SEC Comment Letter for HERITAGE FINANCIAL (HFWA) — Jan 16, 2014
HERITAGE FINANCIAL CORP /WA/ (HFWA) (CIK 0001046025)
Date: Jan. 16, 2014 · CIK: 0001046025 · Accession: 0000000000-14-002389
AI Filing Summary & Sentiment
Reasoning
Letter
January 16, 2014 Via E -mail Kaylene M. Lahn Senior Vice President Heritage Financial Corporation 201 Fifth Avenue SW Olympia, WA 98501
Re: Heritage Financial Corporation Registration Statement on Form S-4 Filed December 20, 2013 File No. 333 -192985
Dear Ms. Lahn :
We have reviewed your registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure.
Please respond to this letter by amending your registration statement and providing the requested information . If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response.
After reviewing any amendment to your registration statement and the information you provide in response to these comments, we may have additional comments.
Registration Statement on Form S -4 Filed December 20, 2013
General
1. Please supplementarily provide the staff with the board books prepared for each board.
2. Noting the disclosures on pages 57 (bullets 2, 3 and 4) and 69 (first full paragraph) regarding financial projections for Washington Banking and Heritage, supplementally provide the staff with those projections. We may have further comment.
3. Please include page citations for all internal cross references in your next amendment .
Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 2
Questions and Answers…, page 1
4. Noting the dissenters’ rights referenced in the last Q&A on page 6, revise either the Shareholder Letter or Notice to Shareholders to inform Washington Banking share holder s that they must notify the Company prior to the vote of their intent to dissent and add a cross -reference t o a section in the proxy where information discloses how to perfect their right to dissent.
Summary, page 9
5. Please move the disclosures on page 33 (the historical and pro forma per share data), to the Summary, as required by Item 3(f) of Form S -4.
6. Revise the disclosures on pages 12 and 13 with regard to the Stock Options and Restricted Stock Units to add an example for each.
7. Please revise your disclosure on page 17 to briefly explain the material changes to the rights of Washington Banking shareholders upon completion of the merger.
8. We note your disclosure on page 18 that multiple shareholder class action lawsuits have been filed attempting to enjoin the proposed merger. Please describe any specific factual accusations included in the plain tiffs’ complaints and tell us whether the Washington Banking or Heritage boards, as applicable, were aware of these facts when they approved the merger agreement.
Risk Factors, page 19
9. We note reference to a “Sandler update” on page 20, and your disclosu re elsewhere, including on page 68 that “Sandler has not undertaken to update…its opinion…after the date of this opinion.” Please disclose the substance or terms of this update and upd ate your prospectus accordingly.
Comparative Unaudited Pro Forma Per Sh are Data, page 33
10. Please expand the disclosure to provide a note to the column titled Pro Forma Combined Amounts for Heritage to state the amounts of stockholders’ equity and shares of common stock outstanding after the merger used for the book value calc ulations per common share at September 30, 2013 and December 31, 2012. In this regard, you may provide a cross - reference to the Unaudited Pro Forma Combined Condensed Consolidated Statement of Financial Condition and Note 2 – Purchase Price used to calcula te the pro forma combined amount for Heritage book value per common share at September 30, 2013.
Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 3
The Merger, page 44
11. Please revise this section to specify the material terms that were discussed and the positions taken by both sides throughout the merge r negotiations.
12. We note that Washington Banking executives met with its financial advisor multiple times in advance of the August 27, 2013 informal meeting between Mr. Vance and Mr. Wagner. However, it appears from your disclosure on page 45 that Mr. Wagn er was not informed that Mr. Vance arranged the meeting to initiate informal merger discussions until the meeting itself. Please revise to explain.
The Merger Agreement, page 87
13. Please do not qualify your discussion in this section. Although you may refer investors to the merger agreement for more detailed information, you must provide all of the material terms of the agreement in this section. Similarly revise the qualification o f your disclosure on the top of page 44, in the second paragraph on page 57, and the first partial paragraph on page 67 .
Unaudited Pro Forma Combined Condensed Consolidated Financial Information, pages 102 -103
14. We note your disclosure that for purposes o f the accompanying pro forma information, the closing price of Heritage common stock as of October 23, 2013, the business day on which the merger agreement was subsequently publically announced was used for purposes of presenting the pro forma combined con densed consolidated statement of financial condition as of September 30, 2013. Under ASC 805, the most recent stock price at the time of filing should be used for determining the value of stock to be issued in a transaction that has not yet consummated. Pl ease revise accordingly. In addition, please expand the notes to the unaudited pro forma combined condensed consolidated statement of financial condition to state the date at which the stock price was determined and present a sensitivity analysis for the r ange of possible outcomes based on percentage increases and decreases in the recent stock price.
15. We note the disclosure appearing in the 4th paragraph. Please expand the discussion to state management’s estimate of how these merger costs are expected to impact the liquidity of the newly combined companies going forward and clearly identify this disclosure as forward -looking information.
Washington Banking Company Unaudited Pro Forma Combined Condensed Consolidated Statements of Income, pages 105 -106
16. The staff notes the line item titled other income under the heading Noninterest income for the nine months ended September 30, 2013 and the year ended December 31, 2012.
Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 4
Please revise to include gains and losses on sales of OREO as well as any write -downs within other expense pursuant to Rule 9 -04 (14) (d) of Regulation S -X.
17. The staff notes the disclosure that certain historical data of Washington Banking has been reclassified on a pro forma basis to conform to Heritage’s classifications. With a view toward expanded disclosure please tell us the amount and basis for these reclassifications for the nine months ended September 30, 2013 and the year ended December 31, 2012.
Note 3 – Allocation of Purchase Price of Washington Banking, page 108
18. Please expand the note to disclose how you determined the amount of premiums and discounts and the relevant assumptions.
Note 4 – Pro Forma Combined Condensed Consolidated Financial Information Adjustments, pages 109 -111
19. With a view toward expanded disclosure in Adjustme nt M, please state how you derived the accretion of interest component of the loan discount resulting from the pro forma loan fair value adjustment of $58,435 amortized over a weighted average life of 3.33 years for the nine months ended September 30, 2013 and for the year ended December 31, 2012.
20. With a view toward expanded disclosure in Adjustment N, please state how you derived the amortization of the discount resulting from the pro forma junior subordinated debenture adjustment of $8,196 amortized over the remaining 24 year life of the debentures for the nine months ended September 30, 2013 and for the year ended December 31, 2012. In this regard, it is unclear how the amortization expense for the nine months ended September 30, 2013 is greater than the amortization expense for the year ended December 31, 2012.
21. With a view toward expanded disclosure in Adjustment O, please state the components of professional services by company that you have determined are direct costs incurred in connection with the m erger.
22. With a view toward expanded disclosure in Adjustment P, please state how you derived the amortization of the CDI resulting from the merger based on an amortization period of 10 years for the nine months ended September 30, 2013 and for the year ended December 31, 2012. In addition, state the accelerated method of amortization used.
23. With regard to note (1) to Adjustment Q, tell us why you have stated that due to impractability, the effect of the historical interest marks incurred in the Washingto n Banking covered loan portfolio for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have not been eliminated.
Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 5
24. You state that no adjustments are shown for the amortization of adjustments for the FDIC indemnification asset , premises and equipment and clawback liability for the nine months ended September 30, 2013 and for the year ended December 31, 2012 as the net effect would be insignificant for the respective periods. Please revise to present these adjustments gross on t he face of the pro forma statements. Alternatively, a more detailed explanation of the components of the adjustments may be presented in the notes to the pro forma statements.
25. Please consider expanding the disclosure to provide a note to present the esti mated amortization/accretion of acquisition accounting adjustments reflected in the pro forma financial statements on the future pre -tax net income on Heritage Financial Corporation after the merger with Washington Banking Company for the 5 year periods en ded December 31, 2018.
Where You Can Find More Information, pages 129 -131
26. Please expand the section titled Where You Can Find More Information appearing on page 130 to note all documents incorporated by reference filed after the date of the filing.
Exhibit Index
27. Revise your incorporation by reference of Exhibits 3.1 and 3.2 to comply with Item 10(d) of Regulation S -K.
Heritage Financial Corporation’s Annual Report on Form 10 -K for Year Ended December 31,
Part II
Item 5. Market for the Registran t’s Common Equity…, page 39
28. We note your dividend activities for the 2012 fiscal year. In future filings, please include dividend activity for the two most recent fiscal years and any subsequent interim period as required by Item 201(c)(1) of Regulation S-K.
Part IV
Signatures, page 66
29. We note that Mr. Hinson has not identified himself as the principal accounting officer on the signature page as is required. Please revise future filings in accordance with General Instruction D of Form 10 -K.
Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 6
We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Act of 193 3 and all applicable Securities Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made.
Notwithstanding our comments, in the event you request acceleration of the effective date of the pending regist ration statement please provide a written statement from the company acknowledging that:
should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commissi on from taking any action with respect to the filing;
the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the company from its full responsibility for the adequacy and acc uracy of the disclosure in the filing; and
the company may not assert staff comments and the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
Please refer to Rules 460 and 461 regarding requests for acceleration . We will consider a written request for acceleration of the effective date of the registration statement as confirmation of the fact that those requesting acceleration are aware of thei r respective responsibilities under the Securities Act of 1933 and the Securities Exchange Act of 1934 as they relate to the proposed public offering of the securities specified in the above registration statement. Please allow adequate time for us to rev iew any amendment prior to the requested effective date of the registration statement.
You may contact Christina Harley at (202) 551 -3695 or John Nolan, Senior Assistant Chief Accountant, at (202) 551 -3492 if you have questions regarding comments on the financial statements and related matters. Please contact Christopher Dunham at (202) 551 -3783 or me at (202) 551 -3434 with any other questions.
Sincerely,
/s/ Michael Clampitt
Show Raw Text
January 16, 2014 Via E -mail Kaylene M. Lahn Senior Vice President Heritage Financial Corporation 201 Fifth Avenue SW Olympia, WA 98501 Re: Heritage Financial Corporation Registration Statement on Form S-4 Filed December 20, 2013 File No. 333 -192985 Dear Ms. Lahn : We have reviewed your registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may better understand your disclosure. Please respond to this letter by amending your registration statement and providing the requested information . If you do not believe our comments apply to your facts and circumstances or do not believe an amendment is appropriate, please tell us why in your response. After reviewing any amendment to your registration statement and the information you provide in response to these comments, we may have additional comments. Registration Statement on Form S -4 Filed December 20, 2013 General 1. Please supplementarily provide the staff with the board books prepared for each board. 2. Noting the disclosures on pages 57 (bullets 2, 3 and 4) and 69 (first full paragraph) regarding financial projections for Washington Banking and Heritage, supplementally provide the staff with those projections. We may have further comment. 3. Please include page citations for all internal cross references in your next amendment . Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 2 Questions and Answers…, page 1 4. Noting the dissenters’ rights referenced in the last Q&A on page 6, revise either the Shareholder Letter or Notice to Shareholders to inform Washington Banking share holder s that they must notify the Company prior to the vote of their intent to dissent and add a cross -reference t o a section in the proxy where information discloses how to perfect their right to dissent. Summary, page 9 5. Please move the disclosures on page 33 (the historical and pro forma per share data), to the Summary, as required by Item 3(f) of Form S -4. 6. Revise the disclosures on pages 12 and 13 with regard to the Stock Options and Restricted Stock Units to add an example for each. 7. Please revise your disclosure on page 17 to briefly explain the material changes to the rights of Washington Banking shareholders upon completion of the merger. 8. We note your disclosure on page 18 that multiple shareholder class action lawsuits have been filed attempting to enjoin the proposed merger. Please describe any specific factual accusations included in the plain tiffs’ complaints and tell us whether the Washington Banking or Heritage boards, as applicable, were aware of these facts when they approved the merger agreement. Risk Factors, page 19 9. We note reference to a “Sandler update” on page 20, and your disclosu re elsewhere, including on page 68 that “Sandler has not undertaken to update…its opinion…after the date of this opinion.” Please disclose the substance or terms of this update and upd ate your prospectus accordingly. Comparative Unaudited Pro Forma Per Sh are Data, page 33 10. Please expand the disclosure to provide a note to the column titled Pro Forma Combined Amounts for Heritage to state the amounts of stockholders’ equity and shares of common stock outstanding after the merger used for the book value calc ulations per common share at September 30, 2013 and December 31, 2012. In this regard, you may provide a cross - reference to the Unaudited Pro Forma Combined Condensed Consolidated Statement of Financial Condition and Note 2 – Purchase Price used to calcula te the pro forma combined amount for Heritage book value per common share at September 30, 2013. Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 3 The Merger, page 44 11. Please revise this section to specify the material terms that were discussed and the positions taken by both sides throughout the merge r negotiations. 12. We note that Washington Banking executives met with its financial advisor multiple times in advance of the August 27, 2013 informal meeting between Mr. Vance and Mr. Wagner. However, it appears from your disclosure on page 45 that Mr. Wagn er was not informed that Mr. Vance arranged the meeting to initiate informal merger discussions until the meeting itself. Please revise to explain. The Merger Agreement, page 87 13. Please do not qualify your discussion in this section. Although you may refer investors to the merger agreement for more detailed information, you must provide all of the material terms of the agreement in this section. Similarly revise the qualification o f your disclosure on the top of page 44, in the second paragraph on page 57, and the first partial paragraph on page 67 . Unaudited Pro Forma Combined Condensed Consolidated Financial Information, pages 102 -103 14. We note your disclosure that for purposes o f the accompanying pro forma information, the closing price of Heritage common stock as of October 23, 2013, the business day on which the merger agreement was subsequently publically announced was used for purposes of presenting the pro forma combined con densed consolidated statement of financial condition as of September 30, 2013. Under ASC 805, the most recent stock price at the time of filing should be used for determining the value of stock to be issued in a transaction that has not yet consummated. Pl ease revise accordingly. In addition, please expand the notes to the unaudited pro forma combined condensed consolidated statement of financial condition to state the date at which the stock price was determined and present a sensitivity analysis for the r ange of possible outcomes based on percentage increases and decreases in the recent stock price. 15. We note the disclosure appearing in the 4th paragraph. Please expand the discussion to state management’s estimate of how these merger costs are expected to impact the liquidity of the newly combined companies going forward and clearly identify this disclosure as forward -looking information. Washington Banking Company Unaudited Pro Forma Combined Condensed Consolidated Statements of Income, pages 105 -106 16. The staff notes the line item titled other income under the heading Noninterest income for the nine months ended September 30, 2013 and the year ended December 31, 2012. Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 4 Please revise to include gains and losses on sales of OREO as well as any write -downs within other expense pursuant to Rule 9 -04 (14) (d) of Regulation S -X. 17. The staff notes the disclosure that certain historical data of Washington Banking has been reclassified on a pro forma basis to conform to Heritage’s classifications. With a view toward expanded disclosure please tell us the amount and basis for these reclassifications for the nine months ended September 30, 2013 and the year ended December 31, 2012. Note 3 – Allocation of Purchase Price of Washington Banking, page 108 18. Please expand the note to disclose how you determined the amount of premiums and discounts and the relevant assumptions. Note 4 – Pro Forma Combined Condensed Consolidated Financial Information Adjustments, pages 109 -111 19. With a view toward expanded disclosure in Adjustme nt M, please state how you derived the accretion of interest component of the loan discount resulting from the pro forma loan fair value adjustment of $58,435 amortized over a weighted average life of 3.33 years for the nine months ended September 30, 2013 and for the year ended December 31, 2012. 20. With a view toward expanded disclosure in Adjustment N, please state how you derived the amortization of the discount resulting from the pro forma junior subordinated debenture adjustment of $8,196 amortized over the remaining 24 year life of the debentures for the nine months ended September 30, 2013 and for the year ended December 31, 2012. In this regard, it is unclear how the amortization expense for the nine months ended September 30, 2013 is greater than the amortization expense for the year ended December 31, 2012. 21. With a view toward expanded disclosure in Adjustment O, please state the components of professional services by company that you have determined are direct costs incurred in connection with the m erger. 22. With a view toward expanded disclosure in Adjustment P, please state how you derived the amortization of the CDI resulting from the merger based on an amortization period of 10 years for the nine months ended September 30, 2013 and for the year ended December 31, 2012. In addition, state the accelerated method of amortization used. 23. With regard to note (1) to Adjustment Q, tell us why you have stated that due to impractability, the effect of the historical interest marks incurred in the Washingto n Banking covered loan portfolio for the nine months ended September 30, 2013 and for the year ended December 31, 2012 have not been eliminated. Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 5 24. You state that no adjustments are shown for the amortization of adjustments for the FDIC indemnification asset , premises and equipment and clawback liability for the nine months ended September 30, 2013 and for the year ended December 31, 2012 as the net effect would be insignificant for the respective periods. Please revise to present these adjustments gross on t he face of the pro forma statements. Alternatively, a more detailed explanation of the components of the adjustments may be presented in the notes to the pro forma statements. 25. Please consider expanding the disclosure to provide a note to present the esti mated amortization/accretion of acquisition accounting adjustments reflected in the pro forma financial statements on the future pre -tax net income on Heritage Financial Corporation after the merger with Washington Banking Company for the 5 year periods en ded December 31, 2018. Where You Can Find More Information, pages 129 -131 26. Please expand the section titled Where You Can Find More Information appearing on page 130 to note all documents incorporated by reference filed after the date of the filing. Exhibit Index 27. Revise your incorporation by reference of Exhibits 3.1 and 3.2 to comply with Item 10(d) of Regulation S -K. Heritage Financial Corporation’s Annual Report on Form 10 -K for Year Ended December 31, 2012 Part II Item 5. Market for the Registran t’s Common Equity…, page 39 28. We note your dividend activities for the 2012 fiscal year. In future filings, please include dividend activity for the two most recent fiscal years and any subsequent interim period as required by Item 201(c)(1) of Regulation S-K. Part IV Signatures, page 66 29. We note that Mr. Hinson has not identified himself as the principal accounting officer on the signature page as is required. Please revise future filings in accordance with General Instruction D of Form 10 -K. Kaylene M. Lahn Heritage Financial Corporation January 16, 2014 Page 6 We urge all persons who are responsible for the accuracy and adequacy of the disclosure in the filing to be certain that the filing includes the information the Securities Act of 193 3 and all applicable Securities Act rules require. Since the company and its management are in possession of all facts relating to a company’s disclosure, they are responsible for the accuracy and adequacy of the disclosures they have made. Notwithstanding our comments, in the event you request acceleration of the effective date of the pending regist ration statement please provide a written statement from the company acknowledging that: should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commissi on from taking any action with respect to the filing; the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the company from its full responsibility for the adequacy and acc uracy of the disclosure in the filing; and the company may not assert staff comments and the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. Please refer to Rules 460 and 461 regarding requests for acceleration . We will consider a written request for acceleration of the effective date of the registration statement as confirmation of the fact that those requesting acceleration are aware of thei r respective responsibilities under the Securities Act of 1933 and the Securities Exchange Act of 1934 as they relate to the proposed public offering of the securities specified in the above registration statement. Please allow adequate time for us to rev iew any amendment prior to the requested effective date of the registration statement. You may contact Christina Harley at (202) 551 -3695 or John Nolan, Senior Assistant Chief Accountant, at (202) 551 -3492 if you have questions regarding comments on the financial statements and related matters. Please contact Christopher Dunham at (202) 551 -3783 or me at (202) 551 -3434 with any other questions. Sincerely, /s/ Michael Clampitt Michael Clampitt Senior Counsel cc: Via E -mail John F. Breyer, Jr., Esq.