Heritage Financial (US:HFWA)2024-08-09 19:37Financial Performance - Net income for Q2 2024 decreased by $2.7 million, or 16.0%, to $14.2 million, compared to $16.8 million in Q2 2023[116] - For the first half of 2024, net income decreased by $17.4 million, or 46.6%, to $19.9 million, compared to $37.3 million in the same period of 2023[117] - Income before income taxes for the three months ended June 30, 2024, was $15.995 million, down $3.876 million, or 19.5%, from $19.871 million in 2023[139] Interest Income and Expense - Interest expense increased by $11.2 million in Q2 2024 due to higher funding costs, contributing to the decline in net income[116] - Interest income increased by $6.5 million in Q2 2024 due to higher yields on interest-earning assets resulting from rising market interest rates[116] - Total interest income increased to $76.6 million for the three months ended June 30, 2024, compared to $70.1 million for the same period in 2023, primarily due to a $7.0 million increase in interest income on loans receivable[121] - Total interest expense increased to $25.5 million during the three months ended June 30, 2024, compared to $14.2 million for the same period in 2023, primarily due to a $9.8 million increase in interest expense on interest-bearing deposits[123] - Net interest income decreased by $4.7 million, or 8.4%, to $51.1 million for the three months ended June 30, 2024, compared to $55.8 million for the same period in 2023[121] Noninterest Income and Expense - Noninterest income decreased by $2.0 million, or 27.9%, to $5.246 million for the three months ended June 30, 2024, primarily due to a $1.9 million pre-tax loss on the sale of investment securities[133] - Total noninterest income decreased by $13.2 million, or 84.9%, during the six months ended June 30, 2024, compared to the same period in 2023[134] - Noninterest expense decreased by $2.2 million in Q2 2024 due to expense management initiatives, including a reduction in full-time equivalent employees from 813 to 748[116] Loans and Assets - The average balance of loans receivable increased to $4.42 billion in Q2 2024, with interest earned of $60.6 million at a yield of 5.52%[118] - Loans receivable increased by $193.768 million, or 4.5%, to $4.481 billion as of June 30, 2024, compared to $4.288 billion at the end of 2023[141] - The average balance of loans receivable, net during the period was $4.36 billion, an increase of $266.8 million, or 6.5%, from the previous year[150] Capital and Liquidity - The Company's stockholders' equity decreased by $2.8 million, or 0.3%, to $850.5 million at June 30, 2024, primarily due to $16.2 million in dividends paid and $10.5 million in stock repurchases[155] - The Company declared a regular quarterly dividend of $0.23 per common share payable on August 21, 2024[155] - The Bank maintained a credit facility with the FHLB with available borrowing capacity of $1.34 billion and had $400 million in advances outstanding at June 30, 2024[153] - Total on-balance sheet liquidity increased to $1,040,579 thousand as of June 30, 2024, up from $981,231 thousand at December 31, 2023[161] Investment Securities - The company sold investment securities with an amortized cost of $182.8 million and a weighted average book yield of 2.44% during the first half of 2024[117] - The company sold investment securities with an amortized cost of $182.8 million at a loss of $11.9 million during the six months ended June 30, 2024[144] - Total investment securities decreased by $215.2 million, or 11.5%, to $1.66 billion at June 30, 2024, from $1.87 billion at December 31, 2023[144] Credit Quality - Provision for credit losses on loans was $3.2 million during the six months ended June 30, 2024, reflecting a decrease of $527,000 or 14.2% compared to the same period in 2023[131] - Nonaccrual loans decreased by $642,000, or 14.4%, to $3.826 million at June 30, 2024, from $4.468 million at December 31, 2023[148] - Total nonperforming assets increased by $2.361 million, or 41.0%, to $8.122 million at June 30, 2024, from $5.761 million at December 31, 2023[148] Regulatory Capital Ratios - The Company's total capital ratio was 13.9% as of June 30, 2024, exceeding the regulatory minimum for well-capitalized institutions[157] - The Tier 1 capital ratio for the Company was 13.0% as of June 30, 2024, also above the regulatory minimum[157] - The common equity Tier 1 capital ratio is 12.9% for both the company and the bank[159]