HFWA - Earnings call 3 2023 | Heritage Financial Corporation

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Operator

Thank you all for joining. I would like to welcome you all to the Heritage Financial Corporation Q3 2023 Earnings Conference Call. My name is Brika, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Jeff Deuel, CEO of Heritage Financial to begin.

So Jeff, please go ahead.

Jeffrey J. Deuel

Brika. you, Thank morning good who in. called Welcome, to and everyone listen is Jeff And for CEO this may who Financial. those Deuel, later, of Heritage me President McDonald, Hinson, and are Operating Chalfant, with Tony Officer. Don Officer; Chief and Credit Chief Officer; Financial Attending Chief Bryan

went release to hopefully, opportunity this morning it prior to earnings you quarter premarket, had have third out Our the review and the call.

of deposits, more posted updated credit on portfolio, Relations portion presentation detail and third the includes which our investor We our quarter an quality. website, have loan also liquidity on corporate Investor

We Please earnings will to statements press the consensus. reference report the presentation share pleased per refer in during call. release. We're with forward-looking to the quarter exceeding another solid the

risk was recoveries. they further This how recoveries quarter's continue to loan by benefit enhanced performance practices management us. and our These strong are evidence of

shift to mix continue net our QX, margin. We in pricing pressure deposits deposit of is continue higher although see QX, stabilized impacting which partially Deposit into in the rate balances products. interest on to

expected, year, focus due future. the balance of we loan to to quarters Overall, growth a loan growing and liquidity are X first compared serve environment, the the in in growth. rate QX well sheet will in year-to-date, reporting slowed with us low to we continue still capital single-digit As strong ample and on although the mostly that the present

who Don, to cover a results. few financial take move will now will We to our minutes

Donald Hinson

of be some our will the I for Jeff. reviewing drivers you, main QX. Thank performance of

yield of the sheet. in $XX.X Year-to-date points in and the on in will all through minutes. the and the than our a QX million walk basis assets. loan basis have slowed prior through noted, an loan with QX, to higher is period I comparisons balance quarter with which second X.X%. production for Bryan yields financial for on XX update point will were at be of a growth quarter, increase XX QX earning increasing quarter. McDonald loan contributed results, otherwise unless X.XX% was growth the Loan Yields the portfolio As XXXX. Starting few

past along spot continue of contributed over the the is customers increase to declines balances, will of balances XX of an securities, earn-back in in be resulting nonmaturity It the quarter, while which by lowering $X.X also balances we cost CD restructure slower the and of interest-bearing higher was X.XX% of of securities. the deposits million, increase and CDs our impacting million take combination these QX, during for earnings as factors rate increase excess sales $XXX QX paying the experience quarter, of X.XX% to as in deposits in million These core balances September Ellensburg during environment decreased was its due of to $XX.X of deposits to the X.X basis higher to related an occurred These advantage [indiscernible] by the cost most for our sales the as well due increased on recognized in deposit $X.X higher position. million deposit cash portfolio Our of deposit million A September. these from done in of our rates, million a prepayments is a as the well pressure as million the branch our period being as current an increasing to quarters. Due substantially cost the estimated improvement the QX. Also few maturities expect points during deposits quarter. $XX rate $XX.X This in to higher-than-normal the accounts. in that XX. Investment our month with annualized deposits, with continue of illustrated total an is increase during although sale their market lower of loss brokered with sale of and partially Total pace. to at to income September to X.XX% of years. of interest-bearing the QX $XX.X of was purchase of million transactions $XX

We order additional downward to loss will margin pressures. continue our trades to consider in defend from

QX on assets. a by in offset average from the statement. net in yields prior The quarter. The the income the X.XX% Moving the income than decrease to rapidly NIM of in more increasing NIM in margin, was interest-bearing earning deposits on decreased due decreased to increase cost due earning partially Net $XXX,XXX interest an to decrease interest for primarily to X.XX% assets.

further of We expect in than balances. was for and since quarter. lower of well as of our the our in X NIM decrease it be as for increases deposits, continued was basis maintaining month QX NIM cost September points will highly pace in margin the cost decrease the dependent The to of the on interest-bearing duration

of adjustments in accrual QX. $XX in in partially This off, on earlier. on compensation to of higher provision versus numerous during million recognized quarter. the deposits level few The As net expect an million We $X in securities categories, the recognized stabilization QX to benefits. branch the the rate due approximately to expense Tony losses Ellensburg cost of decreased income Noninterest for the prior mentioned, by loans. loss the more due recoveries expense information million previously the the to we quarter, $XXX,XXX made $XXX,XXX by million QX. to a due on credit to sale I amount addition reversal compensation of new provide we've margin reversal partially origination increase balances to offset as was of deposit recoveries was higher experience expense provision incentive-based a these well offset minutes. Noninterest $X.X provision to of the sale discussed a rates as was during of in QX. primarily in to on our of our from decreased expense adjustable the due for decreases and that in repricing will due to in end loans $X.X QX of Compensation compared $XXX,XXX

capital regulatory ratios our slightly primarily well-capitalized due at quarter above X.X%, TCE our thresholds and to prior ratio is AOCI. from of comfortably the down All remain

In balances a grow addition, portfolio. I loan and who have call million, have cash to over with $XXX our to an quality XX% metrics. ratio now plenty the approximately pass of will our -- update we deposit credit loan to Tony, of liquidity keep on will

Tony Chalfant

you, Thank first X I'm that stable remained quality year. and report the credit to of the strong pleased Don. through months

and an since X.XX% OREO. now nonaccrual tied Nonaccrual C&I $X was culmination the that $X to nonaccrual largely of were Page workout. our of XX% of over during in As total just by XXXX. loans and not the This of XX we as compared aggregate the the are $XXX,XXX. at relationships status of investor end loans was the of Reductions long-term over of in to the XX loans the agricultural reduction to Partially we've declined the experienced loan loans million of significant over represents the offsetting improvement reflects end, by second the the million, nonaccrual of X months. amount movement did end X.XX% payoff totaled million down last hold quarter any a the presentation just $X.X quarter quarter. of

X in mention XX period. Overall, the past and our end CRE risk-weighted are $X rated nonperforming our perform are entire low our is X% end well are time that the over represent months virtually secured that special the includes real the loans from and commercial stable quarter. X million estate is since of million to of group, year. over unchanged due total portfolio low. Criticized second end of estate remained a risk at commercial loans process collection. that of Total ratios actually or This portfolio. down interest of by quarter, real substandard They still same This first accruing loans loss status the we our loan-to-value been CRE portfolio XXXX. days This and the on million very $X.X loans, criticized and quarter. X.X% and total assets total. the accrual of just totaled are loans by decrease remain and Within the Criticized including those under loan in of of through $XXX loans because X.X% the of well has continues substandard at began stable

closely central the presentation and credit which office our district of reported risk detailed conservatively from our represents continue in the believe to more loans. In exposed the office totaled underwritten to yet office million information the While our to high quality. At quarter of second portfolio the deterioration down watch investor office $XX.X This loans, portfolio approximately owner have we $XX we criticized of and end million office of Page we is areas. quarter. X.X% portfolio is any of CRE our granular the nonowner-occupied at material summary, about of materially not very loans end, total XX portfolio. provides loan business see

assets demonstrates a resulting loan for within the total quarter, earlier. the payoff net Through we net the XX a This by and $XXX,XXX, the million quarter. new large peers. that Page I in of charge-off to under $XXX,XXX. On our is $X.X of year, keep of in During recoveries agricultural the recovery the presentation, recovery we first our that of third portfolio, offset proactively of that we've the months identifying the on was able million had our than of position by mentioned lower of recovery levels the represented a charge-offs we're believe criticized net a X $X.X majority investor just partially in been slide

While environment. other of pressures our in potential economic credit remain the inflation strong, weaknesses we metrics remain and watchful broader

us are loan in economy continue an credit update the to well the coming material underwriting deterioration that quarters. I'll Bryan the now disciplined to serve our for on to and consistent turn We will should approach call show any over production. confident

Bryan McDonald

I'm production starting on our our third Tony. group. going lending provide Thanks, results, commercial detail loan with quarter to

for commercial detail and ended quarter down new million down loans down quarters. The the XX of $XXX over our commitments, on teams quarter in commercial last investor originated For from from third third loan quarter million pipeline in up X from and past million quarter additional of closed the Please to last in from closed quarter the at third the million the $XXX $XXX XXXX. million refer of at third presentation the quarter, $XXX end new million, the $XXX XXXX. quarter $XXX loan Page

loan since is was softening the Our driver the loan of nonowner-occupied happy estate growth have filtering although March interest higher. Loan of pipeline real rates request decline, been at moved demand and principal also lower and payoffs, has balance of primary new to investor deck on demand, a below and despite million our higher due the the last the of loans further on originated construction next lower on over $XX the pipeline combination higher loans originated advances we loans in quarter the prepays the volume as during digits softening loans of detail of in Slides levels loans. the XX in driven on by advances organic for low our loan quarter. Based prepay Please quarter. loan see largely to anticipate levels lower on rate the XX and growth change and couple and net single quarters be

we quarter across pipeline $XXX quarter with at the from ended is are million, we quarter accounts although pipeline associated and balances deposit seeing the new deposit only deposit in new broad higher the The the quarter, million. based The on last presentation. Slide The during the totaled of details $XX increase from coming up the footprint, $XXX opened of million markets. net our reflected major most new Oregon is during where disrupted a teams and Portland and deposit XX growth investor market the the with concentration MSA saw accounts

rates. interest to Moving

loans ] X.XX%, Our average interest was basis commercial last [ the X.XX% points is XX for higher third quarter quarter. for which than new rate average

we is in third average new of versus remaining end quarter. the anticipate levels the working With of quarter competitive, XXXX The lower C&I $XX quarter ended of quarter basis closed X.XX%, coming particularly versus will the at spreads third have department of be underlying included XXXX market low relationships. in last index in and compared the mortgage second of the through call third pipeline the XXXX. rates levels. The loans to points XX Jeff. third at all higher loan for at XXXX rates for loans continue of increase a $XX last from new combination $XX The in continues $XX implemented mortgage quarter to million that quarter widening back $XX due pipeline higher million quarter closed the to addition, in In pricing up the we levels, mortgage $XX at and year-to-date. I'll quarter X.XX% was committed million the the million relatively at now seen into million turn to rate volumes year million XXXX. and the The

Jeffrey J. Deuel

Thank Bryan. you,

earlier, mentioned the quarter. pleased with I in As third our performance we're

this to us continue we over strength our experience and to benefit our we of While are the confident franchise, deposit that rate the continue challenges franchise term. long of the environment will

loan-to-deposit relationships. to expense low well positions continue efficiencies And continue well existing support high-quality customers ratio relatively organization. Our improving our on to as the new focus within as management pursuing will to and we us

we believe take that of That's positioned we in are dislocation our our to advantage Overall, prepared ahead potential markets comments. challenges may to of the well any the navigate occur. and conclusion

have. call ready we're to Brika, So open the any callers questions to may

Operator

Sandler. on we first The question comes of Instructions] have Matthew the from line Piper phone [Operator Clark

Matthew Clark

gentlemen. morning, Good Thanks.

you securities the you anticipate yield proceeds? do a a to And to just First from those that, as on then sale give can reinvesting of just one that for timing us and that quarter, sold the in more. for the appetite sense your pickup me, follow-up the

Donald Hinson

did we it Matthew, in September.

So earning estimated into really much per you $XX we $XXX,XXX. QX. or is went of on million, rest and about the annualized of benefit $XXX,XXX million again, didn't cash, securities, think $XXX,XXX $XX quarter overall -- estimated, of that on of an -- at The average we we it the The about million some purchased get that's The course, sold. that. $X.X might pickup in

basis of calculate points. a you that, about about if NIM So that's X pickup

Matthew Clark

Yes.

Okay.

Donald Hinson

be We did We and it. going We And about the feeling this on again. could depending where is to also market at. considering watch doing more do could do how more, market selective. we're the we we're are

Matthew Clark

it, back to easy the make Okay. just And us? can into I it securities yield on the sold, but on

Donald Hinson

$XXX,XXX [ ].

Matthew Clark

you year. looks Okay. deposits where last And were the region bankers then to up deposits. shifting in gears the like It hire

an that update you're -- I closed. that's what that again, can Portland Just core? And in seeing that on of none us update that's all an First then, front? branch related? maybe it you brokered give assume Is with market on Republic

Bryan McDonald

Sure. the start since you $XX million Matthew, were of see the year. it's And on Bryan. XX, the up Slide about deposits it

due deposits some down of So customers bit we're a a at the above amount about growth XX% chart more XX%, versus bank rate. look And XX MSA, in that's the the about on wide, the that X%. Seattle little we're and you had Slide down if our just to market. actually excess of

And teams. it's mentioned well. of and loan numbers from significant pipeline. loan XX% new the benefit seeing over are So deposit the favorable disruption benefit portion outlook it -- we're both of a XX% in as about seeing my seeing it's the new then benefit other other also not as positively teams the you're the is a from And And we're we branches are here. our just little comments. I team, our market. commercial pipeline and from It's coming seeing then pretty the and in deposit pipelines of pipeline the actually

all we So and strong mentioned, team, the of the bankers a which [indiscernible] variety I'd calling. the spots, from, of and seeing well Obviously, of without and said the with outlook force and we're the First that disruption from in new our also performance, lot having are just And as a but down you Republic customers coming really that not getting I've we're the Columbia market before, a Again, in out portfolio opportunities. market. teams sales pleased add, as different are there as combo.

Matthew Clark

Don. Okay. to expenses, Great. And shifting

your is run updated rate thoughts out curious for an outlook million noninterest guide XQ? bit your I'm have coming are last just $XX than expense a low what quarter. little the of on lighter of You on

Donald Hinson

of of range. been a -- things type like managing for I our from had think of that things the bit would quarter such out. kind happened XX.X% us little we benefit Yes, kind that would have just helped we rate miscellaneous that levels probably to FTE in of are I run kind say

Now initiatives. on that from side various are our initiatives at management I the will and expense looking also say expense we

even potentially even expenses -- review a like as like, decent So higher or rate, possibly year QX a in of run things we short could though in probably we next have are we that's and -- contracts, not value renegotiate -- forward. going going hits to some take feel we're contracts to exit contracts upfront or savings is even that we're we and have could we getting going

So may from But there's a chance we'll we that expenses QX. see we quarters. future in do, higher benefits if in it have

Matthew Clark

give against weakness, know I bit night to for But Can the little totally in last quantify magnitude one obviously. kind in if at Okay. you're call CRE. $XX seeing Great. or the I then you down you someone just stage? X this on heard the office suburban the out that quarter a last office criticized of then associated should suburban And office just segment, any portfolio. And reserve reserve this with or were us we million. that any [indiscernible], portfolio market, have nonperformers differences considering say, in different me,

Tony Chalfant

can has Yes, But is the part in seen Matthew, the first actual lot the haven't weakness I take Tony. we against a then of portfolio. our office office market. suburban number this reserve and Don

watch continue materialize it standpoint. really that but closely, to nothing's from We

comments really not add area. to that my to So in much

Donald Hinson

Yes. I X.X%, the on percentage individually office evaluated But have I'll loans X.XX%, up. is I think allowance. don't believe, is percentage the around side. -- follow the the We any on of the overall office percent just percentage loans

can number. you guess as So the you calculate -- so I

disclose the have of can don't we exact loans that . you out. how We number, have, do I figure kind have we but so the office numbers. many

Operator

We of D.A. Rulis Jeff Davidson. now have

Jeff Rulis

a maybe you. Jeff, question for

on in checking Just capital.

XX%. over capital to close CETX total got You've XX%,

haven't some levels -- exceeded year. And mean, through at point? just I levels last TCE are number. much comfortability over in-house that there you've frankly, the the those this changed rattled You guess, I

get you for a kind we thing to to trying to -- of those with proactive want the higher is when time inch or -- about can feel you right Just want think if be M&A.

Jeffrey J. Deuel

Thanks, Jeff. question for good Don, that's think I a you.

Donald Hinson

the plans We buybacks was that Yes, TCE capital. then about trades see capital the a loss capital depo I shares ratio will is $XXX but We far TCE then our using have may the overabundance go We of Okay. with We a also. a so much, smaller we one. up that. on a we again back are our point. any buybacks over of do do have far few do bigger as wouldn't grow. one, with time looking into stay probably some than capital capital continue levels. as -- are or Obviously, it as or trade don't that same we capital. comfortable But period. And are rates levels, impact that as repurchased. with the could million, would comfortable mentioned impact we're any think we don't did to $XXX,XXX, could a we'll pick I assuming rate environment, -- obviously sorry, don't -- but to We much, certain in for we're lower at our like ideal, large this necessarily at we large-scale to think, QX, our come

Jeff Rulis

that. high It it. But on like Okay. you're sound really doesn't okay. side -- the Appreciate uncomfortable deploy to

Donald Hinson

then high economic XX% I just exceeding and like over But the probably [indiscernible] think I in XX% the XX% in value get ratio, you of keep capital certainly may because we not want start that our now, under think might environment current to leverage Xs. we start we're the right and that. be we getting

we're think I So fine.

Jeff Rulis

that now. know Do -- your steady we've recovery as of loans been question a the hold specific are to growth as reserve. thought Tony, kind this there. you're loans lift years just just maybe, low X seen run, the to for the thoughts continues lift is -- know in terms And or we percent the I loan net I any on a single-digit you've a short those looking over Okay. position it? of if up credits, then in but and to guideline and continue of But reserve on of at squishy in

Tony Chalfant

Yes. I with that don't take want the you to ACL? know Don, on the if --

Donald Hinson

considered holds this really to -- think consistent. plans don't looking all We model. potential already in forward I been have of pretty that. recessions steady. any is the We've change It's

is portfolio tend we what underwriting again, So on of with that criticized charge-offs. can see, -- outperform as the loan kind we're actual to such putting we're our our you and amount always of

loans. think I change pops So and it of is the of mix loans off the the amount

Jeff Rulis

all, recovery then sounds was -- got feel to black it that while know a -- quarter that but is. it's Don, where that white -- gut and you. One like housekeeping, And there you're bump Yes. the an of XXX, to necessarily, pretty that trying flows level in margin was get with added just I the comfortable It have a not yes. there you interest I the through there there? at and

Donald Hinson

don't we balloon I anything don't talking that think had believe you're all, if I about. so. at the what that's yields loan

Jeff Rulis

Yes. side. credit From the

Donald Hinson

think we any I recoveries that. don't had income on large

Jeff Rulis

kind 'XX expectations? Don, or did expense rate XX.X% through in around you managed low? higher And the that that's short growth still balance exiting going you is is right be pretty the say take to kind that keep look in to a -- pretty contracts walked near I of it or -- to But term Okay. it did growth, of little going that term, if something. rate at all, know 'XX, I growth of at I the that if mention

Donald Hinson

at in this to aspects all protect profitability. rate Obviously, looking we're overall environment, Yes.

is I specific, and would So XX.X%, are for maybe because quarter. -- say things compared say, this right, I right of a next profitability mid-XXs, to what expected. was quarter little to are more again, I some more lower down now be we because into mentioned But have maybe

a else the tactics expect we million was incentive are QX, run $XX in of anything don't of are that. the they say go quarter I million run do any down. $XX regarding process more if back would popped that's of a again, I rate would at in but looking starting probably rate, normalized levels, at, If accruals comp ex like, So to we that kind

Operator

have now Feaster We of Raymond James. David

David Feaster

kind segments Maybe and -- a the pipeline standpoint, your the the side. just credit like just sounds as still starting yields curious, on where the Obviously, origination it's are well can on you higher of as how maybe for side, trending? out drive of growth seeing especially then and can pencil new less What NOOCRE even loan here weaker growth are appetite and combination still demand. I'm pipeline opportunities? decline rates? good just loan And from at

Jeffrey J. Deuel

want take Bryan, that do you to one?

Bryan McDonald

Yes. Sure, David.

We requests last have concurrently, been -- back in had the the prepay increase pulling come other what were few that estate And down spring, levels we in years. saw banks on a from real category. as we our in big come then way have

doing our our done, is So really, too been primary the investor get been construction heavy and concentrations CRE we've not driver we've in our to high filtering what has behind concentration of the terms levels managing concentration.

just really new was time spring, hadn't as really consideration were yields the in a that also at adjusted. the the the rates So primary The reason.

so If on forward but investor the estate you rest in. coming on still just fast much good real we're fielding is -- to lower feeling seeing the that a them We're at today, we're level. pricing the

looking space, strong been pretty obviously, in significant that of customers But relationships. And very cases, many levels. a nice have going those that. we've very on pricing and customer aspects we're at focused it's category. activity, got prospect deposit because the we're deposit of in that C&I the competitive base So base We've after. the in

And their overall, that haven't XX it So been the experienced just with business strongly years competitive. been is in rates XX that levels years. makes have have experienced levels. rate of from of these as then business business that loan maybe if business pricing as in these the sense the or They've last that for XX for and XX customers history in are customers or -- some years rate reacting standpoint,

maybe more local general, bit good. is strong. economy a new the Liquidity are projects. In on of the they're and pausing really the So little customer levels base health

expand customers in on that Again, a because surprise more might a more again, part are of primarily is loans. to levels versus seeing liquidity gas We're of economy we overall, are first. But cash pricing rates. demand, use -- using with based seeing use good. the on bit the not just the liquidity We in dip the new a

filter to. And that's I On if in of on then rates, new choice and been X.XX%, our down The closed you total XX has also which portfolio the in chose we the larger from share nonowner for quarter. take mention that the rate average total the is those, points market. did to own a gone hard. asked new last up the deals side, could we But the was quarter, volume basis

David Feaster

And color. side front. on great are That's credit Okay. touching Nonaccruals mean, is credit then point on I maybe the the other of down. the phenomenal.

X. I'm of What classified are It about the quarter? kind what see can't credit some the drove seeing? and we if maybe got you mean, than starting And just that front? are in could ag curious, curious, cracks we're already watching? office, the large touched I'm normalization in get what the what to You've better on a talk recovery on but industry. you maybe more bit you increase broadly, are I seeing then balances you in just

Jeffrey J. Deuel

want do Tony, take you to that?

Tony Chalfant

quarter. even credit quarters, Generally, again, it than lower few historical out, deal bit as NCOs. And And you were pretty recovery the -- this a of David. the mentioned. sure, you than has that very lower think Yes, be remains for quite been -- Yes. low. numbers still much on bubble. a for a now we're a our And benign little still I credit in bit large nonaccruals it would by But netted if impacted

over slower call move back very been to So It's just a a what than I we're slow quarters. in credit I that more several last environment. think the would still I normal expected

nothing of grades, from small really numbers. jumped It's between in credits the as -- little and jumping really nothing a classified that was to the more movement just there So just increase out. out the

prop quite I So right to a what criticized stimulus I to environment. But there know we've would as now in little really call a be now everything its still of operating watch more stable little it's weakness go maybe will think through but -- kind some to way say those don't back economy to closely. to of bit we're got and bit the bit total up. there's normal there probably pretty just room quite credit pressure just more get a move and really while continuing money the worked a I for we again, C&I to time. And isn't more I attribute might stayed of our numbers have space that the forward, companies that's to, what some

more but we're a nothing of So that's there, seeing very significance stress alarming. little any bit

David Feaster

Got higher on kind It expansion kind think implications. to at guess, just just a half kind pressures like persist, environment. for of would year? mean, on if and next then kind that's margin over I on higher do trajectory seems in longer compression. the But for as guess, that stay guess, of maybe you it. upcoming rates you we and talk I we're of longer of in in margin kind quarter? I year, guess, consensus, would to about expect time some just of environment, expect funding trajectory, the Maybe for And the a the NII persist I the it look the the you of about margin how seems the first that guess higher and more of I opportunities I And going to like. out touching least

Donald Hinson

quickly of of in at and a in the requests we if get go there's higher cause than of that is you continue I costs pressure September mentioned our lower think Again, think there like short curve, have there times, and in going how -- go was exception really How we with waves lot I the will up. than factor. Again, continue less problems there's short is kind some the least Yes, the Sure. a another increases for it to so. But the and the quarter. us end could more on we're where deposits the -- rates run. that seems pressure again, NIM the Fed are to as out to -- the where Yes. time lot other on especially hurt

higher will an of at this increases longer, year. at some happen this happen point. hit But QX, till subside middle might reprice we're QX and next point, side rates our maybe the on but might looking For equilibrium. point, and will assets probably That we'll at the not the deposit

Operator

of now Stephens. have Andrew Terrell We

Andrew Terrell

I guys wanted all to to color securities appreciate repositioning back the you the I transaction. go there. provided

be you're you're quarter any extend transactions was, repositioning this would willing I similar want to, it, manage back. X to I of get the that Is kind contemplating Just place or one to As mentioned know think X.X-year earn years? incremental moving you forward, a thoughts looking threshold you there. X, call took around, trades that to the your

Donald Hinson

go At keep this imagine necessarily a we would it I earn-back if very want X go to scale, X.X point, don't under occurring, X.X larger did that would I -- years. slightly good period. over be X maybe years is don't -- it I and over a see preferable. We probably over even definitely

Andrew Terrell

Yes.

definitely... is X.X% Okay.

Donald Hinson

lot environment makes a little challenging. which again, a and to so sales quarter, more now, review the depend this will far been have right of this. And on rate really continue rates the up we'll course, Yes,

Andrew Terrell

Understood. Yes.

talk Okay. time you the on growth how the you deposits competitors customer the looks portfolio. And the are the time brokered growth? And of to side, between new pricing today? the deposit brokered customer just market? in about then deposit, from cost core about Can differential And that X/X compare like where and came deposit at deposits. core growth does It on the

Donald Hinson

]. $X.XX around [ came those Sure. in in did The brokereds, I We July. think, million

quarter a They're the brokered another is pretty So Again, not -- way not deposits. they're we've much there got impact that the the not core the It's brokered. to manage had just balance on customer. sheet. for whole -- the

can this them use of new X% X% the way. The more are instead at coming use borrowings, one using brokers we just we So on, almost lot of in to think a I times. that deposits in

for low the up it's our for on gone customer new even average, have -- and But to X% CDs. We the CDs. Xs the for periodically probably I Xs in think

Andrew Terrell

the Okay. new Got quarter, it. new yields yield could ask for I Bryan, was origination the X.XX something, you said on if origination all And the in?

Bryan McDonald

Yes.

the X.XX%. So it all on was loans,

Andrew Terrell

Okay.

ago, is short-term yields origination anything just the a we've commitments number X on gotten obviously over curious, you as XQ year. would about increases. I'm than terms that lower? that new that could As next, down at yields you months? there is We've I year pickup. how rate or -- range X, last got like basis gotten anything old obviously such in expect a lot within lower of origination to there progress And funding a up And of talk that's to the yield? X.XX% back new And written that are influencing origination XX influencing us rates. I've more point look in Anything

Bryan McDonald

the Yes. went full X% all quarterly kind from way just range of the range looking averages. I at to kind the up X.X%, mean, the of

getting that's So or index strong tied to prime rates. you're anything so a variable

you pressures, If business owner kind Where over renewals or renewal our the that's competitors category. and anything percentage, for commercial rates C&I the and anything X% focused that or we're seeing the deposits occupied on at were then, strong on look related quarter. of because the here really and really are

competitive super the less been it's -- or construction investor space in So estate the so. real that

-- question commitments we've year, last And year of the a worked we that. did have on through carryover yes. of part early Your made largely the we and

move to point. up quarters, us the So over again, few expect at benefiting the indexes continue to this see spreads pricing we and both next

Andrew Terrell

very That's color. I If could I Okay. appreciate one helpful. more the sneak in.

in have you the dollar portfolio? amount the of do -- credits Just total syndicated

Tony Chalfant

$XX end, loans. is X.XX% outstandings total syndicated million about SNCs quarter in Yes, credits, Andrew, which is the of at

is and in So really our a efforts. that play small portion pretty focus space. deals it's fairly that lower higher levered small are portfolio where we really a we Those rated that of

Donald Hinson

for a was the just rates quick, CD I $XXX and QX look or real follow-up. the up originator [ million did around Andrew, it ]. new

Andrew Terrell

million it. $XXX Got [ ].

Jeffrey J. Deuel

have Brika, . call, other any questions? do other any we

Operator

have now We Kelly Motta from KBW.

Kelly Motta

much of my X? up portfolio remind we office. back stage. year over Most maybe could for if you reprices answered at have asked renewal that or the next go us questions comes of or and But to how Can been this

Jeffrey J. Deuel

think I Tony, regard you have some with to... good that, data on

Tony Chalfant

If I that, occupied. of I portfolio, the at owner year, do. $XXX over that's nonowner it mean the don't I which million, a that that, it's of But little haven't I more Yes. portfolio. done, next of actually that what have Kelly, of look I about and next about includes may specific. years have but X little amount is the something over million over $XX I've a got

pretty So that's of over a period, we a like X-year low loans. maturing amount feel

doesn't in that some include repricing might that there, Now too. be

So...

Kelly Motta

area is Got sort you're then, looking control. remarks, Tony. prepared your think really helpful, that at of one And expense I That's in it.

wondering of from those the what how benefit that would you're you're the ability balancing as [indiscernible]. stage Just you sit cycle? in your kind this add viewing rank stack with we as opportunities how the dislocation here at and to to markets of priorities Like,

Jeffrey J. Deuel

it's year. 'XX. can we We're that because said that particularly watching one for are focus to I Kelly, continue to that starting plan one benefits expenses, thing for comp past control. of of And we've Well, just is on plan as expenses categories. many all year think biggest always and We'll it's our us the where of that times in time for one new the we

referenced on can releasing pockets Don acquiring at the organization renewing, it together maybe times. in who belief in there of first our thing one would that part contracts, leadership I we've support time looking thinking comes all of is the is think of renegotiating choice the maybe the can many there's or it's footprint. And with to that's when we on and spend Board, underlying line in are that done our full control. teams be them whether some we an inside do. But that this

they as on I that, they we're presented think in maintaining right that stop focused don't pursuing While the themselves. right teams would controlling us really today. our stand or expenses from the locations that

well of on out over carve we our us. on impact how of that projects months team expense just show X of that's has the how much and also brought kind are XX we very base, but We had impacting last an the can aware that

for years through teams metrics. And those that's functioning opposed assuming about that we teams monitor For we've gives we to as gone kind on brought little X of are that our today the we we we example, as us exercise on seeing now fully okay, of out, model bit saying, which as of as these relief beauty our X think points efficiency ratio, I a are of the pretty that now M&A right center don't fleshing probably it's know the deposits great organization. M&A bringing on is front benefits, at X us the walked to is that Bryan way the those and close locations, on, behind, a know, through rough and next, in think out the and not least. geographic I as we're but for and months we all bringing loans the I us grow

Operator

Coffey have Tim now Janney. We of

Timothy Coffey

for does question reasonable think a outlook. Don, the had NII quarters, a about of a if even that Is couple I of flat it it kind expectation NIM might to compress? -- be here

Donald Hinson

again, maintain interest-bearing depend Well, then to it Can deposits to deposits. key but some. is I a on we lot slowly, more decrease think think that That's decrease still a the the -- going margin is deposits. continue, stabilize, will can our I will on because we will -- continue to continue

a it's so right average quarter it our every sure I'm for not So But mean, bit, came increased I now. going again, the to little will actually that's challenge. assets it earning and happen down deposits. a on we be dependent quarter.

it a might decline I of little continue think a we the bit NII. in see

Timothy Coffey

Okay.

Okay. XQ? relative while changed And exception on that since that, deposits, the you in little Don, ago, pace for pricing XQ of request brought it a the has to

Donald Hinson

Unfortunately, think amounts decreased are pretty think no. have -- still the It's I high. some, the but still I pretty numbers dollar

Timothy Coffey

on Jeff, there. follow up made comments -- you just Okay. And just M&A then, the want I to

buyer right? recently, Western in we was accounting quarter we one, region, buyer. M&A the some the Do Where, all a seem think -- just creatively about And the saw unlock to might value the the banks structure structured saw different regardless fair third legal marks the of transactions, interesting be thinking the you under. carrying? to from sophisticatedly of in take market transactions M&A how kind So

Jeffrey J. Deuel

Yes.

are deals lost on eyes going of that out I think spent deals we ways We about sort at it were us. of particular of and the -- there. that these time well, those haven't looking a -- them, opened lot to variety creative our of not

any see the of would sense deal close have structure for admiration don't as think think contact They're I continue that always organizations succession kind get and is, we the add, to were think than now. makes little have, our scenarios the I they just of like now -- what regardless of be that. conversations I done that But to done. don't a specific we I are urgent. certainly not consider right just deals to want us lot a a for. But mainly with because keeping did structure Historically, retiring we do as I there's of different without deals creative the historically, just

potential a to are lot their what the do. taking targets to decide they want of time think I So

Operator

you. Jeff like remarks. Deuel, turn to Thank to back it CEO, I'd final for any

Jeffrey J. Deuel

goodbye. we you. and of We'll your Thank and forward support quarter's you with couple ongoing many and this Perfect. care, wrap your We our of for weeks. to talking interest you look performance, up time call. your in and next in Take the thank

Operator

call. rest lines. day, today's for you your Please a now then does lovely I confirm joining. all you and Thank of that conclude your have disconnect may

Heritage Financial (HFWA) 19 Oct 232023 Q3 Earnings call transcript