SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended March 31, 2003 |
OR
| ¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-29480
HERITAGE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
| Washington (State or other jurisdiction of incorporation or organization)
201 Fifth Avenue SW, Olympia, WA (Address of principal executive office) |
91-1857900 (I.R.S. Employer Identification No.)
98501 (ZIP Code) |
(360) 943-1500
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of April 13, 2003 there were 6,703,953 common shares outstanding, with no par value, of the registrant.
HERITAGE FINANCIAL CORPORATION
FORM 10-Q
INDEX
| PART I. |
Financial Information |
Page | ||
| Item 1. |
Condensed Consolidated Financial Statements (Unaudited): |
|||
| Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002 |
3 | |||
| Condensed Consolidated Statements of Financial Condition as of March 31, 2003 and December 31, 2002 |
4 | |||
| 5 | ||||
| Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002 |
6 | |||
| 7 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
17 | |||
| Item 4. |
18 | |||
| PART II. |
Other Information |
|||
| Item 6. |
18 | |||
| 19 | ||||
| 20 |
Page 2
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except for per share data)
(Unaudited)
| Three Months Ended March 31, | ||||||
| 2003 |
2002 | |||||
| INTEREST INCOME: |
||||||
| Loans |
$ |
8,647 |
$ |
9,659 | ||
| Investment securities and FHLB dividends |
|
545 |
|
502 | ||
| Interest bearing deposits and fed funds sold |
|
85 |
|
143 | ||
| Total interest income |
|
9,277 |
|
10,304 | ||
| INTEREST EXPENSE: |
||||||
| Deposits |
|
1,988 |
|
2,881 | ||
| Borrowed funds |
|
12 |
|
62 | ||
| Total interest expense |
|
2,000 |
|
2,943 | ||
| Net interest income |
|
7,277 |
|
7,361 | ||
| Provision for loan losses |
|
495 |
|
306 | ||
| Net interest income after provision for loan loss |
|
6,782 |
|
7,055 | ||
| NONINTEREST INCOME: |
||||||
| Gains on sales of loans |
|
415 |
|
276 | ||
| Service charges on deposits |
|
586 |
|
537 | ||
| Rental income |
|
66 |
|
69 | ||
| Merchant visa income |
|
325 |
|
280 | ||
| Other income |
|
235 |
|
231 | ||
| Total noninterest income |
|
1,627 |
|
1,393 | ||
| NONINTEREST EXPENSE: |
||||||
| Salaries and employee benefits |
|
2,803 |
|
2,586 | ||
| Building occupancy |
|
866 |
|
902 | ||
| Data processing |
|
296 |
|
249 | ||
| Marketing |
|
82 |
|
99 | ||
| Office supplies and printing |
|
97 |
|
109 | ||
| Merchant visa |
|
263 |
|
220 | ||
| Other |
|
842 |
|
821 | ||
| Total noninterest expense |
|
5,249 |
|
4,986 | ||
| Income before federal income taxes |
|
3,160 |
|
3,462 | ||
| Federal income taxes |
|
1,099 |
|
1,169 | ||
| Net income |
$ |
2,061 |
$ |
2,293 | ||
| Earnings per share: |
||||||
| Basic |
$ |
0.31 |
$ |
0.31 | ||
| Diluted |
$ |
0.30 |
$ |
0.30 | ||
See Notes to Condensed Consolidated Financial Statements.
Page 3
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
(Unaudited)
| March 31, 2003 |
December 31, 2002 |
|||||||
| Assets |
||||||||
| Cash on hand and in banks |
$ |
15,339 |
|
$ |
18,801 |
| ||
| Interest earning deposits |
|
10,795 |
|
|
19,192 |
| ||
| Federal funds sold |
|
8,500 |
|
|
7,950 |
| ||
| Investment securities available for sale |
|
48,678 |
|
|
48,177 |
| ||
| Investment securities held to maturity |
|
2,679 |
|
|
2,821 |
| ||
| Loans held for sale |
|
8,376 |
|
|
8,113 |
| ||
| Loans receivable |
|
469,657 |
|
|
462,151 |
| ||
| Less: Allowance for loan losses |
|
(7,338 |
) |
|
(6,874 |
) | ||
| Loans receivable, net |
|
462,319 |
|
|
455,277 |
| ||
| Other real estate owned |
|
235 |
|
|
653 |
| ||
| Premises and equipment, net |
|
18,095 |
|
|
18,029 |
| ||
| Federal Home Loan Bank and Federal Reserve stock, at cost |
|
2,899 |
|
|
2,854 |
| ||
| Accrued interest receivable |
|
2,565 |
|
|
2,880 |
| ||
| Prepaid expenses and other assets |
|
2,889 |
|
|
3,200 |
| ||
| Goodwill |
|
6,640 |
|
|
6,640 |
| ||
| Total assets |
$ |
590,009 |
|
$ |
594,587 |
| ||
| Liabilities and Stockholders’ Equity |
||||||||
| Deposits |
$ |
514,458 |
|
$ |
517,116 |
| ||
| Accrued expenses and other liabilities |
|
5,498 |
|
|
4,746 |
| ||
| Deferred federal income taxes |
|
279 |
|
|
328 |
| ||
| Total liabilities |
|
520,235 |
|
|
522,190 |
| ||
| Stockholders’ equity: |
||||||||
| Common stock, no par value per share, 15,000,000 shares authorized; 6,672,921 and 6,809,373 shares outstanding at March 31, 2003 and December 31, 2002, respectively |
|
29,928 |
|
|
33,587 |
| ||
| Unearned compensation—ESOP and other |
|
(1,198 |
) |
|
(1,208 |
) | ||
| Retained earnings, substantially restricted |
|
40,794 |
|
|
39,672 |
| ||
| Accumulated other comprehensive income |
|
250 |
|
|
346 |
| ||
| Total stockholders’ equity |
|
69,774 |
|
|
72,397 |
| ||
| Commitments and contingencies |
|
— |
|
|
— |
| ||
| Total liabilities and stockholders’ equity |
$ |
590,009 |
|
$ |
594,587 |
| ||
See Notes to Condensed Consolidated Financial Statements.
Page 4
HERITAGE FINANCIAL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
Three Months Ended March 31, 2003
(In Thousands)
(Unaudited)
| Number of common shares |
Common stock |
Unearned Compensation- ESOP and other |
Retained earnings |
Accumulated other comprehensive income |
Total stockholders’ equity |
||||||||||||||||||
| Balance at December 31, 2002 |
6,809 |
|
$ |
33,587 |
|
$ |
(1,208 |
) |
$ |
39,672 |
|
$ |
346 |
|
$ |
72,397 |
| ||||||
| Earned ESOP and restricted stock shares |
2 |
|
|
27 |
|
|
10 |
|
|
— |
|
|
— |
|
|
37 |
| ||||||
| Stock repurchase |
(215 |
) |
|
(4,221 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(4,221 |
) | ||||||
| Exercise of stock options |
77 |
|
|
535 |
|
|
— |
|
|
— |
|
|
— |
|
|
535 |
| ||||||
| Net income |
— |
|
|
— |
|
|
— |
|
|
2,061 |
|
|
— |
|
|
2,061 |
| ||||||
| Increase in unrealized gain on securities available for sale, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(96 |
) |
|
(96 |
) | ||||||
| Cash dividends declared |
— |
|
|
— |
|
|
— |
|
|
(939 |
) |
||||||||||||