May 5, 2011
Heritage Bank Main Branch, 1401 S. Virginia St. Reno
Heritage Bancorp has grown while maintaining our strength and stability. Heritage Bancorp produced its eleventh consecutive year of record profitability despite the continuing economic challenges of 2010. The subsidiary bank, Heritage Bank of Nevada, continued to be one of the highest rated banks in the State of Nevada during 2010.
During 2010, Heritage Bancorp assumed substantially all the deposits and assets of Carson River Community Bank from the FDIC, increasing our asset size and geographic footprint. We retained the majority of the Carson River Community Bank customers and employees and subsequently moved the branch to a new location in South Carson Valley. The acquisition and branch move expanded our market presence in Northern Nevada.
During 2011, Heritage Bancorp was able to grow total assets by an amazing 12.4% to $452,164,000 FYE 2010. Our substantial growth in total assets occurred in 2010 during a time when the average bank in our peer group’s growth nationally was less than 1.80%. This continued quality asset growth allowed the basic earnings per share to increase 20% from $3.19 per share in 2009 to $3.83 per share in 2010. This compares very favorably to the majority of the banks in the Nevada market.
The loan portfolio of the subsidiary bank expanded 8.24%, increasing from $290,515,000 FYE 2009 to $314,458,000 FYE 2010. This reflects a loan to deposit ratio of 77%, comparable to the bank’s national peer group. The commercial lending group, managed by Senior Vice President and Chief Credit Officer Tom Traficanti, continues to do an outstanding job in the management, underwriting and collection of the loan portfolio. The loan loss reserve as a percentage of total loans increased from 1.50% FYE 2009 to 1.85% FYE 2010. Solid core earnings from this division allowed us to fund a higher than normal loan loss provision during 2010 and still report record earnings.
Even though the economy in Northern Nevada remained challenging for all of us, the majority of Heritage Bank customers are moving forward with sound business strategies. The bank’s experienced lenders continue to monitor all of the credits in an effort to recognize credit problems early and work with customers who need assistance in getting through these challenging economic times. Net loan losses for 2010 were $3,894,000 which represents 1.24% of total loans.
During the past year, we were able to grow the bank 12.44% with minimal increases in overhead expense, and continued rigorous management of our costs. Our efficiency ratio was 43.57% FYE 2010 which reflects an improvement over FYE 2009, and compares favorably to the national peer group of 68.24%. The efficiency ratio is computed by taking non-interest expense as a percentage of net interest income and non-interest income.
Total shareholder’s equity at December 31, 2010 was $37,936,000, up $4,327,000 (12.9%) from December 31, 2009. During 2010, Heritage Bancorp repurchased 60,437 shares of common stock at a total cost of $1,209,000. The company’s subsidiary, Heritage Bank of Nevada, remains considerably above the regulatory requirements for a well-capitalized bank. At December 31, 2010, Heritage Bank’s Tier 1 capital to average assets ratio was 9.47%, and total capital to risk weighted assets was 15.44%.
Heritage Bank of Nevada is well positioned to remain strong and profitable for 2011, and to continue to grow as opportunities present themselves. The bank’s fundamental strength and stability is apparent in its reported ratios. We expect the economy to continue to be very challenging for the duration of 2011. As always, we remain focused on providing an outstanding banking experience for our customers, and a work environment in which our employees can be proud. We appreciate our team of employees, our Board of Directors, our Stockholders and our customers all of whom continue to support the goals and ambitions of Heritage Bank of Nevada.