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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation On May 3, 2023, based upon the recommendation of the Compensation Committee, the Company's shareholders approved the Heritage Financial Corporation 2023 Omnibus Equity Plan, or "Equity Plan", that provides for the issuance of 1,250,000 shares of the Company's common stock in the form of various types of stock-based compensation. As of December 31, 2023, there were 1,200,714 shares available for future issuance under the Equity Plan. The Equity Plan replaces the Heritage Financial Corporation 2014 Omnibus Equity Plan (the "2014 Plan"). All remaining shares available for future issuance under the 2014 Plan were terminated upon approval of the Equity Plan. All shares issued under the 2014 Plan remain outstanding and are governed by the 2014 Plan. (a) Restricted Stock Units Restricted stock units generally vest ratably over three years, participate in dividends and are subject to service conditions in accordance with each award agreement. Performance-based restricted stock units have a three-year cliff vesting schedule, participate in dividends and are additionally subject to performance-based vesting. The conditions of the grants allow for an actual payout ranging between no payout and 150% of target. The payout level is calculated based on the percentile level of the market condition, which includes the ratio of the Company's total shareholder return and the ratio of the Company's return on average assets and return on tangible common equity over the performance period in relation to the performance of these metrics of a predetermined peer group. The fair value of each performance-based restricted stock unit, inclusive of the market condition, was determined using a Monte Carlo simulation and will be recognized over the vesting period. The Monte-Carlo simulation model uses the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair value determination the possibility the market condition may not be satisfied. Compensation costs related to these awards are recognized regardless of whether the market condition is satisfied, provided the requisite service has been provided. The Company used the following assumptions to estimate the fair value of performance-based restricted share units granted for the periods indicated:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Shares issued | 15,112 |  |  | 15,464 |  |  | 14,347 |
Expected Term in Years | 2.9 |  | 2.9 |  | 2.9
Weighted-Average Risk Free Interest Rate | 4.4 | % |  | 1.7 | % |  | 0.3 | %
Weighted Average Fair Value | 23.85 |  |  | 25.87 |  |  | 24.49 |
Range of peer company volatilities | 25.8%-107.5% |  | 31.6%-77.8% |  | 31.4%-136.4%
Company volatility | 35.8 | % |  | 41.3 | % |  | 40.2 | %
Expected volatilities in the model were estimated using a historical period consistent with the performance period of approximately three years. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the expected life of the grant. For the years ended December 31, 2023, 2022 and 2021, the Company recognized compensation expense related to restricted stock units of $4.3 million, $3.8 million, and $3.7 million respectively, and a related tax benefit of $949,000, $833,000, and $802,000, respectively. As of December 31, 2023, the total unrecognized compensation expense related to non-vested restricted stock units was $6.8 million and the related weighted-average period over which the compensation expense is expected to be recognized was approximately 2.1 years. The vesting date fair value of the restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $3.5 million, $3.3 million and $3.6 million, respectively. The following table summarizes the unit activity for the periods indicated:
| Units |  | Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2020 | 316,116 |  |  | $ | 26.57 |
Granted | 147,944 |  |  | 25.70 |
Vested | (125,377) |  |  | 26.84 |
Forfeited | (23,669) |  |  | 27.20 |
Nonvested at December 31, 2021 | 315,014 |  |  | 26.01 |
Granted | 230,402 |  |  | 25.72 |
Vested | (127,952) |  |  | 26.99 |
Forfeited | (38,572) |  |  | 26.73 |
Nonvested at December 31, 2022 | 378,892 |  |  | 25.42 |
Granted | 225,107 |  |  | 25.53 |
Vested | (162,752) |  |  | 25.05 |
Forfeited | (33,359) |  |  | 26.08 |
Nonvested at December 31, 2023 | 407,888 |  |  | $ | 25.59 |

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