HERITAGE FINANCIAL ANNOUNCES FIRST QUARTER 2024 RESULTS AND DECLARES REGULAR CASH DIVIDEND
-
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 onApril 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.
In the first quarter of 2024, the Company incurred a pre-tax loss of
Financial Highlights
The following table provides financial highlights at the dates and for the periods indicated:
|
As of or for the Quarter Ended |
||||
|
|
|
|
|
|
|
(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
|
|
|
|
|
$ 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: |
|||||||||||||
|
$ 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) |
|
|
|
|
|
|
||||||||
|
|
|
|
|
$ 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: |
|||||||||||||
|
$ 151,110 |
|
$ (29,980) |
|
$ 121,130 |
|
$ 151,075 |
|
$ (27,701) |
|
|
|
$ 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) |
|
|
|
$ (5,436) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities |
$ 1,821,795 |
|
$ (176,284) |
|
$ 1,645,511 |
|
$ 1,967,229 |
|
$ (170,426) |
|
$ 1,796,803 |
|
|
|
|
(1) |
|
Loans receivable increased $92.5 million, or 2.1%, to
Commercial and industrial loans increased
|
|
|
|
|
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
The following table summarizes the Company's total deposits at the dates indicated:
|
|
|
|
|
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
Total stockholders' equity decreased
|
|
|
|
|
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
During the first quarter of 2024, the Company recorded a
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 |
||||||||||||||||
|
|
|
|
|
|
||||||||||||
|
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 |
|
|
$ 1,288 |
|
|
|
|
|
$ 1,534 |
|
|
|
|
|
$ 1,744 |
|
|
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 |
|
|
$ 976 |
|
|
|
|
|
$ 1,288 |
|
|
|
|
|
$ 1,856 |
|
|
Credit Quality
The percentage of classified loans to loans receivable was unchanged at
|
|
|
|
||||
|
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
|
Quarter Ended |
||||
|
|
|
|
|
|
|
(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
The following table summarizes the Company's available liquidity:
|
Quarter Ended |
||
|
|
|
|
|
(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 |
(2) |
Investment securities available for sale at fair value. |
Net Interest Income and Net Interest Margin
Net interest income decreased
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
The following table provides relevant net interest income information for the periods indicated:
|
Quarter Ended |
||||||||||||||||
|
|
|
|
|
|
||||||||||||
|
Average Balance |
|
Interest Earned/ Paid |
|
Average |
|
Average Balance |
|
Interest Earned/ Paid |
|
Average |
|
Average Balance |
|
Interest Earned/ Paid |
|
Average |
|
(Dollars in thousands) |
||||||||||||||||
Interest Earning Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net (2)(3) |
|
|
|
|
5.41 % |
|
|
|
|
|
5.35 % |
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income and spread |
|
|
|
|
2.70 % |
|
|
|
|
|
2.84 % |
|
|
|
|
|
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 |
(3) |
Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis. |
Noninterest Income
Noninterest income increased
Noninterest income decreased
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 |
||||||||
|
|
|
|
|
|
|
$ |
|
% |
|
$ |
|
% |
|
(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
Noninterest expense decreased
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 |
||||||||
|
|
|
|
|
|
|
$ |
|
% |
|
$ |
|
% |
|
(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
The following table presents the income tax expense and related metrics and the change for the periods indicated:
|
Quarter Ended |
|
Change |
||||||
|
|
|
|
|
|
|
|
Prior |
|
|
(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
Stock Repurchase Program
On
The new stock repurchase program supersedes the previous stock repurchase program, which was authorized in
Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on
About
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
|
|||
|
|||
|
|
|
|
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 |
996,510 |
|
1,134,353 |
Investment securities held to maturity, at amortized cost (fair value of |
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 |
|
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 |
|
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 |
|
|||||
|
|||||
|
Quarter Ended |
||||
|
|
|
|
|
|
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 |
|
|||||
|
|||||
Nonperforming Assets and Credit Quality Metrics: |
|||||
|
Quarter Ended |
||||
|
|
|
|
|
|
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 % |
(1) Annualized. |
|
|
|
|
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 % |
|
|||||||||
|
|||||||||
|
Quarter Ended |
||||||||
|
|
|
|
|
|
|
|
|
|
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. |
|
|||||||||
|
|||||||||
|
As of or for the Quarter Ended |
||||||||
|
|
|
|
|
|
|
|
|
|
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. |
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.
|
|
|
|
|
|
|
|
|
|
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 |
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 |
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|
|
|
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|
|
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 |
||||||||
|
|
|
|
|
|
|
|
|
|
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
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