PR Newswire
OLYMPIA, Wash., April 25, 2024
OLYMPIA, Wash., April 25, 2024 /PRNewswire/ -- Heritage Financial Corporation (NASDAQ GS: HFWA) (the "Company" or "Heritage"), the parent company of Heritage Bank (the "Bank"), today reported net income of $5.7 million for the first quarter of 2024 compared to $6.2 million for the fourth quarter of 2023 and $20.5 million for the first quarter of 2023. Diluted earnings per share for the first quarter of 2024 were $0.16 compared to $0.18 for the fourth quarter of 2023 and $0.58 for the first quarter of 2023.
In the first quarter of 2024, the Company incurred a pre-tax loss of $10.0 million on the sale of investment securities due to the strategic repositioning of its balance sheet, which affected diluted earnings per share by $0.22 for the quarter. The Company sold $144.0 million in investment securities with an estimated weighted average book yield of 2.37% and purchased $33.1 million of investment securities with an estimated weighted average book yield of 6.05%. The remaining proceeds from sales were invested in interest earning deposits with a current yield of 5.40%. As a result of these actions, we anticipate an estimated annualized improvement of $4.6 million in interest income. Similar actions were taken during the fourth quarter of 2023 for which we incurred a pre-tax loss of $10.0 million and estimated annualized improvement of $5.3 million in interest income. Further, approximately $1.1 million of severance costs were incurred in the first quarter of 2024 as part of expense management initiatives, which affected diluted earnings per share by $0.02 for the quarter.
Jeffrey J. Deuel, President and Chief Executive Officer of Heritage, commented, "We are pleased with our continued accomplishments in the first quarter including strong loan growth, repositioning of our balance sheet and expense management measures, which will strengthen our earnings in future periods. Although negatively impacting current earnings, we believe these actions will enhance our sustainable long-term returns for our shareholders."
Financial Highlights
The following table provides financial highlights at the dates and for the periods indicated:
| As of or for the Quarter Ended | ||||
| March 31, 2024 | | December 31, | | March 31, |
| (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 $143.3 million, or 7.6%, to $1.73 billion at March 31, 2024 from $1.87 billion at December 31, 2023. As previously discussed, the Company sold $144.0 million in investment securities at a loss of $10.0 million during the first quarter of 2024. These funds were redeployed in investment purchases of $33.1 million, loans and interest earning deposits. The following table summarizes the Company's investment securities at the dates indicated:
| March 31, 2024 | | December 31, 2023 | | $ 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: | |||||||||||||
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