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Although net income fell, the year-over-year period was skewed by a fourth-quarter 2010 profit that was influenced by financial gains associated with a bank acquisition, Heritage President and Chief Executive Brian Vance said Wednesday.
At the time, Heritage had just acquired Pierce Commercial Bank of Tacoma, he said.
For the fourth quarter of 2011, Heritage Financial Corp. earned a $2.2 million profit, or 14 cents a share, compared to a profit of $9.1 million, or 77 cents a share in the fourth quarter of 2010. Heritage earned a $6.5 million profit for all of 2011, compared to $11.7 million in 2010.
Although strong loan growth and lower expenses contributed to company earnings in the fourth quarter, Vance told analysts Wednesday that his outlook for the regional economy remains cautious.
Positive trends include lower unemployment rates and commercial real estate data that shows vacancy rates are falling -- a sign that people and businesses are leasing again -- for apartments, as well as retail, industrial and office space. Occupancy rates, too, are increasing at hotels, another sign that consumers are spending money, Vance said.
Home values, however, continue to fall, he said.
“Bottom line home prices are still dropping,” Vance said after the conference call. “We have to get them stabilized to get much improvement in the overall economy.”
Vance, too, said that he was less than thrilled with a decision by the Federal Open Market Committee, which is part of the Federal Reserve, to keep interest rates low. Although low interest rates help borrowers, it ultimately means less revenue for the company, he said.
Still, there were bright spots for Heritage in 2011:
-Bank branch deposit growth grew 48 percent in Bellevue; 21 percent in Longview; and 16 percent in Vancouver in the year-over-year fourth quarter.
-The company’s cash dividend was increased to six cents in the fourth quarter, after beginning at three cents, then increasing to five cents, earlier in the year. Heritage also paid a special 25-cent cash dividend in December.
-Heritage also announced a stock buy back program last year, including repurchasing 132,000 shares at an average of $11.76 a share in the fourth quarter.
The company was unable to acquire a bank last year, so its capital can be used in other ways, such as to repurchase shares, Vance said. Reducing the number of shares outstanding is another way to reward shareholders because it increases the earnings per share, he said.
Heritage, too, had several opportunities to acquire banks last year, but “what we were willing to pay was not a sufficient price for the seller,” Vance said. Vance expects about five FDIC-assisted bank transactions to take place in the Northwest in 2012, he said.
At market close Wednesday, Heritage’s stock, which trades under the ticker symbol HFWA, rose six cents to close at $14.06 a share. In the past 52 weeks the stock has traded between $10.21 a share and $15 a share.
