Heritage Financial Corp. Files 2023 Annual Report on Form 10-K

TL;DR

<b>Heritage Financial Corp. (HFWA) has filed its 2023 10-K report detailing financial performance and position.</b>

AI Summary

HERITAGE FINANCIAL CORP /WA/ (HFWA) filed a Annual Report (10-K) with the SEC on February 27, 2024. Filed 2023 Form 10-K on February 27, 2024, reporting for the fiscal year ending December 31, 2023. The company is classified under Standard Industrial Classification 6036: Savings Institutions, Not Federally Chartered. Incorporated in Washington (WA) with its principal business address in Olympia, WA. The filing includes data for fiscal years 2023, 2022, and 2021. Key financial statement elements such as common stock, retained earnings, and accumulated other comprehensive income are detailed for multiple periods.

Why It Matters

For investors and stakeholders tracking HERITAGE FINANCIAL CORP /WA/, this filing contains several important signals. This 10-K filing provides a comprehensive overview of Heritage Financial Corp.'s financial health and operational results for the fiscal year 2023, crucial for investors and stakeholders to assess performance and future outlook. The detailed financial data, including balance sheet items and segment information, allows for a thorough analysis of the company's stability, profitability, and strategic direction within the savings institution sector.

Risk Assessment

Risk Level: medium — HERITAGE FINANCIAL CORP /WA/ shows moderate risk based on this filing. The filing is a standard 10-K, which is a comprehensive annual report. While it contains detailed financial information, it does not inherently signal immediate positive or negative trends without further analysis of the specific numbers and accompanying management discussion.

Analyst Insight

Review the detailed financial statements and management's discussion and analysis within the 10-K to understand Heritage Financial Corp.'s performance drivers, risks, and strategic initiatives for 2023.

Key Numbers

• 2023-12-31 — Fiscal Year End (The end date of the reporting period.)
• 2024-02-27 — Filing Date (The date the 10-K was filed with the SEC.)
• 137 — Public Document Count (Number of documents included in the filing.)
• 000-29480 — SEC File Number (The SEC's file number for the company.)

Key Players & Entities

• HERITAGE FINANCIAL CORP /WA/ (company) — Filer of the 10-K report.
• HFWA (company) — Ticker symbol for Heritage Financial Corp.
• Olympia (company) — City where Heritage Financial Corp. is located.
• WA (company) — State of incorporation and business address.
• 2024-02-27 (date) — Filing date of the 10-K.
• 2023-12-31 (date) — Fiscal year end date.
• 2023 (date) — Fiscal year for the report.
• 6036 (other) — Standard Industrial Classification code.

FAQ

Risk Factors

• Regulatory Compliance [medium — regulatory]: The company must comply with various federal and state banking regulations, which can change and impact operations.
• Interest Rate Risk [medium — market]: Fluctuations in interest rates can affect net interest income and the market value of financial instruments.
• Credit Risk [medium — financial]: The risk of loss due to borrowers' failure to repay loans or meet contractual obligations.
• Cybersecurity and Data Security [medium — operational]: The company is exposed to risks associated with data breaches and cyberattacks, which could disrupt operations and damage reputation.
• Competition [medium — market]: The banking industry is highly competitive, with potential impacts on market share and profitability.

Key Financial Figures

• $16.17 — on the NASDAQ Global Select Market, of $16.17 per share, and 34,542,512 shares held b
• $225.0 million — er 31, 2023, our liquidity position was $225.0 million in cash and cash equivalents and $1.87
• $1.87 billion — illion in cash and cash equivalents and $1.87 billion in total investment securities. See als
• $2,500 — . Deposits require a minimum deposit of $2,500 and have maturities ranging from three
• $100,000 — osit accounts are offered in amounts of $100,000 or more for terms of seven days to one
• $3.37 b — ss Lending At December 31, 2023 we had $3.37 billion, or 77.8% of our loans receivable

Filing Documents

• hfwa-20231231.htm (10-K) — 3955KB
• ex-4210kq423.htm (EX-4.2) — 41KB
• ex-1025employmentagreement.htm (EX-10.25) — 243KB
• ex-21010kq423.htm (EX-21.0) — 11KB
• ex-23010kq423.htm (EX-23.0) — 2KB
• ex-24010kq423.htm (EX-24.0) — 12KB
• ex-311q423.htm (EX-31.1) — 8KB
• ex-312q423.htm (EX-31.2) — 8KB
• ex-321q423.htm (EX-32.1) — 6KB
• ex-970policyrelatingtoreco.htm (EX-97.0) — 34KB
• hfwa-20231231_g1.jpg (GRAPHIC) — 93KB
• image_0a.jpg (GRAPHIC) — 23KB
• 0001046025-24-000015.txt (&nbsp;) — 19491KB
• hfwa-20231231.xsd (EX-101.SCH) — 75KB
• hfwa-20231231_cal.xml (EX-101.CAL) — 137KB
• hfwa-20231231_def.xml (EX-101.DEF) — 514KB
• hfwa-20231231_lab.xml (EX-101.LAB) — 1164KB
• hfwa-20231231_pre.xml (EX-101.PRE) — 847KB
• hfwa-20231231_htm.xml (XML) — 4103KB

RISK FACTORS

ITEM 1A. RISK FACTORS 16

UNRESOLVED STAFF COMMENTS

ITEM 1B. UNRESOLVED STAFF COMMENTS 25 ITEM 1C C YBERSECURITY 25

PROPERTIES

ITEM 2. PROPERTIES 26

LEGAL PROCEEDINGS

ITEM 3. LEGAL PROCEEDINGS 26

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 26 PART II

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 26

[RESERVED]

ITEM 6. [RESERVED] 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28 OVERVIEW 28 RESULTS OF OPERATIONS 28 NET INTEREST INCOME AND MARGIN OVERVIEW 29 PROVISION FOR CREDIT LOSSES OVERVIEW 31 NONINTEREST INCOME OVERVIEW 32 NONINTEREST EXPENSE OVERVIEW 32 INCOME TAX EXPENSE OVERVIEW 33 FINANCIAL CONDITION OVERVIEW 33 INVESTMENT ACTIVITIES OVERVIEW 34 LOAN PORTFOLIO OVERVIEW 35 ALLOWANCE FOR CREDIT LOSSES ON LOANS OVERVIEW 38 DEPOSITS OVERVIEW 39 STOCKHOLDERS' EQUITY OVERVIEW 40 LIQUIDITY AND CAPITAL RESOURCES 40 CRITICAL ACCOUNTING ESTIMATES 41

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 44 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID: 173 ) 44 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION—DECEMBER 31, 2023 AND DECEMBER 31, 2022 46 CONSOLIDATED STATEMENTS OF INCOME—FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 47 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)—FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 48 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY—FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 49 CONSOLIDATED STATEMENTS OF CASH FLOWS—FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 50 2 Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 52 NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 52 NOTE 2. INVESTMENT SECURITIES 60 NOTE 3. LOANS RECEIVABLE 64 NOTE 4. ALLOWANCE FOR CREDIT LOSSES ON LOANS 73 NOTE 5. PREMISES AND EQUIPMENT 75 NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS 75 NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS 76 NOTE 8. DEPOSITS 76 NOTE 9. JUNIOR SUBORDINATED DEBENTURES 76 NOTE 10. SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE 77 NOTE 11. OTHER BORROWINGS 77 NOTE 12. LEASES 78 NOTE 13. EMPLOYEE BENEFIT PLANS 78 NOTE 14. STOCKHOLDERS' EQUITY 79 NOTE 15. FAIR VALUE MEASUREMENTS 80 NOTE 16. STOCK-BASED COMPENSATION 84 NOTE 17. CASH RESTRICTION 85 NOTE 18. INCOME TAXES 85 NOTE 19. COMMITMENTS AND CONTINGENCIES 87 NOTE 20. REGULATORY CAPITAL REQUIREMENTS 88 NOTE 21. HERITAGE FINANCIAL CORPORATION (PARENT COMPANY ONLY) 88

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 90

CONTROLS AND PROCEDURES

ITEM 9A. CONTROLS AND PROCEDURES 90

OTHER INFORMATION

ITEM 9B. OTHER INFORMATION 90

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 90 PART III

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 90

EXECUTIVE COMPENSATION

ITEM 11. EXECUTIVE COMPENSATION 91

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 91

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 91

PRINCIPAL ACCOUNTANT FEES AND SERVICES

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 91 PART IV

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 91

FORM 10-K SUMMARY

ITEM 16. FORM 10-K SUMMARY 93

SIGNATURES

SIGNATURES 93 3 Table of Contents Glossary of Acronyms, Abbreviations, and Terms The acronyms, abbreviations, and terms listed below are used in various sections of this Annual Report on Form 10-K. As used throughout this report, the terms "we," "our," or "us" refer to Heritage Financial Corporation and its consolidated subsidiaries, unless the context otherwise requires. ACL Allowance for credit losses AOCI Accumulated other comprehensive income (loss), net ASC Accounting Standards Codification ASU Accounting Standards Update Bank Heritage Bank BOLI Bank owned life insurance BTFP Bank Term Funding Program CECL Current Expected Credit Loss CMO Collateralized Mortgage Obligation Company Heritage Financial Corporation CRE Commercial real estate DEI Diversity, Equity, and Inclusion DFI Division of Banks of the Washington State Department of Financial Institutions Economic Growth Act Economic Growth, Regulatory Relief and Consumer Protection Act Equity Plan Heritage Financial Corporation 2023 Omnibus Equity Plan Exchange Act Securities Exchange Act of 1934, as amended FASB Financial Accounting Standards Board FDIC Federal Deposit Insurance Corporation Federal Reserve Board of Governors of the Federal Reserve System FRB Federal Reserve Bank of San Francisco FHLB Federal Home Loan Bank of Des Moines FOMC Federal Open Market Committee within the Federal Reserve System Form 10-K Company's Annual Report on Form 10-K GAAP U.S. Generally Accepted Accounting Principles LIBOR London Interbank Offering Rate LIHTC Low-Income Housing Tax Credit NMTC New Market Tax Credit MBS Mortgage-backed security OCC Office of the Comptroller of the Currency PCD Purchased Credit Deteriorated; loans purchased with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected; accounted for under FASB ASC 326 Plan Heritage Financial Corporation 401(k) Profit Sharing Plan and Trus

BUSINESS

ITEM 1. BUSINESS Overview Heritage Financial Corporation is a bank holding company that was incorporated in the State of Washington in August 1997. We are primarily engaged in the business of planning, directing, and coordinating the business activities of our wholly owned subsidiary and single reportable segment, Heritage Bank. Heritage Bank is headquartered in Olympia, Washington and conducts business from its 50 branch offices located throughout Washington State, the greater Portland, Oregon area, Eugene, Oregon and Boise, Idaho as of December 31, 2023. The deposits of the Bank are insured by the FDIC. Our business consists primarily of commercial lending and deposit relationships with small and medium-sized businesses and their owners in our market areas and attracting deposits from the general public. We also make real estate construction and land development loans, consumer loans and residential real estate loans for sale or investment purposes on residential properties located primarily in our market. Business Strategy We are committed to being the leading commercial community bank in the Pacific Northwest by continuously improving customer satisfaction, employee empowerment, community investment and shareholder value. Our commitment defines our relationships, sets expectations for our actions and directs decision-making in these four fundamental areas. We will seek to achieve our business goals through the following strategies: Expand geographically as opportunities present themselves. We are committed to continuing the controlled expansion of our franchise through strategic acquisitions designed to increase our market share and enhance franchise value. We believe that consolidation across the community bank landscape will continue to take place and further believe that, with our capital and liquidity positions, our approach to credit management, and our extensive acquisition experience, we are well-positioned to take advantage of acquisitions or ot

View Full Filing

View this 10-K filing on SEC EDGAR