Heritage Financial Q3 net income falls amid strategic balance sheet shift

Heritage Financial Corporation has announced net income of $11.4 million for the third quarter of 2024, down from $14.2 million in the second quarter and $18.2 million in the third quarter of 2023.

Diluted earnings per share were $0.33, compared to $0.41 in Q2 2024 and $0.51 in Q3 2023.

Heritage reported a $6.9 million pre-tax loss from the sale of investment securities, which reduced earnings per share by $0.16. The sale, part of a strategic balance sheet repositioning, included $78 million in securities with an estimated average yield of 1.88%. Proceeds were directed toward higher-yielding loan growth.

The quarter also saw a $146.9 million increase in loans receivable, representing 3.2% growth, or an annualized 12.9%. Deposits rose by $192.8 million, a 3.5% increase or an annualized 13.9%, with non-interest-bearing deposits up $82.9 million, or 5.2% (annualized 20.6%).

Other financial metrics showed a slight improvement in net interest margin, which rose to 3.33% from 3.29% in the previous quarter.

The cost of total deposits rose to 1.42%, up from 1.34% in Q2 2024, while noninterest expense relative to average total assets decreased to 2.18% from 2.21%. On Oct. 23, Heritage declared a regular cash dividend of $0.23 per share.

Heritage CEO Jeff Deuel (pictured above) remarked on the quarter’s performance, highlighting the positive impact of loan and deposit growth, margin expansion, and expense management initiatives.

“The increases in average earning assets and net interest margin resulted in an improvement in net interest income of $1.8 million, or 3.6%, from the prior quarter,” he said.

Despite a charge-off on an owner-occupied commercial real estate loan previously downgraded, Deuel indicated the company’s credit quality remains robust and expressed confidence in future profitability driven by growth and risk management strategies.

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