Heritage Financial (HFWA) delivered a solid core performance in Q1 2024, supported by disciplined balance sheet management and expense control, despite a challenging rate environment that pressured deposit pricing and NIM. The quarter featured robust loan growth, a modest decline in deposits, and continued strong credit quality, underpinned by a conservative underwriting stance. Management signaled near-term margin pressure tied to higher-cost deposits and the need to fund maturities and strategic cash needs, but also indicated steps that should stabilize profitability over the medium term through selective asset/liability repositioning, loan origination, and capital returns.
Key takeaways include a 8.4% annualized Q1 loan growth, a NIM of 3.30% (March), a net interest income cadence influenced by loss-hedging activity and deposit costs, and a firm capital base with an 8.8% TCE. The company reaffirmed expense guidance of $40–$41 million for the year and signaled ongoing buyback activity subject to stock price and capital considerations. Credit quality remained solid, with limited charge-offs and elevated but manageable criticized loan levels, largely driven by a single CRE relationship.