315
|
|
|
$
|
698,533
|
|
|
|
||
Weighted average interest rate
|
|
—
|
%
|
|
2.2
|
%
|
|
2.1
|
%
|
|
2.6
|
%
|
|
2.4
|
%
|
|
2.5
|
%
|
|
|
||||||||
Adjustable rate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
12,322
|
|
|
$
|
65,822
|
|
|
$
|
78,154
|
|
|
|
||
Weighted average interest rate
|
|
—
|
%
|
|
—
|
%
|
|
2.3
|
%
|
|
1.1
|
%
|
|
1.4
|
%
|
|
1.4
|
%
|
|
|
||||||||
Total
|
|
$
|
—
|
|
|
$
|
7,066
|
|
|
$
|
65,622
|
|
|
$
|
416,862
|
|
|
$
|
287,137
|
|
|
$
|
776,687
|
|
|
$
|
777,747
|
|
Loans(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
42,727
|
|
|
$
|
51,655
|
|
|
$
|
313,953
|
|
|
$
|
295,738
|
|
|
$
|
79,421
|
|
|
$
|
783,494
|
|
|
|
||
Weighted average interest rate
|
|
4.8
|
%
|
|
5.4
|
%
|
|
5.0
|
%
|
|
4.5
|
%
|
|
4.9
|
%
|
|
4.8
|
%
|
|
|
||||||||
Adjustable rate
|
|
$
|
96,471
|
|
|
$
|
142,042
|
|
|
$
|
244,540
|
|
|
$
|
817,321
|
|
|
$
|
168,146
|
|
|
$
|
1,468,520
|
|
|
|
||
Weighted average interest rate
|
|
5.3
|
%
|
|
5.1
|
%
|
|
4.6
|
%
|
|
4.7
|
%
|
|
4.2
|
%
|
|
4.7
|
%
|
|
|
||||||||
Total
|
|
$
|
139,198
|
|
|
$
|
193,697
|
|
|
$
|
558,493
|
|
|
$
|
1,113,059
|
|
|
$
|
247,567
|
|
|
$
|
2,252,014
|
|
|
$
|
2,279,081
|
|
Certificates of Deposit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
1,693
|
|
|
$
|
346,202
|
|
|
$
|
176,873
|
|
|
$
|
629
|
|
|
$
|
—
|
|
|
$
|
525,397
|
|
|
$
|
525,768
|
|
Weighted average interest rate
|
|
0.3
|
%
|
|
0.7
|
%
|
|
0.9
|
%
|
|
0.3
|
%
|
|
—
|
%
|
|
0.7
|
%
|
|
|
||||||||
Junior Subordinated Debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Adjustable rate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,082
|
|
|
$
|
19,082
|
|
|
$
|
19,082
|
|
Weighted average interest rate (3)
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
3.6
|
%
|
|
3.6
|
%
|
|
|
(1)
|
Balances represent carrying value, and excludes investment securities with no stated maturity.
|
(2)
|
Excludes deferred loan fees and allowance for loan losses.
|
(3)
|
The contractual interest rate of the junior subordinated debentures was 1.82% at December 31, 2014. The weighted average interest rate includes the effects of the discount accretion for the Washington Banking Merger purchase accounting adjustment.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Plan Category
|
|
Number of
securities
to be issued
upon exercise of outstanding
options and
awards
|
|
Weighted-
average
exercise
price of
outstanding
options
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
|
||||
Equity compensation plans, all of which are approved by security holders
|
|
395,076
|
|
|
$
|
14.56
|
|
|
1,384,105
|
|
ITEM 13.
|
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
Exhibit No.
|
|
Description of Exhibit
|
|
2.1
|
|
|
Purchase and Assumption Agreement for Cowlitz Acquisition (1)
|
|
|
|
|
2.2
|
|
|
Purchase and Assumption Agreement for Pierce Acquisition (2)
|
|
|
|
|
2.3
|
|
|
Definitive Agreement for Valley Acquisition (3)
|
|
|
|
|
2.4
|
|
|
Agreement and Plan of Merger with Washington Banking Company (4)
|
|
|
|
|
3.1
|
|
|
Articles of Incorporation (5)
|
|
|
||
3.2
|
|
|
Amended and Restated Bylaws of the Company (6)
|
|
|
||
10.1
|
|
|
1998 Stock Option and Restricted Stock Award Plan (7)
|
|
|
||
10.2
|
|
|
1997 Stock Option and Restricted Stock Award Plan (8)
|
|
|
||
10.3
|
|
|
2002 Incentive Stock Option Plan, Director Nonqualified Stock Option Plan, and Restricted Stock Option Plan (9)
|
|
|
||
10.4
|
|
|
2006 Incentive Stock Option Plan, Director Nonqualified Stock Option Plan, and Restricted Stock Option Plan (10)
|
|
|
|
|
10.5
|
|
|
Annual Incentive Compensation Plan (11)
|
|
|
||
10.6
|
|
|
2010 Omnibus Equity Plan (12)
|
|
|
|
|
10.7
|
|
|
2014 Omnibus Equity Plan (13)
|
|
|
|
|
10.8
|
|
|
Form of Nonqualified Stock Option Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
|
|
10.9
|
|
|
Form of Restricted Stock Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
||
10.10
|
|
|
Form of Restricted Stock Unit Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
|
|
10.11
|
|
|
Deferred Compensation Plan and Participation Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15)
|
|
|
||
10.12
|
|
|
Employment Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15)
|
|
|
||
10.13
|
|
|
Employment Agreement and Deferred Compensation Participation Agreement by and between Heritage and David A. Spurling (16)
|
|
|
||
10.14
|
|
|
Employment Agreement by and between Heritage and Bryan McDonald (17)
|
|
|
|
|
10.15
|
|
|
Employment Agreements by and between Heritage and Edward Eng (17)
|
|
|
|
|
10.16
|
|
|
Deferred Compensation Plan and Participation Agreement by and between Heritage and Bryan D. McDonald (20)
|
|
|
|
|
11
|
|
|
Statement regarding computation of earnings per share (18)
|
|
|
||
14.0
|
|
|
Code of Ethics and Conduct Policy (19)
|
|
|
|
|
21.0
|
|
|
Subsidiaries of the Company (20)
|
|
|
|
|
23.0
|
|
|
Consent of Independent Registered Public Accounting Firm (20)
|
|
|
|
|
24.0
|
|
|
Power of Attorney (20)
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
||
31.2
|
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
||
32.1
|
|
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
||
101
|
|
|
The following materials from Heritage Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in Extensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders' Equity; (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements (21)
|
(1)
|
Incorporated by reference to the Current Report on Form 8-K dated July 30, 2010.
|
(2)
|
Incorporated by reference to the Current Report on Form 8-K dated November 5, 2010.
|
(3)
|
Incorporated by reference to the Current Report on Form 8-K dated March 11, 2013.
|
(4)
|
Incorporated by reference to the Current Report on Form 8-K dated October 23, 2013.
|
(5)
|
Incorporated by reference to the Registration Statement on Form S-1 (Reg. No. 333-35573) declared effective on November 12, 1997; as amended, said Amendment being incorporated by reference to the Amendment to the Articles of Incorporation of Heritage Financial Corporation filed with the Current Report on Form 8-K dated November 25, 2008.
|
(6)
|
Incorporated by reference to the Current Report on Form 8-K dated April 30, 2014.
|
(7)
|
Incorporated by reference to the Registration Statement on Form S-8 (Reg. No. 333-71415).
|
(8)
|
Incorporated by reference to the Registration Statement on Form S-8 (Reg. No. 333-57513).
|
(9)
|
Incorporated by reference to the Registration Statements on Form S-8 (Reg. No. 333-88980; 333-88982; 333-88976).
|
(10)
|
Incorporated by reference to the Registration Statements on Form S-8 (Reg. No. 333-134473; 333-134474; 333-134475).
|
(11)
|
Incorporated by reference to the Annual Report on Form 10-K dated March 2, 2010.
|
(12)
|
Incorporated by reference to the Registration Statement on Form S-8 (Reg. No. 33-167146).
|
(13)
|
Incorporated by reference to Heritage Financial Corporation's definitive proxy statement dated June 11, 2014.
|
(14)
|
Incorporated by reference to the Current Report on Form 10-Q dated August 6, 2014.
|
(15)
|
Incorporated by reference to the Current Report on Form 8-K dated September 7, 2012.
|
(16)
|
Incorporated by reference to the Current Report on Form 8-K dated January 6, 2014.
|
(17)
|
Incorporated by reference to the Registration Statement on Form S-4 (Reg. No. 333-192985).
|
(18)
|
Reference is made to Note 18—Stockholders' Equity in the Notes to Consolidated Financial Statements under Part II Item 8 herein.
|
(19)
|
Registrant elects to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at
www.HF-WA.com
in the section titled Investor Information: Corporate Governance.
|
(20)
|
Filed herewith.
|
(21)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under those sections.
|
|
|
HERITAGE FINANCIAL CORPORATION
|
|
|
(Registrant)
|
|
|
|
|
|
/S/ BRIAN L. VANCE
|
|
|
Brian L. Vance
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Principal Executive Officer:
|
|
|
|
/S/ BRIAN L. VANCE
|
|
|
|
Brian L. Vance
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
Principal Financial Officer:
|
|
|
|
/S/ DONALD J. HINSON
|
|
|
|
Donald J. Hinson
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Directors*:
|
|
|
|
David H. Brown
|
|
|
|
Brian S. Charneski
|
|
|
|
John A. Clees
|
|
|
|
Gary B. Christiansen
|
|
|
|
Mark D. Crawford
|
|
|
|
Kimberly T. Ellwanger
|
|
|
|
Deborah J. Gavin
|
|
|
|
Jeffrey S. Lyon
|
|
|
|
Gragg E. Miller
|
|
|
|
Anthony B. Pickering
|
|
|
|
Robert T. Severns
|
|
|
|
Ann Watson
|
|
|
|
|
|
|
|
* Brian L. Vance, pursuant to a power of attorney that is being filed with the Annual Report on Form 10-K, has signed this report as attorney in fact for the following directors who constitute a majority of the Board.
|
|||
|
|
|
|
|
|
*By
|
|
|
|
/S/ BRIAN L. VANCE
|
|
|
|
Brian L. Vance
|
|
|
|
Attorney-in-Fact
|
|
|
|
March 10, 2015
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
ASSETS
|
|
|
|
||||
Cash on hand and in banks
|
$
|
74,028
|
|
|
$
|
40,162
|
|
Interest earning deposits
|
47,608
|
|
|
90,238
|
|
||
Cash and cash equivalents
|
121,636
|
|
|
130,400
|
|
||
Other interest earning deposits
|
10,126
|
|
|
15,662
|
|
||
Investment securities available for sale, at fair value
|
742,846
|
|
|
163,134
|
|
||
Investment securities held to maturity (fair value of $36,874 and $36,340, respectively)
|
35,814
|
|
|
36,154
|
|
||
Loans held for sale
|
5,582
|
|
|
—
|
|
||
Noncovered loans receivable, net
|
2,124,877
|
|
|
1,168,166
|
|
||
Allowance for loan losses on noncovered loans
|
(22,153
|
)
|
|
(22,657
|
)
|
||
Noncovered loans receivable, net of allowance for loan losses
|
2,102,724
|
|
|
1,145,509
|
|
||
Covered loans receivable, net
|
126,200
|
|
|
63,754
|
|
||
Allowance for loan losses on covered loans
|
(5,576
|
)
|
|
(6,167
|
)
|
||
Covered loans receivable, net of allowance for loan losses
|
120,624
|
|
|
57,587
|
|
||
Total loans receivable, net
|
2,223,348
|
|
|
1,203,096
|
|
||
FDIC indemnification asset
|
1,116
|
|
|
4,382
|
|
||
Other real estate owned ($1,177 and $182 covered by FDIC shared-loss agreements, respectively)
|
3,355
|
|
|
4,559
|
|
||
Premises and equipment, net
|
64,938
|
|
|
34,348
|
|
||
Federal Home Loan Bank stock, at cost
|
12,188
|
|
|
5,741
|
|
||
Bank owned life insurance
|
35,176
|
|
|
2,193
|
|
||
Accrued interest receivable
|
9,836
|
|
|
5,462
|
|
||
Prepaid expenses and other assets
|
61,871
|
|
|
22,927
|
|
||
Other intangible assets, net
|
10,889
|
|
|
1,615
|
|
||
Goodwill
|
119,029
|
|
|
29,365
|
|
||
Total assets
|
$
|
3,457,750
|
|
|
$
|
1,659,038
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Deposits
|
$
|
2,906,331
|
|
|
$
|
1,399,189
|
|
Junior subordinated debentures
|
19,082
|
|
|
—
|
|
||
Securities sold under agreement to repurchase
|
32,181
|
|
|
29,420
|
|
||
Accrued expenses and other liabilities
|
45,650
|
|
|
14,667
|
|
||
Total liabilities
|
3,003,244
|
|
|
1,443,276
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, no par value, 2,500,000 shares authorized; no shares issued and outstanding at December 31, 2014 and 2013
|
—
|
|
|
—
|
|
||
Common stock, no par value, 50,000,000 shares authorized; 30,259,838 and 16,210,747 shares issued and outstanding at December 31, 2014 and 2013, respectively
|
364,741
|
|
|
138,659
|
|
||
Retained earnings
|
86,387
|
|
|
78,265
|
|
||
Accumulated other comprehensive income (loss), net
|
3,378
|
|
|
(1,162
|
)
|
||
Total stockholders’ equity
|
454,506
|
|
|
215,762
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,457,750
|
|
|
$
|
1,659,038
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
INTEREST INCOME:
|
|
|
|
|
|
|
||||||
Interest and fees on loans
|
|
$
|
110,437
|
|
|
$
|
67,630
|
|
|
$
|
65,588
|
|
Taxable interest on investment securities
|
|
7,328
|
|
|
1,918
|
|
|
2,195
|
|
|||
Nontaxable interest on investment securities
|
|
2,886
|
|
|
1,539
|
|
|
1,097
|
|
|||
Interest and dividends on other interest earning assets
|
|
455
|
|
|
341
|
|
|
229
|
|
|||
Total interest income
|
|
121,106
|
|
|
71,428
|
|
|
69,109
|
|
|||
INTEREST EXPENSE:
|
|
|
|
|
|
|
||||||
Deposits
|
|
5,150
|
|
|
3,673
|
|
|
4,469
|
|
|||
Junior subordinated debentures
|
|
458
|
|
|
—
|
|
|
—
|
|
|||
Other borrowings
|
|
73
|
|
|
51
|
|
|
65
|
|
|||
Total interest expense
|
|
5,681
|
|
|
3,724
|
|
|
4,534
|
|
|||
Net interest income
|
|
115,425
|
|
|
67,704
|
|
|
64,575
|
|
|||
Provision for loan losses on noncovered loans
|
|
2,232
|
|
|
1,784
|
|
|
1,570
|
|
|||
Provision for loan losses on covered loans
|
|
2,362
|
|
|
1,888
|
|
|
446
|
|
|||
Total provision for loan losses
|
|
4,594
|
|
|
3,672
|
|
|
2,016
|
|
|||
Net interest income after provision for loan losses
|
|
110,831
|
|
|
64,032
|
|
|
62,559
|
|
|||
NONINTEREST INCOME:
|
|
|
|
|
|
|
||||||
Bargain purchase gain on bank acquisition
|
|
—
|
|
|
399
|
|
|
—
|
|
|||
Service charges and other fees
|
|
11,143
|
|
|
5,936
|
|
|
5,516
|
|
|||
Merchant Visa income, net
|
|
1,076
|
|
|
862
|
|
|
685
|
|
|||
Change in FDIC indemnification asset
|
|
(2,543
|
)
|
|
(181
|
)
|
|
(1,033
|
)
|
|||
Gain on sale of investment securities, net
|
|
287
|
|
|
—
|
|
|
—
|
|
|||
Gain on sale of loans, net
|
|
1,518
|
|
|
142
|
|
|
295
|
|
|||
Other income
|
|
4,986
|
|
|
2,493
|
|
|
1,809
|
|
|||
Total noninterest income
|
|
16,467
|
|
|
9,651
|
|
|
7,272
|
|
|||
NONINTEREST EXPENSE:
|
|
|
|
|
|
|
||||||
Compensation and employee benefits
|
|
52,634
|
|
|
31,612
|
|
|
29,020
|
|
|||
Occupancy and equipment
|
|
13,406
|
|
|
9,724
|
|
|
7,365
|
|
|||
Data processing
|
|
9,243
|
|
|
4,806
|
|
|
2,555
|
|
|||
Marketing
|
|
2,502
|
|
|
1,598
|
|
|
1,517
|
|
|||
Professional services
|
|
6,185
|
|
|
3,936
|
|
|
2,543
|
|
|||
State and local taxes
|
|
1,976
|
|
|
1,150
|
|
|
1,226
|
|
|||
Impairment loss on investment securities, net
|
|
45
|
|
|
38
|
|
|
78
|
|
|||
Federal deposit insurance premium
|
|
1,718
|
|
|
1,001
|
|
|
1,002
|
|
|||
Other real estate owned, net
|
|
638
|
|
|
309
|
|
|
316
|
|
|||
Amortization of intangible assets
|
|
1,920
|
|
|
543
|
|
|
427
|
|
|||
Other expense
|
|
9,112
|
|
|
4,798
|
|
|
4,343
|
|
|||
Total noninterest expense
|
|
99,379
|
|
|
59,515
|
|
|
50,392
|
|
|||
Income before income taxes
|
|
27,919
|
|
|
14,168
|
|
|
19,439
|
|
|||
Income tax expense
|
|
6,905
|
|
|
4,593
|
|
|
6,178
|
|
|||
Net income
|
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
Basic earnings per common share
|
|
$
|
0.82
|
|
|
$
|
0.61
|
|
|
$
|
0.87
|
|
Diluted earnings per common share
|
|
0.82
|
|
|
0.61
|
|
|
0.87
|
|
|||
Dividends declared per common share
|
|
0.50
|
|
|
0.42
|
|
|
0.80
|
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Net income
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
Change in fair value of securities available for sale, net of tax of $2,531, $(1,596) and $(34), respectively
|
4,676
|
|
|
(2,965
|
)
|
|
(63
|
)
|
|||
Reclassification adjustment of net (gain) loss from sale of available for sale securities included in net income, net of tax of $(101), $0 and $0, respectively
|
(186
|
)
|
|
—
|
|
|
—
|
|
|||
Other-than-temporary impairment on securities held to maturity, net of tax of $0, $0 and $(18), respectively
|
—
|
|
|
—
|
|
|
(34
|
)
|
|||
Accretion of other-than-temporary impairment on securities held to maturity, net of tax of $28, $31 and $57, respectively
|
50
|
|
|
59
|
|
|
105
|
|
|||
Other comprehensive income (loss)
|
4,540
|
|
|
(2,906
|
)
|
|
8
|
|
|||
Comprehensive income
|
$
|
25,554
|
|
|
$
|
6,669
|
|
|
$
|
13,269
|
|
|
Number of
common
shares
|
|
Common
stock
|
|
Unearned Compensation ESOP
|
|
Retained
earnings
|
|
Accumulated
other
comprehensive
income (loss), net
|
|
Total
stock-
holders’
equity
|
|||||||||||
Balance at December 31, 2011
|
15,456
|
|
|
$
|
126,622
|
|
|
$
|
(94
|
)
|
|
$
|
74,256
|
|
|
$
|
1,736
|
|
|
$
|
202,520
|
|
Restricted and unrestricted stock awards issued, net of forfeitures
|
86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock option compensation expense
|
—
|
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
|||||
Exercise of stock options (including excess tax benefits from nonqualified stock options)
|
12
|
|
|
129
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
129
|
|
|||||
Restricted stock compensation expense
|
10
|
|
|
1,091
|
|
|
94
|
|
|
—
|
|
|
—
|
|
|
1,185
|
|
|||||
Excess tax benefit from restricted stock
|
—
|
|
|
(93
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93
|
)
|
|||||
Common stock repurchased
|
(446
|
)
|
|
(6,023
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,023
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
13,261
|
|
|
—
|
|
|
13,261
|
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
|||||
Cash dividends declared on common stock ($0.80 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,155
|
)
|
|
—
|
|
|
(12,155
|
)
|
|||||
Balance at December 31, 2012
|
15,118
|
|
|
121,832
|
|
|
—
|
|
|
75,362
|
|
|
1,744
|
|
|
198,938
|
|
|||||
Restricted and unrestricted stock awards issued, net of forfeitures
|
100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock option compensation expense
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|||||
Exercise of stock options (including excess tax benefits from nonqualified stock options)
|
17
|
|
|
176
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|||||
Restricted stock compensation expense
|
—
|
|
|
1,223
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,223
|
|
|||||
Excess tax benefit from restricted stock
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||||
Common stock repurchased
|
(557
|
)
|
|
(8,825
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,825
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
9,575
|
|
|
—
|
|
|
9,575
|
|
|||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,906
|
)
|
|
(2,906
|
)
|
|||||
Common stock issued in business combination
|
1,533
|
|
|
24,195
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,195
|
|
|||||
Cash dividends declared on common stock ($0.42 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,672
|
)
|
|
—
|
|
|
(6,672
|
)
|
|||||
Balance at December 31, 2013
|
16,211
|
|
|
138,659
|
|
|
—
|
|
|
78,265
|
|
|
(1,162
|
)
|
|
215,762
|
|
|||||
Restricted and unrestricted stock awards issued, net of forfeitures
|
121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Stock option compensation expense
|
—
|
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|||||
Exercise of stock options (including excess tax benefits from nonqualified stock options)
|
84
|
|
|
921
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
921
|
|
|||||
Restricted stock compensation expense
|
—
|
|
|
1,395
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,395
|
|
|||||
Tax benefits from restricted stock
|
—
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
112
|
|
|||||
Common stock repurchased
|
(156
|
)
|
|
(2,601
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,601
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
21,014
|
|
|
—
|
|
|
21,014
|
|
|||||
Other comprehensive income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,540
|
|
|
4,540
|
|
|||||
Common stock issued in business combination (1)
|
14,000
|
|
|
226,235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
226,235
|
|
|||||
Cash dividends declared on common stock ($0.50 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,892
|
)
|
|
—
|
|
|
(12,892
|
)
|
|||||
Balance at December 31, 2014
|
30,260
|
|
|
$
|
364,741
|
|
|
$
|
—
|
|
|
$
|
86,387
|
|
|
$
|
3,378
|
|
|
$
|
454,506
|
|
(1)
|
The amount of common stock issued in connection with the merger is net of
$489,000
of issuance costs.
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
12,882
|
|
|
5,411
|
|
|
4,290
|
|
|||
Changes in net deferred loan fees, net of amortization
|
(1,733
|
)
|
|
574
|
|
|
236
|
|
|||
Provision for loan losses
|
4,594
|
|
|
3,672
|
|
|
2,016
|
|
|||
Net change in accrued interest receivable, FDIC indemnification asset, prepaid expenses and other assets, accrued expenses and other liabilities
|
13,230
|
|
|
9,047
|
|
|
5,878
|
|
|||
Restricted and unrestricted stock compensation expense
|
1,395
|
|
|
1,223
|
|
|
1,185
|
|
|||
Stock option compensation expense
|
20
|
|
|
71
|
|
|
106
|
|
|||
Tax benefits and excess tax benefits from restricted stock
|
(112
|
)
|
|
13
|
|
|
93
|
|
|||
Amortization of intangible assets
|
1,920
|
|
|
543
|
|
|
427
|
|
|||
Bargain purchase gain on bank acquisition
|
—
|
|
|
(399
|
)
|
|
—
|
|
|||
Gain on sale of investment securities, net
|
(287
|
)
|
|
—
|
|
|
—
|
|
|||
Impairment loss on investment of securities, net
|
45
|
|
|
38
|
|
|
78
|
|
|||
Origination of loans held for sale
|
(57,656
|
)
|
|
(6,784
|
)
|
|
(21,035
|
)
|
|||
Gain on sale of loans, net
|
(1,518
|
)
|
|
(142
|
)
|
|
(295
|
)
|
|||
Proceeds from sale of loans
|
57,515
|
|
|
8,602
|
|
|
21,482
|
|
|||
Earnings on bank owned life insurance
|
(455
|
)
|
|
(70
|
)
|
|
(80
|
)
|
|||
Valuation adjustment on other real estate owned
|
—
|
|
|
371
|
|
|
824
|
|
|||
Gain on other real estate owned, net
|
(23
|
)
|
|
(264
|
)
|
|
(587
|
)
|
|||
Loss (gain) on sale or write-off of furniture, equipment and leasehold improvements
|
505
|
|
|
(584
|
)
|
|
3
|
|
|||
Net cash provided by operating activities
|
51,336
|
|
|
30,897
|
|
|
27,882
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Loans originated, net of principal payments
|
(21,651
|
)
|
|
(43,140
|
)
|
|
(2,790
|
)
|
|||
Maturities of other interest earning deposits
|
5,475
|
|
|
1,987
|
|
|
—
|
|
|||
Maturities of investment securities available for sale
|
66,876
|
|
|
51,443
|
|
|
61,751
|
|
|||
Maturities of investment securities held to maturity
|
3,284
|
|
|
4,192
|
|
|
2,177
|
|
|||
Purchase of other interest earning deposits
|
—
|
|
|
—
|
|
|
(2,232
|
)
|
|||
Purchase of investment securities available for sale
|
(344,146
|
)
|
|
(43,627
|
)
|
|
(63,903
|
)
|
|||
Purchase of investment securities held to maturity
|
(3,294
|
)
|
|
(7,414
|
)
|
|
—
|
|
|||
Purchase of premises and equipment
|
(3,940
|
)
|
|
(5,205
|
)
|
|
(3,859
|
)
|
|||
Proceeds from sales of other real estate owned
|
9,914
|
|
|
6,003
|
|
|
5,255
|
|
|||
Proceeds from sales of investment securities available for sale
|
156,994
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from redemption of FHLB stock
|
617
|
|
|
208
|
|
|
99
|
|
|||
Proceeds from sale of premises and equipment
|
1,170
|
|
|
700
|
|
|
—
|
|
|||
Investment in new market tax credit partnership
|
(25,000
|
)
|
|
—
|
|
|
—
|
|
|||
Net cash received from acquisitions
|
32,052
|
|
|
18,260
|
|
|
—
|
|
|||
Net cash used in investing activities
|
(121,649
|
)
|
|
(16,593
|
)
|
|
(3,502
|
)
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Net increase (decrease) in deposits
|
73,248
|
|
|
13,763
|
|
|
(18,073
|
)
|
|||
Common stock cash dividends paid
|
(12,892
|
)
|
|
(6,672
|
)
|
|
(12,155
|
)
|
|||
Net increase (decrease) in securities sold under agreement to repurchase
|
2,761
|
|
|
13,399
|
|
|
(7,070
|
)
|
|||
Proceeds from exercise of stock options
|
921
|
|
|
176
|
|
|
129
|
|
|||
Excess tax benefits from stock options and restricted and unrestricted stock
|
112
|
|
|
(13
|
)
|
|
(93
|
)
|
|||
Repurchase of common stock
|
(2,601
|
)
|
|
(8,825
|
)
|
|
(6,023
|
)
|
|||
Net cash provided by (used in) financing activities
|
61,549
|
|
|
11,828
|
|
|
(43,285
|
)
|
|||
Net (decrease) increase in cash and cash equivalents
|
(8,764
|
)
|
|
26,132
|
|
|
(18,905
|
)
|
|||
Cash and cash equivalents at beginning of year
|
130,400
|
|
|
104,268
|
|
|
123,173
|
|
|||
Cash and cash equivalents at end of year
|
$
|
121,636
|
|
|
$
|
130,400
|
|
|
$
|
104,268
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
5,422
|
|
|
$
|
3,678
|
|
|
$
|
4,608
|
|
Cash paid for income taxes
|
15,852
|
|
|
3,574
|
|
|
10,713
|
|
|||
|
|
|
|
|
|
||||||
Supplemental non-cash disclosures of cash flow information:
|
|
|
|
|
|
||||||
Transfers of loans receivable to other real estate owned
|
$
|
1,566
|
|
|
$
|
2,974
|
|
|
$
|
7,406
|
|
Seller-financed sale of other real estate owned
|
—
|
|
|
250
|
|
|
732
|
|
|||
Investment in low income housing tax credit partnership and related funding commitment
|
3,817
|
|
|
—
|
|
|
—
|
|
|||
Purchases of investment securities available for sale not settled
|
1,288
|
|
|
—
|
|
|
—
|
|
|||
Common stock issued for business combinations
|
226,235
|
|
|
24,195
|
|
|
—
|
|
|||
Stock issuance costs in connection with business combinations
|
489
|
|
|
—
|
|
|
—
|
|
|||
Assets acquired (liabilities assumed) in merger and acquisitions:
|
|
|
|
|
|
||||||
Other interest earning deposits
|
—
|
|
|
14,869
|
|
|
—
|
|
|||
Investment securities available for sale
|
458,312
|
|
|
34,197
|
|
|
—
|
|
|||
Investment securities held to maturity
|
—
|
|
|
22,908
|
|
|
—
|
|
|||
Loans held for sale
|
3,923
|
|
|
—
|
|
|
—
|
|
|||
Noncovered loans receivable
|
895,978
|
|
|
168,580
|
|
|
—
|
|
|||
Covered loans receivable
|
107,050
|
|
|
—
|
|
|
—
|
|
|||
Other real estate owned
|
7,121
|
|
|
2,279
|
|
|
—
|
|
|||
Premises and equipment
|
31,776
|
|
|
6,772
|
|
|
—
|
|
|||
Federal Home Loan Bank stock
|
7,064
|
|
|
454
|
|
|
—
|
|
|||
FDIC indemnification asset
|
7,174
|
|
|
—
|
|
|
—
|
|
|||
Accrued interest receivable
|
4,943
|
|
|
697
|
|
|
—
|
|
|||
Bank owned life insurance
|
32,519
|
|
|
—
|
|
|
—
|
|
|||
Prepaid expenses and other assets
|
14,852
|
|
|
7,135
|
|
|
—
|
|
|||
Other intangible assets
|
11,194
|
|
|
1,072
|
|
|
—
|
|
|||
Deposits
|
(1,433,894
|
)
|
|
(267,455
|
)
|
|
—
|
|
|||
Junior subordinated debentures
|
(18,937
|
)
|
|
—
|
|
|
—
|
|
|||
Accrued expenses and other liabilities
|
(24,067
|
)
|
|
(1,528
|
)
|
|
—
|
|
(1)
|
Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements
|
1.
|
Remove inconsistencies and weaknesses in revenue requirements.
|
2.
|
Provide a more robust framework for addressing revenue issues.
|
3.
|
Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets.
|
4.
|
Provide more useful information to users of financial statements through improved disclosure requirements.
|
5.
|
Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer.
|
(2)
|
Business Combinations
|
|
|
Washington Banking
|
||
|
|
(In thousands)
|
||
Consideration transferred
|
|
|
||
Cash paid (1)
|
|
$
|
42,895
|
|
Fair value of common shares issued (2)
|
|
224,151
|
|
|
Fair value of restricted stock unit awards (3)
|
|
2,092
|
|
|
Fair value of common stock options
|
|
481
|
|
|
Total consideration transferred
|
|
$
|
269,619
|
|
(1)
|
Includes
$3,000
of cash paid due to fractional shares and
$27,000
of cash paid from dissenters.
|
(2)
|
Total of
13,870,716
shares issued. Excludes
1,686
shares dissented and paid in cash and
165
fractional shares paid in cash.
|
(3)
|
Total number of converted shares was
129,462
. Fair value includes
26,783
shares which were forfeited by the Washington Banking stockholder to pay applicable taxes, totaling fair value of
$433,000
.
|
|
Washington Banking
|
|
Valley
|
|
NCB
|
||||||
|
May 1, 2014
|
|
July 15, 2013
|
|
January 9, 2013
|
||||||
|
(In thousands)
|
||||||||||
Assets
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
74,947
|
|
|
$
|
40,643
|
|
|
$
|
2,712
|
|
Other interest earning deposits
|
—
|
|
|
13,866
|
|
|
1,003
|
|
|||
Investment securities available for sale
|
458,312
|
|
|
31,444
|
|
|
2,753
|
|
|||
Investment securities held to maturity
|
—
|
|
|
22,908
|
|
|
—
|
|
|||
Loans held for sale
|
3,923
|
|
|
—
|
|
|
—
|
|
|||
Noncovered loans receivable
|
895,978
|
|
|
117,071
|
|
|
51,509
|
|
|||
Covered loans receivable
|
107,050
|
|
|
—
|
|
|
—
|
|
|||
FDIC indemnification asset
|
7,174
|
|
|
—
|
|
|
—
|
|
|||
Other real estate owned ($5,122, $0, and $0 covered by FDIC shared-loss agreements, respectively)
|
7,121
|
|
|
—
|
|
|
2,279
|
|
|||
Premises and equipment
|
31,776
|
|
|
6,558
|
|
|
214
|
|
|||
Federal Home Loan Bank stock
|
7,064
|
|
|
366
|
|
|
88
|
|
|||
Bank owned life insurance
|
32,519
|
|
|
—
|
|
|
—
|
|
|||
Accrued Interest Receivable
|
4,943
|
|
|
465
|
|
|
232
|
|
|||
Other intangible assets
|
11,194
|
|
|
916
|
|
|
156
|
|
|||
Prepaid expenses and other assets
|
14,852
|
|
|
3,087
|
|
|
4,048
|
|
|||
Total assets acquired
|
1,656,853
|
|
|
237,324
|
|
|
64,994
|
|
|||
Liabilities
|
|
|
|
|
|
||||||
Deposits
|
1,433,894
|
|
|
207,013
|
|
|
60,442
|
|
|||
Junior subordinated debentures
|
18,937
|
|
|
—
|
|
|
—
|
|
|||
Accrued expenses and other liabilities
|
24,067
|
|
|
342
|
|
|
1,186
|
|
|||
Total liabilities assumed
|
1,476,898
|
|
|
207,355
|
|
|
61,628
|
|
|||
Net assets acquired
|
$
|
179,955
|
|
|
$
|
29,969
|
|
|
$
|
3,366
|
|
|
Washington Banking
|
|
Valley
|
|
NCB
|
||||||
|
May 1, 2014
|
|
July 15, 2013
|
|
January 9, 2013
|
||||||
|
(In thousands)
|
||||||||||
Cost basis of net assets on merger date
|
$
|
181,782
|
|
|
$
|
29,720
|
|
|
$
|
6,113
|
|
Less: Consideration transferred
|
(269,619
|
)
|
|
(46,323
|
)
|
|
(2,967
|
)
|
|||
Fair value adjustments:
|
|
|
|
|
|
||||||
Other interest earning deposits
|
—
|
|
|
162
|
|
|
7
|
|
|||
Investment securities
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||
Loans held for sale
|
86
|
|
|
—
|
|
|
—
|
|
|||
Noncovered loans receivable
|
(12,811
|
)
|
|
(3,003
|
)
|
|
(3,299
|
)
|
|||
Covered loans receivable
|
6,384
|
|
|
—
|
|
|
—
|
|
|||
FDIC indemnification asset
|
357
|
|
|
—
|
|
|
—
|
|
|||
Other real estate owned
|
387
|
|
|
—
|
|
|
(1,301
|
)
|
|||
Premises and equipment
|
(1,540
|
)
|
|
1,837
|
|
|
(69
|
)
|
|||
Other intangible assets
|
10,216
|
|
|
916
|
|
|
156
|
|
|||
Prepaid expenses and other assets
|
(6,416
|
)
|
|
198
|
|
|
2,394
|
|
|||
Deposits
|
(1,737
|
)
|
|
(9
|
)
|
|
(11
|
)
|
|||
Junior subordinated debentures
|
6,837
|
|
|
—
|
|
|
—
|
|
|||
Accrued expenses and other liabilities
|
(3,590
|
)
|
|
149
|
|
|
(622
|
)
|
|||
(Goodwill) bargain purchase gain recognized
|
$
|
(89,664
|
)
|
|
$
|
(16,353
|
)
|
|
$
|
399
|
|
|
|
Pro Forma for the Year Ended December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(Dollars In Thousands, except per share amounts)
|
||||||
Net interest income
|
|
$
|
144,470
|
|
|
$
|
147,267
|
|
Net income
|
|
35,758
|
|
|
30,718
|
|
||
Basic earnings per common share
|
|
$
|
1.19
|
|
|
$
|
1.04
|
|
Diluted earnings per common share
|
|
1.18
|
|
|
1.04
|
|
(3)
|
Cash and Cash Equivalents
|
(4)
|
Investment Securities
|
|
Securities Available for Sale
|
||||||||||||||
|
December 31, 2014
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
21,414
|
|
|
$
|
44
|
|
|
$
|
(31
|
)
|
|
$
|
21,427
|
|
Municipal securities
|
170,082
|
|
|
3,139
|
|
|
(184
|
)
|
|
173,037
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
||||||||
U.S. Government-sponsored agencies
|
539,859
|
|
|
4,015
|
|
|
(1,475
|
)
|
|
542,399
|
|
||||
Corporate obligations
|
4,034
|
|
|
—
|
|
|
(24
|
)
|
|
4,010
|
|
||||
Mutual funds and other equities
|
1,956
|
|
|
17
|
|
|
—
|
|
|
1,973
|
|
||||
Total
|
$
|
737,345
|
|
|
$
|
7,215
|
|
|
$
|
(1,714
|
)
|
|
$
|
742,846
|
|
|
Securities Available for Sale
|
||||||||||||||
|
December 31, 2013
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
6,098
|
|
|
$
|
3
|
|
|
$
|
(62
|
)
|
|
$
|
6,039
|
|
Municipal securities
|
49,989
|
|
|
806
|
|
|
(1,735
|
)
|
|
49,060
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
||||||||
U.S. Government-sponsored agencies
|
108,466
|
|
|
898
|
|
|
(1,329
|
)
|
|
108,035
|
|
||||
Total
|
$
|
164,553
|
|
|
$
|
1,707
|
|
|
$
|
(3,126
|
)
|
|
$
|
163,134
|
|
|
Securities Held to Maturity
|
||||||||||||||
|
December 31, 2014
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrecognized Gains |
|
Gross
Unrecognized Losses |
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,591
|
|
|
$
|
167
|
|
|
$
|
—
|
|
|
$
|
1,758
|
|
Municipal securities
|
22,486
|
|
|
643
|
|
|
(11
|
)
|
|
23,118
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
||||||||
U.S. Government-sponsored agencies
|
10,866
|
|
|
364
|
|
|
(74
|
)
|
|
11,156
|
|
||||
Private residential collateralized mortgage obligations
|
871
|
|
|
75
|
|
|
(104
|
)
|
|
842
|
|
||||
Total
|
$
|
35,814
|
|
|
$
|
1,249
|
|
|
$
|
(189
|
)
|
|
$
|
36,874
|
|
|
Securities Held to Maturity
|
||||||||||||||
|
December 31, 2013
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrecognized Gains |
|
Gross
Unrecognized Losses |
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,687
|
|
|
$
|
153
|
|
|
$
|
—
|
|
|
$
|
1,840
|
|
Municipal securities
|
24,290
|
|
|
200
|
|
|
(184
|
)
|
|
24,306
|
|
||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
||||||||
U.S. Government-sponsored agencies
|
9,129
|
|
|
144
|
|
|
(284
|
)
|
|
8,989
|
|
||||
Private residential collateralized mortgage obligations
|
1,048
|
|
|
185
|
|
|
(28
|
)
|
|
1,205
|
|
||||
Total
|
$
|
36,154
|
|
|
$
|
682
|
|
|
$
|
(496
|
)
|
|
$
|
36,340
|
|
|
Securities Available for Sale
|
|
Securities Held to Maturity
|
||||||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Due in one year or less
|
$
|
4,148
|
|
|
$
|
4,171
|
|
|
$
|
2,895
|
|
|
$
|
2,912
|
|
Due after one year through three years
|
31,547
|
|
|
31,693
|
|
|
4,336
|
|
|
4,385
|
|
||||
Due after three years through five years
|
23,675
|
|
|
24,104
|
|
|
5,490
|
|
|
5,710
|
|
||||
Due after five years through ten years
|
150,635
|
|
|
151,946
|
|
|
18,558
|
|
|
19,359
|
|
||||
Due after ten years
|
525,384
|
|
|
528,959
|
|
|
4,535
|
|
|
4,508
|
|
||||
Investment securities with no stated maturity
|
1,956
|
|
|
1,973
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
737,345
|
|
|
$
|
742,846
|
|
|
$
|
35,814
|
|
|
$
|
36,874
|
|
|
Securities Available for Sale
|
||||||||||||||||||||||
|
December 31, 2014
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or
Longer
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
3,567
|
|
|
$
|
(31
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,567
|
|
|
$
|
(31
|
)
|
Municipal securities
|
25,176
|
|
|
(184
|
)
|
|
—
|
|
|
—
|
|
|
25,176
|
|
|
(184
|
)
|
||||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
182,970
|
|
|
(1,475
|
)
|
|
—
|
|
|
—
|
|
|
182,970
|
|
|
(1,475
|
)
|
||||||
Corporate obligations
|
2,119
|
|
|
(24
|
)
|
|
—
|
|
|
—
|
|
|
2,119
|
|
|
(24
|
)
|
||||||
Total
|
$
|
213,832
|
|
|
$
|
(1,714
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
213,832
|
|
|
$
|
(1,714
|
)
|
|
Securities Available for Sale
|
||||||||||||||||||||||
|
December 31, 2013
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or
Longer
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
3,031
|
|
|
$
|
(62
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,031
|
|
|
$
|
(62
|
)
|
Municipal securities
|
21,471
|
|
|
(1,242
|
)
|
|
4,644
|
|
|
(493
|
)
|
|
26,115
|
|
|
(1,735
|
)
|
||||||
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
56,327
|
|
|
(1,184
|
)
|
|
7,758
|
|
|
(145
|
)
|
|
64,085
|
|
|
(1,329
|
)
|
||||||
Total
|
$
|
80,829
|
|
|
$
|
(2,488
|
)
|
|
$
|
12,402
|
|
|
$
|
(638
|
)
|
|
$
|
93,231
|
|
|
$
|
(3,126
|
)
|
|
Securities Held to Maturity
|
||||||||||||||||||||||
|
December 31, 2014
|
||||||||||||||||||||||
|
Less than 12
Months
|
|
12 Months or
Longer
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrecognized
Losses
|
|
Fair
Value
|
|
Unrecognized
Losses
|
|
Fair
Value
|
|
Unrecognized
Losses
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Municipal securities
|
$
|
2,196
|
|
|
$
|
(11
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,196
|
|
|
$
|
(11
|
)
|
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
2,553
|
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
2,553
|
|
|
(74
|
)
|
||||||
Private residential collateralized mortgage obligations
|
558
|
|
|
(104
|
)
|
|
—
|
|
|
—
|
|
|
558
|
|
|
(104
|
)
|
||||||
Total
|
$
|
5,307
|
|
|
$
|
(189
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,307
|
|
|
$
|
(189
|
)
|
|
Securities Held to Maturity
|
||||||||||||||||||||||
|
December 31, 2013
|
||||||||||||||||||||||
|
Less than 12
Months
|
|
12 Months or
Longer
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrecognized
Losses
|
|
Fair
Value
|
|
Unrecognized
Losses
|
|
Fair
Value
|
|
Unrecognized
Losses
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Municipal securities
|
$
|
10,967
|
|
|
$
|
(184
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,967
|
|
|
$
|
(184
|
)
|
Mortgage backed securities and collateralized mortgage obligations-residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Government-sponsored agencies
|
4,869
|
|
|
(284
|
)
|
|
—
|
|
|
—
|
|
|
4,869
|
|
|
(284
|
)
|
||||||
Private residential collateralized mortgage obligations
|
211
|
|
|
(5
|
)
|
|
124
|
|
|
(23
|
)
|
|
335
|
|
|
(28
|
)
|
||||||
Total
|
$
|
16,047
|
|
|
$
|
(473
|
)
|
|
$
|
124
|
|
|
$
|
(23
|
)
|
|
$
|
16,171
|
|
|
$
|
(496
|
)
|
|
Life-to-Date Gross Other-Than-Temporary Impairments (1)
|
|
Life-to-Date Other-Than-Temporary Impairments Included in Other Comprehensive Income (Loss)
|
|
Life-to-Date Net
Other-Than-Temporary Impairments Included in Earnings
|
||||||
|
(In thousands)
|
||||||||||
December 31, 2011
|
$
|
2,435
|
|
|
$
|
1,100
|
|
|
$
|
1,335
|
|
Subsequent impairments
|
130
|
|
|
52
|
|
|
78
|
|
|||
December 31, 2012
|
2,565
|
|
|
1,152
|
|
|
1,413
|
|
|||
Subsequent impairments
|
38
|
|
|
—
|
|
|
38
|
|
|||
December 31, 2013
|
2,603
|
|
|
1,152
|
|
|
1,451
|
|
|||
Subsequent impairments
|
45
|
|
|
—
|
|
|
45
|
|
|||
December 31, 2014
|
$
|
2,648
|
|
|
$
|
1,152
|
|
|
$
|
1,496
|
|
(1)
|
Life-to-date gross other-than-temporary impairments disclosed in this table are not reflective of subsequent recoveries, if any.
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Washington and Oregon state to secure public deposits
|
$
|
150,507
|
|
|
$
|
153,785
|
|
|
$
|
80,386
|
|
|
$
|
80,881
|
|
Federal Reserve Bank and FHLB to secure borrowing arrangements
|
4,430
|
|
|
4,460
|
|
|
—
|
|
|
—
|
|
||||
Repurchase agreements
|
43,676
|
|
|
44,457
|
|
|
34,170
|
|
|
33,893
|
|
||||
Other securities pledged
|
14,828
|
|
|
14,922
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
213,441
|
|
|
$
|
217,624
|
|
|
$
|
114,556
|
|
|
$
|
114,774
|
|
(5)
|
Noncovered Loans Receivable
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
551,343
|
|
|
$
|
336,540
|
|
Owner-occupied commercial real estate
|
535,742
|
|
|
281,309
|
|
||
Non-owner occupied commercial real estate
|
616,757
|
|
|
399,979
|
|
||
Total commercial business
|
1,703,842
|
|
|
1,017,828
|
|
||
One-to-four family residential
|
63,540
|
|
|
43,082
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
46,749
|
|
|
19,724
|
|
||
Five or more family residential and commercial properties
|
61,360
|
|
|
48,655
|
|
||
Total real estate construction and land development
|
108,109
|
|
|
68,379
|
|
||
Consumer
|
250,323
|
|
|
41,547
|
|
||
Gross noncovered loans receivable
|
2,125,814
|
|
|
1,170,836
|
|
||
Net deferred loan fees
|
(937
|
)
|
|
(2,670
|
)
|
||
Noncovered loans receivable, net
|
2,124,877
|
|
|
1,168,166
|
|
||
Allowance for loan losses
|
(22,153
|
)
|
|
(22,657
|
)
|
||
Noncovered loans receivable, net of allowance for loan losses
|
$
|
2,102,724
|
|
|
$
|
1,145,509
|
|
•
|
Grades 0 to 5:
These grades are considered “pass grade” and include loans with negligible to above average but acceptable risk. These borrowers generally have strong to acceptable capital levels and consistent earnings and debt service capacity. Loans with the higher grades within the “pass” category may include borrowers who are experiencing unusual operating difficulties, but have acceptable payment performance to date. Increased monitoring of financials and/or collateral may be appropriate. Loans with this grade show no immediate loss exposure.
|
•
|
Grade 6:
This grade includes "Watch" loans and is considered a “pass grade”. The grade is intended to be utilized on a temporary basis for pass grade borrowers where a potentially significant risk-modifying action is anticipated in the near term.
|
•
|
Grade 7:
This grade includes “Other Assets Especially Mentioned” (“OAEM”) loans in accordance with regulatory guidelines, and is intended to highlight loans with elevated risks. Loans with this grade show signs of deteriorating profits and capital, and the borrower might not be strong enough to sustain a major setback. The borrower is typically higher than normally leveraged, and outside support might be modest and likely illiquid. The loan is at risk of further decline unless active measures are taken to correct the situation.
|
•
|
Grade 8:
This grade includes “Substandard” loans in accordance with regulatory guidelines, which the Company has determined have a high credit risk. These loans also have well-defined weaknesses which make payment default or principal exposure likely, but not yet certain. The borrower may have shown serious negative trends in financial ratios and performance. Such loans may be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. Loans with this grade can be placed on accrual or nonaccrual status based on the Company’s accrual policy.
|
•
|
Grade 9:
This grade includes “Doubtful” loans in accordance with regulatory guidelines, and the Company has determined these loans to have excessive credit risk. Such loans are placed on nonaccrual status and may be dependent upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. Additionally, these loans generally have a specific valuation allowance or have been partially charged-off for the amount considered uncollectible.
|
•
|
Grade 10:
This grade includes “Loss” loans in accordance with regulatory guidelines, and the Company has determined these loans have the highest risk of loss. Such loans are charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt.
|
|
December 31, 2014
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
509,483
|
|
|
$
|
14,487
|
|
|
$
|
27,049
|
|
|
$
|
324
|
|
|
$
|
551,343
|
|
Owner-occupied commercial real estate
|
496,234
|
|
|
22,946
|
|
|
16,562
|
|
|
—
|
|
|
535,742
|
|
|||||
Non-owner occupied commercial real estate
|
584,262
|
|
|
17,643
|
|
|
14,852
|
|
|
—
|
|
|
616,757
|
|
|||||
Total commercial business
|
1,589,979
|
|
|
55,076
|
|
|
58,463
|
|
|
324
|
|
|
1,703,842
|
|
|||||
One-to-four family residential
|
61,185
|
|
|
315
|
|
|
2,040
|
|
|
—
|
|
|
63,540
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
34,356
|
|
|
3,977
|
|
|
8,416
|
|
|
—
|
|
|
46,749
|
|
|||||
Five or more family residential and commercial properties
|
57,025
|
|
|
—
|
|
|
4,335
|
|
|
—
|
|
|
61,360
|
|
|||||
Total real estate construction and land development
|
91,381
|
|
|
3,977
|
|
|
12,751
|
|
|
—
|
|
|
108,109
|
|
|||||
Consumer
|
242,836
|
|
|
—
|
|
|
7,487
|
|
|
—
|
|
|
250,323
|
|
|||||
Gross noncovered loans
|
$
|
1,985,381
|
|
|
$
|
59,368
|
|
|
$
|
80,741
|
|
|
$
|
324
|
|
|
$
|
2,125,814
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
304,959
|
|
|
$
|
9,183
|
|
|
$
|
20,849
|
|
|
$
|
1,549
|
|
|
$
|
336,540
|
|
Owner-occupied commercial real estate
|
269,130
|
|
|
3,814
|
|
|
8,365
|
|
|
—
|
|
|
281,309
|
|
|||||
Non-owner occupied commercial real estate
|
381,355
|
|
|
9,037
|
|
|
8,723
|
|
|
864
|
|
|
399,979
|
|
|||||
Total commercial business
|
955,444
|
|
|
22,034
|
|
|
37,937
|
|
|
2,413
|
|
|
1,017,828
|
|
|||||
One-to-four family residential
|
40,245
|
|
|
269
|
|
|
2,568
|
|
|
—
|
|
|
43,082
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
11,582
|
|
|
4,159
|
|
|
3,983
|
|
|
—
|
|
|
19,724
|
|
|||||
Five or more family residential and commercial properties
|
45,332
|
|
|
—
|
|
|
3,323
|
|
|
—
|
|
|
48,655
|
|
|||||
Total real estate construction and land development
|
56,914
|
|
|
4,159
|
|
|
7,306
|
|
|
—
|
|
|
68,379
|
|
|||||
Consumer
|
39,432
|
|
|
248
|
|
|
1,867
|
|
|
—
|
|
|
41,547
|
|
|||||
Gross noncovered loans
|
$
|
1,092,035
|
|
|
$
|
26,710
|
|
|
$
|
49,678
|
|
|
$
|
2,413
|
|
|
$
|
1,170,836
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
3,463
|
|
|
$
|
4,648
|
|
Owner-occupied commercial real estate
|
1,163
|
|
|
1,024
|
|
||
Non-owner occupied commercial real estate
|
93
|
|
|
3
|
|
||
Total commercial business
|
4,719
|
|
|
5,675
|
|
||
One-to-four family residential
|
—
|
|
|
340
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
2,652
|
|
|
1,045
|
|
||
Total real estate construction and land development
|
2,652
|
|
|
1,045
|
|
||
Consumer
|
139
|
|
|
678
|
|
||
Gross noncovered nonaccrual loans
|
$
|
7,510
|
|
|
$
|
7,738
|
|
|
December 31, 2014
|
||||||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
|
90 Days or More
and Still
Accruing (1)
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
2,503
|
|
|
$
|
1,962
|
|
|
$
|
4,465
|
|
|
$
|
546,878
|
|
|
$
|
551,343
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
1,038
|
|
|
100
|
|
|
1,138
|
|
|
534,604
|
|
|
535,742
|
|
|
—
|
|
||||||
Non-owner occupied commercial real estate
|
113
|
|
|
75
|
|
|
188
|
|
|
616,569
|
|
|
616,757
|
|
|
—
|
|
||||||
Total commercial business
|
3,654
|
|
|
2,137
|
|
|
5,791
|
|
|
1,698,051
|
|
|
1,703,842
|
|
|
—
|
|
||||||
One-to-four family residential
|
200
|
|
|
—
|
|
|
200
|
|
|
63,340
|
|
|
63,540
|
|
|
—
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
62
|
|
|
2,135
|
|
|
2,197
|
|
|
44,552
|
|
|
46,749
|
|
|
—
|
|
||||||
Five or more family residential and commercial properties
|
—
|
|
|
376
|
|
|
376
|
|
|
60,984
|
|
|
61,360
|
|
|
—
|
|
||||||
Total real estate construction and land development
|
62
|
|
|
2,511
|
|
|
2,573
|
|
|
105,536
|
|
|
108,109
|
|
|
—
|
|
||||||
Consumer
|
2,413
|
|
|
125
|
|
|
2,538
|
|
|
247,785
|
|
|
250,323
|
|
|
—
|
|
||||||
Gross noncovered loans
|
$
|
6,329
|
|
|
$
|
4,773
|
|
|
$
|
11,102
|
|
|
$
|
2,114,712
|
|
|
$
|
2,125,814
|
|
|
$
|
—
|
|
(1)
|
Excludes PCI loans.
|
|
December 31, 2013
|
||||||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
|
90 Days or More
and Still Accruing (1) |
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
2,493
|
|
|
$
|
4,379
|
|
|
$
|
6,872
|
|
|
$
|
329,668
|
|
|
$
|
336,540
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
808
|
|
|
849
|
|
|
1,657
|
|
|
279,652
|
|
|
281,309
|
|
|
—
|
|
||||||
Non-owner occupied commercial real estate
|
1,161
|
|
|
179
|
|
|
1,340
|
|
|
398,639
|
|
|
399,979
|
|
|
6
|
|
||||||
Total commercial business
|
4,462
|
|
|
5,407
|
|
|
9,869
|
|
|
1,007,959
|
|
|
1,017,828
|
|
|
6
|
|
||||||
One-to-four family residential
|
571
|
|
|
509
|
|
|
1,080
|
|
|
42,002
|
|
|
43,082
|
|
|
—
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
821
|
|
|
1,045
|
|
|
1,866
|
|
|
17,858
|
|
|
19,724
|
|
|
—
|
|
||||||
Five or more family residential and commercial properties
|
384
|
|
|
453
|
|
|
837
|
|
|
47,818
|
|
|
48,655
|
|
|
—
|
|
||||||
Total real estate construction and land development
|
1,205
|
|
|
1,498
|
|
|
2,703
|
|
|
65,676
|
|
|
68,379
|
|
|
—
|
|
||||||
Consumer
|
210
|
|
|
13
|
|
|
223
|
|
|
41,324
|
|
|
41,547
|
|
|
—
|
|
||||||
Gross noncovered loans
|
$
|
6,448
|
|
|
$
|
7,427
|
|
|
$
|
13,875
|
|
|
$
|
1,156,961
|
|
|
$
|
1,170,836
|
|
|
$
|
6
|
|
(1)
|
Excludes PCI loans.
|
|
December 31, 2014
|
||||||||||||||||||
|
Recorded
Investment With
No Specific
Valuation
Allowance
|
|
Recorded
Investment With
Specific
Valuation
Allowance
|
|
Total
Recorded
Investment
|
|
Unpaid
Contractual
Principal
Balance
|
|
Related
Specific
Valuation
Allowance
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
1,134
|
|
|
$
|
7,906
|
|
|
$
|
9,040
|
|
|
$
|
9,349
|
|
|
$
|
1,325
|
|
Owner-occupied commercial real estate
|
360
|
|
|
2,421
|
|
|
2,781
|
|
|
2,781
|
|
|
684
|
|
|||||
Non-owner occupied commercial real estate
|
2,459
|
|
|
4,846
|
|
|
7,305
|
|
|
7,279
|
|
|
465
|
|
|||||
Total commercial business
|
3,953
|
|
|
15,173
|
|
|
19,126
|
|
|
19,409
|
|
|
2,474
|
|
|||||
One-to-four family residential
|
—
|
|
|
245
|
|
|
245
|
|
|
245
|
|
|
75
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
2,307
|
|
|
2,217
|
|
|
4,524
|
|
|
4,964
|
|
|
396
|
|
|||||
Five or more family residential and commercial properties
|
—
|
|
|
2,056
|
|
|
2,056
|
|
|
2,056
|
|
|
234
|
|
|||||
Total real estate construction and land development
|
2,307
|
|
|
4,273
|
|
|
6,580
|
|
|
7,020
|
|
|
630
|
|
|||||
Consumer
|
33
|
|
|
172
|
|
|
205
|
|
|
208
|
|
|
56
|
|
|||||
Gross noncovered loans
|
$
|
6,293
|
|
|
$
|
19,863
|
|
|
$
|
26,156
|
|
|
$
|
26,882
|
|
|
$
|
3,235
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Recorded
Investment With
No Specific
Valuation
Allowance
|
|
Recorded
Investment With
Specific
Valuation
Allowance
|
|
Total
Recorded
Investment
|
|
Unpaid
Contractual
Principal
Balance
|
|
Related
Specific
Valuation
Allowance
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
6,140
|
|
|
$
|
4,850
|
|
|
$
|
10,990
|
|
|
$
|
13,287
|
|
|
$
|
2,716
|
|
Owner-occupied commercial real estate
|
1,118
|
|
|
1,880
|
|
|
2,998
|
|
|
3,023
|
|
|
595
|
|
|||||
Non-owner occupied commercial real estate
|
3,300
|
|
|
4,123
|
|
|
7,423
|
|
|
7,412
|
|
|
364
|
|
|||||
Total commercial business
|
10,558
|
|
|
10,853
|
|
|
21,411
|
|
|
23,722
|
|
|
3,675
|
|
|||||
One-to-four family residential
|
592
|
|
|
—
|
|
|
592
|
|
|
619
|
|
|
—
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
3,773
|
|
|
911
|
|
|
4,684
|
|
|
5,426
|
|
|
211
|
|
|||||
Five or more family residential and commercial properties
|
2,404
|
|
|
—
|
|
|
2,404
|
|
|
2,404
|
|
|
—
|
|
|||||
Total real estate construction and land development
|
6,177
|
|
|
911
|
|
|
7,088
|
|
|
7,830
|
|
|
211
|
|
|||||
Consumer
|
100
|
|
|
678
|
|
|
778
|
|
|
780
|
|
|
153
|
|
|||||
Gross noncovered loans
|
$
|
17,427
|
|
|
$
|
12,442
|
|
|
$
|
29,869
|
|
|
$
|
32,951
|
|
|
$
|
4,039
|
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Commercial business:
|
|
|
|
|
|
||||||
Commercial and industrial
|
$
|
10,946
|
|
|
$
|
12,628
|
|
|
$
|
11,467
|
|
Owner-occupied commercial real estate
|
3,215
|
|
|
2,638
|
|
|
2,141
|
|
|||
Non-owner occupied commercial real estate
|
7,744
|
|
|
7,897
|
|
|
8,174
|
|
|||
Total commercial business
|
21,905
|
|
|
23,163
|
|
|
21,782
|
|
|||
One-to-four family residential
|
514
|
|
|
880
|
|
|
977
|
|
|||
Real estate construction and land development:
|
|
|
|
|
|
||||||
One-to-four family residential
|
5,416
|
|
|
4,237
|
|
|
4,381
|
|
|||
Five or more family residential and commercial properties
|
2,154
|
|
|
2,839
|
|
|
5,415
|
|
|||
Total real estate construction and land development
|
7,570
|
|
|
7,076
|
|
|
9,796
|
|
|||
Consumer
|
779
|
|
|
254
|
|
|
427
|
|
|||
Gross noncovered impaired loans
|
$
|
30,768
|
|
|
$
|
31,373
|
|
|
$
|
32,982
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Performing
TDRs
|
|
Nonaccrual
TDRs
|
|
Performing
TDRs
|
|
Nonaccrual
TDRs |
||||||||
|
(In thousands)
|
||||||||||||||
Noncovered TDRs
|
$
|
18,764
|
|
|
$
|
5,010
|
|
|
$
|
22,131
|
|
|
$
|
2,634
|
|
Allowance for loan losses on noncovered TDRs
|
1,908
|
|
|
1,033
|
|
|
2,957
|
|
|
191
|
|
|
Years Ended December 31,
|
||||||||||||
|
2014
|
|
2013
|
||||||||||
|
Number of
Contracts
(1)
|
|
Outstanding
Principal Balance
(1)(2)
|
|
Number of
Contracts
(1)
|
|
Outstanding
Principal Balance
(1)(2)
|
||||||
|
(Dollars in thousands)
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||
Commercial and industrial
|
32
|
|
|
$
|
5,926
|
|
|
33
|
|
|
$
|
6,570
|
|
Owner-occupied commercial real estate
|
3
|
|
|
1,063
|
|
|
5
|
|
|
537
|
|
||
Non-owner occupied commercial real estate
|
3
|
|
|
6,548
|
|
|
2
|
|
|
192
|
|
||
Total commercial business
|
38
|
|
|
13,537
|
|
|
40
|
|
|
7,299
|
|
||
One-to-four family residential
|
—
|
|
|
—
|
|
|
1
|
|
|
252
|
|
||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||
One-to-four family residential
|
10
|
|
|
3,553
|
|
|
24
|
|
|
3,639
|
|
||
Five or more family residential and commercial properties
|
—
|
|
|
—
|
|
|
1
|
|
|
2,404
|
|
||
Total real estate construction and land development
|
10
|
|
|
3,553
|
|
|
25
|
|
|
6,043
|
|
||
Consumer
|
3
|
|
|
219
|
|
|
3
|
|
|
141
|
|
||
Total noncovered TDRs
|
51
|
|
|
$
|
17,309
|
|
|
69
|
|
|
$
|
13,735
|
|
(1)
|
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the
years ended December 31, 2014 and 2013
.
|
(2)
|
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. During the year ended December 31, 2014, the Company's initial advance at the time of modification on these construction loans totaled
$45,000
, the total commitment amount was
$190,000
and the outstanding principal balance at December 31, 2014 was
$188,000
. During the year ended December 31, 2013, the Company's initial advance at the time of modification on these construction loans totaled
$1.1 million
, the total commitment amount was
$4.3 million
and the outstanding principal balance at December 31, 2013 was
$2.5 million
.
|
|
Year Ended December 31, 2014
|
|
Year Ended December 31, 2013
|
||||||||||
|
Number of
Contracts
|
|
Outstanding
Principal Balance
|
|
Number of
Contracts |
|
Outstanding
Principal Balance |
||||||
|
(Dollars in thousands)
|
|
|
|
|
||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||
Commercial and industrial
|
—
|
|
|
$
|
—
|
|
|
3
|
|
|
$
|
918
|
|
Non-owner occupied commercial real estate
|
1
|
|
|
75
|
|
|
—
|
|
|
—
|
|
||
Total commercial business
|
1
|
|
|
75
|
|
|
3
|
|
|
918
|
|
||
Total noncovered loans receivable
|
1
|
|
|
$
|
75
|
|
|
3
|
|
|
$
|
918
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Outstanding Principal
|
|
Recorded Investment
|
|
Outstanding Principal
|
|
Recorded Investment
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
22,144
|
|
|
$
|
18,040
|
|
|
$
|
18,193
|
|
|
$
|
16,779
|
|
Owner-occupied commercial real estate
|
18,165
|
|
|
16,208
|
|
|
5,510
|
|
|
5,119
|
|
||||
Non-owner occupied commercial real estate
|
12,684
|
|
|
11,185
|
|
|
8,276
|
|
|
6,785
|
|
||||
Total commercial business
|
52,993
|
|
|
45,433
|
|
|
31,979
|
|
|
28,683
|
|
||||
One-to-four family residential
|
2,269
|
|
|
2,235
|
|
|
4,055
|
|
|
3,768
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
8,456
|
|
|
4,223
|
|
|
1,967
|
|
|
32
|
|
||||
Five or more family residential and commercial properties
|
2,721
|
|
|
2,963
|
|
|
1,077
|
|
|
1,357
|
|
||||
Total real estate construction and land development
|
11,177
|
|
|
7,186
|
|
|
3,044
|
|
|
1,389
|
|
||||
Consumer
|
5,983
|
|
|
7,055
|
|
|
1,150
|
|
|
2,177
|
|
||||
Gross noncovered PCI loans
|
$
|
72,422
|
|
|
$
|
61,909
|
|
|
$
|
40,228
|
|
|
$
|
36,017
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
|||||||||||
Balance at the beginning of the year
|
|
$
|
7,714
|
|
|
$
|
7,352
|
|
|
$
|
14,638
|
|
Accretion
|
|
(4,305
|
)
|
|
(4,402
|
)
|
|
(6,238
|
)
|
|||
Disposal and other
|
|
(3,263
|
)
|
|
(318
|
)
|
|
(2,798
|
)
|
|||
Change in accretable yield (1)
|
|
12,426
|
|
|
5,082
|
|
|
1,750
|
|
|||
Balance at the end of the year
|
|
$
|
12,572
|
|
|
$
|
7,714
|
|
|
$
|
7,352
|
|
(1)
|
Includes accretable difference at acquisition.
|
Balance outstanding at December 31, 2011
|
$
|
10,391
|
|
Principal additions
|
8,906
|
|
|
Principal reductions
|
(7,855
|
)
|
|
Balance outstanding at December 31, 2012
|
11,442
|
|
|
Principal additions
|
—
|
|
|
Elimination of outstanding loan balance due to change in related party status
|
(3,045
|
)
|
|
Principal reductions
|
(923
|
)
|
|
Balance outstanding at December 31, 2013
|
7,474
|
|
|
Principal additions
|
23
|
|
|
Additional of outstanding loan balance due to change in related party status
|
1,858
|
|
|
Principal reductions
|
(191
|
)
|
|
Balance outstanding at December 31, 2014
|
$
|
9,164
|
|
|
|
Years Ended or As of December 31,
|
||||||
|
|
2014
|
|
2013
|
||||
|
|
(In thousands)
|
||||||
Loans held for sale at lower of cost or market
|
|
$
|
5,582
|
|
|
$
|
—
|
|
One-to-four family residential loans sold during the year
|
|
55,997
|
|
|
8,460
|
|
||
Commitments to sell mortgage loans
|
|
10,625
|
|
|
—
|
|
||
Commitments to fund mortgage loans (at interest rates approximating market rates):
|
|
|
|
|
||||
Fixed rate
|
|
$
|
8,467
|
|
|
$
|
—
|
|
Variable or adjustable rate
|
|
2,158
|
|
|
—
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
SBA loans serviced for others with participating interest (1)
|
|
$
|
77,233
|
|
|
$
|
26,854
|
|
SBA loans serviced for others with no participating interest
|
|
—
|
|
|
—
|
|
(1)
|
Represents the gross balance of the loan at year end. The participation owned by the Bank totaled
$29.0 million
and
$9.4 million
, respectively, at December 31, 2014 and 2013 and is included in the balance of noncovered loans receivable on the Company's Consolidated Statements of Financial Condition.
|
(6)
|
Covered Loans Receivable
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
19,110
|
|
|
$
|
14,690
|
|
Owner-occupied commercial real estate
|
59,244
|
|
|
24,366
|
|
||
Non-owner occupied commercial real estate
|
26,879
|
|
|
14,625
|
|
||
Total commercial business
|
105,233
|
|
|
53,681
|
|
||
One-to-four family residential
|
5,990
|
|
|
4,777
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
2,446
|
|
|
1,556
|
|
||
Five or more family residential and commercial properties
|
3,560
|
|
|
—
|
|
||
Total real estate construction and land development
|
6,006
|
|
|
1,556
|
|
||
Consumer
|
8,971
|
|
|
3,740
|
|
||
Gross covered loans receivable
|
126,200
|
|
|
63,754
|
|
||
Allowance for loan losses
|
(5,576
|
)
|
|
(6,167
|
)
|
||
Covered loans receivable, net
|
$
|
120,624
|
|
|
$
|
57,587
|
|
|
December 31, 2014
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
11,297
|
|
|
$
|
131
|
|
|
$
|
5,442
|
|
|
$
|
2,240
|
|
|
$
|
19,110
|
|
Owner-occupied commercial real estate
|
40,357
|
|
|
4,957
|
|
|
13,583
|
|
|
347
|
|
|
59,244
|
|
|||||
Non-owner occupied commercial real estate
|
9,656
|
|
|
40
|
|
|
17,183
|
|
|
—
|
|
|
26,879
|
|
|||||
Total commercial business
|
61,310
|
|
|
5,128
|
|
|
36,208
|
|
|
2,587
|
|
|
105,233
|
|
|||||
One-to-four family residential
|
5,414
|
|
|
425
|
|
|
151
|
|
|
|
|
|
5,990
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
2,178
|
|
|
—
|
|
|
268
|
|
|
—
|
|
|
2,446
|
|
|||||
Five or more family residential and commercial properties
|
1,758
|
|
|
—
|
|
|
1,802
|
|
|
—
|
|
|
3,560
|
|
|||||
Total real estate construction and land development
|
3,936
|
|
|
—
|
|
|
2,070
|
|
|
—
|
|
|
6,006
|
|
|||||
Consumer
|
7,030
|
|
|
—
|
|
|
1,941
|
|
|
—
|
|
|
8,971
|
|
|||||
Gross covered loans receivable
|
$
|
77,690
|
|
|
$
|
5,553
|
|
|
$
|
40,370
|
|
|
$
|
2,587
|
|
|
$
|
126,200
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
9,516
|
|
|
$
|
3,887
|
|
|
$
|
702
|
|
|
$
|
585
|
|
|
$
|
14,690
|
|
Owner-occupied commercial real estate
|
21,084
|
|
|
2,318
|
|
|
708
|
|
|
256
|
|
|
24,366
|
|
|||||
Non-owner occupied commercial real estate
|
6,534
|
|
|
55
|
|
|
4,631
|
|
|
3,405
|
|
|
14,625
|
|
|||||
Total commercial business
|
37,134
|
|
|
6,260
|
|
|
6,041
|
|
|
4,246
|
|
|
53,681
|
|
|||||
One-to-four family residential
|
3,739
|
|
|
882
|
|
|
156
|
|
|
—
|
|
|
4,777
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
698
|
|
|
—
|
|
|
858
|
|
|
—
|
|
|
1,556
|
|
|||||
Five or more family residential and commercial properties
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total real estate construction and land development
|
698
|
|
|
—
|
|
|
858
|
|
|
—
|
|
|
1,556
|
|
|||||
Consumer
|
3,116
|
|
|
106
|
|
|
518
|
|
|
—
|
|
|
3,740
|
|
|||||
Gross covered loans receivable
|
$
|
44,687
|
|
|
$
|
7,248
|
|
|
$
|
7,573
|
|
|
$
|
4,246
|
|
|
$
|
63,754
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
2,321
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
1,132
|
|
|
—
|
|
||
Non-owner-occupied commercial real estate
|
424
|
|
|
—
|
|
||
Total commercial business
|
3,877
|
|
|
—
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
179
|
|
|
—
|
|
||
Consumer
|
6
|
|
|
7
|
|
||
Gross covered nonaccrual loans
|
$
|
4,062
|
|
|
$
|
7
|
|
|
December 31, 2014
|
||||||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
|
90 Days or More
and Still
Accruing (1)
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
2,262
|
|
|
$
|
1,163
|
|
|
$
|
3,425
|
|
|
$
|
15,685
|
|
|
$
|
19,110
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
645
|
|
|
2,680
|
|
|
3,325
|
|
|
55,919
|
|
|
59,244
|
|
|
—
|
|
||||||
Non-owner occupied commercial real estate
|
1,713
|
|
|
456
|
|
|
2,169
|
|
|
24,710
|
|
|
26,879
|
|
|
—
|
|
||||||
Total commercial business
|
4,620
|
|
|
4,299
|
|
|
8,919
|
|
|
96,314
|
|
|
105,233
|
|
|
—
|
|
||||||
One-to-four family residential
|
112
|
|
|
—
|
|
|
112
|
|
|
5,878
|
|
|
5,990
|
|
|
—
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
178
|
|
|
90
|
|
|
268
|
|
|
2,178
|
|
|
2,446
|
|
|
—
|
|
||||||
Five or more family residential and commercial properties
|
—
|
|
|
220
|
|
|
220
|
|
|
3,340
|
|
|
3,560
|
|
|
—
|
|
||||||
Total real estate construction and land development
|
178
|
|
|
310
|
|
|
488
|
|
|
5,518
|
|
|
6,006
|
|
|
—
|
|
||||||
Consumer
|
263
|
|
|
727
|
|
|
990
|
|
|
7,981
|
|
|
8,971
|
|
|
—
|
|
||||||
Gross covered loans receivable
|
$
|
5,173
|
|
|
$
|
5,336
|
|
|
$
|
10,509
|
|
|
$
|
115,691
|
|
|
$
|
126,200
|
|
|
$
|
—
|
|
(1)
|
Excludes covered PCI loans.
|
|
December 31, 2013
|
||||||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
|
90 Days or More
and Still Accruing (1) |
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
726
|
|
|
$
|
1,156
|
|
|
$
|
1,882
|
|
|
$
|
12,808
|
|
|
$
|
14,690
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
28
|
|
|
147
|
|
|
175
|
|
|
24,191
|
|
|
24,366
|
|
|
—
|
|
||||||
Non-owner occupied commercial real estate
|
—
|
|
|
3,540
|
|
|
3,540
|
|
|
11,085
|
|
|
14,625
|
|
|
—
|
|
||||||
Total commercial business
|
754
|
|
|
4,843
|
|
|
5,597
|
|
|
48,084
|
|
|
53,681
|
|
|
—
|
|
||||||
One-to-four family residential
|
113
|
|
|
—
|
|
|
113
|
|
|
4,664
|
|
|
4,777
|
|
|
—
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
213
|
|
|
644
|
|
|
857
|
|
|
699
|
|
|
1,556
|
|
|
—
|
|
||||||
Five or more family residential and commercial properties
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total real estate construction and land development
|
213
|
|
|
644
|
|
|
857
|
|
|
699
|
|
|
1,556
|
|
|
—
|
|
||||||
Consumer
|
67
|
|
|
78
|
|
|
145
|
|
|
3,595
|
|
|
3,740
|
|
|
—
|
|
||||||
Gross covered loans receivable
|
$
|
1,147
|
|
|
$
|
5,565
|
|
|
$
|
6,712
|
|
|
$
|
57,042
|
|
|
$
|
63,754
|
|
|
$
|
—
|
|
(1)
|
Excludes covered PCI loans.
|
|
December 31, 2014
|
||||||||||||||||||
|
Recorded
Investment With
No Specific
Valuation
Allowance
|
|
Recorded
Investment With
Specific
Valuation
Allowance
|
|
Total
Recorded
Investment
|
|
Unpaid
Contractual
Principal
Balance
|
|
Related
Specific
Valuation
Allowance
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
2,240
|
|
|
$
|
94
|
|
|
$
|
2,334
|
|
|
$
|
3,696
|
|
|
$
|
9
|
|
Owner-occupied commercial real estate
|
—
|
|
|
1,132
|
|
|
1,132
|
|
|
1,156
|
|
|
295
|
|
|||||
Non-owner occupied commercial real estate
|
—
|
|
|
424
|
|
|
424
|
|
|
440
|
|
|
66
|
|
|||||
Total commercial business
|
2,240
|
|
|
1,650
|
|
|
3,890
|
|
|
5,292
|
|
|
370
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
—
|
|
|
179
|
|
|
179
|
|
|
182
|
|
|
51
|
|
|||||
Total real estate construction and land development
|
—
|
|
|
179
|
|
|
179
|
|
|
182
|
|
|
51
|
|
|||||
Consumer
|
—
|
|
|
6
|
|
|
6
|
|
|
8
|
|
|
2
|
|
|||||
Gross covered impaired loans
|
$
|
2,240
|
|
|
$
|
1,835
|
|
|
$
|
4,075
|
|
|
$
|
5,482
|
|
|
$
|
423
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Recorded
Investment With
No Specific
Valuation
Allowance
|
|
Recorded
Investment With
Specific
Valuation
Allowance
|
|
Total
Recorded
Investment
|
|
Unpaid
Contractual
Principal
Balance
|
|
Related
Specific
Valuation
Allowance
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
10
|
|
|
$
|
3,751
|
|
|
$
|
3,761
|
|
|
$
|
3,761
|
|
|
$
|
629
|
|
Total commercial business
|
10
|
|
|
3,751
|
|
|
3,761
|
|
|
3,761
|
|
|
629
|
|
|||||
One-to-four family residential
|
—
|
|
|
450
|
|
|
450
|
|
|
423
|
|
|
31
|
|
|||||
Consumer
|
7
|
|
|
—
|
|
|
7
|
|
|
8
|
|
|
—
|
|
|||||
Gross covered impaired loans
|
$
|
17
|
|
|
$
|
4,201
|
|
|
$
|
4,218
|
|
|
$
|
4,192
|
|
|
$
|
660
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
Commercial business:
|
|
|
|
|
|
|
||||||
Commercial and industrial
|
|
$
|
3,421
|
|
|
$
|
1,484
|
|
|
$
|
21
|
|
Owner-occupied commercial real estate
|
|
367
|
|
|
—
|
|
|
—
|
|
|||
Non-owner occupied commercial real estate
|
|
171
|
|
|
—
|
|
|
—
|
|
|||
Total commercial business
|
|
3,959
|
|
|
1,484
|
|
|
21
|
|
|||
One-to-four family residential
|
|
90
|
|
|
459
|
|
|
187
|
|
|||
Real estate construction and land development:
|
|
|
|
|
|
|
||||||
One-to-four family residential
|
|
36
|
|
|
—
|
|
|
—
|
|
|||
Total real estate construction and land development
|
|
36
|
|
|
—
|
|
|
—
|
|
|||
Consumer
|
|
7
|
|
|
20
|
|
|
26
|
|
|||
Gross covered impaired loans
|
|
$
|
4,092
|
|
|
$
|
1,963
|
|
|
$
|
234
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Performing
TDRs
|
|
Nonaccrual
TDRs
|
|
Performing
TDRs |
|
Nonaccrual
TDRs |
||||||||
|
(In thousands)
|
||||||||||||||
Covered TDRs
|
$
|
10,289
|
|
|
$
|
2,246
|
|
|
$
|
4,211
|
|
|
$
|
7
|
|
Allowance for loan losses on covered TDRs
|
1
|
|
|
2
|
|
|
660
|
|
|
—
|
|
|
Years Ended December 31,
|
||||||||||||
|
2014
|
|
2013
|
||||||||||
|
Number of
Contracts
(1)
|
|
Outstanding
Principal Balance
(1)(2)
|
|
Number of
Contracts
(1)
|
|
Outstanding
Principal Balance
(1)(2)
|
||||||
|
(Dollars in thousands)
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||
Commercial and industrial
|
7
|
|
|
$
|
3,394
|
|
|
3
|
|
|
$
|
3,792
|
|
Owner-occupied commercial real estate
|
2
|
|
|
1,133
|
|
|
—
|
|
|
—
|
|
||
Non-owner occupied commercial real estate
|
2
|
|
|
7,561
|
|
|
—
|
|
|
—
|
|
||
Total commercial business
|
11
|
|
|
12,088
|
|
|
3
|
|
|
3,792
|
|
||
One-to-four family residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||
One-to-four family residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Five or more family residential and commercial properties
|
1
|
|
|
428
|
|
|
—
|
|
|
—
|
|
||
Total real estate construction and land development
|
1
|
|
|
428
|
|
|
—
|
|
|
—
|
|
||
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Total covered TDRs
|
12
|
|
|
$
|
12,516
|
|
|
3
|
|
|
$
|
3,792
|
|
(1)
|
Number of contracts and outstanding principal balance represent loans which have balances as of year end as certain loans may have been paid-down or charged-off during the
years ended December 31, 2014 and 2013
.
|
(2)
|
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification).
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||
|
Outstanding Principal
|
|
Recorded Investment
|
|
Outstanding Principal
|
|
Recorded Investment
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
9,635
|
|
|
$
|
7,134
|
|
|
$
|
10,608
|
|
|
$
|
8,680
|
|
Owner-occupied commercial real estate
|
23,071
|
|
|
20,666
|
|
|
11,538
|
|
|
10,923
|
|
||||
Non-owner occupied commercial real estate
|
20,607
|
|
|
20,257
|
|
|
10,611
|
|
|
12,187
|
|
||||
Total commercial business
|
53,313
|
|
|
48,057
|
|
|
32,757
|
|
|
31,790
|
|
||||
One-to-four family residential
|
3,837
|
|
|
3,478
|
|
|
3,966
|
|
|
3,530
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
103
|
|
|
1,308
|
|
|
1,298
|
|
|
1,556
|
|
||||
Five or more family residential and commercial properties
|
2,140
|
|
|
1,802
|
|
|
—
|
|
|
—
|
|
||||
Total real estate construction and land development
|
2,243
|
|
|
3,110
|
|
|
1,298
|
|
|
1,556
|
|
||||
Consumer
|
2,945
|
|
|
2,717
|
|
|
2,022
|
|
|
2,000
|
|
||||
Gross covered PCI loans
|
$
|
62,338
|
|
|
$
|
57,362
|
|
|
$
|
40,043
|
|
|
$
|
38,876
|
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
9,535
|
|
|
$
|
14,286
|
|
|
$
|
19,912
|
|
Accretion
|
(3,749
|
)
|
|
(4,210
|
)
|
|
(6,679
|
)
|
|||
Disposal and other
|
(1,718
|
)
|
|
(4,902
|
)
|
|
(1,140
|
)
|
|||
Change in accretable yield (1)
|
4,452
|
|
|
4,361
|
|
|
2,193
|
|
|||
Balance at the end of the year
|
$
|
8,520
|
|
|
$
|
9,535
|
|
|
$
|
14,286
|
|
(1)
|
Includes accretable difference at acquisition.
|
(7)
|
Allowance for Loan Losses
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
22,657
|
|
|
$
|
24,242
|
|
|
$
|
26,952
|
|
Charge-offs
|
(3,643
|
)
|
|
(4,298
|
)
|
|
(6,017
|
)
|
|||
Recoveries of loans previously charged-off
|
907
|
|
|
929
|
|
|
1,737
|
|
|||
Provision for loan losses
|
2,232
|
|
|
1,784
|
|
|
1,570
|
|
|||
Balance at the end of the year
|
$
|
22,153
|
|
|
$
|
22,657
|
|
|
$
|
24,242
|
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
6,167
|
|
|
$
|
4,352
|
|
|
$
|
3,963
|
|
Charge-offs
|
(2,954
|
)
|
|
(73
|
)
|
|
(57
|
)
|
|||
Recoveries of loans previously charged-off
|
1
|
|
|
—
|
|
|
—
|
|
|||
Provision for loan losses
|
2,362
|
|
|
1,888
|
|
|
446
|
|
|||
Balance at the end of the year
|
$
|
5,576
|
|
|
$
|
6,167
|
|
|
$
|
4,352
|
|
|
Commercial
and
industrial
|
|
Owner-
occupied
commercial
real estate
|
|
Non-owner
occupied
commercial
real estate
|
|
One-to-four
family
residential
|
|
Real estate
construction
and land
development:
one-to-four
family
residential
|
|
Real estate
construction
and land
development:
five or more
family
residential
and
commercial
properties
|
|
Consumer
|
|
Unallocated
|
|
Total
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Allowance for loan losses for the year ended December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
December 31, 2013
|
$
|
13,478
|
|
|
$
|
4,049
|
|
|
$
|
5,326
|
|
|
$
|
1,100
|
|
|
$
|
1,720
|
|
|
$
|
953
|
|
|
$
|
1,597
|
|
|
$
|
601
|
|
|
$
|
28,824
|
|
Charge-offs
|
(4,504
|
)
|
|
(337
|
)
|
|
(411
|
)
|
|
(31
|
)
|
|
(345
|
)
|
|
—
|
|
|
(969
|
)
|
|
—
|
|
|
(6,597
|
)
|
|||||||||
Recoveries
|
716
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
43
|
|
|
—
|
|
|
142
|
|
|
—
|
|
|
908
|
|
|||||||||
Provisions for loan losses
|
863
|
|
|
383
|
|
|
623
|
|
|
124
|
|
|
368
|
|
|
19
|
|
|
1,999
|
|
|
215
|
|
|
4,594
|
|
|||||||||
December 31, 2014
|
$
|
10,553
|
|
|
$
|
4,095
|
|
|
$
|
5,538
|
|
|
$
|
1,200
|
|
|
$
|
1,786
|
|
|
$
|
972
|
|
|
$
|
2,769
|
|
|
$
|
816
|
|
|
$
|
27,729
|
|
Allowance for loan losses as of December 31, 2014 allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Noncovered loans individually evaluated for impairment
|
$
|
1,325
|
|
|
$
|
684
|
|
|
$
|
465
|
|
|
$
|
75
|
|
|
$
|
396
|
|
|
$
|
234
|
|
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
3,235
|
|
Noncovered loans collectively evaluated for impairment
|
6,449
|
|
|
1,629
|
|
|
2,541
|
|
|
530
|
|
|
322
|
|
|
650
|
|
|
1,931
|
|
|
816
|
|
|
14,868
|
|
|||||||||
Covered loans individually evaluated for impairment
|
9
|
|
|
295
|
|
|
66
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
423
|
|
|||||||||
Covered loans collectively evaluated for impairment
|
108
|
|
|
14
|
|
|
6
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
148
|
|
|||||||||
Noncovered PCI loans collectively evaluated for impairment
|
2,191
|
|
|
330
|
|
|
353
|
|
|
207
|
|
|
264
|
|
|
88
|
|
|
617
|
|
|
—
|
|
|
4,050
|
|
|||||||||
Covered PCI loans collectively evaluated for impairment
|
471
|
|
|
1,143
|
|
|
2,107
|
|
|
380
|
|
|
753
|
|
|
—
|
|
|
151
|
|
|
—
|
|
|
5,005
|
|
|||||||||
December 31, 2014
|
$
|
10,553
|
|
|
$
|
4,095
|
|
|
$
|
5,538
|
|
|
$
|
1,200
|
|
|
$
|
1,786
|
|
|
$
|
972
|
|
|
$
|
2,769
|
|
|
$
|
816
|
|
|
$
|
27,729
|
|
|
Commercial
and
industrial
|
|
Owner-
occupied
commercial
real estate
|
|
Non-owner
occupied
commercial
real estate
|
|
One-to-four
family
residential
|
|
Real estate
construction
and land
development:
one-to-four
family
residential
|
|
Real estate
construction
and land
development:
five or more
family
residential
and
commercial
properties
|
|
Consumer
|
|
Unallocated
|
|
Total
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Allowance for loan losses for the year ended December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
December 31, 2012
|
$
|
9,912
|
|
|
$
|
4,021
|
|
|
$
|
5,369
|
|
|
$
|
1,221
|
|
|
$
|
3,131
|
|
|
$
|
2,309
|
|
|
$
|
1,761
|
|
|
$
|
870
|
|
|
$
|
28,594
|
|
Charge-offs
|
(2,826
|
)
|
|
(247
|
)
|
|
—
|
|
|
(52
|
)
|
|
(423
|
)
|
|
(142
|
)
|
|
(681
|
)
|
|
—
|
|
|
(4,371
|
)
|
|||||||||
Recoveries
|
248
|
|
|
560
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
89
|
|
|
—
|
|
|
929
|
|
|||||||||
Provisions for / (reallocation of) loan losses
|
6,144
|
|
|
(285
|
)
|
|
(43
|
)
|
|
(69
|
)
|
|
(988
|
)
|
|
(1,246
|
)
|
|
428
|
|
|
(269
|
)
|
|
3,672
|
|
|||||||||
December 31, 2013
|
$
|
13,478
|
|
|
$
|
4,049
|
|
|
$
|
5,326
|
|
|
$
|
1,100
|
|
|
$
|
1,720
|
|
|
$
|
953
|
|
|
$
|
1,597
|
|
|
$
|
601
|
|
|
$
|
28,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Allowance for loan losses as of December 31, 2013 allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Noncovered loans individually evaluated for impairment
|
$
|
2,716
|
|
|
$
|
595
|
|
|
$
|
364
|
|
|
$
|
—
|
|
|
$
|
211
|
|
|
$
|
—
|
|
|
$
|
153
|
|
|
$
|
—
|
|
|
$
|
4,039
|
|
Noncovered loans collectively evaluated for impairment
|
6,727
|
|
|
2,101
|
|
|
2,516
|
|
|
570
|
|
|
429
|
|
|
855
|
|
|
575
|
|
|
601
|
|
|
14,374
|
|
|||||||||
Covered loans individually evaluated for impairment
|
629
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
660
|
|
|||||||||
Covered loans collectively evaluated for impairment
|
18
|
|
|
7
|
|
|
14
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
57
|
|
|
—
|
|
|
109
|
|
|||||||||
Noncovered PCI loans collectively evaluated for impairment
|
2,294
|
|
|
348
|
|
|
359
|
|
|
216
|
|
|
291
|
|
|
98
|
|
|
638
|
|
|
—
|
|
|
4,244
|
|
|||||||||
Covered PCI loans collectively evaluated for impairment
|
1,094
|
|
|
998
|
|
|
2,073
|
|
|
270
|
|
|
789
|
|
|
—
|
|
|
174
|
|
|
—
|
|
|
5,398
|
|
|||||||||
December 31, 2013
|
$
|
13,478
|
|
|
$
|
4,049
|
|
|
$
|
5,326
|
|
|
$
|
1,100
|
|
|
$
|
1,720
|
|
|
$
|
953
|
|
|
$
|
1,597
|
|
|
$
|
601
|
|
|
$
|
28,824
|
|
|
Commercial
and
industrial
|
|
Owner-
occupied
commercial
real estate
|
|
Non-owner
occupied
commercial
real estate
|
|
One-to-four
family
residential
|
|
Real estate
construction
and land
development:
one-to-four
family
residential
|
|
Real estate
construction
and land
development:
five or more
family
residential
and
commercial
properties
|
|
Consumer
|
|
Unallocated
|
|
Total
|
||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||||||
Allowance for loan losses for the year ended December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
December 31, 2011
|
$
|
11,805
|
|
|
$
|
2,979
|
|
|
$
|
4,394
|
|
|
$
|
794
|
|
|
$
|
4,823
|
|
|
$
|
3,800
|
|
|
$
|
1,410
|
|
|
$
|
910
|
|
|
$
|
30,915
|
|
Charge-offs
|
(2,292
|
)
|
|
(1,142
|
)
|
|
(292
|
)
|
|
(391
|
)
|
|
(835
|
)
|
|
(445
|
)
|
|
(677
|
)
|
|
—
|
|
|
(6,074
|
)
|
|||||||||
Recoveries
|
1,560
|
|
|
8
|
|
|
11
|
|
|
—
|
|
|
125
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
1,737
|
|
|||||||||
Provisions for / (reallocation of) loan losses
|
(1,161
|
)
|
|
2,176
|
|
|
1,256
|
|
|
818
|
|
|
(982
|
)
|
|
(1,046
|
)
|
|
995
|
|
|
(40
|
)
|
|
2,016
|
|
|||||||||
December 31, 2012
|
$
|
9,912
|
|
|
$
|
4,021
|
|
|
$
|
5,369
|
|
|
$
|
1,221
|
|
|
$
|
3,131
|
|
|
$
|
2,309
|
|
|
$
|
1,761
|
|
|
$
|
870
|
|
|
$
|
28,594
|
|
|
Commercial
and
industrial
|
|
Owner-
occupied
commercial
real estate
|
|
Non-owner
occupied
commercial
real estate
|
|
One-to-four
family
residential
|
|
Real estate
construction
and land
development:
one-to-four
family
residential
|
|
Real estate
construction
and land
development:
five or more
family
residential
and
commercial
properties
|
|
Consumer
|
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Noncovered loans individually evaluated for impairment
|
$
|
9,040
|
|
|
$
|
2,781
|
|
|
$
|
7,305
|
|
|
$
|
245
|
|
|
$
|
4,524
|
|
|
$
|
2,056
|
|
|
$
|
205
|
|
|
$
|
26,156
|
|
Noncovered loans collectively evaluated for impairment
|
524,263
|
|
|
516,753
|
|
|
598,267
|
|
|
61,060
|
|
|
38,002
|
|
|
56,341
|
|
|
243,063
|
|
|
2,037,749
|
|
||||||||
Covered loans individually evaluated for impairment
|
2,334
|
|
|
1,132
|
|
|
424
|
|
|
—
|
|
|
179
|
|
|
—
|
|
|
6
|
|
|
4,075
|
|
||||||||
Covered loans collectively evaluated for impairment
|
9,642
|
|
|
37,446
|
|
|
6,198
|
|
|
2,512
|
|
|
959
|
|
|
1,758
|
|
|
6,248
|
|
|
64,763
|
|
||||||||
Noncovered PCI loans collectively evaluated for impairment
|
18,040
|
|
|
16,208
|
|
|
11,185
|
|
|
2,235
|
|
|
4,223
|
|
|
2,963
|
|
|
7,055
|
|
|
61,909
|
|
||||||||
Covered PCI loans collectively evaluated for impairment
|
7,134
|
|
|
20,666
|
|
|
20,257
|
|
|
3,478
|
|
|
1,308
|
|
|
1,802
|
|
|
2,717
|
|
|
57,362
|
|
||||||||
Total gross loans receivable as of December 31, 2014
|
$
|
570,453
|
|
|
$
|
594,986
|
|
|
$
|
643,636
|
|
|
$
|
69,530
|
|
|
$
|
49,195
|
|
|
$
|
64,920
|
|
|
$
|
259,294
|
|
|
$
|
2,252,014
|
|
|
Commercial
and
industrial
|
|
Owner-
occupied
commercial
real estate
|
|
Non-owner
occupied
commercial
real estate
|
|
One-to-four
family
residential
|
|
Real estate
construction
and land
development:
one-to-four
family
residential
|
|
Real estate
construction
and land
development:
five or more
family
residential
and
commercial
properties
|
|
Consumer
|
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Noncovered loans individually evaluated for impairment
|
$
|
10,990
|
|
|
$
|
2,998
|
|
|
$
|
7,423
|
|
|
$
|
592
|
|
|
$
|
4,684
|
|
|
$
|
2,404
|
|
|
$
|
778
|
|
|
$
|
29,869
|
|
Noncovered loans collectively evaluated for impairment
|
308,771
|
|
|
273,192
|
|
|
385,771
|
|
|
38,722
|
|
|
15,008
|
|
|
44,894
|
|
|
38,592
|
|
|
1,104,950
|
|
||||||||
Covered loans individually evaluated for impairment
|
3,761
|
|
|
—
|
|
|
—
|
|
|
450
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
4,218
|
|
||||||||
Covered loans collectively evaluated for impairment
|
2,249
|
|
|
13,443
|
|
|
2,438
|
|
|
797
|
|
|
—
|
|
|
—
|
|
|
1,733
|
|
|
20,660
|
|
||||||||
Noncovered PCI loans collectively evaluated for impairment
|
16,779
|
|
|
5,119
|
|
|
6,785
|
|
|
3,768
|
|
|
32
|
|
|
1,357
|
|
|
2,177
|
|
|
36,017
|
|
||||||||
Covered PCI loans collectively evaluated for impairment
|
8,680
|
|
|
10,923
|
|
|
12,187
|
|
|
3,530
|
|
|
1,556
|
|
|
—
|
|
|
2,000
|
|
|
38,876
|
|
||||||||
Total gross loans receivable as of December 31, 2013
|
$
|
351,230
|
|
|
$
|
305,675
|
|
|
$
|
414,604
|
|
|
$
|
47,859
|
|
|
$
|
21,280
|
|
|
$
|
48,655
|
|
|
$
|
45,287
|
|
|
$
|
1,234,590
|
|
(8)
|
FDIC Indemnification Asset
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
4,382
|
|
|
$
|
7,100
|
|
|
$
|
10,350
|
|
Additions as a result of the Washington Banking Merger
|
7,174
|
|
|
—
|
|
|
—
|
|
|||
Cash payments received or receivable from the FDIC
|
(7,897
|
)
|
|
(2,537
|
)
|
|
(2,217
|
)
|
|||
Loan (recapture) impairment
|
(1,072
|
)
|
|
1,086
|
|
|
843
|
|
|||
Net amortization
|
(1,471
|
)
|
|
(1,267
|
)
|
|
(1,876
|
)
|
|||
Balance at the end of the year
|
$
|
1,116
|
|
|
$
|
4,382
|
|
|
$
|
7,100
|
|
(9)
|
Other Real Estate Owned
|
|
Years Ended December 31,
|
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
4,559
|
|
|
$
|
5,666
|
|
|
$
|
4,484
|
|
Additions
|
1,566
|
|
|
2,974
|
|
|
7,406
|
|
|||
Additions from acquisitions
|
7,121
|
|
|
2,279
|
|
|
—
|
|
|||
Proceeds from dispositions
|
(9,914
|
)
|
|
(6,253
|
)
|
|
(5,987
|
)
|
|||
Gain on sales, net
|
23
|
|
|
264
|
|
|
587
|
|
|||
Valuation adjustment
|
—
|
|
|
(371
|
)
|
|
(824
|
)
|
|||
Balance at the end of the year
|
$
|
3,355
|
|
|
$
|
4,559
|
|
|
$
|
5,666
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
Land
|
|
$
|
22,364
|
|
|
$
|
10,876
|
|
Buildings and building improvements
|
|
52,067
|
|
|
33,482
|
|
||
Furniture, fixtures and equipment
|
|
14,280
|
|
|
18,054
|
|
||
Total premises and equipment
|
|
88,711
|
|
|
62,412
|
|
||
Less accumulated depreciation
|
|
23,773
|
|
|
28,064
|
|
||
Premises and equipment, net
|
|
$
|
64,938
|
|
|
$
|
34,348
|
|
(11)
|
Goodwill and Other Intangible Assets
|
|
Years Ended
December 31, |
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
1,615
|
|
|
$
|
1,086
|
|
|
$
|
1,513
|
|
Additions as a result of acquisitions
|
11,194
|
|
|
1,072
|
|
|
—
|
|
|||
Less: amortization expense
|
1,920
|
|
|
543
|
|
|
427
|
|
|||
Balance at the end of the year
|
$
|
10,889
|
|
|
$
|
1,615
|
|
|
$
|
1,086
|
|
|
Years Ending December 31,
|
||
|
(In thousands)
|
||
2015
|
$
|
2,072
|
|
2016
|
1,443
|
|
|
2017
|
1,285
|
|
|
2018
|
1,122
|
|
|
2019
|
1,043
|
|
|
Thereafter
|
3,924
|
|
|
|
$
|
10,889
|
|
(12)
|
Deposits
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||
|
|
(Dollars in thousands)
|
||||||||||||
Noninterest demand deposits
|
|
$
|
709,673
|
|
|
24.4
|
%
|
|
$
|
349,902
|
|
|
25.0
|
%
|
NOW accounts
|
|
793,362
|
|
|
27.3
|
|
|
352,051
|
|
|
25.2
|
|
||
Money market accounts
|
|
520,065
|
|
|
17.9
|
|
|
232,016
|
|
|
16.6
|
|
||
Savings accounts
|
|
357,834
|
|
|
12.3
|
|
|
155,790
|
|
|
11.1
|
|
||
Total non-maturity deposits
|
|
2,380,934
|
|
|
81.9
|
|
|
1,089,759
|
|
|
77.9
|
|
||
Certificate of deposit accounts
|
|
525,397
|
|
|
18.1
|
|
|
309,430
|
|
|
22.1
|
|
||
Total deposits
|
|
$
|
2,906,331
|
|
|
100.0
|
%
|
|
$
|
1,399,189
|
|
|
100.0
|
%
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
NOW accounts
|
|
$
|
1,011
|
|
|
$
|
645
|
|
|
$
|
797
|
|
Money market accounts
|
|
896
|
|
|
386
|
|
|
452
|
|
|||
Savings accounts
|
|
252
|
|
|
164
|
|
|
204
|
|
|||
Certificate of deposit accounts
|
|
2,991
|
|
|
2,478
|
|
|
3,016
|
|
|||
|
|
$
|
5,150
|
|
|
$
|
3,673
|
|
|
$
|
4,469
|
|
|
Year Ending December 31,
|
||
|
(In thousands)
|
||
2015
|
$
|
347,895
|
|
2016
|
107,849
|
|
|
2017
|
35,254
|
|
|
2018
|
13,887
|
|
|
2019
|
19,883
|
|
|
Thereafter
|
629
|
|
|
|
$
|
525,397
|
|
(13)
|
Junior Subordinated Debentures
|
(14)
|
Repurchase Agreements
|
(15)
|
Other Borrowings
|
(16)
|
Employee Benefit Plans
|
(17)
|
Commitments and Contingencies
|
|
Years Ending December 31,
|
||
|
(In thousands)
|
||
2015
|
$
|
3,307
|
|
2016
|
2,984
|
|
|
2017
|
2,741
|
|
|
2018
|
2,276
|
|
|
2019
|
1,504
|
|
|
Thereafter
|
3,723
|
|
|
|
$
|
16,535
|
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
|
||||
Commercial and industrial
|
|
$
|
288,930
|
|
|
$
|
169,079
|
|
Owner-occupied commercial real estate
|
|
2,648
|
|
|
2,812
|
|
||
Non-owner occupied commercial real estate
|
|
20,240
|
|
|
2,405
|
|
||
Total commercial business
|
|
311,818
|
|
|
174,296
|
|
||
One-to-four family residential
|
|
—
|
|
|
45
|
|
||
Real estate construction and land development:
|
|
|
|
|
||||
One-to-four family residential
|
|
24,028
|
|
|
12,236
|
|
||
Five or more family residential and commercial properties
|
|
32,653
|
|
|
20,720
|
|
||
Total real estate construction and land development
|
|
56,681
|
|
|
32,956
|
|
||
Consumer
|
|
122,633
|
|
|
27,480
|
|
||
Total outstanding commitments
|
|
$
|
491,132
|
|
|
$
|
234,777
|
|
(18)
|
Stockholders’ Equity
|
|
Years Ended
December 31, |
||||||||||
|
2014
|
|
2013
|
|
2012
|
||||||
|
(Dollars in thousands)
|
||||||||||
Net income:
|
|
|
|
|
|
||||||
Net income
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
Less: Dividends and undistributed earnings allocated to participating securities
|
(163
|
)
|
|
(118
|
)
|
|
(162
|
)
|
|||
Net income allocated to common stockholders
|
$
|
20,851
|
|
|
$
|
9,457
|
|
|
$
|
13,099
|
|
Basic:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
25,641,229
|
|
|
15,667,912
|
|
|
15,262,452
|
|
|||
Less: Restricted stock awards
|
(210,690
|
)
|
|
(191,677
|
)
|
|
(182,303
|
)
|
|||
Total basic weighted average common shares outstanding
|
25,430,539
|
|
|
15,476,235
|
|
|
15,080,149
|
|
|||
Diluted:
|
|
|
|
|
|
||||||
Basic weighted average common shares outstanding
|
25,430,539
|
|
|
15,476,235
|
|
|
15,080,149
|
|
|||
Incremental shares from stock options
|
46,750
|
|
|
11,480
|
|
|
14,640
|
|
|||
Total diluted weighted average common shares outstanding
|
25,477,289
|
|
|
15,487,715
|
|
|
15,094,789
|
|
Declared
|
|
Cash Dividend per Share
|
|
Record Date
|
|
Paid Date
|
February 1, 2012
|
|
$0.06
|
|
February 10, 2012
|
|
February 24, 2012
|
April 26, 2012
|
|
$0.08
|
|
May 10, 2012
|
|
May 24, 2012
|
June 26, 2012
|
|
$0.20
|
|
July 10, 2012
|
|
July 24, 2012
|
July 25, 2012
|
|
$0.08
|
|
August 14, 2012
|
|
August 24, 2012
|
October 30, 2012
|
|
$0.08
|
|
November 9, 2012
|
|
November 21, 2012
|
November 30, 2012
|
|
$0.30
|
|
November 26, 2012
|
|
December 6, 2012
|
January 30, 2013
|
|
$0.08
|
|
February 8, 2013
|
|
February 22, 2013
|
April 24, 2013
|
|
$0.08
|
|
May 10, 2013
|
|
May 24, 2013
|
July 23, 2013
|
|
$0.18
|
|
August 6, 2013
|
|
August 15, 2013
|
October 23, 2013
|
|
$0.08
|
|
November 5, 2013
|
|
November 15, 2013
|
January 29, 2014
|
|
$0.08
|
|
February 10, 2014
|
|
February 24, 2014
|
March 27, 2014
|
|
$0.08
|
|
April 8, 2014
|
|
April 23, 2014
|
July 24, 2014
|
|
$0.09
|
|
August 7, 2014
|
|
August 21, 2014
|
October 23, 2014
|
|
$0.09
|
|
November 6, 2014
|
|
November 20, 2014
|
November 11, 2014
|
|
$0.16
|
|
December 2, 2014
|
|
December 12, 2014
|
|
Years Ended December 31,
|
|
|
||||||||||||
|
2014
|
|
2013
|
|
2012
|
|
Plan Total
|
||||||||
Ninth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
389,627
|
|
|
590,832
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13.45
|
|
|
$
|
12.83
|
|
|
|
|
|
|
|
|
|
||||||||
Tenth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
108,075
|
|
|
544,000
|
|
|
52,900
|
|
|
704,975
|
|
||||
Stock repurchase average share price
|
$
|
16.68
|
|
|
$
|
15.88
|
|
|
$
|
13.88
|
|
|
$
|
15.85
|
|
|
|
|
|
|
|
|
|
||||||||
Eleventh Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(19)
|
Accumulated Other Comprehensive Income (Loss)
|
|
Year ended December 31, 2014
|
||||||||||
|
Changes in
fair value of available for sale securities (1) |
|
Accretion of other-than-
temporary impairment on held to maturity securities (1) |
|
Total
|
||||||
|
(In thousands)
|
||||||||||
Balance of AOCI at the beginning of the year
|
$
|
(923
|
)
|
|
$
|
(239
|
)
|
|
$
|
(1,162
|
)
|
Other comprehensive income before reclassification
|
4,676
|
|
|
50
|
|
|
4,726
|
|
|||
Amounts reclassified from AOCI for gain on sale of investment securities available for sale included in net income
|
(186
|
)
|
|
—
|
|
|
(186
|
)
|
|||
Net current period other comprehensive income
|
4,490
|
|
|
50
|
|
|
4,540
|
|
|||
Balance of AOCI at the end of the year
|
$
|
3,567
|
|
|
$
|
(189
|
)
|
|
$
|
3,378
|
|
(1)
|
All amounts are net of tax.
|
|
Year ended December 31, 2013
|
||||||||||
|
Changes in
fair value of available for sale securities (1) |
|
Accretion of other-than-
temporary impairment on held to maturity securities (1) |
|
Total
|
||||||
|
(In thousands)
|
||||||||||
Balance of AOCI at the beginning of the year
|
$
|
2,042
|
|
|
$
|
(298
|
)
|
|
$
|
1,744
|
|
Other comprehensive (loss) income before reclassification
|
(2,965
|
)
|
|
59
|
|
|
(2,906
|
)
|
|||
Amounts reclassified from AOCI for gain on sale of investment securities available for sale included in net income
|
—
|
|
|
—
|
|
|
—
|
|
|||
Net current period other comprehensive (loss) income
|
(2,965
|
)
|
|
59
|
|
|
(2,906
|
)
|
|||
Balance of AOCI at the end of the year
|
$
|
(923
|
)
|
|
$
|
(239
|
)
|
|
$
|
(1,162
|
)
|
(1)
|
All amounts are net of tax.
|
|
Year ended December 31, 2012
|
||||||||||||||
|
Changes in
fair value of available for sale securities (1) |
|
Accretion of other-than-
temporary impairment on held to maturity securities (1) |
|
Other-than-temporary impairments on securities held to maturity (1)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
Balance of AOCI at the beginning of the year
|
$
|
2,105
|
|
|
$
|
(369
|
)
|
|
$
|
—
|
|
|
$
|
1,736
|
|
Other comprehensive (loss) income before reclassification
|
(63
|
)
|
|
105
|
|
|
(34
|
)
|
|
8
|
|
||||
Amounts reclassified from AOCI for gain on sale of investment securities available for sale included in net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net current period other comprehensive (loss) income
|
(63
|
)
|
|
105
|
|
|
(34
|
)
|
|
8
|
|
||||
Balance of AOCI at the end of the year
|
$
|
2,042
|
|
|
$
|
(264
|
)
|
|
$
|
(34
|
)
|
|
$
|
1,744
|
|
(1)
|
All amounts are net of tax.
|
(20)
|
Fair Value Measurements
|
|
December 31, 2014
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Investment securities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
21,427
|
|
|
$
|
—
|
|
|
$
|
21,427
|
|
|
$
|
—
|
|
Municipal securities
|
173,037
|
|
|
—
|
|
|
173,037
|
|
|
—
|
|
||||
Mortgage backed securities and collateralized mortgage obligations—residential:
|
|
|
|
|
|
|
|
||||||||
U.S Government-sponsored agencies
|
542,399
|
|
|
—
|
|
|
542,399
|
|
|
—
|
|
||||
Corporate obligations
|
4,010
|
|
|
—
|
|
|
4,010
|
|
|
—
|
|
||||
Mutual funds and other equities
|
1,973
|
|
|
1,973
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
742,846
|
|
|
$
|
1,973
|
|
|
$
|
740,873
|
|
|
$
|
—
|
|
|
December 31, 2013
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Investment securities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
6,039
|
|
|
$
|
—
|
|
|
$
|
6,039
|
|
|
$
|
—
|
|
Municipal securities
|
49,060
|
|
|
—
|
|
|
49,060
|
|
|
—
|
|
||||
Mortgage backed securities and collateralized mortgage obligations—residential:
|
|
|
|
|
|
|
|
||||||||
U.S Government-sponsored agencies
|
108,035
|
|
|
—
|
|
|
108,035
|
|
|
—
|
|
||||
Total
|
$
|
163,134
|
|
|
$
|
—
|
|
|
$
|
163,134
|
|
|
$
|
—
|
|
|
Basis (1)
|
|
Fair Value at December 31, 2014
|
|
|
||||||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Net Losses
(Gains)
Recorded in
Earnings
During
the Year Ended December 31, 2014
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Noncovered impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
161
|
|
|
$
|
138
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
138
|
|
|
$
|
23
|
|
Total commercial business
|
161
|
|
|
138
|
|
|
—
|
|
|
—
|
|
|
138
|
|
|
23
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
2,094
|
|
|
1,725
|
|
|
—
|
|
|
—
|
|
|
1,725
|
|
|
350
|
|
||||||
Total real estate construction and land development
|
2,094
|
|
|
1,725
|
|
|
—
|
|
|
—
|
|
|
1,725
|
|
|
350
|
|
||||||
Consumer
|
49
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
5
|
|
||||||
Total noncovered impaired loans
|
2,304
|
|
|
1,908
|
|
|
—
|
|
|
—
|
|
|
1,908
|
|
|
378
|
|
||||||
Investment securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage back securities and collateralized mortgage obligations—residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Private residential collateralized mortgage obligations
|
36
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
45
|
|
||||||
Total
|
$
|
2,340
|
|
|
$
|
1,919
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
1,908
|
|
|
$
|
423
|
|
(1)
|
Basis represents the unpaid principal balance of noncovered impaired loans and amortized cost of investment securities held to maturity.
|
|
Basis (1)
|
|
Fair Value at December 31, 2013
|
|
|
||||||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Net Losses
(Gains)
Recorded in
Earnings
During
the Year Ended December 31, 2013
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Noncovered impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
4,850
|
|
|
$
|
2,134
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,134
|
|
|
$
|
1,681
|
|
Owner-occupied commercial real estate
|
1,880
|
|
|
1,285
|
|
|
—
|
|
|
—
|
|
|
1,285
|
|
|
594
|
|
||||||
Non-owner occupied commercial real estate
|
4,123
|
|
|
3,759
|
|
|
—
|
|
|
—
|
|
|
3,759
|
|
|
(2,409
|
)
|
||||||
Total commercial business
|
10,853
|
|
|
7,178
|
|
|
—
|
|
|
—
|
|
|
7,178
|
|
|
(134
|
)
|
||||||
One-to-four family residential
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
911
|
|
|
700
|
|
|
—
|
|
|
—
|
|
|
700
|
|
|
211
|
|
||||||
Total real estate construction and land development
|
911
|
|
|
700
|
|
|
—
|
|
|
—
|
|
|
700
|
|
|
211
|
|
||||||
Consumer
|
678
|
|
|
525
|
|
|
—
|
|
|
—
|
|
|
525
|
|
|
153
|
|
||||||
Total noncovered impaired loans
|
12,442
|
|
|
8,403
|
|
|
—
|
|
|
—
|
|
|
8,403
|
|
|
230
|
|
||||||
Covered impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
3,751
|
|
|
3,122
|
|
|
—
|
|
|
—
|
|
|
3,122
|
|
|
628
|
|
||||||
Non-owner occupied commercial real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total commercial business
|
3,751
|
|
|
3,122
|
|
|
—
|
|
|
—
|
|
|
3,122
|
|
|
628
|
|
||||||
One-to-four family residential
|
450
|
|
|
419
|
|
|
—
|
|
|
—
|
|
|
419
|
|
|
(13
|
)
|
||||||
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Total covered impaired loans
|
4,201
|
|
|
3,541
|
|
|
—
|
|
|
—
|
|
|
3,541
|
|
|
613
|
|
||||||
Investment securities held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Mortgage back securities and collateralized mortgage obligations – residential:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Private residential collateralized mortgage obligations
|
19
|
|
|
19
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
38
|
|
||||||
Other real estate owned:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial properties
|
1,720
|
|
|
1,222
|
|
|
—
|
|
|
—
|
|
|
1,222
|
|
|
348
|
|
||||||
Total
|
$
|
18,382
|
|
|
$
|
13,185
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
13,166
|
|
|
$
|
1,229
|
|
(1)
|
Basis represents the unpaid principal balance of noncovered impaired and covered impaired loans, amortized cost of investment securities held to maturity, and carrying value at ownership date of other real estate owned.
|
|
December 31, 2014
|
||||||||
|
Fair
Value
|
|
Valuation
Technique(s)
|
|
Unobservable Input(s)
|
|
Range of Inputs; Weighted
Average
|
||
|
(Dollars in thousands)
|
||||||||
Noncovered impaired loans
|
$
|
1,908
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(47.5%) - 96.2%; 7.0%
|
|
December 31, 2013
|
||||||||
|
Fair
Value
|
|
Valuation
Technique(s)
|
|
Unobservable Input(s)
|
|
Range of Inputs; Weighted
Average
|
||
|
(Dollars in thousands)
|
||||||||
Noncovered impaired loans
|
$
|
8,403
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(27.8%) - 19.1%; (6.6%)
|
Covered impaired loans
|
$
|
3,541
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(50.0%) - (25.0%); (35.0%)
|
Other real estate owned
|
$
|
1,222
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(60.1)% - 13.6%; (35.2%)
|
|
December 31, 2014
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Fair Value Measurements Using:
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
121,636
|
|
|
$
|
121,636
|
|
|
$
|
121,636
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other interest earning deposits
|
10,126
|
|
|
10,145
|
|
|
—
|
|
|
10,145
|
|
|
—
|
|
|||||
Investment securities available for sale
|
742,846
|
|
|
742,846
|
|
|
1,973
|
|
|
740,873
|
|
|
—
|
|
|||||
Investment securities held to maturity
|
35,814
|
|
|
36,874
|
|
|
—
|
|
|
36,874
|
|
|
—
|
|
|||||
Federal Home Loan Bank stock
|
12,188
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Loans held for sale
|
5,582
|
|
|
5,710
|
|
|
—
|
|
|
5,710
|
|
|
—
|
|
|||||
Loans receivable, net of allowance for loan losses
|
2,223,348
|
|
|
2,279,081
|
|
|
—
|
|
|
—
|
|
|
2,279,081
|
|
|||||
Accrued interest receivable
|
9,836
|
|
|
9,836
|
|
|
3
|
|
|
3,009
|
|
|
6,824
|
|
|||||
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Noninterest deposits, NOW accounts, money market accounts and savings accounts
|
$
|
2,380,934
|
|
|
$
|
2,380,934
|
|
|
$
|
2,380,934
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificate of deposit accounts
|
525,397
|
|
|
525,768
|
|
|
—
|
|
|
525,768
|
|
|
—
|
|
|||||
Total deposits
|
$
|
2,906,331
|
|
|
$
|
2,906,702
|
|
|
$
|
2,380,934
|
|
|
$
|
525,768
|
|
|
$
|
—
|
|
Securities sold under agreement to repurchase
|
$
|
32,181
|
|
|
$
|
32,181
|
|
|
$
|
32,181
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Junior subordinated debentures
|
19,082
|
|
|
19,082
|
|
|
—
|
|
|
—
|
|
|
19,082
|
|
|||||
Accrued interest payable
|
411
|
|
|
411
|
|
|
62
|
|
|
328
|
|
|
21
|
|
|
December 31, 2013
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Fair Value Measurements Using:
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
130,400
|
|
|
$
|
130,400
|
|
|
$
|
130,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other interest earning deposits
|
15,662
|
|
|
15,747
|
|
|
—
|
|
|
15,747
|
|
|
—
|
|
|||||
Investment securities available for sale
|
163,134
|
|
|
163,134
|
|
|
—
|
|
|
163,134
|
|
|
—
|
|
|||||
Investment securities held to maturity
|
36,154
|
|
|
36,340
|
|
|
—
|
|
|
36,340
|
|
|
—
|
|
|||||
Federal Home Loan Bank stock
|
5,741
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Loans receivable, net of allowance
|
1,203,096
|
|
|
1,218,192
|
|
|
—
|
|
|
—
|
|
|
1,218,192
|
|
|||||
Accrued interest receivable
|
5,462
|
|
|
5,462
|
|
|
26
|
|
|
910
|
|
|
4,526
|
|
|||||
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Noninterest deposits, NOW accounts, money market accounts and savings accounts
|
$
|
1,089,759
|
|
|
$
|
1,089,759
|
|
|
$
|
1,089,759
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificate of deposit accounts
|
309,430
|
|
|
311,065
|
|
|
—
|
|
|
311,065
|
|
|
—
|
|
|||||
Total deposits
|
$
|
1,399,189
|
|
|
$
|
1,400,824
|
|
|
$
|
1,089,759
|
|
|
$
|
311,065
|
|
|
$
|
—
|
|
Securities sold under agreement to repurchase
|
$
|
29,420
|
|
|
$
|
29,420
|
|
|
$
|
29,420
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued interest payable
|
152
|
|
|
152
|
|
|
17
|
|
|
135
|
|
|
—
|
|
(21)
|
Stock-Based Compensation
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average
Remaining
Contractual
Term (In years)
|
|
Aggregate
Intrinsic
Value (In
thousands)
|
|||||
Outstanding at December 31, 2011
|
417,123
|
|
|
$
|
18.33
|
|
|
|
|
|
||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(11,365
|
)
|
|
11.35
|
|
|
|
|
|
|||
Forfeited or expired
|
(105,100
|
)
|
|
21.52
|
|
|
|
|
|
|||
Outstanding at December 31, 2012
|
300,658
|
|
|
17.48
|
|
|
|
|
|
|||
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
(16,553
|
)
|
|
12.10
|
|
|
|
|
|
|||
Forfeited or expired
|
(89,623
|
)
|
|
22.07
|
|
|
|
|
|
|||
Outstanding at December 31, 2013
|
194,482
|
|
|
15.82
|
|
|
|
|
|
|||
Granted (1)
|
90,248
|
|
|
10.72
|
|
|
|
|
|
|||
Exercised
|
(84,189
|
)
|
|
10.86
|
|
|
|
|
|
|||
Forfeited or expired
|
(44,134
|
)
|
|
22.76
|
|
|
|
|
|
|||
Outstanding at December 31, 2014
|
156,407
|
|
|
$
|
13.59
|
|
|
2.63
|
|
$
|
647
|
|
Vested and expected to vest at December 31, 2014
|
156,407
|
|
|
$
|
13.59
|
|
|
2.63
|
|
$
|
647
|
|
Exercisable at December 31, 2014
|
156,407
|
|
|
$
|
13.59
|
|
|
2.63
|
|
$
|
647
|
|
(1)
|
Options granted during the year ended December 31, 2014 represent the stock options issued in conjunction with the Washington Banking Merger. See "Note 2. Business Combinations" for additional information. The weighted average exercise price reflects the exchange ratio applied to the original Washington Banking exercise price pursuant to the Merger Agreement.
|
(22)
|
Income Taxes
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
Current tax expense
|
|
$
|
9,992
|
|
|
$
|
4,344
|
|
|
$
|
5,916
|
|
Deferred tax (benefit) expense
|
|
(3,087
|
)
|
|
326
|
|
|
185
|
|
|||
(Decrease) increase in valuation allowance
|
|
—
|
|
|
(77
|
)
|
|
77
|
|
|||
Income tax expense
|
|
$
|
6,905
|
|
|
$
|
4,593
|
|
|
$
|
6,178
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
Income tax expense at Federal statutory rate
|
|
$
|
9,772
|
|
|
$
|
4,959
|
|
|
$
|
6,804
|
|
Tax-exempt instruments
|
|
(1,598
|
)
|
|
(858
|
)
|
|
(649
|
)
|
|||
Non-deductible acquisition costs
|
|
373
|
|
|
469
|
|
|
—
|
|
|||
Federal tax credits (1)
|
|
(812
|
)
|
|
—
|
|
|
—
|
|
|||
Effects of BOLI
|
|
(159
|
)
|
|
(25
|
)
|
|
(28
|
)
|
|||
Tax position resolution (2)
|
|
(728
|
)
|
|
—
|
|
|
—
|
|
|||
Valuation allowance
|
|
—
|
|
|
(77
|
)
|
|
77
|
|
|||
Other, net
|
|
57
|
|
|
125
|
|
|
(26
|
)
|
|||
Income tax expense
|
|
$
|
6,905
|
|
|
$
|
4,593
|
|
|
$
|
6,178
|
|
(1)
|
Federal tax credits are provided for under the New Market Tax Credit program. A subsidiary of Heritage Bank was awarded an allocation of New Market Tax Credit investments consisting of
three
tranches totaling
$25.0 million
. Gross tax credits related to these tranches totaling
$9.8 million
are available through
2020
. The subsidiary
|
(2)
|
Washington Banking Company had recorded a liability for certain tax positions prior to the merger effective date, which the Company assumed as part of the Washington Banking Merger. These tax positions were resolved as of December 31, 2014, resulting in a decrease of the Company's income tax expense for the year ended December 31, 2014.
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
Deferred tax assets:
|
|
|
|
|
||||
Allowance for loan losses
|
|
$
|
5,460
|
|
|
$
|
7,003
|
|
Accrued compensation
|
|
1,382
|
|
|
821
|
|
||
Stock compensation
|
|
818
|
|
|
524
|
|
||
Capital loss carryforward
|
|
30
|
|
|
95
|
|
||
Unrealized losses charged to earnings on other than temporarily impaired investment securities
|
|
338
|
|
|
622
|
|
||
Net unrealized losses charged to other comprehensive income on securities
|
|
—
|
|
|
626
|
|
||
Goodwill and other intangible assets
|
|
—
|
|
|
2,107
|
|
||
Market discount on purchased loans
|
|
17,949
|
|
|
6,767
|
|
||
Foregone interest on nonaccrual loans
|
|
2,337
|
|
|
1,026
|
|
||
Net operating loss carryforward acquired from NCB
|
|
553
|
|
|
588
|
|
||
Difference in amounts reflected in financial statements and income tax basis of certain liabilities assumed in business combinations
|
|
3,492
|
|
|
—
|
|
||
Other deferred tax assets
|
|
1,394
|
|
|
705
|
|
||
Total deferred tax assets
|
|
33,753
|
|
|
20,884
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Deferred loan fees, net
|
|
(1,982
|
)
|
|
(867
|
)
|
||
Premises and equipment
|
|
(1,937
|
)
|
|
(1,520
|
)
|
||
FHLB stock
|
|
(2,768
|
)
|
|
(1,039
|
)
|
||
Net unrealized gains charged to other comprehensive income on securities
|
|
(1,832
|
)
|
|
—
|
|
||
Indemnification asset
|
|
(392
|
)
|
|
(1,539
|
)
|
||
Goodwill and other intangible assets
|
|
(1,560
|
)
|
|
—
|
|
||
Federal tax credits
|
|
(439
|
)
|
|
—
|
|
||
Junior subordinated debentures
|
|
(2,349
|
)
|
|
—
|
|
||
Other deferred tax liabilities
|
|
(730
|
)
|
|
(248
|
)
|
||
Total deferred tax liabilities
|
|
(13,989
|
)
|
|
(5,213
|
)
|
||
Deferred income tax asset, net
|
|
$
|
19,764
|
|
|
$
|
15,671
|
|
(23)
|
Regulatory Capital Requirements
|
|
|
Minimum
Requirements
|
|
Well-
Capitalized
Requirements
|
|
Actual
|
|||||||||||||
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||
As of December 31, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Company consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tier 1 leverage capital to average assets
|
|
$
|
132,881
|
|
|
4.0
|
%
|
|
N/A
|
|
|
N/A
|
|
$
|
340,292
|
|
|
10.2
|
%
|
Tier 1 capital to risk-weighted assets
|
|
97,620
|
|
|
4.0
|
|
|
N/A
|
|
|
N/A
|
|
340,292
|
|
|
13.9
|
|
||
Total capital to risk-weighted assets
|
|
195,240
|
|
|
8.0
|
|
|
N/A
|
|
|
N/A
|
|
368,198
|
|
|
15.1
|
|
||
Heritage Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tier 1 leverage capital to average assets
|
|
132,853
|
|
|
4.0
|
|
|
166,066
|
|
|
5.0
|
|
332,147
|
|
|
10.0
|
|
||
Tier 1 capital to risk-weighted assets
|
|
97,585
|
|
|
4.0
|
|
|
146,378
|
|
|
6.0
|
|
332,147
|
|
|
13.6
|
|
||
Total capital to risk-weighted assets
|
|
195,171
|
|
|
8.0
|
|
|
243,964
|
|
|
10.0
|
|
360,053
|
|
|
14.8
|
|
||
As of December 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Company consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tier 1 leverage capital to average assets
|
|
$
|
65,847
|
|
|
4.0
|
%
|
|
N/A
|
|
|
N/A
|
|
$
|
185,951
|
|
|
11.3
|
%
|
Tier 1 capital to risk-weighted assets
|
|
47,853
|
|
|
4.0
|
|
|
N/A
|
|
|
N/A
|
|
185,951
|
|
|
15.5
|
|
||
Total capital to risk-weighted assets
|
|
95,706
|
|
|
8.0
|
|
|
N/A
|
|
|
N/A
|
|
201,076
|
|
|
16.8
|
|
||
Heritage Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tier 1 leverage capital to average assets
|
|
65,831
|
|
|
4.0
|
|
|
82,288
|
|
|
5.0
|
|
182,543
|
|
|
11.1
|
|
||
Tier 1 capital to risk-weighted assets
|
|
47,807
|
|
|
4.0
|
|
|
71,710
|
|
|
6.0
|
|
182,543
|
|
|
15.3
|
|
||
Total capital to risk-weighted assets
|
|
95,613
|
|
|
8.0
|
|
|
119,517
|
|
|
10.0
|
|
197,656
|
|
|
16.5
|
|
•
|
Permits banking organizations that had less than $15 billion in total consolidated assets as of December 31, 2009, or were mutual holding companies as of May 19, 2010, to include in Tier 1 capital trust preferred securities and cumulative perpetual preferred stock that were issued and included in Tier 1 capital prior to May 19, 2010, subject to a limit of 25% of Tier 1 capital elements, excluding any non-qualifying capital instruments and after all regulatory capital deductions and adjustments have been applied to Tier 1 capital.
|
•
|
Establishes new qualifying criteria for regulatory capital, including new limitations on the inclusion of deferred tax assets and mortgage servicing rights.
|
•
|
Requires a minimum ratio of common equity Tier 1 capital to risk-weighted assets of 4.5%.
|
•
|
Increases the minimum Tier 1 capital to risk-weighted assets ratio requirement from 4% to 6%.
|
•
|
Retains the minimum total capital to risk-weighted assets ratio requirement of 8%.
|
•
|
Establishes a minimum leverage ratio requirement of 4%.
|
•
|
Retains the existing regulatory capital framework for 1-4 family residential mortgage exposures.
|
•
|
Permits banking organizations that are not subject to the advanced approaches rule, such as the Company and the Bank, to retain, through a one-time election, the existing treatment for most accumulated other comprehensive income, such that unrealized gains and losses on securities available for sale will not affect regulatory capital amounts and ratios.
|
•
|
Implements a new capital conservation buffer requirement for a banking organization to maintain a common equity capital ratio more than 2.5% above the minimum common equity Tier 1 capital, Tier 1 capital and total risk-based capital ratios in order to avoid limitations on capital distributions, including dividend payments, and certain discretionary bonus payments. The capital conservation buffer requirement will be phased in beginning on January 1, 2016 at 0.625% and will be fully phased in at 2.50% by January 1, 2019. A banking organization with a buffer of less than the required amount would be subject to increasingly stringent limitations on such distributions and payments as the buffer approaches zero. The new rule also generally prohibits a banking organization from making such distributions or payments during any quarter if its eligible retained income is negative and its capital conservation buffer ratio was 2.5% or less at the end of the previous quarter. The eligible retained income of a banking organization is defined as its net income for the four calendar quarters preceding the current calendar quarter, based on the organization’s quarterly regulatory reports, net of any distributions and associated tax effects not already reflected in net income.
|
•
|
Increases capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short-term commitments and securitization exposures.
|
•
|
Expands the recognition of collateral and guarantors in determining risk-weighted assets.
|
•
|
Removes references to credit ratings consistent with the Dodd-Frank Act and establishes due diligence requirements for securitization exposures.
|
(24)
|
Heritage Financial Corporation (Parent Company Only)
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||
|
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
|
||||
Cash and interest earning deposits
|
|
$
|
8,835
|
|
|
$
|
2,645
|
|
Investment in subsidiary bank
|
|
465,442
|
|
|
212,354
|
|
||
Other assets
|
|
863
|
|
|
1,041
|
|
||
|
|
$
|
475,140
|
|
|
$
|
216,040
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
Junior subordinated debentures
|
|
$
|
19,082
|
|
|
$
|
—
|
|
Other liabilities
|
|
1,552
|
|
|
278
|
|
||
Total stockholders’ equity
|
|
454,506
|
|
|
215,762
|
|
||
|
|
$
|
475,140
|
|
|
$
|
216,040
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
Interest income:
|
|
|
|
|
|
|
||||||
Interest earning deposits and other assets
|
|
$
|
17
|
|
|
$
|
22
|
|
|
$
|
44
|
|
ESOP loan
|
|
—
|
|
|
—
|
|
|
8
|
|
|||
Total interest income
|
|
17
|
|
|
22
|
|
|
52
|
|
|||
Interest expense:
|
|
|
|
|
|
|
||||||
Junior subordinated debentures
|
|
458
|
|
|
—
|
|
|
—
|
|
|||
Total interest expense
|
|
458
|
|
|
—
|
|
|
—
|
|
|||
Net interest (expense) income
|
|
(441
|
)
|
|
22
|
|
|
52
|
|
|||
Noninterest income:
|
|
|
|
|
|
|
||||||
Dividends from subsidiary banks
|
|
66,300
|
|
|
26,000
|
|
|
14,100
|
|
|||
Equity in (excess distributed) undistributed income of subsidiary banks
|
|
(40,737
|
)
|
|
(13,001
|
)
|
|
962
|
|
|||
Other income
|
|
3
|
|
|
—
|
|
|
—
|
|
|||
Total noninterest income
|
|
25,566
|
|
|
12,999
|
|
|
15,062
|
|
|||
Noninterest expense:
|
|
|
|
|
|
|
||||||
Professional services
|
|
2,943
|
|
|
1,718
|
|
|
—
|
|
|||
Other expense
|
|
3,109
|
|
|
2,905
|
|
|
2,766
|
|
|||
Total noninterest expense
|
|
6,052
|
|
|
4,623
|
|
|
2,766
|
|
|||
Income before income taxes
|
|
19,073
|
|
|
8,398
|
|
|
12,348
|
|
|||
Income tax benefit
|
|
(1,941
|
)
|
|
(1,177
|
)
|
|
(913
|
)
|
|||
Net income
|
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
|
|
Years Ended December 31,
|
||||||||||
|
|
2014
|
|
2013
|
|
2012
|
||||||
|
|
(In thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
21,014
|
|
|
$
|
9,575
|
|
|
$
|
13,261
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Equity in excess distributed (undistributed) income of subsidiary bank
|
|
40,737
|
|
|
13,001
|
|
|
(962
|
)
|
|||
Tax (benefit) provision realized from stock options exercised, share-based payment and dividends on unallocated ESOP shares
|
|
(112
|
)
|
|
13
|
|
|
93
|
|
|||
Recognition of compensation related to ESOP shares and share based payment
|
|
1,395
|
|
|
1,223
|
|
|
1,185
|
|
|||
Stock option compensation expense
|
|
20
|
|
|
71
|
|
|
106
|
|
|||
Net change in other assets and liabilities
|
|
811
|
|
|
(489
|
)
|
|
7
|
|
|||
Net cash provided by operating activities
|
|
63,865
|
|
|
23,394
|
|
|
13,690
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
ESOP loan principal repayments
|
|
—
|
|
|
—
|
|
|
161
|
|
|||
Investment in subsidiary
|
|
(43,215
|
)
|
|
(21,666
|
)
|
|
—
|
|
|||
Net cash (used in) provided by investing activities
|
|
(43,215
|
)
|
|
(21,666
|
)
|
|
161
|
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Common stock cash dividends paid
|
|
(12,892
|
)
|
|
(6,672
|
)
|
|
(12,155
|
)
|
|||
Proceeds from exercise of stock options
|
|
921
|
|
|
176
|
|
|
129
|
|
|||
Tax benefit (provision) realized from stock options exercised, share-based payment and dividends on unallocated ESOP shares
|
|
112
|
|
|
(13
|
)
|
|
(93
|
)
|
|||
Repurchase of common stock
|
|
(2,601
|
)
|
|
(8,825
|
)
|
|
(6,023
|
)
|
|||
Net cash used in financing activities
|
|
(14,460
|
)
|
|
(15,334
|
)
|
|
(18,142
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
6,190
|
|
|
(13,606
|
)
|
|
(4,291
|
)
|
|||
Cash and cash equivalents at beginning of year
|
|
2,645
|
|
|
16,251
|
|
|
20,542
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
8,835
|
|
|
$
|
2,645
|
|
|
$
|
16,251
|
|
(25)
|
Selected Quarterly Financial Data (Unaudited)
|
|
|
Year Ended December 31, 2014
|
||||||||||||||
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||
Interest income
|
|
$
|
17,613
|
|
|
$
|
30,023
|
|
|
$
|
35,031
|
|
|
$
|
38,439
|
|
Interest expense
|
|
872
|
|
|
1,426
|
|
|
1,724
|
|
|
1,659
|
|
||||
Net interest income
|
|
16,741
|
|
|
28,597
|
|
|
33,307
|
|
|
36,780
|
|
||||
Provision for loan losses
|
|
458
|
|
|
691
|
|
|
594
|
|
|
2,851
|
|
||||
Net interest income after provision for loan losses
|
|
16,283
|
|
|
27,906
|
|
|
32,713
|
|
|
33,929
|
|
||||
Noninterest income
|
|
2,307
|
|
|
4,780
|
|
|
5,483
|
|
|
3,897
|
|
||||
Noninterest expense
|
|
14,779
|
|
|
26,994
|
|
|
28,363
|
|
|
29,243
|
|
||||
Income before provision for income taxes
|
|
3,811
|
|
|
5,692
|
|
|
9,833
|
|
|
8,583
|
|
||||
Income tax expense
|
|
1,268
|
|
|
1,544
|
|
|
2,765
|
|
|
1,328
|
|
||||
Net income
|
|
$
|
2,543
|
|
|
$
|
4,148
|
|
|
$
|
7,068
|
|
|
$
|
7,255
|
|
Basic earnings per common share
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.23
|
|
|
$
|
0.24
|
|
Diluted earnings per common share
|
|
0.16
|
|
|
0.16
|
|
|
0.23
|
|
|
0.24
|
|
||||
Cash dividends declared on common stock
|
|
0.16
|
|
|
—
|
|
|
0.09
|
|
|
0.25
|
|
||||
|
||||||||||||||||
|
|
Year Ended December 31, 2013
|
||||||||||||||
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||
Interest income
|
|
$
|
17,484
|
|
|
$
|
16,859
|
|
|
$
|
18,533
|
|
|
$
|
18,552
|
|
Interest expense
|
|
946
|
|
|
919
|
|
|
952
|
|
|
907
|
|
||||
Net interest income
|
|
16,538
|
|
|
15,940
|
|
|
17,581
|
|
|
17,645
|
|
||||
Provision for loan losses
|
|
858
|
|
|
1,308
|
|
|
1,078
|
|
|
428
|
|
||||
Net interest income after provision for loan losses
|
|
15,680
|
|
|
14,632
|
|
|
16,503
|
|
|
17,217
|
|
||||
Noninterest income
|
|
2,282
|
|
|
2,357
|
|
|
2,582
|
|
|
2,430
|
|
||||
Noninterest expense
|
|
13,719
|
|
|
13,007
|
|
|
14,285
|
|
|
18,504
|
|
||||
Income before provision for income taxes
|
|
4,243
|
|
|
3,982
|
|
|
4,800
|
|
|
1,143
|
|
||||
Income tax expense
|
|
1,358
|
|
|
1,292
|
|
|
1,510
|
|
|
433
|
|
||||
Net income
|
|
$
|
2,885
|
|
|
$
|
2,690
|
|
|
$
|
3,290
|
|
|
$
|
710
|
|
Basic earnings per common share
|
|
$
|
0.19
|
|
|
$
|
0.18
|
|
|
$
|
0.20
|
|
|
$
|
0.04
|
|
Diluted earnings per common share
|
|
0.19
|
|
|
0.18
|
|
|
0.20
|
|
|
0.04
|
|
||||
Cash dividends declared on common stock
|
|
0.08
|
|
|
0.08
|
|
|
0.18
|
|
|
0.08
|
|
(26)
|
Subsequent Event
|
Performance Metric*
|
Weighting
|
Minimum*
|
Target*
|
Maximum*
|
Actual Performance Result
|
Company Contribution‡
|
[Metric]
|
50%
|
(5% Company Contribution)
|
(10% Company Contribution)
|
(17.5% Company Contribution)
|
$________
|
_____%
|
[Metric 2]
|
50%
|
(5% Company Contribution)
|
(10% Company Contribution)
|
(17.5% Company Contribution)
|
_____%
|
_____%
|
Total 2015 Plan Year Company Contribution
|
_____%
|
|
[Metric]
(50%)
|
[Metric 2]
(50%)
|
Total Company Contribution (as % of Annual Base Salary†)
|
Minimum
|
5%
|
5%
|
10.00%
|
Target
|
10%
|
10%
|
20.00%
|
Maximum or above
|
17.5%
|
17.5%
|
35.00%
|
Parent
|
|
|
|
|
Heritage Financial Corporation
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
Percentage Owned
|
|
State or Other Jurisdiction
of Incorporation or
Organization
|
Heritage Bank
|
|
100%
|
|
Washington
|
Washington Banking Master Trust
|
|
100%
|
|
Delaware
|
Signature
|
|
Title
|
|
|
|
/s/ David H. Brown
|
|
|
David H. Brown
|
|
Director
|
|
|
|
/s/ Brian S. Charneski
|
|
|
Brian S. Charneski
|
|
Director
|
|
|
|
/s/ John A. Clees
|
|
|
John A. Clees
|
|
Director
|
|
|
|
/s/ Gary B. Christiansen
|
|
|
Gary B. Christiansen
|
|
Director
|
|
|
|
/s/ Mark D. Crawford
|
|
|
Mark D. Crawford
|
|
Director
|
|
|
|
/s/ Kimberly T. Ellwanger
|
|
|
Kimberly T. Ellwanger
|
|
Director
|
|
|
|
/s/ Deborah J. Gavin
|
|
|
Deborah J. Gavin
|
|
Director
|
|
|
|
/s/ Jeffrey S. Lyon
|
|
|
Jeffrey S. Lyon
|
|
Director
|
|
|
|
/s/ Gragg E. Miller
|
|
|
Gragg E. Miller
|
|
Director
|
|
|
|
/s/ Anthony B. Pickering
|
|
|
Anthony B. Pickering
|
|
Director
|
|
|
|
/s/ Robert T. Severns
|
|
|
Robert T. Severns
|
|
Director
|
|
|
|
/s/ Ann Watson
|
|
|
Ann Watson
|
|
Director
|
1.
|
I have reviewed the annual report on Form 10-K of Heritage Financial Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Brian L. Vance
|
Brian L. Vance
|
President and Chief Executive Officer
Principal Executive Officer
|
1.
|
I have reviewed the annual report on Form 10-K of Heritage Financial Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
/s/ Donald J. Hinson
|
Donald J. Hinson
|
Executive Vice President and Chief Financial Officer
Principal Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates presented in the financial statements included in such Report.
|
March 10, 2015
|
/s/ Brian L. Vance
|
|
Brian L. Vance
|
|
President and Chief Executive Officer
Principal Executive Officer
|
|
|
March 10, 2015
|
/s/ Donald J. Hinson
|
|
Donald J. Hinson
|
|
Executive Vice President and Chief Financial Officer
Principal Financial Officer
|