“deposit balances declined modestly in Q1, and the mix of deposits continues to partially shift to higher rate products.”
— Jeffrey J. Deuel (CEO)
03Detailed Report
HFWA
Company HFWA
Period
Q1 2024
CurrencyUSD
Report TypeQuarterly Earnings
GeneratedJun 28, 2026
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Executive Summary
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.
Key Performance Indicators
Revenue
Increasing
74.35M
QoQ: 4.55% | YoY: 9.18%
Gross Profit
Increasing
71.45M
96.10% margin
QoQ: 0.48% | YoY: 4.92%
Operating Income
Decreasing
8.08M
QoQ: 0.84% | YoY: -73.47%
Net Income
Decreasing
5.75M
QoQ: -7.78% | YoY: -71.90%
EPS
Decreasing
0.17
QoQ: -5.56% | YoY: -70.69%
Revenue Trend
Margin Analysis
Financial Highlights
- Revenue: $74.35 million; Gross Profit: $71.45 million; Operating Income: $8.08 million; Net Income: $5.75 million; EPS: $0.17 (GAAP, basic) / $0.16 (diluted). YoY revenue growth 9.18%, QoQ growth 4.55%; Net income YoY -71.9%, QoQ -7.8%; EPS YoY -70.7%, QoQ -5.6%.
- Net Interest Margin (March): 3.30% (declined from prior quarter’s 3.41%); margin pressure driven by faster rising cost of deposits vs. earning-asset yields.
- Loan growth: $92.5 million QoQ, 8.4% annualized, with construction loan activity and higher net advances contributing.
- Deposits: declined by $67.5 million in the quarter; nonmaturity deposits down ~$154 million, partially offset by +$87 million in CDs; cost of interest-bearing deposits ended Q1 at ~1.70% (March) with spot ~1.80% at 3/31.
- Capital and liquidity: Total assets $7.091B; cash and cash equivalents $189.6M; total deposits ~$5.532B; TCE 8.8%; total equity $847.6M.
- Credit quality: Nonaccrual loans $4.8M (0.11% of total loans); criticized loans $172M (3.9% of total loans); charge-offs $0.2M, net recoveries $0.033M.
- Cash flow: Operating cash flow $12.90M; free cash flow $11.97M; investing cash flow negative $33.47M; financing cash flow negative $81.69M; net change in cash -$35.33M; cash end period $189.65M.
- Guidance: 2024 expense run rate expected to be $40–$41 million; ongoing emphasis on loan and deposit growth and cost management.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
74.35M
9.18%
4.55%
Gross Profit
71.45M
4.92%
0.48%
Operating Income
8.08M
-73.47%
0.84%
Net Income
5.75M
-71.90%
-7.78%
EPS
0.17
-70.69%
-5.56%
Key Financial Ratios
Gross Profit Margin
Weak
1.00%
Gross profit margin is below industry norms, profitability concerns
Operating Profit Margin
Fair
11.30%
Operating margin is moderate, room for improvement in cost management
Net Profit Margin
Fair
8.04%
Net profit margin is moderate, room for improvement in cost management
Return on Assets
Weak
0.08%
Return on assets suggests inefficient capital allocation
Return on Equity
Weak
0.68%
Return on equity suggests inefficient capital allocation
Current Ratio
Concern
0.04
Current ratio below safe levels, potential liquidity risk