x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington | 91-1857900 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
201 Fifth Avenue SW, Olympia, WA | 98501 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | x | |
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Page | ||
Part I. | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
CERTIFICATIONS |
September 30, 2016 | December 31, 2015 | |||||||
(Dollars in thousands) | ||||||||
ASSETS | ||||||||
Cash on hand and in banks | $ | 86,142 | $ | 63,816 | ||||
Interest earning deposits | 26,618 | 62,824 | ||||||
Cash and cash equivalents | 112,760 | 126,640 | ||||||
Other interest earning deposits | 5,461 | 6,719 | ||||||
Investment securities available for sale, at fair value | 819,159 | 811,869 | ||||||
Loans held for sale | 8,964 | 7,682 | ||||||
Loans receivable, net | 2,578,977 | 2,402,042 | ||||||
Allowance for loan losses | (30,211 | ) | (29,746 | ) | ||||
Total loans receivable, net | 2,548,766 | 2,372,296 | ||||||
Other real estate owned | — | 2,019 | ||||||
Premises and equipment, net | 63,312 | 61,891 | ||||||
Federal Home Loan Bank stock, at cost | 5,088 | 4,148 | ||||||
Bank owned life insurance | 69,962 | 60,876 | ||||||
Accrued interest receivable | 11,327 | 10,469 | ||||||
Prepaid expenses and other assets | 74,816 | 58,365 | ||||||
Other intangible assets, net | 7,732 | 8,789 | ||||||
Goodwill | 119,029 | 119,029 | ||||||
Total assets | $ | 3,846,376 | $ | 3,650,792 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Deposits | $ | 3,242,421 | $ | 3,108,287 | ||||
Federal Home Loan Bank advances | 17,700 | — | ||||||
Junior subordinated debentures | 19,644 | 19,424 | ||||||
Securities sold under agreement to repurchase | 22,425 | 23,214 | ||||||
Accrued expenses and other liabilities | 48,174 | 29,897 | ||||||
Total liabilities | 3,350,364 | 3,180,822 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, no par value, 2,500,000 shares authorized; no shares issued and outstanding at September 30, 2016 and December 31, 2015 | — | — | ||||||
Common stock, no par value, 50,000,000 shares authorized; 29,946,823 and 29,975,439 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively | 358,451 | 359,451 | ||||||
Retained earnings | 126,497 | 107,960 | ||||||
Accumulated other comprehensive income, net | 11,064 | 2,559 | ||||||
Total stockholders’ equity | 496,012 | 469,970 | ||||||
Total liabilities and stockholders’ equity | $ | 3,846,376 | $ | 3,650,792 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans | $ | 30,915 | $ | 30,179 | $ | 91,595 | $ | 91,213 | ||||||||
Taxable interest on investment securities | 2,888 | 2,187 | 8,522 | 7,199 | ||||||||||||
Nontaxable interest on investment securities | 1,235 | 1,056 | 3,599 | 3,137 | ||||||||||||
Interest and dividends on other interest earning assets | 76 | 62 | 225 | 173 | ||||||||||||
Total interest income | 35,114 | 33,484 | 103,941 | 101,722 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 1,269 | 1,335 | 3,765 | 3,961 | ||||||||||||
Junior subordinated debentures | 221 | 195 | 647 | 627 | ||||||||||||
Other borrowings | 18 | 14 | 78 | 50 | ||||||||||||
Total interest expense | 1,508 | 1,544 | 4,490 | 4,638 | ||||||||||||
Net interest income | 33,606 | 31,940 | 99,451 | 97,084 | ||||||||||||
Provision for loan losses | 1,495 | 851 | 3,754 | 3,247 | ||||||||||||
Net interest income after provision for loan losses | 32,111 | 31,089 | 95,697 | 93,837 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Service charges and other fees | 3,630 | 3,593 | 10,462 | 10,575 | ||||||||||||
Gain on sale of investment securities, net | 345 | 393 | 1,106 | 1,362 | ||||||||||||
Gain on sale of loans, net | 3,435 | 1,411 | 5,406 | 3,828 | ||||||||||||
Gain on termination of FDIC shared-loss agreements | — | 1,747 | — | 1,747 | ||||||||||||
Gain on sale of Merchant Visa portfolio | — | — | — | 1,650 | ||||||||||||
Other income | 2,457 | 2,400 | 6,459 | 5,607 | ||||||||||||
Total noninterest income | 9,867 | 9,544 | 23,433 | 24,769 | ||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||
Compensation and employee benefits | 15,633 | 14,918 | 45,652 | 42,984 | ||||||||||||
Occupancy and equipment | 3,926 | 3,970 | 11,873 | 11,511 | ||||||||||||
Data processing | 1,943 | 2,398 | 5,564 | 5,950 | ||||||||||||
Marketing | 745 | 899 | 2,254 | 2,595 | ||||||||||||
Professional services | 830 | 894 | 2,508 | 2,602 | ||||||||||||
State and local taxes | 820 | 619 | 2,031 | 1,808 | ||||||||||||
Federal deposit insurance premium | 296 | 499 | 1,316 | 1,537 | ||||||||||||
Other real estate owned, net | (142 | ) | (5 | ) | 330 | 854 | ||||||||||
Amortization of intangible assets | 359 | 523 | 1,057 | 1,577 | ||||||||||||
Other expense | 2,408 | 2,607 | 7,079 | 8,021 | ||||||||||||
Total noninterest expense | 26,818 | 27,322 | 79,664 | 79,439 | ||||||||||||
Income before income taxes | 15,160 | 13,311 | 39,466 | 39,167 | ||||||||||||
Income tax expense | 4,121 | 3,819 | 10,441 | 11,171 | ||||||||||||
Net income | $ | 11,039 | $ | 9,492 | $ | 29,025 | $ | 27,996 | ||||||||
Basic earnings per common share | $ | 0.37 | $ | 0.32 | $ | 0.97 | $ | 0.93 | ||||||||
Diluted earnings per common share | $ | 0.37 | $ | 0.32 | $ | 0.97 | $ | 0.93 | ||||||||
Dividends declared per common share | $ | 0.12 | $ | 0.11 | $ | 0.35 | $ | 0.32 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 11,039 | $ | 9,492 | $ | 29,025 | $ | 27,996 | ||||||||
Change in fair value of investment securities available for sale, net of tax of $(570), $1,657, $4,983 and $1,300, respectively | (1,055 | ) | 3,064 | 9,223 | 2,407 | |||||||||||
Reclassification adjustment for net gain from sale of investment securities available for sale included in income, net of tax of $(121), $(138), $(388) and $(520), respectively | (224 | ) | (255 | ) | (718 | ) | (967 | ) | ||||||||
Accretion of other-than-temporary impairment on investment securities, net of tax of $0, $0, $0 and $4, respectively | — | — | — | 108 | ||||||||||||
Reclassification of remaining unaccreted other-than-temporary impairment upon sale of investment securities held to maturity included in income, net of tax $0, $0, $0 and $44, respectively | — | — | — | 81 | ||||||||||||
Other comprehensive (loss) income | (1,279 | ) | 2,809 | 8,505 | 1,629 | |||||||||||
Comprehensive income | $ | 9,760 | $ | 12,301 | $ | 37,530 | $ | 29,625 |
Number of common shares | Common stock | Retained earnings | Accumulated other comprehensive income, net | Total stock- holders’ equity | ||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||
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 excess tax benefits from nonqualified stock options) | 53 | 686 | — | — | 686 | |||||||||||||
Restricted stock compensation expense | — | 1,125 | — | — | 1,125 | |||||||||||||
Net excess tax benefits from vesting of restricted stock | — | 105 | — | — | 105 | |||||||||||||
Common stock repurchased | (464 | ) | (7,730 | ) | — | — | (7,730 | ) | ||||||||||
Net income | — | — | 27,996 | — | 27,996 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 1,629 | 1,629 | |||||||||||||
Cash dividends declared on common stock ($0.32 per share) | — | — | (9,621 | ) | — | (9,621 | ) | |||||||||||
Balance at September 30, 2015 | 29,967 | $ | 358,927 | $ | 104,762 | $ | 5,007 | $ | 468,696 | |||||||||
Balance at December 31, 2015 | 29,975 | $ | 359,451 | $ | 107,960 | $ | 2,559 | $ | 469,970 | |||||||||
Restricted and unrestricted stock awards issued, net of forfeitures | 111 | — | — | — | — | |||||||||||||
Exercise of stock options (including excess tax benefits from nonqualified stock options) | 28 | 421 | — | — | 421 | |||||||||||||
Restricted stock compensation expense | — | 1,367 | — | — | 1,367 | |||||||||||||
Net excess tax benefits from vesting of restricted stock | — | 99 | — | — | 99 | |||||||||||||
Common stock repurchased | (167 | ) | (2,887 | ) | — | — | (2,887 | ) | ||||||||||
Net income | — | — | 29,025 | — | 29,025 | |||||||||||||
Other comprehensive income, net of tax | — | — | — | 8,505 | 8,505 | |||||||||||||
Cash dividends declared on common stock ($0.35 per share) | — | — | (10,488 | ) | — | (10,488 | ) | |||||||||||
Balance at September 30, 2016 | 29,947 | $ | 358,451 | $ | 126,497 | $ | 11,064 | $ | 496,012 |
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
(In thousands) | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 29,025 | $ | 27,996 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 9,543 | 10,486 | ||||||
Changes in net deferred loan costs, net of amortization | (971 | ) | (1,257 | ) | ||||
Provision for loan losses | 3,754 | 3,247 | ||||||
Net change in accrued interest receivable, FDIC indemnification asset, prepaid expenses and other assets, accrued expenses and other liabilities | (193 | ) | (4,085 | ) | ||||
Restricted stock compensation expense | 1,367 | 1,125 | ||||||
Net excess tax benefit from exercise of stock options and vesting of restricted stock | (119 | ) | (125 | ) | ||||
Amortization of intangible assets | 1,057 | 1,577 | ||||||
Gain on sale of investment securities, net | (1,106 | ) | (1,362 | ) | ||||
Origination of loans held for sale | (99,513 | ) | (102,310 | ) | ||||
Gain on sale of loans, net | (5,406 | ) | (3,828 | ) | ||||
Proceeds from sale of loans | 103,637 | 103,739 | ||||||
Earnings on bank owned life insurance | (1,086 | ) | (769 | ) | ||||
Valuation adjustment on other real estate owned | 383 | 415 | ||||||
(Gain) loss on sale of other real estate owned, net | (173 | ) | 94 | |||||
Gain on termination of FDIC shared-loss agreements | — | (1,747 | ) | |||||
Loss (gain) on sale or write-off of furniture, equipment and leasehold improvements | 107 | (1 | ) | |||||
Net cash provided by operating activities | 40,306 | 33,195 | ||||||
Cash flows from investing activities: | ||||||||
Loans originated, net of principal payments | (179,930 | ) | (156,106 | ) | ||||
Maturities of other interest earning deposits | 1,248 | 4,836 | ||||||
Maturities, calls and payments of investment securities available for sale | 94,328 | 91,915 | ||||||
Maturities, calls and payments of investment securities held to maturity | — | 1,897 | ||||||
Purchase of investment securities available for sale | (188,164 | ) | (158,048 | ) | ||||
Purchase of premises and equipment | (5,128 | ) | (1,409 | ) | ||||
Proceeds from sales of other real estate owned | 2,486 | 3,199 | ||||||
Proceeds from sales of investment securities available for sale | 94,380 | 102,937 | ||||||
Proceeds from sales of investment securities held to maturity | — | 972 | ||||||
Proceeds from redemption of FHLB stock | 15,416 | 8,040 | ||||||
Purchases of FHLB stock | (16,356 | ) | — | |||||
Proceeds from sale of premises and equipment | 659 | 10 | ||||||
Purchase of bank owned life insurance | (8,000 | ) | (25,000 | ) | ||||
Investment in low-income housing tax credit partnership | (3,315 | ) | (442 | ) | ||||
Net cash used for termination of FDIC shared-loss agreements | — | (7,110 | ) | |||||
Net cash used in investing activities | (192,376 | ) | (134,309 | ) |
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
(In thousands) | ||||||||
Cash flows from financing activities: | ||||||||
Net increase in deposits | 134,134 | 147,867 | ||||||
FHLB advances | 403,100 | — | ||||||
Repayments of FHLB advances | (385,400 | ) | — | |||||
Common stock cash dividends paid | (10,488 | ) | (9,621 | ) | ||||
Net decrease in securities sold under agreement to repurchase | (789 | ) | (9,352 | ) | ||||
Proceeds from exercise of stock options | 401 | 666 | ||||||
Net excess tax benefit from exercise of stock options and vesting of restricted stock | 119 | 125 | ||||||
Repurchase of common stock | (2,887 | ) | (7,730 | ) | ||||
Net cash provided by financing activities | 138,190 | 121,955 | ||||||
Net (decrease) increase in cash and cash equivalents | (13,880 | ) | 20,841 | |||||
Cash and cash equivalents at beginning of period | 126,640 | 121,636 | ||||||
Cash and cash equivalents at end of period | $ | 112,760 | $ | 142,477 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 4,533 | $ | 4,841 | ||||
Cash paid for income taxes | 9,000 | 12,286 | ||||||
Supplemental non-cash disclosures of cash flow information: | ||||||||
Transfers of loans receivable to other real estate owned | $ | 677 | $ | 2,424 | ||||
Investment in low income housing tax credit partnership and related funding commitment | 19,663 | — |
(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) | Investment Securities |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
September 30, 2016 | |||||||||||||||
U.S. Treasury and U.S. Government-sponsored agencies | $ | 5,565 | $ | 29 | $ | — | $ | 5,594 | |||||||
Municipal securities | 236,913 | 9,169 | (378 | ) | 245,704 | ||||||||||
Mortgage backed securities and collateralized mortgage obligations(1): | |||||||||||||||
Residential | 337,689 | 5,340 | (272 | ) | 342,757 | ||||||||||
Commercial | 194,666 | 3,276 | (105 | ) | 197,837 | ||||||||||
Collateralized loan obligations | 14,032 | 9 | (52 | ) | 13,989 | ||||||||||
Corporate obligations | 13,201 | 7 | (25 | ) | 13,183 | ||||||||||
Other equities | 45 | 50 | — | 95 | |||||||||||
Total | $ | 802,111 | $ | 17,880 | $ | (832 | ) | $ | 819,159 | ||||||
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 equities | 45 | 9 | — | 54 | |||||||||||
Total | $ | 807,921 | $ | 7,072 | $ | (3,124 | ) | $ | 811,869 |
Amortized Cost | Fair Value | ||||||
(In thousands) | |||||||
Due in one year or less | $ | 3,564 | $ | 3,578 | |||
Due after one year through five years | 121,014 | 123,124 | |||||
Due after five years through ten years | 232,087 | 237,820 | |||||
Due after ten years | 445,401 | 454,542 | |||||
Investment securities with no stated maturities | 45 | 95 | |||||
Total | $ | 802,111 | $ | 819,159 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
September 30, 2016 | |||||||||||||||||||||||
Municipal securities | $ | 22,030 | $ | (378 | ) | $ | — | $ | — | $ | 22,030 | $ | (378 | ) | |||||||||
Mortgage backed securities and collateralized mortgage obligations(1): | |||||||||||||||||||||||
Residential | 27,459 | (128 | ) | 17,416 | (144 | ) | 44,875 | (272 | ) | ||||||||||||||
Commercial | 38,378 | (79 | ) | 8,240 | (26 | ) | 46,618 | (105 | ) | ||||||||||||||
Collateralized loan obligations | — | — | 11,130 | (52 | ) | 11,130 | (52 | ) | |||||||||||||||
Corporate obligations | 6,021 | (21 | ) | 4,022 | (4 | ) | 10,043 | (25 | ) | ||||||||||||||
Total | $ | 93,888 | $ | (606 | ) | $ | 40,808 | $ | (226 | ) | $ | 134,696 | $ | (832 | ) | ||||||||
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 | ) |
September 30, 2016 | December 31, 2015 | ||||||||||||||
Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Washington and Oregon state to secure public deposits | $ | 220,203 | $ | 226,536 | $ | 212,325 | $ | 215,284 | |||||||
Federal Reserve Bank of San Francisco and Federal Home Loan Bank to secure borrowing arrangements | — | — | 506 | 506 | |||||||||||
Repurchase agreements | 25,934 | 26,312 | 28,500 | 28,503 | |||||||||||
Other securities pledged | 3,590 | 3,683 | 2,125 | 2,160 | |||||||||||
Total | $ | 249,727 | $ | 256,531 | $ | 243,456 | $ | 246,453 |
(3) | Loans Receivable |
September 30, 2016 | December 31, 2015 | ||||||
(In thousands) | |||||||
Commercial business: | |||||||
Commercial and industrial | $ | 638,082 | $ | 596,726 | |||
Owner-occupied commercial real estate | 578,147 | 572,609 | |||||
Non-owner occupied commercial real estate | 802,502 | 753,986 | |||||
Total commercial business | 2,018,731 | 1,923,321 | |||||
One-to-four family residential | 78,253 | 72,548 | |||||
Real estate construction and land development: | |||||||
One-to-four family residential | 52,052 | 51,752 | |||||
Five or more family residential and commercial properties | 97,108 | 55,325 | |||||
Total real estate construction and land development | 149,160 | 107,077 | |||||
Consumer | 330,933 | 298,167 | |||||
Gross loans receivable | 2,577,077 | 2,401,113 | |||||
Net deferred loan costs | 1,900 | 929 | |||||
Loans receivable, net | 2,578,977 | 2,402,042 | |||||
Allowance for loan losses | (30,211 | ) | (29,746 | ) | |||
Total loans receivable, net | $ | 2,548,766 | $ | 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 financial information 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. |
September 30, 2016 | |||||||||||||||||||
Pass | OAEM | Substandard | Doubtful | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 599,694 | $ | 5,952 | $ | 32,376 | $ | 60 | $ | 638,082 | |||||||||
Owner-occupied commercial real estate | 550,065 | 6,412 | 21,413 | 257 | 578,147 | ||||||||||||||
Non-owner occupied commercial real estate | 759,097 | 15,799 | 27,606 | — | 802,502 | ||||||||||||||
Total commercial business | 1,908,856 | 28,163 | 81,395 | 317 | 2,018,731 | ||||||||||||||
One-to-four family residential | 76,735 | — | 1,518 | — | 78,253 | ||||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 45,287 | 824 | 5,941 | — | 52,052 | ||||||||||||||
Five or more family residential and commercial properties | 92,562 | 1,004 | 3,542 | — | 97,108 | ||||||||||||||
Total real estate construction and land development | 137,849 | 1,828 | 9,483 | — | 149,160 | ||||||||||||||
Consumer | 325,832 | 54 | 5,047 | — | 330,933 | ||||||||||||||
Gross loans receivable | $ | 2,449,272 | $ | 30,045 | $ | 97,443 | $ | 317 | $ | 2,577,077 |
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 |
September 30, 2016 | December 31, 2015 | ||||||
(In thousands) | |||||||
Commercial business: | |||||||
Commercial and industrial | $ | 3,849 | $ | 5,095 | |||
Owner-occupied commercial real estate | 2,984 | 2,027 | |||||
Non-owner occupied commercial real estate | 1,983 | — | |||||
Total commercial business | 8,816 | 7,122 | |||||
One-to-four family residential | 35 | 38 | |||||
Real estate construction and land development: | |||||||
One-to-four family residential | 2,008 | 2,414 | |||||
Five or more family residential and commercial properties | — | — | |||||
Total real estate construction and land development | 2,008 | 2,414 | |||||
Consumer | 681 | 94 | |||||
Nonaccrual loans | $ | 11,540 | $ | 9,668 |
September 30, 2016 | |||||||||||||||||||
30-89 Days | 90 Days or Greater | Total Past Due | Current | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 587 | $ | 1,165 | $ | 1,752 | $ | 636,330 | $ | 638,082 | |||||||||
Owner-occupied commercial real estate | 2,063 | 1,871 | 3,934 | 574,213 | 578,147 | ||||||||||||||
Non-owner occupied commercial real estate | 759 | 1,983 | 2,742 | 799,760 | 802,502 | ||||||||||||||
Total commercial business | 3,409 | 5,019 | 8,428 | 2,010,303 | 2,018,731 | ||||||||||||||
One-to-four family residential | 112 | — | 112 | 78,141 | 78,253 | ||||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | — | 865 | 865 | 51,187 | 52,052 | ||||||||||||||
Five or more family residential and commercial properties | 459 | — | 459 | 96,649 | 97,108 | ||||||||||||||
Total real estate construction and land development | 459 | 865 | 1,324 | 147,836 | 149,160 | ||||||||||||||
Consumer | 1,407 | 620 | 2,027 | 328,906 | 330,933 | ||||||||||||||
Gross loans receivable | $ | 5,387 | $ | 6,504 | $ | 11,891 | $ | 2,565,186 | $ | 2,577,077 |
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 |
September 30, 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 | $ | 2,544 | $ | 6,320 | $ | 8,864 | $ | 9,470 | $ | 907 | |||||||||
Owner-occupied commercial real estate | 847 | 3,723 | 4,570 | 4,927 | 458 | ||||||||||||||
Non-owner occupied commercial real estate | 5,595 | 6,464 | 12,059 | 12,113 | 832 | ||||||||||||||
Total commercial business | 8,986 | 16,507 | 25,493 | 26,510 | 2,197 | ||||||||||||||
One-to-four family residential | — | 263 | 263 | 266 | 81 | ||||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 2,310 | 829 | 3,139 | 3,824 | 4 | ||||||||||||||
Five or more family residential and commercial properties | — | 1,606 | 1,606 | 1,606 | 176 | ||||||||||||||
Total real estate construction and land development | 2,310 | 2,435 | 4,745 | 5,430 | 180 | ||||||||||||||
Consumer | 576 | 191 | 767 | 1,028 | 49 | ||||||||||||||
Total | $ | 11,872 | $ | 19,396 | $ | 31,268 | $ | 33,234 | $ | 2,507 |
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Commercial business: | |||||||||||||||
Commercial and industrial | $ | 9,625 | $ | 8,692 | $ | 9,750 | $ | 10,776 | |||||||
Owner-occupied commercial real estate | 4,553 | 4,882 | 4,560 | 4,151 | |||||||||||
Non-owner occupied commercial real estate | 12,107 | 10,256 | 12,232 | 8,893 | |||||||||||
Total commercial business | 26,285 | 23,830 | 26,542 | 23,820 | |||||||||||
One-to-four family residential | 265 | 259 | 267 | 315 | |||||||||||
Real estate construction and land development: | |||||||||||||||
One-to-four family residential | 3,177 | 3,639 | 3,253 | 4,312 | |||||||||||
Five or more family residential and commercial properties | 1,619 | 1,997 | 1,746 | 2,032 | |||||||||||
Total real estate construction and land development | 4,796 | 5,636 | 4,999 | 6,344 | |||||||||||
Consumer | 885 | 159 | 907 | 329 | |||||||||||
Total | $ | 32,231 | $ | 29,884 | $ | 32,715 | $ | 30,808 |
September 30, 2016 | December 31, 2015 | ||||||||||||||
Performing TDRs | Nonaccrual TDRs | Performing TDRs | Nonaccrual TDRs | ||||||||||||
(In thousands) | |||||||||||||||
TDR loans | $ | 19,728 | $ | 5,073 | $ | 20,695 | $ | 6,301 | |||||||
Allowance for loan losses on TDR loans | 1,833 | 450 | 2,069 | 679 |
Three Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
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 | 8 | $ | 2,324 | 10 | $ | 3,598 | |||||||
Owner-occupied commercial real estate | 2 | 576 | 2 | 1,102 | |||||||||
Non-owner occupied commercial real estate | 1 | 818 | 1 | 1,082 | |||||||||
Total commercial business | 11 | 3,718 | 13 | 5,782 | |||||||||
Real estate construction and land development: | |||||||||||||
One-to-four family residential | 5 | 2,274 | 2 | 1,087 | |||||||||
Five or more family residential and commercial properties | 1 | 1,606 | 0 | — | |||||||||
Total real estate construction and land development | 6 | 3,880 | 2 | 1,087 | |||||||||
Consumer | 2 | 26 | — | — | |||||||||
Total TDR loans | 19 | $ | 7,624 | 15 | $ | 6,869 |
Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | ||||||||||||
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 | 15 | $ | 2,915 | 29 | $ | 6,443 | |||||||
Owner-occupied commercial real estate | 2 | 576 | 7 | 2,201 | |||||||||
Non-owner occupied commercial real estate | 1 | 818 | 6 | 15,634 | |||||||||
Total commercial business | 18 | 4,309 | 42 | 24,278 | |||||||||
Real estate construction and land development: | |||||||||||||
One-to-four family residential | 5 | 2,274 | 6 | 2,681 | |||||||||
Five or more family residential and commercial properties | 1 | 1,606 | 1 | 415 | |||||||||
Total real estate construction and land development | 6 | 3,880 | 7 | 3,096 | |||||||||
Consumer | 6 | 70 | 2 | 144 | |||||||||
Total TDR loans | 30 | $ | 8,259 | 51 | $ | 27,518 |
(1) | Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the three and nine months ended September 30, 2016 and 2015. |
(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). |
September 30, 2016 | December 31, 2015 | ||||||||||||||
Outstanding Principal | Recorded Investment | Outstanding Principal | Recorded Investment | ||||||||||||
(In thousands) | |||||||||||||||
Commercial business: | |||||||||||||||
Commercial and industrial | $ | 14,931 | $ | 10,801 | $ | 20,110 | $ | 16,986 | |||||||
Owner-occupied commercial real estate | 19,218 | 17,404 | 24,730 | 22,313 | |||||||||||
Non-owner occupied commercial real estate | 25,425 | 23,680 | 30,685 | 27,774 | |||||||||||
Total commercial business | 59,574 | 51,885 | 75,525 | 67,073 | |||||||||||
One-to-four family residential | 5,168 | 4,936 | 5,707 | 5,392 | |||||||||||
Real estate construction and land development: | |||||||||||||||
One-to-four family residential | 3,036 | 2,157 | 6,904 | 4,121 | |||||||||||
Five or more family residential and commercial properties | 2,648 | 2,536 | 3,071 | 3,207 | |||||||||||
Total real estate construction and land development | 5,684 | 4,693 | 9,975 | 7,328 | |||||||||||
Consumer | 5,536 | 6,457 | 6,720 | 7,126 | |||||||||||
Gross PCI loans | $ | 75,962 | $ | 67,971 | $ | 97,927 | $ | 86,919 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance at the beginning of the period | $ | 15,359 | $ | 18,731 | $ | 17,592 | $ | 21,092 | ||||||||
Accretion | (1,178 | ) | (1,661 | ) | (3,900 | ) | (5,399 | ) | ||||||||
Disposal and other | (491 | ) | 22 | (2,921 | ) | (2,382 | ) | |||||||||
Change in accretable yield | 1,214 | 1,586 | 4,133 | 5,367 | ||||||||||||
Balance at the end of the period | $ | 14,904 | $ | 18,678 | $ | 14,904 | $ | 18,678 |
(4) | Allowance for Loan Losses |
Balance at Beginning of Period | Charge-offs | Recoveries | Provision for Loan Losses | Balance at End of Period | |||||||||||||||
(In thousands) | |||||||||||||||||||
Three Months Ended September 30, 2016 | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 9,970 | $ | (240 | ) | $ | 993 | $ | 182 | $ | 10,905 | ||||||||
Owner-occupied commercial real estate | 3,578 | (88 | ) | — | 222 | 3,712 | |||||||||||||
Non-owner occupied commercial real estate | 6,924 | — | — | 303 | 7,227 | ||||||||||||||
Total commercial business | 20,472 | (328 | ) | 993 | 707 | 21,844 | |||||||||||||
One-to-four family residential | 950 | — | — | 26 | 976 | ||||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 754 | — | — | 96 | 850 | ||||||||||||||
Five or more family residential and commercial properties | 1,277 | — | — | 5 | 1,282 | ||||||||||||||
Total real estate construction and land development | 2,031 | — | — | 101 | 2,132 | ||||||||||||||
Consumer | 4,816 | (572 | ) | 197 | 665 | 5,106 | |||||||||||||
Unallocated | 157 | — | — | (4 | ) | 153 | |||||||||||||
Total | $ | 28,426 | $ | (900 | ) | $ | 1,190 | $ | 1,495 | $ | 30,211 | ||||||||
Nine Months Ended September 30, 2016 | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 9,972 | $ | (2,810 | ) | $ | 1,352 | $ | 2,391 | $ | 10,905 | ||||||||
Owner-occupied commercial real estate | 4,370 | (538 | ) | — | (120 | ) | 3,712 | ||||||||||||
Non-owner occupied commercial real estate | 7,722 | (350 | ) | — | (145 | ) | 7,227 | ||||||||||||
Total commercial business | 22,064 | (3,698 | ) | 1,352 | 2,126 | 21,844 | |||||||||||||
One-to-four family residential | 1,157 | — | 2 | (183 | ) | 976 | |||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 1,058 | (100 | ) | 83 | (191 | ) | 850 | ||||||||||||
Five or more family residential and commercial properties | 813 | (54 | ) | — | 523 | 1,282 | |||||||||||||
Total real estate construction and land development | 1,871 | (154 | ) | 83 | 332 | 2,132 | |||||||||||||
Consumer | 4,309 | (1,370 | ) | 496 | 1,671 | 5,106 | |||||||||||||
Unallocated | 345 | — | — | (192 | ) | 153 | |||||||||||||
Total | $ | 29,746 | $ | (5,222 | ) | $ | 1,933 | $ | 3,754 | $ | 30,211 |
Loans Individually Evaluated for Impairment | Loans Collectively Evaluated for Impairment | PCI Loans | Total Allowance for Loan Losses | ||||||||||||
(In thousands) | |||||||||||||||
Commercial business: | |||||||||||||||
Commercial and industrial | $ | 907 | $ | 8,230 | $ | 1,768 | $ | 10,905 | |||||||
Owner-occupied commercial real estate | 458 | 1,858 | 1,396 | 3,712 | |||||||||||
Non-owner occupied commercial real estate | 832 | 4,564 | 1,831 | 7,227 | |||||||||||
Total commercial business | 2,197 | 14,652 | 4,995 | 21,844 | |||||||||||
One-to-four family residential | 81 | 595 | 300 | 976 | |||||||||||
Real estate construction and land development: | |||||||||||||||
One-to-four family residential | 4 | 582 | 264 | 850 | |||||||||||
Five or more family residential and commercial properties | 176 | 963 | 143 | 1,282 | |||||||||||
Total real estate construction and land development | 180 | 1,545 | 407 | 2,132 | |||||||||||
Consumer | 49 | 3,878 | 1,179 | 5,106 | |||||||||||
Unallocated | — | 153 | — | 153 | |||||||||||
Total | $ | 2,507 | $ | 20,823 | $ | 6,881 | $ | 30,211 |
Loans Individually Evaluated for Impairment | Loans Collectively Evaluated for Impairment | PCI Loans | Total Gross Loans Receivable | ||||||||||||
(In thousands) | |||||||||||||||
Commercial business: | |||||||||||||||
Commercial and industrial | $ | 8,864 | $ | 618,417 | $ | 10,801 | $ | 638,082 | |||||||
Owner-occupied commercial real estate | 4,570 | 556,173 | 17,404 | 578,147 | |||||||||||
Non-owner occupied commercial real estate | 12,059 | 766,763 | 23,680 | 802,502 | |||||||||||
Total commercial business | 25,493 | 1,941,353 | 51,885 | 2,018,731 | |||||||||||
One-to-four family residential | 263 | 73,054 | 4,936 | 78,253 | |||||||||||
Real estate construction and land development: | |||||||||||||||
One-to-four family residential | 3,139 | 46,756 | 2,157 | 52,052 | |||||||||||
Five or more family residential and commercial properties | 1,606 | 92,966 | 2,536 | 97,108 | |||||||||||
Total real estate construction and land development | 4,745 | 139,722 | 4,693 | 149,160 | |||||||||||
Consumer | 767 | 323,709 | 6,457 | 330,933 | |||||||||||
Total | $ | 31,268 | $ | 2,477,838 | $ | 67,971 | $ | 2,577,077 |
Balance at Beginning of Period | Charge-offs | Recoveries | Provision for Loan Losses | Balance at End of Period | |||||||||||||||
(In thousands) | |||||||||||||||||||
Three Months Ended September 30, 2015 | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 9,891 | $ | (70 | ) | $ | 59 | $ | 494 | $ | 10,374 | ||||||||
Owner-occupied commercial real estate | 4,587 | — | — | (296 | ) | 4,291 | |||||||||||||
Non-owner occupied commercial real estate | 6,146 | — | — | 592 | 6,738 | ||||||||||||||
Total commercial business | 20,624 | (70 | ) | 59 | 790 | 21,403 | |||||||||||||
One-to-four family residential | 1,271 | — | 12 | (88 | ) | 1,195 | |||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 1,462 | — | — | 79 | 1,541 | ||||||||||||||
Five or more family residential and commercial properties | 1,062 | — | — | (20 | ) | 1,042 | |||||||||||||
Total real estate construction and land development | 2,524 | — | — | 59 | 2,583 | ||||||||||||||
Consumer | 3,167 | (278 | ) | 152 | 174 | 3,215 | |||||||||||||
Unallocated | 692 | — | — | (84 | ) | 608 | |||||||||||||
Total | $ | 28,278 | $ | (348 | ) | $ | 223 | $ | 851 | $ | 29,004 | ||||||||
Nine Months Ended September 30, 2015 | |||||||||||||||||||
Commercial business: | |||||||||||||||||||
Commercial and industrial | $ | 10,553 | $ | (1,392 | ) | $ | 447 | $ | 766 | $ | 10,374 | ||||||||
Owner-occupied commercial real estate | 4,032 | — | — | 259 | 4,291 | ||||||||||||||
Non-owner occupied commercial real estate | 5,601 | (188 | ) | — | 1,325 | 6,738 | |||||||||||||
Total commercial business | 20,186 | (1,580 | ) | 447 | 2,350 | 21,403 | |||||||||||||
One-to-four family residential | 1,200 | — | 13 | (18 | ) | 1,195 | |||||||||||||
Real estate construction and land development: | |||||||||||||||||||
One-to-four family residential | 1,786 | (106 | ) | 100 | (239 | ) | 1,541 | ||||||||||||
Five or more family residential and commercial properties | 972 | — | — | 70 | 1,042 | ||||||||||||||
Total real estate construction and land development | 2,758 | (106 | ) | 100 | (169 | ) | 2,583 | ||||||||||||
Consumer | 2,769 | (1,208 | ) | 362 | 1,292 | 3,215 | |||||||||||||
Unallocated | 816 | — | — | (208 | ) | 608 | |||||||||||||
Total | $ | 27,729 | $ | (2,894 | ) | $ | 922 | $ | 3,247 | $ | 29,004 |
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 | Total 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 |
(5) | Other Real Estate Owned |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(In thousands) | |||||||||||||||
Balance at the beginning of the period | $ | 1,560 | $ | 3,017 | $ | 2,019 | $ | 3,355 | |||||||
Additions | 25 | 611 | 677 | 2,424 | |||||||||||
Proceeds from dispositions | (1,716 | ) | (1,560 | ) | (2,486 | ) | (3,199 | ) | |||||||
Gain (loss) on sales, net | 131 | 3 | 173 | (94 | ) | ||||||||||
Valuation adjustment | — | — | (383 | ) | (415 | ) | |||||||||
Balance at the end of the period | $ | — | $ | 2,071 | $ | — | $ | 2,071 |
(6) | Goodwill and Other Intangible Assets |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(In thousands) | ||||||||||||||||
Balance at the beginning of the period | $ | 8,091 | $ | 9,835 | $ | 8,789 | $ | 10,889 | ||||||||
Less: Amortization | 359 | 523 | 1,057 | 1,577 | ||||||||||||
Balance at the end of the period | $ | 7,732 | $ | 9,312 | $ | 7,732 | $ | 9,312 |
(7) | Other Borrowings |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Average balance during the period | $ | 5,618 | $ | — | $ | 11,608 | $ | 2,267 | |||||||
Maximum month-end balance during the period | $ | 17,700 | $ | — | $ | 57,300 | $ | 48,200 | |||||||
Weighted average rate during the period | 0.57 | % | — | % | 0.54 | % | 0.29 | % |
(8) | Junior Subordinated Debentures |
(9) | Repurchase Agreements |
(10) | Derivative Financial Instruments |
September 30, 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 | $ | 68,450 | $ | 3,336 | $ | 20,750 | $ | 543 | ||||||||
Interest rate swap with third party | (68,450 | ) | (3,336 | ) | (20,750 | ) | (543 | ) |
(11) | Stockholders’ Equity |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Net income: | |||||||||||||||
Net income | $ | 11,039 | $ | 9,492 | $ | 29,025 | $ | 27,996 | |||||||
Less: Dividends and undistributed earnings allocated to participating securities | (102 | ) | (84 | ) | (280 | ) | (247 | ) | |||||||
Net income allocated to common shareholders | $ | 10,937 | $ | 9,408 | $ | 28,745 | $ | 27,749 | |||||||
Basic: | |||||||||||||||
Weighted average common shares outstanding | 29,962,270 | 29,960,133 | 29,968,034 | 30,086,057 | |||||||||||
Less: Restricted stock awards | (277,495 | ) | (263,404 | ) | (292,832 | ) | (268,999 | ) | |||||||
Total basic weighted average common shares outstanding | 29,684,775 | 29,696,729 | 29,675,202 | 29,817,058 | |||||||||||
Diluted: | |||||||||||||||
Basic weighted average common shares outstanding | 29,684,775 | 29,696,729 | 29,675,202 | 29,817,058 | |||||||||||
Incremental shares from stock options | 11,031 | 22,395 | 12,543 | 22,718 | |||||||||||
Total diluted weighted average common shares outstanding | 29,695,806 | 29,719,124 | 29,687,745 | 29,839,776 |
Declared | Cash Dividend per Share | Record Date | Paid Date | ||||
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 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | Plan Total (1) | |||||||||||||||
Eleventh Plan | |||||||||||||||||||
Repurchased shares | 38,000 | — | 138,000 | 441,966 | 579,996 | ||||||||||||||
Stock repurchase average share price | $ | 17.46 | $ | — | $ | 17.16 | $ | 16.64 | $ | 16.76 |
(12) | Accumulated Other Comprehensive Income |
Three Months Ended September 30, 2016 (1) | Nine Months Ended September 30, 2016 (1) | |||||||
(In thousands) | ||||||||
Balance of AOCI at the beginning of period | $ | 12,343 | $ | 2,559 | ||||
Other comprehensive (loss) income before reclassification | (1,055 | ) | 9,223 | |||||
Amounts reclassified from AOCI for gain on sale of investment securities included in net income | (224 | ) | (718 | ) | ||||
Net current period other comprehensive (loss) income | (1,279 | ) | 8,505 | |||||
Balance of AOCI at the end of period | $ | 11,064 | $ | 11,064 |
(1) | All amounts are due to the changes in fair value of available for sale securities and are net of tax. |
Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | |||||||||||||||
Total (1)(2) | Changes in fair value of available for sale securities (2) | Accretion of other-than- temporary impairment on held to maturity securities (2) | Total (2) | |||||||||||||
(In thousands) | ||||||||||||||||
Balance of AOCI at the beginning of period | $ | 2,198 | $ | 3,567 | $ | (189 | ) | $ | 3,378 | |||||||
Other comprehensive income before reclassification | 3,064 | 2,407 | 108 | 2,515 | ||||||||||||
Amounts reclassified from AOCI for gain on sale of investment securities available for sale included in net income | (255 | ) | (967 | ) | 81 | (886 | ) | |||||||||
Net current period other comprehensive income | 2,809 | 1,440 | 189 | 1,629 | ||||||||||||
Balance of AOCI at the end of period | $ | 5,007 | $ | 5,007 | $ | — | $ | 5,007 |
(1) | All amounts are due to the changes in fair value of available for sale securities. |
(2) | All amounts are net of tax. |
(13) | Stock-Based Compensation |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (In years) | Aggregate Intrinsic Value (In thousands) | |||||||||
Outstanding at December 31, 2014 | 156,407 | $ | 13.59 | |||||||||
Exercised | (53,198 | ) | 12.45 | |||||||||
Forfeited or expired | (12,278 | ) | 16.73 | |||||||||
Outstanding at September 30, 2015 | 90,931 | $ | 13.84 | 3.05 | $ | 456 | ||||||
Outstanding at December 31, 2015 | 79,408 | $ | 14.19 | |||||||||
Exercised | (27,867 | ) | 14.37 | |||||||||
Forfeited or expired | (4,200 | ) | 16.80 | |||||||||
Outstanding, vested and expected to vest and exercisable at September 30, 2016 | 47,341 | $ | 13.85 | 2.80 | $ | 194 |
Shares | Weighted-Average Grant Date Fair Value | |||||
Nonvested at December 31, 2014 | 238,669 | $ | 15.20 | |||
Granted | 121,320 | 16.72 | ||||
Vested | (91,642 | ) | 15.12 | |||
Forfeited | (2,837 | ) | 15.71 | |||
Nonvested at September 30, 2015 | 265,510 | $ | 15.92 | |||
Nonvested at December 31, 2015 | 264,521 | 15.92 | ||||
Granted | 119,939 | 17.53 | ||||
Vested | (111,357 | ) | 15.62 | |||
Forfeited | (9,216 | ) | 16.57 | |||
Nonvested at September 30, 2016 | 263,887 | $ | 16.76 |
(14) | Fair Value Measurements |
September 30, 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 | $ | 5,594 | $ | 593 | $ | 5,001 | $ | — | |||||||
Municipal securities | 245,704 | — | 245,704 | — | |||||||||||
Mortgage backed securities and collateralized mortgage obligations: | |||||||||||||||
Residential | 342,757 | — | 342,757 | — | |||||||||||
Commercial | 197,837 | — | 197,837 | — | |||||||||||
Collateralized loan obligations | 13,989 | — | 13,989 | — | |||||||||||
Corporate obligations | 13,183 | — | 13,183 | — | |||||||||||
Other equities | 95 | 95 | — | — | |||||||||||
Total investment securities available for sale | $ | 819,159 | $ | 688 | $ | 818,471 | $ | — | |||||||
Derivative assets - interest rate swaps | $ | 3,336 | $ | — | $ | 3,336 | $ | — | |||||||
Liabilities | |||||||||||||||
Derivative liabilities - interest rate swaps | $ | 3,336 | $ | — | $ | 3,336 | $ | — |
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 equities | 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 September 30, 2016 | ||||||||||||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | Net Losses (Gains) Recorded in Earnings During the Three Months Ended September 30, 2016 | Net Losses (Gains) Recorded in Earnings During the Nine Months Ended September 30, 2016 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Impaired loans: | |||||||||||||||||||||||||||
Commercial business: | |||||||||||||||||||||||||||
Commercial and industrial | $ | 225 | $ | 167 | $ | — | $ | — | $ | 167 | $ | 24 | $ | 25 | |||||||||||||
Owner-occupied commercial real estate | 631 | 609 | — | — | 609 | 23 | (2 | ) | |||||||||||||||||||
Total commercial business | 856 | 776 | — | — | 776 | 47 | 23 | ||||||||||||||||||||
Real estate construction and land development: | |||||||||||||||||||||||||||
One-to-four family residential | 829 | 825 | — | — | 825 | (13 | ) | (26 | ) | ||||||||||||||||||
Total real estate construction and land development | 829 | 825 | — | — | 825 | (13 | ) | (26 | ) | ||||||||||||||||||
Total impaired loans and assets measured at fair value on nonrecurring basis | $ | 1,685 | $ | 1,601 | $ | — | $ | — | $ | 1,601 | $ | 34 | $ | (3 | ) |
(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 Three Months Ended September 30, 2015 | Net Losses (Gains) Recorded in Earnings During the Nine Months Ended September 30, 2015 | ||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||
Total assets measured at fair value on a nonrecurring basis (2) | $ | 1,753 | $ | 1,719 | $ | — | $ | — | $ | 1,719 | $ | — | $ | 102 |
(1) | Basis represents the unpaid principal balance of impaired loans. |
(2) | The only assets measured at December 31, 2015 were one-to-four family residential real estate construction and land development impaired loans. |
September 30, 2016 | |||||||||
Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range of Inputs; Weighted Average | ||||||
(Dollars in thousands) | |||||||||
Impaired loans | $ | 1,601 | Market approach | Adjustment for differences between the comparable sales | (17.2%) - 63.9%; 22.5% |
December 31, 2015 | |||||||||
Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range of Inputs; Weighted Average | ||||||
(Dollars in thousands) | |||||||||
Impaired loans | $ | 1,719 | Market approach | Adjustment for differences between the comparable sales | (30.0%) - 63.9%; 24.5% |
September 30, 2016 | |||||||||||||||||||
Carrying Value | Fair Value | Fair Value Measurements Using: | |||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||
(In thousands) | |||||||||||||||||||
Assets | |||||||||||||||||||
Cash and cash equivalents | $ | 112,760 | $ | 112,760 | $ | 112,760 | $ | — | $ | — | |||||||||
Other interest earning deposits | 5,461 | 5,489 | — | 5,489 | — | ||||||||||||||
Investment securities available for sale | 819,159 | 819,159 | 688 | 818,471 | — | ||||||||||||||
Federal Home Loan Bank stock | 5,088 | N/A | N/A | N/A | N/A | ||||||||||||||
Loans held for sale | 8,964 | 9,223 | — | 9,223 | — | ||||||||||||||
Total loans receivable, net | 2,548,766 | 2,634,175 | — | — | 2,634,175 | ||||||||||||||
Accrued interest receivable | 11,327 | 11,327 | 1 | 3,775 | 7,551 | ||||||||||||||
Derivative assets - interest rate swaps | 3,336 | 3,336 | — | 3,336 | — | ||||||||||||||
Liabilities | |||||||||||||||||||
Deposits: | |||||||||||||||||||
Noninterest deposits, NOW accounts, money market accounts and savings accounts | $ | 2,873,777 | $ | 2,873,777 | $ | 2,873,777 | $ | — | $ | — | |||||||||
Certificate of deposit accounts | 368,644 | 368,731 | — | 368,731 | — | ||||||||||||||
Total deposits | $ | 3,242,421 | $ | 3,242,508 | $ | 2,873,777 | $ | 368,731 | $ | — | |||||||||
Federal Home Loan Bank advances | $ | 17,700 | $ | 17,700 | $ | — | $ | 17,700 | $ | — | |||||||||
Securities sold under agreement to repurchase | $ | 22,425 | $ | 22,425 | $ | 22,425 | $ | — | $ | — | |||||||||
Junior subordinated debentures | 19,644 | 16,250 | — | — | 16,250 | ||||||||||||||
Accrued interest payable | 164 | 164 | 44 | 94 | 26 | ||||||||||||||
Derivative liabilities - interest rate swaps | 3,336 | 3,336 | — | 3,336 | — |
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 | — |
(15) | Commitments and Contingencies |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended September 30, | |||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||
Average Balance | Interest Earned/ Paid | Average Yield/ Rate (1) | Average Balance | Interest Earned/ Paid | Average Yield/ Rate (1) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Interest Earning Assets: | |||||||||||||||||||||
Total loans receivable, net (2) (3) | $ | 2,526,150 | $ | 30,915 | 4.87 | % | $ | 2,356,090 | $ | 30,179 | 5.08 | % | |||||||||
Taxable securities | 588,749 | 2,888 | 1.95 | 525,013 | 2,187 | 1.65 | |||||||||||||||
Nontaxable securities (3) | 225,994 | 1,235 | 2.17 | 201,233 | 1,056 | 2.08 | |||||||||||||||
Other interest earning assets | 42,934 | 76 | 0.70 | 81,909 | 62 | 0.30 | |||||||||||||||
Total interest earning assets | 3,383,827 | 35,114 | 4.13 | % | 3,164,245 | 33,484 | 4.20 | % | |||||||||||||
Noninterest earning assets | 408,634 | 385,065 | |||||||||||||||||||
Total assets | $ | 3,792,461 | $ | 3,549,310 | |||||||||||||||||
Interest Bearing Liabilities: | |||||||||||||||||||||
Certificates of deposit | $ | 378,407 | $ | 468 | 0.49 | % | $ | 447,425 | $ | 586 | 0.52 | % | |||||||||
Savings accounts | 507,523 | 214 | 0.17 | 424,620 | 118 | 0.11 | |||||||||||||||
Interest bearing demand and money market accounts | 1,480,220 | 587 | 0.16 | 1,383,212 | 631 | 0.18 | |||||||||||||||
Total interest bearing deposits | 2,366,150 | 1,269 | 0.21 | 2,255,257 | 1,335 | 0.23 | |||||||||||||||
FHLB advances and other borrowings | 5,618 | 8 | 0.57 | — | — | — | |||||||||||||||
Securities sold under agreement to repurchase | 18,861 | 10 | 0.21 | 21,197 | 14 | 0.26 | |||||||||||||||
Junior subordinated debentures | 19,602 | 221 | 4.49 | 19,314 | 195 | 4.01 | |||||||||||||||
Total interest bearing liabilities | 2,410,231 | 1,508 | 0.25 | % | 2,295,768 | 1,544 | 0.27 | % | |||||||||||||
Demand and other noninterest bearing deposits | 844,468 | 760,004 | |||||||||||||||||||
Other noninterest bearing liabilities | 44,378 | 29,715 | |||||||||||||||||||
Stockholders’ equity | 493,384 | 463,823 | |||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,792,461 | $ | 3,549,310 | |||||||||||||||||
Net interest income | $ | 33,606 | $ | 31,940 | |||||||||||||||||
Net interest spread | 3.88 | % | 3.93 | % | |||||||||||||||||
Net interest margin | 3.95 | % | 4.00 | % | |||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 140.39 | % | 137.83 | % |
(1) | Annualized |
(2) | The average loan balances presented in the table are net of allowances for loan losses. Nonaccrual loans have been included in the table as loans carrying a zero yield. |
Three Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Loan yield, excluding incremental accretion on purchased loans (1) | 4.62 | % | 4.75 | % | ||||
Impact on loan yield from incremental accretion on purchased loans (1) | 0.25 | % | 0.33 | % | ||||
Loan yield | 4.87 | % | 5.08 | % | ||||
Incremental accretion on purchased loans (1) | $ | 1,599 | $ | 1,937 |
(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. |
Three Months Ended September 30, | ||||||
2016 | 2015 | |||||
Net interest margin, excluding incremental accretion on purchased loans (1) | 3.76 | % | 3.76 | % | ||
Impact on net interest margin from incremental accretion on purchased loans (1) | 0.19 | 0.24 | ||||
Net interest margin | 3.95 | % | 4.00 | % |
(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. |
Nine Months Ended September 30, | |||||||||||||||||||||
2016 | 2015 | ||||||||||||||||||||
Average Balance | Interest Earned/ Paid | Average Yield/ Rate (1) | Average Balance | Interest Earned/ Paid | Average Yield/ Rate (1) | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Interest Earning Assets: | |||||||||||||||||||||
Total loans receivable, net (2) (3) | $ | 2,461,856 | $ | 91,595 | 4.97 | % | $ | 2,295,881 | $ | 91,213 | 5.31 | % | |||||||||
Taxable securities | 594,301 | 8,522 | 1.92 | 548,282 | 7,199 | 1.76 | |||||||||||||||
Nontaxable securities (3) | 220,038 | 3,599 | 2.18 | 201,796 | 3,137 | 2.08 | |||||||||||||||
Other interest earning assets | 47,829 | 225 | 0.63 | 69,493 | 173 | 0.33 | |||||||||||||||
Total interest earning assets | 3,324,024 | 103,941 | 4.18 | % | 3,115,452 | 101,722 | 4.37 | % | |||||||||||||
Noninterest earning assets | 391,342 | 374,938 | |||||||||||||||||||
Total assets | $ | 3,715,366 | $ | 3,490,390 | |||||||||||||||||
Interest Bearing Liabilities: | |||||||||||||||||||||
Certificates of deposit | $ | 397,070 | $ | 1,496 | 0.50 | % | $ | 475,826 | $ | 1,844 | 0.52 | % | |||||||||
Savings accounts | 478,762 | 540 | 0.15 | 391,273 | 316 | 0.11 | |||||||||||||||
Interest bearing demand and money market accounts | 1,457,399 | 1,729 | 0.16 | 1,358,521 | 1,801 | 0.18 | |||||||||||||||
Total interest bearing deposits | 2,333,231 | 3,765 | 0.22 | 2,225,620 | 3,961 | 0.24 | |||||||||||||||
FHLB advances and other borrowings | 11,608 | 47 | 0.54 | 2,267 | 5 | 0.29 | |||||||||||||||
Securities sold under agreement to repurchase | 20,031 | 31 | 0.21 | 23,222 | 45 | 0.26 | |||||||||||||||
Junior subordinated debentures | 19,527 | 647 | 4.43 | 19,233 | 627 | 4.36 | |||||||||||||||
Total interest bearing liabilities | 2,384,397 | 4,490 | 0.25 | % | 2,270,342 | 4,638 | 0.27 | % | |||||||||||||
Demand and other noninterest bearing deposits | 811,043 | 722,665 | |||||||||||||||||||
Other noninterest bearing liabilities | 35,266 | 34,993 | |||||||||||||||||||
Stockholders’ equity | 484,660 | 462,390 | |||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,715,366 | $ | 3,490,390 | |||||||||||||||||
Net interest income | $ | 99,451 | $ | 97,084 | |||||||||||||||||
Net interest spread | 3.93 | % | 4.10 | % | |||||||||||||||||
Net interest margin | 4.00 | % | 4.17 | % | |||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 139.41 | % | 137.22 | % |
(1) | Annualized |
(2) | The average loan balances presented in the table are net of allowances for loan losses. Nonaccrual loans have been included in the table as loans carrying a zero yield. |
Nine Months Ended September 30, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Loan yield, excluding incremental accretion on purchased loans (1) | 4.65 | % | 4.85 | % | ||||
Impact on loan yield from incremental accretion on purchased loans (1) | 0.32 | % | 0.46 | % | ||||
Loan yield | 4.97 | % | 5.31 | % | ||||
Incremental accretion on purchased loans (1) | $ | 5,976 | $ | 7,972 |
(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. |
Nine Months Ended September 30, | ||||||
2016 | 2015 | |||||
Net interest margin, excluding incremental accretion on purchased loans (1) | 3.76 | % | 3.83 | % | ||
Impact on net interest margin from incremental accretion on purchased loans (1) | 0.24 | 0.34 | ||||
Net interest margin | 4.00 | % | 4.17 | % |
(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. |
Three Months Ended September 30, | ||||||||||||||
2016 | 2015 | Change | Percentage Change | |||||||||||
(Dollars in thousands) | ||||||||||||||
Service charges and other fees | $ | 3,630 | $ | 3,593 | $ | 37 | 1.0 | % | ||||||
Gain on sale of investment securities, net | 345 | 393 | (48 | ) | (12.2 | ) | ||||||||
Gain on sale of loans, net | 3,435 | 1,411 | 2,024 | 143.4 | ||||||||||
Gain on termination of FDIC shared-loss agreements | — | 1,747 | (1,747 | ) | (100.0 | ) | ||||||||
Other income | 2,457 | 2,400 | 57 | 2.4 | ||||||||||
Total noninterest income | $ | 9,867 | $ | 9,544 | $ | 323 | 3.4 | % |
Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | Change | Percentage Change | |||||||||||
(Dollars in thousands) | ||||||||||||||
Service charges and other fees | $ | 10,462 | $ | 10,575 | $ | (113 | ) | (1.1 | )% | |||||
Gain on sale of investment securities, net | 1,106 | 1,362 | (256 | ) | (18.8 | ) | ||||||||
Gain on sale of loans, net | 5,406 | 3,828 | 1,578 | 41.2 | ||||||||||
Gain on termination of FDIC shared-loss agreements | — | 1,747 | (1,747 | ) | (100.0 | ) | ||||||||
Gain on sale of Merchant Visa portfolio | — | 1,650 | (1,650 | ) | (100.0 | ) | ||||||||
Other income | 6,459 | 5,607 | 852 | 15.2 | ||||||||||
Total noninterest income | $ | 23,433 | $ | 24,769 | $ | (1,336 | ) | (5.4 | )% |
Three Months Ended September 30, | ||||||||||||||
2016 | 2015 | Change | Percentage Change | |||||||||||
(Dollars in thousands) | ||||||||||||||
Compensation and employee benefits | $ | 15,633 | $ | 14,918 | $ | 715 | 4.8 | % | ||||||
Occupancy and equipment | 3,926 | 3,970 | (44 | ) | (1.1 | ) | ||||||||
Data processing | 1,943 | 2,398 | (455 | ) | (19.0 | ) | ||||||||
Marketing | 745 | 899 | (154 | ) | (17.1 | ) | ||||||||
Professional services | 830 | 894 | (64 | ) | (7.2 | ) | ||||||||
State and local taxes | 820 | 619 | 201 | 32.5 | ||||||||||
Federal deposit insurance premium | 296 | 499 | (203 | ) | (40.7 | ) | ||||||||
Other real estate owned, net | (142 | ) | (5 | ) | (137 | ) | 2,740.0 | |||||||
Amortization of intangible assets | 359 | 523 | (164 | ) | (31.4 | ) | ||||||||
Other expense | 2,408 | 2,607 | (199 | ) | (7.6 | ) | ||||||||
Total noninterest expense | $ | 26,818 | $ | 27,322 | $ | (504 | ) | (1.8 | )% |
Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | Change | Percentage Change | |||||||||||
(Dollars in thousands) | ||||||||||||||
Compensation and employee benefits | $ | 45,652 | $ | 42,984 | $ | 2,668 | 6.2 | % | ||||||
Occupancy and equipment | 11,873 | 11,511 | 362 | 3.1 | ||||||||||
Data processing | 5,564 | 5,950 | (386 | ) | (6.5 | ) | ||||||||
Marketing | 2,254 | 2,595 | (341 | ) | (13.1 | ) | ||||||||
Professional services | 2,508 | 2,602 | (94 | ) | (3.6 | ) | ||||||||
State and local taxes | 2,031 | 1,808 | 223 | 12.3 | ||||||||||
Federal deposit insurance premium | 1,316 | 1,537 | (221 | ) | (14.4 | ) | ||||||||
Other real estate owned, net | 330 | 854 | (524 | ) | (61.4 | ) | ||||||||
Amortization of intangible assets | 1,057 | 1,577 | (520 | ) | (33.0 | ) | ||||||||
Other expense | 7,079 | 8,021 | (942 | ) | (11.7 | ) | ||||||||
Total noninterest expense | $ | 79,664 | $ | 79,439 | $ | 225 | 0.3 | % |
September 30, 2016 | December 31, 2015 | Change between September 30, 2016 and December 31, 2015 | Percent Change | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Assets | |||||||||||||||
Cash and cash equivalents | $ | 112,760 | $ | 126,640 | $ | (13,880 | ) | (11.0 | )% | ||||||
Other interest earning deposits | 5,461 | 6,719 | (1,258 | ) | (18.7 | ) | |||||||||
Investment securities | 819,159 | 811,869 | 7,290 | 0.9 | |||||||||||
Loans held for sale | 8,964 | 7,682 | 1,282 | 16.7 | |||||||||||
Total loans receivable, net | 2,548,766 | 2,372,296 | 176,470 | 7.4 | |||||||||||
Other real estate owned | — | 2,019 | (2,019 | ) | (100.0 | ) | |||||||||
Premises and equipment, net | 63,312 | 61,891 | 1,421 | 2.3 | |||||||||||
Federal Home Loan Bank stock, at cost | 5,088 | 4,148 | 940 | 22.7 | |||||||||||
Bank owned life insurance | 69,962 | 60,876 | 9,086 | 14.9 | |||||||||||
Accrued interest receivable | 11,327 | 10,469 | 858 | 8.2 | |||||||||||
Prepaid expenses and other assets | 74,816 | 58,365 | 16,451 | 28.2 | |||||||||||
Other intangible assets, net | 7,732 | 8,789 | (1,057 | ) | (12.0 | ) | |||||||||
Goodwill | 119,029 | 119,029 | — | — | |||||||||||
Total assets | $ | 3,846,376 | $ | 3,650,792 | $ | 195,584 | 5.4 | % | |||||||
Liabilities | |||||||||||||||
Deposits | $ | 3,242,421 | $ | 3,108,287 | $ | 134,134 | 4.3 | ||||||||
Federal Home Loan Bank advances | 17,700 | — | 17,700 | 100.0 | |||||||||||
Junior subordinated debentures | 19,644 | 19,424 | 220 | 1.1 | |||||||||||
Securities sold under agreement to repurchase | 22,425 | 23,214 | (789 | ) | (3.4 | ) | |||||||||
Accrued expenses and other liabilities | 48,174 | 29,897 | 18,277 | 61.1 | |||||||||||
Total liabilities | 3,350,364 | 3,180,822 | 169,542 | 5.3 | |||||||||||
Stockholders' equity | |||||||||||||||
Common stock | 358,451 | 359,451 | (1,000 | ) | (0.3 | ) | |||||||||
Retained earnings | 126,497 | 107,960 | 18,537 | 17.2 | |||||||||||
Accumulated other comprehensive income, net | 11,064 | 2,559 | 8,505 | 332.4 | |||||||||||
Total stockholders' equity | 496,012 | 469,970 | 26,042 | 5.5 | |||||||||||
Total liabilities and stockholders' equity | $ | 3,846,376 | $ | 3,650,792 | $ | 195,584 | 5.4 | % |
September 30, 2016 | December 31, 2015 | ||||||||||||
Balance | % of Total | Balance | % of Total | ||||||||||
(Dollars in thousands) | |||||||||||||
Commercial business: | |||||||||||||
Commercial and industrial | $ | 638,082 | 24.8 | % | $ | 596,726 | 24.8 | % | |||||
Owner-occupied commercial real estate | 578,147 | 22.4 | 572,609 | 23.8 | |||||||||
Non-owner occupied commercial real estate | 802,502 | 31.1 | 753,986 | 31.4 | |||||||||
Total commercial business | 2,018,731 | 78.3 | 1,923,321 | 80.0 | |||||||||
One-to-four family residential | 78,253 | 3.0 | 72,548 | 3.0 | |||||||||
Real estate construction and land development: | |||||||||||||
One-to-four family residential | 52,052 | 2.0 | 51,752 | 2.2 | |||||||||
Five or more family residential and commercial properties | 97,108 | 3.8 | 55,325 | 2.3 | |||||||||
Total real estate construction and land development | 149,160 | 5.8 | 107,077 | 4.5 | |||||||||
Consumer | 330,933 | 12.8 | 298,167 | 12.4 | |||||||||
Gross loans receivable | 2,577,077 | 99.9 | 2,401,113 | 99.9 | |||||||||
Deferred loan costs, net | 1,900 | 0.1 | 929 | 0.1 | |||||||||
Loans receivable, net | $ | 2,578,977 | 100.0 | % | $ | 2,402,042 | 100.0 | % |
September 30, 2016 | December 31, 2015 | ||||||
(Dollars in thousands) | |||||||
Nonaccrual loans: | |||||||
Commercial business | $ | 8,816 | $ | 7,122 | |||
One-to-four family residential | 35 | 38 | |||||
Real estate construction and land development | 2,008 | 2,414 | |||||
Consumer | 681 | 94 | |||||
Total nonaccrual loans (1)(2) | 11,540 | 9,668 | |||||
Other real estate owned | — | 2,019 | |||||
Total nonperforming assets | $ | 11,540 | $ | 11,687 | |||
Allowance for loan losses | $ | 30,211 | $ | 29,746 | |||
Allowance for loan losses to loans receivable, net | 1.17 | % | 1.24 | % | |||
Allowance for loan losses to nonperforming loans | 261.79 | % | 307.67 | % | |||
Nonperforming loans to total loans receivable, net | 0.45 | % | 0.40 | % | |||
Nonperforming assets to total assets | 0.30 | % | 0.32 | % | |||
Performing TDR loans: | |||||||
Commercial business | $ | 16,676 | $ | 17,345 | |||
One-to-four family residential | 229 | 236 | |||||
Real estate construction and land development | 2,737 | 3,014 | |||||
Consumer | 86 | 100 | |||||
Total performing TDR loans (3) | $ | 19,728 | $ | 20,695 | |||
Accruing loans past due 90 days or more (4) | $ | — | $ | — | |||
Potential problem loans (5) | 100,972 | 110,357 |
(1) | At September 30, 2016 and December 31, 2015, $5.1 million and $6.3 million of nonperforming loans, respectively, were considered TDR loans. |
(2) | At September 30, 2016 and December 31, 2015, $3.0 million and $1.3 million of nonperforming loans, respectively, were guaranteed by government agencies. |
(3) | At September 30, 2016 and December 31, 2015, $697,000 and $491,000 of performing TDR loans, respectively, were guaranteed by government agencies. |
(4) | There were no accruing loans past due 90 days or more that were guaranteed by government agencies at September 30, 2016 or December 31, 2015. |
(5) | At September 30, 2016 and December 31, 2015, $2.2 million and $3.0 million of potential problem loans, respectively, were guaranteed by government agencies. |
▪ | Effects of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices; |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(Dollars in thousands) | |||||||||||||||
Loans receivable, net at the end of the period | $ | 2,578,977 | $ | 2,404,044 | $ | 2,578,977 | $ | 2,404,044 | |||||||
Average loans receivable during the period | $ | 2,526,150 | $ | 2,356,090 | $ | 2,461,856 | $ | 2,295,881 | |||||||
Allowance for loan losses on loans at the beginning of the period | $ | 28,426 | $ | 28,278 | $ | 29,746 | $ | 27,729 | |||||||
Provision for loan losses | 1,495 | 851 | 3,754 | 3,247 | |||||||||||
Charge-offs: | |||||||||||||||
Commercial business | (328 | ) | (70 | ) | (3,698 | ) | (1,580 | ) | |||||||
Real estate construction and land development | — | — | (154 | ) | (106 | ) | |||||||||
Consumer | (572 | ) | (278 | ) | (1,370 | ) | (1,208 | ) | |||||||
Total charge-offs | (900 | ) | (348 | ) | (5,222 | ) | (2,894 | ) | |||||||
Recoveries: | |||||||||||||||
Commercial business | 993 | 59 | 1,352 | 447 | |||||||||||
One-to-four family residential | — | 12 | 2 | 13 | |||||||||||
Real estate construction and land development | — | — | 83 | 100 | |||||||||||
Consumer | 197 | 152 | 496 | 362 | |||||||||||
Total recoveries | 1,190 | 223 | 1,933 | 922 | |||||||||||
Net recoveries (charge-offs) | 290 | (125 | ) | (3,289 | ) | (1,972 | ) | ||||||||
Allowance for loan losses at the end of the period | $ | 30,211 | $ | 29,004 | $ | 30,211 | $ | 29,004 | |||||||
Allowance for loan losses to loans receivable, net | 1.17 | % | 1.21 | % | 1.17 | % | 1.21 | % | |||||||
Ratio of net (recoveries) charge-offs to average loans receivable (annualized) | (0.05 | )% | 0.02 | % | 0.18 | % | 0.11 | % |
September 30, 2016 | December 31, 2015 | ||||||
(Dollars in thousands) | |||||||
General Valuation Allowance: | |||||||
Allowance for loan losses | $ | 20,823 | $ | 17,354 | |||
Gross loans, excluding PCI and impaired loans | $ | 2,477,838 | $ | 2,283,832 | |||
Percentage | 0.84 | % | 0.76 | % | |||
PCI Allowance: | |||||||
Allowance for loan losses | $ | 6,881 | $ | 9,084 | |||
Gross PCI loans | $ | 67,971 | $ | 86,919 | |||
Percentage | 10.12 | % | 10.45 | % | |||
Specific Valuation Allowance: | |||||||
Allowance for loan losses | $ | 2,507 | $ | 3,308 | |||
Gross impaired loans | $ | 31,268 | $ | 30,362 | |||
Percentage | 8.02 | % | 10.90 | % | |||
Total Allowance for Loan Losses: | |||||||
Allowance for loan losses | $ | 30,211 | $ | 29,746 | |||
Gross loans receivable | $ | 2,577,077 | $ | 2,401,113 | |||
Percentage | 1.17 | % | 1.24 | % |
September 30, 2016 | December 31, 2015 | ||||||||||||
Balance | % of Total | Balance | % of Total | ||||||||||
(Dollars in thousands) | |||||||||||||
Noninterest bearing demand deposits | $ | 865,930 | 26.7 | % | $ | 770,927 | 24.8 | % | |||||
NOW accounts | 963,827 | 29.7 | 917,859 | 29.5 | |||||||||
Money market accounts | 535,454 | 16.5 | 545,342 | 17.6 | |||||||||
Savings accounts | 508,566 | 15.7 | 453,826 | 14.6 | |||||||||
Total non-maturity deposits | 2,873,777 | 88.6 | 2,687,954 | 86.5 | |||||||||
Certificates of deposit | 368,644 | 11.4 | 420,333 | 13.5 | |||||||||
Total deposits | $ | 3,242,421 | 100.0 | % | $ | 3,108,287 | 100.0 | % |
Minimum Requirements | Well-Capitalized Requirements | Actual | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
As of September 30, 2016: | |||||||||||||||||||
The Company consolidated | |||||||||||||||||||
Common equity Tier 1 capital to risk-weighted assets | $ | 142,901 | 4.5 | % | N/A | N/A | $ | 362,971 | 11.4 | % | |||||||||
Tier 1 leverage capital to average assets | 146,095 | 4.0 | N/A | N/A | 382,491 | 10.5 | |||||||||||||
Tier 1 capital to risk-weighted assets | 190,534 | 6.0 | N/A | N/A | 382,491 | 12.0 | |||||||||||||
Total capital to risk-weighted assets | 254,045 | 8.0 | N/A | N/A | 412,913 | 13.0 | |||||||||||||
Heritage Bank | |||||||||||||||||||
Common equity Tier 1 capital to risk-weighted assets | 142,771 | 4.5 | 206,225 | 6.5 | 371,140 | 11.7 | |||||||||||||
Tier 1 leverage capital to average assets | 145,984 | 4.0 | 182,480 | 5.0 | 371,140 | 10.2 | |||||||||||||
Tier 1 capital to risk-weighted assets | 190,362 | 6.0 | 253,816 | 8.0 | 371,140 | 11.7 | |||||||||||||
Total capital to risk-weighted assets | 253,816 | 8.0 | 317,270 | 10.0 | 401,521 | 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 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | Plan Total (1) | |||||||||||||||
Eleventh Plan | |||||||||||||||||||
Repurchased shares | 38,000 | — | 138,000 | 441,966 | 579,996 | ||||||||||||||
Stock repurchase average share price | $ | 17.46 | $ | — | $ | 17.16 | $ | 16.64 | $ | 16.76 |
Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share(1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | |||||||||
July 1, 2016— July 31, 2016 | 38,000 | $ | 17.46 | 7,893,389 | 935,034 | ||||||||
August 1, 2016— August 31, 2016 | — | — | 7,893,389 | 935,034 | |||||||||
September 1, 2016— September 30, 2016 | 5,267 | 18.64 | 7,893,389 | 935,034 | |||||||||
Total | 43,267 | $ | 17.60 | 7,893,389 | 935,034 |
(1) | Of the common shares repurchased by the Company between July 1, 2016 and September 30, 2016, 5,267 shares of restricted stock represented the cancellation of stock to pay withholding taxes at a weighted average price per share of $18.64. |
Exhibit No. | Description of Exhibit | ||
2.1 | Purchase and Assumption Agreement for Cowlitz Acquisition (1) | ||
2.2 | Purchase and Assumption Agreement for Pierce Acquisition (2) | ||
2.3 | Definitive Agreement for Valley Acquisition (3) | ||
2.4 | Agreement and Plan of Merger with Washington Banking Company (4) | ||
3.1 | Articles of Incorporation (5) | ||
3.2 | Amended and Restated Bylaws of the Company (6) | ||
10.1 | 1998 Stock Option and Restricted Stock Award Plan (7) | ||
10.2 | 1997 Stock Option and Restricted Stock Award Plan (8) | ||
10.3 | 2002 Incentive Stock Option Plan, Director Nonqualified Stock Option Plan, and Restricted Stock Option Plan (9) | ||
10.4 | 2006 Incentive Stock Option Plan, Director Nonqualified Stock Option Plan, and Restricted Stock Option Plan (10) | ||
10.5 | Annual Incentive Compensation Plan (11) | ||
10.6 | 2010 Omnibus Equity Plan (12) | ||
10.7 | 2014 Omnibus Equity Plan (13) | ||
10.8 | Form of Nonqualified Stock Option Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14) | ||
10.9 | Form of Restricted Stock Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14) | ||
10.10 | Form of Restricted Stock Unit Award Agreement under the Heritage Financial Corporation 2014 Omnibus Equity Plan (14) | ||
10.11 | Deferred Compensation Plan and Participation Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15) | ||
10.12 | Employment Agreements by and between Heritage and each of Brian L. Vance, Jeffrey J. Deuel and Donald J. Hinson (15) | ||
10.13 | Employment Agreement and Deferred Compensation Participation Agreement by and between Heritage and David A. Spurling (16) | ||
10.14 | Employment Agreement by and between Heritage and Bryan McDonald (17) | ||
10.15 | Employment Agreements by and between Heritage and Edward Eng (17) | ||
10.16 | Deferred Compensation Plan and Participation Agreement by and between Heritage and Bryan D. McDonald (18) | ||
10.17 | 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) | ||
10.18 | Deferred Compensation Plan and Participation Agreement by and between Heritage and David A. Spurling (20) | ||
11 | Statement regarding computation of earnings per share (21) | ||
14.0 | Code of Ethics and Conduct Policy (22) | ||
31.1 | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2 | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101 | The following materials from Heritage Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, formatted in Extensible Business Reporting Language (“XBRL”): (i) Unaudited Condensed Consolidated Statements of Financial Condition, (ii) Unaudited Condensed Consolidated Statements of Income; (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income, (iv) Unaudited Condensed Consolidated Statements of Stockholders' Equity; (v) Unaudited Condensed Consolidated Statements of Cash Flows, and (vi) Unaudited Notes to Condensed 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 filed on 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) | Incorporated by reference to the Annual Report on Form 10-K dated March 2, 2010. |
(12) | Incorporated by reference to the Registration Statement on Form S-8 (Reg. No. 33-167146). |
(13) | Incorporated by reference to Heritage Financial Corporation's definitive proxy statement dated June 11, 2014. |
(14) | Incorporated by reference to the Current Report on Form 10-Q dated August 6, 2014. |
(15) | Incorporated by reference to the Current Report on Form 8-K dated September 7, 2012. |
(16) | Incorporated by reference to the Current Report on Form 8-K dated January 6, 2014. |
(17) | Incorporated by reference to the Registration Statement on Form S-4 (Reg. No. 333-192985). |
(18) | Incorporated by reference to the Annual Report on Form 10-K dated March 10, 2015. |
(19) | Incorporated by reference to the Current Report on Form 10-Q dated August 6, 2015. |
(20) | Incorporated by reference to the Current Report on Form 8-K dated December 22, 2015. |
(21) | Reference is made to Note (11)—Stockholders' Equity in the Notes to Condensed Consolidated Financial Statements under Part 1. Item 1. 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 | ||
Date: | ||
November 8, 2016 | /S/ BRIAN L. VANCE | |
Brian L. Vance | ||
President and Chief Executive Officer | ||
(Duly Authorized Officer) | ||
Date: | ||
November 8, 2016 | /S/ DONALD J. HINSON | |
Donald J. Hinson | ||
Executive Vice President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
Exhibit No. | Description of Exhibit | |
31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101 | The following financial information from Heritage Financial Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 is formatted in XBRL: (i) the Unaudited Condensed Consolidated Statements of Financial Condition, (ii) the Unaudited Condensed Consolidated Statements of Income, (iii) the Unaudited Condensed Consolidated Statements Comprehensive Income, (iv) the Unaudited Condensed Consolidated Statements of Stockholders’ Equity, (v) the Unaudited Condensed Consolidated Statements of Cash Flows, and (vi) the Unaudited Notes to Condensed Consolidated Financial Statements. |
1. | I have reviewed the quarterly report on Form 10-Q of Heritage Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Brian L. Vance |
Brian L. Vance |
President and Chief Executive Officer Principal Executive Officer |
1. | I have reviewed the quarterly report on Form 10-Q of Heritage Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Donald J. Hinson |
Donald J. Hinson |
Executive Vice President and Chief Financial Officer Principal Financial and Accounting Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report. |
November 8, 2016 | /s/ Brian L. Vance |
Brian L. Vance | |
President and Chief Executive Officer Principal Executive Officer | |
November 8, 2016 | /s/ Donald J. Hinson |
Donald J. Hinson | |
Executive Vice President and Chief Financial Officer Principal Financial and Accounting Officer |
Document and Entity Information - shares |
9 Months Ended | |
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Sep. 30, 2016 |
Oct. 26, 2016 |
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Document and Entity Information [Abstract] | ||
Entity Registrant Name | HERITAGE FINANCIAL CORP /WA/ | |
Entity Central Index Key | 0001046025 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 29,946,823 |
Condensed Consolidated Statements of Financial Condition (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in usd per share) | ||
Preferred stock, shares authorized | 2,500,000 | 2,500,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in usd per share) | ||
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 29,946,823 | 29,975,439 |
Common stock, shares outstanding | 29,946,823 | 29,975,439 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Change in fair value of securities available for sale, tax | $ (570) | $ 1,657 | $ 4,983 | $ 1,300 |
Reclassification adjustment of net gain from sale of investment securities included in income, tax | (121) | (138) | (388) | (520) |
Accretion of other-than-temporary impairment on investment securities, tax | 0 | 0 | 0 | 4 |
Reclassification of remaining unaccreted other-than-temporary impairment upon sale of investment securities held to maturity included in income, tax | $ 0 | $ 0 | $ 0 | $ 44 |
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (Parenthetical) - $ / shares |
3 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 20, 2016 |
Apr. 20, 2016 |
Jan. 27, 2016 |
Oct. 22, 2015 |
Jul. 22, 2015 |
Apr. 22, 2015 |
Jan. 28, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Statement of Stockholders' Equity [Abstract] | |||||||||||
Cash dividends declared on common stock (in usd per share) | $ 0.12 | $ 0.12 | $ 0.11 | $ 0.11 | $ 0.11 | $ 0.11 | $ 0.10 | $ 0.12 | $ 0.11 | $ 0.35 | $ 0.32 |
Description of Business, Basis of Presentation and Significant Accounting Policies |
9 Months Ended | ||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
Description of Business, Basis of Presentation and Significant Accounting Policies and Recently Issued Accounting Pronouncements | Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements (a) Description of Business Heritage Financial Corporation ("Heritage" or the “Company”) is a bank holding company that was incorporated in the State of Washington in August 1997. The Company is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly-owned subsidiary, Heritage Bank (the “Bank”). The Bank is a Washington-chartered commercial bank and its deposits are insured by the FDIC under the Deposit Insurance Fund. The Bank is headquartered in Olympia, Washington and conducts business from its 63 branch offices located throughout Washington State and the greater Portland, Oregon area. The Bank’s business consists primarily of commercial lending and deposit relationships with small businesses and their owners in its market areas and attracting deposits from the general public. The Bank also makes real estate construction and land development loans and consumer loans and originates first mortgage loans on residential properties primarily located in its market area. The Company has expanded its footprint through mergers and acquisitions. The largest of these transactions was the strategic merger with Washington Banking Company (“Washington Banking”) and its wholly owned subsidiary bank, Whidbey Island Bank ("Whidbey"). Effective May 1, 2014, Washington Banking merged with and into Heritage and Whidbey merged with and into Heritage Bank and this transaction is referred to herein as the "Washington Banking Merger". In connection with the Washington Banking Merger, Heritage also acquired as a subsidiary the Washington Banking Master Trust, a Delaware statutory business trust. Pursuant to the merger agreement, Heritage assumed the performance and observance of the covenants to be performed by Washington Banking under an indenture relating to $25.0 million in trust preferred securities issued in 2007 and the due and punctual payment of the principal of and premium and interest on such trust preferred securities. For additional information, see Note (8) Junior Subordinated Debentures. (b) Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. It is recommended that these unaudited Condensed Consolidated Financial Statements and accompanying Notes be read with the audited Consolidated Financial Statements and the accompanying Notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Form 10-K”). In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. In preparing the unaudited Condensed Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the facts and circumstances at the time. Actual results, however, could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period’s presentation. The Company reclassified $56.6 million of loans receivable previously classified as owner-occupied commercial real estate at December 31, 2015 to non-owner occupied commercial real estate for all comparative tables in Note (3) Loans Receivable. The related allowance for loan losses and provision for loan losses for all historical periods in Note (4) Allowance for Loan Losses were also reclassified. None of these loans were considered impaired at September 30, 2016 or December 31, 2015. The reclassification was due to a review of certain loan products, including hotels, assisted-living housing and self-storage units, for which the Bank determined the risk characteristics were more akin to non-owner occupied loans. The Company also reclassified $179.0 million fair value ($179.8 million amortized cost) of mortgage backed securities and collateralized mortgage obligations previously classified as residential to commercial based on a detailed review of the investment types. The reclassifications had no effect on prior periods' net income or stockholders’ equity. (c) Significant Accounting Policies The significant accounting policies used in preparation of the Company's Condensed Consolidated Financial Statements are disclosed in the 2015 Annual Report on Form 10-K. There have not been any material changes in the Company's significant accounting policies from those contained in the 2015 Annual Report on Form 10-K. (d) Recently Issued Accounting Pronouncements Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU" or "Update") 2014-09, Revenue from Contracts with Customers, was issued in May 2014. Under this Update, FASB created a new Topic 606 which is in response to a joint initiative of FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and international financial reporting standards that would:
The original effective date for this Update was deferred in FASB ASU 2015-14 below. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2015-14, Revenue from Contracts with Customers, was issued in August 2015 and defers the effective date of the above-mentioned FASB ASU 2014-09 for certain entities. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is now permitted, but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is a public business entity and will not early adopt the guidance in Update 2014-09 as permitted in this Update. The Company is currently evaluating the impact that Update 2014-09 will have on its Condensed Consolidated Financial Statements upon adoption. FASB ASU 2015-16, Business Combinations (Topic 805), was issued in September 2015. Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the Update requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present separately on the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Update did not have an impact on the Company's Condensed Consolidated Financial Statements as of September 30, 2016. FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10), was issued in January 2016, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This Update contains several provisions, including but not limited to 1) requiring equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; 2) simplifying the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) eliminating the requirement to disclose the method(s) and significant assumptions used to estimate fair value; and 4) requiring separate presentation of financial assets and liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. The Update also changes certain financial statement disclosure requirements, including requiring disclosures of the fair value of financial instruments be made on the basis of exit price. The Update is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-02, Leases (Topic 842), was issued in February 2016, to increase transparency and comparability of leases among organizations and to disclose key information about leasing arrangements. The Update sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The Update requires lessees to apply a dual approach, classifying leases as either a finance or operating lease. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. All cash payments will be classified within operating activities in the statement of cash flows. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Update is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, was issued in March 2016 and it clarifies the implementation guidance of the above-mentioned FASB ASU 2014-09 as it relates to principal versus agent considerations. The Update addresses identifying the unit of account and nature of the goods or services as well as applying the control principle and interactions with the control principle. The amendments to the Update do not change the core principle of the guidance. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-09, Stock Compensation (Topic 718), issued in March 2016, is intended to simplify several aspects of the accounting for share-based payment award transactions. For public business entities, the guidance is effective for annual periods after December 15, 2016, including interim periods within those annual periods with early adoption permitted. Certain amendments will be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Other amendments will be applied retroactively (such as presentation of employee taxes paid on the statement of cash flows) or prospectively (such as recognition of excess tax benefits on the income statement). The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, was issued in April 2016 which clarifies the implementation guidance of the above-mentioned FASB ASU 2014-09 as it relates to identifying performance obligations and licensing. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-scope Improvements and Practical Expedients, was issued in May 2016. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only the narrow aspects of Topic 606. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-13, Financial Instruments: Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, was issued in June 2016. Commonly referred to as the current expected credit loss model("CECL"), this Update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amendment affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial asset not excluded from the scope that have the contractual right to receive cash. The Update replaces the incurred loss impairment methodology, which generally only considered past events and current conditions, with a methodology that reflects the expected credit losses and required consideration of a broader range of reasonable and supportable information to estimate all expected credit losses. The Update additionally addresses purchased assets and introduces the purchased financial asset with a more-than-insignificant amount of credit deterioration since origination ("PCD"). The accounting for these PCD assets is similar to the existing accounting guidance of FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, for purchased credit impaired ("PCI") assets, except the subsequent improvements in estimated cash flows will be immediately recognized into income, similar to the immediate recognition of subsequent deteriorations in cash flows. Current guidance only allows for the prospective recognition of these cash flow improvements. Because the terminology has been changed to a "more-than-insignificant" amount of credit deterioration, the presumption is that more assets might qualify for this accounting under the Update than those under current guidance. For public business entities, the Update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted for fiscal years after December 15, 2018. An entity will apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. A prospective transition approach is required for debt securities. An entity that has previously applied the guidance of ASC 310-30 will prospectively apply the guidance in this Update for PCD assets. A prospective transition approach should be used for PCD assets where upon adoption, the amortized cost basis should be adjusted to reflect the addition of the allowance for credit losses. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-15, Statement of Cash Flows (Topic 213): Classification of Certain Cash Receipts and Cash Payments, was issued in August 2016. The Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and must be applied using a retrospective transitional method to each period presented. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. |
Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Investment Securities The Company’s investment policy is designed primarily to provide and maintain liquidity, generate a favorable return on assets without incurring undue interest rate and credit risk, and complement the Bank’s lending activities. Securities are classified as either available for sale or held to maturity when acquired. During the year ended December 31, 2015, the Company transferred all of its investment securities previously classified as held to maturity to available for sale. As a result of the transfer and subsequent sales, the Company believes its held to maturity classification process has been compromised and careful evaluation and analysis will be required going forward in determining when circumstances are suitable for management to assert with a sufficient degree of credibility that it has the intent and ability to hold investments to maturity. (a) Securities by Type and Maturity The amortized cost, gross unrealized gains, gross unrealized losses and fair values of investment securities available for sale at the dates indicated were as follows:
(1) U.S. Government-sponsored agencies. There were no securities classified as trading or held to maturity at September 30, 2016 or December 31, 2015. The amortized cost and fair value of investment securities available for sale at September 30, 2016, by contractual maturity, are set forth below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
(b) Unrealized Losses and Other-Than-Temporary Impairments The following table shows the gross unrealized losses and fair value of the Company's investment securities available for sale that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in continuous unrealized loss positions as of September 30, 2016 and December 31, 2015 were as follows:
(1) U.S. Government-sponsored agencies. The Company has evaluated these investment securities available for sale as of September 30, 2016 and December 31, 2015 and has determined that the decline in their value is temporary. The unrealized losses are primarily due to increases in market interest rates. The fair value of these securities is expected to recover as the securities approach their maturity date. None of the underlying bonds of the municipal securities had credit ratings that were below investment grade levels at September 30, 2016 or December 31, 2015. The Company has the ability and intent to hold the investments until recovery of the securities' amortized cost which may be the maturity date of the securities. All of the other-than-temporary impairment experienced by the Company in historical periods has been related to its portfolio of private-residential collateralized mortgage obligations. As there were no private-residential collateralized mortgage obligations at September 30, 2016 and December 31, 2015, the Company did not perform an other-than-temporary impairment analysis for the three and nine months ended September 30, 2016 on these securities. For the three and nine months ended September 30, 2015, there were no investment securities held to maturity determined to be other-than-temporarily impaired and the Company recorded no unrealized losses for the three and nine months ended September 30, 2015 in earnings or other comprehensive income. To analyze the unrealized losses, the Company estimated expected future cash flows of the investments by estimating the expected future cash flows of the underlying collateral and applying those collateral cash flows, together with any credit enhancements such as subordinated interests owned by third parties, to the security. The expected future cash flows of the underlying collateral were determined using the remaining contractual cash flows adjusted for future expected credit losses (which considers current delinquencies and nonperforming assets, future expected default rates and collateral value by vintage and geographic region) and prepayments. The expected cash flows of the security were then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. The Company did not use any impairment assumptions as of September 30, 2015 as the unrealized losses were insignificant. (c) Pledged Securities The following table summarizes the amortized cost and fair value of investment securities available for sale that are pledged as collateral for the following obligations at September 30, 2016 and December 31, 2015:
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Loans and Leases Receivable Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Receivable | Loans Receivable The Company originates loans in the ordinary course of business and has also acquired loans through FDIC-assisted and open bank transactions. Loans acquired in a business combination may be further classified as “purchased” loans. Loans purchased with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are accounted for under FASB ASC310-30. These loans are identified as PCI, or purchased credit impaired loans. Loans purchased that are not accounted for under FASB ASC 310-30 are accounted for under FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs, and are referred to as "non-PCI" loans. Disclosures related to the Company's recorded investment in loans receivable generally exclude accrued interest receivable and net deferred loan origination fees and costs because they are insignificant. (a) Loan Origination/Risk Management The Company categorizes loans in one of the four segments of the total loan portfolio: commercial business, one-to-four family residential, real estate construction and land development and consumer. Within these segments are classes of loans for which management monitors and assesses credit risk in the loan portfolios. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies, and nonperforming and potential problem loans. The Company also conducts internal loan reviews and validates the credit risk assessment on a periodic basis and presents the results of these reviews to management. The loan review process complements and reinforces the risk identification and assessment decisions made by loan officers and credit personnel, as well as the Company’s policies and procedures. A discussion of the risk characteristics of each loan portfolio segment is as follows: Commercial Business: There are three significant classes of loans in the commercial portfolio segment: commercial and industrial loans, owner-occupied commercial real estate and non-owner occupied commercial real estate. The owner and non-owner occupied commercial real estate are both considered commercial real estate loans. As the commercial and industrial loans carry different risk characteristics than the commercial real estate loans, they are discussed separately below. Commercial and industrial. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial and industrial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may include a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial real estate. The Company originates commercial real estate loans within its primary market areas. These loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate involves more risk than other classes of loans in that the lending typically involves higher loan principal amounts, and payments on loans secured by real estate properties are dependent on successful operation and management of the properties. Repayment of these loans may be more adversely affected by conditions in the real estate market or the economy. Owner-occupied commercial real estate loans are generally of lower credit risk than non-owner occupied commercial real estate loans as the borrowers' businesses are likely dependent on the properties. One-to-Four Family Residential: The majority of the Company’s one-to-four family residential loans are secured by single-family residences located in its primary market areas. The Company’s underwriting standards require that single-family portfolio loans generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral. Terms of maturity typically range from 15 to 30 years. Historically, the Company sold most single-family loans in the secondary market and retained a smaller portion in its loan portfolio. From the second quarter of 2013 until May 1, 2014, the Company only originated single-family loans for its loan portfolio. As a result of the Washington Banking Merger, since May 1, 2014 the Company has been originating and selling a majority of its single-family mortgages. Real Estate Construction and Land Development: The Company originates construction loans for one-to-four family residential and for five or more family residential and commercial properties. The one-to-four family residential construction loans generally include construction of custom homes whereby the home buyer is the borrower. The Company also provides financing to builders for the construction of pre-sold homes and, in selected cases, to builders for the construction of speculative residential property. Substantially all construction loans are short-term in nature and priced with variable rates of interest. Construction lending can involve a higher level of risk than other types of lending because funds are advanced partially based upon the value of the project, which is uncertain prior to the project’s completion. Because of the uncertainties inherent in estimating construction costs as well as the market value of a completed project and the effects of governmental regulation of real property, the Company’s estimates with regard to the total funds required to complete a project and the related loan-to-value ratio may vary from actual results. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property or refinance the indebtedness. If the Company’s estimate of the value of a project at completion proves to be overstated, it may have inadequate security for repayment of the loan and may incur a loss if the borrower does not repay the loan. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being dependent upon successful completion of the construction project, interest rate changes, government regulation of real property, general economic conditions and the availability of long-term financing. Consumer: The Company originates consumer loans and lines of credit that are both secured and unsecured. The underwriting process for these loans ensures a qualifying primary and secondary source of repayment. Underwriting standards for home equity loans are significantly influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage of 80%, collection remedies, the number of such loans a borrower can have at one time and documentation requirements. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. The majority of consumer loans are for relatively small amounts disbursed among many individual borrowers which reduces the credit risk for this type of loan. To further reduce the risk, trend reports are reviewed by management on a regular basis. As a result of the Washington Banking Merger, the Company is originating indirect consumer loans. These loans are for new and used automobile and recreational vehicles that are originated indirectly by selected dealers located in the Company's market areas. The Company has limited its purchase of indirect loans primarily to dealerships that are established and well known in their market areas and to applicants that are not classified as sub-prime. Loans receivable at September 30, 2016 and December 31, 2015 consisted of the following portfolio segments and classes:
(b) Concentrations of Credit Most of the Company’s lending activity occurs within Washington State, and to a lesser extent Oregon. The Company’s primary market areas are concentrated along the I-5 corridor from Whatcom County to Clark County in Washington State and Multnomah County in Oregon, as well as other contiguous markets. The majority of the Company’s loan portfolio consists of, in order of balances at September 30, 2016, non-owner occupied commercial real estate, commercial and industrial and owner-occupied commercial real estate. As of September 30, 2016 and December 31, 2015, there were no concentrations of loans related to any single industry in excess of 10% of the Company’s total loans. (c) Credit Quality Indicators As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of the loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans, and (v) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 10. A description of the general characteristics of the risk grades is as follows:
Numerical loan grades for loans are established at the origination of the loan. Loan grades are reviewed on a quarterly basis, or more frequently if necessary, by the credit department. The Bank follows the FDIC’s Uniform Retail Credit Classification and Account Management Policy for subsequent classification in the event of payment delinquencies or default. Typically, an individual loan grade will not be changed from the prior period unless there is a specific indication of credit deterioration or improvement. Credit deterioration is evidenced by delinquency, direct communications with the borrower, or other borrower information that becomes known to management. Credit improvements are evidenced by known facts regarding the borrower or the collateral property. The loan grades relate to the likelihood of losses in that the higher the grade, the greater the loss potential. Loans with a pass grade may have some estimated inherent losses, but to a lesser extent than the other loan grades. The OAEM loan grade is transitory in that the Company is waiting on additional information to determine the likelihood and extent of the potential loss. The likelihood of loss for OAEM graded loans, however, is greater than Watch graded loans because there has been measurable credit deterioration. Loans with a Substandard grade are generally loans for which the Company has individually analyzed for potential impairment. For Doubtful and Loss graded loans, the Company is almost certain of the losses, and the outstanding principal balances are generally charged-off to the realizable value. The following tables present the balance of the loans receivable by credit quality indicator as of September 30, 2016 and December 31, 2015.
Potential problem loans are loans classified as OAEM or worse that are currently accruing interest and are not considered impaired, but which management is monitoring because the financial information of the borrower causes concern as to their ability to meet their loan repayment terms. Potential problem loans may include PCI loans as these loans continue to accrete loan discounts established at acquisition based on the guidance of FASB ASC 310-30. Potential problem loans as of September 30, 2016 and December 31, 2015 were $101.0 million and $110.4 million, respectively. The balance of potential problem loans guaranteed by a governmental agency, which guarantee reduces the Company's credit exposure, was $2.2 million and $3.0 million as of September 30, 2016 and December 31, 2015, respectively. (d) Nonaccrual Loans Nonaccrual loans, segregated by segments and classes of loans, were as follows as of September 30, 2016 and December 31, 2015:
The Company had $3.0 million and $1.3 million of nonaccrual loans guaranteed by governmental agencies at September 30, 2016 and December 31, 2015, respectively. PCI loans are not included in the nonaccrual loan table above because these loans are accounted for under FASB ASC 310-30, which provides that accretable yield is calculated based on a loan's expected cash flow even if the loan is not performing under its contractual terms. (e) Past due loans The Company performs an aging analysis of past due loans using the categories of 30-89 days past due and 90 or more days past due. This policy is consistent with regulatory reporting requirements. The balances of past due loans, segregated by segments and classes of loans, as of September 30, 2016 and December 31, 2015 were as follows:
There were no loans 90 days or more past due that were still accruing interest as of September 30, 2016 or December 31, 2015, excluding PCI loans. (f) Impaired loans Impaired loans include nonaccrual loans and performing troubled debt restructured ("TDR") loans. The balances of impaired loans as of September 30, 2016 and December 31, 2015 are set forth in the following tables.
The Company had governmental guarantees of $3.7 million and $1.8 million related to the impaired loan balances at September 30, 2016 and December 31, 2015, respectively. The average recorded investment of impaired loans for the three and nine months ended September 30, 2016 and 2015 are set forth in the following table.
For the three and nine months ended September 30, 2016 and 2015, no interest income was recognized subsequent to a loan’s classification as nonaccrual. For the three and nine months ended September 30, 2016, the Bank recorded $156,000 and $501,000, respectively, of interest income related to performing TDR loans. For the three and nine months ended September 30, 2015, the Bank recorded $278,000 and $905,000, respectively, of interest income related to performing TDR loans. (g) Troubled Debt Restructured Loans A TDR loan is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDRs are considered impaired and are separately measured for impairment under FASB ASC 310-10-35, whether on accrual ("performing") or nonaccrual ("nonperforming") status. The Company has more stringent definitions of concessions and impairment measures for PCI loans as these loans have known credit deterioration and are generally accreting income at a lower discounted rate as compared to the contractual note rate based on the guidance of FASB ASC 310-30. The majority of the Bank’s TDR loans are a result of granting extensions of maturity on troubled credits which have already been adversely classified. The Bank grants such extensions to reassess the borrower’s financial status and to develop a plan for repayment. The second most prevalent concessions are certain modifications with extensions that also include interest rate reductions. Certain TDRs were additionally re-amortized over a longer period of time. These modifications would all be considered a concession for a borrower that could not obtain similar financing terms from another source other than from the Bank. The financial effects of each modification will vary based on the specific restructure. For the majority of the Bank’s TDRs, the loans were interest-only with a balloon payment at maturity. If the interest rate is not adjusted and the modified terms are consistent with other similar credits being offered, the Bank may not experience any loss associated with the restructure. If, however, the restructure involves forbearance agreements or interest rate modifications, the Bank may not collect all the principal and interest based on the original contractual terms. The Bank estimates the necessary allowance for loan losses on TDRs using the same guidance as used for other impaired loans. The recorded investment balance and related allowance for loan losses of performing and nonaccrual TDR loans as of September 30, 2016 and December 31, 2015 were as follows:
The unfunded commitment to borrowers related to TDRs was $269,000 and $551,000 at September 30, 2016 and December 31, 2015, respectively. Loans that were modified as TDRs during the three and nine months ended September 30, 2016 and 2015 are set forth in the following tables:
Of the 19 loans modified during the three months ended September 30, 2016, eight loans with a total outstanding principal balance of $1.4 million had no prior modifications. Of the 30 loans modified during the nine months ended September 30, 2016, 15 loans with a total outstanding principal balance of $1.7 million had no prior modifications. Of the 15 loans modified during the three months ended September 30, 2015, six loans with a total outstanding principal balance of $2.3 million had no prior modifications. Of the 51 loans modified during the nine months ended September 30, 2015, 27 loans with a total outstanding principal balance of $8.8 million had no prior modifications. The remaining loans included in the tables above for the three and nine months ended September 30, 2016 and 2015 were previously reported as TDRs. The Bank typically grants shorter extension periods to continually monitor these troubled credits despite that the extended date may not be when cash flows from these troubled credits are expected. The Company does not consider these modifications a subsequent default of a TDR as new loan terms, specifically new maturity dates, were granted. The potential losses related to these loans would have been considered in the period the loan was first reported as a TDR and adjusted, as necessary, in the current period based on more recent information. The related specific valuation allowance at September 30, 2016 was $639,000 for loans that were modified as TDRs during the nine months ended September 30, 2016. There were no loans that were modified during the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2016. There was one commercial and industrial loan totaling $98,000 at September 30, 2015 that was modified during the previous twelve months that subsequently defaulted during the three months ended September 30, 2015 because the borrower was 90 days delinquent on his scheduled payment. There was one commercial and industrial loan of $1.8 million at September 30, 2015 that was modified during the previous twelve months and subsequently defaulted during the nine months ended September 30, 2015 because the borrower did not make the specific curtailment payments on the loan in prior periods, but for which the required payment was made during the three months ended September 30, 2015. (h) Purchased Credit Impaired Loans The Company acquired loans and designated them as PCI loans, which are accounted for under FASB ASC 310-30, in the Washington Banking Merger on May 1, 2014 and in previously completed acquisitions, including the acquisitions of Northwest Commercial Bank ("NCB") on January 9, 2013 and Valley Community Bancshares, Inc. ("Valley") on July 15, 2013 and the FDIC-assisted acquisitions of Cowlitz Bank ("Cowlitz") and Pierce Commercial Bank ("Pierce") on July 30, 2010 and November 8, 2010, respectively. The following table reflects the outstanding principal balance and recorded investment of the PCI loans at September 30, 2016 and December 31, 2015:
On the acquisition dates, the amount by which the undiscounted expected cash flows of the PCI loans exceeded the estimated fair value of the loan is the “accretable yield.” The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loans. The following table summarizes the accretable yield on the PCI loans for the three and nine months ended September 30, 2016 and 2015.
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Allowance for Loan Losses |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses is maintained at a level deemed appropriate by management to provide for probable incurred credit losses in the loan portfolio. The methodology for calculating the allowance for loan losses is completed on loans originated by the Bank and on loans purchased in mergers and acquisitions. The FDIC shared-loss agreements for loans purchased in mergers and acquisitions were terminated on August 4, 2015. Prior to their termination, when a credit deterioration occurred, subsequent to the acquisition, on a loan that was covered by the FDIC shared-loss agreements, a provision for loan losses was charged to earnings for the full amount of the impairment, without regard to the coverage of the FDIC shared-loss agreements. The following tables detail the activity in the allowance for loan losses disaggregated by segment and class for the three and nine months ended September 30, 2016:
The following table details the balance in the allowance for loan losses disaggregated on the basis of the Company's impairment method as of September 30, 2016.
The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of September 30, 2016:
The following tables detail activity in the allowance for loan losses disaggregated by segment and class for the three and nine months ended September 30, 2015.
The following table details the balance in the allowance for loan losses disaggregated on the basis of the Company's impairment method as of December 31, 2015.
The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of December 31, 2015:
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Other Real Estate Owned |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Real Estate Owned | Other Real Estate Owned Changes in other real estate owned during the three and nine months ended September 30, 2016 and 2015 were as follows:
At September 30, 2016, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $576,000. |
Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets (a) Goodwill The Company’s goodwill represents the excess of the purchase price over the fair value of net assets acquired in the Washington Banking Merger on May 1, 2014, and the acquisitions of Valley on July 15, 2013, Western Washington Bancorp in 2006 and North Pacific Bank in 1998. The Company’s goodwill is assigned to the Bank and is evaluated for impairment at the Bank level (reporting unit). There were no additions to goodwill during the three and nine months ended September 30, 2016 and 2015. At September 30, 2016, the Company’s step-one analysis concluded that the reporting unit’s fair value was greater than its carrying value and therefore no goodwill impairment charges were required, or recorded, for the three and nine months ended September 30, 2016. Similarly, no goodwill impairment charges were required, or recorded, for the three and nine months ended September 30, 2015. Even though there was no goodwill impairment at September 30, 2016, adverse events may impact the recoverability of goodwill and could result in a future impairment charge which could have a material impact on the Company’s operating results. b) Other Intangible Assets The other intangible assets represent the core deposit intangible ("CDI") acquired in business combinations. The useful life of the CDI related to the Washington Banking Merger, the acquisitions of Valley, NCB, Pierce, Cowlitz, and Western Washington Bancorp were estimated to be ten, ten, five, four, nine and eight years, respectively. The following table presents the change in the other intangible assets for the periods indicated:
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Other Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Borrowings | Other Borrowings (a) Federal Home Loan Bank Advances The Federal Home Loan Bank ("FHLB") of Des Moines functions as a member-owned cooperative providing credit for member financial institutions. Advances are made pursuant to several different programs. Each credit program has its own interest rate and range of maturities. Limitations on the amount of advances are based on a percentage of the Bank's assets or on the FHLB’s assessment of the institution’s creditworthiness. At September 30, 2016, the Bank maintained a credit facility with the FHLB of Des Moines for $664.5 million and had $17.7 million of FHLB advances outstanding at a weighted average rate of 0.45%. At December 31, 2015 there were no FHLB advances outstanding. The following table sets forth the details of FHLB advances during the three and nine months ended September 30, 2016 and 2015:
Advances from the FHLB are collateralized by a blanket pledge on FHLB stock owned by the Bank, deposits at the FHLB, certain one-to-four single family residential loans, investment securities which are obligations of or guaranteed by the United States or other assets. In accordance with the pledge agreement, the Company must maintain unencumbered collateral in an amount equal to varying percentages ranging from 100% to 160% of outstanding advances depending on the type of collateral. (b) Federal Funds Purchased The Bank maintains advance lines with Wells Fargo Bank, US Bank, TIB and Pacific Coast Bankers’ Bank to purchase federal funds of up to $90.0 million as of September 30, 2016. The lines generally mature annually or are reviewed annually. As of September 30, 2016 and December 31, 2015, there were no federal funds purchased. (c) Credit facilities The Bank maintains a credit facility with the Federal Reserve Bank of San Francisco for $51.2 million as of September 30, 2016, of which there were no borrowings outstanding as of September 30, 2016 or December 31, 2015. Any advances on the credit facility would have to be first secured by the Bank's investment securities or loans receivable. |
Junior Subordinated Debentures |
9 Months Ended |
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Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Junior Subordinated Debentures | Junior Subordinated Debentures As part of the Washington Banking Merger, the Company assumed trust preferred securities and junior subordinated debentures with a total fair value of $18.9 million at the May 1, 2014 merger date. Washington Banking Master Trust ("Trust"), a Delaware statutory business trust, was a wholly-owned subsidiary of Washington Banking created for the exclusive purposes of issuing and selling capital securities and utilizing sale proceeds to acquire junior subordinated debt issued by Washington Banking. During 2007, the Trust issued $25.0 million of trust preferred securities with a 30-year maturity, callable after the fifth year by Washington Banking. The trust preferred securities have a quarterly adjustable rate based upon the three-month London Interbank Offered Rate (“LIBOR”) plus 1.56%. On the Washington Banking Merger date of May 1, 2014, the Company acquired the Trust, which retained the Washington Banking Master Trust name, and assumed the performance and observance of the covenants under the indenture related to the trust preferred securities. The adjustable rate of the trust preferred securities at September 30, 2016 was 2.41%. The weighted average rate of the junior subordinated debentures was 4.49% and 4.43% for the three and nine months ended September 30, 2016, respectively, and 4.01% and 4.36% for the three and nine months ended September 30, 2015, respectively. The weighted average rate includes the accretion of the discount established at the merger date which is amortized over the life of the trust preferred securities. The junior subordinated debentures are the sole assets of the Trust, and payments under the junior subordinated debentures are the sole revenues of the Trust. At September 30, 2016 and December 31, 2015, the balance of the junior subordinated debentures, net of unaccreted discount, was $19.6 million and $19.4 million, respectively. All of the common securities of the Trust are owned by the Company. Heritage has fully and unconditionally guaranteed the capital securities along with all obligations of the Trust under the trust agreements. |
Repurchase Agreements |
9 Months Ended |
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Sep. 30, 2016 | |
Disclosure of Repurchase Agreements [Abstract] | |
Repurchase Agreements | Repurchase Agreements The Company utilizes repurchase agreements with one-day maturities as a supplement to funding sources. Repurchase agreements are secured by pledged investment securities available for sale. Under the repurchase agreements, the Company is required to maintain an aggregate market value of securities pledged greater than the balance of the repurchase agreements. The Company is required to pledge additional securities to cover any declines below the balance of the repurchase agreements. The classes of collateral pledged for the Company's repurchase agreement obligations as of September 30, 2016 were residential mortgage backed securities and collateralized mortgage obligations of $13.9 million, commercial mortgage backed securities and collateralized mortgage obligations of $5.6 million and and U.S. Government-sponsored agencies of $2.9 million. The classes of collateral pledged for the Company's repurchase agreement obligations as of December 31, 2015, were residential mortgage backed securities and collateralized mortgage obligations of $18.0 million and commercial mortgage backed securities and collateralized mortgage obligations of $5.2 million. For additional information on the total value of investment securities pledged for repurchase agreements see Note (2) Investment Securities. |
Derivative Financial Instruments (Notes) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments The Company has entered into certain interest rate swap contracts that are not designated as hedging instruments. The purpose of these derivative contracts is primarily to provide commercial business loan customers the ability to convert their loans from variable to fixed interest rates. Upon the origination of a derivative contract with a customer, the Company simultaneously enters into an offsetting derivative contract with a third party in order to offset its exposure on the variable and fixed rate components of the customer agreement. The Company recognizes immediate income based upon the difference in the bid/ask spread of the underlying transactions with its customers and the third party. Because the Company acts only as an intermediary for its customer, subsequent changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations. The notional amounts and estimated fair values of interest rate derivative contracts outstanding at September 30, 2016 and December 31, 2015 are presented in the following table.
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Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity (a) Earnings Per Common Share The following table illustrates the reconciliation of weighted average shares used for earnings per common share computations for the three and nine months ended September 30, 2016 and 2015:
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. For the three months ended September 30, 2016, there were no anti-dilutive shares outstanding related to options to acquire common stock. For the nine months ended September 30, 2016, anti-dilutive shares outstanding related to options to acquire common stock totaled 580 as the assumed proceeds from exercise price, tax benefits and future compensation were in excess of the market value. For the three and nine months ended September 30, 2015, anti-dilutive shares outstanding related to options to acquire common stock totaled 2,650 and 4,883, respectively, for the same reasons indicated for the 2016 periods. (b) Dividends The timing and amount of cash dividends paid on the Company's common stock depends on the Company’s earnings, capital requirements, financial condition and other relevant factors. Dividends on common stock from the Company depend substantially upon receipt of dividends from the Bank, which is the Company’s predominant source of income. The following table summarizes the dividend activity for the nine months ended September 30, 2016 and calendar year 2015.
* Denotes a special dividend. The FDIC and the Washington State Department of Financial Institutions, Division of Banks, as the Bank's primary regulators, have the authority to prohibit the payment of dividends by the Bank to the Company. Additionally, current guidance from the Board of Governors of the Federal Reserve System ("Federal Reserve Board") provides, among other things, that dividends per share on the Company’s common stock generally should not exceed earnings per share, measured over the previous four fiscal quarters. Current regulations allow the Company and the Bank to pay dividends on their common stock if the Company’s or the Bank’s regulatory capital would not be reduced below the statutory minimum capital requirements set by the Federal Reserve Board and the FDIC, respectively. (c) Stock Repurchase Program The Company has had various stock repurchase programs since March 1999. On October 23, 2014, the Company's Board of Directors authorized the repurchase of up to 5% of the Company's outstanding common shares, or approximately 1,513,000 shares, under the eleventh stock repurchase plan. The number, timing and price of shares repurchased will depend on business and market conditions, and other factors, including opportunities to deploy the Company's capital. The following table provides total repurchased shares and average share prices under the plan for the periods indicated:
(1) Represents shares repurchased and average price per share paid during the duration of the plan. In addition to the stock repurchases disclosed in the table above, the Company repurchased shares to pay withholding taxes on the vesting of restricted stock. During the three and nine months ended September 30, 2016, the Company repurchased 5,267 and 29,206 shares of common stock at an average price per share of $18.64 and $17.77, respectively, to pay withholding taxes on the vesting of restricted stock that vested during the respective periods. During the three and nine months ended September 30, 2015, the Company repurchased 388 and 21,998 shares of common stock at an average price per share of $17.63 and $17.07, respectively, to pay withholding taxes on the vesting of restricted stock that vested during the respective periods. |
Accumulated Other Comprehensive Income |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The changes in accumulated other comprehensive income (“AOCI”) by component, during the three and nine months ended September 30, 2016 and 2015 are as follows:
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Stock-Based Compensation |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Stock options generally vest ratably over three years and expire five years after they become exercisable or vest ratably over four years and expire ten years from date of grant. Restricted stock awards issued generally have a four-year cliff vesting or four-year ratable vesting schedule. The Company issues new shares of common stock to satisfy share option exercises and restricted stock awards. On July 24, 2014, the Company's shareholders approved the Heritage Financial Corporation 2014 Omnibus Equity Plan that provides for the issuance of 1,500,000 shares of the Company's common stock in the form of stock options, stock appreciation rights, stock awards (which includes restricted stock units, restricted stock, performance units, performance shares or bonus shares) and cash incentive awards. Under the Company's stock-based compensation plans, 1,151,503 shares remain available for future issuance as of September 30, 2016. (a) Stock Option Awards For the three and nine months ended September 30, 2016 and 2015, the Company did not recognize any compensation expense or related tax benefit related to stock options as all of the compensation expense related to the outstanding stock options had been previously recognized. The intrinsic value and cash proceeds from options exercised during the nine months ended September 30, 2016 was $99,000 and $401,000, respectively. The intrinsic value and cash proceeds from options exercised during the nine months ended September 30, 2015 was $223,000 and $666,000, respectively. The following table summarizes the stock option activity for the nine months ended September 30, 2016 and 2015:
(b) Restricted and Unrestricted Stock Awards For the three and nine months ended September 30, 2016, the Company recognized compensation expense related to restricted stock awards of $494,000 and $1.4 million, respectively, and a related tax benefit of $173,000 and $479,000, respectively. For the three and nine months ended September 30, 2015, the Company recognized compensation expense related to restricted stock awards of $409,000 and $1.1 million, respectively, and a related tax benefit of $144,000 and $395,000, respectively. As of September 30, 2016, the total unrecognized compensation expense related to non-vested restricted stock awards was $3.5 million and the related weighted average period over which the compensation expense is expected to be recognized is approximately 2.41 years. The vesting date fair value of the restricted stock awards that vested during the nine months ended September 30, 2016 and 2015 was $2.0 million and $1.6 million, respectively. The following tables summarize the restricted and unrestricted stock award activity for the nine months ended September 30, 2016 and 2015:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: Level 1: Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow the Company to sell its ownership interest back to the fund at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities, or funds. Level 2: Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or valuations using methodologies with observable inputs. Level 3: Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques using unobservable inputs, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. (a) Recurring and Nonrecurring Basis The Company used the following methods and significant assumptions to measure the fair value of certain assets on a recurring and nonrecurring basis: Investment Securities Available for Sale: The fair values of all investment securities are based upon the assumptions market participants would use in pricing the security. If available, fair values of investment securities are determined by quoted market prices (Level 1). For investment securities where quoted market prices are not available, fair values are calculated based on market prices on similar securities (Level 2). For investment securities where quoted prices or market prices of similar securities are not available, fair values are calculated by using observable and unobservable inputs such as discounted cash flows or other market indicators (Level 3). Security valuations are obtained from third party pricing services for comparable assets or liabilities. Impaired Loans: At the time a loan is considered impaired, its impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, observable market price, or fair market value of the collateral if the loan is collateral-dependent. Impaired loans for which impairment is measured using the discounted cash flow approach are not considered to be measured at fair value because the loan’s effective interest rate is generally not a fair value input, and for the purposes of fair value disclosures, the fair value of these loans are measured commensurate with non-impaired loans. If the Company utilizes the fair market value of the collateral method, the fair value used to measure impairment is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value based on the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business (Level 3). Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in Level 3 classification of the inputs for determining fair value. Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified general appraisers for commercial properties or certified residential appraisers for residential properties whose qualifications and licenses have been reviewed and verified by the Company. Once received, the Company reviews the assumptions and approaches utilized in the appraisal as well as the resulting fair value in comparison with independent data sources such as recent market data or industry-wide statistics. On a quarterly basis, the Company compares the actual selling price of collateral that has been liquidated to the most recent appraised value to determine what additional adjustment should be made to the appraisal value to arrive at fair value. Derivative Financial Instruments: The Company obtains broker/dealer quotes to value its interest rate derivative contracts, which use valuation models using observable market data as of the measurement date (Level 2). The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015.
There were no transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2016 and 2015. The Company may be required to measure certain financial assets and liabilities at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The tables below represent assets measured at fair value on a nonrecurring basis at September 30, 2016 and December 31, 2015 and the net losses (gains) recorded in earnings during three and nine months ended September 30, 2016 and 2015.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2016 and December 31, 2015.
(b) Fair Value of Financial Instruments Because broadly traded markets do not exist for most of the Company’s financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. These determinations are subjective in nature, involve uncertainties and matters of significant judgment and do not include tax ramifications; therefore, the results cannot be determined with precision, substantiated by comparison to independent markets and may not be realized in an actual sale or immediate settlement of the instruments. There may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results. For all of these reasons, the aggregation of the fair value calculations presented herein do not represent, and should not be construed to represent, the underlying value of the Company. The tables below present the carrying value amount of the Company’s financial instruments and their corresponding estimated fair values at the dates indicated.
The methods and assumptions, not previously presented, used to estimate fair value are described as follows: Cash and Cash Equivalents: The fair value of financial instruments that are short-term or reprice frequently and that have little or no risk are considered to have a fair value equal to carrying value (Level 1). Other Interest Earning Deposits: These deposits with other banks have maturities greater than three months. The fair value is calculated based upon market prices for similar deposits (Level 2). Federal Home Loan Bank Stock: FHLB stock is not publicly traded; thus, it is not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. Loans Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts or quotes from third party investors for similar loans. (Level 2). Loans Receivable: Except for certain impaired loans discussed previously, fair value is based on discounted cash flows using current market rates applied to the estimated life (Level 3). While these methodologies are permitted under U.S. GAAP, they are not based on the exit price concept of the fair value required under FASB ASC 820-10, Fair Value Measurements and Disclosures, and generally produce a higher value. Accrued Interest Receivable/Payable: The fair value of accrued interest receivable/payable balances are determined using inputs and fair value measurements commensurate with the asset or liability from which the accrued interest is generated. The carrying amounts of accrued interest approximate fair value (Level 1, Level 2 and Level 3). Deposits: For deposits with no contractual maturity, the fair value is assumed to equal the carrying value (Level 1). The fair value of fixed maturity deposits is based on discounted cash flows using the difference between the deposit rate and the rates offered by the Company for deposits of similar remaining maturities (Level 2). Federal Home Loan Bank Advances: The fair value of FHLB advances is estimated based on discounting the future cash flows using the market rate currently offered (Level 2). Securities Sold Under Agreement to Repurchase: Securities sold under agreement to repurchase are short-term in nature and they reprice on a daily basis. Fair value financial instruments that are short-term or reprice frequently and that have little or no risk are considered to have a fair value equal to carrying value (Level 1). Junior Subordinated Debentures: The fair value is estimated using discounted cash flow analysis based on current rates for similar types of debt, which many be unobservable, and considering recent trading activity of similar instruments in markets which can be inactive (Level 3). Off-Balance Sheet Financial Instruments: The majority of our commitments to extend credit, standby letters of credit and commitments to sell mortgage loans carry current market interest rates if converted to loans. As such, no premium or discount was ascribed to these commitments (Level 1). They are excluded from the preceding tables. |
Commitments and Contingencies |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies In June 2016, the Company received preliminary findings from the Washington State Department of Revenue ("DOR") regarding their business and occupation ("B&O") tax audit on the B&O tax returns of Whidbey for the years 2010-2014. The state B&O tax is a gross receipts tax and is calculated on the gross income from activities. It is measured on the value of products, gross proceeds of sale, or gross income of the business. A substantial portion of the preliminary findings related to the receipt of FDIC shared-loss payments from the FDIC to Washington Banking Company in connection with its acquisitions of City Bank in April 2010 and North County Bank in September 2010. In their preliminary findings, the DOR is considering those payments as taxable for B&O tax purposes. The total amount of this preliminary finding, along with calculated back interest, is approximately $1.6 million. Given the early stages of this DOR audit, management's estimates of the Company's ultimate liability, if any, involve significant judgment and are based on currently available information and an assessment of the validity of facts and calculations assumed by the DOR. Management does not believe a material loss is probable at this time and there are significant factual and legal issues to be resolved. Management believes that it is reasonably possible that future changes to the Company's estimates of loss and the ultimate amount paid for resolution of this B&O audit could impact the Company's results of operations in future periods. Any such losses would be reported as a noninterest expense in the Company's Condensed Consolidated Statement of Income. |
Description of Business, Basis of Presentation and Significant Accounting Policies and Recent Issued Accounting Policies (Policies) |
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Sep. 30, 2016 | |||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
Description of Business | Description of Business Heritage Financial Corporation ("Heritage" or the “Company”) is a bank holding company that was incorporated in the State of Washington in August 1997. The Company is primarily engaged in the business of planning, directing and coordinating the business activities of its wholly-owned subsidiary, Heritage Bank (the “Bank”). The Bank is a Washington-chartered commercial bank and its deposits are insured by the FDIC under the Deposit Insurance Fund. The Bank is headquartered in Olympia, Washington and conducts business from its 63 branch offices located throughout Washington State and the greater Portland, Oregon area. The Bank’s business consists primarily of commercial lending and deposit relationships with small businesses and their owners in its market areas and attracting deposits from the general public. The Bank also makes real estate construction and land development loans and consumer loans and originates first mortgage loans on residential properties primarily located in its market area. The Company has expanded its footprint through mergers and acquisitions. The largest of these transactions was the strategic merger with Washington Banking Company (“Washington Banking”) and its wholly owned subsidiary bank, Whidbey Island Bank ("Whidbey"). Effective May 1, 2014, Washington Banking merged with and into Heritage and Whidbey merged with and into Heritage Bank and this transaction is referred to herein as the "Washington Banking Merger". In connection with the Washington Banking Merger, Heritage also acquired as a subsidiary the Washington Banking Master Trust, a Delaware statutory business trust. Pursuant to the merger agreement, Heritage assumed the performance and observance of the covenants to be performed by Washington Banking under an indenture relating to $25.0 million in trust preferred securities issued in 2007 and the due and punctual payment of the principal of and premium and interest on such trust preferred securities. For additional information, see Note (8) Junior Subordinated Debentures. |
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Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. It is recommended that these unaudited Condensed Consolidated Financial Statements and accompanying Notes be read with the audited Consolidated Financial Statements and the accompanying Notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Form 10-K”). In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. In preparing the unaudited Condensed Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate based on the facts and circumstances at the time. Actual results, however, could differ from those estimates. Certain prior period amounts have been reclassified to conform to the current period’s presentation. The Company reclassified $56.6 million of loans receivable previously classified as owner-occupied commercial real estate at December 31, 2015 to non-owner occupied commercial real estate for all comparative tables in Note (3) Loans Receivable. The related allowance for loan losses and provision for loan losses for all historical periods in Note (4) Allowance for Loan Losses were also reclassified. None of these loans were considered impaired at September 30, 2016 or December 31, 2015. The reclassification was due to a review of certain loan products, including hotels, assisted-living housing and self-storage units, for which the Bank determined the risk characteristics were more akin to non-owner occupied loans. The Company also reclassified $179.0 million fair value ($179.8 million amortized cost) of mortgage backed securities and collateralized mortgage obligations previously classified as residential to commercial based on a detailed review of the investment types. The reclassifications had no effect on prior periods' net income or stockholders’ equity. |
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Significant Accounting Policies | Significant Accounting Policies The significant accounting policies used in preparation of the Company's Condensed Consolidated Financial Statements are disclosed in the 2015 Annual Report on Form 10-K. There have not been any material changes in the Company's significant accounting policies from those contained in the 2015 Annual Report on Form 10-K. |
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU" or "Update") 2014-09, Revenue from Contracts with Customers, was issued in May 2014. Under this Update, FASB created a new Topic 606 which is in response to a joint initiative of FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP and international financial reporting standards that would:
The original effective date for this Update was deferred in FASB ASU 2015-14 below. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2015-14, Revenue from Contracts with Customers, was issued in August 2015 and defers the effective date of the above-mentioned FASB ASU 2014-09 for certain entities. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is now permitted, but only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is a public business entity and will not early adopt the guidance in Update 2014-09 as permitted in this Update. The Company is currently evaluating the impact that Update 2014-09 will have on its Condensed Consolidated Financial Statements upon adoption. FASB ASU 2015-16, Business Combinations (Topic 805), was issued in September 2015. Topic 805 requires that an acquirer retrospectively adjust provisional amounts recognized in a business combination, during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the Update requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present separately on the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The Update did not have an impact on the Company's Condensed Consolidated Financial Statements as of September 30, 2016. FASB ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10), was issued in January 2016, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This Update contains several provisions, including but not limited to 1) requiring equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; 2) simplifying the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; 3) eliminating the requirement to disclose the method(s) and significant assumptions used to estimate fair value; and 4) requiring separate presentation of financial assets and liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. The Update also changes certain financial statement disclosure requirements, including requiring disclosures of the fair value of financial instruments be made on the basis of exit price. The Update is effective for public entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-02, Leases (Topic 842), was issued in February 2016, to increase transparency and comparability of leases among organizations and to disclose key information about leasing arrangements. The Update sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The Update requires lessees to apply a dual approach, classifying leases as either a finance or operating lease. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. All cash payments will be classified within operating activities in the statement of cash flows. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Update is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations, was issued in March 2016 and it clarifies the implementation guidance of the above-mentioned FASB ASU 2014-09 as it relates to principal versus agent considerations. The Update addresses identifying the unit of account and nature of the goods or services as well as applying the control principle and interactions with the control principle. The amendments to the Update do not change the core principle of the guidance. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that the Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-09, Stock Compensation (Topic 718), issued in March 2016, is intended to simplify several aspects of the accounting for share-based payment award transactions. For public business entities, the guidance is effective for annual periods after December 15, 2016, including interim periods within those annual periods with early adoption permitted. Certain amendments will be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Other amendments will be applied retroactively (such as presentation of employee taxes paid on the statement of cash flows) or prospectively (such as recognition of excess tax benefits on the income statement). The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, was issued in April 2016 which clarifies the implementation guidance of the above-mentioned FASB ASU 2014-09 as it relates to identifying performance obligations and licensing. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-scope Improvements and Practical Expedients, was issued in May 2016. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update affect only the narrow aspects of Topic 606. The effective date and transition requirements for this Update are the same as FASB ASU 2014-09. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-13, Financial Instruments: Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, was issued in June 2016. Commonly referred to as the current expected credit loss model("CECL"), this Update requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. The amendment affects loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial asset not excluded from the scope that have the contractual right to receive cash. The Update replaces the incurred loss impairment methodology, which generally only considered past events and current conditions, with a methodology that reflects the expected credit losses and required consideration of a broader range of reasonable and supportable information to estimate all expected credit losses. The Update additionally addresses purchased assets and introduces the purchased financial asset with a more-than-insignificant amount of credit deterioration since origination ("PCD"). The accounting for these PCD assets is similar to the existing accounting guidance of FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, for purchased credit impaired ("PCI") assets, except the subsequent improvements in estimated cash flows will be immediately recognized into income, similar to the immediate recognition of subsequent deteriorations in cash flows. Current guidance only allows for the prospective recognition of these cash flow improvements. Because the terminology has been changed to a "more-than-insignificant" amount of credit deterioration, the presumption is that more assets might qualify for this accounting under the Update than those under current guidance. For public business entities, the Update is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years with early adoption permitted for fiscal years after December 15, 2018. An entity will apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. A prospective transition approach is required for debt securities. An entity that has previously applied the guidance of ASC 310-30 will prospectively apply the guidance in this Update for PCD assets. A prospective transition approach should be used for PCD assets where upon adoption, the amortized cost basis should be adjusted to reflect the addition of the allowance for credit losses. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. FASB ASU 2016-15, Statement of Cash Flows (Topic 213): Classification of Certain Cash Receipts and Cash Payments, was issued in August 2016. The Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and must be applied using a retrospective transitional method to each period presented. The Company is currently evaluating the impact that this Update will have on its Condensed Consolidated Financial Statements. |
Investment Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of securities available for sale | The amortized cost, gross unrealized gains, gross unrealized losses and fair values of investment securities available for sale at the dates indicated were as follows:
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Schedule of maturities of investment securities | The amortized cost and fair value of investment securities available for sale at September 30, 2016, by contractual maturity, are set forth below. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
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Schedule of fair value and unrealized losses of available for sale investment securities | The following table shows the gross unrealized losses and fair value of the Company's investment securities available for sale that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that the individual securities have been in continuous unrealized loss positions as of September 30, 2016 and December 31, 2015 were as follows:
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Scheduled of amortized cost and fair value of securities pledged as collateral | The following table summarizes the amortized cost and fair value of investment securities available for sale that are pledged as collateral for the following obligations at September 30, 2016 and December 31, 2015:
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Loans Receivable (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans and Leases Receivable Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of loans receivable | Loans receivable at September 30, 2016 and December 31, 2015 consisted of the following portfolio segments and classes:
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Loans receivable by credit quality indicator | The following tables present the balance of the loans receivable by credit quality indicator as of September 30, 2016 and December 31, 2015.
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Schedule of nonaccrual loans | Nonaccrual loans, segregated by segments and classes of loans, were as follows as of September 30, 2016 and December 31, 2015:
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Past due financing receivables | The balances of past due loans, segregated by segments and classes of loans, as of September 30, 2016 and December 31, 2015 were as follows:
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Schedule of impaired loans, including restructured | Impaired loans include nonaccrual loans and performing troubled debt restructured ("TDR") loans. The balances of impaired loans as of September 30, 2016 and December 31, 2015 are set forth in the following tables.
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Schedule of average recorded investment impaired loans including restructuring loans | The average recorded investment of impaired loans for the three and nine months ended September 30, 2016 and 2015 are set forth in the following table.
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Recorded investment balance and related allowance for loan losses of accruing and non-accruing TDRs | The recorded investment balance and related allowance for loan losses of performing and nonaccrual TDR loans as of September 30, 2016 and December 31, 2015 were as follows:
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Troubled debt restructurings on financing receivables | Loans that were modified as TDRs during the three and nine months ended September 30, 2016 and 2015 are set forth in the following tables:
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Purchased impaired loans | The following table reflects the outstanding principal balance and recorded investment of the PCI loans at September 30, 2016 and December 31, 2015:
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Schedule of impaired purchased loans accretable yield | The following table summarizes the accretable yield on the PCI loans for the three and nine months ended September 30, 2016 and 2015.
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Allowance for Loan Losses (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in allowance for loan losses | The following tables detail the activity in the allowance for loan losses disaggregated by segment and class for the three and nine months ended September 30, 2016:
The following table details the balance in the allowance for loan losses disaggregated on the basis of the Company's impairment method as of September 30, 2016.
The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of September 30, 2016:
The following tables detail activity in the allowance for loan losses disaggregated by segment and class for the three and nine months ended September 30, 2015.
The following table details the balance in the allowance for loan losses disaggregated on the basis of the Company's impairment method as of December 31, 2015.
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Schedule of loan receivables on the basis of impairment method | The following table details the recorded investment balance of the loan receivables disaggregated on the basis of the Company’s impairment method as of December 31, 2015:
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Other Real Estate Owned (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in other real estate owned | Changes in other real estate owned during the three and nine months ended September 30, 2016 and 2015 were as follows:
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Goodwill and Other Intangible Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in other intangible assets | The following table presents the change in the other intangible assets for the periods indicated:
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Other Borrowings (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of FHLB advances | The following table sets forth the details of FHLB advances during the three and nine months ended September 30, 2016 and 2015:
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Derivative Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of notional amounts and estimated fair values of interest rate derivative contracts | The notional amounts and estimated fair values of interest rate derivative contracts outstanding at September 30, 2016 and December 31, 2015 are presented in the following table.
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Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share reconciliation | The following table illustrates the reconciliation of weighted average shares used for earnings per common share computations for the three and nine months ended September 30, 2016 and 2015:
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Schedule of dividends activity | The following table summarizes the dividend activity for the nine months ended September 30, 2016 and calendar year 2015.
* Denotes a special dividend. |
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Schedule of repurchased shares | The following table provides total repurchased shares and average share prices under the plan for the periods indicated:
(1) Represents shares repurchased and average price per share paid during the duration of the plan. |
Accumulated Other Comprehensive Income (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in accumulated other comprehensive income (AOCI) by component | The changes in accumulated other comprehensive income (“AOCI”) by component, during the three and nine months ended September 30, 2016 and 2015 are as follows:
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Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option activity | The following table summarizes the stock option activity for the nine months ended September 30, 2016 and 2015:
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Schedule of restricted stock award activity | The following tables summarize the restricted and unrestricted stock award activity for the nine months ended September 30, 2016 and 2015:
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements of assets on a recurring basis | The following tables summarize the balances of assets and liabilities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015.
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Fair value measurements of assets on a nonrecurring basis | The tables below represent assets measured at fair value on a nonrecurring basis at September 30, 2016 and December 31, 2015 and the net losses (gains) recorded in earnings during three and nine months ended September 30, 2016 and 2015.
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Fair value measurements for financial instruments measured at fair value on a non-recurring basis | The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at September 30, 2016 and December 31, 2015.
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Schedule of carrying value and fair value of financial instruments | The tables below present the carrying value amount of the Company’s financial instruments and their corresponding estimated fair values at the dates indicated.
|
Description of Business, Basis of Presentation and Significant Accounting Policies and Recent Issued Accounting Policies (Details) |
Sep. 30, 2016
USD ($)
Branch
|
Dec. 31, 2015
USD ($)
|
Dec. 31, 2007
USD ($)
|
---|---|---|---|
Business Description and Basis of Presentation [Line Items] | |||
Issued amount | $ 25,000,000.0 | ||
Investment securities available for sale, at fair value | $ 819,159,000 | $ 811,869,000 | |
Investment securities available for sale, amortized cost | $ 802,111,000 | 807,921,000 | |
Heritage Bank | |||
Business Description and Basis of Presentation [Line Items] | |||
Number of branches operating | Branch | 63 | ||
Commercial | |||
Business Description and Basis of Presentation [Line Items] | |||
Investment securities available for sale, at fair value | $ 197,837,000 | 179,011,000 | |
Investment securities available for sale, amortized cost | $ 194,666,000 | $ 179,797,000 |
Investment Securities - Contractual Maturities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Amortized Cost | ||
Due in one year or less | $ 3,564 | |
Due after one year through five years | 121,014 | |
Due after five years through ten years | 232,087 | |
Due after ten years | 445,401 | |
Investment securities with no stated maturities | 45 | |
Amortized Cost | 802,111 | $ 807,921 |
Fair Value | ||
Due in one year or less | 3,578 | |
Due after one year through five years | 123,124 | |
Due after five years through ten years | 237,820 | |
Due after ten years | 454,542 | |
Investment securities with no stated maturities | 95 | |
Fair Value | $ 819,159 | $ 811,869 |
Investment Securities (Details Textual) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
loan
|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2015
USD ($)
loan
|
Dec. 31, 2015
USD ($)
|
|
Investments, Debt and Equity Securities [Abstract] | ||||
Securities classified as trading | $ 0 | $ 0 | ||
OTTI, unrealized losses | $ 0 | $ 0 | ||
Private residential collateralized mortgage obligations | ||||
Investment Holdings [Line Items] | ||||
Mortgage backed securities evaluation non temporary decline number (securities) | loan | 0 | 0 |
Investment Securities - Amortized Cost and Fair Value (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Scheduled of amortized cost and fair value of securities pledged as collateral | ||
Amortized Cost | $ 249,727 | $ 243,456 |
Fair Value | 256,531 | 246,453 |
Washington and Oregon state to secure public deposits | ||
Scheduled of amortized cost and fair value of securities pledged as collateral | ||
Amortized Cost | 220,203 | 212,325 |
Fair Value | 226,536 | 215,284 |
Federal Reserve Bank of San Francisco and Federal Home Loan Bank to secure borrowing arrangements | ||
Scheduled of amortized cost and fair value of securities pledged as collateral | ||
Amortized Cost | 0 | 506 |
Fair Value | 0 | 506 |
Repurchase agreements | ||
Scheduled of amortized cost and fair value of securities pledged as collateral | ||
Amortized Cost | 25,934 | 28,500 |
Fair Value | 26,312 | 28,503 |
Other securities pledged | ||
Scheduled of amortized cost and fair value of securities pledged as collateral | ||
Amortized Cost | 3,590 | 2,125 |
Fair Value | $ 3,683 | $ 2,160 |
Loans Receivable - Concentrations of Credit (Details) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015
Loan
|
|
Receivables [Abstract] | ||
Concentration of loans greater than 10% | 0 | 0 |
Percentage of concentrations of loans in any industry (in excess of 10%) (percent) | 10.00% | 10.00% |
Loans Receivable - TDR Loans, Recorded Investment and Allowance (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Receivables [Abstract] | ||
Performing TDRs, TDR loans | $ 19,728,000 | $ 20,695,000 |
Nonaccrual TDRs, TDR loans | 5,073,000 | 6,301,000 |
Performing TDRs, Allowance for loan losses on TDR loans | 1,833,000 | 2,069,000 |
Nonaccrual TDRs, Allowance for loan losses on TDR loans | 450,000 | 679,000 |
Unfunded commitments related to credits classified as TDRs | $ 269,000 | $ 551,000 |
Loans Receivable - Change in Accretable Yield (Details) - PCI Loans - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | ||||
Balance at the beginning of the period | $ 15,359 | $ 18,731 | $ 17,592 | $ 21,092 |
Accretion | (1,178) | (1,661) | (3,900) | (5,399) |
Disposals and other | (491) | 22 | (2,921) | (2,382) |
Change in accretable yield | 1,214 | 1,586 | 4,133 | 5,367 |
Balance at the end of the period | $ 14,904 | $ 18,678 | $ 14,904 | $ 18,678 |
Other Real Estate Owned (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Real Estate [Abstract] | ||||
Mortgage Loans in Process of Foreclosure, Amount | $ 576,000 | $ 576,000 | ||
Changes in other real estate owned | ||||
Balance at the beginning of the period | 1,560,000 | $ 3,017,000 | 2,019,000 | $ 3,355,000 |
Additions | 25,000 | 611,000 | 677,000 | 2,424,000 |
Proceeds from dispositions | (1,716,000) | (1,560,000) | (2,486,000) | (3,199,000) |
Gain (loss) on sales, net | 131,000 | 3,000 | 173,000 | (94,000) |
Valuation adjustment | 0 | 0 | (383,000) | (415,000) |
Balance at the end of the period | $ 0 | $ 2,071,000 | $ 0 | $ 2,071,000 |
Goodwill and Other Intangible Assets (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Goodwill additions | $ 0 | $ 0 | $ 0 | |
Goodwill impairment charges | $ 0 | $ 0 | $ 0 | $ 0 |
Core Deposits | Washington Banking | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 10 years | |||
Core Deposits | Valley | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 10 years | |||
Core Deposits | NCB | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 5 years | |||
Core Deposits | Pierce | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 4 years | |||
Core Deposits | Cowlitz | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 9 years | |||
Core Deposits | Western Washington Bancorp | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Useful life | 8 years |
Goodwill and Other Intangible Assets Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Finite-lived Intangible Assets [Roll Forward] | ||||
Balance at the beginning of the period | $ 8,091 | $ 9,835 | $ 8,789 | $ 10,889 |
Less: Amortization | 359 | 523 | 1,057 | 1,577 |
Balance at the end of the period | $ 7,732 | $ 9,312 | $ 7,732 | $ 9,312 |
Other Borrowings - Textuals (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Federal Home Loan Bank, Advances [Line Items] | ||
Credit facility with the FHLB | $ 664,500,000 | |
FHLB advances outstanding | $ 17,700,000 | $ 0 |
Weighted average rate | 0.45% | |
Maximum federal funds purchases | $ 90,000,000 | |
Federal funds purchased | 0 | 0 |
Federal Reserve Bank Advances | ||
Federal Home Loan Bank, Advances [Line Items] | ||
Credit facility with the Federal Reserve Bank of San Francisco | 51,200,000 | |
Borrowings outstanding | $ 0 | $ 0 |
Minimum | ||
Federal Home Loan Bank, Advances [Line Items] | ||
Unencumbered collateral in amount equal to varying percentages | 100.00% | |
Maximum | ||
Federal Home Loan Bank, Advances [Line Items] | ||
Unencumbered collateral in amount equal to varying percentages | 160.00% |
Other Borrowings - Federal Funds Purchased (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Debt Disclosure [Abstract] | ||||
Average balance during the period | $ 5,618 | $ 0 | $ 11,608 | $ 2,267 |
Maximum month-end balance during the period | $ 17,700 | $ 0 | $ 57,300 | $ 48,200 |
Weighted average rate during the period | 0.57% | 0.00% | 0.54% | 0.29% |
Junior Subordinated Debentures (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2007 |
Dec. 31, 2015 |
May 01, 2014 |
|
Debt Instrument [Line Items] | |||||||
Issued amount | $ 25,000,000.0 | ||||||
Debt term | 30 years | ||||||
Adjustable rate of trust preferred securities | 2.41% | 2.41% | |||||
Junior subordinated debentures | $ 19,644,000 | $ 19,644,000 | $ 19,424,000 | ||||
Junior Subordinated Debentures | |||||||
Debt Instrument [Line Items] | |||||||
Weighted average rate | 4.49% | 4.01% | 4.43% | 4.36% | |||
LIBOR | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 1.56% | ||||||
Washington Banking | |||||||
Debt Instrument [Line Items] | |||||||
Assumed trust preferred securities and junior subordinated debentures, fair value | $ 18,900,000 |
Repurchase Agreements (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Repurchase agreements, maturity period | P1D | |
Repurchase agreement obligations | $ 22,425 | $ 23,214 |
Residential | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Repurchase agreement obligations | 13,900 | 18,000 |
Commercial | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Repurchase agreement obligations | 5,600 | $ 5,200 |
US Treasury and Government [Member] | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Repurchase agreement obligations | $ 2,900 |
Derivative Financial Instruments (Details) - Interest rate derivatives - Non-hedging interest rate swaps - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Derivative Asset | ||
Notional Amounts | $ 68,450 | $ 20,750 |
Estimated Fair Value | 3,336 | 543 |
Derivative Liability | ||
Notional Amounts | (68,450) | (20,750) |
Estimated Fair Value | $ (3,336) | $ (543) |
Stockholders' Equity - Reconciliation of Weighted Average Shares (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Net income: | ||||
Net income | $ 11,039 | $ 9,492 | $ 29,025 | $ 27,996 |
Less: Dividends and undistributed earnings allocated to participating securities | (102) | (84) | (280) | (247) |
Net income allocated to common shareholders | $ 10,937 | $ 9,408 | $ 28,745 | $ 27,749 |
Basic: | ||||
Weighted average common shares outstanding (in shares) | 29,962,270 | 29,960,133 | 29,968,034 | 30,086,057 |
Less: Restricted stock awards (in shares) | (277,495) | (263,404) | (292,832) | (268,999) |
Total basic weighted average common shares outstanding (in shares) | 29,684,775 | 29,696,729 | 29,675,202 | 29,817,058 |
Diluted: | ||||
Basic weighted average common shares outstanding (in shares) | 29,684,775 | 29,696,729 | 29,675,202 | 29,817,058 |
Incremental shares from stock options (in shares) | 11,031 | 22,395 | 12,543 | 22,718 |
Total diluted weighted average common shares outstanding (in shares) | 29,695,806 | 29,719,124 | 29,687,745 | 29,839,776 |
Stockholders' Equity - Dividends (Details) - $ / shares |
3 Months Ended | 9 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 20, 2016 |
Apr. 20, 2016 |
Jan. 27, 2016 |
Oct. 22, 2015 |
Jul. 22, 2015 |
Apr. 22, 2015 |
Jan. 28, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Dividends Payable [Line Items] | |||||||||||
Declared | Jul. 20, 2016 | Apr. 20, 2016 | Jan. 27, 2016 | Oct. 21, 2015 | Jul. 22, 2015 | Apr. 22, 2015 | Jan. 28, 2015 | ||||
Cash Dividend per Share (in usd per share) | $ 0.12 | $ 0.12 | $ 0.11 | $ 0.11 | $ 0.11 | $ 0.11 | $ 0.10 | $ 0.12 | $ 0.11 | $ 0.35 | $ 0.32 |
Record Date | Aug. 04, 2016 | May 05, 2016 | Feb. 10, 2016 | Nov. 04, 2015 | Aug. 06, 2015 | May 07, 2015 | Feb. 10, 2015 | ||||
Paid Date | Aug. 18, 2016 | May 19, 2016 | Feb. 24, 2016 | Nov. 18, 2015 | Aug. 20, 2015 | May 21, 2015 | Feb. 24, 2015 | ||||
Special Dividend | |||||||||||
Dividends Payable [Line Items] | |||||||||||
Declared | Oct. 21, 2015 | ||||||||||
Cash Dividend per Share (in usd per share) | $ 0.10 | ||||||||||
Record Date | Nov. 04, 2015 | ||||||||||
Paid Date | Nov. 18, 2015 |
Stockholders' Equity - Shares Repurchased (Details) - Eleventh Plan - $ / shares |
3 Months Ended | 9 Months Ended | 45 Months Ended | ||
---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
|
Equity, Class of Treasury Stock [Line Items] | |||||
Repurchased shares | 38,000 | 0 | 138,000 | 441,966 | 579,996 |
Stock repurchase average share price (in usd per share) | $ 17.46 | $ 0.00 | $ 17.16 | $ 16.64 | $ 16.76 |
Stockholders' Equity (Details Textual) - $ / shares |
3 Months Ended | 9 Months Ended | 45 Months Ended | |||
---|---|---|---|---|---|---|
Oct. 23, 2014 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
|
Stockholders Equity (Textual) [Abstract] | ||||||
Anti-dilutive securities excluded from computation (in shares) | 0 | 2,650 | 580 | 4,883 | ||
Eleventh Plan | ||||||
Stockholders Equity (Textual) [Abstract] | ||||||
Outstanding share percent | 5.00% | |||||
Outstanding common shares in the plan | 1,513,000 | |||||
Shares repurchased at an average price | 38,000 | 0 | 138,000 | 441,966 | 579,996 | |
Withholding taxes average price per share (in usd per share) | $ 17.46 | $ 0.00 | $ 17.16 | $ 16.64 | $ 16.76 | |
Shares Related to Withholding Taxes on the Vesting of Restricted Stock [Member] | ||||||
Stockholders Equity (Textual) [Abstract] | ||||||
Shares repurchased at an average price | 5,267 | 388 | 29,206 | 21,998 | ||
Withholding taxes average price per share (in usd per share) | $ 18.64 | $ 17.63 | $ 17.77 | $ 17.07 |
Stock-Based Compensation - Restricted and Unrestricted Stock Award Activity (Details) - Restricted and Unrestricted Stock - $ / shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Shares | ||
Nonvested at beginning of period (in shares) | 264,521 | 238,669 |
Granted (in shares) | 119,939 | 121,320 |
Vested (in shares) | (111,357) | (91,642) |
Forfeited (in shares) | (9,216) | (2,837) |
Nonvested at end of period (in shares) | 263,887 | 265,510 |
Weighted-Average Grant Date Fair Value | ||
Nonvested at beginning of period (in usd per share) | $ 15.92 | $ 15.20 |
Granted (in usd per share) | 17.53 | 16.72 |
Vested (in usd per share) | 15.62 | 15.12 |
Forfeited (in usd per share) | 16.57 | 15.71 |
Nonvested at end of period (in usd per share) | $ 16.76 | $ 15.92 |
Fair Value Measurements (Details Textual) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Fair Value Disclosures [Abstract] | ||||
Fair value assets transfers between level 1 and level 2 transfer amount | $ 0 | $ 0 | $ 0 | $ 0 |
Commitments and Contingencies (Details) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
B&O Tax Audit | |
Loss Contingencies [Line Items] | |
Estimate of possible loss | $ 1.6 |
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