Heritage merce p(US:HTBK)2024-11-08 21:16Financial Performance - For the three months ended September 30, 2024, net income was $10.5 million, or $0.17 per average diluted common share, a decrease from $15.8 million, or $0.26 per average diluted common share for the same period in 2023[160]. - For the nine months ended September 30, 2024, net income was $29.9 million, or $0.49 per average diluted common share, down from $51.1 million, or $0.83 per average diluted common share for the same period in 2023[161]. - Net interest income decreased by 12% to $39.9 million for the third quarter of 2024, compared to $45.4 million for the third quarter of 2023[162]. - Total revenue for the three months ended September 30, 2024, was $42,155 thousand, down from $47,588 thousand in the same period of 2023[332]. - Net income for 2024 decreased to $29,907,000 from $51,115,000 in 2023, representing a decline of approximately 41.5%[337]. Interest Income and Margin - Net interest income for the third quarter of 2024 was $39.915 million, with a net interest margin of 3.17%[183]. - The non-GAAP FTE net interest margin contracted by 40 basis points to 3.17% for Q3 2024, down from 3.57% for Q3 2023[188]. - The average yield on the total loan portfolio decreased to 5.42% for the third quarter of 2024, down from 5.46% in the same quarter of 2023[192]. - The average yield on core loans increased, partially offsetting the decrease in net interest income[189]. - The company has increased deposit beta assumptions in rising rate scenarios and added deposit cost lag assumptions in 2023 to reflect current market conditions[322]. Noninterest Income and Expense - Total noninterest income decreased by 7% to $6.6 million for the first nine months of 2024, compared to $7.1 million for the same period in 2023[162]. - Total noninterest expense for the third quarter of 2024 increased to $27.6 million, compared to $25.2 million for the third quarter of 2023, primarily due to higher salaries and employee benefits[162]. - Total noninterest expense for Q3 2024 increased to $27.6 million, up from $25.2 million in Q3 2023, primarily due to higher salaries and employee benefits, rent expense, and professional fees[207]. - Total noninterest income for the nine months ended September 30, 2024, decreased by 7% to $6,563 thousand, down from $7,056 thousand for the same period in 2023[202]. Asset and Deposit Growth - Total deposits increased by $154.1 million, or 3%, to $4.7 billion at September 30, 2024, compared to $4.6 billion at September 30, 2023[175]. - Total assets increased by 3% to $5.6 billion as of September 30, 2024, compared to $5.4 billion a year earlier, primarily due to growth in client deposits[213]. - Total interest-earning assets amounted to $5.011 billion, generating interest income of $61.497 million for the three months ended September 30, 2024[183]. - The migration of client deposits into interest-bearing accounts resulted in an increase in ICS/CDARS deposits to $997.8 million at September 30, 2024, compared to $921.2 million at September 30, 2023[175]. - Total deposits rose by $154.1 million, or 3%, to $4.7 billion at September 30, 2024, compared to $4.6 billion a year earlier[216]. Loan Performance - Loans, excluding loans held-for-sale, increased by $124.8 million, or 4%, to $3.4 billion at September 30, 2024, compared to $3.3 billion at the same date in 2023[171]. - Nonperforming assets totaled $7,158,000 at September 30, 2024, compared to $5,484,000 at September 30, 2023, reflecting an increase of 30.6%[262]. - The allowance for credit losses on loans was $47.8 million, or 1.40% of total loans, representing 668% of total nonperforming loans at September 30, 2024[174]. - The provision for credit losses on loans was $153,000 for the third quarter of 2024, compared to $168,000 for the same quarter in 2023, indicating a decrease of 8.9%[200]. - The loan to deposit ratio was 72.11% at September 30, 2024, compared to 71.81% at September 30, 2023[178]. Capital and Liquidity - Total capital ratio was 15.6% at September 30, 2024, exceeding the 10.0% regulatory guideline for well-capitalized financial institutions[179]. - The Company’s liquidity position is supported by a large base of core deposits, which have historically been a stable source of funds[293]. - The Company's total liquidity and borrowing capacity was $3.2 billion, representing 69% of total deposits and approximately 147% of estimated uninsured deposits at September 30, 2024[299]. - Total shareholders' equity was $685.3 million at September 30, 2024, up from $661.9 million at September 30, 2023, and $672.9 million at December 31, 2023[313]. - The Company met all capital adequacy guidelines as of September 30, 2024, and is categorized as well-capitalized[312]. Credit Quality and Risk Management - The company has established limits on industry and geographic credit concentrations to manage credit risk effectively[256]. - The company experienced net charge-offs of $947,000, with recoveries amounting to $395,000 during the same period[273]. - The loan portfolio can be adversely affected by weakening economic conditions, particularly in the San Francisco Bay Area and the technology industry, which may lead to increased nonperforming loans[272]. - The company has engaged an outside firm for independent credit reviews of its loan portfolio, which are subject to regulatory review[272]. - The allowance for credit losses is influenced by loan volumes, risk rating migration, and changes in historical loss experience[269].