Bryan D. McDonald
About Bryan D. McDonald
Bryan D. McDonald (age 53) is President & Chief Executive Officer of Heritage Financial Corporation (HFWA) and serves on the Board of Directors; he was promoted to President of the Company and President & CEO of Heritage Bank in 2024, and was anticipated and subsequently appointed to the Company’s Board and CEO role in 2025 . Company performance context during his leadership transition includes 2024 net income of $43.3 million (down 29.9% YoY), diluted EPS of $1.24 (down 29.1%), and total loans up 10.7% YoY; Heritage executed balance sheet restructuring and expense reductions while maintaining strong credit quality (NCOs/Average Loans 0.06%) . Pay-versus-performance shows Company TSR value (fixed $100) of $105.05 for 2024 and peer group TSR value of $132.44, with diluted EPS of $1.24 and net income $43.3 million .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Heritage Financial Corporation | President (Company) | 2024–present | Led corporate execution of cost reductions, tech contract renewals/terminations; maintained credit quality through restructuring year . |
| Heritage Bank (subsidiary) | President & Chief Executive Officer | 2024–present | Oversaw balance sheet restructuring and operational efficiencies (FTE reductions, mortgage exit) . |
| Heritage Bank | President & Chief Operating Officer | 2021–2024 | Operational leadership prior to CEO succession; credit and risk oversight continuity . |
| Heritage Bank | EVP & Chief Operating Officer | 2018–2021 | Enterprise operations; platform and process scaling . |
| Heritage Bank (via 2014 acquisition of Washington Banking Co./Whidbey Island Bank) | EVP & Chief Lending Officer | 2014–2018 | Commercial lending leadership post-acquisition integration . |
| Heritage Financial Corporation | President & CEO; Director | 2025–present | Announced strategic acquisition of Olympic Bancorp (Kitsap Bank); deal projects ~18% EPS pickup in 2027, ~35% cost saves, TBV earnback ~3 years . |
External Roles
No external public-company directorships or outside board roles for McDonald are disclosed in HFWA’s filings .
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | 414,243 | 436,128 | 493,446 |
| Target Bonus (% of base) | 45% | 45% | 45% |
| Actual Annual Cash Incentive ($) | 208,107 | 160,931 | 208,728 |
| Perquisites and Other ($) | 159,211 | 163,062 | 95,657 |
2024 base salary was increased to $535,000 effective July 1, 2024 (promotion-related; +18.4% YoY), while target bonus remained 45% . 2024 perquisites included Company automobile ($5,392), executive life insurance imputed income ($449), and employer 401(k) match ($10,350) .
Performance Compensation
| Metric | Weight | Threshold | Target | Maximum | Actual 2024 | % of Target Achieved |
|---|---|---|---|---|---|---|
| Diluted EPS | 40% | $1.50 | $2.00 | $2.50 | $1.24; adjusted $1.80 for incentive calc | 80% |
| Net Charge-Offs/Average Loans | 20% | 0.11% | 0.06% | 0.01% | 0.06% | 100% |
| Overhead Ratio | 40% | 2.39% | 2.24% | 2.04% | 2.22% | 105% |
2024 annual cash incentive earned 42.3% of base salary; payout $208,728, consistent with scorecard outcomes above .
2024 equity awards:
- Target equity equal to 45% of eligible salary; total grant-date value $202,236 split 50% PSUs and 50% RSUs; 5,599 target PSUs and 5,599 RSUs granted . Grant-date fair values per unit: $18.16 (time-vested/ROATCE PSUs share) and $17.76 (TSR PSUs under Monte Carlo) .
- PSU performance metrics (2024–2026): ROATCE vs peers (50% weight) and 3-year TSR vs peers (50%); payout slope: 50% at threshold (25th percentile), 100% at target (50th), 150% at max (75th), with 2% incremental vesting per percentile .
2022 PSU payout (measured through 2024):
| Grant Year | Target Shares | Earned Shares | Payout % |
|---|---|---|---|
| 2022 | 2,761 | 2,208 | 80% |
Vesting schedules:
- RSUs vest ratably over three years, March 15 annually .
- PSUs cliff-vest after three years based on peer-relative ROATCE/TSR .
Equity Ownership & Alignment
Beneficial ownership (record date March 10, 2025):
| Component | Shares |
|---|---|
| Common shares owned (incl. joint and 401k) | 38,112 (incl. 27,247 joint; 4,591 vested 401k) |
| RSUs vesting within 60 days | 6,663 |
| Total beneficial ownership | 44,775 (<1% of outstanding) |
Unvested and performance awards (12/31/2024):
| Award Type | Unvested Units | Market Value ($) | Notes |
|---|---|---|---|
| RSUs (service-based; Feb 2022, Feb 2023, Feb 2024 grants) | 921; 2,230; 5,599 | 22,565; 54,635; 137,176 (at $24.50) | Vest ratably over 3 years; March 15 schedule . |
| PSUs (performance-based; 2022–2024, 2023–2025, 2024–2026 cycles) | 3,451; 3,345; 5,599 (at target) | 84,550; 81,953; 137,176 (at $24.50) | TSR/ROATCE peer-relative; cliff-vest after 3 years . |
Ownership guidelines and alignment:
- NEO stock ownership guidelines: CEO must hold ≥3x base salary; other NEOs ≥1.5x base; must retain ≥50% of net shares until compliant; all NEOs in compliance as of 12/31/2024 .
- Anti-hedging and pledging policy: hedging prohibited; no pledging reported by NEOs/directors .
Deferred compensation:
| Item | Value |
|---|---|
| Company contributions earned for 2024 (based on 2023 performance) | $79,081 |
| Approved Company contribution (Feb 2025; based on 2024 performance) | $96,300 |
| Aggregate plan balance (12/31/2024) | $967,941 |
| Vesting | 90% vested as of Jan 1, 2024; +10% each Jan 1 thereafter; fully vests upon change of control/death/disability |
Supply calendar indicators: RSUs vest in equal annual tranches each March 15; PSUs cliff-vest at cycle completion (e.g., 2025, 2026), potentially creating sellable supply subject to insider-trading windows .
Employment Terms
Key provisions (current Employment Agreement as of July 1, 2024):
- Term and auto-renewal: current term to June 30, 2027; auto-renews annually each July 1 starting 2026 unless notice given .
- Base and incentives: base salary $535,000; target annual bonus 45% (MIP); eligible for long-term equity and benefits consistent with peers; Company automobile provision .
- Severance (termination not in connection with change in control): 100% of Base Compensation payable over 24 months; continued medical/dental 12 months; accelerated vesting of equity and unvested Company deferred comp contributions (performance awards vest based on actual performance without proration) .
- Change-in-control (double-trigger): 200% of Base Compensation lump sum; 18 months continued medical/dental; equity awards vest at target level if in connection with change in control and termination (double trigger) or if awards not assumed/substituted; deferred comp fully vests upon change in control .
- Restrictive covenants: non-compete 12 months; non-solicit 24 months (reduces to 12 months in connection with change in control); perpetual confidentiality; certain reductions/adjustments for 280G/4999 .
- Clawback: enhanced clawback policy adopted Nov 7, 2023 per SEC/Nasdaq rules .
Illustrative potential payments (as of 12/31/2024 assumptions):
| Scenario | Total ($) |
|---|---|
| Termination without cause / good reason (no CIC) | $1,348,906 |
| Qualifying termination in connection with change in control | $2,088,181 |
| Termination due to disability | $806,671 |
| Termination due to death | $1,391,671 |
| Change in control – no termination (accelerated vesting only) | $383,568 |
Split-dollar life insurance: death benefit up to base salary; accelerated chronic/terminal illness benefit up to $500,000; additional $50,000 legacy Whidbey plan .
Board Governance
Board service history and roles:
- Appointment: McDonald anticipated to be appointed to the Company’s Board at the May 2025 organizational meeting; later referenced as President, CEO & Director in transaction communications .
- Independence: As CEO/director, McDonald is non-independent; Heritage maintains independent Board Chair (Brian L. Vance) and Lead Independent Director (Brian S. Charneski), with separate CEO and Chair roles to mitigate dual-role concerns .
- Committees: Audit & Finance, Compensation, Corporate Governance & Nominating committees are comprised solely of independent directors; in 2024, the Risk & Technology Committee included one non-independent director (then-CEO Deuel). McDonald’s specific committee assignments as a director are not disclosed .
- Board meeting cadence and rigor: Board met 10 times in 2024; independent director executive sessions after each meeting; all directors attended ≥75% of Board/committee meetings .
- Director compensation: Employee-directors (CEO) do not receive director fees or equity for Board service (compensated via executive program) .
- Stock ownership guidelines for directors: ≥3x annual cash retainer; all directors in compliance as of 12/31/2024 .
Performance & Track Record
- Strategic M&A: Announced acquisition of Olympic Bancorp (Kitsap Bank) in Sept 2025; all-stock deal implies ~$176.6 million value at announcement price, ~18% fully phased-in EPS pick-up projected in 2027; ~35% cost saves targeted (45% realized in 2026; 100% in 2027); TBV dilution <10% earnback ~3 years; regulatory capital preserved; plan to redeem $35 million sub debt; retain Kitsap brand in most markets .
- Operating discipline: 2024 actions included closing mortgage business, workforce reductions, technology contract optimization; overhead ratio improved to 2.22% from 2.33% YoY; credit quality solid (NCOs/Average Loans 0.06%) .
- Capital priorities and growth: Pro forma assets projected under $9 billion at closing; management focused on profitability vs size, with runway to $10 billion threshold; cautious on additional M&A until integration success, while opportunistic .
Compensation Committee Analysis
- Committee: Independent directors (Lyon, Ellwanger, Giacobbe, Rivera, Watson) oversee NEO compensation; 2024 say-on-pay supported by >98% of votes cast; routine shareholder outreach conducted with largest holders .
- Consultant: Pearl Meyer engaged; 20-bank benchmarking peer group set with asset/revenue/market-cap criteria; performance equity peer group broader to mitigate attrition risk during cycles; program emphasizes variable pay and clawbacks; no option repricing or tax gross-ups .
Compensation Structure Signals
- Mix and leverage: 2024 CEO equity target 60% of salary; McDonald 45% target equity; 50% of awards performance-based (ROATCE/TSR relative to peers), 50% service-based RSUs; deferred compensation contributions performance-based and vesting staggered, enhancing retention .
- Adjustments: Compensation Committee exercised discretion to adjust EPS for incentives due to securities losses/BOLI restructuring/gains, using adjusted diluted EPS of $1.80 for plan calculations, which increased EPS goal attainment vs unadjusted $1.24 .
- Risk controls: Annual compensation risk assessment found no plans likely to create material adverse risk; clawback policy enhanced; MIP prohibits bonus if Tier 1 leverage <8% .
Say-on-Pay & Shareholder Feedback
| Year | Say-on-Pay Approval |
|---|---|
| 2024 | >98% approval |
Shareholder outreach to 15 largest institutions (~54% of outstanding) covered governance, succession, compensation; feedback supportive .
Investment Implications
- Alignment: Strong pay-for-performance design with peer-relative PSUs and ownership guidelines; anti-hedging/pledging reduces misalignment risk; >98% say-on-pay suggests governance support .
- Retention and supply: Deferred comp contributions and staggered vesting (RSUs annually; PSUs in cycles) support retention but create periodic supply; monitor March 15 RSU vest dates and PSU cliff vest years (2025, 2026) for potential insider selling pressure subject to windows .
- Change-in-control economics: Double-trigger vesting and 200% Base Compensation multiple under CIC provide security but could amplify costs in a sale; however, clawback and 280G cutback provisions mitigate extremes .
- Execution risk vs value creation: 2025 Kitsap transaction offers scale, EPS accretion and cost saves with limited branch overlap and neutral rate sensitivity; track integration milestones, cost-save realization trajectory (45% in 2026; 100% in 2027), and TBV earnback pace; disciplined balance sheet restructuring and credit quality in 2024 elevate confidence in execution .