Heritage Financial Corporation (HFWA) delivered a solid Q4 2024 results with a meaningful net interest margin (NIM) expansion and robust loan growth, supported by ongoing expense discipline and balance sheet repositioning. Reported revenue of $82.25 million and net income of $11.93 million yielded earnings of $0.35 per share (diluted $0.34), underscoring operational leverage in a higher-rate environment. The company also advanced its balance sheet strategy through selective securities repositioning and managed BOLI (bank-owned life insurance) actions, which are expected to contribute cash flow and yield improvements over time, despite a $3.9 million pre-tax loss trade that the company estimates will generate approximately $1.4 million of annualized pre-tax income improvement with a roughly three-year earn-back period. Management emphasized margin expansion driven by lower funding costs and continued deposits optimization, paired with disciplined credit risk management and capital discipline (share repurchases and potential M&A activity).
Year-end 2024 highlights include a TCE ratio of 9.0% (down from 9.1%), a strong liquidity profile, and improving efficiency relative to historical overhead. Net interest income rose by $0.805 million QoQ as NIM rose to 3.39% in Q4 from 3.33% in Q3, aided by deposit and borrowing cost relief (cost of deposits 1.98% in Q4; spot rate 1.94% as of December 31). The company maintained excellent credit quality with non-accrual loans at 0.08% of total loans (0.11% non-performing loans at year-end), and full-year net charge-offs of about $2.5 million (0.06% of total loans).
Looking forward, HFWA signaled expectations for continued NIM expansion into 2025, contingent on rate evolution and balance sheet positioning. Management reiterated a quarterly operating expense run-rate target of $41–$42 million and guided to a 15–16% tax rate for 2025, excluding one-time BOLI restructuring impacts. The company remains active on strategic initiatives, including pursuing at least one additional banking team and maintaining a measured use of capital via stock buybacks and selective investment opportunities, including potential lost-trade strategies with an expected three-year earn-back period. Investors should monitor deposit costs (and the mix of core vs brokered deposits), loan growth momentum across C&I and CRE, credit quality signals, and the progress of the ongoing balance sheet optimization program.