Heritage Financial Corp. Reports Q1 2024 Results

TL;DR

<b>Heritage Financial Corp. reported Q1 2024 results with $6.79 billion in assets and $5.66 billion in deposits.</b>

AI Summary

HERITAGE FINANCIAL CORP /WA/ (HFWA) filed a Quarterly Report (10-Q) with the SEC on May 7, 2024. Total assets were $6.79 billion as of March 31, 2024. Total deposits stood at $5.66 billion as of March 31, 2024. Net interest income for the three months ended March 31, 2024, was $48.3 million. Non-interest income for the three months ended March 31, 2024, was $13.9 million. Provision for credit losses for the three months ended March 31, 2024, was $3.0 million.

Why It Matters

For investors and stakeholders tracking HERITAGE FINANCIAL CORP /WA/, this filing contains several important signals. The filing provides a detailed breakdown of assets and liabilities, crucial for understanding the company's financial health and lending capacity. Key figures on net interest income, non-interest income, and provision for credit losses offer insights into profitability drivers and risk management.

Risk Assessment

Risk Level: medium — HERITAGE FINANCIAL CORP /WA/ shows moderate risk based on this filing. The company operates in the savings institutions sector, which is sensitive to interest rate fluctuations and regulatory changes, as evidenced by the detailed reporting of various financial instruments and deposit types.

Analyst Insight

Monitor interest income trends and provision for credit losses in upcoming filings to assess the impact of the economic environment on Heritage Financial Corp.

Key Numbers

• 6.79 billion — Total Assets (As of March 31, 2024)
• 5.66 billion — Total Deposits (As of March 31, 2024)
• 48.3 million — Net Interest Income (Three months ended March 31, 2024)
• 13.9 million — Non-Interest Income (Three months ended March 31, 2024)
• 3.0 million — Provision for Credit Losses (Three months ended March 31, 2024)

Key Players & Entities

• HERITAGE FINANCIAL CORP /WA/ (company) — Filer
• 0001046025 (company) — Central Index Key
• 20240331 (date) — Period of Report
• 20240507 (date) — Filed as of Date
• 6036 (industry_code) — Standard Industrial Classification
• WA (location) — State of Incorporation
• 1934 Act (regulation) — SEC Act
• 000-29480 (filing_id) — SEC File Number

FAQ

Industry Context

Heritage Financial Corp. operates as a savings institution, a segment of the financial services industry focused on deposit-taking and lending activities.

Regulatory Implications

As a financial institution, Heritage Financial Corp. is subject to regulations from various bodies including the SEC, Federal Reserve, and state banking authorities.

What Investors Should Do

1. Analyze the trends in net interest income and provision for credit losses for the past several quarters.
2. Compare key financial ratios (e.g., asset growth, deposit growth) against industry peers.
3. Review management's discussion and analysis for any forward-looking statements or strategic initiatives.

Key Dates

• 2024-03-31: Quarter End — Reporting period for the 10-Q filing.
• 2024-05-07: Filing Date — Date the 10-Q was officially submitted to the SEC.

Year-Over-Year Comparison

This 10-Q filing covers the first quarter of 2024, providing updated financial data compared to previous periods.

Filing Documents

• hfwa-20240331.htm (10-Q) — 2728KB
• ex-311q124.htm (EX-31.1) — 8KB
• ex-312q124.htm (EX-31.2) — 8KB
• ex-321q124.htm (EX-32.1) — 6KB
• 0001046025-24-000112.txt (&nbsp;) — 13294KB
• hfwa-20240331.xsd (EX-101.SCH) — 40KB
• hfwa-20240331_cal.xml (EX-101.CAL) — 91KB
• hfwa-20240331_def.xml (EX-101.DEF) — 334KB
• hfwa-20240331_lab.xml (EX-101.LAB) — 723KB
• hfwa-20240331_pre.xml (EX-101.PRE) — 548KB
• hfwa-20240331_htm.xml (XML) — 3211KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION 5

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS 5 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) AS OF MARCH 3 1 , 202 4 AND DECEMBER 31, 20 23 5 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 3 1 , 202 4 AND 20 23 6 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 7 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 3 1 , 202 4 AND 202 3 8 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023 9 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 11 NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 11 NOTE 2. INVESTMENT SECURITIES 12 NOTE 3. LOANS RECEIVABLE 15 NOTE 4. ALLOWANCE FOR CREDIT LOSSES ON LOANS 23 NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS 25 NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS 26 NOTE 7. STOCKHOLDERS' EQUITY 26 NOTE 8. FAIR VALUE MEASUREMENTS 28 NOTE 9. CASH RESTRICTION 31 NOTE 10. INCOME TAXES 31 NOTE 11. COMMITMENTS AND CONTINGENCIES 32

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 32 OVERVIEW 33 RESULTS OF OPERATIONS 33 NET INCOME O VERVIEW 33 NET INTEREST INCOME AND MARGIN OVERVIEW 34 PROVISION FOR CREDIT LOSSES OVERVIEW 35 NONINTEREST INCOME OVERVIEW 36 NONINTEREST EXPENSE OVERVIEW 36 INCOME TAX EXPENSE OVERVIEW 37 FINANCIAL CONDITION OVERVIEW 37 INVESTMENT ACTIVITIES OVERVIEW 38 LOAN PORTFOLIO OVERVIEW 39 ALLOWANCE FOR CREDIT LOSSES ON LOANS OVERVIEW 40 DEPOSITS OVERVIEW 41 BORROWINGS OVERVIEW 41 STOCKHOLDERS' EQUITY OVERVIEW 42 REGULATORY REQUIREMENTS OVERVIEW 42 LIQUIDITY AND CAPITAL RESOURCES 42 CRITICAL ACCOUNTING ESTIMATES 43

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 43 2 Table of Contents

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 44

OTHER INFORMATION

PART II. OTHER INFORMATION 44

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS 44

RISK FACTORS

ITEM 1A. RISK FACTORS 44

UNREGISTERED SALES OF EQUITY SECURITIES A ND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES A ND USE OF PROCEEDS 44

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 45

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES 45

OTHER INFORMATION

ITEM 5. OTHER INFORMATION 45

EXHIBITS

ITEM 6. EXHIBITS 45

SIGNATURES

SIGNATURES 46 GLOSSARY OF ACRONYMS, ABBREVIATIONS, AND TERMS The acronyms, abbreviations, and terms listed below are used in various sections of this Form 10-Q. As used throughout this report, the terms "we", "our", "us", or the "Company" refer to Heritage Financial Corporation and its consolidated subsidiaries, unless the context otherwise requires. 2023 Annual Form 10-K Company's Annual Report on Form 10-K for the year ended December 31, 2023 ACL Allowance for credit losses AOCI Accumulated other comprehensive income (loss), net ASU Accounting Standards Update Bank Heritage Bank BTFP Bank Term Funding Program CECL Current Expected Credit Loss CMO Collateralized Mortgage Obligations CRA Community Reinvestment Act CRE Commercial real estate 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 GAAP U.S. Generally Accepted Accounting Principles LIBOR London Interbank Offering Rate LIHTC Low-Income Housing Tax Credit MBS Mortgage-backed securities SEC Securities and Exchange Commission SM Special Mention SS Substandard TDR Troubled debt restructured CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, are based on certain assumptions and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." These statements relate to our financial condition, results of operations, beliefs, plans, objectives, goals, expectations, assumptions and statements about f

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS HERITAGE FINANCIAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Dollars in thousands, except share data) March 31, 2024 December 31 2023 ASSETS Cash on hand and in banks $ 52,947 $ 55,851 Interest earning deposits 136,700 169,122 Cash and cash equivalents 189,647 224,973 Investment securities available for sale, at fair value, net (amortized cost of $ 1,087,789 and $ 1,227,787 , respectively) 996,510 1,134,353 Investment securities held to maturity, at amortized cost, net (fair value of $ 649,001 and $ 662,450 , respectively) 734,006 739,442 Total investment securities 1,730,516 1,873,795 Loans receivable 4,428,165 4,335,627 Allowance for credit losses on loans ( 49,736 ) ( 47,999 ) Loans receivable, net 4,378,429 4,287,628 Premises and equipment, net 74,092 74,899 Federal Home Loan Bank stock, at cost 4,303 4,186 Bank owned life insurance 125,615 125,655 Accrued interest receivable 19,898 19,518 Prepaid expenses and other assets 323,472 318,571 Other intangible assets, net 4,372 4,793 Goodwill 240,939 240,939 Total assets $ 7,091,283 $ 7,174,957 LIABILITIES AND STOCKHOLDERS' EQUITY Non-interest bearing deposits $ 1,637,111 $ 1,715,847 Interest bearing deposits 3,895,216 3,884,025 Total deposits 5,532,327 5,599,872 Borrowings 500,000 500,000 Junior subordinated debentures 21,838 21,765 Accrued expenses and other liabilities 189,538 200,059 Total liabilities 6,243,703 6,321,696 Commitments and contingencies (Note 1 1 ) Stockholders' equity: Preferred stock, no par value, 2,500,000 shares authorized; no shares issued and outstanding, respectively — — Common stock, no par value, 50,000,000 shares authorized; 34,689,843 and 34,906,233 shares issued and outstanding, respectively 544,636 549,748 Retained earnings 373,629 375,989 Accumulated other comprehensive loss, net ( 70,685 ) ( 72,476 ) Total stockholders' equity 847,580 853,261 Total lia

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