Tony W. Chalfant
About Tony W. Chalfant
Tony W. Chalfant, age 63, is Executive Vice President and Chief Credit Officer of Heritage Financial Corporation and Heritage Bank, roles held since July 2020; previously, he served as Senior Vice President and Deputy Chief Credit Officer (July 2019–July 2020) and Regional Credit Officer (January 2018 onward following Heritage’s acquisition of Puget Sound Bank), where he had been Chief Credit Officer for 13 years prior to the acquisition . Heritage’s 2024 performance included net income of $43.3 million and diluted EPS of $1.24 (adjusted to $1.80 for incentive purposes), with an overhead ratio of 2.22% and net charge-offs to average loans of 0.06% . Long-term incentives reference a peer-relative three-year TSR and ROATCE framework; the 2022–2024 PSU cycle paid at 80% of target, comprised of TSR at the 62nd percentile and ROATCE at the 34th percentile . Pay-versus-performance disclosures show the value of a $100 investment in HFWA at $105.05 for 2024 versus $87.68 in 2023; diluted EPS was $1.24 in 2024, $1.75 in 2023, and $2.31 in 2022 .
Past Roles
| Organization | Role | Years | Strategic Notes |
|---|---|---|---|
| Heritage Financial/Heritage Bank | Executive Vice President, Chief Credit Officer | Jul 2020–Present | Promoted after serving as Deputy CCO; oversees credit risk for the bank . |
| Heritage Bank | Senior Vice President, Deputy Chief Credit Officer | Jul 2019–Jul 2020 | Supported CCO responsibilities prior to promotion . |
| Heritage Bank | Regional Credit Officer | Jan 2018–Jul 2019 | Role assumed upon Heritage’s acquisition of Puget Sound Bank . |
| Puget Sound Bank | Chief Credit Officer | ~2005–2018 (13 years) | Led credit function prior to acquisition by Heritage . |
External Roles
No external board roles or public company directorships disclosed for Mr. Chalfant .
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | $306,438 | $322,628 | $339,303 |
| Base Salary (Effective July 1) ($) | — | $334,289 | $344,318 |
| Target Annual Bonus (% of Base) | 40% | 40% | 40% |
| Actual Annual Cash Incentive ($) | $144,950 | $116,791 | $128,596 |
| All Other Compensation ($) | $128,783 | $136,243 | $87,163 (incl. $58,501 deferred contrib., $17,149 club) |
Performance Compensation
Annual Cash Incentive (MIP) – 2024
| Metric | Weighting | Threshold | Target | Maximum | Actual Used for Plan | % of Target Achieved |
|---|---|---|---|---|---|---|
| Diluted EPS | 35% | $1.50 | $2.00 | $2.50 | $1.80 (discretionary adjustments applied) | 80% |
| Net Charge-Offs (Recoveries) / Avg Loans | 30% | 0.11% | 0.06% | 0.01% | 0.06% | 100% |
| Overhead Ratio | 35% | 2.39% | 2.24% | 2.04% | 2.22% | 105% |
| Resulting Annual Cash Incentive | — | — | — | — | 37.9% of base salary earned | $128,596 |
Committee adjustments for EPS reflect $22.7 million pre-tax securities losses, $2.9 million after-tax BOLI restructuring costs, and $1.6 million pre-tax gain on sale of premises and equipment, yielding adjusted diluted EPS of $1.80 vs. reported $1.24 .
Equity Awards – 2024 Grant Mix and Vesting
| Component | Target Granted (#) | Vesting Terms | Performance Metrics |
|---|---|---|---|
| PSUs | 3,682 | 3-year cliff (2024–2026) | ROATCE and 3-year TSR vs peer group; payout 50–150% of target |
| RSUs | 3,682 | Ratable over 3 years (vest each Mar 15) | Service-based |
Prior PSU Cycle Payout (2022–2024)
| Metric | Weight | Threshold | Target | Max | Actual Percentile | Payout vs Target |
|---|---|---|---|---|---|---|
| ROATCE | 50% | 25th | 50th | 75th | 34th | 36% |
| 3-year TSR | 50% | 25th | 50th | 75th | 62nd | 124% |
| Total Payout | — | — | — | — | — | 80%; 1,400 shares earned (vs. 1,751 target) |
Equity Ownership & Alignment
| Category | Amount |
|---|---|
| Common Shares Owned | 20,119 (jointly with spouse) |
| RSUs (vest within 60 days of 3/10/2025) | 4,295 |
| Total Beneficial Ownership | 24,414 |
| Ownership as % of Shares Outstanding | <1% |
| Unvested RSUs by Grant Date | 2,631 (6/25/2020; 6-year ratable vest, Jun 15) |
| Unvested RSUs (2022) | 584 (ratable over 3 years, Mar 15) |
| Unvested RSUs (2023) | 1,466 (ratable over 3 years, Mar 15) |
| Unvested RSUs (2024) | 3,682 (ratable over 3 years, Mar 15) |
| Unearned PSUs (2024 grant) | 3,682 at target (3-year cliff) |
| Stock Ownership Guidelines | 1.5× base salary for non-CEO NEOs; retain ≥50% of net shares until compliant; all NEOs in compliance as of 12/31/2024 |
| Hedging/Pledging | Hedging prohibited; pledging discouraged; to company’s knowledge, no pledging by NEOs/directors |
Employment Terms
| Term | Detail |
|---|---|
| Agreement Effective Date | Employment agreement entered into July 1, 2020 |
| Term/Auto-Renewal | Non-CEO NEO agreements automatically extend annually; Mr. Chalfant’s current term date listed as June 30, 2023, with July 1 automatic extensions thereafter unless notice given |
| Base Salary in Agreement | $344,318 (2024 base salary effective July 1) |
| Target Incentive Opportunity | 40% of annual base salary under MIP |
| Severance (No CIC) | 100% of base compensation paid over 24 months; continued medical/dental 12 months; accelerated vesting of outstanding equity and company deferred compensation contributions (performance vesting based on actual results) |
| Severance (With CIC) | 200% of base compensation lump sum; continued medical/dental 18 months; equity vests at target for performance awards; deferred comp accelerates |
| Non-Compete | 12 months post-termination (reduces to 12 months with CIC) |
| Non-Solicit | 24 months post-termination (reduces to 12 months with CIC) |
| Clawback | Enhanced clawback policy adopted in 2023 per SEC/Nasdaq rules |
| Tax Gross-Ups | No tax gross-ups; severance subject to automatic reduction for optimal net-after-tax outcome under IRC 280G/4999 |
| Insider Trading Policy | Prohibits hedging; discourages pledging; policy publicly filed with 2024 Form 10-K |
| Deferred Compensation Plan | Company contributions set at 10%/20%/35% of salary at threshold/target/max; Mr. Chalfant’s vesting was 60% as of Jan 1, 2024, increasing 20% annually until July 1, 2026; contributions extended via addendum through 2028 |
Potential Payments (12/31/2024 measurement)
| Scenario | Cash Severance ($) | Equity Acceleration ($) | Deferred Comp Acceleration ($) | Medical/Dental ($) | Split-Dollar ($) | MIP ($) | Total ($) |
|---|---|---|---|---|---|---|---|
| Termination Without Cause / Good Reason | 474,430 | 391,902 | 227,292 | 14,816 | — | — | 1,108,440 |
| Qualifying Termination w/ CIC | 948,861 | 391,902 | 227,292 | 22,224 | — | — | 1,590,279 |
| Disability | — | 391,902 | 227,292 | — | — | 128,596 | 747,790 |
| Death | — | 391,902 | 227,292 | — | 344,318 | 128,596 | 1,092,108 |
| CIC, No Termination | — | 187,009 | 227,292 | — | — | — | 414,301 |
Equity acceleration amounts reflect HFWA common stock closing price $24.50 on 12/31/2024; performance awards vest at target on CIC; actual performance used on non-CIC termination .
Compensation Structure Analysis
- Variable pay emphasis: 50% of NEO equity grants are performance-based (PSUs), with the remainder service-based RSUs; CEO at 60% of salary, other NEOs at 35–45% of salary target equity, placing a meaningful proportion at-risk .
- Performance metrics aligned to risk/returns: Annual incentives weighted to EPS, credit losses (NCOs), and expense efficiency (overhead ratio), with a Tier 1 leverage ratio gate at 8% and committee discretion for extraordinary items .
- Governance safeguards: Enhanced clawback policy (2023), no option repricing/reloads, no tax gross-ups, hedging prohibited, pledging discouraged; double-trigger equity vesting under the 2023 Omnibus Equity Plan .
- Shareholder support: Say‑on‑pay approval exceeded 98% in 2024 amid eleventh successive annual shareholder outreach cycle .
Say‑on‑Pay & Peer Group
- 2024 say‑on‑pay approval: >98% of votes cast supported NEO compensation .
- Benchmarking peer group (20 banks): Includes TriCo Bancshares, Byline Bancorp, Veritex Holdings, Lakeland Financial, among others, selected on size, revenue, market cap and Western U.S. emphasis .
- Performance peer group: Larger, asset-based U.S. bank cohort used solely for PSU payouts to mitigate M&A churn in peer sets .
Investment Implications
- Alignment and retention: Compensation design ties a substantial portion of pay to objective performance (EPS/NCOs/overhead; ROATCE/TSR) with rigorous peer-relative equity metrics; hedging prohibited and pledging discouraged; all NEOs meet ownership guidelines, supporting skin‑in‑the‑game alignment .
- Event risk and severance: Double‑trigger equity vesting and 2× base compensation CIC severance cap potential exit costs; automatic 280G cutback reduces golden‑parachute tax friction, balancing retention with shareholder protections .
- Execution signals: Discretionary adjustments to EPS reflect balance sheet restructuring and governance oversight to avoid incenting imprudent risk; 2022–2024 PSU payout at 80% (TSR 62nd percentile, ROATCE 34th) indicates mixed relative performance, emphasizing efficiency and credit discipline under Chalfant’s credit leadership .
- Ongoing retention incentives: Deferred compensation participation and vesting cadence (with 2025 contributions approved, and addendum extending company contributions through 2028) create multi‑year retention hooks for senior leadership, including Mr. Chalfant .