Heritage Financial Corporation (NASDAQ:HFWA) Q4 2023 Earnings Conference Call January 25, 2024 1:00 PM ET
Company Participants
Jeff Deuel - Chief Executive Officer
Bryan McDonald - President and Chief Operating Officer
Don Hinson - Chief Financial Officer
Tony Chalfant - Chief Credit Officer
Conference Call Participants
Jeff Rulis - D.A. Davidson
Matt Fedorjaka - KBW
Operator
Hello, everyone and welcome to today’s call. My name is Drew, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Heritage Financial Q4 and Year End Earnings Call. [Operator Instructions] I will now turn the call over to your host, Jeff Deuel, CEO. Please go ahead.
Jeff Deuel
Thank you, Drew. Welcome to everybody who called in and those who may listen later. This is Jeff Deuel, CEO of Heritage Financial. Attending with me are Bryan McDonald, President and Chief Operating Officer; Don Hinson, Chief Financial Officer; and Tony Chalfant, Chief Credit Officer.
Our fourth quarter earnings release went out this morning pre-market and hopefully, you have had the opportunity to review it prior to the call. We have also posted an updated fourth quarter investor presentation on the Investor Relations portion of our corporate website, which includes more detail on our deposits, loan portfolio, liquidity and credit quality. We will reference the presentation during the call. Please refer to the forward-looking statements in the press release.
We are reporting a somewhat noisy quarter that ultimately sets us up well for 2024 and beyond. That so-called noise can be attributed to active balance sheet management and expense reduction measures. When we started to run the preliminary budget in 2024, non-interest expense was running around $171 million for the year. That, coupled with continued pressure on margins caused the management team to take a hard look at our org structure in Q4 and we were able to get that number down to a run-rate more around $162 million.
In the end, expense reduction actions included contract rationalization, elimination of management layers, streamlining certain back office operations and exiting our retail mortgage platform, all of which will be referenced in this presentation. We continued to see pressure on deposit pricing in Q4 and we expect to see this continue for the near-term.
Deposit balances declined modestly in Q4 and the mix of deposits continues to partially shift to higher rate products. Loan growth was strong in Q4, running at a 7% annualized rate. Credit quality remains strong, resulting from our long-term practice of actively managing the loan portfolio. We have ample liquidity, a low loan-to-deposit ratio and a solid capital base. Going forward, we will keep a sharp eye on expenses while we focus on growing loans and deposits.