HERITAGE FINANCIAL CORP WA
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
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FY2024 · Filed Feb 27, 2025
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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, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| (Dollars in thousands) | |||
| ACL on loans at the beginning of the period | $47,999 | $42,986 | $42,361 |
| Charge-offs: | |||
| Commercial business | (2,953) | (719) | (316) |
| Residential real estate | — | — | (30) |
| Consumer | (538) | (586) | (547) |
| Total charge-offs | (3,491) | (1,305) | (893) |
| Recoveries: | |||
| Commercial business | 855 | 1,372 | 929 |
| Residential real estate | — | — | 3 |
| Real estate construction and land development | — | — | 384 |
| Consumer | 122 | 210 | 765 |
| Total recoveries | 977 | 1,582 | 2,081 |
| Net (charge-offs) recoveries | (2,514) | 277 | 1,188 |
| Provision for (reversal of) credit losses on loans | 6,983 | 4,736 | (563) |
| ACL on loans at the end of period | $52,468 | $47,999 | $42,986 |
| At or For the Years Ended December 31, | |||
|---|---|---|---|
| 2024 | 2023 | 2022 | |
| (Dollars in thousands) | |||
| Credit quality ratios: | |||
| ACL on loans to: | |||
| Loans receivable | 1.09% | 1.11% | 1.06% |
| Nonaccrual loans | 1286.30 | 1074.28 | 727.84 |
| Nonaccrual loans to loans receivable | 0.08% | 0.10% | 0.15% |
| Balances at the end of the period: | |||
| Loans receivable | $4,802,123 | $4,335,627 | $4,050,858 |
| Nonaccrual loans | 4,079 | 4,468 | 5,906 |
| Average balances outstanding during the period:(1) | |||
| Commercial business | $3,522,065 | $3,289,564 | $3,188,238 |
| Residential real estate | 399,857 | 369,297 | 250,780 |
| Real estate construction and land development | 446,713 | 362,919 | 242,528 |
| Consumer | 167,830 | 179,454 | 212,306 |
| Total | $4,536,465 | $4,201,234 | $3,893,852 |
| Net charge-offs (recoveries) during the period to average balances outstanding during the period: | |||
| 2024 | 2023 | 2022 | |
| Commercial business | 0.06% | (0.02)% | (0.02)% |
| Residential real estate | — | — | 0.01 |
| Real estate construction and land development | — | — | (0.16) |
| Consumer | 0.25 | 0.21 | (0.10) |
| Total | 0.06% | (0.01)% | (0.03)% |
(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 $7.0 million recognized during the year ended December 31, 2024 was due primarily to growth in balances of collectively evaluated loans and secondarily to $2.5 million in charge-offs. The ACL on loans to loans receivable decreased to 1.09% as December 31, 2024, compared to 1.11% at December 31, 2023 due to changes in the loan mix as loan growth occurred in segments requiring a lower calculated reserve as a percentage of loans as well as a reduction in the baseline loss rates applied and weighted average life of the residential real estate and real estate construction and land development segments which contributed to a decrease in the ACL as a % of loans in these loan segments.
The following table presents the ACL on loans by loan portfolio segment at the indicated dates:
| December 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| ACL on Loans | ACL as a % of Loans in Loan Category | % of Loans in Loan Category toTotal Loans | ACL on Loans | ACL as a % of Loans in Loan Category | % of Loans in Loan Category toTotal Loans | |
| (Dollars in thousands) | ||||||
| Commercial business | $38,293 | 1.02% | 78.3% | $31,303 | 0.93% | 77.8% |
| Residential real estate | 3,464 | 0.86 | 8.4 | 3,473 | 0.93 | 8.7 |
| Real estate construction and land development | 8,656 | 1.81 | 9.9 | 10,876 | 2.62 | 9.5 |
| Consumer | 2,055 | 1.25 | 3.4 | 2,347 | 1.37 | 4.0 |
| Total ACL on loans | $52,468 | 1.09% | 100.0% | $47,999 | 1.11% | 100.0% |
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