Heritage merce p(HTBK) - 2024 Q4 - Annual Results

Financial Performance - Fourth quarter 2024 net income was $10.6 million, compared to $13.3 million in Q4 2023, reflecting a decrease of 20.3% year-over-year[1] - For the year ended December 31, 2024, net interest income decreased by 11% to $163.6 million from $183.2 million in 2023[9] - Net income for the quarter was $10,621,000, a decrease of 37% compared to $40,528,000 for the previous year[49] - Net income for the year ended December 31, 2024, was $40,528,000, a significant decrease from $64,443,000 for the year ended December 31, 2023, representing a decline of approximately 37.1%[73] Deposits and Loans - Deposit balances grew 2% quarter-over-quarter and 10% year-over-year, driven by local community commercial deposit relationships[2] - Total deposits increased by $90.5 million, or 2%, to $4.8 billion at December 31, 2024, compared to $4.7 billion at September 30, 2024, and increased by $441.6 million, or 10% from $4.4 billion at December 31, 2023[40] - Loan growth increased by 2% from the prior quarter and 4% year-over-year, indicating solid demand for loans[2] - Total loans increased by $81.7 million, or 2%, to $3.5 billion at December 31, 2024, compared to $3.4 billion at September 30, 2024[30] Interest Income and Margin - The net interest margin expanded to 3.34% in Q4 2024, up from 3.17% in Q3 2024, primarily due to reduced funding costs[2] - Net interest income rose 11% to $44.2 million in Q4 2024 compared to $39.9 million in Q3 2024[9] - Interest income for the quarter was $64,633,000, reflecting a 5% increase from $61,438,000 in the previous quarter[49] - The average yield on the total loan portfolio increased to 5.53% in Q4 2024, compared to 5.39% in Q4 2023[10] Noninterest Income and Expenses - Total noninterest income for Q4 2024 remained flat at $2.2 million compared to Q3 2024, but increased 13% from $1.9 million in Q4 2023 due to higher gains on SBA loan sales[18] - Total noninterest expense for Q4 2024 increased to $30.3 million, compared to $27.6 million in Q3 2024, primarily due to one-time personnel-related expenses and legal fees[16] - Total noninterest income decreased by 3% to $2,185,000 compared to $2,240,000 in the previous quarter[49] - Total noninterest expense rose by 10% to $30,304,000 compared to $27,555,000 in the previous quarter[49] Asset Quality - Nonperforming assets and net charge-offs remained low, indicating positive credit trends[2] - Total nonperforming loans were $7.667 million at December 31, 2024, compared to $7.158 million at September 30, 2024[35] - The allowance for credit losses on loans (ACLL) increased to $48.953 million at December 31, 2024, from $47.819 million at September 30, 2024[35] - The provision for credit losses on loans during the fourth quarter of 2024 was $1.331 million[35] Capital and Equity - Tangible common equity was $515.7 million at December 31, 2024, compared to $510.8 million at September 30, 2024, and $496.6 million at December 31, 2023[42] - The Company’s total capital ratio was 15.6% at December 31, 2024, exceeding the well-capitalized regulatory guideline of 10.0%[41] - Tangible book value per share increased to $8.41 at December 31, 2024, from $8.33 at September 30, 2024, and $8.12 at December 31, 2023[42] Efficiency and Ratios - The efficiency ratio for Q4 2024 was 65.35%, slightly improved from 65.37% in Q3 2024, but increased from 57.62% in Q4 2023 due to higher noninterest expenses[23] - The annualized return on average tangible common equity was 65.35%, up 25% from 52.57% in the previous year[49] - The loan to deposit ratio was 72.45% at December 31, 2024, compared to 72.11% at September 30, 2024, and 76.52% at December 31, 2023[24] Securities and Investments - The weighted average life of the securities held-to-maturity portfolio was 6.35 years at December 31, 2024, reflecting longer maturities of certain mortgage-backed securities[27] - The pre-tax unrealized loss on the securities available-for-sale portfolio was ($5.1) million at December 31, 2024, which was less than 1% of total shareholders' equity[26] - Total investment securities projected paydowns and maturities for 2025 are expected to be $259.202 million[28]