What caused HFWA's earnings surprises in 2024?

Heritage Financial Corporation (HFWA) experienced earnings surprises in 2024 due to several key factors:

1. **Strategic Shifts and Challenges**: HFWA faced challenges such as lower revenue estimates in Q1 2024 and Q3 2024, which contributed to the earnings surprises. These challenges were likely due to strategic shifts and repositioning within the company.
2. **Loan Growth and Demand**: Despite the challenges, HFWA reported strong loan growth in Q4 2024, with loan balances increasing by $123 million. This growth was driven by increased loan demand, higher banker activity, and the addition of new teams.
3. **Expense Management and Cost Efficiency**: The company managed to keep noninterest expense $250,000 above Q4 2023 levels but maintained a lower-than-historical overhead ratio of 2.20%. This efficient cost management likely had a positive impact on the company's financial performance.
4. **Deposit Stability and Cost Reduction**: HFWA experienced a decrease in total deposits, which was attributed to a $25 million reduction in brokered CDs. However, the cost of interest-bearing deposits decreased to 1.98% in Q4, benefiting from the increase in core CD balances and lower cost of deposits.
5. **Credit Quality Improvement**: The company reported a decline in nonaccrual loans, which totaled $4 million at year-end, representing 0.08% of total loans. This improvement was attributed to strong credit quality and disciplined risk management.

In conclusion, HFWA's earnings surprises in 2024 were primarily caused by strategic shifts, loan growth, expense management, deposit stability, and credit quality improvement. These factors, combined with challenges in revenue estimation, resulted in the observed earnings outcomes.