- Net income was $5.7 million,
or $0.16 per diluted share, for the
first quarter of 2024 compared to $6.2
million, or $0.18 per diluted
share, for the fourth quarter of 2023.
- Significant items in the first quarter of 2024 results
include a loss on sale of securities of $10.0 million, or $0.22 per diluted share, and costs relating to
expense management measures of $1.1
million, or $0.02 per diluted
share.
- Loans receivable increased $92.5
million, or 2.1% (8.4% annualized), during the first quarter
of 2024.
- Net interest margin was 3.32% for the first quarter of 2024
compared to 3.41% for the fourth quarter of 2023.
- Cost of total deposits was 1.19% for the first quarter of
2024 compared to 1.01% for the fourth quarter of 2023.
- Declared a regular cash dividend of $0.23 per share on April
24, 2024.
- Approved a new stock repurchase program authorizing the
repurchase of up to 5% of the Company's outstanding shares, or
approximately 1.7 million shares.
OLYMPIA,
Wash., April 25, 2024 /PRNewswire/ -- Heritage
Financial Corporation (NASDAQ GS: HFWA) (the "Company" or
"Heritage"), the parent company of Heritage Bank (the "Bank"),
today reported net income of $5.7
million for the first quarter of 2024 compared to
$6.2 million for the fourth quarter
of 2023 and $20.5 million for the
first quarter of 2023. Diluted earnings per share for the first
quarter of 2024 were $0.16 compared
to $0.18 for the fourth quarter of
2023 and $0.58 for the first quarter
of 2023.
In the first quarter of 2024, the Company incurred a pre-tax
loss of $10.0 million on the sale of
investment securities due to the strategic repositioning of its
balance sheet, which affected diluted earnings per share by
$0.22 for the quarter. The Company
sold $144.0 million in investment
securities with an estimated weighted average book yield of 2.37%
and purchased $33.1 million of
investment securities with an estimated weighted average book yield
of 6.05%. The remaining proceeds from sales were invested in
interest earning deposits with a current yield of 5.40%. As a
result of these actions, we anticipate an estimated annualized
improvement of $4.6 million in
interest income. Similar actions were taken during the fourth
quarter of 2023 for which we incurred a pre-tax loss of
$10.0 million and estimated
annualized improvement of $5.3
million in interest income. Further, approximately
$1.1 million of severance costs were
incurred in the first quarter of 2024 as part of expense management
initiatives, which affected diluted earnings per share by
$0.02 for the quarter.
Jeffrey J. Deuel, President and
Chief Executive Officer of Heritage, commented, "We are pleased
with our continued accomplishments in the first quarter including
strong loan growth, repositioning of our balance sheet and expense
management measures, which will strengthen our earnings in
future periods. Although negatively impacting current
earnings, we believe these actions will enhance our sustainable
long-term returns for our shareholders."
Financial Highlights
The following table provides financial highlights at the dates
and for the periods indicated:
|
As of or for the
Quarter Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
(Dollars in
thousands, except per share amounts)
|
|
Net income
|
$
5,748
|
|
$
6,233
|
|
$
20,457
|
|
Pre-tax, pre-provision
income(1)
|
$
8,260
|
|
$
8,001
|
|
$
26,495
|
|
Diluted earnings per
share
|
$
0.16
|
|
$
0.18
|
|
$
0.58
|
|
Return on average
assets(2)
|
0.33 %
|
|
0.35 %
|
|
1.17 %
|
|
Pre-tax, pre-provision
return on average assets(1)(2)
|
0.47 %
|
|
0.44 %
|
|
1.52 %
|
|
Return on average
common equity(2)
|
2.73 %
|
|
3.04 %
|
|
10.21 %
|
|
Return on average
tangible common equity(1)(2)
|
4.07 %
|
|
4.69 %
|
|
15.05 %
|
|
Net interest
margin(2)
|
3.32 %
|
|
3.41 %
|
|
3.91 %
|
|
Cost of total
deposits(2)
|
1.19 %
|
|
1.01 %
|
|
0.31 %
|
|
Efficiency
ratio
|
83.0 %
|
|
84.2 %
|
|
61.1 %
|
|
Noninterest expense to
average total assets(2)
|
2.29 %
|
|
2.37 %
|
|
2.39 %
|
|
Total assets
|
$ 7,091,283
|
|
$ 7,174,957
|
|
$ 7,236,806
|
|
Loans receivable,
net
|
$ 4,378,429
|
|
$ 4,287,628
|
|
$ 4,083,003
|
|
Total
deposits
|
$ 5,532,327
|
|
$ 5,599,872
|
|
$ 5,789,022
|
|
Loan to deposit
ratio(3)
|
80.0 %
|
|
77.4 %
|
|
71.3 %
|
|
Book value per
share
|
$
24.43
|
|
$
24.44
|
|
$
23.53
|
|
Tangible book value per
share(1)
|
$
17.36
|
|
$
17.40
|
|
$
16.48
|
|
(1)
|
See Non-GAAP Financial
Measures section herein.
|
|
(2)
|
Annualized.
|
|
(3)
|
Loans receivable
divided by total deposits.
|
Balance Sheet
Total investment securities decreased $143.3 million, or 7.6%, to $1.73 billion at March 31,
2024 from $1.87 billion at
December 31, 2023. As previously
discussed, the Company sold $144.0
million in investment securities at a loss of $10.0 million during the first quarter of 2024.
These funds were redeployed in investment purchases of $33.1 million, loans and interest earning
deposits. The following table summarizes the Company's investment
securities at the dates indicated:
|
March 31,
2024
|
|
December 31,
2023
|
|
$ Change in Carrying
Value
|
|
Amortized
Cost
|
|
Net Unrealized Gain
(Loss)
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Net Unrealized
Loss
|
|
Fair
Value
|
|
|
(Dollars in
thousands)
|
|
Investment
securities available for sale:
|
|
U.S. government and
agency securities
|
$
16,001
|
|
$
(2,584)
|
|
$
13,417
|
|
$
16,047
|
|
$
(2,297)
|
|
$
13,750
|
|
$
(333)
|
|
Municipal
securities
|
83,788
|
|
(11,833)
|
|
71,955
|
|
92,231
|
|
(12,706)
|
|
79,525
|
|
(7,570)
|
|
Residential CMO and
MBS(1)
|
519,152
|
|
(42,410)
|
|
476,742
|
|
555,518
|
|
(43,469)
|
|
512,049
|
|
(35,307)
|
|
Commercial CMO and
MBS(1)
|
443,537
|
|
(34,069)
|
|
409,468
|
|
538,910
|
|
(34,652)
|
|
504,258
|
|
(94,790)
|
|
Corporate
obligations
|
11,658
|
|
(467)
|
|
11,191
|
|
7,745
|
|
(132)
|
|
7,613
|
|
3,578
|
|
Other asset-backed
securities
|
13,653
|
|
84
|
|
13,737
|
|
17,336
|
|
(178)
|
|
17,158
|
|
(3,421)
|
|
Total
|
$
1,087,789
|
|
$
(91,279)
|
|
$
996,510
|
|
$
1,227,787
|
|
$
(93,434)
|
|
$
1,134,353
|
|
$ (137,843)
|
|
|
|
|
|
|
|
March 31,
2024
|
|
December 31,
2023
|
|
$ Change in Carrying
Value
|
|
Amortized
Cost
|
|
Net
Unrecognized
Loss
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Net
Unrecognized
Loss
|
|
Fair
Value
|
|
|
(Dollars in
thousands)
|
|
Investment
securities held to maturity:
|
|
U.S. government and
agency securities
|
$
151,110
|
|
$
(29,980)
|
|
$
121,130
|
|
$
151,075
|
|
$
(27,701)
|
|
$ 123,374
|
|
$
35
|
|
Residential CMO and
MBS(1)
|
262,359
|
|
(17,439)
|
|
244,920
|
|
267,204
|
|
(14,101)
|
|
253,103
|
|
(4,845)
|
|
Commercial CMO and
MBS(1)
|
320,537
|
|
(37,586)
|
|
282,951
|
|
321,163
|
|
(35,190)
|
|
285,973
|
|
(626)
|
|
Total
|
$
734,006
|
|
$
(85,005)
|
|
$
649,001
|
|
$
739,442
|
|
$
(76,992)
|
|
$ 662,450
|
|
$
(5,436)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment
securities
|
$
1,821,795
|
|
$ (176,284)
|
|
$
1,645,511
|
|
$
1,967,229
|
|
$ (170,426)
|
|
$
1,796,803
|
|
|
|
|
|
(1)
|
U.S. government agency
and government-sponsored enterprise mortgage-backed securities and
collateralized mortgage obligations.
|
Loans receivable increased $92.5 million, or 2.1%, to
$4.43 billion at March 31, 2024 from $4.34
billion at December 31, 2023.
New loans funded in the first quarter of 2024 and fourth quarter of
2023 totaled $101.7 million and
$113.4 million, respectively. Loan
prepayments decreased slightly during the first quarter of 2024 to
$39.1 million, compared to
$42.8 million during the fourth
quarter of 2023.
Commercial and industrial loans increased $42.1 million, or 5.9%, due primarily to new loan
production of $37.4 million during
the first quarter of 2024 and advances on outstanding commitments.
Commercial and multifamily construction loans increased
$36.7 million, or 10.9%, due
primarily to advances on outstanding commitments. The following
table summarizes the Company's loans receivable, net at the dates
indicated:
|
March 31,
2024
|
|
December 31,
2023
|
|
Change
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
$
|
|
%
|
|
(Dollars in
thousands)
|
|
Commercial
business:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
industrial
|
$
760,391
|
|
17.2 %
|
|
$
718,291
|
|
16.6 %
|
|
$
42,100
|
|
5.9 %
|
|
Owner-occupied
commercial real estate ("CRE")
|
951,583
|
|
21.5
|
|
958,620
|
|
22.1
|
|
(7,037)
|
|
(0.7)
|
|
Non-owner occupied
CRE
|
1,702,665
|
|
38.4
|
|
1,697,574
|
|
39.1
|
|
5,091
|
|
0.3
|
|
Total commercial
business
|
3,414,639
|
|
77.1
|
|
3,374,485
|
|
77.8
|
|
40,154
|
|
1.2
|
|
Residential real
estate
|
386,357
|
|
8.7
|
|
375,342
|
|
8.7
|
|
11,015
|
|
2.9
|
|
Real estate
construction and land development:
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
84,081
|
|
1.9
|
|
78,610
|
|
1.8
|
|
5,471
|
|
7.0
|
|
Commercial and
multifamily
|
372,532
|
|
8.4
|
|
335,819
|
|
7.7
|
|
36,713
|
|
10.9
|
|
Total real estate
construction and land development
|
456,613
|
|
10.3
|
|
414,429
|
|
9.5
|
|
42,184
|
|
10.2
|
|
Consumer
|
170,556
|
|
3.9
|
|
171,371
|
|
4.0
|
|
(815)
|
|
(0.5)
|
|
Loans
receivable
|
4,428,165
|
|
100.0 %
|
|
4,335,627
|
|
100.0 %
|
|
92,538
|
|
2.1
|
|
Allowance for credit
losses on loans
|
(49,736)
|
|
|
|
(47,999)
|
|
|
|
(1,737)
|
|
3.6
|
|
Loans receivable,
net
|
$
4,378,429
|
|
|
|
$
4,287,628
|
|
|
|
$
90,801
|
|
2.1 %
|
Total deposits decreased $67.5
million, or 1.2%, to $5.53
billion at March 31, 2024 from
$5.60 billion at December 31, 2023. Certificates of deposit
increased $86.7 million, or 12.5%, to
$779.7 million at March 31, 2024 from $693.0
million at December 31, 2023
primarily due to transfers from non-maturity deposit accounts as
customers moved balances to higher yielding accounts.
The following table summarizes the Company's total deposits at
the dates indicated:
|
March 31,
2024
|
|
December 31,
2023
|
|
Change
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
$
|
|
%
|
|
(Dollars in
thousands)
|
|
Noninterest demand
deposits
|
$
1,637,111
|
|
29.5 %
|
|
$
1,715,847
|
|
30.7 %
|
|
$
(78,736)
|
|
(4.6) %
|
|
Interest bearing demand
deposits
|
1,552,584
|
|
28.1
|
|
1,608,745
|
|
28.7
|
|
(56,161)
|
|
(3.5)
|
|
Money market
accounts
|
1,099,983
|
|
19.9
|
|
1,094,351
|
|
19.5
|
|
5,632
|
|
0.5
|
|
Savings
accounts
|
462,974
|
|
8.4
|
|
487,956
|
|
8.7
|
|
(24,982)
|
|
(5.1)
|
|
Total non-maturity
deposits
|
4,752,652
|
|
85.9
|
|
4,906,899
|
|
87.6
|
|
(154,247)
|
|
(3.1)
|
|
Certificates of
deposit
|
779,675
|
|
14.1
|
|
692,973
|
|
12.4
|
|
86,702
|
|
12.5
|
|
Total
deposits
|
$
5,532,327
|
|
100.0 %
|
|
$
5,599,872
|
|
100.0 %
|
|
$
(67,545)
|
|
(1.2) %
|
Total borrowings were $500 million
at March 31, 2024 and December 31, 2023. All borrowings were from the
Federal Reserve Bank ("FRB") Bank Term Funding Program. Borrowings
totaling $400 million mature in
May 2024 while the remaining
$100 million mature in January 2025.
Total stockholders' equity decreased $5.7
million, or 0.7%, to $847.6
million at March 31, 2024
compared to $853.3 million at
December 31, 2023 due primarily to
$8.1 million in dividends paid to
common shareholders and $6.1 million
in common stock repurchases offset partially by $5.7 million of net income recognized for the
quarter and a $1.8 million decrease
in accumulated other comprehensive loss, net.
The Company and Bank continue to maintain capital levels in
excess of the applicable regulatory requirements for them both to
be categorized as "well-capitalized." The following table
summarizes capital ratios for the Company at the dates
indicated:
|
March 31,
2024
|
|
December 31,
2023
|
|
Change
|
|
Stockholders' equity to
total assets
|
12.0 %
|
|
11.9 %
|
|
0.1 %
|
|
Tangible common equity
to tangible assets (1)
|
8.8
|
|
8.8
|
|
—
|
|
Common equity tier 1
capital ratio (2)
|
12.6
|
|
12.9
|
|
(0.3)
|
|
Leverage ratio
(2)
|
10.0
|
|
10.0
|
|
—
|
|
Tier 1 capital ratio
(2)
|
13.0
|
|
13.3
|
|
(0.3)
|
|
Total capital ratio
(2)
|
13.9
|
|
14.1
|
|
(0.2)
|
|
|
|
(1)
|
See Non-GAAP
Financial Measures section herein.
|
|
(2)
|
Current quarter ratios
are estimates pending completion and filing of the Company's
regulatory reports.
|
Allowance for Credit Losses and Provision for Credit
Losses
The allowance for credit losses ("ACL") on loans as a percentage
of loans receivable was 1.12% at March 31,
2024 compared to 1.11% at December
31, 2023. During both the first quarter of 2024 and the
fourth quarter of 2023, the Company recorded a $1.7 million provision for credit losses on
loans. The provision for credit losses on loans during the first
quarter of 2024 was primarily driven by loan growth during the
quarter.
During the first quarter of 2024, the Company recorded a
$312,000 reversal of provision for
credit losses on unfunded commitments compared to a $246,000 reversal of provision for credit losses
on unfunded commitments during the fourth quarter of 2023. The
reversal of provision for credit losses on unfunded commitments
during the first quarter of 2024 was due primarily to a
$50.0 million decrease in the
unfunded exposure on construction loans.
The following table provides detail on the changes in the ACL on
loans and the ACL on unfunded, and the related provision for
(reversal of) credit losses for the periods indicated:
|
As of or for the
Quarter Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
ACL on
Loans
|
|
ACL on
Unfunded
|
|
Total
|
|
ACL on
Loans
|
|
ACL on
Unfunded
|
|
Total
|
|
ACL on
Loans
|
|
ACL on
Unfunded
|
|
Total
|
|
(Dollars in
thousands)
|
|
Balance, beginning of
period
|
$ 47,999
|
|
$ 1,288
|
|
$ 49,287
|
|
$ 46,947
|
|
$ 1,534
|
|
$ 48,481
|
|
$ 42,986
|
|
$ 1,744
|
|
$ 44,730
|
|
Provision for (reversal
of) credit losses
|
1,704
|
|
(312)
|
|
1,392
|
|
1,670
|
|
(246)
|
|
1,424
|
|
1,713
|
|
112
|
|
1,825
|
|
Net recoveries (net
charge-offs)
|
33
|
|
—
|
|
33
|
|
(618)
|
|
—
|
—
|
(618)
|
|
(230)
|
|
—
|
|
(230)
|
|
Balance, end of
period
|
$ 49,736
|
|
$
976
|
|
$ 50,712
|
|
$ 47,999
|
|
$ 1,288
|
|
$ 49,287
|
|
$ 44,469
|
|
$ 1,856
|
|
$ 46,325
|
Credit Quality
The percentage of classified loans to loans receivable was
unchanged at March 31, 2024 and
December 31, 2023. Classified loans
include loans rated substandard or worse. Total loans designated as
special mention increased by $22.2
million to $102.2 million at
March 31, 2024, compared to
$80.0 million at December 31, 2023. This increase was primarily
due to the downgrade of a $15.1
million commercial and multifamily construction loan and a
$5.5 million commercial and
industrial loan from pass to special mention. The following table
illustrates total loans by risk rating and their respective
percentage of total loans at the dates indicated:
|
March 31,
2024
|
|
December 31,
2023
|
|
Balance
|
|
% of
Total
|
|
Balance
|
|
% of
Total
|
|
(Dollars in
thousands)
|
|
Risk Rating:
|
|
|
|
|
|
|
|
|
Pass
|
$
4,255,750
|
|
96.1 %
|
|
$
4,185,893
|
|
96.6 %
|
|
Special
Mention
|
102,232
|
|
2.3
|
|
79,977
|
|
1.8
|
|
Substandard
|
70,183
|
|
1.6
|
|
69,757
|
|
1.6
|
|
Total
|
$
4,428,165
|
|
100.0 %
|
|
$
4,335,627
|
|
100.0 %
|
Nonaccrual loans to loans receivable was 0.11% and 0.10% at
March 31, 2024 and December 31, 2023, respectively. Changes in
nonaccrual loans during the periods indicated were as follows:
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
(In
thousands)
|
|
Balance, beginning of
period
|
$
4,468
|
|
$
3,065
|
|
$
5,906
|
|
Additions
|
593
|
|
2,149
|
|
468
|
|
Net principal payments
and transfers to accruing status
|
(269)
|
|
(333)
|
|
(909)
|
|
Payoffs
|
—
|
|
(413)
|
|
(650)
|
|
Balance, end of
period
|
$
4,792
|
|
$
4,468
|
|
$
4,815
|
Liquidity
Total liquidity sources available at March 31, 2024 were $2.50
billion. This includes internal as well as external sources
of liquidity. The Company has access to FHLB advances and the FRB
Discount Window. The Company's available liquidity sources at
March 31, 2024 represented a coverage
ratio of 45.2% of total deposits and 122.3% of estimated uninsured
deposits.
The following table summarizes the Company's available
liquidity:
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
(Dollars in
thousands)
|
|
FRB borrowing
availability
|
$
71,300
|
|
$
319,492
|
|
FHLB borrowing
availability(1)
|
1,384,631
|
|
1,417,518
|
|
Unencumbered investment
securities available for sale(2)
|
708,378
|
|
756,258
|
|
Cash and cash
equivalents
|
189,647
|
|
224,973
|
|
Fed funds line
borrowing availability with correspondent banks
|
145,000
|
|
145,000
|
|
Total available
liquidity
|
$
2,498,956
|
|
$
2,863,241
|
|
|
|
(1)
|
Includes FHLB total
borrowing availability of $1.38 billion at March 31, 2024 based on
pledged assets, however, maximum credit capacity is 45% of the
Bank's total assets one quarter in arrears or
$3.23 billion.
|
|
(2)
|
Investment securities
available for sale at fair value.
|
Net Interest Income and Net Interest Margin
Net interest income decreased $2.3
million, or 4.3%, during the first quarter of 2024 compared
to the fourth quarter of 2023 due primarily to an increase of
$2.4 million in interest expense. Net
interest margin decreased nine basis points to 3.32% during the
first quarter of 2024 from 3.41% during the fourth quarter of
2023.
The cost of interest bearing deposits increased 22 basis points
to 1.70% for the first quarter of 2024 from 1.48% for the fourth
quarter of 2023. This increase was primarily due to customers
transferring balances from non-maturity deposits to higher rate
certificates of deposit.
The yield on interest earning assets increased nine basis points
to 4.79% for the first quarter of 2024 compared to 4.70% for the
fourth quarter of 2023. The yield on loans receivable, net
increased six basis points to 5.41% during the first quarter of
2024 compared to 5.35% during the fourth quarter of 2023 due to
higher rates on new and renewed loans. The yield on taxable
securities increased 14 basis points to 3.29% during the first
quarter of 2024 compared to 3.15% during the fourth quarter of 2023
due to sales in the fourth quarter of 2023 and first quarter of
2024 of lower yielding investments offset by purchases of higher
yielding investments.
Net interest income decreased $8.3
million, or 13.9%, during the first quarter of 2024 compared
to the first quarter of 2023 and the net interest margin decreased
59 basis points to 3.32% from 3.91% during this same period. The
decrease was due primarily to an increase in interest expense
resulting from increased deposit rates and borrowing expense
partially offset by an increase in yields earned on interest
earning assets following increases in market interest rates.
The following table provides relevant net interest income
information for the periods indicated:
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
Average
Balance
|
|
Interest
Earned/
Paid
|
|
Average
Yield/
Rate (1)
|
|
(Dollars in
thousands)
|
|
Interest Earning
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
(2)(3)
|
$ 4,303,394
|
|
$ 57,862
|
|
5.41 %
|
|
$ 4,233,743
|
|
$ 57,092
|
|
5.35 %
|
|
$ 4,039,395
|
|
$ 50,450
|
|
5.07 %
|
|
Taxable
securities
|
1,810,709
|
|
14,834
|
|
3.29
|
|
1,824,205
|
|
14,488
|
|
3.15
|
|
2,007,339
|
|
14,657
|
|
2.96
|
|
Nontaxable securities
(3)
|
21,302
|
|
181
|
|
3.42
|
|
37,382
|
|
300
|
|
3.18
|
|
82,893
|
|
586
|
|
2.87
|
|
Interest earning
deposits
|
108,733
|
|
1,476
|
|
5.46
|
|
174,475
|
|
2,382
|
|
5.42
|
|
83,376
|
|
972
|
|
4.73
|
|
Total interest earning
assets
|
6,244,138
|
|
74,353
|
|
4.79 %
|
|
6,269,805
|
|
74,262
|
|
4.70 %
|
|
6,213,003
|
|
66,665
|
|
4.35 %
|
|
Noninterest earning
assets
|
848,314
|
|
|
|
|
|
871,071
|
|
|
|
|
|
848,956
|
|
|
|
|
|
Total
assets
|
$ 7,092,452
|
|
|
|
|
|
$ 7,140,876
|
|
|
|
|
|
$ 7,061,959
|
|
|
|
|
|
Interest Bearing
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of
deposit
|
$
733,816
|
|
$
7,671
|
|
4.20 %
|
|
$
638,101
|
|
$
6,261
|
|
3.89 %
|
|
$
350,206
|
|
$
1,224
|
|
1.42 %
|
|
Savings
accounts
|
475,075
|
|
230
|
|
0.19
|
|
497,484
|
|
231
|
|
0.18
|
|
601,166
|
|
142
|
|
0.10
|
|
Interest bearing demand
and money market accounts
|
2,659,999
|
|
8,487
|
|
1.28
|
|
2,713,482
|
|
7,846
|
|
1.15
|
|
2,829,198
|
|
3,162
|
|
0.45
|
|
Total interest bearing
deposits
|
3,868,890
|
|
16,388
|
|
1.70
|
|
3,849,067
|
|
14,338
|
|
1.48
|
|
3,780,570
|
|
4,528
|
|
0.49
|
|
Junior subordinated
debentures
|
21,800
|
|
547
|
|
10.09
|
|
21,729
|
|
553
|
|
10.10
|
|
21,501
|
|
482
|
|
9.09
|
|
Securities sold under
agreement to repurchase
|
—
|
|
—
|
|
—
|
|
17,511
|
|
5
|
|
0.11
|
|
43,202
|
|
47
|
|
0.44
|
|
Borrowings
|
500,660
|
|
5,888
|
|
4.73
|
|
459,784
|
|
5,495
|
|
4.74
|
|
145,605
|
|
1,766
|
|
4.92
|
|
Total interest bearing
liabilities
|
4,391,350
|
|
22,823
|
|
2.09 %
|
|
4,348,091
|
|
20,391
|
|
1.86 %
|
|
3,990,878
|
|
6,823
|
|
0.69 %
|
|
Noninterest demand
deposits
|
1,657,132
|
|
|
|
|
|
1,772,261
|
|
|
|
|
|
2,068,688
|
|
|
|
|
|
Other noninterest
bearing liabilities
|
197,023
|
|
|
|
|
|
207,141
|
|
|
|
|
|
189,893
|
|
|
|
|
|
Stockholders'
equity
|
846,947
|
|
|
|
|
|
813,383
|
|
|
|
|
|
812,500
|
|
|
|
|
|
Total liabilities and
stockholders' equity
|
$ 7,092,452
|
|
|
|
|
|
$ 7,140,876
|
|
|
|
|
|
$ 7,061,959
|
|
|
|
|
|
Net interest income and
spread
|
|
|
$ 51,530
|
|
2.70 %
|
|
|
|
$ 53,871
|
|
2.84 %
|
|
|
|
$ 59,842
|
|
3.66 %
|
|
Net interest
margin
|
|
|
|
|
3.32 %
|
|
|
|
|
|
3.41 %
|
|
|
|
|
|
3.91 %
|
|
|
|
(1)
|
Annualized; average
balances are calculated using daily balances.
|
|
(2)
|
Average loans
receivable, net includes loans held for sale and loans classified
as nonaccrual, which carry a zero yield. Interest earned on loans
receivable, net includes the amortization of net deferred loan fees
of $809,000, $832,000 and $752,000 for the first quarter of 2024,
fourth quarter of 2023 and first quarter of 2023,
respectively.
|
|
(3)
|
Yields on tax-exempt
loans and securities have not been stated on a tax-equivalent
basis.
|
Noninterest Income
Noninterest income increased $247,000 to a loss of $2.9
million during the first quarter of 2024 from a loss of
$3.1 million during the fourth
quarter of 2023. The losses for both the first quarter of 2024 and
the fourth quarter of 2023 were due to strategic repositioning of
the investment portfolio which resulted in a $10.0 million loss on the sale of investment
securities during both periods. Card revenue decreased $105,000 during the first quarter of 2024
compared to the fourth quarter of 2023 due to annual incentives of
$250,000 recognized in the fourth
quarter of 2023. Bank owned life insurance income increased
$266,000 due to the recognition of
death benefits during the first quarter of 2024.
Noninterest income decreased $11.2
million from the same period in 2023 due primarily to a
$10.0 million pre-tax loss on the
sale of investment securities available for sale. The decline in
other income was due to the gain on sale of Visa Inc. Class B
common stock of $1.6 million
recognized in the first quarter of 2023.
The following table presents the key components of noninterest
income and the change for the periods indicated:
|
Quarter
Ended
|
|
Quarter Over Quarter
Change
|
|
Prior Year Quarter
Change
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
$
|
|
%
|
|
$
|
|
%
|
|
(Dollars in
thousands)
|
|
Service charges and
other fees
|
$
2,788
|
|
$
2,804
|
|
$
2,624
|
|
$ (16)
|
|
(0.6) %
|
|
$ 164
|
|
6.3 %
|
|
Card revenue
|
1,839
|
|
1,944
|
|
2,000
|
|
(105)
|
|
(5.4)
|
|
(161)
|
|
(8.1)
|
|
Loss on sale of
investment securities
|
(9,973)
|
|
(10,005)
|
|
(286)
|
|
32
|
|
(0.3)
|
|
(9,687)
|
|
3387.1
|
|
Gain on sale of loans,
net
|
26
|
|
36
|
|
49
|
|
(10)
|
|
(27.8)
|
|
(23)
|
|
(46.9)
|
|
Interest rate swap
fees
|
—
|
|
—
|
|
53
|
|
—
|
|
—
|
|
(53)
|
|
(100.0)
|
|
Bank owned life
insurance income
|
920
|
|
654
|
|
709
|
|
266
|
|
40.7
|
|
211
|
|
29.8
|
|
Gain on sale of other
assets, net
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
(2)
|
|
(100.0)
|
|
Other income
|
1,500
|
|
1,420
|
|
3,107
|
|
80
|
|
5.6
|
|
(1,607)
|
|
(51.7)
|
|
Total noninterest
income (loss)
|
$
(2,900)
|
|
$
(3,147)
|
|
$
8,258
|
|
$ 247
|
|
(7.8) %
|
|
$
(11,158)
|
|
(135.1) %
|
Noninterest Expense
Noninterest expense decreased $2.4
million, or 5.5%, during the first quarter of 2024 from the
fourth quarter of 2023. The decline was primarily due to decreases
in data processing, professional services and marketing expenses,
partially offset by an increase in compensation and employee
benefits. Data processing expenses decreased due primarily to
reduced ongoing expenses following technology-related contract
renewals and terminations occurring in the fourth quarter of 2023,
as well as a $320,000 accrual for the
early termination of a technology-related contract expensed during
the same period. Marketing expenses decreased due to expense
management efforts during the first quarter of 2024. Professional
services decreased primarily because of a $1.5 million expense for negotiation fees related
to renewal of the core vendor contract during the fourth quarter of
2023. Compensation and employee benefits expenses increased during
the first quarter of 2024 compared to the prior quarter, primarily
due to $1.1 million in severance
costs resulting from staff reductions.
Noninterest expense decreased $1.2
million, or 3.0%, during the first quarter of 2024 compared
to the same period in 2023, primarily due to a decrease in data
processing expense. Data processing expenses decreased primarily
due to a decline in ongoing costs resulting from prior
technology-related contract renewals and terminations. Amortization
of intangible assets decreased due to a reduction in core deposit
intangible expense. Marketing expenses decreased due to expense
management efforts during the first quarter of 2024. The decrease
was partially offset by an increase in state/municipal business and
use tax due to an increase in gross revenue.
The following table presents the key components of noninterest
expense and the change for the periods indicated:
|
Quarter
Ended
|
|
Quarter Over Quarter
Change
|
|
Prior Year Quarter
Change
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
$
|
|
%
|
|
$
|
|
%
|
|
(Dollars in
thousands)
|
|
Compensation and
employee benefits
|
$
25,476
|
|
$
24,758
|
|
$
25,536
|
|
$ 718
|
|
2.9 %
|
|
$ (60)
|
|
(0.2) %
|
|
Occupancy and
equipment
|
4,932
|
|
4,784
|
|
4,892
|
|
148
|
|
3.1
|
|
40
|
|
0.8
|
|
Data
processing
|
3,537
|
|
4,863
|
|
4,342
|
|
(1,326)
|
|
(27.3)
|
|
(805)
|
|
(18.5)
|
|
Marketing
|
211
|
|
698
|
|
402
|
|
(487)
|
|
(69.8)
|
|
(191)
|
|
(47.5)
|
|
Professional
services
|
567
|
|
2,266
|
|
628
|
|
(1,699)
|
|
(75.0)
|
|
(61)
|
|
(9.7)
|
|
State/municipal
business and use taxes
|
1,300
|
|
909
|
|
1,008
|
|
391
|
|
43.0
|
|
292
|
|
29.0
|
|
Federal deposit
insurance premium
|
795
|
|
847
|
|
850
|
|
(52)
|
|
(6.1)
|
|
(55)
|
|
(6.5)
|
|
Amortization of
intangible assets
|
421
|
|
593
|
|
623
|
|
(172)
|
|
(29.0)
|
|
(202)
|
|
(32.4)
|
|
Other
expense
|
3,131
|
|
3,005
|
|
3,324
|
|
126
|
|
4.2
|
|
(193)
|
|
(5.8)
|
|
Total noninterest
expense
|
$
40,370
|
|
$
42,723
|
|
$
41,605
|
|
$
(2,353)
|
|
(5.5) %
|
|
$
(1,235)
|
|
(3.0) %
|
Income Tax Expense
Income tax expense increased during the first quarter of 2024
compared to the fourth quarter of 2023, and decreased compared to
the first quarter of 2023. The increase in income tax expense
during the current quarter compared to the prior quarter was
primarily due to an increase in the effective income tax rate
during the first quarter of 2024. The effective income tax rate was
lower during the fourth quarter of 2023 due to a downward
adjustment to the annualized effective tax rate as a result of
lower pre-tax income in the fourth quarter of 2023. The decrease in
pre-tax income increased the impact of favorable permanent tax
items such as tax-exempt investments, investments in bank owned
life insurance and tax credits. The effective income tax rate for
the year ended December 31, 2023 was
15.3%. The decrease in income tax expense during the first quarter
of 2024 compared to the same quarter in 2023 was due to lower
pre-tax income.
The following table presents the income tax expense and related
metrics and the change for the periods indicated:
|
Quarter
Ended
|
|
Change
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Quarter Over
Quarter
|
Prior Year
Quarter
|
|
(Dollars in
thousands)
|
|
Income before income
taxes
|
$
6,868
|
|
$
6,577
|
|
$
24,670
|
|
$
291
|
|
$
(17,802)
|
|
Income tax
expense
|
$
1,120
|
|
$
344
|
|
$
4,213
|
|
$
776
|
|
$
(3,093)
|
|
Effective income tax
rate
|
16.3 %
|
|
5.2 %
|
|
17.1 %
|
|
11.1 %
|
|
(0.8) %
|
Dividends
On April 24, 2024, the Company's Board of Directors
declared a quarterly cash dividend of $0.23 per share. The dividend is payable on
May 22, 2024 to shareholders of record as of the close of
business on May 8, 2024.
Stock Repurchase Program
On April 24, 2024, the Company's
Board of Directors authorized the repurchase of up to 5% of the
Company's outstanding common shares or approximately 1.7 million
shares. The number, timing and price of shares repurchased will
depend on business and market conditions, and other factors,
including opportunities to deploy the Company's capital.
The new stock repurchase program supersedes the previous stock
repurchase program, which was authorized in March 2020 and allowed for the buyback of
approximately 1.8 million shares. The previous program was
substantially completed during the quarter ended March 31, 2024.
Earnings Conference Call
The Company will hold a telephone conference call to discuss
this earnings release on Thursday, April 25, 2024 at
10:00 a.m. Pacific time. To access
the call, please dial (833) 470-1428 -- access code 070217 a few
minutes prior to 10:00 a.m. Pacific
time. The call will be available for replay through
May 2, 2024 by dialing (866) 813-9403
-- access code 294191.
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 branch network
of 50 banking offices in Washington, Oregon and Idaho. Heritage Bank does business 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.
Forward-Looking Statements
This press release includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995. Such statements often include words such as "believe,"
"expect," "anticipate," "estimate," and "intend" or future or
conditional verbs such as "will," "would," "should," "could," or
"may." Forward-looking statements are not historical facts but
instead represent management's current expectations and forecasts
regarding future events, many of which are inherently uncertain and
outside of our control. Actual results may differ, possibly
materially, from those currently expected or projected in these
forward-looking statements. Factors that could cause the Company's
actual results to differ materially from those described in the
forward-looking statements, include but are not limited to, the
following: changes in general economic conditions nationally or in
our local market areas, other markets where the Company has lending
relationships, or other aspects of the Company's business
operations or financial markets including, without limitation, as a
result of employment levels, labor shortages and the effects of
inflation, a potential recession or slowed economic growth, or
increased political instability due to acts of war; changes in the
interest rate environment, including prior increases in the Board
of Governors of the Federal Reserve System (the "Federal Reserve")
benchmark rate and duration at which such increased interest rate
levels are maintained, which could adversely affect our revenues
and expenses, the value of assets and obligations, and the
availability and cost of capital and liquidity; the impact of
continuing elevated inflation and the current and future monetary
policies of the Federal Reserve in response thereto; the impact of
bank failures or adverse developments at other banks and related
negative press about the banking industry in general on investor
and depositor sentiment; the effects of any federal government
shutdown; changes in the interest rate environment; the quality and
composition of our securities portfolio and the impact of any
adverse changes including market liquidity within the securities
markets; legislative and regulatory changes, including changes in
banking, securities and tax law, in regulatory policies and
principles, or the interpretation of regulatory capital or other
rules; credit and interest rate risks associated with the Company's
businesses, customers, borrowings, repayment, investment, and
deposit practices; fluctuations in deposits; liquidity issues,
including our ability to borrow funds or raise additional capital,
if necessary; disruptions, security breaches, or other adverse
events, failures or interruptions in, or attacks on, our
information technology systems or on the third-party vendors who
perform several of our critical processing functions; effects of
critical accounting policies and judgments, including the use of
estimates in determining fair value of certain of our assets, which
estimates may prove to be incorrect and result in significant
declines in valuation; and other factors described in Heritage's
latest Annual Report on Form 10-K and Quarterly Reports on Form
10-Q and other documents filed with or furnished to the Securities
and Exchange Commission (the "SEC") which are available on our
website at www.heritagebanknw.com and on the SEC's website at
www.sec.gov. The Company cautions readers not to place undue
reliance on any forward-looking statements. Moreover, any of the
forward-looking statements that we make in this press release or
the documents we file with or furnish to the SEC are based only on
information then actually known to the Company and upon
management's beliefs and assumptions at the time they are made
which may turn out to be wrong because of inaccurate assumptions we
might make, because of the factors described above or because of
other factors that we cannot foresee. The Company does not
undertake and specifically disclaims any obligation to revise any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements.
|
HERITAGE FINANCIAL
CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION (Unaudited)
(Dollars in thousands,
except shares)
|
|
|
March 31,
2024
|
|
December 31,
2023
|
|
Assets
|
|
|
|
|
Cash on hand and in
banks
|
$
52,947
|
|
$
55,851
|
|
Interest earning
deposits
|
136,700
|
|
169,122
|
|
Cash and cash
equivalents
|
189,647
|
|
224,973
|
|
Investment securities
available for sale, at fair value (amortized cost of $1,087,789 and
$1,227,787, respectively)
|
996,510
|
|
1,134,353
|
|
Investment securities
held to maturity, at amortized cost (fair value of $649,001 and
$662,450, respectively)
|
734,006
|
|
739,442
|
|
Total investment
securities
|
1,730,516
|
|
1,873,795
|
|
Loans
receivable
|
4,428,165
|
|
4,335,627
|
|
Allowance for credit
losses on loans
|
(49,736)
|
|
(47,999)
|
|
Loans receivable,
net
|
4,378,429
|
|
4,287,628
|
|
Premises and equipment,
net
|
74,092
|
|
74,899
|
|
Federal Home Loan Bank
stock, at cost
|
4,303
|
|
4,186
|
|
Bank owned life
insurance
|
125,615
|
|
125,655
|
|
Accrued interest
receivable
|
19,898
|
|
19,518
|
|
Prepaid expenses and
other assets
|
323,472
|
|
318,571
|
|
Other intangible
assets, net
|
4,372
|
|
4,793
|
|
Goodwill
|
240,939
|
|
240,939
|
|
Total
assets
|
$
7,091,283
|
|
$
7,174,957
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Non-interest bearing
deposits
|
1,637,111
|
|
1,715,847
|
|
Interest bearing
deposits
|
3,895,216
|
|
3,884,025
|
|
Total
deposits
|
5,532,327
|
|
5,599,872
|
|
Borrowings
|
500,000
|
|
500,000
|
|
Junior subordinated
debentures
|
21,838
|
|
21,765
|
|
Accrued expenses and
other liabilities
|
189,538
|
|
200,059
|
|
Total
liabilities
|
6,243,703
|
|
6,321,696
|
|
|
|
|
|
Common stock
|
544,636
|
|
549,748
|
|
Retained
earnings
|
373,629
|
|
375,989
|
|
Accumulated other
comprehensive loss, net
|
(70,685)
|
|
(72,476)
|
|
Total stockholders'
equity
|
847,580
|
|
853,261
|
|
Total liabilities and
stockholders' equity
|
$
7,091,283
|
|
$
7,174,957
|
|
|
|
|
|
Shares
outstanding
|
34,689,843
|
|
34,906,233
|
|
HERITAGE FINANCIAL
CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share
amounts)
|
|
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Interest
Income
|
|
|
|
|
|
|
Interest and fees on
loans
|
$
57,862
|
|
$
57,092
|
|
$
50,450
|
|
Taxable interest on
investment securities
|
14,834
|
|
14,488
|
|
14,657
|
|
Nontaxable interest on
investment securities
|
181
|
|
300
|
|
586
|
|
Interest on interest
earning deposits
|
1,476
|
|
2,382
|
|
972
|
|
Total interest
income
|
74,353
|
|
74,262
|
|
66,665
|
|
Interest
Expense
|
|
|
|
|
|
|
Deposits
|
16,388
|
|
14,338
|
|
4,528
|
|
Junior subordinated
debentures
|
547
|
|
553
|
|
482
|
|
Securities sold under
agreement to repurchase
|
—
|
|
5
|
|
47
|
|
Borrowings
|
5,888
|
|
5,495
|
|
1,766
|
|
Total interest
expense
|
22,823
|
|
20,391
|
|
6,823
|
|
Net interest
income
|
51,530
|
|
53,871
|
|
59,842
|
|
Provision for credit
losses
|
1,392
|
|
1,424
|
|
1,825
|
|
Net interest income
after provision for credit losses
|
50,138
|
|
52,447
|
|
58,017
|
|
Noninterest
Income
|
|
|
|
|
|
|
Service charges and
other fees
|
2,788
|
|
2,804
|
|
2,624
|
|
Card revenue
|
1,839
|
|
1,944
|
|
2,000
|
|
Loss on sale of
investment securities, net
|
(9,973)
|
|
(10,005)
|
|
(286)
|
|
Gain on sale of loans,
net
|
26
|
|
36
|
|
49
|
|
Interest rate swap
fees
|
—
|
|
—
|
|
53
|
|
Bank owned life
insurance income
|
920
|
|
654
|
|
709
|
|
Gain on sale of other
assets, net
|
—
|
|
—
|
|
2
|
|
Other income
|
1,500
|
|
1,420
|
|
3,107
|
|
Total noninterest
income (loss)
|
(2,900)
|
|
(3,147)
|
|
8,258
|
|
Noninterest
Expense
|
|
|
|
|
|
|
Compensation and
employee benefits
|
25,476
|
|
24,758
|
|
25,536
|
|
Occupancy and
equipment
|
4,932
|
|
4,784
|
|
4,892
|
|
Data
processing
|
3,537
|
|
4,863
|
|
4,342
|
|
Marketing
|
211
|
|
698
|
|
402
|
|
Professional
services
|
567
|
|
2,266
|
|
628
|
|
State/municipal
business and use taxes
|
1,300
|
|
909
|
|
1,008
|
|
Federal deposit
insurance premium
|
795
|
|
847
|
|
850
|
|
Amortization of
intangible assets
|
421
|
|
593
|
|
623
|
|
Other
expense
|
3,131
|
|
3,005
|
|
3,324
|
|
Total noninterest
expense
|
40,370
|
|
42,723
|
|
41,605
|
|
Income before income
taxes
|
6,868
|
|
6,577
|
|
24,670
|
|
Income tax
expense
|
1,120
|
|
344
|
|
4,213
|
|
Net income
|
$
5,748
|
|
$
6,233
|
|
$
20,457
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
0.17
|
|
$
0.18
|
|
$
0.58
|
|
Diluted earnings per
share
|
$
0.16
|
|
$
0.18
|
|
$
0.58
|
|
Dividends declared per
share
|
$
0.23
|
|
$
0.22
|
|
$
0.22
|
|
Average shares
outstanding - basic
|
34,825,471
|
|
34,902,029
|
|
35,108,390
|
|
Average shares
outstanding - diluted
|
35,227,138
|
|
35,084,635
|
|
35,445,340
|
|
HERITAGE FINANCIAL
CORPORATION
FINANCIAL STATISTICS
(Unaudited)
(Dollars in thousands)
|
|
|
Nonperforming Assets and Credit Quality
Metrics:
|
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
March 31,
2023
|
|
Allowance for Credit
Losses on Loans:
|
|
Balance, beginning of
period
|
$
47,999
|
|
$
46,947
|
|
$
42,986
|
|
Provision for credit
losses on loans
|
1,704
|
|
1,670
|
|
1,713
|
|
Charge-offs:
|
|
|
|
|
|
|
Commercial
business
|
(77)
|
|
(543)
|
|
(161)
|
|
Consumer
|
(123)
|
|
(166)
|
|
(153)
|
|
Total
charge-offs
|
(200)
|
|
(709)
|
|
(314)
|
|
Recoveries:
|
|
|
|
|
|
|
Commercial
business
|
217
|
|
30
|
|
51
|
|
Consumer
|
16
|
|
61
|
|
33
|
|
Total
recoveries
|
233
|
|
91
|
|
84
|
|
Net recoveries
(charge-offs)
|
33
|
|
(618)
|
|
(230)
|
|
Balance, end of
period
|
$
49,736
|
|
$
47,999
|
|
$
44,469
|
|
Net charge-offs on
loans to average loans receivable, net(1)
|
— %
|
|
0.06 %
|
|
0.02 %
|
|
March 31,
2024
|
|
December 31,
2023
|
|
Nonperforming
Assets:
|
|
|
|
|
Nonaccrual
loans:
|
|
|
|
|
Commercial
business
|
$
4,792
|
|
$
4,468
|
|
Total nonaccrual
loans
|
4,792
|
|
4,468
|
|
Accruing loans past due
90 days or more
|
2,628
|
|
1,293
|
|
Total nonperforming
loans
|
7,420
|
|
5,761
|
|
Other real estate
owned
|
—
|
|
—
|
|
Nonperforming
assets
|
$
7,420
|
|
$
5,761
|
|
|
|
|
|
ACL on loans
to:
|
|
|
|
|
Loans
receivable
|
1.12 %
|
|
1.11 %
|
|
Nonaccrual
loans
|
1,037.90 %
|
|
1,074.28 %
|
|
Nonaccrual loans to
loans receivable
|
0.11 %
|
|
0.10 %
|
|
Nonperforming loans to
loans receivable
|
0.17 %
|
|
0.13 %
|
|
Nonperforming assets to
total assets
|
0.10 %
|
|
0.08 %
|
|
HERITAGE FINANCIAL
CORPORATION
QUARTERLY FINANCIAL STATISTICS
(Unaudited)
(Dollars in thousands, except per share
amounts)
|
|
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
September
30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Earnings:
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
$
51,530
|
|
$
53,871
|
|
$
55,618
|
|
$
55,824
|
|
$
59,842
|
|
Provision for credit
losses
|
1,392
|
|
1,424
|
|
(878)
|
|
1,909
|
|
1,825
|
|
Noninterest income
(loss)
|
(2,900)
|
|
(3,147)
|
|
6,271
|
|
7,281
|
|
8,258
|
|
Noninterest
expense
|
40,370
|
|
42,723
|
|
40,970
|
|
41,325
|
|
41,605
|
|
Net income
|
5,748
|
|
6,233
|
|
18,219
|
|
16,846
|
|
20,457
|
|
Pre-tax, pre-provision
net income (3)
|
8,260
|
|
8,001
|
|
20,919
|
|
21,780
|
|
26,495
|
|
Basic earnings per
share
|
$
0.17
|
|
$
0.18
|
|
$
0.52
|
|
$
0.48
|
|
$
0.58
|
|
Diluted earnings per
share
|
$
0.16
|
|
$
0.18
|
|
$
0.51
|
|
$
0.48
|
|
$
0.58
|
|
Average
Balances:
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
(1)
|
$
4,303,394
|
|
$
4,233,743
|
|
$
4,201,554
|
|
$
4,145,556
|
|
$
4,039,395
|
|
Total investment
securities
|
1,832,011
|
|
1,861,587
|
|
1,992,303
|
|
2,061,100
|
|
2,090,232
|
|
Total interest earning
assets
|
6,244,138
|
|
6,269,805
|
|
6,363,043
|
|
6,297,410
|
|
6,213,003
|
|
Total assets
|
7,092,452
|
|
7,140,876
|
|
7,212,732
|
|
7,142,865
|
|
7,061,959
|
|
Total interest bearing
deposits
|
3,868,890
|
|
3,849,067
|
|
3,841,148
|
|
3,755,005
|
|
3,780,570
|
|
Total noninterest
demand deposits
|
1,657,132
|
|
1,772,261
|
|
1,859,374
|
|
1,900,640
|
|
2,068,688
|
|
Stockholders'
equity
|
846,947
|
|
813,383
|
|
821,494
|
|
824,742
|
|
812,500
|
|
Financial
Ratios:
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets (2)
|
0.33 %
|
|
0.35 %
|
|
1.00 %
|
|
0.95 %
|
|
1.17 %
|
|
Pre-tax, pre-provision
return on average assets (2)(3)
|
0.47
|
|
0.44
|
|
1.15
|
|
1.22
|
|
1.52
|
|
Return on average
common equity (2)
|
2.73
|
|
3.04
|
|
8.80
|
|
8.19
|
|
10.21
|
|
Return on average
tangible common equity (2) (3)
|
4.07
|
|
4.69
|
|
12.90
|
|
12.04
|
|
15.05
|
|
Efficiency
ratio
|
83.0
|
|
84.2
|
|
66.2
|
|
65.5
|
|
61.1
|
|
Noninterest expense to
average total assets (2)
|
2.29
|
|
2.37
|
|
2.25
|
|
2.32
|
|
2.39
|
|
Net interest spread
(2)
|
2.70
|
|
2.84
|
|
2.95
|
|
3.11
|
|
3.66
|
|
Net interest margin
(2)
|
3.32
|
|
3.41
|
|
3.47
|
|
3.56
|
|
3.91
|
|
|
|
(1)
|
Average loans
receivable, net includes loans held for sale.
|
|
(2)
|
Annualized.
|
|
(3)
|
See Non-GAAP Financial
Measures section herein.
|
|
HERITAGE FINANCIAL
CORPORATION
QUARTERLY FINANCIAL STATISTICS
(Unaudited)
(Dollars in thousands, except per share
amounts)
|
|
|
As of or for the
Quarter Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
September
30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Select Balance
Sheet:
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
7,091,283
|
|
$
7,174,957
|
|
$
7,150,588
|
|
$
7,115,410
|
|
$
7,236,806
|
|
Loans receivable,
net
|
4,378,429
|
|
4,287,628
|
|
4,219,911
|
|
4,204,936
|
|
4,083,003
|
|
Total investment
securities
|
1,730,516
|
|
1,873,795
|
|
1,894,392
|
|
2,030,826
|
|
2,078,235
|
|
Deposits
|
5,532,327
|
|
5,599,872
|
|
5,635,187
|
|
5,595,543
|
|
5,789,022
|
|
Noninterest demand
deposits
|
1,637,111
|
|
1,715,847
|
|
1,789,293
|
|
1,857,492
|
|
1,982,909
|
|
Stockholders'
equity
|
847,580
|
|
853,261
|
|
813,546
|
|
819,733
|
|
826,082
|
|
Financial
Measures:
|
|
|
|
|
|
|
|
|
|
|
Book value per
share
|
$
24.43
|
|
$
24.44
|
|
$
23.31
|
|
$
23.39
|
|
$
23.53
|
|
Tangible book value per
share (1)
|
17.36
|
|
17.40
|
|
16.25
|
|
16.34
|
|
16.48
|
|
Stockholders' equity to
total assets
|
12.0 %
|
|
11.9 %
|
|
11.4 %
|
|
11.5 %
|
|
11.4 %
|
|
Tangible common equity
to tangible assets (1)
|
8.8
|
|
8.8
|
|
8.2
|
|
8.3
|
|
8.3
|
|
Loans to deposits
ratio
|
80.0
|
|
77.4
|
|
75.7
|
|
76.0
|
|
71.3
|
|
Regulatory Capital
Ratios:(2)
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1
capital ratio
|
12.6 %
|
|
12.9 %
|
|
12.9 %
|
|
12.8 %
|
|
12.9 %
|
|
Leverage
ratio
|
10.0
|
|
10.0
|
|
9.9
|
|
9.9
|
|
9.9
|
|
Tier 1 capital
ratio
|
13.0
|
|
13.3
|
|
13.3
|
|
13.2
|
|
13.3
|
|
Total capital
ratio
|
13.9
|
|
14.1
|
|
14.1
|
|
14.1
|
|
14.1
|
|
Credit Quality
Metrics:
|
|
|
|
|
|
|
|
|
|
|
ACL on
loans to:
|
|
|
|
|
|
|
|
|
|
|
Loans
receivable
|
1.12 %
|
|
1.11 %
|
|
1.10 %
|
|
1.09 %
|
|
1.08 %
|
|
Nonperforming
loans
|
1,037.9
|
|
1,074.3
|
|
1,531.7
|
|
1,002.3
|
|
923.6
|
|
Nonaccrual loans to
loans receivable
|
0.11
|
|
0.10
|
|
0.07
|
|
0.11
|
|
0.12
|
|
Nonperforming loans to
loans receivable
|
0.17
|
|
0.13
|
|
0.12
|
|
0.16
|
|
0.17
|
|
Nonperforming assets to
total assets
|
0.10
|
|
0.08
|
|
0.07
|
|
0.10
|
|
0.10
|
|
Net charge-offs
(recoveries) on loans to average loans receivable,
net(3)
|
—
|
|
0.06
|
|
(0.11)
|
|
—
|
|
0.02
|
|
Criticized Loans by
Credit Quality Rating:
|
|
Special
mention
|
$
102,232
|
|
$
79,977
|
|
$
72,152
|
|
$
84,623
|
|
$
96,832
|
|
Substandard
|
70,183
|
|
69,757
|
|
62,653
|
|
58,653
|
|
48,824
|
|
Other
Metrics:
|
|
|
|
|
|
|
|
|
|
|
Number of banking
offices
|
50
|
|
50
|
|
50
|
|
51
|
|
51
|
|
Deposits per
branch
|
$
110,647
|
|
$
111,997
|
|
$
112,704
|
|
$
109,717
|
|
$
113,510
|
|
Average number of
full-time equivalent employees
|
765
|
|
803
|
|
821
|
|
813
|
|
809
|
|
Average assets per
full-time equivalent employee
|
9,271
|
|
8,893
|
|
8,785
|
|
8,786
|
|
8,729
|
|
|
|
(1)
|
See Non-GAAP Financial
Measures section herein.
|
|
(2)
|
Current quarter ratios
are estimates pending completion and filing of the Company's
regulatory reports.
|
|
(3)
|
Annualized.
|
HERITAGE FINANCIAL
CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in thousands, except per share
amounts)
This earnings release contains certain financial measures not
presented in accordance with Generally Accepted Accounting
Principles ("GAAP") in addition to financial measures presented in
accordance with GAAP. The Company has presented these non-GAAP
financial measures in this earnings release because it believes
that they provide useful and comparative information to assess
trends in the Company's capital, performance and asset quality
reflected in the current quarter and comparable period results and
to facilitate comparison of its performance with the performance of
its peers. These non-GAAP measures have inherent limitations, are
not required to be uniformly applied and are not audited. They
should not be considered in isolation or as a substitute for
financial measures presented in accordance with GAAP. These
non-GAAP measures may not be comparable to similarly titled
measures reported by other companies. Reconciliations of the GAAP
and non-GAAP financial measures are presented below.
The Company considers the tangible common equity to tangible
assets ratio and tangible book value per share to be useful
measurements of the adequacy of the Company's capital levels.
|
March 31,
2024
|
|
December 31,
2023
|
|
September
30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Tangible Common
Equity to Tangible Assets and Tangible Book Value Per
Share:
|
|
Total stockholders'
equity (GAAP)
|
$
847,580
|
|
$
853,261
|
|
$
813,546
|
|
$
819,733
|
|
$
826,082
|
|
Exclude intangible
assets
|
(245,311)
|
|
(245,732)
|
|
(246,325)
|
|
(246,920)
|
|
(247,543)
|
|
Tangible common equity
(non-GAAP)
|
$
602,269
|
|
$
607,529
|
|
$
567,221
|
|
$
572,813
|
|
$
578,539
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
(GAAP)
|
$
7,091,283
|
|
$
7,174,957
|
|
$
7,150,588
|
|
$
7,115,410
|
|
$
7,236,806
|
|
Exclude intangible
assets
|
(245,311)
|
|
(245,732)
|
|
(246,325)
|
|
(246,920)
|
|
(247,543)
|
|
Tangible assets
(non-GAAP)
|
$
6,845,972
|
|
$
6,929,225
|
|
$
6,904,263
|
|
$
6,868,490
|
|
$
6,989,263
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity to
total assets (GAAP)
|
12.0 %
|
|
11.9 %
|
|
11.4 %
|
|
11.5 %
|
|
11.4 %
|
|
Tangible common equity
to tangible assets (non-GAAP)
|
8.8 %
|
|
8.8 %
|
|
8.2 %
|
|
8.3 %
|
|
8.3 %
|
|
|
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
34,689,843
|
|
34,906,233
|
|
34,901,076
|
|
35,047,800
|
|
35,108,120
|
|
|
|
|
|
|
|
|
|
|
|
Book value per share
(GAAP)
|
$
24.43
|
|
$
24.44
|
|
$
23.31
|
|
$
23.39
|
|
$
23.53
|
|
Tangible book value per
share (non-GAAP)
|
$
17.36
|
|
$
17.40
|
|
$
16.25
|
|
$
16.34
|
|
$
16.48
|
HERITAGE FINANCIAL
CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Dollars in thousands, except per share
amounts)
The Company considers the return on average tangible common
equity ratio to be a useful measurement of the Company's ability to
generate returns for its common shareholders. By removing the
impact of intangible assets and their related amortization and tax
effects, the performance of the Company's ongoing business
operations can be evaluated.
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
September
30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Return on Average
Tangible Common Equity, annualized:
|
|
Net income
(GAAP)
|
$
5,748
|
|
$
6,233
|
|
$
18,219
|
|
$
16,846
|
|
$
20,457
|
|
Add amortization of
intangible assets
|
421
|
|
593
|
|
595
|
|
623
|
|
623
|
|
Exclude tax effect of
adjustment
|
(88)
|
|
(125)
|
|
(125)
|
|
(131)
|
|
(131)
|
|
Tangible net income
(non-GAAP)
|
$
6,081
|
|
$
6,701
|
|
$
18,689
|
|
$
17,338
|
|
$
20,949
|
|
|
|
|
|
|
|
|
|
|
|
Average stockholders'
equity (GAAP)
|
$
846,947
|
|
$
813,383
|
|
$
821,494
|
|
$
824,742
|
|
$
812,500
|
|
Exclude average
intangible assets
|
(245,536)
|
|
(246,022)
|
|
(246,663)
|
|
(247,278)
|
|
(247,922)
|
|
Average tangible common
stockholders' equity (non-GAAP)
|
$
601,411
|
|
$
567,361
|
|
$
574,831
|
|
$
577,464
|
|
$
564,578
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
common equity, annualized (GAAP)
|
2.73 %
|
|
3.04 %
|
|
8.80 %
|
|
8.19 %
|
|
10.21 %
|
|
Return on average
tangible common equity, annualized (non-GAAP)
|
4.07 %
|
|
4.69 %
|
|
12.90 %
|
|
12.04 %
|
|
15.05 %
|
The Company believes that presenting pre-tax pre-provision
income, which reflects its profitability before income taxes and
provision for credit losses, and the pre-tax, pre-provision return
on average assets are useful measurements in assessing its
operating income and expenses by removing the volatility that may
be associated with credit loss provisions.
|
Quarter
Ended
|
|
March 31,
2024
|
|
December 31,
2023
|
|
September
30,
2023
|
|
June 30,
2023
|
|
March 31,
2023
|
|
Pre-tax,
Pre-provision Income and Pre-tax, Pre-provision Return on Average
Assets, annualized:
|
|
Net income
(GAAP)
|
$
5,748
|
|
$
6,233
|
|
$
18,219
|
|
$
16,846
|
|
$
20,457
|
|
Add income tax
expense
|
1,120
|
|
344
|
|
3,578
|
|
3,025
|
|
4,213
|
|
Add (subtract)
provision for (reversal of) credit losses
|
1,392
|
|
1,424
|
|
(878)
|
|
1,909
|
|
1,825
|
|
Pre-tax, pre-provision
income (non-GAAP)
|
$
8,260
|
|
$
8,001
|
|
$
20,919
|
|
$
21,780
|
|
$
26,495
|
|
|
|
|
|
|
|
|
|
|
|
Average total assets
(GAAP)
|
$
7,092,452
|
|
$
7,140,876
|
|
$
7,212,732
|
|
$
7,142,865
|
|
$
7,061,959
|
|
|
|
|
|
|
|
|
|
|
|
Return on average
assets, annualized (GAAP)
|
0.33 %
|
|
0.35 %
|
|
1.00 %
|
|
0.95 %
|
|
1.17 %
|
|
Pre-tax, pre-provision
return on average assets (non-GAAP)
|
0.47 %
|
|
0.44 %
|
|
1.15 %
|
|
1.22 %
|
|
1.52 %
|
View original
content:https://www.prnewswire.com/news-releases/heritage-financial-announces-first-quarter-2024-results-and-declares-regular-cash-dividend-302127097.html
SOURCE Heritage Financial Corporation
