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Heritage Financial (HFWA)
:HFWA
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Heritage Financial
(NASDAQ:HFWA)72Outperform
Heritage Financial (HFWA) vs. S&P 500 (SPY)
Market Cap
$804.22M
Dividend Yield3.89%
Average Volume (3M)241.30K
Price to Earnings (P/E)19.3
Beta (1Y)0.89
Revenue Growth4.64%
EPS Growth-28.68%
CountryUS
Employees799
SectorFinancial
Sector Strength93
IndustryBanking
Share Statistics
EPS (TTM)1.24
Shares Outstanding33,990,826
10 Day Avg. Volume300,128
30 Day Avg. Volume241,302
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.80
Price to Cash Flow (P/CF)9.80
P/FCF Ratio2.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$30.00Price Target Upside25.47% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Heritage Financial Business Overview & Revenue Model
Company DescriptionHeritage Financial Corporation (HFWA) is a bank holding company based in Olympia, Washington. It primarily operates through its wholly-owned subsidiary, Heritage Bank, offering a comprehensive range of financial services to small and medium-sized businesses and individuals. The company focuses on commercial lending, retail banking, and wealth management services, with a strong presence in Washington and Oregon.
How the Company Makes MoneyHeritage Financial Corporation generates revenue primarily through interest income from its lending activities, including commercial loans, consumer loans, and real estate loans. Additionally, the company earns non-interest income from various sources such as service charges on deposit accounts, fees for wealth management and investment advisory services, and mortgage banking activities. Heritage Financial also benefits from strategic partnerships and local community engagement, which enhance its market presence and contribute to its earnings.
Heritage Financial Financial Statement Overview
Summary
Heritage Financial maintains a strong financial position with an excellent balance sheet marked by zero debt and robust equity. However, inconsistent revenue growth and declining profitability margins highlight areas for improvement, particularly in income stability and cash flow generation.Income Statement
Heritage Financial shows a mixed performance in its income statement. Gross profit margins are stable, indicating good cost management. However, net profit margin has decreased from the previous year, reflecting lower profitability. Revenue growth is inconsistent, with recent declines indicating potential challenges. EBIT margins are strong, suggesting efficient operations, although EBITDA margins are not applicable due to zero EBITDA reported.75
Positive
Balance Sheet
The balance sheet for Heritage Financial is strong, with a zero total debt indicating no leverage risk. The equity ratio is robust, showcasing financial stability and a strong asset base. Return on equity is positive, albeit lower than previous years, suggesting some efficiency concerns. Overall, the company's balance sheet reflects solid financial health with ample equity support.85
Very Positive
Cash Flow
Cash flow analysis reveals a slight decline in operating cash flow, yet free cash flow remains positive, indicating operational efficiency. Free cash flow growth is negative, reflecting challenges in maintaining cash generation levels. The operating cash flow to net income ratio is stable, but the declining free cash flow to net income ratio suggests potential pressure on liquidity.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 309.71M | 239.54M | 248.98M | 240.40M | 238.23M | Gross Profit |
| 309.71M | 239.54M | 248.98M | 240.40M | 238.23M | EBIT |
| 308.72M | 72.92M | 99.44M | 120.51M | 53.18M | EBITDA |
| 0.00 | 0.00 | 102.53M | 0.00 | 9.11M | Net Income Common Stockholders |
| 43.26M | 61.76M | 81.88M | 98.03M | 46.57M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 823.22M | 1.19B | 1.44B | 2.62B | 1.55B | Total Assets |
| 7.11B | 7.17B | 6.98B | 7.43B | 6.62B | Total Debt |
| 405.06M | 21.77M | 21.47M | 21.18M | 20.89M | Net Debt |
| 287.96M | -203.21M | -82.12M | -1.70B | -722.43M | Total Liabilities |
| 6.24B | 6.32B | 21.47M | 21.18M | 20.89M | Stockholders Equity |
| 863.53M | 853.26M | 797.89M | 854.43M | 820.44M |
| Cash Flow | Free Cash Flow | |||
| 61.02M | 99.15M | 90.44M | 66.51M | 63.33M | Operating Cash Flow |
| 64.48M | 109.52M | 94.46M | 69.53M | 70.33M | Investing Cash Flow |
| -85.90M | -93.45M | -1.21B | 163.76M | -538.55M | Financing Cash Flow |
| -86.45M | 105.31M | -506.38M | 746.68M | 982.97M |
Heritage Financial Technical Analysis
Negative
23.91
Price Trends
24.44
Negative
24.46
Negative
22.11
Positive
Market Momentum
-0.12
Positive
41.35
Neutral
23.52
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HFWA, the sentiment is Negative. The current price of 23.91 is below the 20-day moving average (MA) of 24.48, below the 50-day MA of 24.44, and above the 200-day MA of 22.11, indicating a neutral trend. The MACD of -0.12 indicates Positive momentum. The RSI at 41.35 is Neutral, neither overbought nor oversold. The STOCH value of 23.52 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HFWA.
Heritage Financial Risk Analysis
Heritage Financial disclosed 27 risk factors in its most recent earnings report. Heritage Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Heritage Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $804.22M | 19.29 | 5.04% | 3.89% | 4.64% | -28.68% | |
71 Outperform | $2.20B | 13.11 | 9.86% | 3.00% | 11.14% | -8.38% | |
67 Neutral | $2.71B | 13.52 | 9.35% | 4.12% | 2.84% | -9.46% | |
67 Neutral | $2.35B | 13.31 | 6.90% | 3.64% | 29.57% | -36.51% | |
65 Neutral | $5.25B | 9.82 | 10.55% | 5.75% | 7.84% | 54.79% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% | |
63 Neutral | $3.03B | 13.21 | 6.92% | 6.50% | 4.30% | -15.74% |
* Financial Sector Average
Performance Comparison
HFWA
Heritage Financial
23.91
5.49
29.80%
BANR
Banner
62.95
17.82
39.49%
COLB
Columbia Banking System
24.51
6.10
33.13%
CVBF
Cvb Financial
19.04
2.15
12.73%
FIBK
First Interstate Bancsystem
27.81
2.75
10.97%
WAFD
Washington Federal
28.81
1.42
5.18%
Heritage Financial Earnings Call Summary
Earnings Call Date: Jan 23, 2025 | % Change Since: -1.89% | Next Earnings Date: Apr 17, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed performance with strong loan growth and net interest margin improvement as positives. However, these were balanced by challenges such as a decrease in deposits, investment losses, and an increase in criticized loans, leading to a cautious outlook.Highlights
Strong Loan Growth
Loan balances increased by $123 million during Q4, with a 10.8% growth for the full year 2024. This growth was driven by new production across the footprint and moderate prepay and payoff levels.
Net Interest Margin Improvement
Net interest margin increased to 3.39% in Q4 from 3.33% in Q3, with an expectation of further expansion in upcoming quarters.
Stable Credit Quality
Nonaccrual loans totaled just over $4 million at year-end, representing 0.08% of total loans, showing stability in credit quality over the past years.
Successful Stock Buyback Program
Repurchased 165,000 shares at a total cost of $4.3 million during Q4, with 990,000 shares still available for repurchase.
Lowlights
Decrease in Deposits
Total deposits decreased by $24 million in Q4 due to a $25 million reduction in brokered CDs.
Pretax Loss from Investment Sales
A pretax loss of $3.9 million was recognized on the sale of $36 million of securities as part of a strategic repositioning of the balance sheet.
Increase in Criticized Loans
Criticized loans rose by 4.7% during the quarter, mainly due to the downgrade of 3 C&I relationships.
Company Guidance
During the HFWA Q4 2024 earnings call, the executives provided comprehensive guidance, highlighting several key financial metrics. Jennifer Nino, the Chief Accounting Officer, reported a strong loan growth of $123 million, although yields on the loan portfolio slightly decreased to 5.53% due to a 100 basis point reduction in the Fed funds rate. Deposit levels remained relatively flat, with a $24 million decrease largely attributed to a $25 million reduction in brokered CDs, yet the cost of interest-bearing deposits decreased to 1.98%. Investment balances decreased by $104.5 million, partly due to a strategic loss trade yielding an estimated annualized pretax income improvement of $1.4 million. Moreover, the net interest margin improved to 3.39%, and the provision for credit losses was $1.2 million, driven mainly by loan growth. Noninterest expense saw a modest increase of $250,000, while capital ratios stayed robust with a TCE ratio of 9.0%. The company also repurchased 165,000 shares at a cost of $4.3 million, with 990,000 shares still available for repurchase.Heritage Financial Corporate Events
DividendsBusiness Operations and StrategyFinancial Disclosures
Heritage Financial Reports Strong Q4 2024 Results
Positive
Jan 23, 2025
In its latest financial results announcement for the fourth quarter of 2024, Heritage Financial Corporation reported a net income of $11.9 million, marking an increase from both the previous quarter and the same period in 2023. Despite facing losses due to strategic repositioning of its balance sheet, including a pre-tax loss on sale of securities and restructuring costs, the company managed to improve its net interest margin and reduce the cost of deposits. Additionally, the board declared a regular quarterly cash dividend of $0.24 per share, reflecting an increase from the previous dividend. The company’s strategic efforts, although impacting reported earnings, are aimed at enhancing core earnings and ensuring sustainable long-term shareholder returns.
Executive/Board Changes
Heritage Financial Announces Board Changes and New Appointments
Neutral
Dec 19, 2024
Heritage Financial Corporation announced the retirement of Board member Deborah J. Gavin, who will step down following the 2025 Annual Meeting, and appointed Karen R. Saunders to the Board of Directors, effective January 1, 2025. Ms. Saunders, with extensive experience in audit and financial services from her career at KPMG, will also join the Board of Heritage Bank. In addition, the company entered a deferred compensation plan agreement with Matthew T. Ray, contingent on performance metrics, offering potential contributions and vesting arrangements through 2035.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.