Heritage Financial's Q4 2024: Navigating Contradictions in NIM, Loan Growth, and Capital Strategies

Strong Loan Growth:
- Heritage Financial reported loan growth of $123 million in Q4, with loan balances increasing by 10% annualized for the quarter.
- The growth was driven by increased loan demand, higher banker activity, and the addition of new teams.

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 was achieved by tightly managing FTE levels and other expenses.

Deposit Stability and Cost Reduction:
- Total deposits decreased by $24 million due to a $25 million reduction in brokered CDs but remained stable after adjusting for this reduction.
- 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.

Credit Quality Improvement:
- Nonaccrual loans totaled $4 million at year-end, representing 0.08% of total loans, a decline of $222,000 during the quarter.
- This improvement was attributed to strong credit quality and disciplined risk management.

Capital Position and Shareholder Returns:
- Heritage Financial's TCE ratio remained strong at 9.0%, allowing for active stock buybacks and loss trades.
- During Q4, the company repurchased 165,000 shares and has 990,000 shares available for repurchase under the current plan.