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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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ITEM 16.
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•
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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;
|
•
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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;
|
•
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changes in general economic conditions, either nationally or in our market areas;
|
•
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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;
|
•
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risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar;
|
•
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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 Wall Street Reform and Consumer Protection Act of 2010 (“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;
|
•
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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;
|
•
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our ability to implement our growth strategies;
|
•
|
increased competitive pressures among financial service companies;
|
•
|
changes in consumer spending, borrowing and savings habits;
|
•
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the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions;
|
•
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adverse changes in the securities markets;
|
•
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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 Financial Accounting Standards Board (“FASB"), including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and
|
•
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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.
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Name
|
|
Age as of
December 31,
2016
|
|
Position
|
|
Has Served the
Company or Heritage Bank Since
|
|
Brian L. Vance
|
|
62
|
|
|
President and Chief Executive Officer of Heritage; Chief Executive Officer of Heritage Bank
|
|
1996
|
Jeffrey J. Deuel
|
|
58
|
|
|
Executive Vice President of Heritage; President and Chief Operating Officer of Heritage Bank
|
|
2010
|
Donald J. Hinson
|
|
55
|
|
|
Executive Vice President and Chief Financial Officer of Heritage and Heritage Bank
|
|
2005
|
David A. Spurling
|
|
63
|
|
|
Executive Vice President and Chief Credit Officer of Heritage and Heritage Bank
|
|
2001
|
Bryan McDonald (1)
|
|
45
|
|
|
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;
|
•
|
higher than expected deposit attrition;
|
•
|
potential diversion of our management's time and attention;
|
•
|
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
|
•
|
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;
|
•
|
since 2006, we completed six acquisitions or mergers, including one acquisition in 2006, 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 process, this may not occur, and our acquisitions or branching activities may not be accretive to earnings in the short or long-term; and
|
•
|
to the extent our costs of an acquisition exceed the fair value of the net assets acquired, the acquisition will generate goodwill. As discussed below under “-If the goodwill we have recorded in connection with acquisitions become impaired, our earnings and capital could be reduced,” we are required to assess our goodwill for impairment at least annually, and any goodwill impairment charge could have a material adverse effect on our results of operations and financial condition.
|
•
|
the cash flow of the borrower, guarantors 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 or guarantor;
|
•
|
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 impaired loans and their underlying collateral or discounted cash flows; and
|
•
|
current macroeconomic factors, regulatory requirements and management’s expectation of future events.
|
•
|
loan delinquencies, problem assets and foreclosures may increase;
|
•
|
the sale of foreclosed assets may be slow;
|
•
|
our provision for loan losses may increase;
|
•
|
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
|
|
|
6
|
|
|
1
|
|
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
|
|
|
4
|
|
|
—
|
|
Snohomish
|
|
WA
|
|
10
|
|
|
7
|
|
|
3
|
|
Thurston
|
|
WA
|
|
5
|
|
|
4
|
|
|
1
|
|
Whatcom
|
|
WA
|
|
4
|
|
|
3
|
|
|
1
|
|
Yakima
|
|
WA
|
|
4
|
|
|
4
|
|
|
—
|
|
Total
|
|
|
|
63
|
|
|
44
|
|
|
19
|
|
|
|
2016 Quarter ended,
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
High
|
|
$
|
18.68
|
|
|
$
|
18.45
|
|
|
$
|
18.67
|
|
|
$
|
26.10
|
|
Low
|
|
$
|
16.54
|
|
|
$
|
16.47
|
|
|
$
|
16.92
|
|
|
$
|
17.70
|
|
|
|
2015 Quarter ended,
|
||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
High
|
|
$
|
17.16
|
|
|
$
|
17.99
|
|
|
$
|
19.30
|
|
|
$
|
19.70
|
|
Low
|
|
$
|
15.52
|
|
|
$
|
16.76
|
|
|
$
|
17.22
|
|
|
$
|
18.08
|
|
Declared
|
|
Cash
Dividend per Share
|
|
Record Date
|
|
Paid
|
|
|
January 28, 2015
|
|
$0.10
|
|
February 10, 2015
|
|
February 24, 2015
|
|
|
April 22, 2015
|
|
$0.11
|
|
May 7, 2015
|
|
May 21, 2015
|
|
|
July 22, 2015
|
|
$0.11
|
|
August 6, 2015
|
|
August 20, 2015
|
|
|
October 21, 2015
|
|
$0.11
|
|
November 4, 2015
|
|
November 18, 2015
|
|
|
October 21, 2015
|
|
$0.10
|
|
November 4, 2015
|
|
November 18, 2015
|
|
*
|
January 27, 2016
|
|
$0.11
|
|
February 10, 2016
|
|
February 24, 2016
|
|
|
April 20, 2016
|
|
$0.12
|
|
May 5, 2016
|
|
May 19, 2016
|
|
|
July 20, 2016
|
|
$0.12
|
|
August 4, 2016
|
|
August 18, 2016
|
|
|
October 26, 2016
|
|
$0.12
|
|
November 8, 2016
|
|
November 22, 2016
|
|
|
October 26, 2016
|
|
$0.25
|
|
November 8, 2016
|
|
November 22, 2016
|
|
*
|
January 25, 2017
|
|
$0.12
|
|
February 9, 2017
|
|
February 23, 2017
|
|
|
|
Years Ended December 31,
|
|
|
||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
Plan Total
|
||||||||
Tenth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
108,075
|
|
|
704,975
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.88
|
|
|
$
|
15.85
|
|
|
|
|
|
|
|
|
|
||||||||
Eleventh Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
138,000
|
|
|
441,966
|
|
|
—
|
|
|
579,966
|
|
||||
Stock repurchase average share price
|
$
|
17.16
|
|
|
$
|
16.64
|
|
|
$
|
—
|
|
|
$
|
16.76
|
|
Period
|
|
Total Number of
Shares
Purchased(1)
|
|
Average Price
Paid Per Share(1)
|
|
Cumulative 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, 2016—
October 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
7,893,389
|
|
|
935,034
|
|
November 1, 2016—November 30, 2016
|
|
110
|
|
|
18.45
|
|
|
7,893,389
|
|
|
935,034
|
|
|
December 1, 2016—December 31, 2016
|
|
196
|
|
|
25.40
|
|
|
7,893,389
|
|
|
935,034
|
|
|
Total
|
|
306
|
|
|
$
|
22.90
|
|
|
7,893,389
|
|
|
935,034
|
|
(1)
|
Common shares repurchased by the Company between October 1,
2016
and
December 31, 2016
represent shares of restricted stock that were canceled to pay withholding taxes.
|
|
|
Years Ended December 31,
|
||||||||||||||||||||||
Index
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
||||||||||||
Heritage Financial Corporation
|
|
$
|
100.00
|
|
|
$
|
123.74
|
|
|
$
|
148.08
|
|
|
$
|
156.57
|
|
|
$
|
173.21
|
|
|
$
|
246.48
|
|
NASDAQ Composite
|
|
100.00
|
|
|
117.45
|
|
|
164.57
|
|
|
188.84
|
|
|
201.98
|
|
|
219.89
|
|
||||||
NASDAQ Bank
|
|
100.00
|
|
|
118.69
|
|
|
168.21
|
|
|
176.48
|
|
|
192.08
|
|
|
265.02
|
|
||||||
SNL U.S. Bank NASDAQ
|
|
100.00
|
|
|
119.19
|
|
|
171.31
|
|
|
177.42
|
|
|
191.53
|
|
|
265.56
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||||||
Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income
|
|
$
|
138,512
|
|
|
$
|
135,739
|
|
|
$
|
121,106
|
|
|
$
|
71,428
|
|
|
$
|
69,109
|
|
Interest expense
|
|
6,006
|
|
|
6,120
|
|
|
5,681
|
|
|
3,724
|
|
|
4,534
|
|
|||||
Net interest income
|
|
132,506
|
|
|
129,619
|
|
|
115,425
|
|
|
67,704
|
|
|
64,575
|
|
|||||
Provision for loan losses
|
|
4,931
|
|
|
4,372
|
|
|
4,594
|
|
|
3,672
|
|
|
2,016
|
|
|||||
Noninterest income
|
|
31,619
|
|
|
32,268
|
|
|
16,467
|
|
|
9,651
|
|
|
7,272
|
|
|||||
Noninterest expense
|
|
106,473
|
|
|
106,208
|
|
|
99,379
|
|
|
59,515
|
|
|
50,392
|
|
|||||
Income tax expense
|
|
13,803
|
|
|
13,818
|
|
|
6,905
|
|
|
4,593
|
|
|
6,178
|
|
|||||
Net income
|
|
38,918
|
|
|
37,489
|
|
|
21,014
|
|
|
9,575
|
|
|
13,261
|
|
|||||
Earnings per common share
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
$
|
1.30
|
|
|
$
|
1.25
|
|
|
$
|
0.82
|
|
|
$
|
0.61
|
|
|
$
|
0.87
|
|
Diluted
|
|
1.30
|
|
|
1.25
|
|
|
0.82
|
|
|
0.61
|
|
|
0.87
|
|
|||||
Dividend payout ratio to common shareholders
(1)
|
|
55.4
|
%
|
|
42.4
|
%
|
|
61.0
|
%
|
|
68.9
|
%
|
|
92.0
|
%
|
|||||
Performance Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net interest spread
(2)
|
|
3.89
|
%
|
|
4.04
|
%
|
|
4.45
|
%
|
|
4.69
|
%
|
|
5.03
|
%
|
|||||
Net interest margin
(3)
|
|
3.96
|
|
|
4.11
|
|
|
4.53
|
|
|
4.80
|
|
|
5.17
|
|
|||||
Efficiency ratio
(4)
|
|
64.87
|
|
|
65.61
|
|
|
75.35
|
|
|
76.94
|
|
|
70.14
|
|
|||||
Noninterest expense to average assets
|
|
2.84
|
|
|
3.01
|
|
|
3.49
|
|
|
3.86
|
|
|
3.72
|
|
|||||
Return on average assets
|
|
1.04
|
|
|
1.06
|
|
|
0.74
|
|
|
0.62
|
|
|
0.98
|
|
|||||
Return on average common equity
|
|
8.01
|
|
|
8.08
|
|
|
5.61
|
|
|
4.58
|
|
|
6.52
|
|
(1)
|
Dividend payout ratio is declared dividends per common share divided by diluted 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,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
|
$
|
3,878,981
|
|
|
$
|
3,650,792
|
|
|
$
|
3,457,750
|
|
|
$
|
1,659,038
|
|
|
$
|
1,345,540
|
|
Total loans receivable, net
|
|
2,609,666
|
|
|
2,372,296
|
|
|
2,223,348
|
|
|
1,203,096
|
|
|
998,344
|
|
|||||
Investment securities
|
|
794,645
|
|
|
811,869
|
|
|
778,660
|
|
|
199,288
|
|
|
154,392
|
|
|||||
FDIC indemnification asset
|
|
—
|
|
|
—
|
|
|
1,116
|
|
|
4,382
|
|
|
7,100
|
|
|||||
Goodwill and other intangible assets
|
|
126,403
|
|
|
127,818
|
|
|
129,918
|
|
|
30,980
|
|
|
14,098
|
|
|||||
Deposits
|
|
3,229,648
|
|
|
3,108,287
|
|
|
2,906,331
|
|
|
1,399,189
|
|
|
1,117,971
|
|
|||||
Federal Home Loan Bank advances
|
|
79,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Junior subordinated debentures
|
|
19,717
|
|
|
19,424
|
|
|
19,082
|
|
|
—
|
|
|
—
|
|
|||||
Securities sold under agreement to repurchase
|
|
22,104
|
|
|
23,214
|
|
|
32,181
|
|
|
29,420
|
|
|
16,021
|
|
|||||
Stockholders’ equity
|
|
481,763
|
|
|
469,970
|
|
|
454,506
|
|
|
215,762
|
|
|
198,938
|
|
|||||
Financial Measures:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Book value per common share
|
|
$
|
16.08
|
|
|
$
|
15.68
|
|
|
$
|
15.02
|
|
|
$
|
13.31
|
|
|
$
|
13.16
|
|
Stockholders' equity to assets ratio
|
|
12.4
|
%
|
|
12.9
|
%
|
|
13.1
|
%
|
|
13.0
|
%
|
|
14.8
|
%
|
|||||
Net loans to deposits
(1)
|
|
81.2
|
%
|
|
76.6
|
%
|
|
76.7
|
%
|
|
86.0
|
%
|
|
89.4
|
%
|
|||||
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total risk-based capital ratio
|
|
13.0
|
%
|
|
13.7
|
%
|
|
15.1
|
%
|
|
16.8
|
%
|
|
19.9
|
%
|
|||||
Tier 1 risk-based capital ratio
|
|
12.0
|
|
|
12.7
|
|
|
13.9
|
|
|
15.5
|
|
|
18.7
|
|
|||||
Leverage ratio
|
|
10.3
|
|
|
10.4
|
|
|
10.2
|
|
|
11.3
|
|
|
13.6
|
|
|||||
Common equity Tier 1 capital to risk-weighted assets
|
|
11.4
|
|
|
12.0
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Asset Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nonperforming loans to loans receivable, net
(2)
|
|
0.41
|
%
|
|
0.40
|
%
|
|
0.51
|
%
|
|
0.63
|
%
|
|
1.29
|
%
|
|||||
Allowance for loan losses to loans receivable, net
(2)
|
|
1.18
|
|
|
1.24
|
|
|
1.23
|
|
|
2.34
|
|
|
2.78
|
|
|||||
Allowance for loan losses to nonperforming loans
(2)
|
|
284.93
|
|
|
307.67
|
|
|
239.62
|
|
|
372.16
|
|
|
215.67
|
|
|||||
Nonperforming assets to total assets
(2)
|
|
0.30
|
|
|
0.32
|
|
|
0.43
|
|
|
0.74
|
|
|
1.41
|
|
|||||
Net charge-off on loans to average loans receivable, net
|
|
0.14
|
|
|
0.10
|
|
|
0.30
|
|
|
0.31
|
|
|
0.44
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Number of banking offices
|
|
63
|
|
|
67
|
|
|
66
|
|
|
35
|
|
|
33
|
|
|||||
Number of full-time equivalent employees
|
|
760
|
|
|
717
|
|
|
748
|
|
|
373
|
|
|
363
|
|
|||||
Deposits per branch
|
|
51,264
|
|
|
46,392
|
|
|
44,035
|
|
|
39,977
|
|
|
33,878
|
|
|||||
Assets per full-time equivalent
|
|
5,104
|
|
|
5,092
|
|
|
4,623
|
|
|
4,448
|
|
|
3,707
|
|
(1)
|
Total loans receivable, net plus loans held for sale divided by deposits.
|
(2)
|
At
December 31, 2016
,
2015
,
2014
,
2013
and
2012
,
$2.8 million
,
$1.3 million
$1.6 million, $1.7 million and $1.2 million of nonaccrual loans were guaranteed by government agencies, respectively.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
historical loss experience in the loan portfolio;
|
•
|
balance of potential problem loans in the loan portfolio;
|
•
|
impact of environmental factors, including:
|
◦
|
levels of and trends in delinquencies and impaired loans;
|
◦
|
levels of and trends in charge-offs and recoveries;
|
◦
|
trends in volume and terms of loans;
|
◦
|
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;
|
◦
|
other external factors such as competition, legal, and regulatory;
|
◦
|
effects of changes in credit concentrations; and
|
◦
|
other factors
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Change 2016 vs. 2015
|
|
Percent Change 2016 vs. 2015
|
|||||||
|
(Dollars in thousands)
|
|
|
|||||||||||
Cash and cash equivalents
|
$
|
103,745
|
|
|
$
|
126,640
|
|
|
$
|
(22,895
|
)
|
|
(18.1
|
)%
|
Other interest earning deposits
|
—
|
|
|
6,719
|
|
|
(6,719
|
)
|
|
(100.0
|
)
|
|||
Investment securities available for sale
|
794,645
|
|
|
811,869
|
|
|
(17,224
|
)
|
|
(2.1
|
)
|
|||
Loans held for sale
|
11,662
|
|
|
7,682
|
|
|
3,980
|
|
|
51.8
|
|
|||
Total loans receivable, net
|
2,609,666
|
|
|
2,372,296
|
|
|
237,370
|
|
|
10.0
|
|
|||
Other real estate owned
|
754
|
|
|
2,019
|
|
|
(1,265
|
)
|
|
(62.7
|
)
|
|||
Premises and equipment, net
|
63,911
|
|
|
61,891
|
|
|
2,020
|
|
|
3.3
|
|
|||
FHLB stock, at cost
|
7,564
|
|
|
4,148
|
|
|
3,416
|
|
|
82.4
|
|
|||
Bank owned life insurance
|
70,355
|
|
|
60,876
|
|
|
9,479
|
|
|
15.6
|
|
|||
Accrued interest receivable
|
10,925
|
|
|
10,469
|
|
|
456
|
|
|
4.4
|
|
|||
Prepaid expenses and other assets
|
79,351
|
|
|
58,365
|
|
|
20,986
|
|
|
36.0
|
|
|||
Other intangible assets, net
|
7,374
|
|
|
8,789
|
|
|
(1,415
|
)
|
|
(16.1
|
)
|
|||
Goodwill
|
119,029
|
|
|
119,029
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
$
|
3,878,981
|
|
|
$
|
3,650,792
|
|
|
$
|
228,189
|
|
|
6.3
|
%
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
|||||||||||||||
|
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
|
$
|
1,569
|
|
|
0.2
|
%
|
|
$
|
35,577
|
|
|
4.4
|
%
|
|
$
|
21,427
|
|
|
2.9
|
%
|
Municipal securities
|
237,256
|
|
|
29.9
|
|
|
220,993
|
|
|
27.2
|
|
|
173,037
|
|
|
23.3
|
|
|||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Residential
|
309,176
|
|
|
38.9
|
|
|
352,024
|
|
|
43.4
|
|
|
498,737
|
|
|
67.1
|
|
|||
Commercial
|
208,318
|
|
|
26.2
|
|
|
179,011
|
|
|
22.0
|
|
|
43,662
|
|
|
5.9
|
|
|||
Collateralized loan obligations
|
10,478
|
|
|
1.3
|
|
|
15,097
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|||
Corporate obligations
|
16,706
|
|
|
2.1
|
|
|
9,113
|
|
|
1.1
|
|
|
4,010
|
|
|
0.5
|
|
|||
Other securities
|
11,142
|
|
|
1.4
|
|
|
54
|
|
|
—
|
|
|
1,973
|
|
|
0.3
|
|
|||
Total
|
$
|
794,645
|
|
|
100.0
|
%
|
|
$
|
811,869
|
|
|
100.0
|
%
|
|
$
|
742,846
|
|
|
100.0
|
%
|
|
One Year or Less
|
|
Over One to Five
Years
|
|
Over Five to Ten
Years
|
|
Over Ten Years
|
||||||||||||||||||||
|
Fair
Value
|
|
Weighted
Average
Yield
(2)
|
|
Fair
Value
|
|
Weighted
Average
Yield
(2)
|
|
Fair
Value
|
|
Weighted
Average
Yield
(2)
|
|
Fair
Value
|
|
Weighted
Average
Yield
(2)
|
||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,000
|
|
|
1.47
|
%
|
|
$
|
569
|
|
|
2.00
|
%
|
|
$
|
—
|
|
|
—
|
%
|
|
$
|
—
|
|
|
—
|
%
|
Municipal securities
|
4,651
|
|
|
3.19
|
|
|
62,452
|
|
|
3.26
|
|
|
48,525
|
|
|
3.44
|
|
|
121,628
|
|
|
3.77
|
|
||||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential
|
—
|
|
|
—
|
|
|
4,575
|
|
|
1.26
|
|
|
69,176
|
|
|
2.19
|
|
|
235,425
|
|
|
2.12
|
|
||||
Commercial
|
|
|
|
|
52,612
|
|
|
2.05
|
|
|
120,676
|
|
|
2.30
|
|
|
35,030
|
|
|
2.06
|
|
||||||
Collateralized loan obligations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,478
|
|
|
2.54
|
|
|
—
|
|
|
—
|
|
||||
Corporate obligations
|
1,015
|
|
|
1.75
|
|
|
4,032
|
|
|
1.67
|
|
|
11,659
|
|
|
2.07
|
|
|
—
|
|
|
—
|
|
||||
Other securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,019
|
|
|
2.10
|
|
||||
Total
|
$
|
6,666
|
|
|
2.71
|
%
|
|
$
|
124,240
|
|
|
2.62
|
%
|
|
$
|
260,514
|
|
|
2.48
|
%
|
|
$
|
403,102
|
|
|
2.61
|
%
|
|
December 31, 2014
|
|||||
|
Amortized
Cost
|
|
% of
Total
Investments
|
|||
|
(Dollars in thousands)
|
|||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,591
|
|
|
4.4
|
%
|
Municipal securities
|
22,486
|
|
|
62.8
|
|
|
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|||
Residential
|
5,261
|
|
|
14.7
|
|
|
Commercial
|
5,605
|
|
|
15.7
|
|
|
Private residential collateralized mortgage obligations
|
871
|
|
|
2.4
|
|
|
Total
|
$
|
35,814
|
|
|
100.0
|
%
|
|
December 31,
|
|||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||||||||||||
|
Balance
|
|
% of Total
(3)
|
|
Balance
|
|
% of Total
(3) |
|
Balance
|
|
% of Total
(3) |
|
Balance
|
|
% of Total
(3) |
|
Balance
|
|
% of Total
(3) |
|||||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Commercial and industrial
|
$
|
637,773
|
|
|
24.2
|
%
|
|
$
|
596,726
|
|
|
24.8
|
%
|
|
$
|
570,453
|
|
|
25.3
|
%
|
|
$
|
351,230
|
|
|
28.5
|
%
|
|
$
|
327,784
|
|
|
31.9
|
%
|
Owner-occupied commercial real estate
|
558,035
|
|
|
21.1
|
|
|
572,609
|
|
|
23.8
|
|
|
574,687
|
|
|
25.5
|
|
|
303,073
|
|
|
24.6
|
|
|
236,501
|
|
|
23.0
|
|
|||||
Non-owner occupied commercial real estate
|
880,880
|
|
|
33.4
|
|
|
753,986
|
|
|
31.4
|
|
|
663,935
|
|
|
29.5
|
|
|
417,206
|
|
|
33.9
|
|
|
289,882
|
|
|
28.2
|
|
|||||
Total commercial business
|
2,076,688
|
|
|
78.7
|
|
|
1,923,321
|
|
|
80.0
|
|
|
1,809,075
|
|
|
80.3
|
|
|
1,071,509
|
|
|
87.0
|
|
|
854,167
|
|
|
83.1
|
|
|||||
One-to-four family residential(1)
|
77,391
|
|
|
2.9
|
|
|
72,548
|
|
|
3.0
|
|
|
69,530
|
|
|
3.1
|
|
|
47,859
|
|
|
3.9
|
|
|
46,915
|
|
|
4.6
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
One-to-four family residential
|
50,414
|
|
|
1.9
|
|
|
51,752
|
|
|
2.2
|
|
|
49,195
|
|
|
2.2
|
|
|
21,280
|
|
|
1.7
|
|
|
30,121
|
|
|
2.9
|
|
|||||
Five or more family residential and commercial properties
|
108,764
|
|
|
4.1
|
|
|
55,325
|
|
|
2.3
|
|
|
64,920
|
|
|
2.9
|
|
|
48,655
|
|
|
3.9
|
|
|
52,939
|
|
|
5.2
|
|
|||||
Total real estate construction and land development (2)
|
159,178
|
|
|
6.0
|
|
|
107,077
|
|
|
4.5
|
|
|
114,115
|
|
|
5.1
|
|
|
69,935
|
|
|
5.6
|
|
|
83,060
|
|
|
8.1
|
|
|||||
Consumer
|
325,140
|
|
|
12.3
|
|
|
298,167
|
|
|
12.4
|
|
|
259,294
|
|
|
11.5
|
|
|
45,287
|
|
|
3.7
|
|
|
44,892
|
|
|
4.4
|
|
|||||
Gross loans receivable
|
2,638,397
|
|
|
99.9
|
|
|
2,401,113
|
|
|
99.9
|
|
|
2,252,014
|
|
|
100.0
|
|
|
1,234,590
|
|
|
100.2
|
|
|
1,029,034
|
|
|
100.2
|
|
|||||
Deferred loan costs (fees), net
|
2,352
|
|
|
0.1
|
|
|
929
|
|
|
0.1
|
|
|
(937
|
)
|
|
—
|
|
|
(2,670
|
)
|
|
(0.2
|
)
|
|
(2,096
|
)
|
|
(0.2
|
)
|
|||||
Loans receivable, net
|
$
|
2,640,749
|
|
|
100.0
|
%
|
|
$
|
2,402,042
|
|
|
100.0
|
%
|
|
$
|
2,251,077
|
|
|
100.0
|
%
|
|
$
|
1,231,920
|
|
|
100.0
|
%
|
|
$
|
1,026,938
|
|
|
100.0
|
%
|
(1)
|
Excludes loans held for sale of
$11.7 million
,
$7.7 million
,
$5.6 million
and
$1.7 million
as of December 31,
2016
,
2015
, and 2014, respectively. There were no loans held for sale at December 31, 2013.
|
(2)
|
Balances are net of undisbursed loan proceeds.
|
(3)
|
Percent of loans receivable, net.
|
|
|
Maturing
|
||||||||||||||
|
|
One Year or Less
|
|
Over One to Five Years
|
|
Over Five Years
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Commercial business
|
|
$
|
260,081
|
|
|
$
|
401,563
|
|
|
$
|
1,415,044
|
|
|
$
|
2,076,688
|
|
One-to-four family residential
|
|
1,065
|
|
|
3,125
|
|
|
73,201
|
|
|
77,391
|
|
||||
Real estate construction and land development
|
|
98,652
|
|
|
52,517
|
|
|
8,009
|
|
|
159,178
|
|
||||
Consumer
|
|
16,690
|
|
|
$
|
93,498
|
|
|
$
|
214,952
|
|
|
325,140
|
|
||
Gross loans receivable
|
|
$
|
376,488
|
|
|
$
|
550,703
|
|
|
$
|
1,711,206
|
|
|
$
|
2,638,397
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fixed rate loans
|
|
$
|
115,452
|
|
|
$
|
362,273
|
|
|
$
|
511,325
|
|
|
$
|
989,050
|
|
Variable or adjustable rate loans
|
|
261,036
|
|
|
188,430
|
|
|
1,199,881
|
|
|
1,649,347
|
|
||||
Total
|
|
$
|
376,488
|
|
|
$
|
550,703
|
|
|
$
|
1,711,206
|
|
|
$
|
2,638,397
|
|
|
|
December 31,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
$
|
8,580
|
|
|
$
|
7,122
|
|
|
$
|
8,596
|
|
|
$
|
5,675
|
|
|
$
|
6,068
|
|
One-to-four family residential
|
|
94
|
|
|
38
|
|
|
—
|
|
|
340
|
|
|
450
|
|
|||||
Real estate construction and land development
|
|
2,008
|
|
|
2,414
|
|
|
2,831
|
|
|
1,045
|
|
|
6,420
|
|
|||||
Consumer
|
|
227
|
|
|
94
|
|
|
145
|
|
|
685
|
|
|
320
|
|
|||||
Total nonaccrual loans
(1)(2)
|
|
10,909
|
|
|
9,668
|
|
|
11,572
|
|
|
7,745
|
|
|
13,258
|
|
|||||
Other real estate owned
|
|
754
|
|
|
2,019
|
|
|
3,355
|
|
|
4,559
|
|
|
5,666
|
|
|||||
Total nonperforming assets
|
|
$
|
11,663
|
|
|
$
|
11,687
|
|
|
$
|
14,927
|
|
|
$
|
12,304
|
|
|
$
|
18,924
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Allowance for loan losses
|
|
$
|
31,083
|
|
|
$
|
29,746
|
|
|
$
|
27,729
|
|
|
$
|
28,824
|
|
|
$
|
28,594
|
|
Nonperforming loans to loans receivable, net
|
|
0.41
|
%
|
|
0.40
|
%
|
|
0.51
|
%
|
|
0.63
|
%
|
|
1.29
|
%
|
|||||
Allowance for loan losses to loans receivable, net
|
|
1.18
|
%
|
|
1.24
|
%
|
|
1.23
|
%
|
|
2.34
|
%
|
|
2.78
|
%
|
|||||
Allowance for loan losses to nonperforming loans
|
|
284.93
|
%
|
|
307.67
|
%
|
|
239.62
|
%
|
|
372.16
|
%
|
|
215.67
|
%
|
|||||
Nonperforming assets to total assets
|
|
0.30
|
%
|
|
0.32
|
%
|
|
0.43
|
%
|
|
0.74
|
%
|
|
1.41
|
%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Performing TDR loans:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
$
|
19,837
|
|
|
$
|
17,345
|
|
|
$
|
14,421
|
|
|
$
|
19,496
|
|
|
$
|
15,227
|
|
One-to-four family residential
|
|
227
|
|
|
236
|
|
|
245
|
|
|
702
|
|
|
888
|
|
|||||
Real estate construction and land development
|
|
2,141
|
|
|
3,014
|
|
|
3,927
|
|
|
6,043
|
|
|
361
|
|
|||||
Consumer
|
|
83
|
|
|
100
|
|
|
66
|
|
|
101
|
|
|
—
|
|
|||||
Total performing TDR loans
(3)
|
|
$
|
22,288
|
|
|
$
|
20,695
|
|
|
$
|
18,659
|
|
|
$
|
26,342
|
|
|
$
|
16,476
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Accruing loans past due 90 days or more
(4)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
248
|
|
Potential problem loans
(5)
|
|
87,762
|
|
|
110,357
|
|
|
162,930
|
|
|
67,662
|
|
|
31,900
|
|
(1)
|
At
December 31, 2016
,
2015
,
2014
,
2013
and
2012
,
$6.9 million
$6.3 million
, $7.3 million, $2.6 million and $9.3 million of nonaccrual loans were considered TDR loans, respectively.
|
(2)
|
At
December 31, 2016
,
2015
,
2014
,
2013
and
2012
,
$2.8 million
,
$1.3 million
$1.6 million, $1.7 million and $1.2 million of nonaccrual loans were guaranteed by government agencies, respectively.
|
(3)
|
At
December 31, 2016
,
2015
,
2014
,
2013
and
2012
,
$682,000
, $491,000, $751,000, $1.2 million and $965,000 of performing TDR loans were guaranteed by government agencies, respectively.
|
(4)
|
There were
no
accruing loans past due 90 days or more that were guaranteed by government agencies at
December 31, 2016
,
2015
,
2014
and
2013
. There were accruing loans past due 90 days or more of $6,000 guaranteed by government agencies at December 31,
2012
.
|
(5)
|
At
December 31, 2016
,
2015
,
2014
,
2013
and
2012
,
$1.1 million
,
$3.0 million
, $2.0 million, $1.8 million and $2.9 million of potential problem loans were guaranteed by government agencies, respectively.
|
|
|
At or For the Years Ended December 31,
|
||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||
Allowance for loan losses at beginning of the year
|
|
$
|
29,746
|
|
|
$
|
27,729
|
|
|
$
|
28,824
|
|
|
$
|
28,594
|
|
|
$
|
30,915
|
|
Provision for loan losses
|
|
4,931
|
|
|
4,372
|
|
|
4,594
|
|
|
3,672
|
|
|
2,016
|
|
|||||
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
(4,153
|
)
|
|
(1,676
|
)
|
|
(5,252
|
)
|
|
(3,073
|
)
|
|
(3,726
|
)
|
|||||
One-to-four family residential
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
|
(52
|
)
|
|
(391
|
)
|
|||||
Real estate construction and land development
|
|
(154
|
)
|
|
(106
|
)
|
|
(345
|
)
|
|
(565
|
)
|
|
(1,280
|
)
|
|||||
Consumer
|
|
(1,778
|
)
|
|
(1,700
|
)
|
|
(969
|
)
|
|
(681
|
)
|
|
(677
|
)
|
|||||
Total charge-offs
|
|
(6,085
|
)
|
|
(3,482
|
)
|
|
(6,597
|
)
|
|
(4,371
|
)
|
|
(6,074
|
)
|
|||||
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business
|
|
1,844
|
|
|
476
|
|
|
716
|
|
|
808
|
|
|
1,579
|
|
|||||
One-to-four family residential
|
|
2
|
|
|
13
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|||||
Real estate construction and land development
|
|
83
|
|
|
100
|
|
|
43
|
|
|
32
|
|
|
125
|
|
|||||
Consumer
|
|
562
|
|
|
538
|
|
|
142
|
|
|
89
|
|
|
33
|
|
|||||
Total recoveries
|
|
2,491
|
|
|
1,127
|
|
|
908
|
|
|
929
|
|
|
1,737
|
|
|||||
Net charge-offs
|
|
(3,594
|
)
|
|
(2,355
|
)
|
|
(5,689
|
)
|
|
(3,442
|
)
|
|
(4,337
|
)
|
|||||
Allowance for loan losses at end of the year
|
|
$
|
31,083
|
|
|
$
|
29,746
|
|
|
$
|
27,729
|
|
|
$
|
28,824
|
|
|
$
|
28,594
|
|
Gross loans receivable at end of the year
(1)
|
|
$
|
2,638,397
|
|
|
$
|
2,401,113
|
|
|
$
|
2,252,014
|
|
|
$
|
1,234,590
|
|
|
$
|
1,029,034
|
|
Average loans receivable during the year
(1)
|
|
2,489,730
|
|
|
2,316,175
|
|
|
1,871,696
|
|
|
1,124,828
|
|
|
996,186
|
|
|||||
Ratio of net charge-offs on loans to average loans receivable
|
|
(0.14
|
)%
|
|
(0.10
|
)%
|
|
(0.30
|
)%
|
|
(0.31
|
)%
|
|
(0.44
|
)%
|
(1)
|
Excludes loans held for sale.
|
|
December 31,
|
|||||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||||||||||||||||
|
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
|
$
|
22,382
|
|
|
78.8
|
%
|
|
$
|
22,064
|
|
|
80.1
|
%
|
|
$
|
20,186
|
|
|
80.3
|
%
|
|
$
|
22,853
|
|
|
86.7
|
%
|
|
$
|
19,302
|
|
|
82.9
|
%
|
One-to-four family residential
|
1,015
|
|
|
2.9
|
|
|
1,157
|
|
|
3.0
|
|
|
1,200
|
|
|
3.1
|
|
|
1,100
|
|
|
3.9
|
|
|
1,221
|
|
|
4.6
|
|
|||||
Real estate construction
|
2,156
|
|
|
6.0
|
|
|
1,871
|
|
|
4.5
|
|
|
2,758
|
|
|
5.1
|
|
|
2,673
|
|
|
5.7
|
|
|
5,440
|
|
|
8.1
|
|
|||||
Consumer
|
5,024
|
|
|
12.3
|
|
|
4,309
|
|
|
12.4
|
|
|
2,769
|
|
|
11.5
|
|
|
1,597
|
|
|
3.7
|
|
|
1,761
|
|
|
4.4
|
|
|||||
Unallocated
|
506
|
|
|
—
|
|
|
345
|
|
|
—
|
|
|
816
|
|
|
—
|
|
|
601
|
|
|
—
|
|
|
870
|
|
|
—
|
|
|||||
Total allowance for loan losses
|
$
|
31,083
|
|
|
100.0
|
%
|
|
$
|
29,746
|
|
|
100.0
|
%
|
|
$
|
27,729
|
|
|
100.0
|
%
|
|
$
|
28,824
|
|
|
100.0
|
%
|
|
$
|
28,594
|
|
|
100.0
|
%
|
(1)
|
Represents the percent of loans receivable by loan category to total gross loans receivable.
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
(Dollars in thousands)
|
||||||
General Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
21,791
|
|
|
$
|
17,354
|
|
Gross loans, excluding PCI and impaired loans
|
2,540,751
|
|
|
2,283,832
|
|
||
Percentage
|
0.86
|
%
|
|
0.76
|
%
|
||
|
|
|
|
||||
PCI Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
6,558
|
|
|
$
|
9,084
|
|
Gross PCI loans
|
64,448
|
|
|
86,919
|
|
||
Percentage
|
10.18
|
%
|
|
10.45
|
%
|
||
|
|
|
|
||||
Specific Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
2,734
|
|
|
$
|
3,308
|
|
Gross impaired loans
|
33,198
|
|
|
30,362
|
|
||
Percentage
|
8.24
|
%
|
|
10.90
|
%
|
||
|
|
|
|
||||
Total Allowance for Loan Losses:
|
|
|
|
||||
Allowance for loan losses
|
$
|
31,083
|
|
|
$
|
29,746
|
|
Gross loans receivable
|
2,638,397
|
|
|
2,401,113
|
|
||
Percentage
|
1.18
|
%
|
|
1.24
|
%
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
|||||||||||||||
|
|
Amount
|
|
Percent of Total
|
|
Amount
|
|
Percent of Total
|
|
Amount
|
|
Percent of Total
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||
Noninterest demand deposits
|
|
$
|
882,091
|
|
|
27.3
|
%
|
|
$
|
770,927
|
|
|
24.8
|
%
|
|
$
|
709,673
|
|
|
24.4
|
%
|
NOW accounts
|
|
963,821
|
|
|
29.8
|
|
|
917,859
|
|
|
29.5
|
|
|
793,362
|
|
|
27.3
|
|
|||
Money market accounts
|
|
523,875
|
|
|
16.2
|
|
|
545,342
|
|
|
17.6
|
|
|
520,065
|
|
|
17.9
|
|
|||
Savings accounts
|
|
502,460
|
|
|
15.6
|
|
|
453,826
|
|
|
14.6
|
|
|
357,834
|
|
|
12.3
|
|
|||
Total non-maturity deposits
|
|
2,872,247
|
|
|
88.9
|
|
|
2,687,954
|
|
|
86.5
|
|
|
2,380,934
|
|
|
81.9
|
|
|||
CDs
|
|
357,401
|
|
|
11.1
|
|
|
420,333
|
|
|
13.5
|
|
|
525,397
|
|
|
18.1
|
|
|||
Total deposits
|
|
$
|
3,229,648
|
|
|
100.0
|
%
|
|
$
|
3,108,287
|
|
|
100.0
|
%
|
|
$
|
2,906,331
|
|
|
100.0
|
%
|
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|
Average
Balance
|
|
Average
Yield/Rate
|
|||||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||||
NOW accounts and money market accounts
|
|
$
|
1,464,198
|
|
|
0.16
|
%
|
|
$
|
1,374,757
|
|
|
0.17
|
%
|
|
$
|
1,049,078
|
|
|
0.18
|
%
|
Savings accounts
|
|
485,482
|
|
|
0.16
|
|
|
405,633
|
|
|
0.11
|
|
|
282,150
|
|
|
0.09
|
|
|||
CDs
|
|
388,286
|
|
|
0.50
|
|
|
464,277
|
|
|
0.51
|
|
|
494,948
|
|
|
0.60
|
|
|||
Total interest bearing deposits
|
|
2,337,966
|
|
|
0.21
|
|
|
2,244,667
|
|
|
0.23
|
|
|
1,826,176
|
|
|
0.28
|
|
|||
Noninterest demand deposits
|
|
829,912
|
|
|
—
|
|
|
740,718
|
|
|
—
|
|
|
574,692
|
|
|
—
|
|
|||
Total deposits
|
|
$
|
3,167,878
|
|
|
0.16
|
%
|
|
$
|
2,985,385
|
|
|
0.18
|
%
|
|
$
|
2,400,868
|
|
|
0.21
|
%
|
|
December 31, 2016
|
||
|
(In thousands)
|
||
Remaining maturity:
|
|
||
Three months or less
|
$
|
14,954
|
|
Over three months through twelve months
|
25,810
|
|
|
Over twelve months through three years
|
11,390
|
|
|
Over three years
|
2,670
|
|
|
Total
|
$
|
54,824
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands
|
||||||||||
Dividends paid per common share
|
$
|
0.72
|
|
|
$
|
0.53
|
|
|
$
|
0.50
|
|
Dividend payout ratio
(1)
|
55.4
|
%
|
|
42.4
|
%
|
|
61.0
|
%
|
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||||||||||||||
|
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)
|
|||||||||||||||||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total loans receivable, net
|
$
|
2,489,730
|
|
|
$
|
122,147
|
|
|
4.91
|
%
|
|
$
|
2,316,175
|
|
|
$
|
121,687
|
|
|
5.25
|
%
|
|
$
|
1,871,696
|
|
|
$
|
110,437
|
|
|
5.90
|
%
|
Taxable securities
|
589,867
|
|
|
11,215
|
|
|
1.90
|
|
|
548,787
|
|
|
9,578
|
|
|
1.75
|
|
|
383,626
|
|
|
7,328
|
|
|
1.91
|
|
||||||
Nontaxable securities
|
221,708
|
|
|
4,870
|
|
|
2.20
|
|
|
204,443
|
|
|
4,196
|
|
|
2.05
|
|
|
145,113
|
|
|
2,886
|
|
|
1.99
|
|
||||||
Other interest earning assets
|
44,951
|
|
|
280
|
|
|
0.62
|
|
|
80,882
|
|
|
278
|
|
|
0.34
|
|
|
150,189
|
|
|
455
|
|
|
0.30
|
|
||||||
Total interest earning assets
|
3,346,256
|
|
|
138,512
|
|
|
4.14
|
|
|
3,150,287
|
|
|
135,739
|
|
|
4.31
|
|
|
2,550,624
|
|
|
121,106
|
|
|
4.75
|
|
||||||
Noninterest earning assets
|
399,279
|
|
|
|
|
|
|
377,228
|
|
|
|
|
|
|
295,666
|
|
|
|
|
|
||||||||||||
Total assets
|
$
|
3,745,535
|
|
|
|
|
|
|
$
|
3,527,515
|
|
|
|
|
|
|
$
|
2,846,290
|
|
|
|
|
|
|||||||||
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Certificates of deposit
|
$
|
388,286
|
|
|
$
|
1,936
|
|
|
0.50
|
%
|
|
$
|
464,277
|
|
|
$
|
2,386
|
|
|
0.51
|
%
|
|
$
|
494,948
|
|
|
$
|
2,991
|
|
|
0.60
|
%
|
Savings accounts
|
485,482
|
|
|
756
|
|
|
0.16
|
|
|
405,633
|
|
|
445
|
|
|
0.11
|
|
|
282,150
|
|
|
252
|
|
|
0.09
|
|
||||||
Interest bearing demand and money market accounts
|
1,464,198
|
|
|
2,318
|
|
|
0.16
|
|
|
1,374,757
|
|
|
2,398
|
|
|
0.17
|
|
|
1,049,078
|
|
|
1,907
|
|
|
0.18
|
|
||||||
Total interest bearing deposits
|
2,337,966
|
|
|
5,010
|
|
|
0.21
|
|
|
2,244,667
|
|
|
5,229
|
|
|
0.23
|
|
|
1,826,176
|
|
|
5,150
|
|
|
0.28
|
|
||||||
Junior subordinated debentures
|
19,565
|
|
|
880
|
|
|
4.50
|
|
|
19,271
|
|
|
827
|
|
|
4.29
|
|
|
12,751
|
|
|
458
|
|
|
3.59
|
|
||||||
FHLB advances and other borrowings
|
13,349
|
|
|
74
|
|
|
0.55
|
|
|
1,777
|
|
|
6
|
|
|
0.34
|
|
|
111
|
|
|
—
|
|
|
—
|
|
||||||
Securities sold under agreement to repurchase
|
20,392
|
|
|
42
|
|
|
0.21
|
|
|
23,522
|
|
|
58
|
|
|
0.25
|
|
|
27,984
|
|
|
73
|
|
|
0.26
|
|
|
Year Ended December 31,
|
|||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||||||||||||||
|
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)
|
|||||||||||||||||||||||||||||||
Total interest bearing liabilities
|
2,391,272
|
|
|
6,006
|
|
|
0.25
|
|
|
2,289,237
|
|
|
6,120
|
|
|
0.27
|
|
|
1,867,022
|
|
|
5,681
|
|
|
0.30
|
|
||||||
Demand and other noninterest bearing deposits
|
829,912
|
|
|
|
|
|
|
740,718
|
|
|
|
|
|
|
574,692
|
|
|
|
|
|
||||||||||||
Other noninterest bearing liabilities
|
38,474
|
|
|
|
|
|
|
33,458
|
|
|
|
|
|
|
29,669
|
|
|
|
|
|
||||||||||||
Stockholders’ equity
|
485,877
|
|
|
|
|
|
|
464,102
|
|
|
|
|
|
|
374,907
|
|
|
|
|
|
||||||||||||
Total liabilities and stockholders’ equity
|
$
|
3,745,535
|
|
|
|
|
|
|
$
|
3,527,515
|
|
|
|
|
|
|
$
|
2,846,290
|
|
|
|
|
|
|||||||||
Net interest income
|
|
|
$
|
132,506
|
|
|
|
|
|
|
$
|
129,619
|
|
|
|
|
|
|
$
|
115,425
|
|
|
|
|||||||||
Net interest spread
|
|
|
|
|
3.89
|
%
|
|
|
|
|
|
4.04
|
%
|
|
|
|
|
|
4.45
|
%
|
||||||||||||
Net interest margin
|
|
|
|
|
3.96
|
%
|
|
|
|
|
|
4.11
|
%
|
|
|
|
|
|
4.53
|
%
|
||||||||||||
Average interest earning assets to average interest bearing liabilities
|
|
|
|
|
139.94
|
%
|
|
|
|
|
|
137.61
|
%
|
|
|
|
|
|
136.61
|
%
|
|
|
Year Ended December 31,
|
||||||||||||||||||||||
|
|
2016 Compared to 2015
Increase (Decrease) Due to
|
|
2015 Compared to 2014
Increase (Decrease) Due to
|
||||||||||||||||||||
|
|
Volume
|
|
Rate
|
|
Total
|
|
Volume
|
|
Rate
|
|
Total
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Interest Earning Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans
|
|
$
|
8,515
|
|
|
$
|
(8,055
|
)
|
|
$
|
460
|
|
|
$
|
23,352
|
|
|
$
|
(12,102
|
)
|
|
$
|
11,250
|
|
Taxable securities
|
|
781
|
|
|
856
|
|
|
1,637
|
|
|
2,883
|
|
|
(633
|
)
|
|
2,250
|
|
||||||
Nontaxable securities
|
|
379
|
|
|
295
|
|
|
674
|
|
|
1,218
|
|
|
92
|
|
|
1,310
|
|
||||||
Other interest earning assets
|
|
(224
|
)
|
|
226
|
|
|
2
|
|
|
(238
|
)
|
|
61
|
|
|
(177
|
)
|
||||||
Interest income
|
|
$
|
9,451
|
|
|
$
|
(6,678
|
)
|
|
$
|
2,773
|
|
|
$
|
27,215
|
|
|
$
|
(12,582
|
)
|
|
$
|
14,633
|
|
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Certificates of deposit
|
|
$
|
(379
|
)
|
|
$
|
(71
|
)
|
|
$
|
(450
|
)
|
|
$
|
(158
|
)
|
|
$
|
(447
|
)
|
|
$
|
(605
|
)
|
Savings accounts
|
|
124
|
|
|
187
|
|
|
311
|
|
|
135
|
|
|
58
|
|
|
193
|
|
||||||
Interest bearing demand and money market accounts
|
|
142
|
|
|
(222
|
)
|
|
(80
|
)
|
|
568
|
|
|
(77
|
)
|
|
491
|
|
||||||
Total interest bearing deposits
|
|
(113
|
)
|
|
(106
|
)
|
|
(219
|
)
|
|
545
|
|
|
(466
|
)
|
|
79
|
|
||||||
Junior subordinated debentures
|
|
13
|
|
|
40
|
|
|
53
|
|
|
280
|
|
|
89
|
|
|
369
|
|
||||||
FHLB advances and other borrowings
|
|
64
|
|
|
4
|
|
|
68
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||||
Securities sold under agreement to repurchase
|
|
(6
|
)
|
|
(10
|
)
|
|
(16
|
)
|
|
(11
|
)
|
|
(4
|
)
|
|
(15
|
)
|
||||||
Interest expense
|
|
$
|
(42
|
)
|
|
$
|
(72
|
)
|
|
$
|
(114
|
)
|
|
$
|
820
|
|
|
$
|
(381
|
)
|
|
$
|
439
|
|
Net Interest Income
|
|
$
|
9,493
|
|
|
$
|
(6,606
|
)
|
|
$
|
2,887
|
|
|
$
|
26,395
|
|
|
$
|
(12,201
|
)
|
|
$
|
14,194
|
|
(1)
|
As of the dates of the completion of each of the merger and acquisition transactions, purchased loans were recorded at their estimated fair value, including our estimate of future expected cash flows until the ultimate resolution of these credits. The difference between the contractual loan balance and the fair value represents the purchased discount. The purchased discount is modified quarterly as a result of cash flow re-estimation. The incremental accretion income represents the amount of income recorded on the purchased loans in excess of the contractual stated interest rate in the individual loan notes.
|
|
Year Ended December 31,
|
||||
|
2016
|
|
2015
|
||
Net interest margin, excluding incremental accretion on purchased loans
(1)
|
3.75
|
%
|
|
3.78
|
%
|
Impact on net interest margin from incremental accretion on purchased loans
(1)
|
0.21
|
|
|
0.33
|
|
Net interest margin
|
3.96
|
%
|
|
4.11
|
%
|
(1)
|
As of the dates of the completion of each of the merger and acquisition transactions, purchased loans were recorded at their estimated fair value, including our estimate of future expected cash flows until the ultimate resolution of these credits. The difference between the contractual loan balance and the fair value represents the purchased discount. The purchased discount is accreted into income over the estimated remaining life of
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Change 2016 vs. 2015
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Service charges and other fees
|
$
|
14,354
|
|
|
$
|
14,179
|
|
|
$
|
175
|
|
|
1.2
|
%
|
Gain on sale of investment securities, net
|
1,315
|
|
|
1,516
|
|
|
(201
|
)
|
|
(13.3
|
)
|
|||
Gain on sale of loans, net
|
6,994
|
|
|
4,683
|
|
|
2,311
|
|
|
49.3
|
|
|||
Gain on termination of FDIC shared-loss agreements
|
—
|
|
|
1,747
|
|
|
(1,747
|
)
|
|
(100.0
|
)
|
|||
Gain on sale of Merchant Visa portfolio
|
—
|
|
|
2,198
|
|
|
(2,198
|
)
|
|
(100.0
|
)
|
|||
Interest rate swap fees
|
1,854
|
|
|
452
|
|
|
1,402
|
|
|
310.2
|
|
|||
Other income
|
7,102
|
|
|
7,493
|
|
|
(391
|
)
|
|
(5.2
|
)
|
|||
Total noninterest income
|
$
|
31,619
|
|
|
$
|
32,268
|
|
|
$
|
(649
|
)
|
|
(2.0
|
)%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Change 2016 vs. 2015
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Gain on sale of mortgage loans, net
|
$
|
3,723
|
|
|
$
|
3,150
|
|
|
$
|
573
|
|
|
18.2
|
%
|
Gain on sale of guaranteed portion of SBA loans, net
|
1,016
|
|
|
1,533
|
|
|
(517
|
)
|
|
(33.7
|
)
|
|||
Gain on sale of other loans, net
|
2,255
|
|
|
—
|
|
|
2,255
|
|
|
100.0
|
|
|||
Gain on sale of loans, net
|
$
|
6,994
|
|
|
$
|
4,683
|
|
|
$
|
2,311
|
|
|
49.3
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||
|
2016
|
|
2015
|
|
Change 2016 vs. 2015
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Compensation and employee benefits
|
$
|
61,405
|
|
|
$
|
58,134
|
|
|
$
|
3,271
|
|
|
5.6
|
%
|
Occupancy and equipment
|
15,763
|
|
|
15,846
|
|
|
(83
|
)
|
|
(0.5
|
)
|
|||
Data processing
|
7,312
|
|
|
7,700
|
|
|
(388
|
)
|
|
(5.0
|
)
|
|||
Marketing
|
2,835
|
|
|
3,066
|
|
|
(231
|
)
|
|
(7.5
|
)
|
|||
Professional services
|
3,606
|
|
|
3,536
|
|
|
70
|
|
|
2.0
|
|
|||
State and local taxes
|
2,616
|
|
|
2,378
|
|
|
238
|
|
|
10.0
|
|
|||
Federal deposit insurance premium
|
1,620
|
|
|
2,046
|
|
|
(426
|
)
|
|
(20.8
|
)
|
|||
Other real estate owned, net
|
334
|
|
|
1,007
|
|
|
(673
|
)
|
|
(66.8
|
)
|
|||
Amortization of intangible assets
|
1,415
|
|
|
2,100
|
|
|
(685
|
)
|
|
(32.6
|
)
|
|||
Other expense
|
9,567
|
|
|
10,395
|
|
|
(828
|
)
|
|
(8.0
|
)
|
|||
Total noninterest expense
|
$
|
106,473
|
|
|
$
|
106,208
|
|
|
$
|
265
|
|
|
0.2
|
%
|
|
Year Ended December 31,
|
||||
|
2015
|
|
2014
|
||
Net interest margin, excluding incremental accretion on purchased loans
(1)
|
3.78
|
%
|
|
3.97
|
%
|
Impact on net interest margin from incremental accretion on purchased loans
(1)
|
0.33
|
|
|
0.56
|
|
Net interest margin
|
4.11
|
%
|
|
4.53
|
%
|
(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 for PCI loans as a result of cash flow re-estimation.
|
|
December 31, 2015
|
|
December 31, 2014
|
||||
|
(Dollars in thousands)
|
||||||
General Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
17,354
|
|
|
$
|
15,016
|
|
Gross loans, excluding PCI and impaired loans
|
2,283,832
|
|
|
2,102,512
|
|
||
Percentage
|
0.76
|
%
|
|
0.71
|
%
|
||
|
|
|
|
||||
PCI Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
9,084
|
|
|
$
|
9,055
|
|
Gross PCI loans
|
86,919
|
|
|
119,271
|
|
||
Percentage
|
10.45
|
%
|
|
7.59
|
%
|
||
|
|
|
|
||||
Specific Valuation Allowance:
|
|
|
|
||||
Allowance for loan losses
|
$
|
3,308
|
|
|
$
|
3,658
|
|
Gross impaired loans
|
30,362
|
|
|
30,231
|
|
||
Percentage
|
10.90
|
%
|
|
12.10
|
%
|
||
|
|
|
|
||||
Total Allowance for Loan Losses:
|
|
|
|
||||
Allowance for loan losses
|
$
|
29,746
|
|
|
$
|
27,729
|
|
Gross loans receivable
|
2,401,113
|
|
|
2,252,014
|
|
||
Percentage
|
1.24
|
%
|
|
1.23
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|||||||||
|
2015
|
|
2014
|
|
Change 2015 vs. 2014
|
|
Percentage Change
|
|||||||
|
(Dollars in thousands)
|
|||||||||||||
Service charges and other fees
|
$
|
14,179
|
|
|
$
|
11,143
|
|
|
$
|
3,036
|
|
|
27.2
|
%
|
Merchant Visa income, net
|
513
|
|
|
1,076
|
|
|
(563
|
)
|
|
(52.3
|
)
|
|||
Change in FDIC indemnification asset
|
(497
|
)
|
|
(2,543
|
)
|
|
2,046
|
|
|
(80.5
|
)
|
|||
Gain on sale of investment securities, net
|
1,516
|
|
|
287
|
|
|
1,229
|
|
|
428.2
|
|
|||
Gain on sale of loans, net
|
4,683
|
|
|
1,518
|
|
|
3,165
|
|
|
208.5
|
|
|||
Gain on termination of FDIC shared-loss agreements
|
1,747
|
|
|
—
|
|
|
1,747
|
|
|
100.0
|
|
|||
Gain on sale of Merchant Visa portfolio
|
2,198
|
|
|
—
|
|
|
2,198
|
|
|
100.0
|
|
|||
Interest rate swap fees
|
452
|
|
|
—
|
|
|
452
|
|
|
100.0
|
|
|||
Other income
|
7,477
|
|
|
4,986
|
|
|
2,491
|
|
|
50.0
|
|
|||
Total noninterest income
|
$
|
32,268
|
|
|
$
|
16,467
|
|
|
$
|
15,801
|
|
|
96.0
|
%
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|||||||||||
|
2015
|
|
2014
|
|
Change 2015 vs. 2014
|
|
Percentage Change
|
|
Company Initiatives
(1)
|
|||||||||
|
(Dollars in thousands)
|
|||||||||||||||||
Compensation and employee benefits
|
$
|
58,134
|
|
|
$
|
52,634
|
|
|
$
|
5,500
|
|
|
10.4
|
%
|
|
$
|
1,522
|
|
Occupancy and equipment
|
15,846
|
|
|
13,406
|
|
|
2,440
|
|
|
18.2
|
|
|
602
|
|
||||
Data processing
|
7,700
|
|
|
9,243
|
|
|
(1,543
|
)
|
|
(16.7
|
)
|
|
3,038
|
|
||||
Marketing
|
3,066
|
|
|
2,502
|
|
|
564
|
|
|
22.5
|
|
|
140
|
|
||||
Professional services
|
3,536
|
|
|
6,185
|
|
|
(2,649
|
)
|
|
(42.8
|
)
|
|
3,751
|
|
||||
State and local taxes
|
2,378
|
|
|
1,976
|
|
|
402
|
|
|
20.3
|
|
|
—
|
|
||||
Impairment loss on investment securities, net
|
—
|
|
|
45
|
|
|
(45
|
)
|
|
(100.0
|
)
|
|
—
|
|
||||
Federal deposit insurance premium
|
2,046
|
|
|
1,718
|
|
|
328
|
|
|
19.1
|
|
|
—
|
|
||||
Other real estate owned, net
|
1,007
|
|
|
638
|
|
|
369
|
|
|
57.8
|
|
|
—
|
|
||||
Amortization of intangible assets
|
2,100
|
|
|
1,920
|
|
|
180
|
|
|
9.4
|
|
|
—
|
|
||||
Other expense
|
10,395
|
|
|
9,112
|
|
|
1,283
|
|
|
14.1
|
|
|
535
|
|
||||
Total noninterest expense
|
$
|
106,208
|
|
|
$
|
99,379
|
|
|
$
|
6,829
|
|
|
6.9
|
%
|
|
$
|
9,588
|
|
•
|
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 Whidbey Island Bank information to the Heritage core system.
|
•
|
Professional services expense related to fees paid to: (1) financial advisors for the Washington Banking Merger, and (2) attorney, accountant and consultant fees related to merger and acquisitions.
|
|
|
December 31, 2016
|
||||||||||||||||||||||
|
|
One Year or Less
|
|
One to Three Years
|
|
Over Three to Five Years
|
|
Over Five Years
|
|
Other (1)
|
|
Total
|
||||||||||||
|
|
(In thousands)
|
||||||||||||||||||||||
Contractual payments by period:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Deposits
|
|
$
|
235,173
|
|
|
$
|
95,170
|
|
|
$
|
27,008
|
|
|
$
|
50
|
|
|
$
|
2,872,247
|
|
|
$
|
3,229,648
|
|
Junior subordinated debentures
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
||||||
Operating leases
|
|
3,409
|
|
|
5,548
|
|
|
3,555
|
|
|
2,143
|
|
|
—
|
|
|
14,655
|
|
||||||
Total contractual obligations
|
|
$
|
238,582
|
|
|
$
|
100,718
|
|
|
$
|
30,563
|
|
|
$
|
27,193
|
|
|
$
|
2,872,247
|
|
|
$
|
3,269,303
|
|
(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, 2016
|
||||||||||||||||||||||
|
|
Estimated Maturity or Repricing Within
|
||||||||||||||||||||||
|
|
Three Months or Less
|
|
Over Three Months to 12
Months
|
|
Over One to Five Years
|
|
Over Five to 15
Years
|
|
Over
15 Years
|
|
Total
|
||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||
Interest Earnings Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loans Receivable
(1)
|
|
$
|
618,225
|
|
|
$
|
161,876
|
|
|
$
|
1,242,743
|
|
|
$
|
554,654
|
|
|
$
|
60,899
|
|
|
$
|
2,638,397
|
|
Investment securities
(2)
|
|
86,967
|
|
|
25,761
|
|
|
170,344
|
|
|
323,882
|
|
|
187,691
|
|
|
794,645
|
|
||||||
FHLB stock
|
|
7,564
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,564
|
|
||||||
Interest earning deposits
|
|
26,628
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,628
|
|
||||||
Total interest earning assets
|
|
$
|
739,384
|
|
|
$
|
187,637
|
|
|
$
|
1,413,087
|
|
|
$
|
878,536
|
|
|
$
|
248,590
|
|
|
$
|
3,467,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Percentage of interest earning assets
|
|
21.3
|
%
|
|
5.4
|
%
|
|
40.8
|
%
|
|
25.3
|
%
|
|
7.2
|
%
|
|
100.0
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest Bearing Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total interest bearing deposits
(3)
|
|
$
|
2,064,837
|
|
|
$
|
160,692
|
|
|
$
|
121,979
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
2,347,557
|
|
Federal Home Loan Bank advances
|
|
79,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
79,600
|
|
||||||
Junior subordinated debentures
|
|
19,717
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,717
|
|
||||||
Securities sold under agreement to repurchase
|
|
22,104
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22,104
|
|
||||||
Total interest bearing liabilities
|
|
$
|
2,186,258
|
|
|
$
|
160,692
|
|
|
$
|
121,979
|
|
|
$
|
49
|
|
|
$
|
—
|
|
|
$
|
2,468,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest bearing liabilities, as a percentage of total interest earning assets
|
|
63.1
|
%
|
|
4.6
|
%
|
|
3.5
|
%
|
|
—
|
%
|
|
—
|
%
|
|
71.2
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate sensitivity gap
|
|
$
|
(1,446,874
|
)
|
|
$
|
26,945
|
|
|
$
|
1,291,108
|
|
|
$
|
878,487
|
|
|
$
|
248,590
|
|
|
$
|
998,256
|
|
Interest rate sensitivity gap, as a percentage of total interest earning assets
|
|
(41.7
|
)%
|
|
0.8
|
%
|
|
37.2
|
%
|
|
25.3
|
%
|
|
7.2
|
%
|
|
28.8
|
%
|
||||||
Cumulative interest rate sensitivity gap
|
|
$
|
(1,446,874
|
)
|
|
$
|
(1,419,929
|
)
|
|
$
|
(128,821
|
)
|
|
$
|
749,666
|
|
|
$
|
998,256
|
|
|
|
||
Cumulative interest rate sensitivity gap, as a percentage of total interest earning assets
|
|
(41.7
|
)%
|
|
(41.0
|
)%
|
|
(3.7
|
)%
|
|
21.6
|
%
|
|
28.8
|
%
|
|
|
(1)
|
Excludes deferred loan costs (fees), net and allowance for loan losses.
|
(2)
|
Interest earning investment securities with no stated maturity date are included in less than three 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
|
|
|
By Expected Maturity Date
|
||||||||||||||||||||||||||
|
|
Year Ended December 31, 2016
|
||||||||||||||||||||||||||
|
|
Three Months or Less
|
|
Over Three Months to 12 Months
|
|
Over One Year to Five Years
|
|
Over Five Years to 15 Years
|
|
Over
15 Years
|
|
Total
|
|
Fair Value
|
||||||||||||||
|
|
(Dollars in thousands)
|
||||||||||||||||||||||||||
Investment Securities
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
85
|
|
|
$
|
6,580
|
|
|
$
|
112,878
|
|
|
$
|
336,049
|
|
|
$
|
229,244
|
|
|
$
|
684,836
|
|
|
|
||
Weighted average interest rate
|
|
7.7
|
%
|
|
2.7
|
%
|
|
2.8
|
%
|
|
2.8
|
%
|
|
2.5
|
%
|
|
2.7
|
%
|
|
|
||||||||
Adjustable rate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,363
|
|
|
$
|
34,000
|
|
|
$
|
64,323
|
|
|
$
|
109,686
|
|
|
|
||
Weighted average interest rate
|
|
—
|
%
|
|
—
|
%
|
|
1.3
|
%
|
|
2.0
|
%
|
|
2.0
|
%
|
|
1.9
|
%
|
|
|
||||||||
Total
|
|
$
|
85
|
|
|
$
|
6,580
|
|
|
$
|
124,241
|
|
|
$
|
370,049
|
|
|
$
|
293,567
|
|
|
$
|
794,522
|
|
|
$
|
794,522
|
|
Loans
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
57,076
|
|
|
$
|
58,376
|
|
|
$
|
362,273
|
|
|
$
|
450,672
|
|
|
$
|
60,653
|
|
|
$
|
989,050
|
|
|
|
||
Weighted average interest rate
|
|
4.4
|
%
|
|
4.8
|
%
|
|
4.5
|
%
|
|
3.9
|
%
|
|
4.6
|
%
|
|
4.3
|
%
|
|
|
||||||||
Adjustable rate
|
|
$
|
104,584
|
|
|
$
|
156,452
|
|
|
$
|
188,430
|
|
|
$
|
1,063,475
|
|
|
$
|
136,406
|
|
|
$
|
1,649,347
|
|
|
|
||
Weighted average interest rate
|
|
5.1
|
%
|
|
4.8
|
%
|
|
4.7
|
%
|
|
4.2
|
%
|
|
4.2
|
%
|
|
4.4
|
%
|
|
|
||||||||
Total
|
|
$
|
161,660
|
|
|
$
|
214,828
|
|
|
$
|
550,703
|
|
|
$
|
1,514,147
|
|
|
$
|
197,059
|
|
|
$
|
2,638,397
|
|
|
$
|
2,675,811
|
|
Certificates of Deposit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Fixed rate
|
|
$
|
70,969
|
|
|
$
|
164,204
|
|
|
$
|
122,178
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
357,401
|
|
|
$
|
357,536
|
|
Weighted average interest rate
|
|
0.3
|
%
|
|
0.4
|
%
|
|
0.8
|
%
|
|
1.0
|
%
|
|
—
|
%
|
|
0.5
|
%
|
|
|
||||||||
Junior Subordinated Debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Amounts maturing:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Adjustable rate
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,717
|
|
|
$
|
19,717
|
|
|
$
|
15,000
|
|
Weighted average interest rate
(3)
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
|
4.5
|
%
|
|
4.5
|
%
|
|
|
(1)
|
Balances represent carrying value, and excludes investment securities with no stated maturity.
|
(2)
|
Excludes deferred loan costs (fees), net and allowance for loan losses.
|
(3)
|
The contractual interest rate of the junior subordinated debentures was
2.56%
at
December 31, 2016
. The weighted average interest rate includes the effects of the discount accretion for the Washington Banking Merger purchase accounting adjustment.
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
ASSETS
|
|
|
|
||||
Cash on hand and in banks
|
$
|
77,117
|
|
|
$
|
63,816
|
|
Interest earning deposits
|
26,628
|
|
|
62,824
|
|
||
Cash and cash equivalents
|
103,745
|
|
|
126,640
|
|
||
Other interest earning deposits
|
—
|
|
|
6,719
|
|
||
Investment securities available for sale, at fair value
|
794,645
|
|
|
811,869
|
|
||
Loans held for sale
|
11,662
|
|
|
7,682
|
|
||
Loans receivable, net
|
2,640,749
|
|
|
2,402,042
|
|
||
Allowance for loan losses
|
(31,083
|
)
|
|
(29,746
|
)
|
||
Total loans receivable, net
|
2,609,666
|
|
|
2,372,296
|
|
||
Other real estate owned
|
754
|
|
|
2,019
|
|
||
Premises and equipment, net
|
63,911
|
|
|
61,891
|
|
||
Federal Home Loan Bank stock, at cost
|
7,564
|
|
|
4,148
|
|
||
Bank owned life insurance
|
70,355
|
|
|
60,876
|
|
||
Accrued interest receivable
|
10,925
|
|
|
10,469
|
|
||
Prepaid expenses and other assets
|
79,351
|
|
|
58,365
|
|
||
Other intangible assets, net
|
7,374
|
|
|
8,789
|
|
||
Goodwill
|
119,029
|
|
|
119,029
|
|
||
Total assets
|
$
|
3,878,981
|
|
|
$
|
3,650,792
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Deposits
|
$
|
3,229,648
|
|
|
$
|
3,108,287
|
|
Federal Home Loan Bank advances
|
79,600
|
|
|
—
|
|
||
Junior subordinated debentures
|
19,717
|
|
|
19,424
|
|
||
Securities sold under agreement to repurchase
|
22,104
|
|
|
23,214
|
|
||
Accrued expenses and other liabilities
|
46,149
|
|
|
29,897
|
|
||
Total liabilities
|
3,397,218
|
|
|
3,180,822
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, no par value, 2,500,000 shares authorized; no shares issued and outstanding at December 31, 2016 and 2015
|
—
|
|
|
—
|
|
||
Common stock, no par value, 50,000,000 shares authorized; 29,954,931 and 29,975,439 shares issued and outstanding at December 31, 2016 and 2015, respectively
|
359,060
|
|
|
359,451
|
|
||
Retained earnings
|
125,309
|
|
|
107,960
|
|
||
Accumulated other comprehensive (loss) income, net
|
(2,606
|
)
|
|
2,559
|
|
||
Total stockholders’ equity
|
481,763
|
|
|
469,970
|
|
||
Total liabilities and stockholders’ equity
|
$
|
3,878,981
|
|
|
$
|
3,650,792
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
INTEREST INCOME:
|
|
|
|
|
|
||||||
Interest and fees on loans
|
$
|
122,147
|
|
|
$
|
121,687
|
|
|
$
|
110,437
|
|
Taxable interest on investment securities
|
11,215
|
|
|
9,578
|
|
|
7,328
|
|
|||
Nontaxable interest on investment securities
|
4,870
|
|
|
4,196
|
|
|
2,886
|
|
|||
Interest and dividends on other interest earning assets
|
280
|
|
|
278
|
|
|
455
|
|
|||
Total interest income
|
138,512
|
|
|
135,739
|
|
|
121,106
|
|
|||
INTEREST EXPENSE:
|
|
|
|
|
|
||||||
Deposits
|
5,010
|
|
|
5,229
|
|
|
5,150
|
|
|||
Junior subordinated debentures
|
880
|
|
|
827
|
|
|
458
|
|
|||
Other borrowings
|
116
|
|
|
64
|
|
|
73
|
|
|||
Total interest expense
|
6,006
|
|
|
6,120
|
|
|
5,681
|
|
|||
Net interest income
|
132,506
|
|
|
129,619
|
|
|
115,425
|
|
|||
Provision for loan losses
|
4,931
|
|
|
4,372
|
|
|
4,594
|
|
|||
Net interest income after provision for loan losses
|
127,575
|
|
|
125,247
|
|
|
110,831
|
|
|||
NONINTEREST INCOME:
|
|
|
|
|
|
||||||
Service charges and other fees
|
14,354
|
|
|
14,179
|
|
|
11,143
|
|
|||
Gain on sale of investment securities, net
|
1,315
|
|
|
1,516
|
|
|
287
|
|
|||
Gain on sale of loans, net
|
6,994
|
|
|
4,683
|
|
|
1,518
|
|
|||
Gain on termination of FDIC shared-loss agreements
|
—
|
|
|
1,747
|
|
|
—
|
|
|||
Gain on sale of Merchant Visa portfolio
|
—
|
|
|
2,198
|
|
|
—
|
|
|||
Interest rate swap fees
|
1,854
|
|
|
452
|
|
|
—
|
|
|||
Other income
|
7,102
|
|
|
7,493
|
|
|
3,519
|
|
|||
Total noninterest income
|
31,619
|
|
|
32,268
|
|
|
16,467
|
|
|||
NONINTEREST EXPENSE:
|
|
|
|
|
|
||||||
Compensation and employee benefits
|
61,405
|
|
|
58,134
|
|
|
52,634
|
|
|||
Occupancy and equipment
|
15,763
|
|
|
15,846
|
|
|
13,406
|
|
|||
Data processing
|
7,312
|
|
|
7,700
|
|
|
9,243
|
|
|||
Marketing
|
2,835
|
|
|
3,066
|
|
|
2,502
|
|
|||
Professional services
|
3,606
|
|
|
3,536
|
|
|
6,185
|
|
|||
State and local taxes
|
2,616
|
|
|
2,378
|
|
|
1,976
|
|
|||
Impairment loss on investment securities, net
|
—
|
|
|
—
|
|
|
45
|
|
|||
Federal deposit insurance premium
|
1,620
|
|
|
2,046
|
|
|
1,718
|
|
|||
Other real estate owned, net
|
334
|
|
|
1,007
|
|
|
638
|
|
|||
Amortization of intangible assets
|
1,415
|
|
|
2,100
|
|
|
1,920
|
|
|||
Other expense
|
9,567
|
|
|
10,395
|
|
|
9,112
|
|
|||
Total noninterest expense
|
106,473
|
|
|
106,208
|
|
|
99,379
|
|
|||
Income before income taxes
|
52,721
|
|
|
51,307
|
|
|
27,919
|
|
|||
Income tax expense
|
13,803
|
|
|
13,818
|
|
|
6,905
|
|
|||
Net income
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
Basic earnings per common share
|
$
|
1.30
|
|
|
$
|
1.25
|
|
|
$
|
0.82
|
|
Diluted earnings per common share
|
$
|
1.30
|
|
|
$
|
1.25
|
|
|
$
|
0.82
|
|
Dividends declared per common share
|
$
|
0.72
|
|
|
$
|
0.53
|
|
|
$
|
0.50
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
Change in fair value of investment securities available for sale, net of tax of $(2,316), $(306) and $2,531, respectively
|
(4,311
|
)
|
|
(559
|
)
|
|
4,676
|
|
|||
Reclassification adjustment of net gain from sale of investment securities available for sale included in income, net of tax of $(461), $(574) and $(101), respectively
|
(854
|
)
|
|
(1,067
|
)
|
|
(186
|
)
|
|||
Accretion of other-than-temporary impairment on investment securities, net of tax of $0, $4 and $28, respectively
|
—
|
|
|
108
|
|
|
50
|
|
|||
Reclassification of remaining unaccreted other-than-temporary impairment upon sale of investment securities held to maturity included in income, net of tax of $0, $44 and $0, respectively
|
—
|
|
|
81
|
|
|
—
|
|
|||
Transfer of investment securities from held to maturity to available for sale, net of tax of $0, $334 and $0, respectively
|
—
|
|
|
618
|
|
|
—
|
|
|||
Other comprehensive (loss) income
|
(5,165
|
)
|
|
(819
|
)
|
|
4,540
|
|
|||
Comprehensive income
|
$
|
33,753
|
|
|
$
|
36,670
|
|
|
$
|
25,554
|
|
|
Number of
common
shares
|
|
Common
stock
|
|
Retained
earnings
|
|
Accumulated
other
comprehensive (loss)
income, net
|
|
Total
stock-
holders’
equity
|
|||||||||
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 net excess tax benefits/deficiencies from nonqualified options)
|
84
|
|
|
921
|
|
|
—
|
|
|
—
|
|
|
921
|
|
||||
Restricted stock compensation expense
|
—
|
|
|
1,395
|
|
|
—
|
|
|
—
|
|
|
1,395
|
|
||||
Net excess tax benefits/deficiencies from vesting of 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
|
|
||||
Restricted and unrestricted stock awards issued, net of forfeitures
|
118
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Exercise of stock options (including net excess tax benefits/deficiencies from nonqualified options)
|
61
|
|
|
765
|
|
|
—
|
|
|
—
|
|
|
765
|
|
||||
Restricted stock compensation expense
|
—
|
|
|
1,555
|
|
|
—
|
|
|
—
|
|
|
1,555
|
|
||||
Net excess tax benefits/deficiencies from vesting of restricted stock
|
—
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
126
|
|
||||
Common stock repurchased
|
(464
|
)
|
|
(7,736
|
)
|
|
—
|
|
|
—
|
|
|
(7,736
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
37,489
|
|
|
—
|
|
|
37,489
|
|
||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(819
|
)
|
|
(819
|
)
|
||||
Cash dividends declared on common stock ($0.53 per share)
|
—
|
|
|
—
|
|
|
(15,916
|
)
|
|
—
|
|
|
(15,916
|
)
|
||||
Balance at December 31, 2015
|
29,975
|
|
|
359,451
|
|
|
107,960
|
|
|
2,559
|
|
|
469,970
|
|
||||
Restricted and unrestricted stock awards issued, net of forfeitures
|
110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Exercise of stock options (including net excess tax benefits/deficiencies from nonqualified options)
|
38
|
|
|
560
|
|
|
—
|
|
|
—
|
|
|
560
|
|
||||
Restricted stock compensation expense
|
—
|
|
|
1,840
|
|
|
—
|
|
|
—
|
|
|
1,840
|
|
||||
Net excess tax benefits/deficiencies from vesting of restricted stock
|
—
|
|
|
103
|
|
|
—
|
|
|
—
|
|
|
103
|
|
||||
Common stock repurchased
|
(168
|
)
|
|
(2,894
|
)
|
|
—
|
|
|
—
|
|
|
(2,894
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
38,918
|
|
|
—
|
|
|
38,918
|
|
||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,165
|
)
|
|
(5,165
|
)
|
||||
Cash dividends declared on common stock ($0.72 per share)
|
—
|
|
|
—
|
|
|
(21,569
|
)
|
|
—
|
|
|
(21,569
|
)
|
||||
Balance at December 31, 2016
|
29,955
|
|
|
$
|
359,060
|
|
|
$
|
125,309
|
|
|
$
|
(2,606
|
)
|
|
$
|
481,763
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
12,709
|
|
|
13,967
|
|
|
12,882
|
|
|||
Changes in net deferred loan costs, net of amortization
|
(1,422
|
)
|
|
(1,866
|
)
|
|
(1,733
|
)
|
|||
Provision for loan losses
|
4,931
|
|
|
4,372
|
|
|
4,594
|
|
|||
Net change in accrued interest receivable, FDIC indemnification asset, prepaid expenses and other assets, accrued expenses and other liabilities
|
2,147
|
|
|
(78
|
)
|
|
13,236
|
|
|||
Restricted stock compensation expense
|
1,840
|
|
|
1,555
|
|
|
1,395
|
|
|||
Stock option compensation expense
|
—
|
|
|
—
|
|
|
20
|
|
|||
Net excess tax benefit from exercise of stock options and vesting of restricted stock
|
(123
|
)
|
|
(140
|
)
|
|
(118
|
)
|
|||
Amortization of intangible assets
|
1,415
|
|
|
2,100
|
|
|
1,920
|
|
|||
Gain on sale of investment securities, net
|
(1,315
|
)
|
|
(1,516
|
)
|
|
(287
|
)
|
|||
Impairment loss on investment of securities, net
|
—
|
|
|
—
|
|
|
45
|
|
|||
Origination of loans held for sale
|
(145,107
|
)
|
|
(132,932
|
)
|
|
(57,656
|
)
|
|||
Gain on sale of loans, net
|
(6,994
|
)
|
|
(4,683
|
)
|
|
(1,518
|
)
|
|||
Proceeds from sale of loans
|
148,121
|
|
|
135,515
|
|
|
57,515
|
|
|||
Earnings on bank-owned life insurance
|
(1,460
|
)
|
|
(1,354
|
)
|
|
(455
|
)
|
|||
Valuation adjustment on other real estate owned
|
383
|
|
|
529
|
|
|
—
|
|
|||
(Gain) loss on sale of other real estate owned, net
|
(173
|
)
|
|
97
|
|
|
(23
|
)
|
|||
Gain on termination of FDIC shared-loss agreements
|
—
|
|
|
(1,747
|
)
|
|
—
|
|
|||
Loss on sale or write-off of furniture, equipment and leasehold improvements
|
110
|
|
|
89
|
|
|
505
|
|
|||
Net cash provided by operating activities
|
53,980
|
|
|
51,397
|
|
|
51,336
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Loans originated, net of principal payments
|
(242,310
|
)
|
|
(154,111
|
)
|
|
(21,651
|
)
|
|||
Maturities of other interest earning deposits
|
6,709
|
|
|
3,346
|
|
|
5,475
|
|
|||
Maturities, calls and payments of investment securities available for sale
|
129,408
|
|
|
124,592
|
|
|
66,876
|
|
|||
Maturities, calls and payments of investment securities held to maturity
|
—
|
|
|
5,221
|
|
|
3,284
|
|
|||
Purchase of investment securities available for sale
|
(267,657
|
)
|
|
(290,499
|
)
|
|
(344,146
|
)
|
|||
Purchase of investment securities held to maturity
|
—
|
|
|
—
|
|
|
(3,294
|
)
|
|||
Purchase of premises and equipment
|
(6,722
|
)
|
|
(1,821
|
)
|
|
(3,940
|
)
|
|||
Purchase of other real estate owned
|
—
|
|
|
(188
|
)
|
|
—
|
|
|||
Proceeds from sales of other real estate owned
|
2,486
|
|
|
3,555
|
|
|
9,914
|
|
|||
Proceeds from sales of investment securities available for sale
|
140,373
|
|
|
116,332
|
|
|
156,994
|
|
|||
Proceeds from sales of investment securities held to maturity
|
—
|
|
|
972
|
|
|
—
|
|
|||
Proceeds from redemption of FHLB stock
|
23,732
|
|
|
8,040
|
|
|
617
|
|
|||
Purchases of FHLB stock
|
(27,148
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from sale of premises and equipment
|
659
|
|
|
815
|
|
|
1,170
|
|
|||
Purchase of bank owned life insurance
|
(8,000
|
)
|
|
(25,019
|
)
|
|
—
|
|
|||
Investment in new market tax credit partnership
|
—
|
|
|
—
|
|
|
(25,000
|
)
|
|||
Investment in low-income housing tax credit partnership
|
(4,456
|
)
|
|
(746
|
)
|
|
—
|
|
|||
Net cash used for termination of FDIC shared-loss agreements
|
—
|
|
|
(7,110
|
)
|
|
—
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net cash received from acquisitions
|
—
|
|
|
—
|
|
|
32,052
|
|
|||
Net cash used in investing activities
|
(252,926
|
)
|
|
(216,621
|
)
|
|
(121,649
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Net increase in deposits
|
121,361
|
|
|
201,956
|
|
|
73,248
|
|
|||
FHLB advances
|
660,900
|
|
|
—
|
|
|
—
|
|
|||
Repayments of FHLB advances
|
(581,300
|
)
|
|
—
|
|
|
—
|
|
|||
Common stock cash dividends paid
|
(21,569
|
)
|
|
(15,916
|
)
|
|
(12,892
|
)
|
|||
Net (decrease) increase in securities sold under agreement to repurchase
|
(1,110
|
)
|
|
(8,967
|
)
|
|
2,761
|
|
|||
Proceeds from exercise of stock options
|
540
|
|
|
751
|
|
|
915
|
|
|||
Net excess tax benefit (deficiencies) from exercise of stock options and vesting of restricted stock
|
123
|
|
|
140
|
|
|
118
|
|
|||
Repurchase of common stock
|
(2,894
|
)
|
|
(7,736
|
)
|
|
(2,601
|
)
|
|||
Net cash provided by financing activities
|
176,051
|
|
|
170,228
|
|
|
61,549
|
|
|||
Net increase (decrease) in cash and cash equivalents
|
(22,895
|
)
|
|
5,004
|
|
|
(8,764
|
)
|
|||
Cash and cash equivalents at beginning of year
|
126,640
|
|
|
121,636
|
|
|
130,400
|
|
|||
Cash and cash equivalents at end of year
|
$
|
103,745
|
|
|
$
|
126,640
|
|
|
$
|
121,636
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
5,998
|
|
|
$
|
6,324
|
|
|
$
|
5,422
|
|
Cash paid for income taxes
|
11,500
|
|
|
15,286
|
|
|
9,786
|
|
|||
|
|
|
|
|
|
||||||
Supplemental non-cash disclosures of cash flow information:
|
|
|
|
|
|
||||||
Transfers of loans receivable to other real estate owned
|
$
|
1,431
|
|
|
$
|
2,657
|
|
|
$
|
1,566
|
|
Investment in low income housing tax credit partnership and related funding commitment
|
19,663
|
|
|
—
|
|
|
3,817
|
|
|||
Purchases (settlement) of investment securities available for sale not settled at year end
|
—
|
|
|
(1,288
|
)
|
|
1,288
|
|
|||
Common stock issued for business combinations
|
—
|
|
|
—
|
|
|
226,235
|
|
|||
Stock issuance costs in connection with business combination
|
—
|
|
|
—
|
|
|
489
|
|
|||
Transfer from investment securities held to maturity to available for sale
|
—
|
|
|
29,370
|
|
|
—
|
|
|||
Receivable due from bank owned life insurance contract
|
—
|
|
|
445
|
|
|
—
|
|
|||
Assets acquired (liabilities assumed) in merger:
|
|
|
|
|
|
||||||
Investment securities available for sale
|
—
|
|
|
—
|
|
|
458,312
|
|
|||
Loans held for sale
|
—
|
|
|
—
|
|
|
3,923
|
|
|||
Loans receivable
|
—
|
|
|
—
|
|
|
895,978
|
|
|||
Loans receivable, covered at merger date
|
—
|
|
|
—
|
|
|
107,050
|
|
|||
Other real estate owned
|
—
|
|
|
—
|
|
|
7,121
|
|
|||
Premises and equipment
|
—
|
|
|
—
|
|
|
31,776
|
|
|||
Federal Home Loan Bank stock
|
—
|
|
|
—
|
|
|
7,064
|
|
|||
FDIC indemnification asset
|
—
|
|
|
—
|
|
|
7,174
|
|
|||
Accrued interest receivable
|
—
|
|
|
—
|
|
|
4,943
|
|
|||
Bank owned life insurance
|
—
|
|
|
—
|
|
|
32,519
|
|
|||
Prepaid expenses and other assets
|
—
|
|
|
—
|
|
|
14,852
|
|
|||
Other intangible assets
|
—
|
|
|
—
|
|
|
11,194
|
|
|||
Deposits
|
—
|
|
|
—
|
|
|
(1,433,894
|
)
|
|||
Junior subordinated debentures
|
—
|
|
|
—
|
|
|
(18,937
|
)
|
|||
Accrued expenses and other liabilities
|
—
|
|
|
—
|
|
|
(24,067
|
)
|
(1)
|
Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements
|
•
|
Remove inconsistencies and weaknesses in revenue requirements.
|
•
|
Provide a more robust framework for addressing revenue issues.
|
•
|
Improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets.
|
•
|
Provide more useful information to users of financial statements through improved disclosure requirements.
|
•
|
Simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer.
|
(2)
|
Business Combination
|
|
|
Year Ended December 31, 2014
|
||
|
|
(In thousands, except per share amounts)
|
||
Net interest income
|
|
$
|
144,470
|
|
Net income
|
|
$
|
35,758
|
|
Basic earnings per common share
|
|
$
|
1.19
|
|
Diluted earnings per common share
|
|
$
|
1.18
|
|
(3)
|
Investment Securities
|
|
Securities Available for Sale
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,563
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
1,569
|
|
Municipal securities
|
237,305
|
|
|
2,427
|
|
|
(2,476
|
)
|
|
237,256
|
|
||||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
||||||||
Residential
|
310,391
|
|
|
985
|
|
|
(2,200
|
)
|
|
309,176
|
|
||||
Commercial
|
211,259
|
|
|
599
|
|
|
(3,540
|
)
|
|
208,318
|
|
||||
Collateralized loan obligations
|
10,505
|
|
|
4
|
|
|
(31
|
)
|
|
10,478
|
|
||||
Corporate obligations
|
16,611
|
|
|
104
|
|
|
(9
|
)
|
|
16,706
|
|
||||
Other securities
|
11,005
|
|
|
156
|
|
|
(19
|
)
|
|
11,142
|
|
||||
Total
|
$
|
798,639
|
|
|
$
|
4,281
|
|
|
$
|
(8,275
|
)
|
|
$
|
794,645
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
35,618
|
|
|
$
|
145
|
|
|
$
|
(186
|
)
|
|
$
|
35,577
|
|
Municipal securities
|
216,352
|
|
|
4,826
|
|
|
(185
|
)
|
|
220,993
|
|
||||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
||||||||
Residential
|
351,606
|
|
|
1,749
|
|
|
(1,331
|
)
|
|
352,024
|
|
||||
Commercial
|
179,797
|
|
|
343
|
|
|
(1,129
|
)
|
|
179,011
|
|
||||
Collateralized loan obligations
|
15,251
|
|
|
—
|
|
|
(154
|
)
|
|
15,097
|
|
||||
Corporate obligations
|
9,252
|
|
|
—
|
|
|
(139
|
)
|
|
9,113
|
|
||||
Other securities
|
45
|
|
|
9
|
|
|
—
|
|
|
54
|
|
||||
Total
|
$
|
807,921
|
|
|
$
|
7,072
|
|
|
$
|
(3,124
|
)
|
|
$
|
811,869
|
|
|
Securities Available for Sale
|
||||||
|
Amortized
Cost
|
|
Fair Value
|
||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
6,596
|
|
|
$
|
6,666
|
|
Due after one year through five years
|
123,618
|
|
|
124,240
|
|
||
Due after five years through ten years
|
262,644
|
|
|
260,514
|
|
||
Due after ten years
|
405,736
|
|
|
403,102
|
|
||
Investment securities with no stated maturities
|
45
|
|
|
123
|
|
||
Total
|
$
|
798,639
|
|
|
$
|
794,645
|
|
|
Securities Available for Sale
|
||||||||||||||||||||||
|
Less than 12 Months
|
|
12 Months or
Longer
|
|
Total
|
||||||||||||||||||
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal securities
|
90,188
|
|
|
(2,476
|
)
|
|
—
|
|
|
—
|
|
|
90,188
|
|
|
(2,476
|
)
|
||||||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential
|
181,562
|
|
|
(2,148
|
)
|
|
10,854
|
|
|
(52
|
)
|
|
192,416
|
|
|
(2,200
|
)
|
||||||
Commercial
|
157,055
|
|
|
(3,446
|
)
|
|
12,597
|
|
|
(94
|
)
|
|
169,652
|
|
|
(3,540
|
)
|
||||||
Collateralized loan obligations
|
2,976
|
|
|
(1
|
)
|
|
2,969
|
|
|
(30
|
)
|
|
5,945
|
|
|
(31
|
)
|
||||||
Corporate obligations
|
4,032
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
4,032
|
|
|
(9
|
)
|
||||||
Other securities
|
6,998
|
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
6,998
|
|
|
(19
|
)
|
||||||
Total
|
$
|
442,811
|
|
|
$
|
(8,099
|
)
|
|
$
|
26,420
|
|
|
$
|
(176
|
)
|
|
$
|
469,231
|
|
|
$
|
(8,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
30,381
|
|
|
$
|
(186
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,381
|
|
|
$
|
(186
|
)
|
Municipal securities
|
21,929
|
|
|
(174
|
)
|
|
2,068
|
|
|
(11
|
)
|
|
23,997
|
|
|
(185
|
)
|
||||||
Mortgage-backed securities and collateralized mortgage obligations
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Residential
|
173,959
|
|
|
(870
|
)
|
|
39,891
|
|
|
(461
|
)
|
|
213,850
|
|
|
(1,331
|
)
|
||||||
Commercial
|
79,103
|
|
|
(1,117
|
)
|
|
4,047
|
|
|
(12
|
)
|
|
83,150
|
|
|
(1,129
|
)
|
||||||
Collateralized loan obligations
|
15,097
|
|
|
(154
|
)
|
|
—
|
|
|
—
|
|
|
15,097
|
|
|
(154
|
)
|
||||||
Corporate obligations
|
8,134
|
|
|
(110
|
)
|
|
979
|
|
|
(29
|
)
|
|
9,113
|
|
|
(139
|
)
|
||||||
Total
|
$
|
328,603
|
|
|
$
|
(2,611
|
)
|
|
$
|
46,985
|
|
|
$
|
(513
|
)
|
|
$
|
375,588
|
|
|
$
|
(3,124
|
)
|
|
Life-to-Date Gross Other-Than-Temporary Impairments (1)
|
|
Life-to-Date Other-Than-Temporary Impairments Included in Other Comprehensive Income
|
|
Life-to-Date Net
Other-Than-Temporary Impairments Included in Earnings
|
||||||
|
(In thousands)
|
||||||||||
December 31, 2013
|
$
|
2,603
|
|
|
$
|
1,152
|
|
|
$
|
1,451
|
|
Subsequent impairments
|
45
|
|
|
—
|
|
|
45
|
|
|||
December 31, 2014
|
$
|
2,648
|
|
|
$
|
1,152
|
|
|
$
|
1,496
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Washington and Oregon state to secure public deposits
|
$
|
214,834
|
|
|
$
|
215,247
|
|
|
$
|
212,325
|
|
|
$
|
215,284
|
|
Federal Reserve Bank of San Francisco and FHLB to secure borrowing arrangements
|
—
|
|
|
—
|
|
|
506
|
|
|
506
|
|
||||
Repurchase agreements
|
29,481
|
|
|
29,294
|
|
|
28,500
|
|
|
28,503
|
|
||||
Other securities pledged
|
3,557
|
|
|
3,546
|
|
|
2,125
|
|
|
2,160
|
|
||||
Total
|
$
|
247,872
|
|
|
$
|
248,087
|
|
|
$
|
243,456
|
|
|
$
|
246,453
|
|
(4)
|
Loans Receivable
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
637,773
|
|
|
$
|
596,726
|
|
Owner-occupied commercial real estate
|
558,035
|
|
|
572,609
|
|
||
Non-owner occupied commercial real estate
|
880,880
|
|
|
753,986
|
|
||
Total commercial business
|
2,076,688
|
|
|
1,923,321
|
|
||
One-to-four family residential
|
77,391
|
|
|
72,548
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
50,414
|
|
|
51,752
|
|
||
Five or more family residential and commercial properties
|
108,764
|
|
|
55,325
|
|
||
Total real estate construction and land development
|
159,178
|
|
|
107,077
|
|
||
Consumer
|
325,140
|
|
|
298,167
|
|
||
Gross loans receivable
|
2,638,397
|
|
|
2,401,113
|
|
||
Net deferred loan costs (fees)
|
2,352
|
|
|
929
|
|
||
Loans receivable, net
|
2,640,749
|
|
|
2,402,042
|
|
||
Allowance for loan losses
|
(31,083
|
)
|
|
(29,746
|
)
|
||
Total loans receivable, net of allowance for loan losses
|
$
|
2,609,666
|
|
|
$
|
2,372,296
|
|
•
|
Grades 1 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
|
•
|
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, 2016
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
601,273
|
|
|
$
|
5,048
|
|
|
$
|
31,452
|
|
|
$
|
—
|
|
|
$
|
637,773
|
|
Owner-occupied commercial real estate
|
532,585
|
|
|
4,437
|
|
|
21,013
|
|
|
—
|
|
|
558,035
|
|
|||||
Non-owner occupied commercial real estate
|
841,383
|
|
|
14,573
|
|
|
24,924
|
|
|
—
|
|
|
880,880
|
|
|||||
Total commercial business
|
1,975,241
|
|
|
24,058
|
|
|
77,389
|
|
|
—
|
|
|
2,076,688
|
|
|||||
One-to-four family residential
|
76,020
|
|
|
—
|
|
|
1,371
|
|
|
—
|
|
|
77,391
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
44,752
|
|
|
500
|
|
|
5,162
|
|
|
—
|
|
|
50,414
|
|
|||||
Five or more family residential and commercial properties
|
105,723
|
|
|
1,150
|
|
|
1,891
|
|
|
—
|
|
|
108,764
|
|
|||||
Total real estate construction and land development
|
150,475
|
|
|
1,650
|
|
|
7,053
|
|
|
—
|
|
|
159,178
|
|
|||||
Consumer
|
320,140
|
|
|
—
|
|
|
5,000
|
|
|
—
|
|
|
325,140
|
|
|||||
Gross loans receivable
|
$
|
2,521,876
|
|
|
$
|
25,708
|
|
|
$
|
90,813
|
|
|
$
|
—
|
|
|
$
|
2,638,397
|
|
|
December 31, 2015
|
||||||||||||||||||
|
Pass
|
|
OAEM
|
|
Substandard
|
|
Doubtful
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
563,002
|
|
|
$
|
8,093
|
|
|
$
|
25,333
|
|
|
$
|
298
|
|
|
$
|
596,726
|
|
Owner-occupied commercial real estate
|
544,429
|
|
|
11,662
|
|
|
16,260
|
|
|
258
|
|
|
572,609
|
|
|||||
Non-owner occupied commercial real estate
|
699,759
|
|
|
23,447
|
|
|
30,780
|
|
|
—
|
|
|
753,986
|
|
|||||
Total commercial business
|
1,807,190
|
|
|
43,202
|
|
|
72,373
|
|
|
556
|
|
|
1,923,321
|
|
|||||
One-to-four family residential
|
71,457
|
|
|
—
|
|
|
1,091
|
|
|
—
|
|
|
72,548
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
44,069
|
|
|
896
|
|
|
6,787
|
|
|
—
|
|
|
51,752
|
|
|||||
Five or more family residential and commercial properties
|
50,678
|
|
|
—
|
|
|
4,647
|
|
|
—
|
|
|
55,325
|
|
|||||
Total real estate construction and land development
|
94,747
|
|
|
896
|
|
|
11,434
|
|
|
—
|
|
|
107,077
|
|
|||||
Consumer
|
291,892
|
|
|
—
|
|
|
6,275
|
|
|
—
|
|
|
298,167
|
|
|||||
Gross loans receivable
|
$
|
2,265,286
|
|
|
$
|
44,098
|
|
|
$
|
91,173
|
|
|
$
|
556
|
|
|
$
|
2,401,113
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
||||
Commercial and industrial
|
$
|
3,531
|
|
|
$
|
5,095
|
|
Owner-occupied commercial real estate
|
3,728
|
|
|
2,027
|
|
||
Non-owner occupied commercial real estate
|
1,321
|
|
|
—
|
|
||
Total commercial business
|
8,580
|
|
|
7,122
|
|
||
One-to-four family residential
|
94
|
|
|
38
|
|
||
Real estate construction and land development:
|
|
|
|
||||
One-to-four family residential
|
2,008
|
|
|
2,414
|
|
||
Total real estate construction and land development
|
2,008
|
|
|
2,414
|
|
||
Consumer
|
227
|
|
|
94
|
|
||
Nonaccrual loans
|
$
|
10,909
|
|
|
$
|
9,668
|
|
|
December 31, 2016
|
||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
2,687
|
|
|
$
|
1,733
|
|
|
$
|
4,420
|
|
|
$
|
633,353
|
|
|
$
|
637,773
|
|
Owner-occupied commercial real estate
|
1,807
|
|
|
2,915
|
|
|
4,722
|
|
|
553,313
|
|
|
558,035
|
|
|||||
Non-owner occupied commercial real estate
|
733
|
|
|
—
|
|
|
733
|
|
|
880,147
|
|
|
880,880
|
|
|||||
Total commercial business
|
5,227
|
|
|
4,648
|
|
|
9,875
|
|
|
2,066,813
|
|
|
2,076,688
|
|
|||||
One-to-four family residential
|
523
|
|
|
—
|
|
|
523
|
|
|
76,868
|
|
|
77,391
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
90
|
|
|
2,008
|
|
|
2,098
|
|
|
48,316
|
|
|
50,414
|
|
|||||
Five or more family residential and commercial properties
|
—
|
|
|
377
|
|
|
377
|
|
|
108,387
|
|
|
108,764
|
|
|||||
Total real estate construction and land development
|
90
|
|
|
2,385
|
|
|
2,475
|
|
|
156,703
|
|
|
159,178
|
|
|||||
Consumer
|
2,292
|
|
|
105
|
|
|
2,397
|
|
|
322,743
|
|
|
325,140
|
|
|||||
Gross loans receivable
|
$
|
8,132
|
|
|
$
|
7,138
|
|
|
$
|
15,270
|
|
|
$
|
2,623,127
|
|
|
$
|
2,638,397
|
|
|
December 31, 2015
|
||||||||||||||||||
|
30-89 Days
|
|
90 Days or
Greater
|
|
Total Past
Due
|
|
Current
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
2,900
|
|
|
$
|
2,679
|
|
|
$
|
5,579
|
|
|
$
|
591,147
|
|
|
$
|
596,726
|
|
Owner-occupied commercial real estate
|
2,240
|
|
|
2,609
|
|
|
4,849
|
|
|
567,760
|
|
|
572,609
|
|
|||||
Non-owner occupied commercial real estate
|
2,177
|
|
|
184
|
|
|
2,361
|
|
|
751,625
|
|
|
753,986
|
|
|||||
Total commercial business
|
7,317
|
|
|
5,472
|
|
|
12,789
|
|
|
1,910,532
|
|
|
1,923,321
|
|
|||||
One-to-four family residential
|
490
|
|
|
—
|
|
|
490
|
|
|
72,058
|
|
|
72,548
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
—
|
|
|
2,392
|
|
|
2,392
|
|
|
49,360
|
|
|
51,752
|
|
|||||
Five or more family residential and commercial properties
|
118
|
|
|
42
|
|
|
160
|
|
|
55,165
|
|
|
55,325
|
|
|||||
Total real estate construction and land development
|
118
|
|
|
2,434
|
|
|
2,552
|
|
|
104,525
|
|
|
107,077
|
|
|||||
Consumer
|
3,029
|
|
|
202
|
|
|
3,231
|
|
|
294,936
|
|
|
298,167
|
|
|||||
Gross loans receivable
|
$
|
10,954
|
|
|
$
|
8,108
|
|
|
$
|
19,062
|
|
|
$
|
2,382,051
|
|
|
$
|
2,401,113
|
|
|
December 31, 2016
|
||||||||||||||||||
|
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
|
$
|
1,739
|
|
|
$
|
10,636
|
|
|
$
|
12,375
|
|
|
$
|
13,249
|
|
|
$
|
1,199
|
|
Owner-occupied commercial real estate
|
1,150
|
|
|
3,574
|
|
|
4,724
|
|
|
5,107
|
|
|
511
|
|
|||||
Non-owner occupied commercial real estate
|
4,905
|
|
|
6,413
|
|
|
11,318
|
|
|
11,386
|
|
|
797
|
|
|||||
Total commercial business
|
7,794
|
|
|
20,623
|
|
|
28,417
|
|
|
29,742
|
|
|
2,507
|
|
|||||
One-to-four family residential
|
—
|
|
|
321
|
|
|
321
|
|
|
325
|
|
|
97
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
2,243
|
|
|
828
|
|
|
3,071
|
|
|
3,755
|
|
|
6
|
|
|||||
Five or more family residential and commercial properties
|
—
|
|
|
1,079
|
|
|
1,079
|
|
|
1,079
|
|
|
60
|
|
|||||
Total real estate construction and land development
|
2,243
|
|
|
1,907
|
|
|
4,150
|
|
|
4,834
|
|
|
66
|
|
|||||
Consumer
|
48
|
|
|
262
|
|
|
310
|
|
|
325
|
|
|
64
|
|
|||||
Total
|
$
|
10,085
|
|
|
$
|
23,113
|
|
|
$
|
33,198
|
|
|
$
|
35,226
|
|
|
$
|
2,734
|
|
|
December 31, 2015
|
||||||||||||||||||
|
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
|
$
|
872
|
|
|
$
|
8,769
|
|
|
$
|
9,641
|
|
|
$
|
11,368
|
|
|
$
|
1,173
|
|
Owner-occupied commercial real estate
|
—
|
|
|
4,295
|
|
|
4,295
|
|
|
4,342
|
|
|
809
|
|
|||||
Non-owner occupied commercial real estate
|
3,696
|
|
|
6,834
|
|
|
10,530
|
|
|
10,539
|
|
|
943
|
|
|||||
Total commercial business
|
4,568
|
|
|
19,898
|
|
|
24,466
|
|
|
26,249
|
|
|
2,925
|
|
|||||
One-to-four family residential
|
—
|
|
|
275
|
|
|
275
|
|
|
276
|
|
|
85
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
1,403
|
|
|
2,065
|
|
|
3,468
|
|
|
4,089
|
|
|
66
|
|
|||||
Five or more family residential and commercial properties
|
—
|
|
|
1,960
|
|
|
1,960
|
|
|
1,960
|
|
|
203
|
|
|||||
Total real estate construction and land development
|
1,403
|
|
|
4,025
|
|
|
5,428
|
|
|
6,049
|
|
|
269
|
|
|||||
Consumer
|
48
|
|
|
145
|
|
|
193
|
|
|
200
|
|
|
29
|
|
|||||
Total
|
$
|
6,019
|
|
|
$
|
24,343
|
|
|
$
|
30,362
|
|
|
$
|
32,774
|
|
|
$
|
3,308
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Commercial business:
|
|
|
|
|
|
||||||
Commercial and industrial
|
$
|
10,207
|
|
|
$
|
9,781
|
|
|
$
|
14,367
|
|
Owner-occupied commercial real estate
|
4,540
|
|
|
4,346
|
|
|
3,582
|
|
|||
Non-owner occupied commercial real estate
|
11,709
|
|
|
9,257
|
|
|
7,915
|
|
|||
Total commercial business
|
26,456
|
|
|
23,384
|
|
|
25,864
|
|
|||
One-to-four family residential
|
279
|
|
|
257
|
|
|
604
|
|
|||
Real estate construction and land development:
|
|
|
|
|
|
||||||
One-to-four family residential
|
3,305
|
|
|
3,841
|
|
|
5,452
|
|
|||
Five or more family residential and commercial properties
|
1,656
|
|
|
2,008
|
|
|
2,154
|
|
|||
Total real estate construction and land development
|
4,961
|
|
|
5,849
|
|
|
7,606
|
|
|||
Consumer
|
645
|
|
|
171
|
|
|
786
|
|
|||
Total
|
$
|
32,341
|
|
|
$
|
29,661
|
|
|
$
|
34,860
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Performing
TDR loans
|
|
Nonaccrual
TDR loans
|
|
Performing
TDR loans
|
|
Nonaccrual
TDR loans |
||||||||
|
(In thousands)
|
||||||||||||||
TDR loans
|
$
|
22,288
|
|
|
$
|
6,900
|
|
|
$
|
20,695
|
|
|
$
|
6,301
|
|
Allowance for loan losses on TDR loans
|
1,965
|
|
|
437
|
|
|
2,069
|
|
|
679
|
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
|
Number of
Contracts
(1)
|
|
Outstanding
Principal Balance (1)(2) |
|
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
|
19
|
|
|
$
|
7,398
|
|
|
25
|
|
|
$
|
6,312
|
|
|
33
|
|
|
$
|
8,166
|
|
Owner-occupied commercial real estate
|
2
|
|
|
569
|
|
|
4
|
|
|
1,311
|
|
|
3
|
|
|
1,063
|
|
|||
Non-owner occupied commercial real estate
|
2
|
|
|
2,121
|
|
|
4
|
|
|
7,496
|
|
|
3
|
|
|
6,548
|
|
|||
Total commercial business
|
23
|
|
|
10,088
|
|
|
33
|
|
|
15,119
|
|
|
39
|
|
|
15,777
|
|
|||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
One-to-four family residential
|
5
|
|
|
2,206
|
|
|
4
|
|
|
2,291
|
|
|
10
|
|
|
3,553
|
|
|||
Five or more family residential and commercial properties
|
1
|
|
|
1,078
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total real estate construction and land development
|
6
|
|
|
3,284
|
|
|
4
|
|
|
2,291
|
|
|
10
|
|
|
3,553
|
|
|||
Consumer
|
6
|
|
|
66
|
|
|
1
|
|
|
37
|
|
|
2
|
|
|
101
|
|
|||
Total modified loans
|
35
|
|
|
$
|
13,438
|
|
|
38
|
|
|
$
|
17,447
|
|
|
51
|
|
|
$
|
19,431
|
|
(1)
|
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-off or charged-off during the years ended December 31,
2016
,
2015
and
2014
.
|
(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. There were
no
advances on these types of loans during the years ended December 31,
2016
and
2015
. During the year ended December 31, 2014, the Company's initial advance at the time of modification on these construction loans totaled
$45,000
and the total commitment amount was
$190,000
and the outstanding principal balance at December 31, 2014 was
$188,000
.
|
|
Year Ended December 31,
|
|||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
|
Number of
Contracts
|
|
Outstanding
Principal
Balance
|
|
Number of
Contracts |
|
Outstanding
Principal Balance |
|
Number of
Contracts |
|
Outstanding
Principal Balance |
|||||||||
|
(Dollars in thousands)
|
|||||||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Commercial and industrial
|
—
|
|
|
$
|
—
|
|
|
2
|
|
|
$
|
1,755
|
|
|
—
|
|
|
$
|
—
|
|
Owner-occupied commercial real estate
|
1
|
|
|
488
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Non-owner occupied commercial real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
75
|
|
|||
Total commercial business
|
1
|
|
|
488
|
|
|
2
|
|
|
1755
|
|
|
1
|
|
|
75
|
|
|||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
One-to-four family residential
|
2
|
|
|
1,143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total real estate construction and land development
|
2
|
|
|
1,143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
3
|
|
|
$
|
1,631
|
|
|
2
|
|
|
$
|
1,755
|
|
|
1
|
|
|
$
|
75
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Outstanding Principal
|
|
Recorded Investment
|
|
Outstanding Principal
|
|
Recorded Investment
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
13,067
|
|
|
$
|
9,317
|
|
|
$
|
20,110
|
|
|
$
|
16,986
|
|
Owner-occupied commercial real estate
|
17,639
|
|
|
15,973
|
|
|
24,730
|
|
|
22,313
|
|
||||
Non-owner occupied commercial real estate
|
25,037
|
|
|
23,360
|
|
|
30,685
|
|
|
27,774
|
|
||||
Total commercial business
|
55,743
|
|
|
48,650
|
|
|
75,525
|
|
|
67,073
|
|
||||
One-to-four family residential
|
5,120
|
|
|
4,905
|
|
|
5,707
|
|
|
5,392
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
2,958
|
|
|
2,123
|
|
|
6,904
|
|
|
4,121
|
|
||||
Five or more family residential and commercial properties
|
2,614
|
|
|
2,488
|
|
|
3,071
|
|
|
3,207
|
|
||||
Total real estate construction and land development
|
5,572
|
|
|
4,611
|
|
|
9,975
|
|
|
7,328
|
|
||||
Consumer
|
5,296
|
|
|
6,282
|
|
|
6,720
|
|
|
7,126
|
|
||||
Gross PCI loans
|
$
|
71,731
|
|
|
$
|
64,448
|
|
|
$
|
97,927
|
|
|
$
|
86,919
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
|
$
|
17,592
|
|
|
$
|
21,092
|
|
|
$
|
17,249
|
|
Accretion
|
|
(4,962
|
)
|
|
(6,993
|
)
|
|
(8,054
|
)
|
|||
Disposal and other
|
|
(3,329
|
)
|
|
(3,111
|
)
|
|
(4,981
|
)
|
|||
Change in accretable yield (1)
|
|
4,559
|
|
|
6,604
|
|
|
16,878
|
|
|||
Balance at the end of the year
|
|
$
|
13,860
|
|
|
$
|
17,592
|
|
|
$
|
21,092
|
|
(1)
|
Includes accretable yield of PCI loans at acquisition date for the year ended December 31, 2014.
|
|
|
Year Ended or As of December 31,
|
||
|
|
(in thousands)
|
||
Balance outstanding at December 31, 2013
|
|
$
|
7,474
|
|
Principal additions
|
|
23
|
|
|
Elimination of outstanding loan balance due to change in related party status
|
|
1,858
|
|
|
Principal reductions
|
|
(191
|
)
|
|
Balance outstanding at December 31, 2014
|
|
9,164
|
|
|
Principal additions
|
|
12,189
|
|
|
Principal reductions
|
|
(578
|
)
|
|
Balance outstanding at December 31, 2015
|
|
20,775
|
|
|
Principal additions
|
|
738
|
|
|
Principal reductions
|
|
(1,596
|
)
|
|
Balance outstanding at December 31, 2016
|
|
$
|
19,917
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
One-to-four family residential loans:
|
|
|
|
|
|
|
||||||
Originated
(1)
|
|
$
|
178,169
|
|
|
$
|
164,974
|
|
|
$
|
75,500
|
|
Sold
|
|
141,127
|
|
|
132,365
|
|
|
55,997
|
|
|||
Gains on sales of loans, net
(2)
|
|
3,723
|
|
|
3,150
|
|
|
1,080
|
|
(1)
|
Includes loans originated for sale in the secondary market or for the Bank's loan portfolio.
|
(2)
|
Excludes net gains on sales of SBA and other loans.
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
Commitments to sell mortgage loans
|
|
$
|
18,166
|
|
|
$
|
11,621
|
|
|
|
|
|
|
||||
Commitments to fund mortgage loans (at interest rates approximating market rates) for portfolio or for sale:
|
|
|
|
|
||||
Fixed rate
|
|
$
|
19,301
|
|
|
$
|
11,884
|
|
Variable or adjustable rate
|
|
4,189
|
|
|
4,857
|
|
||
Total commitments to fund mortgage loans
|
|
$
|
23,490
|
|
|
$
|
16,741
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
SBA loans serviced for others with participating interest, gross loan balance
|
|
$
|
48,359
|
|
|
$
|
43,771
|
|
SBA loans serviced for others with participating interest, participation balance owned by Bank
(1)
|
|
11,218
|
|
|
10,076
|
|
(1)
|
Included in the balances of total loans receivable, net on the Company's Consolidated Statements of Financial Condition.
|
(5)
|
Allowance for Loan Losses
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
29,746
|
|
|
$
|
27,729
|
|
|
$
|
28,824
|
|
Charge-offs
|
(6,085
|
)
|
|
(3,482
|
)
|
|
(6,597
|
)
|
|||
Recoveries of loans previously charged-off
|
2,491
|
|
|
1,127
|
|
|
908
|
|
|||
Provision for loan losses
|
4,931
|
|
|
4,372
|
|
|
4,594
|
|
|||
Balance at the end of the year
|
$
|
31,083
|
|
|
$
|
29,746
|
|
|
$
|
27,729
|
|
|
Balance at Beginning of Year
|
|
Charge-offs
|
|
Recoveries
|
|
Provision for Loan Losses
|
|
Balance at End of Year
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
9,972
|
|
|
$
|
(3,265
|
)
|
|
$
|
1,844
|
|
|
$
|
2,417
|
|
|
$
|
10,968
|
|
Owner-occupied commercial real estate
|
4,370
|
|
|
(538
|
)
|
|
—
|
|
|
(171
|
)
|
|
3,661
|
|
|||||
Non-owner occupied commercial real estate
|
7,722
|
|
|
(350
|
)
|
|
—
|
|
|
381
|
|
|
7,753
|
|
|||||
Total commercial business
|
22,064
|
|
|
(4,153
|
)
|
|
1,844
|
|
|
2,627
|
|
|
22,382
|
|
|||||
One-to-four family residential
|
1,157
|
|
|
—
|
|
|
2
|
|
|
(144
|
)
|
|
1,015
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
1,058
|
|
|
(100
|
)
|
|
83
|
|
|
(244
|
)
|
|
797
|
|
|||||
Five or more family residential and commercial properties
|
813
|
|
|
(54
|
)
|
|
—
|
|
|
600
|
|
|
1,359
|
|
|||||
Total real estate construction and land development
|
1,871
|
|
|
(154
|
)
|
|
83
|
|
|
356
|
|
|
2,156
|
|
|||||
Consumer
|
4,309
|
|
|
(1,778
|
)
|
|
562
|
|
|
1,931
|
|
|
5,024
|
|
|||||
Unallocated
|
345
|
|
|
—
|
|
|
—
|
|
|
161
|
|
|
506
|
|
|||||
Total
|
$
|
29,746
|
|
|
$
|
(6,085
|
)
|
|
$
|
2,491
|
|
|
$
|
4,931
|
|
|
$
|
31,083
|
|
|
Loans Individually Evaluated for Impairment
|
|
Loans Collectively Evaluated for Impairment
|
|
PCI Loans
|
|
Total Allowance for Loan Losses
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
1,199
|
|
|
$
|
8,048
|
|
|
$
|
1,721
|
|
|
$
|
10,968
|
|
Owner-occupied commercial real estate
|
511
|
|
|
1,834
|
|
|
1,316
|
|
|
3,661
|
|
||||
Non-owner occupied commercial real estate
|
797
|
|
|
5,142
|
|
|
1,814
|
|
|
7,753
|
|
||||
Total commercial business
|
2,507
|
|
|
15,024
|
|
|
4,851
|
|
|
22,382
|
|
||||
One-to-four family residential
|
97
|
|
|
643
|
|
|
275
|
|
|
1,015
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
6
|
|
|
538
|
|
|
253
|
|
|
797
|
|
||||
Five or more family residential and commercial properties
|
60
|
|
|
1,168
|
|
|
131
|
|
|
1,359
|
|
||||
Total real estate construction and land development
|
66
|
|
|
1,706
|
|
|
384
|
|
|
2,156
|
|
||||
Consumer
|
64
|
|
|
3,912
|
|
|
1,048
|
|
|
5,024
|
|
||||
Unallocated
|
—
|
|
|
506
|
|
|
—
|
|
|
506
|
|
||||
Total
|
$
|
2,734
|
|
|
$
|
21,791
|
|
|
$
|
6,558
|
|
|
$
|
31,083
|
|
|
Loans Individually Evaluated for Impairment
|
|
Loans Collectively Evaluated for Impairment
|
|
PCI Loans
|
|
Gross Loans Receivable
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
12,375
|
|
|
$
|
616,081
|
|
|
$
|
9,317
|
|
|
$
|
637,773
|
|
Owner-occupied commercial real estate
|
4,724
|
|
|
537,338
|
|
|
15,973
|
|
|
558,035
|
|
||||
Non-owner occupied commercial real estate
|
11,318
|
|
|
846,202
|
|
|
23,360
|
|
|
880,880
|
|
||||
Total commercial business
|
28,417
|
|
|
1,999,621
|
|
|
48,650
|
|
|
2,076,688
|
|
||||
One-to-four family residential
|
321
|
|
|
72,165
|
|
|
4,905
|
|
|
77,391
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
3,071
|
|
|
45,220
|
|
|
2,123
|
|
|
50,414
|
|
||||
Five or more family residential and commercial properties
|
1,079
|
|
|
105,197
|
|
|
2,488
|
|
|
108,764
|
|
||||
Total real estate construction and land development
|
4,150
|
|
|
150,417
|
|
|
4,611
|
|
|
159,178
|
|
||||
Consumer
|
310
|
|
|
318,548
|
|
|
6,282
|
|
|
325,140
|
|
||||
Total
|
$
|
33,198
|
|
|
$
|
2,540,751
|
|
|
$
|
64,448
|
|
|
$
|
2,638,397
|
|
|
Balance at Beginning of Year
|
|
Charge-offs
|
|
Recoveries
|
|
Provision for Loan Losses
|
|
Balance at End of Year
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
10,553
|
|
|
$
|
(1,488
|
)
|
|
$
|
476
|
|
|
$
|
431
|
|
|
$
|
9,972
|
|
Owner-occupied commercial real estate
|
4,032
|
|
|
—
|
|
|
—
|
|
|
338
|
|
|
4,370
|
|
|||||
Non-owner occupied commercial real estate
|
5,601
|
|
|
(188
|
)
|
|
—
|
|
|
2,309
|
|
|
7,722
|
|
|||||
Total commercial business
|
20,186
|
|
|
(1,676
|
)
|
|
476
|
|
|
3,078
|
|
|
22,064
|
|
|||||
One-to-four family residential
|
1,200
|
|
|
—
|
|
|
13
|
|
|
(56
|
)
|
|
1,157
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
1,786
|
|
|
(106
|
)
|
|
100
|
|
|
(722
|
)
|
|
1,058
|
|
|||||
Five or more family residential and commercial properties
|
972
|
|
|
—
|
|
|
—
|
|
|
(159
|
)
|
|
813
|
|
|||||
Total real estate construction and land development
|
2,758
|
|
|
(106
|
)
|
|
100
|
|
|
(881
|
)
|
|
1,871
|
|
|||||
Consumer
|
2,769
|
|
|
(1,700
|
)
|
|
538
|
|
|
2,702
|
|
|
4,309
|
|
|||||
Unallocated
|
816
|
|
|
—
|
|
|
—
|
|
|
(471
|
)
|
|
345
|
|
|||||
Total
|
$
|
27,729
|
|
|
$
|
(3,482
|
)
|
|
$
|
1,127
|
|
|
$
|
4,372
|
|
|
$
|
29,746
|
|
|
Loans Individually Evaluated for Impairment
|
|
Loans Collectively Evaluated for Impairment
|
|
PCI Loans
|
|
Total Allowance for Loan Losses
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
1,173
|
|
|
$
|
6,276
|
|
|
$
|
2,523
|
|
|
$
|
9,972
|
|
Owner-occupied commercial real estate
|
809
|
|
|
1,662
|
|
|
1,899
|
|
|
4,370
|
|
||||
Non-owner occupied commercial real estate
|
943
|
|
|
4,336
|
|
|
2,443
|
|
|
7,722
|
|
||||
Total commercial business
|
2,925
|
|
|
12,274
|
|
|
6,865
|
|
|
22,064
|
|
||||
One-to-four family residential
|
85
|
|
|
546
|
|
|
526
|
|
|
1,157
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
66
|
|
|
481
|
|
|
511
|
|
|
1,058
|
|
||||
Five or more family residential and commercial properties
|
203
|
|
|
519
|
|
|
91
|
|
|
813
|
|
||||
Total real estate construction and land development
|
269
|
|
|
1,000
|
|
|
602
|
|
|
1,871
|
|
||||
Consumer
|
29
|
|
|
3,189
|
|
|
1,091
|
|
|
4,309
|
|
||||
Unallocated
|
—
|
|
|
345
|
|
|
—
|
|
|
345
|
|
||||
Total
|
$
|
3,308
|
|
|
$
|
17,354
|
|
|
$
|
9,084
|
|
|
$
|
29,746
|
|
|
Loans Individually Evaluated for Impairment
|
|
Loans Collectively Evaluated for Impairment
|
|
PCI Loans
|
|
Gross Loans Receivable
|
||||||||
|
(In thousands)
|
||||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
||||||||
Commercial and industrial
|
$
|
9,641
|
|
|
$
|
570,099
|
|
|
$
|
16,986
|
|
|
$
|
596,726
|
|
Owner-occupied commercial real estate
|
4,295
|
|
|
546,001
|
|
|
22,313
|
|
|
572,609
|
|
||||
Non-owner occupied commercial real estate
|
10,530
|
|
|
715,682
|
|
|
27,774
|
|
|
753,986
|
|
||||
Total commercial business
|
24,466
|
|
|
1,831,782
|
|
|
67,073
|
|
|
1,923,321
|
|
||||
One-to-four family residential
|
275
|
|
|
66,881
|
|
|
5,392
|
|
|
72,548
|
|
||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
||||||||
One-to-four family residential
|
3,468
|
|
|
44,163
|
|
|
4,121
|
|
|
51,752
|
|
||||
Five or more family residential and commercial properties
|
1,960
|
|
|
50,158
|
|
|
3,207
|
|
|
55,325
|
|
||||
Total real estate construction and land development
|
5,428
|
|
|
94,321
|
|
|
7,328
|
|
|
107,077
|
|
||||
Consumer
|
193
|
|
|
290,848
|
|
|
7,126
|
|
|
298,167
|
|
||||
Total
|
$
|
30,362
|
|
|
$
|
2,283,832
|
|
|
$
|
86,919
|
|
|
$
|
2,401,113
|
|
|
Balance at Beginning of Year
|
|
Charge-offs
|
|
Recoveries
|
|
Provision for Loan Losses
|
|
Balance at End of Year
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commercial and industrial
|
$
|
13,478
|
|
|
$
|
(4,504
|
)
|
|
$
|
716
|
|
|
$
|
863
|
|
|
$
|
10,553
|
|
Owner-occupied commercial real estate
|
4,049
|
|
|
(337
|
)
|
|
—
|
|
|
320
|
|
|
4,032
|
|
|||||
Non-owner occupied commercial real estate
|
5,326
|
|
|
(411
|
)
|
|
—
|
|
|
686
|
|
|
5,601
|
|
|||||
Total commercial business
|
22,853
|
|
|
(5,252
|
)
|
|
716
|
|
|
1,869
|
|
|
20,186
|
|
|||||
One-to-four family residential
|
1,100
|
|
|
(31
|
)
|
|
7
|
|
|
124
|
|
|
1,200
|
|
|||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
||||||||||
One-to-four family residential
|
1,720
|
|
|
(345
|
)
|
|
43
|
|
|
368
|
|
|
1,786
|
|
|||||
Five or more family residential and commercial properties
|
953
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
972
|
|
|||||
Total real estate construction and land development
|
2,673
|
|
|
(345
|
)
|
|
43
|
|
|
387
|
|
|
2,758
|
|
|||||
Consumer
|
1,597
|
|
|
(969
|
)
|
|
142
|
|
|
1,999
|
|
|
2,769
|
|
|||||
Unallocated
|
601
|
|
|
—
|
|
|
—
|
|
|
215
|
|
|
816
|
|
|||||
Total
|
$
|
28,824
|
|
|
$
|
(6,597
|
)
|
|
$
|
908
|
|
|
$
|
4,594
|
|
|
$
|
27,729
|
|
(6)
|
FDIC Indemnification Asset
|
|
Year Ended December 31,
|
||||||
|
2015
|
|
2014
|
||||
|
(In thousands)
|
||||||
Balance at the beginning of the year
|
$
|
1,116
|
|
|
$
|
4,382
|
|
Additions as a result of the Washington Banking Merger
|
—
|
|
|
7,174
|
|
||
Cash payments received or receivable from the FDIC
|
(231
|
)
|
|
(7,897
|
)
|
||
FDIC share of additional estimated gains
|
(352
|
)
|
|
(1,072
|
)
|
||
Net amortization
|
(145
|
)
|
|
(1,471
|
)
|
||
Change due to termination of FDIC shared-loss agreements
|
(388
|
)
|
|
—
|
|
||
Balance at the end of the year
|
$
|
—
|
|
|
$
|
1,116
|
|
(7)
|
Other Real Estate Owned
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands
|
||||||||||
Balance at the beginning of the year
|
$
|
2,019
|
|
|
$
|
3,355
|
|
|
$
|
4,559
|
|
Additions
|
1,431
|
|
|
2,845
|
|
|
1,566
|
|
|||
Additions from acquisitions
|
—
|
|
|
—
|
|
|
7,121
|
|
|||
Proceeds from dispositions
|
(2,486
|
)
|
|
(3,555
|
)
|
|
(9,914
|
)
|
|||
Gain (loss) on sales, net
|
173
|
|
|
(97
|
)
|
|
23
|
|
|||
Valuation adjustment
|
(383
|
)
|
|
(529
|
)
|
|
—
|
|
|||
Balance at the end of the year
|
$
|
754
|
|
|
$
|
2,019
|
|
|
$
|
3,355
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
Land
|
|
$
|
22,677
|
|
|
$
|
21,695
|
|
Buildings and building improvements
|
|
52,432
|
|
|
49,630
|
|
||
Furniture, fixtures and equipment
|
|
18,723
|
|
|
17,234
|
|
||
Total premises and equipment
|
|
93,832
|
|
|
88,559
|
|
||
Accumulated depreciation
|
|
29,921
|
|
|
26,668
|
|
||
Premises and equipment, net
|
|
$
|
63,911
|
|
|
$
|
61,891
|
|
(9)
|
Goodwill and Other Intangible Assets
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(In thousands)
|
||||||||||
Balance at the beginning of the year
|
$
|
8,789
|
|
|
$
|
10,889
|
|
|
$
|
1,615
|
|
Additions as a result of acquisitions
|
—
|
|
|
—
|
|
|
11,194
|
|
|||
Less: Amortization
|
1,415
|
|
|
2,100
|
|
|
1,920
|
|
|||
Balance at the end of the year
|
$
|
7,374
|
|
|
$
|
8,789
|
|
|
$
|
10,889
|
|
|
|
Year Ending December 31,
|
||
|
|
(In thousands)
|
||
2017
|
|
$
|
1,285
|
|
2018
|
|
1,122
|
|
|
2019
|
|
1,043
|
|
|
2020
|
|
989
|
|
|
2021
|
|
938
|
|
|
Thereafter
|
|
1,997
|
|
|
|
|
$
|
7,374
|
|
(10)
|
Deposits
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||
|
|
(Dollars in thousands)
|
||||||||||||
Noninterest demand deposits
|
|
$
|
882,091
|
|
|
27.3
|
%
|
|
$
|
770,927
|
|
|
24.8
|
%
|
NOW accounts
|
|
963,821
|
|
|
29.8
|
|
|
917,859
|
|
|
29.5
|
|
||
Money market accounts
|
|
523,875
|
|
|
16.2
|
|
|
545,342
|
|
|
17.6
|
|
||
Savings accounts
|
|
502,460
|
|
|
15.6
|
|
|
453,826
|
|
|
14.6
|
|
||
Total non-maturity deposits
|
|
2,872,247
|
|
|
88.9
|
|
|
2,687,954
|
|
|
86.5
|
|
||
Certificate of deposit accounts
|
|
357,401
|
|
|
11.1
|
|
|
420,333
|
|
|
13.5
|
|
||
Total deposits
|
|
$
|
3,229,648
|
|
|
100.0
|
%
|
|
$
|
3,108,287
|
|
|
100.0
|
%
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
NOW accounts
|
|
$
|
1,569
|
|
|
$
|
1,476
|
|
|
$
|
1,011
|
|
Money market accounts
|
|
749
|
|
|
922
|
|
|
896
|
|
|||
Savings accounts
|
|
756
|
|
|
445
|
|
|
252
|
|
|||
Certificate of deposit accounts
|
|
1,936
|
|
|
2,386
|
|
|
2,991
|
|
|||
|
|
$
|
5,010
|
|
|
$
|
5,229
|
|
|
$
|
5,150
|
|
|
|
Year Ending December 31,
|
||
|
|
(In thousands)
|
||
2017
|
|
$
|
235,173
|
|
2018
|
|
66,431
|
|
|
2019
|
|
28,740
|
|
|
2020
|
|
15,979
|
|
|
2021
|
|
11,029
|
|
|
Thereafter
|
|
49
|
|
|
|
|
$
|
357,401
|
|
(11)
|
Junior Subordinated Debentures
|
(12)
|
Repurchase Agreements
|
(13)
|
Other Borrowings
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
(In thousands)
|
||||||
FHLB Advances:
|
|
|
|
||||
Balance at end of year
|
$
|
79,600
|
|
|
$
|
—
|
|
Average balance during the year
|
$
|
13,349
|
|
|
$
|
1,777
|
|
Maximum month-end balance during the year
|
$
|
79,600
|
|
|
$
|
48,200
|
|
Weighted average rate during the year
|
0.55
|
%
|
|
0.34
|
%
|
||
Weighted average rate at end of year
|
0.81
|
%
|
|
—
|
%
|
(14)
|
Employee Benefit Plans
|
(15)
|
Commitments and Contingencies
|
|
|
Year Ending December 31,
|
||
|
|
(In thousands)
|
||
2017
|
|
$
|
3,409
|
|
2018
|
|
3,010
|
|
|
2019
|
|
2,538
|
|
|
2020
|
|
2,175
|
|
|
2021
|
|
1,380
|
|
|
Thereafter
|
|
2,143
|
|
|
|
|
$
|
14,655
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
Commercial business:
|
|
|
|
|
||||
Commercial and industrial
|
|
$
|
368,308
|
|
|
$
|
350,227
|
|
Owner-occupied commercial real estate
|
|
3,443
|
|
|
2,220
|
|
||
Non-owner occupied commercial real estate
|
|
8,732
|
|
|
11,168
|
|
||
Total commercial business
|
|
380,483
|
|
|
363,615
|
|
||
One-to-four family residential
|
|
—
|
|
|
—
|
|
||
Real estate construction and land development:
|
|
|
|
|
||||
One-to-four family residential
|
|
23,004
|
|
|
21,778
|
|
||
Five or more family residential and commercial properties
|
|
78,121
|
|
|
52,772
|
|
||
Total real estate construction and land development
|
|
101,125
|
|
|
74,550
|
|
||
Consumer
|
|
144,405
|
|
|
134,313
|
|
||
Total outstanding commitments
|
|
$
|
626,013
|
|
|
$
|
572,478
|
|
(16)
|
Derivative Financial Instruments
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||||||||
|
Notional Amounts
|
|
Estimated Fair Value
|
|
Notional Amounts
|
|
Estimated Fair Value
|
||||||||
|
(In thousands)
|
|
|
|
|||||||||||
Non-hedging interest rate derivatives
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps with customer
(1)
|
$
|
102,709
|
|
|
$
|
1,099
|
|
|
$
|
20,750
|
|
|
$
|
543
|
|
Interest rate swap with third party
(1)
|
102,709
|
|
|
(1,099
|
)
|
|
20,750
|
|
|
(543
|
)
|
(17)
|
Stockholders’ Equity
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(Dollars in thousands)
|
||||||||||
Net income:
|
|
|
|
|
|
||||||
Net income
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
Less: Dividends and undistributed earnings allocated to participating securities
|
(358
|
)
|
|
(328
|
)
|
|
(163
|
)
|
|||
Net income allocated to common shareholders
|
$
|
38,560
|
|
|
$
|
37,161
|
|
|
$
|
20,851
|
|
Basic:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding
|
29,963,365
|
|
|
30,057,558
|
|
|
25,641,229
|
|
|||
Less: Restricted stock awards
|
(285,063
|
)
|
|
(267,943
|
)
|
|
(210,690
|
)
|
|||
Total basic weighted average common shares outstanding
|
29,678,302
|
|
|
29,789,615
|
|
|
25,430,539
|
|
|||
Diluted:
|
|
|
|
|
|
||||||
Basic weighted average common shares outstanding
|
29,678,302
|
|
|
29,789,615
|
|
|
25,430,539
|
|
|||
Incremental shares from stock options
|
13,851
|
|
|
22,725
|
|
|
46,750
|
|
|||
Total diluted weighted average common shares outstanding
|
29,692,153
|
|
|
29,812,340
|
|
|
25,477,289
|
|
Declared
|
|
Cash Dividend per Share
|
|
Record Date
|
|
Paid Date
|
|
|
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
|
|
|
April 22, 2015
|
|
$0.11
|
|
May 7, 2015
|
|
May 21, 2015
|
|
|
July 22, 2015
|
|
$0.11
|
|
August 6, 2015
|
|
August 20, 2015
|
|
|
October 21, 2015
|
|
$0.11
|
|
November 4, 2015
|
|
November 18, 2015
|
|
|
October 21, 2015
|
|
$0.10
|
|
November 4, 2015
|
|
November 18, 2015
|
|
*
|
January 27, 2016
|
|
$0.11
|
|
February 10, 2016
|
|
February 24, 2016
|
|
|
April 20, 2016
|
|
$0.12
|
|
May 5, 2016
|
|
May 19, 2016
|
|
|
July 20, 2016
|
|
$0.12
|
|
August 4, 2016
|
|
August 18, 2016
|
|
|
October 26, 2016
|
|
$0.12
|
|
November 8, 2016
|
|
November 22, 2016
|
|
|
October 26, 2016
|
|
$0.25
|
|
November 8, 2016
|
|
November 22, 2016
|
|
*
|
|
Year Ended December 31,
|
|
|
||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
Plan Total (1)
|
||||||||
Tenth Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
—
|
|
|
—
|
|
|
108,075
|
|
|
704,975
|
|
||||
Stock repurchase average share price
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16.88
|
|
|
$
|
15.85
|
|
|
|
|
|
|
|
|
|
||||||||
Eleventh Plan
|
|
|
|
|
|
|
|
||||||||
Repurchased shares
|
138,000
|
|
|
441,966
|
|
|
—
|
|
|
579,966
|
|
||||
Stock repurchase average share price
|
$
|
17.16
|
|
|
$
|
16.64
|
|
|
$
|
—
|
|
|
$
|
16.76
|
|
(18)
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
December 31, 2016
(1)
|
||
|
|
(In thousands)
|
||
Balance of AOCI at the beginning of the year
|
|
$
|
2,559
|
|
Other comprehensive loss before reclassification
|
|
(4,311
|
)
|
|
Amounts reclassified from AOCI for gain on sale of investment securities included in net income
|
|
(854
|
)
|
|
Net current period other comprehensive loss
|
|
(5,165
|
)
|
|
Balance of AOCI at the end of the year
|
|
$
|
(2,606
|
)
|
(1)
|
All amounts are due to the changes in fair value of available for sale securities and are net of tax.
|
|
December 31, 2015
|
||||||||||
|
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
|
$
|
3,567
|
|
|
$
|
(189
|
)
|
|
$
|
3,378
|
|
Other comprehensive (loss) income before reclassification
|
(559
|
)
|
|
108
|
|
|
(451
|
)
|
|||
Amounts reclassified from AOCI for gain on sale of investment securities included in net income
|
(1,067
|
)
|
|
81
|
|
|
(986
|
)
|
|||
Held to maturity transfer to available for sale
|
618
|
|
|
—
|
|
|
618
|
|
|||
Net current period other comprehensive (loss) income
|
(1,008
|
)
|
|
189
|
|
|
(819
|
)
|
|||
Balance of AOCI at the end of the year
|
$
|
2,559
|
|
|
$
|
—
|
|
|
$
|
2,559
|
|
(1)
|
All amounts are net of tax.
|
|
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.
|
(19)
|
Fair Value
|
|
December 31, 2016
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investment securities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
1,569
|
|
|
$
|
—
|
|
|
$
|
1,569
|
|
|
$
|
—
|
|
Municipal securities
|
237,256
|
|
|
—
|
|
|
237,256
|
|
|
—
|
|
||||
Mortgage backed securities and collateralized mortgage obligations:
|
|
|
|
|
|
|
|
||||||||
Residential
|
309,176
|
|
|
—
|
|
|
309,176
|
|
|
—
|
|
||||
Commercial
|
208,318
|
|
|
—
|
|
|
208,318
|
|
|
—
|
|
||||
Collateralized loan obligations
|
10,478
|
|
|
—
|
|
|
10,478
|
|
|
—
|
|
||||
Corporate obligations
|
16,706
|
|
|
—
|
|
|
16,706
|
|
|
—
|
|
||||
Other securities
|
11,142
|
|
|
123
|
|
|
11,019
|
|
|
—
|
|
||||
Total investment securities available for sale
|
$
|
794,645
|
|
|
$
|
123
|
|
|
$
|
794,522
|
|
|
$
|
—
|
|
Derivative assets - interest rate swaps
|
$
|
2,804
|
|
|
$
|
—
|
|
|
$
|
2,804
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities - interest rate swaps
|
$
|
2,804
|
|
|
$
|
—
|
|
|
$
|
2,804
|
|
|
$
|
—
|
|
|
December 31, 2015
|
||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
|
(In thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Investment securities available for sale:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury and U.S. Government-sponsored agencies
|
$
|
35,577
|
|
|
$
|
15,676
|
|
|
$
|
19,901
|
|
|
$
|
—
|
|
Municipal securities
|
220,993
|
|
|
—
|
|
|
220,993
|
|
|
—
|
|
||||
Mortgage backed securities and collateralized mortgage obligations:
|
|
|
|
|
|
|
|
||||||||
Residential
|
352,024
|
|
|
—
|
|
|
352,024
|
|
|
—
|
|
||||
Commercial
|
179,011
|
|
|
—
|
|
|
179,011
|
|
|
—
|
|
||||
Collateralized loan obligations
|
15,097
|
|
|
—
|
|
|
15,097
|
|
|
—
|
|
||||
Corporate obligations
|
9,113
|
|
|
—
|
|
|
9,113
|
|
|
—
|
|
||||
Other securities
|
54
|
|
|
54
|
|
|
—
|
|
|
—
|
|
||||
Total investment securities available for sale
|
$
|
811,869
|
|
|
$
|
15,730
|
|
|
$
|
796,139
|
|
|
$
|
—
|
|
Derivative assets - interest rate swaps
|
$
|
543
|
|
|
$
|
—
|
|
|
$
|
543
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative liabilities - interest rate swaps
|
$
|
543
|
|
|
$
|
—
|
|
|
$
|
543
|
|
|
$
|
—
|
|
|
Basis
(1)
|
|
Fair Value at December 31, 2016
|
|
|
||||||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Net Losses
(Gains)
Recorded in
Earnings
During
the Year Ended December 31, 2016
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial business:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commercial and industrial
|
$
|
205
|
|
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
200
|
|
|
$
|
5
|
|
Owner-occupied commercial real estate
|
780
|
|
|
603
|
|
|
—
|
|
|
—
|
|
|
603
|
|
|
(145
|
)
|
||||||
Total commercial business
|
985
|
|
|
803
|
|
|
—
|
|
|
—
|
|
|
803
|
|
|
(140
|
)
|
||||||
Real estate construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
One-to-four family residential
|
828
|
|
|
822
|
|
|
—
|
|
|
—
|
|
|
822
|
|
|
(23
|
)
|
||||||
Total real estate construction and land development
|
828
|
|
|
822
|
|
|
—
|
|
|
—
|
|
|
822
|
|
|
(23
|
)
|
||||||
Consumer
|
16
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
6
|
|
||||||
Total assets measured
|
$
|
1,829
|
|
|
$
|
1,634
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,634
|
|
|
$
|
(157
|
)
|
(1)
|
Basis represents the unpaid principal balance of impaired loans.
|
|
Basis
(1)
|
|
Fair Value at December 31, 2015
|
|
|
||||||||||||||||||
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Net Losses
(Gains)
Recorded in
Earnings
During
the Year Ended December 31, 2015
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total assets measured at fair value on a nonrecurring basis
(2)
|
$
|
1,753
|
|
|
$
|
1,719
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,719
|
|
|
$
|
35
|
|
(1)
|
Basis represents the unpaid principal balance of impaired loans and amortized cost of investment securities held to maturity.
|
(2)
|
The only assets measured at December 31, 2015 were one-to-four family residential real estate construction and land development impaired loans.
|
|
December 31, 2016
|
||||||||
|
Fair
Value
|
|
Valuation
Technique(s)
|
|
Unobservable Input(s)
|
|
Range of Inputs; Weighted
Average
|
||
|
(Dollars in thousands)
|
||||||||
Impaired loans measured at fair value
|
$
|
1,634
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(23.8%) - 63.9%; 20.4%
|
|
December 31, 2015
|
||||||||
|
Fair
Value
|
|
Valuation
Technique(s)
|
|
Unobservable Input(s)
|
|
Range of Inputs; Weighted
Average
|
||
|
(Dollars in thousands)
|
||||||||
Impaired loans measured at fair value
|
$
|
1,719
|
|
|
Market approach
|
|
Adjustment for differences between the comparable sales
|
|
(30.0%) - 63.9%; 24.5%
|
|
December 31, 2016
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Fair Value Measurements Using:
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
103,745
|
|
|
$
|
103,745
|
|
|
$
|
103,745
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Investment securities available for sale
|
794,645
|
|
|
794,645
|
|
|
123
|
|
|
794,522
|
|
|
—
|
|
|||||
Federal Home Loan Bank stock
|
7,564
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Loans held for sale
|
11,662
|
|
|
11,988
|
|
|
—
|
|
|
11,988
|
|
|
—
|
|
|||||
Total loans receivable, net of allowance for loan losses
|
2,609,666
|
|
|
2,675,811
|
|
|
—
|
|
|
—
|
|
|
2,675,811
|
|
|||||
Accrued interest receivable
|
10,925
|
|
|
10,925
|
|
|
3
|
|
|
3,472
|
|
|
7,450
|
|
|||||
Derivative assets - interest rate swaps
|
2,804
|
|
|
2,804
|
|
|
—
|
|
|
2,804
|
|
|
—
|
|
|||||
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Noninterest deposits, NOW accounts, money market accounts and savings accounts
|
$
|
2,872,247
|
|
|
$
|
2,872,247
|
|
|
$
|
2,872,247
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificate of deposit accounts
|
357,401
|
|
|
357,536
|
|
|
—
|
|
|
357,536
|
|
|
—
|
|
|||||
Total deposits
|
$
|
3,229,648
|
|
|
$
|
3,229,783
|
|
|
$
|
2,872,247
|
|
|
$
|
357,536
|
|
|
$
|
—
|
|
Federal Home Loan Bank advances
|
$
|
79,600
|
|
|
$
|
79,600
|
|
|
$
|
—
|
|
|
$
|
79,600
|
|
|
$
|
—
|
|
Securities sold under agreement to repurchase
|
22,104
|
|
|
22,104
|
|
|
22,104
|
|
|
—
|
|
|
—
|
|
|||||
Junior subordinated debentures
|
19,717
|
|
|
15,000
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
|||||
Accrued interest payable
|
215
|
|
|
215
|
|
|
44
|
|
|
142
|
|
|
29
|
|
|||||
Derivative liabilities - interest rate swaps
|
2,804
|
|
|
2,804
|
|
|
—
|
|
|
2,804
|
|
|
—
|
|
|
December 31, 2015
|
||||||||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Fair Value Measurements Using:
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||||
Financial Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
126,640
|
|
|
$
|
126,640
|
|
|
$
|
126,640
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other interest earning deposits
|
6,719
|
|
|
6,723
|
|
|
—
|
|
|
6,723
|
|
|
—
|
|
|||||
Investment securities available for sale
|
811,869
|
|
|
811,869
|
|
|
15,730
|
|
|
796,139
|
|
|
—
|
|
|||||
Federal Home Loan Bank stock
|
4,148
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|||||
Loans held for sale
|
7,682
|
|
|
7,883
|
|
|
—
|
|
|
7,883
|
|
|
—
|
|
|||||
Loans receivable, net of allowance for loan losses
|
2,372,296
|
|
|
2,441,531
|
|
|
—
|
|
|
—
|
|
|
2,441,531
|
|
|||||
Accrued interest receivable
|
10,469
|
|
|
10,469
|
|
|
5
|
|
|
3,335
|
|
|
7,129
|
|
|||||
Derivative assets-interest rate swaps
|
543
|
|
|
543
|
|
|
—
|
|
|
543
|
|
|
—
|
|
|||||
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Deposits:
|
|
|
|
|
|
|
|
|
|
||||||||||
Noninterest deposits, NOW accounts, money market accounts and savings accounts
|
$
|
2,687,954
|
|
|
$
|
2,687,954
|
|
|
$
|
2,687,954
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificate of deposit accounts
|
420,333
|
|
|
423,352
|
|
|
—
|
|
|
423,352
|
|
|
—
|
|
|||||
Total deposits
|
$
|
3,108,287
|
|
|
$
|
3,111,306
|
|
|
$
|
2,687,954
|
|
|
$
|
423,352
|
|
|
$
|
—
|
|
Securities sold under agreement to repurchase
|
$
|
23,214
|
|
|
$
|
23,214
|
|
|
$
|
23,214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Junior subordinated debentures
|
19,424
|
|
|
15,000
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
|||||
Accrued interest payable
|
207
|
|
|
207
|
|
|
50
|
|
|
133
|
|
|
24
|
|
|||||
Derivative liabilities-interest rate swaps
|
543
|
|
|
543
|
|
|
—
|
|
|
543
|
|
|
—
|
|
(20)
|
Stock-Based Compensation
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average
Remaining
Contractual
Term (In years)
|
|
Aggregate
Intrinsic
Value (In
thousands)
|
|||||
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
|
|
|
|
|
|
|||
Exercised
|
(61,529
|
)
|
|
12.15
|
|
|
|
|
|
|||
Forfeited or expired
|
(15,470
|
)
|
|
16.27
|
|
|
|
|
|
|||
Outstanding at December 31, 2015
|
79,408
|
|
|
14.19
|
|
|
|
|
|
|||
Exercised
|
(37,713
|
)
|
|
14.31
|
|
|
|
|
|
|||
Forfeited or expired
|
(4,200
|
)
|
|
16.80
|
|
|
|
|
|
|||
Outstanding, vested and expected to vest and exercisable at December 31, 2016
|
37,495
|
|
|
$
|
13.77
|
|
|
2.81
|
|
$
|
449
|
|
(1)
|
Options granted during the year ended December 31, 2014 represent only the stock options issued in conjunction with the Washington Banking Merger. See Note (2) Business Combination 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.
|
|
Shares
|
|
Weighted-Average Grant Date Fair Value
|
|||
Nonvested at December 31, 2013
|
202,939
|
|
|
$
|
14.29
|
|
Granted
|
130,548
|
|
|
16.03
|
|
|
Vested
|
(85,373
|
)
|
|
14.37
|
|
|
Forfeited
|
(9,445
|
)
|
|
14.67
|
|
|
Nonvested at December 31, 2014
|
238,669
|
|
|
15.20
|
|
|
Granted
|
121,320
|
|
|
16.72
|
|
|
Vested
|
(92,486
|
)
|
|
15.12
|
|
|
Forfeited
|
(2,982
|
)
|
|
15.73
|
|
|
Nonvested at December 31, 2015
|
264,521
|
|
|
15.92
|
|
|
Granted
|
121,039
|
|
|
17.60
|
|
|
Vested
|
(112,516
|
)
|
|
15.62
|
|
|
Forfeited
|
(11,748
|
)
|
|
16.62
|
|
|
Nonvested at December 31, 2016
|
261,296
|
|
|
$
|
16.80
|
|
(21)
|
Income Taxes
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
Current tax expense
|
|
$
|
6,885
|
|
|
$
|
9,760
|
|
|
$
|
9,992
|
|
Deferred tax expense (benefit)
|
|
6,918
|
|
|
4,058
|
|
|
(3,087
|
)
|
|||
Income tax expense
|
|
$
|
13,803
|
|
|
$
|
13,818
|
|
|
$
|
6,905
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
Income tax expense at Federal statutory rate
|
|
$
|
18,452
|
|
|
$
|
17,957
|
|
|
$
|
9,772
|
|
Tax-exempt instruments
|
|
(3,198
|
)
|
|
(2,482
|
)
|
|
(1,547
|
)
|
|||
Non-deductible acquisition costs
|
|
—
|
|
|
—
|
|
|
373
|
|
|||
Federal tax credits and other benefits
(1)
|
|
(931
|
)
|
|
(880
|
)
|
|
(830
|
)
|
|||
Effects of BOLI
|
|
(511
|
)
|
|
(474
|
)
|
|
(159
|
)
|
|||
Tax resolutions
(2)
|
|
—
|
|
|
(300
|
)
|
|
(728
|
)
|
|||
Other, net
|
|
(9
|
)
|
|
(3
|
)
|
|
24
|
|
|||
Income tax expense
|
|
$
|
13,803
|
|
|
$
|
13,818
|
|
|
$
|
6,905
|
|
(1)
|
Federal tax credits are provided for under the NMTC program and LIHTC programs as described in Note (15) Commitments and Contingencies. Tax benefits related to these credits were recognized for financial reporting purposes in the same period that the credits were recognized in the Company's income tax returns. Other benefits include the proportional amortization of the LIHTC of
$523,000
,
$209,000
and
$53,000
, for the years ended December 31, 2016, 2015 and 2014, respectively.
|
(2)
|
Washington Banking Company had recorded tax-related liabilities prior to the merger effective date, which the Company assumed as part of the Washington Banking Merger. These tax-related liabilities were resolved during the years ended December 31, 2015 and 2014, resulting in a decrease of the Company's income tax expense for the years ended December 31, 2015 and 2014.
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
Deferred tax assets:
|
|
|
|
|
||||
Allowance for loan losses
|
|
$
|
4,739
|
|
|
$
|
6,317
|
|
Accrued compensation
|
|
2,685
|
|
|
1,011
|
|
||
Stock compensation
|
|
910
|
|
|
890
|
|
||
Net unrealized losses charged to other comprehensive income on securities
|
|
1,388
|
|
|
—
|
|
||
Market discount on purchased loans
|
|
10,506
|
|
|
15,562
|
|
||
Foregone interest on nonaccrual loans
|
|
1,536
|
|
|
2,665
|
|
||
Net operating loss carryforward acquired from NCB
|
|
483
|
|
|
518
|
|
||
Difference in amounts reflected in financial statements and income tax basis of certain liabilities assumed in business combinations
|
|
37
|
|
|
89
|
|
||
Other deferred tax assets
|
|
1,446
|
|
|
1,503
|
|
||
Total deferred tax assets
|
|
23,730
|
|
|
28,555
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Deferred loan fees, net
|
|
(3,736
|
)
|
|
(3,489
|
)
|
||
Premises and equipment
|
|
(1,660
|
)
|
|
(1,853
|
)
|
||
FHLB stock
|
|
(926
|
)
|
|
(926
|
)
|
||
Net unrealized gains charged to other comprehensive income on securities
|
|
—
|
|
|
(1,389
|
)
|
||
Goodwill and other intangible assets
|
|
(740
|
)
|
|
(1,021
|
)
|
||
Federal tax credits
|
|
(1,314
|
)
|
|
(876
|
)
|
||
Junior subordinated debentures
|
|
(2,122
|
)
|
|
(2,225
|
)
|
||
Other deferred tax liabilities
|
|
(1,223
|
)
|
|
(627
|
)
|
||
Total deferred tax liabilities
|
|
(11,721
|
)
|
|
(12,406
|
)
|
||
Deferred income tax asset, net
|
|
$
|
12,009
|
|
|
$
|
16,149
|
|
(22)
|
Regulatory Capital Requirements
|
|
|
Minimum
Requirements |
|
Well-
Capitalized Requirements |
|
Actual
|
|||||||||||||
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|||||||
|
|
(Dollars in thousands)
|
|||||||||||||||||
As of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Company consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common equity Tier 1 capital to risk-weighted assets
|
|
$
|
142,688
|
|
|
4.5
|
%
|
|
N/A
|
|
|
N/A
|
|
$
|
362,350
|
|
|
11.4
|
%
|
Tier 1 leverage capital to average assets
|
|
148,144
|
|
|
4.0
|
|
|
N/A
|
|
|
N/A
|
|
381,989
|
|
|
10.3
|
|
||
Tier 1 capital to risk-weighted assets
|
|
190,250
|
|
|
6.0
|
|
|
N/A
|
|
|
N/A
|
|
381,989
|
|
|
12.0
|
|
||
Total capital to risk-weighted assets
|
|
253,667
|
|
|
8.0
|
|
|
N/A
|
|
|
N/A
|
|
413,320
|
|
|
13.0
|
|
||
Heritage Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common equity Tier 1 capital to risk-weighted assets
|
|
142,573
|
|
|
4.5
|
|
|
205,938
|
|
|
6.5
|
|
369,915
|
|
|
11.7
|
|
||
Tier 1 leverage capital to average assets
|
|
148,024
|
|
|
4.0
|
|
|
185,030
|
|
|
5.0
|
|
369,915
|
|
|
10.0
|
|
||
Tier 1 capital to risk-weighted assets
|
|
190,097
|
|
|
6.0
|
|
|
253,462
|
|
|
8.0
|
|
369,915
|
|
|
11.7
|
|
||
Total capital to risk-weighted assets
|
|
253,462
|
|
|
8.0
|
|
|
316,828
|
|
|
10.0
|
|
401,168
|
|
|
12.7
|
|
||
As of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Company consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common equity Tier 1 capital to risk-weighted assets
|
|
$
|
129,673
|
|
|
4.5
|
%
|
|
N/A
|
|
|
N/A
|
|
$
|
345,993
|
|
|
12.0
|
%
|
Tier 1 leverage capital to average assets
|
|
140,395
|
|
|
4.0
|
|
|
N/A
|
|
|
N/A
|
|
365,232
|
|
|
10.4
|
|
||
Tier 1 capital to risk-weighted assets
|
|
172,897
|
|
|
6.0
|
|
|
N/A
|
|
|
N/A
|
|
365,232
|
|
|
12.7
|
|
||
Total capital to risk-weighted assets
|
|
230,530
|
|
|
8.0
|
|
|
N/A
|
|
|
N/A
|
|
395,148
|
|
|
13.7
|
|
||
Heritage Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common equity Tier 1 capital to risk-weighted assets
|
|
129,633
|
|
|
4.5
|
|
|
187,248
|
|
|
6.5
|
|
358,600
|
|
|
12.5
|
|
||
Tier 1 leverage capital to average assets
|
|
140,331
|
|
|
4.0
|
|
|
175,414
|
|
|
5.0
|
|
358,600
|
|
|
10.2
|
|
||
Tier 1 capital to risk-weighted assets
|
|
172,844
|
|
|
6.0
|
|
|
230,459
|
|
|
8.0
|
|
358,600
|
|
|
12.5
|
|
||
Total capital to risk-weighted assets
|
|
230,459
|
|
|
8.0
|
|
|
288,074
|
|
|
10.0
|
|
388,516
|
|
|
13.5
|
|
(23)
|
Heritage Financial Corporation (Parent Company Only)
|
|
|
December 31, 2016
|
|
December 31, 2015
|
||||
|
|
(In thousands)
|
||||||
ASSETS
|
|
|
|
|
||||
Cash and interest earning deposits
|
|
$
|
10,568
|
|
|
$
|
6,722
|
|
Investment in subsidiary bank
|
|
489,388
|
|
|
482,749
|
|
||
Other assets
|
|
2,601
|
|
|
1,185
|
|
||
Total assets
|
|
$
|
502,557
|
|
|
$
|
490,656
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||
Junior subordinated debentures
|
|
$
|
19,717
|
|
|
$
|
19,424
|
|
Other liabilities
|
|
1,077
|
|
|
1,262
|
|
||
Total stockholders’ equity
|
|
481,763
|
|
|
469,970
|
|
||
Total liabilities and stockholders’ equity
|
|
$
|
502,557
|
|
|
$
|
490,656
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
INTEREST INCOME:
|
|
|
|
|
|
|
||||||
Interest and dividends on interest earning deposits and other assets
|
|
$
|
34
|
|
|
$
|
28
|
|
|
$
|
17
|
|
Total interest income
|
|
34
|
|
|
28
|
|
|
17
|
|
|||
INTEREST EXPENSE:
|
|
|
|
|
|
|
||||||
Junior subordinated debentures
|
|
880
|
|
|
827
|
|
|
458
|
|
|||
Total interest expense
|
|
880
|
|
|
827
|
|
|
458
|
|
|||
Net interest (expense) income
|
|
(846
|
)
|
|
(799
|
)
|
|
(441
|
)
|
|||
NONINTEREST INCOME:
|
|
|
|
|
|
|
||||||
Dividends from subsidiary banks
|
|
30,000
|
|
|
22,000
|
|
|
66,300
|
|
|||
Equity in (excess distributed) undistributed income of subsidiary banks
|
|
11,848
|
|
|
18,131
|
|
|
(40,737
|
)
|
|||
Other income
|
|
—
|
|
|
—
|
|
|
3
|
|
|||
Total noninterest income
|
|
41,848
|
|
|
40,131
|
|
|
25,566
|
|
|||
NONONTEREST EXPENSE:
|
|
|
|
|
|
|
||||||
Professional services
|
|
385
|
|
|
263
|
|
|
2,943
|
|
|||
Other expense
|
|
3,437
|
|
|
3,120
|
|
|
3,109
|
|
|||
Total noninterest expense
|
|
3,822
|
|
|
3,383
|
|
|
6,052
|
|
|||
Income before income taxes
|
|
37,180
|
|
|
35,949
|
|
|
19,073
|
|
|||
Income tax benefit
|
|
(1,738
|
)
|
|
(1,540
|
)
|
|
(1,941
|
)
|
|||
Net income
|
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2016
|
|
2015
|
|
2014
|
||||||
|
|
(In thousands)
|
||||||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net income
|
|
$
|
38,918
|
|
|
$
|
37,489
|
|
|
$
|
21,014
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||||
Equity in excess of (undistributed) distributed income of subsidiary bank
|
|
(11,848
|
)
|
|
(18,131
|
)
|
|
40,737
|
|
|||
Net excess tax benefit from exercise of stock options and vesting of restricted stock
|
|
(123
|
)
|
|
(140
|
)
|
|
(118
|
)
|
|||
Restricted stock compensation expense
|
|
1,840
|
|
|
1,555
|
|
|
1,395
|
|
|||
Stock option compensation expense
|
|
—
|
|
|
—
|
|
|
20
|
|
|||
Net change in other assets and liabilities
|
|
(1,141
|
)
|
|
(125
|
)
|
|
817
|
|
|||
Net cash provided by operating activities
|
|
27,646
|
|
|
20,648
|
|
|
63,865
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||||
Investment in subsidiary
|
|
—
|
|
|
—
|
|
|
(43,215
|
)
|
|||
Net cash used in investing activities
|
|
—
|
|
|
—
|
|
|
(43,215
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||||
Common stock cash dividends paid
|
|
(21,569
|
)
|
|
(15,916
|
)
|
|
(12,892
|
)
|
|||
Proceeds from exercise of stock options
|
|
540
|
|
|
751
|
|
|
915
|
|
|||
Net excess tax benefit (deficiencies) from exercise of stock options and vesting of restricted stock
|
|
123
|
|
|
140
|
|
|
118
|
|
|||
Repurchase of common stock
|
|
(2,894
|
)
|
|
(7,736
|
)
|
|
(2,601
|
)
|
|||
Net cash used in financing activities
|
|
(23,800
|
)
|
|
(22,761
|
)
|
|
(14,460
|
)
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
3,846
|
|
|
(2,113
|
)
|
|
6,190
|
|
|||
Cash and cash equivalents at beginning of year
|
|
6,722
|
|
|
8,835
|
|
|
2,645
|
|
|||
Cash and cash equivalents at end of year
|
|
$
|
10,568
|
|
|
$
|
6,722
|
|
|
$
|
8,835
|
|
(24)
|
Selected Quarterly Financial Data (Unaudited)
|
|
|
Year Ended December 31, 2016
|
||||||||||||||
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||
Interest income
|
|
$
|
34,235
|
|
|
$
|
34,592
|
|
|
$
|
35,114
|
|
|
$
|
34,571
|
|
Interest expense
|
|
1,475
|
|
|
1,507
|
|
|
1,508
|
|
|
1,516
|
|
||||
Net interest income
|
|
32,760
|
|
|
33,085
|
|
|
33,606
|
|
|
33,055
|
|
||||
Provision for loan losses
|
|
1,139
|
|
|
1,120
|
|
|
1,495
|
|
|
1,177
|
|
||||
Net interest income after provision for loan losses
|
|
31,621
|
|
|
31,965
|
|
|
32,111
|
|
|
31,878
|
|
||||
Noninterest income
|
|
6,990
|
|
|
6,576
|
|
|
9,867
|
|
|
8,186
|
|
||||
Noninterest expense
|
|
26,369
|
|
|
26,477
|
|
|
26,818
|
|
|
26,809
|
|
||||
Income before provision for income taxes
|
|
12,242
|
|
|
12,064
|
|
|
15,160
|
|
|
13,255
|
|
||||
Income tax expense
|
|
3,151
|
|
|
3,169
|
|
|
4,121
|
|
|
3,362
|
|
||||
Net income
|
|
$
|
9,091
|
|
|
$
|
8,895
|
|
|
$
|
11,039
|
|
|
$
|
9,893
|
|
Basic earnings per common share
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.37
|
|
|
$
|
0.33
|
|
Diluted earnings per common share
|
|
0.30
|
|
|
0.30
|
|
|
0.37
|
|
|
0.33
|
|
||||
Cash dividends declared on common stock
|
|
0.11
|
|
|
0.12
|
|
|
0.12
|
|
|
0.37
|
|
||||
|
||||||||||||||||
|
|
Year Ended December 31, 2015
|
||||||||||||||
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
|
|
(Dollars in thousands, except per share amounts)
|
||||||||||||||
Interest income
|
|
$
|
34,249
|
|
|
$
|
33,990
|
|
|
$
|
33,484
|
|
|
$
|
34,016
|
|
Interest expense
|
|
1,575
|
|
|
1,520
|
|
|
1,544
|
|
|
1,481
|
|
||||
Net interest income
|
|
32,674
|
|
|
32,470
|
|
|
31,940
|
|
|
32,535
|
|
||||
Provision for loan losses
|
|
1,208
|
|
|
1,189
|
|
|
851
|
|
|
1,124
|
|
||||
Net interest income after provision for loan losses
|
|
31,466
|
|
|
31,281
|
|
|
31,089
|
|
|
31,411
|
|
||||
Noninterest income
|
|
8,345
|
|
|
6,881
|
|
|
9,544
|
|
|
7,498
|
|
||||
Noninterest expense
|
|
26,038
|
|
|
26,079
|
|
|
27,322
|
|
|
26,769
|
|
||||
Income before provision for income taxes
|
|
13,773
|
|
|
12,083
|
|
|
13,311
|
|
|
12,140
|
|
||||
Income tax expense
|
|
3,994
|
|
|
3,358
|
|
|
3,819
|
|
|
2,647
|
|
||||
Net income
|
|
$
|
9,779
|
|
|
$
|
8,725
|
|
|
$
|
9,492
|
|
|
$
|
9,493
|
|
Basic earnings per common share
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
Diluted earnings per common share
|
|
0.32
|
|
|
0.29
|
|
|
0.32
|
|
|
0.32
|
|
||||
Cash dividends declared on common stock
|
|
0.10
|
|
|
0.11
|
|
|
0.11
|
|
|
0.21
|
|
Plan Category
|
|
Number of
securities to be issued upon vesting of restricted stock |
|
Number of
securities
to be issued
upon exercise of outstanding
options
|
|
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
|
|
261,296
|
|
|
37,495
|
|
|
$
|
13.77
|
|
|
1,152,935
|
|
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
|
|
|
Form of Performance-Based Restricted Stock Unit Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
|
|
10.12
|
|
|
Form of Cash Incentive Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
|
|
10.13
|
|
|
Form of Incentive Stock Option Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14)
|
|
|
|
|
10.14
|
|
|
Deferred Compensation Plan and Participation Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15)
|
|
|
|
|
10.15
|
|
|
Employment Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15)
|
|
|
|
|
10.16
|
|
|
Employment Agreement and Deferred Compensation Participation Agreement by and between Heritage and David A. Spurling (16)
|
|
|
|
|
10.17
|
|
|
Employment Agreement by and between Heritage and Bryan McDonald (17)
|
|
|
|
|
10.18
|
|
|
Deferred Compensation Plan and Participation Agreement by and between Heritage and Bryan D. McDonald (18)
|
|
|
|
|
10.19
|
|
|
Form of Split Dollar Agreements, dated August 3, 2015, by and between Heritage and Brian L. Vance, Jeffrey J. Deuel, Donald J. Hinson, Bryan D. McDonald and David A. Spurling (19)
|
|
|
|
Exhibit No.
|
|
Description of Exhibit
|
|
10.20
|
|
|
Deferred Compensation Plan and Participation Agreement by and between Heritage and David A. Spurling (20)
|
|
|
|
|
11.0
|
|
|
Statement regarding computation of earnings per share (21)
|
|
|
|
|
14.0
|
|
|
Code of Ethics and Conduct Policy (22)
|
|
|
|
|
21.0
|
|
|
Subsidiaries of the Company (11)
|
|
|
|
|
23.0
|
|
|
Consent of Independent Registered Public Accounting Firm (11)
|
|
|
|
|
24.0
|
|
|
Power of Attorney (11)
|
|
|
|
|
31.1
|
|
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (11)
|
|
|
|
|
31.2
|
|
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (11)
|
|
|
|
|
32.1
|
|
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (11)
|
|
|
|
|
101
|
|
|
The following materials from Heritage Financial Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016, 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
|
(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 and October 3, 2016.
|
(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)
|
Filed herewith.
|
(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; as amended, said Amendment being incorporated by reference to the Current Report on Form 8-K dated February 1, 2017.
|
(14)
|
Incorporated by reference to the Current Report on Form 10-Q dated August 6, 2014 and on Form 8-K dated February 1, 2017.
|
(15)
|
Incorporated by reference to the Current Report on Form 8-K dated September 7, 2012 and December 22, 2016.
|
(16)
|
Incorporated by reference to the Current Report on Form 8-K dated January 6, 2014 and December 22, 2016.
|
(17)
|
Incorporated by reference to the Registration Statement on Form S-4 (Reg. No. 333-192985).
|
(18)
|
Incorporated by reference to the Annual Report on Form 10-K dated March 10, 2015 and Form 8-K dated December 22, 2016.
|
(19)
|
Incorporated by reference to the Current Report on Form 10-Q updated August 6, 2015.
|
(20)
|
Incorporated by reference to the Current Report on Form 8-K dated December 22, 2015 and Form 8-K dated December 22, 2016.
|
(21)
|
Reference is made to Note (17)—Stockholders' Equity in the Notes to Consolidated Financial Statements under Part II. Item 8. herein.
|
(22)
|
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.
|
|
|
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
|
|
|
|
|
|
|
|
|
|
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.
|
|||
|
|
|
|
Rhoda L. Altom
|
|
|
|
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
|
|
|
|
|
|
By
|
|
|
|
/S/ BRIAN L. VANCE
|
|
|
|
Brian L. Vance
|
|
|
|
Attorney-in-Fact
|
|
|
|
March 9, 2017
|
I.
|
OBJECTIVE & PURPOSE
|
II.
|
PARTICIPATION/ELIGIBILITY
|
A.
|
The 2017 Plan is limited to selected employees of the Company. The CEO will identify such employees for eligibility under the Plan.
|
•
|
New employees must be employed by October 31
st
in a given Plan Year to be eligible for an award related to performance in that Plan Year.
|
•
|
Employees hired after October 31
st
must wait until the next fiscal year to be eligible for an award.
|
•
|
Employees hired before October 31
st
who works a partial year will receive pro-rated awards based on hours worked.
|
•
|
Plan participants must also receive a minimum annual performance review rating of “satisfactory” or equivalent for the Plan Year to be eligible for any payout. The company
|
•
|
A Plan participant must be an active employee as of the award payout date to receive an award.
|
•
|
Generally, participants are not eligible to participate in other annual or production incentive plan which may exist, such as, but not limited to:
|
◦
|
Employee Annual Incentive Plan
|
◦
|
Cash Management Sales Officer Annual Incentive Plan
|
◦
|
SBA Business Development Officer Incentive Plan
|
◦
|
Mortgage Division Incentive Plans
|
◦
|
Wealth Strategies Advisor Incentive Plans
|
•
|
Eligible employees who have earned an annual incentive award and terminate employment due to disability or death can receive a pro-rata award for the year, even if they are not employed as of the award payout date based upon target performance.
|
III.
|
PLAN YEAR/PERFORMANCE PERIOD
|
IV.
|
PLAN DESIGN
|
V.
|
AWARD OPPORTUNITIES
|
A.
|
Minimum Performance
:
The minimum level of performance needed to begin to be eligible to receive an incentive award.
|
B.
|
Target Performance
:
The budgeted, or expected, level of performance based upon both historical data and management's best judgment of expected performance during the performance period.
|
C.
|
Maximum Performance
:
The level of performance which based upon historical performance and management’s judgment would be exceptional or significantly beyond the expected.
|
VI.
|
PERFORMANCE OBJECTIVES
|
A.
|
Company Performance
- The Company’s performance will be based on the Company’s success as measured by criteria determined by the Committee with input from the CEO. The percentage of payout for overall Company performance will be allocated based on the specific weighting of the Company’s goal based on the participant’s tier, and the actual performance compared to the pre-determined Minimum, Target, and Maximum Performance levels.
|
B.
|
Department or Individual Performance
- Certain Plan participants may have a portion of their annual incentive award based on a combination of department and/or individual performance criteria. The number of performance criteria included, the specific type of performance criteria to use, and the weighting of each criteria for the overall incentive award will vary based on the position and role of each Plan participant.
|
VII.
|
AWARD CALCULATION
|
VIII.
|
EARNING OF ANNUAL INCENTIVE AWARDS
|
A.
|
Plan Trigger:
The Committee may at its discretion establish a plan trigger applicable to any plan year. The Committee will set any such trigger at the beginning of the performance period. If established, in order for the Annual Incentive Plan to be funded and “activated”, the Company must achieve a threshold performance level to be determined by the Committee for each Plan Year/Performance Period. This performance level is not related to the Company Minimum, Target, or Maximum Performance goals. It is instead a threshold level of performance that needs to be attained for any incentive awards to be paid out. If this threshold level of performance is not met, the Plan will not be “turned on” for that given year and no payouts will be made, regardless of Company or individual performance. If a plan trigger is not established by the Committee at the beginning of the performance period, any payouts will be determined based upon Company, department and/or individual performance objectives as established and approved by the Committee, with input from the CEO, as described in Section VIII.
|
IX.
|
PAYMENT OF AWARDS
|
•
|
Payments will be declared no later than 2½ months following the end of the Plan Year that constitutes the Performance Period.
|
•
|
Payment will be made at the time provided for in Section III.
|
•
|
A Plan participant must be an active employee on the date of the award payout in order to receive a payout.
|
•
|
The result of the performance criteria is calculated as a percent of the base salary on January 1 of the plan year for participant during the current Plan Year.
|
X.
|
PLAN ADMINISTRATION
|
A.
|
Responsibilities of the Compensation Committee
|
B.
|
Responsibilities of the CEO
|
•
|
Recommend the Plan participants to be included in the Plan for a Plan Year/Performance Period. This includes determining if additional employees should be added to the Plan and if any Plan participants should be removed from participating in the Plan.
|
•
|
Provide recommendations for the award opportunity amounts at target and maximum for all other Plan participants. The CEO will review the objectives and evaluations, adjust guideline awards for performance and recommend final awards to the Committee for its approval.
|
•
|
Provide other appropriate recommendations that may become necessary during the life of the Plan. This could include such items as changes to Plan provisions.
|
C.
|
Responsibilities of Human Resources
|
XI.
|
TERMINATION OF EMPLOYMENT
|
A.
|
Disability or Death
|
XII.
|
AMENDMENTS AND PLAN TERMINATION
|
XIII.
|
PLAN FUNDING
|
XIV.
|
CLAIMS AND REVIEW PROCEDURES
|
A.
|
Claims Procedure
|
1.
|
Initiation - Written Claim
. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.
|
2.
|
Timing of Plan Administrator Response
.
The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing.
|
3.
|
Notice of Decision
. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial.
|
B.
|
Review Procedure
|
1.
|
Initiation - Written Request
. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.
|
2.
|
Additional Submissions - Information Access
. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim.
|
3.
|
Considerations on Review
. In considering the review, the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
|
4.
|
Timing of Plan Administrator Response
. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing.
|
5.
|
Notice of Decision
. The Plan Administrator shall notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant.
|
XV.
|
COMMUNICATION OF PLAN TO PLAN PARTICIPANTS
|
A.
|
An initial communication to Plan participants of the Plan details, including the performance targets set for the initial Plan Year. This will typically take place in the first few months of the Plan Year
|
B.
|
Communication of new performance targets, Plan procedure changes, etc., at the beginning of each Plan Year.
|
C.
|
Periodic reviews and/or performance updates throughout the Plan Year. These reviews should include a year-to-date performance update and discuss any changes that may be necessary to assure attainment of the Plan targets.
|
D.
|
A year-end review of estimated Plan results, including an estimate of the Company's performance on each performance measure.
|
E.
|
An evaluation discussion surrounding the Plan participants’ final annual incentive awards to be conducted by the appropriate manager upon final determination of year-end results.
|
XVI.
|
RECOUPMENT BY THE COMPANY
|
A.
|
Any bonus payment which is later determined to have been paid in error or based on inaccurate or incomplete information or financial reports will be subject to recoupment by the Bank.
|
B.
|
At the sole discretion of Management or the Compensation Committee, loan or other bank charge-offs or losses may result in elimination or reduction in the originating, supervising or branch Officers future bonus payment.
|
XVII.
|
MISCELLANEOUS
|
A.
|
Binding Effect.
This Plan shall bind the Plan the participant, the Company, and their respective beneficiaries, survivors, executors, successors, administrators and transferees.
|
B.
|
No Guarantee of Employment.
This Plan is not an employment policy or contract. It does not give the Plan participant the right to remain an employee of the Company, nor does it interfere with the Company's right to discharge the Plan participant.
|
C.
|
Non-Transferability.
Benefits under this Plan cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
|
D.
|
Reorganization.
If the Company shall (1) merge into or consolidate with another company, (2) reorganize, (3) sell substantially all of its assets to another company, firm, or person, or upon a change in control involving Heritage Financial Corporation stock, then the succeeding or continuing company, firm, or person shall succeed to, assume and discharge the obligations of the Company under this Plan. Upon the occurrence of such event, the term “Company” as used in this Plan shall be deemed to refer to the successor or survivor company.
|
E.
|
Tax Withholding.
The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Plan.
|
F.
|
Applicable Law.
The Plan and all rights hereunder shall be governed by the laws of the State of Washington, except to the extent preempted by the laws of the United States of America.
|
G.
|
Entire Plan.
This Plan constitutes the entire Plan between the Company and the Plan participant as to the subject matter hereof. No rights are granted to the Plan participant by virtue of this Plan other than those specifically set forth herein.
|
H.
|
Code 162(m) Limitation.
|
1.
|
Any amounts
payable hereunder that would not be deductible on account of the limitations of Code Section 162(m) shall be paid in the next following year in which the Company reasonably anticipates that the deduction of such payment would not be barred by the application of Code Section 162(m).
|
2.
|
In the event that the payments hereunder are intended by the Committee to be treated as “performance-based compensation” defined in Code Section 162(m), such amounts shall be payable pursuant to the Company’s 2014 Omnibus Equity Pan, or its successor plan (the “Omnibus Plan”), and may, at the Committee’s discretion, be reflected in an award agreement under the Omnibus plan.
|
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/ Rhoda L. Altom
|
|
|
Rhoda L. Altom
|
|
Director
|
|
|
|
/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
|
|
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/s/ Jeffrey S. Lyon
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Jeffrey S. Lyon
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Director
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/s/ Gragg E. Miller
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Gragg E. Miller
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Director
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/s/ Anthony B. Pickering
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Anthony B. Pickering
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Director
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/s/ Robert T. Severns
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Robert T. Severns
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Director
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/s/ Ann Watson
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Ann Watson
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Director
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1.
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I have reviewed the annual report on Form 10-K of Heritage Financial Corporation;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/s/ Brian L. Vance
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Brian L. Vance
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President and Chief Executive Officer
Principal Executive Officer
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1.
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I have reviewed the annual report on Form 10-K of Heritage Financial Corporation;
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2.
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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;
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3.
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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;
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4.
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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:
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a.
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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;
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b.
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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;
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c.
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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
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d.
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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
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5.
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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):
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a.
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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
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b.
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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.
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/s/ Donald J. Hinson
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Donald J. Hinson
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Executive Vice President and Chief Financial Officer
Principal Financial and Accounting Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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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 and for the periods presented in the financial statements included in such Report.
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March 9, 2017
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/s/ Brian L. Vance
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Brian L. Vance
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President and Chief Executive Officer
Principal Executive Officer
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March 9, 2017
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/s/ Donald J. Hinson
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Donald J. Hinson
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Executive Vice President and Chief Financial Officer
Principal Financial and Accounting Officer
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