HERITAGE FINANCIAL CORP WA
For the period ended Dec 31, 2023. Filed Feb 27, 2024.
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FY2023 · Filed Feb 27, 2024
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ALLOWANCE FOR CREDIT LOSSES ON LOANS OVERVIEW
The following table provides information regarding changes in our ACL on loans for the years indicated:
| At or For the Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| (Dollars in thousands) | |||
| ACL on loans at the beginning of the period | $42,986 | $42,361 | $70,185 |
| Charge-offs: | |||
| Commercial business | (719) | (316) | (1,276) |
| Residential real estate | — | (30) | — |
| Real estate construction and land development | — | — | (1) |
| Consumer | (586) | (547) | (669) |
| Total charge-offs | (1,305) | (893) | (1,946) |
| Recoveries: | |||
| Commercial business | 1,372 | 929 | 816 |
| Residential real estate | — | 3 | — |
| Real estate construction and land development | — | 384 | 32 |
| Consumer | 210 | 765 | 572 |
| Total recoveries | 1,582 | 2,081 | 1,420 |
| Net recoveries (charge-offs) | 277 | 1,188 | (526) |
| Provision for (reversal of) credit losses on loans | 4,736 | (563) | (27,298) |
| ACL on loans at the end of period | $47,999 | $42,986 | $42,361 |
| Credit quality ratios: | |||
| ACL on loans to: | |||
| Loans receivable | 1.11% | 1.06% | 1.11% |
| Nonaccrual loans | 1074.28 | 727.84 | 178.33 |
| Nonaccrual loans to loans receivable | 0.10 | 0.15 | 0.62 |
| Balances at the end of the period: | |||
| Loans receivable | $4,335,627 | $4,050,858 | $3,815,662 |
| Nonaccrual loans | 4,468 | 5,906 | 23,754 |
| Average balances outstanding during the period:(1) | |||
| Commercial business | $3,289,564 | $3,188,238 | $3,540,728 |
| Residential real estate | 369,297 | 250,780 | 123,875 |
| Real estate construction and land development | 362,919 | 242,528 | 301,532 |
| At or For the Years Ended December 31, | |||
|---|---|---|---|
| 2023 | 2022 | 2021 | |
| (Dollars in thousands) | |||
| Consumer | 179,454 | 212,306 | 271,834 |
| Total | $4,201,234 | $3,893,852 | $4,237,969 |
| Net (recoveries) charge-offs during the period to average balances outstanding during the period: | |||
| 2023 | 2022 | 2021 | |
| Commercial business | (0.02)% | (0.02)% | 0.01% |
| Residential real estate | — | 0.01 | — |
| Real estate construction and land development | — | (0.16) | (0.01) |
| Consumer | 0.21 | (0.10) | 0.04 |
| Total | (0.01)% | (0.03)% | 0.01% |
(1) Average balances exclude the ACL on loans and loans held for sale, but include loans classified as nonaccrual.
The provision for credit losses on loans of $4.7 million recognized during the year ended December 31, 2023 was due primarily to growth in balances of collectively evaluated loans. The ACL on loans to Loans receivable increased to 1.11% as December 31, 2023, compared to 1.06% at December 31, 2022 due to changes in the loan mix as loan growth occurred in segments requiring a higher calculated reserve as a percentage of loans including real estate construction and land development loans.
The following table presents the ACL on loans by loan portfolio segment at the indicated dates:
| December 31, 2023 · December 31, 2022 · Change | ||||||
|---|---|---|---|---|---|---|
| ACL on loans | Percent ofTotal (1) | ACL on loans | Percent ofTotal (1) | $ | % | |
| (Dollars in thousands) | ||||||
| Commercial business | $31,303 | 77.8% | $30,718 | 79.4% | $585 | 1.9% |
| Residential real estate | 3,473 | 8.7 | 2,872 | 8.5 | 601 | 20.9 |
| Real estate construction and land development | 10,876 | 9.5 | 7,063 | 7.3 | 3,813 | 54.0 |
| Consumer | 2,347 | 4.0 | 2,333 | 4.8 | 14 | 0.6 |
| Total ACL on loans | $47,999 | 100.0% | $42,986 | 100.0% | $5,013 | 11.7% |
(1) Represents the percent of loans receivable by loan category to loans receivable.
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