Heritage Financial (HFWA) Q1 2025 earnings summary

Executive summary

• Net income for Q1 2025 was $13.9 million, up 142% year-over-year and 17% sequentially, with total assets of $7.13 billion and loans receivable of $4.76 billion.

• Net interest margin improved to 3.44% from 3.36% in Q4 2024, driven by lower deposit and borrowing costs.

• Strategic balance sheet repositioning included a $3.9 million pre-tax loss on $60.9 million in securities sales, significantly less than the prior year.

• Strong capital position with leverage ratio at 10.2%, total capital ratio at 13.6%, and stockholders' equity to assets at 12.4%.

• Expanded into Spokane, WA, hiring new commercial bankers and declared a $0.24 per share dividend.

Financial highlights

• Net interest income was $53.7 million, up 4.2% year-over-year, with total deposits increasing $160.7 million (2.8%) to $5.85 billion.

• Cost of interest-bearing deposits decreased to 1.92% from 1.98% sequentially; cost of total deposits was 1.38%.

• Noninterest expense rose to $41.4 million, mainly from higher benefit costs, payroll taxes, and professional services.

• Allowance for credit losses on loans was 1.09% of loans receivable; provision for credit losses was minimal.

• Diluted EPS was $0.51; adjusted diluted EPS was $0.49.

Outlook and guidance

• Management projects Q2 annualized loan growth at 5–8%, with a strong pipeline but uncertainty for Q3 and Q4 due to economic conditions.

• 2025E EPS projected at $2.02; 2026E EPS at $2.29.

• Quarterly non-interest expenses guided in the $41–$42 million range for 2025.

• Focus on organic growth, operational efficiency, and disciplined M&A in the Pacific Northwest.

• Expect continued reduction in cost of total deposits as CDs reprice; no significant change in non-maturity deposit costs unless further Fed cuts occur.