OLYMPIA - Heritage Financial Corp., which operates Heritage Bank, earned a profit in the final quarter of 2009, something few community banks have been able to achieve in this slower economy.
For the quarter, Heritage Financial recorded a profit of $772,000, compared with a net loss of $194,000 in the fourth quarter of 2008. Even after making a preferred-stock dividend payment to the U.S. Treasury for accepting funds as part of the Troubled Asset Relief Program, the company still earned $441,000 in the quarter, the company announced Thursday. The U.S. Treasury invested $24 million in the company last year.
For all of 2009, Heritage reported a $739,000 net loss, compared with a $6.2 million profit for 2008.
Heritage President and Chief Executive Brian Vance said that by cutting expenses, the company made a profit in the fourth quarter after narrowly missing in the third quarter.
“We paid the dividend and had some profit left over for the common shareholders; it’s nice progress to see,” Vance said Thursday.
Some of the expenses the company reduced included not paying bonuses to its officers in the final quarter, partly because Heritage Financial missed a profit in the prior quarter.
“We didn’t earn it, so we didn’t pay it,” Vance said. “Unlike our Wall Street brethren, we have some common sense here when it comes to things like that.”
D.A. Davidson research analyst Jeff Rulis again praised the company’s performance last quarter, noting that the company was profitable and managed to slightly reduce its nonperforming assets.
“If safe and soundness is the message, then it’s a very safe franchise,” he said. “It’s a testament to the management team and how they have approached this (business) cycle.”
Rulis said he still has a “buy” rating on the stock and price-per-share target of $17. On Thursday, the company’s stock, which trades under the ticker symbol of HFWA, closed down 31 cents at $13.71 a share. In the past 52 weeks, the stock has traded between $8.55 and $14.25 a share.
Although Heritage earned a profit last quarter, Vance remains guarded about the economy and doesn’t expect growth to occur until unemployment and real estate values stabilize.
“By the end of the second quarter, maybe we can see some stabilization in the economy,” he said.
Also in the quarter: Total assets rose $68.7 million to $1.01 billion and total deposits increased $15.6 million to $840.1 million. The company’s provision for potentially bad loans was $5 million last quarter, and its nonperforming assets fell to $33.7 million in the fourth quarter from $35.8 million in the third quarter. Although nonperforming assets fell from the third to the fourth quarter of 2009, they increased to $33.7 million from $5.4 million on a year-over-year fourth-quarter basis.
“Slower sales and excess inventory in the housing market has been the primary cause of the increase in nonperforming assets,” the company said in a statement.
Rolf Boone: 360-754-5403