Heritage Financial (HFWA)2025-02-27 20:01Financial Position and Capital - As of December 31, 2024, the company's on-balance sheet liquidity position was 1.47 billion in total investment securities[28]. - The regulatory capital ratios of the Bank were above the "well-capitalized" status, with a common equity tier 1 capital ratio of 12.0%, leverage ratio of 10.0%, Tier 1 capital ratio of 12.4%, and total capital ratio of 13.3%[28]. - As of December 31, 2024, the Bank was well-capitalized according to FDIC regulations and had regulatory capital exceeding Federal Reserve requirements[67]. - The Basel III Rule requires a minimum Common Equity Tier 1 Capital ratio of 7%, Tier 1 Capital ratio of 8.5%, and Total Capital ratio of 10.5% when including the capital conservation buffer[64]. - The Basel III Rule increased the required quantity and quality of capital, establishing more stringent criteria for Additional Tier 1 Capital and Tier 2 Capital[63]. - Banking organizations must maintain a capital conservation buffer of 2.5% in Common Equity Tier 1 Capital to make unrestricted capital distributions[64]. - The Bank is required to maintain adequate capital levels and exceeded its capital requirements under applicable guidelines as of December 31, 2024[96]. Loan Portfolio Composition - Commercial business loans comprised 479.4 million, representing 9.9% of total loans receivable[45]. - Residential real estate loans amounted to 164.7 million, or 3.4% of total loans receivable, as of December 31, 2024[49]. - The company has maintained a diversified portfolio of lending relationships without significant concentrations in any industry[30]. Employee and Corporate Culture - The company has a strong corporate culture supported by internal development and retention of management and officers in key roles[31]. - As of December 31, 2024, the company employed 733 full-time and 28 part-time employees, with a voluntary workforce turnover of 14.9%, down from 16.6% in 2023[126]. - In 2024, 43% of new hires came from underrepresented minority groups, an increase from 37% in 2023[124]. - The company achieved a 7.5-year average overall employee tenure and a 9.7-year average tenure for management as of December 31, 2024[127]. - The company launched two new Leadership Certificate Programs in April 2024, with 33 employees receiving certification since the launch[134]. - The company received recognition as one of the top 100 Best Places to Work in Washington and Oregon based on the 2024 employee engagement survey[130]. - The company’s total workforce composition as of December 31, 2024, was 69.5% female and 30.5% male[128]. - The company’s generational representation included 17% Baby Boomers, 37% Gen X-ers, 35% Millennials, and 10% Gen Z-ers as of December 31, 2024[135]. - Over 3,700 e-cards were posted on the internal recognition platform "Celebrate Great" in 2024, highlighting employee appreciation[136]. Financial Performance - Net income for 2024 was 61.8 million in 2023[339]. - Basic earnings per share decreased to 1.76 in 2023, reflecting a decline of approximately 28.4%[339]. - Total assets decreased to 7.2 billion in 2023[336]. - Loans receivable increased to 4.3 billion in 2023, marking an increase of approximately 10.7%[336]. - Total noninterest expense decreased to 166.6 million in 2023, a reduction of about 5%[339]. - The company reported a total of 18.7 million in 2023, indicating a decline of approximately 60%[339]. - The total stockholders' equity increased to 853.3 million in 2023, reflecting a growth of about 1.5%[336]. Regulatory Compliance and Risk Management - The Bank's liquidity risk management policies are under review in light of regulatory requirements and industry developments, particularly following the failures of Silicon Valley Bank and Signature Bank[93][95]. - The Company is subject to periodic examination by the Federal Reserve and must file reports regarding its operations and those of the Bank[72]. - The Bank is subject to examination, supervision, reporting, and enforcement requirements of the DFI and the FDIC as a Washington state-chartered bank[86]. - The Bank's ability to engage in certain acquisitions or mergers may require approval from the DFI, the FDIC, and other banking agencies[98]. - The FDIC adopted a special assessment for banking organizations with assets of 52.5 million as of December 31, 2024, with a provision for credit losses of 6,282,000 in 2024, compared to $4,280,000 in 2023, indicating a rise in expected credit losses[346]. - The Company evaluates the need for an Allowance for Credit Losses (ACL) on investment securities available for sale at least quarterly, especially during adverse economic conditions[356]. - The ACL on loans is calculated using a historic loss, open pool CECL methodology, with loans evaluated collectively or individually based on risk characteristics[369]. - The Company assesses the adequacy of the ACL on loans quarterly, with potential adjustments required based on local and national economic conditions[377]. - The provision for credit losses includes provisions for loans, unfunded commitments, and investment securities[382]. Investment Securities - The Company classifies investment securities as held to maturity, trading, or available for sale, with unrealized gains and losses reported accordingly[354]. - Realized gains and losses on sales of investment securities are recorded on the trade date, with specific identification method used for determination[355]. - The allowance methodology for unfunded commitments includes considerations of current and future utilization based on historical data and economic forecasts[379]. Community Engagement and Sustainability - The company continues to assess the impact of the CRA Rule on its lending and investment activities in respective markets[110]. - The company must comply with stringent economic and trade sanctions regimes administered by the Office of Foreign Assets Control[112]. - In 2024, over 550 employees volunteered approximately 1,665 hours at more than 60 organizations in Washington, Oregon, and Idaho during the annual volunteer event[143]. - The EcoChallenge in 2024 involved 41 teams and resulted in 21,887 environmentally sustainable actions, enhancing community engagement and sustainability awareness[144].