OLYMPIA, Wash., Aug. 5, 2015 /PRNewswire/ -- Heritage Financial Corporation, ("Company" or "Heritage") (Nasdaq: HFWA) today announced that its wholly owned subsidiary, Heritage Bank (the "Bank"), has entered into an agreement with the Federal Deposit Insurance Corporation (the "FDIC") that terminates all existing loss share agreements with the FDIC, and has made a payment of $7.1 million to the FDIC as consideration for the early termination of the shared-loss agreements. The termination results in a pre-tax gain of approximately $1.7 million during the third quarter of 2015 and the elimination of the FDIC indemnification asset and the FDIC clawback liability. The FDIC indemnification asset and FDIC clawback liability amounts were $388,000 and $9.3 million, respectively, as of June 30, 2015.
Brian Vance, Chief Executive Officer and President of Heritage, commented, "Reaching agreement on early termination produces a mutually beneficial conclusion to our partnership with the FDIC on our acquired institutions. In addition to the gain recognized on the termination of the agreements, we expect there will be an immediate positive impact to ongoing earnings through the elimination of the FDIC indemnification asset amortization expense and the FDIC clawback liability expense that totaled $497,000 and $107,000, respectively, for the six months ended June 30, 2015. Additional benefits include the elimination of administrative costs and more efficient financial reporting."
All rights and obligations of the parties under the FDIC shared-loss agreements, including the clawback provisions, will be eliminated under this termination agreement. The termination of the shared-loss agreements should have no impact on the yields for the loans that were previously covered under these agreements. All future charge-offs, recoveries, gains, losses and expenses related to covered assets, however, will now be recognized entirely by the Bank since the FDIC will no longer be sharing in such charge-offs, recoveries, gains, losses and expenses.
About Heritage Financial Heritage Financial Corporation is an Olympia-based bank holding company with Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary. Heritage Bank has a branching network of 67 banking offices in Washington and Oregon. Heritage Bank also does business under the Central Valley Bank name in the Yakima and Kittitas counties of Washington and under the Whidbey Island Bank name on Whidbey Island. Heritage's stock is traded on the NASDAQ Global Select Market under the symbol "HFWA". More information about Heritage Financial Corporation can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.
Cautionary Note Regarding Forward-Looking Statements Certain statements in this news release contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "intend," "plan," "seek," "believe," "expect," "strategy," "future," "likely," "project," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include our anticipated pre-tax gain in the third quarter of 2015 and future earnings performance related to the termination of loss share agreements. Such forward-looking statements are subject to risks, uncertainties, and other factors including the performance of the assets that were previously covered under the loss share agreements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, we can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that future events, plans or expectations contemplated by our company will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the most recently ended fiscal year, for a description of some of the other factors that may affect actual outcomes.
SOURCE Heritage Financial Corporation