Heritage Financial Corporation (HFWA)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | — | 72,915 | 94,377 | 93,468 | 87 |
| Interest expense | US$ in thousands | 100,348 | 59,310 | 8,072 | 7,042 | 13,323 |
| Interest coverage | 0.00 | 1.23 | 11.69 | 13.27 | 0.01 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $100,348K
= 0.00
The interest coverage ratio for Heritage Financial Corporation has displayed significant fluctuations over the years. In 2020, the ratio was extremely low at 0.01, indicating that the company's operating income was only able to cover a minimal portion of its interest expenses. This raised concerns about the firm's ability to meet its interest obligations.
However, there was a substantial improvement in 2021, with the interest coverage ratio rising to a healthy 13.27. This indicates that the company's operating income was more than sufficient to cover its interest expenses, reflecting a strong financial position and reduced risk of defaulting on interest payments.
In the following years, the interest coverage ratio remained relatively stable, ranging between 11.69 and 1.23. Despite a slight decrease in 2023, the company continued to maintain a comfortable margin of coverage for its interest obligations.
The sharp decline to 0.00 in 2024 is a cause for concern as it suggests that the company's operating income may no longer be covering its interest expenses. This could potentially signal financial distress and the need for closer scrutiny of the company's debt management strategies and overall financial health.
In conclusion, while Heritage Financial Corporation has shown improvement in managing its interest expenses, the significant fluctuations in the interest coverage ratio highlight the importance of closely monitoring the company's financial performance and debt servicing capabilities.