Heritage Financial (HFWA) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $11.4 million ($0.33 per diluted share), down from $14.2 million in Q3 2023, mainly due to higher funding costs and a $6.9 million pre-tax loss on securities sales as part of strategic balance sheet repositioning.

• Loans receivable reached $4.7 billion and deposits totaled $5.7 billion as of September 30, 2024, with strong loan and deposit growth, margin expansion, and continued expense management supporting core profitability.

• Efficiency ratio was 71.7% (adjusted 65.2%), and return on average equity was 5.30% for Q3 2024.

• The company continues to focus on operational efficiencies, disciplined M&A, and conservative underwriting.

• Declared a regular cash dividend of $0.23 per share for Q4 2024.

Financial highlights

• Net interest income for Q3 2024 was $53.0 million, up $1.8 million (3.6%) sequentially, with net interest margin rising to 3.33% from 3.29% in Q2 2024.

• Loans receivable increased $146.9 million (3.2%) to $4.68 billion; deposits rose $192.8 million (3.5%) to $5.71 billion.

• Noninterest expense decreased 4.1% year-over-year, with the overhead ratio improving to 2.18%.

• Noninterest income dropped 70.7% in Q3 2024, mainly due to the $6.9 million pre-tax loss on investment securities sales.

• Diluted EPS for Q3 2024 was $0.33, with adjusted diluted EPS at $0.45.

Outlook and guidance

• Management expects Q4 net interest margin to remain steady, with optimism for expansion in 2025 as CDs and borrowings reprice lower.

• Loan growth projected in the mid- to high-single digits for Q4 and 2025, supported by a strong pipeline.

• Expenses anticipated to rise to $41–$42 million per quarter in 2025, with FTE levels held flat.

• EPS guidance for 2024 is $1.61 and for 2025 is $1.81, with price/2024E EPS at 13.5x.

• Management remains focused on organic growth, operational efficiency, and disciplined capital management.