Heritage Financial (HFWA) - 2024 Q1 - Quarterly Results

Financial Performance - Net income for Q1 2024 was $5.7 million, or $0.16 per diluted share, down from $6.2 million, or $0.18 per diluted share in Q4 2023, and $20.5 million, or $0.58 per diluted share in Q1 2023[2][5] - Income before income taxes for the quarter ended March 31, 2024, was $6,868,000, an increase of 4.4% from $6,577,000 in the previous quarter[43] - Net income for the quarter ended March 31, 2024, was $5,748,000, a decrease of 7.8% from $6,233,000 in the previous quarter[44] - Net interest income for Q1 2024 was $51.53 million, a decrease of 4.3% from $53.87 million in Q4 2023 and a decrease of 13.9% from $59.84 million in Q1 2023[23] - Noninterest income improved by $247,000 to a loss of $2.9 million in Q1 2024 from a loss of $3.1 million in Q4 2023, primarily due to a $10 million loss on the sale of investment securities in both periods[24][25] Asset and Deposit Management - Total assets as of March 31, 2024, were $7.09 billion, a slight decrease from $7.14 billion at the end of Q4 2023[23] - Total deposits decreased by $67.5 million, or 1.2%, to $5.53 billion at March 31, 2024, from $5.60 billion at December 31, 2023[9] - Total deposits decreased to $5,532,327,000 as of March 31, 2024, from $5,599,872,000 as of December 31, 2023[42] - The loans to deposits ratio increased to 80.0% from 77.4% in the previous quarter, suggesting a more aggressive lending strategy[51] Investment and Securities - The company incurred a pre-tax loss of $10.0 million on the sale of investment securities, impacting diluted earnings per share by $0.22 for the quarter[3][5] - Total investment securities decreased by $143.3 million, or 7.6%, to $1.73 billion at March 31, 2024, from $1.87 billion at December 31, 2023[7] - The loss on the sale of investment securities was $9.97 million in Q1 2024, compared to a loss of $10.00 million in Q4 2023[27] Expenses and Cost Management - Noninterest expense decreased by $2.4 million, or 5.5%, in Q1 2024 compared to Q4 2023, driven by reductions in data processing, professional services, and marketing expenses[28] - Approximately $1.1 million in severance costs were incurred in Q1 2024 as part of expense management initiatives, affecting diluted earnings per share by $0.02[3][5] - Compensation and employee benefits increased by $718,000, or 2.9%, in Q1 2024 compared to Q4 2023, largely due to $1.1 million in severance costs[30] Equity and Dividends - The company declared a regular cash dividend of $0.23 per share on April 24, 2024[5] - Total stockholders' equity decreased by $5.7 million, or 0.7%, to $847.6 million at March 31, 2024, primarily due to $8.1 million in dividends and $6.1 million in stock repurchases[12] - Stockholders' equity increased to $847,580,000 from $853,261,000 in the previous quarter, reflecting a stable capital position[51] Credit Quality - The allowance for credit losses on loans increased to 1.12% at March 31, 2024, from 1.11% at December 31, 2023, with a provision for credit losses of $1.7 million recorded in both quarters[14] - Total nonperforming loans rose to $7,420,000, an increase of 28.7% from $5,761,000 in the previous quarter[48] - Nonaccrual loans to loans receivable were 0.11% at March 31, 2024, compared to 0.10% at December 31, 2023[17] Interest Income and Margin - The net interest margin was 3.32% for Q1 2024, down from 3.41% in Q4 2023[5][6] - Total interest income for the quarter ended March 31, 2024, was $74,353,000, slightly up from $74,262,000 in the previous quarter[44] - The cost of interest-bearing deposits increased by 22 basis points to 1.70% in Q1 2024 from 1.48% in Q4 2023[20] Taxation - The effective income tax rate for the year ended December 31, 2023, was 15.3%, with an increase in income tax expense in Q1 2024 compared to Q4 2023 due to a higher effective tax rate[32] - Income tax expense for the quarter ended March 31, 2024, was $1,120,000, up 225.6% from $344,000 in the previous quarter[43] - The effective income tax rate increased to 16.3% for the quarter ended March 31, 2024, compared to 5.2% in the previous quarter[43]