Heritage Financial (HFWA)

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Heritage Financial (HFWA) - 2023 Q1 - Earnings Call Transcript
2023-04-20 19:39
Heritage Financial Corporation (NASDAQ:HFWA) Q1 2023 Earnings Conference Call April 20, 2023 1:00 PM ET Company Participants Jeffrey Deuel - CEO Donald Hinson - CFO Bryan McDonald - President and COO Anthony Chalfant - Chief Credit Officer Conference Call Participants Jeff Rulis - D.A. Davidson Andrew Terrell - Stephens Adam Butler - Piper Sandler David Feaster - Raymond James Operator Hello everyone. Thank you for attending today's Heritage Financial Corporation Q1 2023 Earnings Call. My name is Sierra, an ...
Heritage Financial (HFWA) - 2022 Q4 - Annual Report
2023-02-24 21:14
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 HERITAGE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Washington 9 ...
Heritage Financial (HFWA) - 2022 Q4 - Earnings Call Transcript
2023-01-26 21:38
Financial Data and Key Metrics Changes - The company reported a net interest income increase of $3.8 million or 6.4%, primarily due to a higher net interest margin which rose by 41 basis points to 3.98% for Q4 [40] - Non-interest expense increased by $1.2 million to $40.4 million in Q4, attributed to inflationary pressures and higher full-time equivalent (FTE) levels [31] - The total criticized loans decreased by approximately 10% or $15.6 million in Q4, now down 26% from year-end 2021 [33] Business Line Data and Key Metrics Changes - The commercial lending group closed $329 million in new loan commitments for the quarter, consistent with the same amount closed in Q4 2021 [46] - Consumer loan production was $21 million during the quarter, down from $29 million in the previous quarter [64] - The average interest rate for new commercial loans was 5.72%, up from 4.87% in the previous quarter [65] Market Data and Key Metrics Changes - Deposits decreased by $313 million or 5% in Q4, primarily due to rate-sensitive customers seeking higher-yielding investments [57] - The company added $125 million in funds under management from deposit customers during the quarter through its Wealth Management division [41] - The loan-to-deposit ratio stood at 68%, indicating ample liquidity for loan portfolio growth [42] Company Strategy and Development Direction - The company aims to maintain a conservative risk profile while focusing on organic loan growth and expanding its production teams in new markets [29][36] - There is an ongoing strategy to enhance technology to support efficient operations and improve customer experience [50][67] - The company is open to pursuing acquisitions in its three-state region when suitable opportunities arise [67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong credit quality metrics despite potential economic challenges in 2023 [62] - The company anticipates continued margin expansion, contingent on deposit runoff and the actions required to manage liquidity [96] - Management noted that while there may be some impact from tech company layoffs, the overall credit quality remains stable [104][116] Other Important Information - The company reported net recoveries of approximately $1.2 million for the full year, a significant improvement compared to net charge-offs in previous years [44] - The company has seen a significant reduction in non-accrual loans, totaling $5.9 million, representing only 0.15% of total loans [43] Q&A Session Summary Question: What is the outlook for liquidity and potential outflows? - Management indicated a mix of strategies may be employed, including borrowings and possibly selling securities to defend the deposit base [75][91] Question: How does the company view capital going forward? - The focus remains on growth, with potential buybacks not being a priority at this time [77] Question: What are the expectations for margin expansion in 2023? - Management expects some margin expansion, but it will depend on deposit runoff and the associated costs of managing liquidity [96] Question: Can you provide details on the office portfolio exposure? - The company has limited exposure in core markets, with criticized office loans totaling approximately $23 million, representing 4% of the total office loan portfolio [34][60]
Heritage Financial (HFWA) - 2022 Q3 - Quarterly Report
2022-11-08 22:39
[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for Heritage Financial Corporation as of September 30, 2022, and for the three and nine months then ended [Condensed Consolidated Statements of Financial Condition (Unaudited)](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION%20(UNAUDITED)) Total assets decreased to $7.20 billion by September 30, 2022, due to cash redeployment and equity decline from AOCI losses Condensed Consolidated Statements of Financial Condition (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $407,324 | $1,723,292 | | Total investment securities | $2,129,461 | $1,277,728 | | Loans receivable, net | $3,959,206 | $3,773,301 | | **Total assets** | **$7,200,312** | **$7,432,412** | | **Liabilities & Equity** | | | | Total deposits | $6,237,735 | $6,394,290 | | **Total liabilities** | **$6,423,610** | **$6,577,980** | | Accumulated other comprehensive (loss) income, net | ($105,001) | $9,396 | | **Total stockholders' equity** | **$776,702** | **$854,432** | [Condensed Consolidated Statements of Income (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20(UNAUDITED)) Q3 2022 net income slightly increased to $21.0 million, while YTD net income decreased to $59.3 million due to credit loss provisions Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $59,286 | $51,378 | $156,278 | $157,881 | | Provision for (reversal of) credit losses | $1,945 | ($3,149) | ($2,836) | ($24,335) | | Noninterest income | $7,453 | $8,228 | $23,007 | $24,776 | | Noninterest expense | $39,147 | $37,166 | $110,574 | $110,804 | | **Net income** | **$20,990** | **$20,592** | **$59,331** | **$78,638** | | **Diluted EPS** | **$0.59** | **$0.58** | **$1.67** | **$2.18** | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Notes detail financial statement components, including loan portfolios, credit quality, and fair value measurements, and the company's core business - The company's business consists primarily of **commercial lending and deposit relationships** with small and medium-sized businesses in Washington and Oregon[30](index=30&type=chunk) - Material estimates susceptible to significant change relate to the **Allowance for Credit Losses (ACL)** on securities and loans, **goodwill impairment**, and the **fair value of financial instruments**[32](index=32&type=chunk) - The company is **transitioning away from LIBOR** as a reference rate, with no new LIBOR-indexed loans initiated or renewed after January 1, 2022[36](index=36&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, highlighting Q3 2022 net income growth, YTD decline, balance sheet shifts, and equity changes [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q3 2022 net income rose to $21.0 million due to higher net interest income, while YTD net income decreased to $59.3 million - Q3 2022 net income increased to **$21.0 million** from $20.6 million in Q3 2021, primarily due to higher interest income from rising market rates, offset by a provision for credit losses versus a reversal in the prior year[117](index=117&type=chunk) - YTD 2022 net income decreased to **$59.3 million** from $78.6 million in YTD 2021, mainly due to a significantly lower reversal of provision for credit losses[118](index=118&type=chunk) - Net interest income for Q3 2022 increased by **$7.9 million (15.4%)** YoY, driven by higher yields on assets, despite a **$7.8 million** decrease in SBA PPP loan fee income[123](index=123&type=chunk)[124](index=124&type=chunk) - Noninterest expense for Q3 2022 increased by **5.3%** YoY, primarily due to a **$2.2 million (10.2%)** increase in compensation and employee benefits from market pressure on wages and incentive accruals[138](index=138&type=chunk) [Financial Condition Overview](index=40&type=section&id=Financial%20Condition%20Overview) Total assets decreased to $7.2 billion due to cash redeployment, while deposits and stockholders' equity also declined - Total assets decreased by **3.1%** since year-end 2021, driven by a **$1.3 billion (76.4%)** decrease in cash and cash equivalents[143](index=143&type=chunk)[144](index=144&type=chunk) - The company deployed excess liquidity, increasing total investment securities by **$851.7 million (66.7%)** and net loans receivable by **$185.9 million (4.9%)**[143](index=143&type=chunk)[144](index=144&type=chunk) - Total deposits decreased by **$156.6 million (2.4%)**, attributed to competitive pricing pressures and customers seeking higher-yielding investments[144](index=144&type=chunk)[152](index=152&type=chunk) - Stockholders' equity decreased by **9.1%**, primarily due to AOCI becoming a loss of **$105.0 million** from a gain of $9.4 million, a negative swing of **$114.4 million**, due to rising interest rates impacting the fair value of AFS securities[144](index=144&type=chunk)[154](index=154&type=chunk) [Loan Portfolio Overview](index=42&type=section&id=Loan%20Portfolio%20Overview) Total loans grew to $4.0 billion, driven by C&I and residential real estate, while asset quality improved with fewer nonaccrual loans Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2022 | Dec 31, 2021 | % Change | | :--- | :--- | :--- | :--- | | Commercial and industrial | $735,028 | $621,567 | 18.3% | | SBA PPP | $3,593 | $145,840 | -97.5% | | Owner-occupied CRE | $959,486 | $931,150 | 3.0% | | Non-owner occupied CRE | $1,547,114 | $1,493,099 | 3.6% | | Residential real estate | $296,019 | $164,582 | 79.9% | | **Total Loans** | **$4,001,295** | **$3,815,662** | **4.9%** | - Nonaccrual loans decreased significantly by **$17.5 million (73.8%)** to **$6.2 million** at September 30, 2022, from $23.8 million at year-end 2021, due to collection efforts, payoffs, and transfers to accruing status[147](index=147&type=chunk)[148](index=148&type=chunk) [Allowance for Credit Losses (ACL) on Loans Overview](index=43&type=section&id=Allowance%20for%20Credit%20Losses%20on%20Loans%20Overview) The ACL on loans decreased to $42.1 million (1.05% of total loans) by September 30, 2022, reflecting improved economic forecasts ACL Ratios | Metric | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | ACL on loans | $42,089 thousand | $42,361 thousand | | ACL on loans to loans receivable | 1.05% | 1.11% | | ACL on loans to loans receivable (ex-PPP) | 1.05% | 1.15% | - The ACL decreased during the first nine months of 2022 due to a reduction in reserves for individually evaluated loans and improvements in the economic forecast compared to the prior year[149](index=149&type=chunk) [Regulatory Requirements Overview](index=44&type=section&id=Regulatory%20Requirements%20Overview) As of September 30, 2022, the Company and Heritage Bank met all capital adequacy requirements, maintaining well-capitalized status Capital Ratios as of September 30, 2022 | Ratio | Company | Heritage Bank | | :--- | :--- | :--- | | Common equity Tier 1 capital ratio | 12.8% | 13.0% | | Tier 1 capital ratio | 13.3% | 13.0% | | Total capital ratio | 14.0% | 13.8% | | Leverage ratio | 9.2% | 9.0% | - Management believes that as of September 30, 2022, the Company and the Bank met all capital adequacy requirements to which they are subject[157](index=157&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material change in interest rate risk exposure since 2021, with no trading accounts, hedging, or high-risk derivatives - There has not been a material change in the company's interest rate risk exposure since the 2021 Annual Form 10-K[166](index=166&type=chunk) [Controls and Procedures](index=47&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal financial reporting controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of September 30, 2022[167](index=167&type=chunk) - No material changes occurred in the Company's internal control over financial reporting during the third quarter of 2022[168](index=168&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Neither the Company nor Heritage Bank is a party to any material pending legal proceedings beyond routine litigation - The Company is not a party to any material pending legal proceedings outside of ordinary routine litigation[170](index=170&type=chunk) [Risk Factors](index=47&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to the risk factors previously disclosed in the Company's 2021 Annual Form 10-K - There have been no material changes to the risk factors set forth in the Company's 2021 Annual Form 10-K[171](index=171&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) In Q3 2022, the company repurchased 100 shares for tax withholding, with 638,214 shares remaining under the repurchase plan - In Q3 2022, the company repurchased **100 shares** at an average price of **$26.94** to pay withholding taxes on vested restricted stock[172](index=172&type=chunk) - As of September 30, 2022, **638,214 shares** may yet be purchased under the current stock repurchase plan[172](index=172&type=chunk) [Exhibits](index=48&type=section&id=ITEM%206.%20EXHIBITS) Exhibits filed with Form 10-Q include executive agreements, deferred compensation plan addendums, and required CEO/CFO certifications - Key exhibits filed include a Transitional Retirement Agreement for Cindy M. Hirman and Deferred Compensation Plan addendums for several key executives[174](index=174&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act were filed[174](index=174&type=chunk)
Heritage Financial (HFWA) - 2022 Q3 - Earnings Call Transcript
2022-10-20 21:40
Heritage Financial Corporation (NASDAQ:HFWA) Q3 2022 Earnings Conference Call October 20, 2022 1:00 PM ET Company Participants Jeff Deuel - CEO Donald Hinson - CFO Tony Chalfant - Chief Credit Officer Bryan McDonald - President and COO Conference Call Participants Eric Spector - Raymond James Jeff Rulis - DA Davidson Eleanor Hagan - KBW Operator Good morning. Thank you for attending today's Heritage Financial Corporation Q3 2022 Earnings Call. My name is Bethany, I will be the moderator for today's call. [O ...
Heritage Financial (HFWA) - 2022 Q1 - Earnings Call Transcript
2022-04-21 22:08
Financial Data and Key Metrics Changes - The annualized loan growth excluding PPP was 9.5% for the quarter, supported by lower payoffs and higher line utilization [4] - Net interest income decreased by almost $1 million, primarily due to a $1.8 million decrease in income from PPP loans [12] - Total deposits grew by $97 million or 1.5% in Q1, with a year-over-year increase of $458 million or 7.6% [16] - Non-interest income decreased by $1.3 million from the prior quarter, mainly due to a $2.7 million gain on sale of property recognized in Q4 [19] - The overhead ratio improved to 1.95% compared to 2.06% in the prior quarter [19] Business Line Data and Key Metrics Changes - Commercial lending closed $225 million in new loan commitments, down from $329 million in the previous quarter [34] - Consumer loan production was $22 million during the quarter, down from $23 million in the previous quarter [38] - The mortgage department closed $37 million of new loans in Q1, compared to $45 million in Q4 [41] Market Data and Key Metrics Changes - The average interest rate for new commercial loans was 3.54%, down 17 basis points from the previous quarter [39] - The average interest rate for all new loans was 3.39%, down 11 basis points from the previous quarter [39] Company Strategy and Development Direction - The company is focused on maintaining a moderate risk profile and has not loosened underwriting standards despite competitive pressures [32] - There is an intention to pursue acquisitions in the three-state region when suitable opportunities arise [46] - The company continues to refine its technology strategy to support efficient operations and enhance customer experience [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about organic growth due to the economic vitality of the Pacific Northwest [8] - The company anticipates high single-digit loan growth for the year [43] - Management acknowledged inflationary pressures on compensation expenses and technology investments [20] Other Important Information - The allowance for credit losses (ACL) settled at 1.07% excluding PPP, compared to the pre-pandemic ACL of 1.01% [7] - Non-accrual loans declined by $7.2 million or 30% from year-end 2021 levels [23] - The company experienced net recoveries of $494,000 for the quarter [30] Q&A Session Summary Question: Is there a figure for net interest margin excluding PPP, interest recoveries, and accretion? - The margin would be about 260 basis points, unchanged from the prior quarter [51] Question: What is the buyback appetite compared to last quarter? - The company does not have a significant appetite for buybacks, maintaining a steady share count [52] Question: Is the expense outlook of $37 million to $38 million still appropriate? - Yes, that range is still appropriate, but expenses are expected to increase due to inflationary pressures [56][58] Question: Will the company continue to purchase residential mortgages? - The company may utilize this strategy as a lever to manage excess cash, depending on the environment [59][61] Question: What are the expectations for deposit rates with upcoming rate hikes? - The company expects a lag in deposit rate increases, with a potential need to raise rates later in the year [62] Question: What is the near-term margin outlook? - The company is optimistic about margin increases in the coming quarters, anticipating a bottoming out in Q1 [68][69] Question: What is the status of M&A discussions? - There has been no significant change in the M&A environment, and discussions are ongoing but not imminent [74] Question: Are there increased conversations regarding digitalization opportunities? - Opportunities are still expected to emerge later in the year as the market stabilizes [76]
Heritage Financial (HFWA) - 2021 Q4 - Annual Report
2022-02-24 23:10
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 HERITAGE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) (State or ot ...
Heritage Financial (HFWA) - 2021 Q2 - Quarterly Report
2021-08-05 21:21
Table of Contents WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 UNITED STATES SECURITIES AND EXCHANGE COMMISSION (I.R.S. Employer Identification No.) HERITAGE FINANCIAL CORPORATION (Exact name of registrant ...
Heritage Financial (HFWA) - 2021 Q2 - Earnings Call Presentation
2021-07-22 18:01
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |---------|----------------------|-----------------------|-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Heritage CORPORATION | Financial | | | | | | | | | Q2 2021 | | INVESTOR PRESENTATION | | | | | | | | FORWARD LOOKING STATEMENTS The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ult ...
Heritage Financial (HFWA) - 2021 Q1 - Quarterly Report
2021-05-05 18:19
Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 HERITAGE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) (State ...