HFWA - Earnings call transcript Q2 2018 | Heritage Financial Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Heritage Financial's Second Quarter 2018 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. [Operator Instructions] And as a reminder, today's conference is being recorded. to conference like Brian to now Vance. would turn over the CEO, I go Please ahead.

Brian Vance

morning. all who Welcome in Good of recorded Cynthia. Thanks, to Vance, Brian call in in CEO morning version. listening I'm to holding who this and be those company. may the later a our called have

CEO CEO Operating I become the Officer of company Bank. of Heritage plan will the This July Bank. add is which Financial holding of communities always, Chief you to to went to title of review well me opportunity and some Operating everyone of forward-looking Chief release time for Executive And that transition press Jeff this the Chair questions and employees, expected in plan Board. this his underway earnings Bryan the time Bryan you has the as with Jeff CEO as Officer. as serve. you an And this morning know, July including press you for most until is goal as of will a we our smooth our a release we succession will later. I Chief which taken role got of on Deuel, shareholders, the President Attending Bank; as involved, and prior providing I'll in pre-market customers, holding with we statements in Officer; addressing the it At Our at morning on Heritage go announced company continue that of out release, McDonald the prepared CEO call. time, McDonald, may to as and refer of the been hopefully X any of release of has that Xth. remarks have through Hinson, Don Heritage XXXX, current

Now, to to Jeff. over like I'd call hand the

Jeff Deuel

morning you, and everybody. good Brian, Thank

carries are through succession we and a as to well. know, deliberate that CEO plan organization you of most As the

strategies recall we'll we're to team, on collaborative current execute together, and a built the also You'll continue strategies. that very and we've those

see a succession You significant plan. not will in of strategy result the changes as

Some quarter the of Diluted per 'XX, our the by of was the we Portland, In quarter second XXXX. Sound with share the the follows. minutes the on second share adjusted a and and July cover highlights nine of May, the expenses are share X.XX% conversion first presence our in 'XX. Puget Hillsboro increased Bank quarter for previously will of locations quarter our would of buyout. MSA. completed quarter common $X.XX to announced our agreement core completed margin per for for $X.XX. systems. which second was for X.XX% Vancouver, earnings And second statements. to Community closing combination the XXXX from to a Don X, few and costs we earnings Earnings to $X.XX Net be financial Bank to Hinson Premier the a due early adjusting of the merger-related show improvement, merger these to take of impacted of X.XX% of consulting Therefore, continued increasing interest for per as

Don Hinson

from year saw second just in prior Thanks, XXXX. from We linked metrics of earnings. overview and in both XXXX start cold continued Jeff. improvement QX profitability an I'll our quarter QX quarter with the

merger-related buyout XXXX. decreased a gain agreement large the share by expenses this due in consulting well Although QX $X.XX, year-over-year QX to loan in and XXXX, as as QX decrease was sale earnings per

loan. classified sale credit of $X.XX a purchase per QX reminder, XXXX on impaired a $X.XX approximately by was the $X share million gain in boosted due a previously As to the

or an annualized X.X% we QX, on on X.X% however $XX.X Moving prepayments. million which is a of in strong Loan strong basis unusually increase Loans the sheet, offset QX, originations total million were $XXX annualized in the originations had by an high to in on QX. balance increased growth were asset basis.

We loan pipelines, are or this Bryan grew in loan optimistic the in which few on A will to McDonald X.X% portion due in second-half due discuss Deposits a strong annualized that our growth minutes. in balances. of was to QX. basis $XX.X CD XXXX will million increase an of improve growth

CDs expected well as during QX, rate future During to rate that XXXX, we some increases. prior locking in replaced matured as had

money our deposits You'll also prior notice from demand end. balances swing interest-bearing in a quarter market to from accounts

the with purpose due by the one As release, product a types better transfer account this was substantially mentioned needs. in alignment deposit of between for customer to $XX.X million

are down Although at XX.X% deposits QX. of the end very healthy a at deposits of from still QX, non-interest-bearing demand total

increase looking primarily to to relationship to loans was at in amount at XX. $XXX,XXX. loans at increased XX. one increased June The at $XX.X credit nonperforming March The on to quality, from due XX, nonperforming loans from X.XX% million of of $XX.X to at the XX loans X.XX% Ag nonperforming in our million March Moving loan total June percentage

our at However, ratio XXX%. losses government very guaranteed. allowance a approximately of this is to healthy loan nonperforming XX% balance loans to The of still stands

$X $X.X reduce in accounting of allowance for on charge-offs In This loan the losses of those increase QX. This primarily QX. million $XXX,XXX loans. needs Net addition, aggregate carrying was potential Ag to due increased substantially million the loan the purchase a value loans two increase And a loans to impacted purchase fair increased relationships. value included was discounts by to million which million of of loan $XX.X relationship. relating during of farm charge-offs downgrade net Ag in $XX.X was related may an

X.XX% is interest in interest Our from in from QX, X.XX% points X.XX% basis increase in increase from QX a basis loan QX, XX XX net in in to increased this for point Pre-accretion XXXX. XX QX XX QX and was margin basis an X.XX% X.XX% yields QX and increased X.XX% and a in XXXX. points from XXXX. basis from QX, was X.XX%, point QX Pre-accretion for X.XX% net QX, increase margin

New compensate XXXX. higher was loans X.XX% average QX X.XX% in at due a advances credit. originated QX, QX to and weighted source in primarily X.XX%, a income QX business in in from in an Accretion cost QX rate and to is increase funds loan increase Accretion from provision former X.XX% QX a value related of over QX. losses increase in to of from loans. for of was QX fair for cost of higher result, acquired an X.XX% of QX impacted which of X.XX% our is income tend the as be for discount acceleration in lines which Also by funding of credit discounts QX in as the life lines results was an of recognized to in accretion. the loans nature, a The the runoff these of This higher the specialty increase and in short-term the XXXX. is in for use

slightly interest cost QX QX in the high in XX loan by XXXXX. our increased of basis in fees X.X X.XX% X.XX% QX purchases, cost total increase rate investment expansion. swap of margin for our of to deposits million in to low gains. and are from Our margin in QX. interest pleased and floating XXXX QX in continued Overall, X.XX% million QX with points increase to deposits low on was X.X rates our and rate slightly compared partially the decreases our sale in Accommodation production net XXXX. we QX in from offset to The Non-interest resulted income increased interest has assets,

QX for expense QX. they Express expect for million were buyout XXXX in levels impacted in mortgage as and SPA than as to quarters sale were in XXXX. both of gains We million XX.X merger loan decreased QX. expenses Non-interest agreement well consulting from weighted XX.X be lower to a a in

contracted other of in three decided expenses deposit to This Bank the product additional over a period sale assist the earnings we amount release, Community years and from realized buyer realignment. The more was future converting is end implementation. a based X.X savings of it with advantageous third-party to product by us Sound with Bank. a the prior XXXX. and we of revenue or buy As Premier losses million, buyout consolidated was for purely on comp with expected and We cost agreement to mentioned our Puget

XXX,XXX expense addition, merger In XXXX non-interest in weighted of expenses. was included QX

Moving X.XX% slightly in QX. from cost non-interest with a the or solid by consulting in common and at our XX, end And X.XX% at down of expenses expense the commercial agreement finally, QX the to QX. tangible X.X% weighted just from X.X% was to June as a ratio improved equity

as was agreement regular the to due of to in dividend buyout QX overall the weighted expenses the XX% discussed. payout payout well XX% merger guided ratio as XX%, which for Our ratio impact consulting previously QX is

potential and for future believe internal our to balance and supports continue our our M&A. We risk, growth sheet sufficiently organic capitalization growth

loan have Now on to production. Bryan I'll an McDonald pass call the to update

Bryan McDonald

than negatively at higher match previous quarter production business of Don. XXX.X off debt Commercial and by XXX impacted XXXX. with starting detail lending quarter terms. XXX levels quarter XX.X million a XXXX commercial XXX.X and several end from quarter five up XX.X the clients going loan second to were first million a on quarter customers million of area with the were XXXX Net after average. our aggressive was elected up million quarters. an the at new the provide from we of growth quarter, higher loans close five versus to XXXX. which elevated by was quarter of of XX% payoffs our previous during and the of first of for quarter cash XXX.X closed loans the commercial XXX.X of over I'm paying the in payoff ended XX.X quarter which real-estate the teams level pipelines in group. team Total XX% million is underwriting along second in the not million second Payout average million second second Thanks, the to million million a first by is sales, from In the lending quarter activity results the payout using loan at that

increasing growth optimistic we about strong the quarter. in loan after With stronger second the XX% our loan the very quarter-over-quarter in new third loan pipeline for quarter potential production are

X.X% quarter and Moving on increasing is XX rates average second quarter, for points rates, second last points was in XXXX. quarter basis new higher, interest of X.XX% X.X% up interest versus to loans from XX to the basis commercial

loans million mentioned, the Don of all quarter the up the second in $XX.X million quarter of during Consumer quarter from XXXX. up from for the second in as quarter rates average was X.XX%. XXXX addition, and million was In production $XX.X first second $XX.X

$XX.X quarter and million $XX.X mortgage, on and in quarter in of of new million at $XX of XXXX now $XX.X department in last the XXXX. new Moving to of of XXXX. closed second up the $XX.X compared quarter loans ended call of Jeff. XXXX The million loans the million second the $XX.X quarter quarter the the from to second I'll pipeline turn back mortgage in the to million million quarter first

Jeff Deuel

Bryan. you, about to some summary results. observations our like I'd offer Thank

now We management disciplined had continue XX robust normalized, we closer of all lower Puget for however a expect to which segments a loan been continue mentioned loan about was in In Pacific we to Bryan our is optimistic the Sound are level July play Premier the economy; in growth conversion, high-end are early scenario Currently, to that the normal in Bellevue continue of our be our we we economic in annualized little XXX% to we in may new closed be experience Community team will that is this transaction to higher concentration to can than QX same the QX, the conversion us for growth robust be are process days valuations CRE brisk early McDonald pipeline, strong positive while relying pay-offs region, out area around pay-offs in guidance. earlier, that of with concentrations annualized been see July, the cautious QX in competition and to CRE environment loan continue as passed completed developing of distraction does once for Also Single and team on be certain family we segments. provide spite QX our the Northwest and November. XX%, much we have the loan estimates. than more

funds it's relatively from deposit slightly cost up continue to low. of We the composition benefit our quarter-over-quarter, quality still while is

balance sheet. of also us the optimize while level deposit with flexibility have XX% loan comfortable pricing which We the to to provides managing a

head We are in continued trend positive a shows expenses the expenses impacted growing in cost items our and trend which see to to across adjusting focus footprint. ratio as buyout expect on are we maintaining year results consulting deposits the the continue of Merger and our progresses. items those non-core overhead the after we and right for agreement we with that the but expenses negatively direction this

Puget we've yet all enterprise cost strengthening Bank continued structure. qualified Heritage to have legacy We Sound filled individuals well positions We've work In IT realized with not add our Sound positions related Puget open to from merger. the our sales premium have Bank as risk several cases, as to strengthen additionally

support past as over balance supporting the of in in as the sheet this of All well XX% the future year growth. growth

During service reduced branch count while branches QX, branch by Tacoma. two limited a we new total XX to our opening in community consolidating focus

credits consolidated years, of a With XX are addition you we premiere community this in the have our that perspective we few presentation. branches past branches will noticed the put Ag in we six have bank to times referenced XX in

any stable. time. do bank's to credits. and not for for managing overall long-term and lending credit the references All tied Ag we X% than that overall of relationships less losses outstanding credit to time Ag part monitoring some exposure The portfolio. about We closely some these been be concerned anticipate from the of been continues that have have have quality been is to actively we material Ag We

As is increases well deposit as we're variable NIM, pleased to ability Don loans improvement improvements which originations the beta as rate the with our on minimize continuing industry. our the pricing by loan disciplined noted, in facing with together new supported

bank like to and so our position as a respond back continue planned turn the they to I'd We closing themselves. the as when now capital present this balance support for can well manage positioning to our opportunities risk to we growth, organic to sheet M&A few in Bryan comments.

Brian Vance

combined in positive quarter. progress Thanks, Puget the I'm Jeff. one have the we Sound, team. coalesce with made into teams I am to Premier pleased and pleased Heritage, see second the

that business cultures, doing to this leadership are years. bank completes also the questions. to questions that these similar effectively to positive next similar call call pleased brining continue And our three we comments release our forward-looking I strong met plan plan while we'll was to our couple fortunate will welcome That again, and our am back to you goals, confident the in stakeholders. together to all be succession answer any over in from deploy we We see teams press Cynthia, I'm the with all may you business manage of prepared to feedback the announced refer you with statements markets. as any robust of And continue up And And have. morning. would once these for our turn we'd we of open any questions. team

Operator

Rulis question Thank of from Instructions] with [Operator you. D.A. first will line come the Jeff Our Davidson.

Your line is open.

Jeff Rulis

morning. Good

Jeff Deuel

Hi, Jeff.

Jeff Rulis

the down expenses coming nail heard the to talk conversion early the in Premier a wanted bit. about little November. I I Jeff

baseline again line the the could in you to the the And guess QX, just color you this the add if balance you the If through buyout walk merger costs the and of if could quarter. on if just then speak year, the expense could? items of I for kind year, of exclude you us back-half of Premier the

Don Hinson

Don. Sure, Jeff. is This

expecting will Banks combination Puget acquisitions. we're it's to run help We or have fill a that we're cases year savings haven't cost these open a Sound from mentioned, we Sound cost not have maybe on some again, be positions Obviously a of some as still new go-forward to in going of position savings are -- starting -- Jeff rate. with noisy QX. two in to We had very although to the That brining we employees that created. some Puget realize to on going out

some buyout people after Puget of more about $XXX,XXX and were, again, think we of that. Bank, have talked since contract have savings expenses in color So much I But to $X.X I quarter, kind the in leaving that QX in about know million. of some the conversion to that the we occurred expense pure one-time and Sound were gives will for addition to don't what you, how addition we

Brian Vance

comment overhead be the might by see you in just ratio on what Don, also the range end-of-year. you might

Don Hinson

thoughts keeping the 'XX, were between we with overall that and we're of our get X.XX down in to there down end XXXX. of overhead X.XX I we're and by QX ratio expecting of back think

heading that's So of expenses we're And track that's any of thrown course, kind merger-related for. the without in.

Jeff Deuel

we have right Sound at support Jeff, and from moved because some you can little it's And team maybe bit resources market employees. conversion out when look could the you of we you for I the that ourselves do could human not of highly qualified folks gotten advantage on Puget immediate them the the referencing, find the team. competitive also after it from think, of hard of standpoint have the in utilize people organization in that the to a a And really some we're organization. grabbing of cost-saves when future take you larger to sitting front them having the would've

Jeff Rulis

margin, the if mentioned loan increases on of similar I -- saw guess potential of you this a a we the coming deal all positive being yields anticipate latest in. things could Don, equal. if accretion then in. comments rolled On -- And you we where are quarter about some you comment magnitude with couple things do

Don Hinson

about lines Bank there. I'd banks Sure, with our The Sound we're of that many I'll accretion, of of let's a I -- with. Puget think the start credit say, higher, merged other talk than percentage

bank that estate more higher have of Sound is think higher real Puget term might for percentage little I that a So than a this Bank a loans.

will Premier be Premier, little coming So discount lower and probably But will in start Puget that bumped at think did. but loans think forward, think, I or I though, two. but think see we elevated it'll Sound with for probably I quarter think -- will next I there accretion rate than the the because, and less Xnd start we'll those also, merged that again, seeing Bank be July up, the I a we're going a

For overall the again margin. of loans slows you on margin. That up on And added to floating could year. amount we the again, overall which last rate our of as points up as that margin, that out say -- has will closer and investments, of through the think kind you're basis I'm loans might necessarily we've we'll over it pretty that far continue we're again seven few years optimistic out the as magnitude, helped predict obviously see improvement nice happen are but still what the go amount, I it we get remainder not to to down. But putting core this

Jeff Rulis

it. Got guys. Thanks

Don Hinson

Thanks, Jeff.

Operator

Thank comes from Jaffray. Piper you. with Clark question Matthew Please And our line go ahead. the next of

Matthew Clark

Hey, good morning.

Brian Vance

Matthew. Hi,

Matthew Clark

wanted portfolio, And with how Just the was of of kind also you loss to on really it's Ag X% each relationships? of criticized in about much maybe talk those just than like Was then content. of situation and touch don't sounds any portfolio; non-accrual. the could less wondering specific that if expect it already the portfolio there

Jeff Deuel

it's in on several things Matt, portfolio. morning, Jeff. the going There're Good

portfolio Valley. -- our phenomenon they I one been our portfolio. carefully to we're dollars. probably saw and Ag was couch with be some large that by million few the large pressing for interestingly it. expect themselves out themselves got in with we we the that to First to that under the made to you then there we've straightened enough of one that they for customer while, a think valley last Central of holding went the face into went good on loss followed rest in way that operated with a provider. It's to average were points of one is to is of we advice, standard focused working we've for we coming. guess larger I on more that the in And portion ag In should potential it Yakima that fact operated, the time, expected what felt comparison we a there's we competitors. granularity the a familiar but conservative that I of had that in we've But our relationships any portfolio that a I out, loan the comment not not to weakness. happen certain A had The of couple for longer-term not because a reposition Heritage Bank, And another have also larger is an long as where it category for name we see saying non where that was of all, underwriting them good been them is, been pointed under lot a the watching another one good maybe organization. we The with. interesting was years and that customers of loan see

ag because with a So was who gone that long-term the that two are left. while. you'll also been credits a other large overall for see quite considerably the customer credits working exposure we've And has down

And sometimes we've back, that we loan continues a one what that's cases. it's that bring the just in the always progression deteriorate. not can of the And other think is I and two to seen relationship over time it

Matthew Clark

of types about talking we're the are? And here crops

Jeff Deuel

about next talking is what of -- we've tree What is in concerned you hay, we come of fruit. crop, tariffs been most XXXX. other the not carefully. cherries, the Most We're is this got cherries, that point and at question generally for some might conclusion necessarily have to livestock, tariffs. at especially is the the of watching about We're very We've mostly apples, the point. this

XXXX. the concern and planning of Lots our and next going with have should see us think providers, that on takes just more where on we'll customers be year. to I their

Matthew Clark

like seem of a how about feel of going the deposit do a deposit continue and you Did pricing then see I manage CDs, towards of and Okay, pressure growth the there's will balance great. mix change aspect forward pressure. to well. It pricing mix that general? front, very, And of kind sheet very you in lot on doesn't mean

Don Hinson

Don. Matthew, this is

slower -- always had year or than the of year. see the the historically the to growth I a looked going always we're at growth first half a been of that has think we've that, better last I half --

a as balance of we deposit expected were better, the again, So say, in the climb year in QX I to the non-maturity would continue both growth layered and to we rates some see of CDs in that locking But first-half the the before running some short-term year. anyway. that result rates purposes for much we're climb, second-half usually off in some of

So see I would that to have again. expect to

expect the would to of a in CDs I the of the So the not year. be portion second-half major growth

Matthew Clark

thank Great, you.

Operator

And our the next Thank of question line comes go from you. Jacque ahead. Bohlen with Please KBW.

Jacque Bohlen

Hi, everyone. good morning

Brian Vance

Good morning, Jacque.

Jacque Bohlen

a of to the kind rate do Premier expect still First, about tax be you housekeeping question, Don, with to XX%? XX.X%

Don Hinson

get Once their income I Yes, the tax do. in to I range, be that yes. expect they in with brought it and onboard percentages Oregon state

Jacque Bohlen

Okay, then of could thank payoffs. so very July about thinking some just maybe comments elevated forward competition caused quarter, surrounding get more they just were the that? the in and far loan And a versus little growth in payoffs the the terms going that on bit realizing in you're what we that some if you. seeing And of color of

Bryan McDonald

coming closings. had is the quarter this -- had We Jacque, Hey, into we felt second were the pipeline fortunate and pretty very Bryan. strong

As you elevated. were the payoffs noted, very

loans. then what the some are noted, on Jeff predict. occur. competitive customers had last funds And sell and look think sell as We saw had XX% we their customers few willing strong. all loans last that QX real very they the those those Ag real to really use to and estate the offer where market business of not one three estate although of to But referenced essentially because I more relationships, always owner-occupied very to Again, to we payoff already those were really up match. we the was a the We to on just but something a at quarter. that had hard quarter-over-quarter, of it's aggressive you was than predict. continue difficult pipeline, businesses then in side. elevated it's it things the that strong also a We had had I range level be quarter, they'll

so our of And that's best indicator growth. the

so of on think it do feel based I well. as the the seeing that We're end going see and to in we'll that provided And August at yes, and like we've be pipeline. I that in range September it's out play July, upper

Jeff Deuel

flurry payoffs. know, good where a emails all when going competitors, good of when recently and been of them. them for the Jacque, selling we sudden don't see every many, all many we typically go get we You And say there's a and and see cash a It's a with not part It's business do And day through we we that paying it somebody But customer reasons. loan we for have. as just the periods a in cases pays cycle. than back-story, they all loan the a off matured is get it's off is or when necessarily was to it's loan. of we business to see

So good loans actually. lot of these a were

Jacque Bohlen

makes pricing structure maybe guess loans to it or in I'm trying I change that a that maybe change extra refinanced that sense, seeing, the drive and in into a covenant? no, Okay, the appreciate color. away, what I credit you're it is is is

Don Hinson

on elsewhere. we these compete very will -- us to price, on often strong the all were competitive structuring-related we credit the let fees, caused that be It's and client credit-related, go

Jacque Bohlen

thought an that. Okay. could then, but XX% I you if provide And your on update the then one upper that remarks, somehow just is last I so your was I apologize rates if if Brian, in growth limit, you to X%, missed just referenced, X% had this mind, someone and one, prepared wouldn't

Brian Vance

had comments. Jeff in XX% his mentioned Yes,

And been have the had over those more have the would been so, if do just would XX%. been normalized, could assuming we higher the on math loan you payout QX, rates in growth

Jacque Bohlen

the for that is But upper-end target the year? your of growth

Bryan McDonald

is Jacque, Bryan. I this think that --

hard QX, loan as have last to the balance the of pay-offs and would as in And for What pay-offs, that think totals. I to we as that bit QX pay-offs normalized in growth quarter not we've we indicated going talked X% QX, Brian X% the to be of and couple maybe about. the predict the it's been been as if those XX% to -- the area a much be the to elevated indicated, our our going probably For for loan have pay-offs years they're has are guiding taken in Brian in growth QX.

that, if so, but that settle hard balance the we're - going to is more our Can And that? exceed you it growth range when of that it of to X%. level, together, prepayment to upper all activities if I a think predict. on little that the historical Sure, X% all be down back is to hopeful our a

here in bottom is and growth then gets going the overall pipeline Premier the coming the folks loan the to with for to hopeful think future, the onboard when pipeline at we're is Sound serve that Puget pipeline in us later rigorous we the the well when really conversion, our growth I year. year, line look of pretty

Jacque Bohlen

added for you Thank great. Okay, the I color, appreciate it.

Brian Vance

Sure.

Operator

comes our the with question of Tim go O'Brien Please Thank And next Sandler line ahead. O'Neill. from you.

Tim O'Brien

morning. Good

Brian Vance

Good Tim. morning. Hi,

Tim O'Brien

downgraded or… real quick to the from watch guys rating you question, a that standpoint, Ag us was our risk relationship the rating Just or to $XX.X risk what substandard downgraded million that you

Brian Vance

downgraded substandard. the We

Tim O'Brien

or cost could right, referred I've And Don, you, are Sound okay, got great. then, quarter? there third Substandard, Puget cost have all for mentioned the might one-time realized, since quite associated this that a or you; of with it now to all in another you question stud hit is

Don Hinson

into you're will QX, few that is substantially but most think there a over all right, have bleed realized, are realized. of been just them Tim, we I

Tim O'Brien

Sound, what was what cost deal specific announcement remind the us targeted a from saves you just it the can cost was regarding Puget it then, a number? or range And savings

Don Hinson

as guidance We on gave XX% approximately that.

Tim O'Brien

know, that cost Don, how up of XX% of remaining? at XX%, and much you been XX% saves, XX%, much of the is how has can give XX, a June sense realized to you And all,

Don Hinson

get think it's Tim, can -- I that in I lingering QX it's once post not very QX, few think we things obviously but think we of. have little, are a think that I I

Tim O'Brien

of kind it's of captured? most So

Don Hinson

I next cost we'll I it to care substantially captured that are would most that would yes, lingering but say, over see there a a couple related but overall the through are say, QX, going of kind is of taken all but again, quite things of. set through are year savings, of them forward,

Tim O'Brien

switching last still leases good no still employees, and on that that so to and job other kind stuff. just the you the the XX% bearing originally new of had, bank there the of because found cost saving to is question number numbers were over of, off right? number in valid And jobs, a openings parts that's the model you listings then like those Yes, XX% good has number a

Don Hinson

Correct.

Tim O'Brien

for were Great, Thanks the my all help. those questions.

Brian Vance

Tim. Thanks,

Operator

go question the line Tim ahead. Thank our you Partners. with from Coffey FIG [Operator Instructions]. comes Please And next of

Tim Coffey

everybody. Good thank morning Hi, you.

Brian Vance

Hi, Tim.

Don Hinson

Good morning.

Tim Coffey

the I can the you had construction quarter, in of headwinds bit Hi, I portfolio are a the headwinds level XQ? the -- during guess similar of anticipating

Bryan McDonald

Bryan. is This

the actively converted and years. is a a it's just to last same be portfolio chunky. contractual constructing lending couple continues ebb of towards the firm, of have attempts to get are We little takes bit for the flow still doing that to thing this bit approach which we But community

Tim Coffey

no nothing scheduled then? so Okay,

Bryan McDonald

No.

Tim Coffey

now right portfolio loan the of percentage what is then, rate? And variable Okay.

Bryan McDonald

It's I'm sorry. what? Tim,

Tim Coffey

loan portfolio the of percentage is rate? what variable Well,

Bryan McDonald

to real XX%. think it can I think, that quick, what from a I it think I'm it's XX%, is look I trying at take

Don Hinson

a it a guess days XX there of if gives variable, days a later, in complicated, XX that reprise XX get is what variable I how days crime, reprise also later, define And later, little you at can there is but… terms

Bryan McDonald

close within Bank. about Sound Puget to I think XX% year one re-prices it add is I in What XX%. Tim, is which guess I Actually

Tim Coffey

Okay, great. Thank you.

Bryan McDonald

I'm sorry, go Thanks, Tim. Oh ahead.

Tim Coffey

saw this question. that have this about than of year versus comments of lower one last is gain I being that the year? Yes, more reflection year, soft we in first-half The softness the sales on for

Don Hinson

one a this over Tim quite last up quarter. you mortgage bit things; you strong couple quarter of is pipeline the know probably know,

much doing than we custom more business last year. did are construction We

a so, a And lower on are balance. gain larger seeing we sales, but portfolio outstanding

have gain then, per sales we the of the margin rate. some that on up, a that than in with made -- business, doesn't And our as up So same the kind variable we of at on up seen with refi market but move to business on rates secondary receive FDA more those and moving decline construction.

And if the we of to one so, long sell those we evaluate them. want each side to

in more we them, seeing loans and already so to prime the sell that not up moving likely far consequence SBA more year. likely is So increases this that the the rotate are natural with are occur to we rates

So it's a combination of those two factors.

Tim Coffey

questions. great, right, thanks. Those my All were

Don Hinson

Thanks, Tim.

Operator

further you. please questions in are queue, there continue. no Thank And

Brian Vance

Okay. calling conference on I everyone QX in call. appreciate listening our in, earnings

Conference the week's many of see KBW will We investor the side, then. you we look next forward on York, and in New to discussions

So concludes That call I today. today. in appreciate calling all our

Operator

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now disconnect. may You

Heritage Financial (HFWA) 25 Jul 182018 Q2 Earnings call transcript