2018 Message to Shareholders
(May, 2018) This is an exciting time for Heritage Bank of Nevada to be in business in Northern Nevada. The economy is greatly improving with tremendous growth throughout the area thanks in part to the expansion of the Tahoe Reno Industrial Center (TRIC). As a result of the addition of new businesses into the Center, there are currently 12,000 unfilled jobs in Northern Nevada and additional opportunity for businesses to grow.
Heritage Bank is a big part of the growth in our community as there is new construction taking place all around us. We are excited to have our main headquarters building located in the middle of the Park Lane Master Planned development, which includes the addition of over 1,700 housing units and multiple new retail establishments. As the community focuses on Park Lane as it nears completion, Heritage Bank will be poised to take advantage of the modern development.
Once again in 2017, Heritage Bank was awarded the number one SBA 504 Lender of the Year award in Northern Nevada as named by the Small Business Development Administration. This is the seventh straight year Heritage Bank has received the award, adding to our positive brand and reputation. While the big banks continue to have regulation missteps, Heritage Bank has a great reputation and relationship not only with the SBA, but with both state and federal regulators.
Overall, the bank had an outstanding year in 2017. Profitability was strong pre-tax law change. The new tax law changes resulted in an adjustment to the deferred tax asset of $1.6 million, resulting in an expense realized in December of 2017.
Our overall loans have been impacted as a result of cash flowing in from California. Businesses are seeing increased liquidity as those dollars are used to fund loan payoffs and business acquisitions. In addition, we are seeing increasing interest rates with four rate increases in the last 14 months and the possibility of more to come.
Our credit quality continued to improve along with Northern Nevada’s strengthening economy. In 2017, we saw charge-offs net of recoveries of $105,000. In addition, we reversed $575,000 from the provision while maintaining a 1.47% allowance for future loan losses, well above the peer level of 1.25%.
Total deposits grew by 12% from $652 million at year-end 2016, to $728 million at year-end 2017, with the growth continuing in core deposits. Net loan growth continues to be strong at 6%, increasing from $506 million at year-end 2016 to $536 million at year-end 2017.
Our increased profitability enabled us to continue our stock buy-back program. In 2017, the Board of Directors authorized $7 million for the program. The stock buy-back program has been in existence since 2006 and enables the bank to provide liquidity for shareholders. During 2017, we were able to repurchase 53,195 shares, bringing the total repurchased to-date to 534,780 shares or approximately 31% of the shares issued. With our current capital levels exceeding regulatory requirements, we anticipate continuing the stock repurchase program in 2018.
As the largest state chartered bank in all of Nevada, we continue to grow and build on our excellent reputation. We provide our customers with the most up to date products and services available to us, and educate them on keeping their accounts safe and secure. Looking forward, we are very optimistic about what the future of Northern Nevada holds for Heritage Bank, our customers and our community. We are well positioned to take full advantage of the economic growth that is forecast to continue in our market area.
Heritage Bank assists our customers with the personalized service that only a locally-based community bank can provide. As a community bank, we remain involved in and supportive of the activities and organizations that support our community. And as always, we appreciate our team of employees, our customers, our stockholders, and our Board of Directors who continue to support the goals of Heritage Bancorp and our subsidiary Heritage Bank of Nevada.
Robert Cashell, Jr.