Core Viewpoint - Heritage Financial Corporation reported strong financial performance in Q4 2025, with significant increases in net income, earnings per share, and net interest income compared to previous quarters and the same period last year [2][3][28]. Financial Performance - Net income for Q4 2025 was $22.2 million, up from $19.2 million in Q3 2025 and $11.9 million in Q4 2024 [2][5]. - Diluted earnings per share increased to $0.65 in Q4 2025 from $0.55 in Q3 2025 and $0.34 in Q4 2024 [2][4]. - Adjusted diluted earnings per share rose to $0.66 in Q4 2025, compared to $0.56 in Q3 2025 and $0.51 in Q4 2024 [2][4]. Profitability Metrics - Return on average assets improved to 1.27% in Q4 2025 from 1.09% in Q3 2025 [4][5]. - Return on average common equity increased to 9.68% in Q4 2025 from 8.52% in Q3 2025 [4]. - Net interest margin rose to 3.72%, an increase of 8 basis points from 3.64% in Q3 2025 [4][25]. Deposit and Loan Growth - Total deposits increased by $62.7 million, or 1.1%, to $5.92 billion at the end of Q4 2025 [12][13]. - Loans receivable rose by $14.1 million, or 0.3%, during Q4 2025, driven by new loan production [10][12]. Acquisition Plans - The company is set to complete the acquisition of Olympic Bancorp, Inc. and its subsidiary, Kitsap Bank, with regulatory and shareholder approvals already obtained [3][5]. Noninterest Income - Noninterest income decreased by $338,000 to $8.0 million in Q4 2025 compared to $8.3 million in Q3 2025, primarily due to declines in card revenue and other income [31]. - However, noninterest income increased by $4.7 million compared to the same period in 2024, largely due to a prior year loss from the sale of investment securities [32]. Credit Quality - The allowance for credit losses on loans as a percentage of loans receivable was 1.10% at the end of Q4 2025, down from 1.13% at the end of Q3 2025 [18]. - Classified loans increased by $22.4 million, raising the percentage of classified loans to 2.4% of loans receivable [22]. Liquidity Position - Total liquidity sources available were $2.62 billion at the end of Q4 2025, representing a coverage ratio of 44.2% of total deposits [23][24].

Core Viewpoint - Analysts project that Heritage Financial (HFWA) will report quarterly earnings of $0.57 per share, reflecting an 11.8% year-over-year increase, with revenues expected to reach $65.7 million, a 7.8% increase from the same quarter last year [1]. Earnings Estimates - The consensus EPS estimate for the quarter has been revised upward by 1.9% over the past 30 days, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock price performance [3]. Key Financial Metrics - Analysts estimate the 'Net Interest Margin' at 3.7%, up from 3.4% in the same quarter last year [5]. - The 'Efficiency Ratio' is projected to be 63.1%, a significant improvement from 69.3% reported in the same quarter last year [5]. - 'Total Nonperforming Assets' are estimated at $16.75 million, compared to $5.27 million in the same quarter last year [6]. - 'Total Nonaccrual Loans' are expected to reach $14.25 million, up from $4.08 million a year ago [6]. - The 'Average Balance - Total interest earning assets' is estimated at $6.27 billion, slightly down from $6.31 billion a year ago [7]. - 'Total Noninterest Income' is projected at $8.00 million, compared to $3.29 million in the same quarter last year [7]. - 'Net Interest Income' is expected to be $57.71 million, an increase from $53.76 million reported in the same quarter last year [8]. Market Performance - Heritage Financial shares have returned +1.1% over the past month, outperforming the Zacks S&P 500 composite, which has seen a -0.4% change [8].

Group 1 - Heritage Financial Corporation announced a quarterly cash dividend of $0.24 per common share, to be paid on February 11, 2026, to shareholders of record on January 28, 2026 [1] - The dividend is being paid in advance of the normal quarterly dividend due to the anticipated merger with Olympic Bancorp, Inc. [1] Group 2 - Heritage Financial Corporation is based in Olympia and operates Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary [3] - Heritage Bank has a network of 51 banking offices located in Washington and Oregon [3] - The company's stock is traded on the NASDAQ Global Select Market under the symbol "HFWA" [3]

Core Insights - Heritage Financial Corporation has appointed Scott T. Allan to its Board of Directors, effective January 1, 2026 [1][2] - Mr. Allan brings a diverse background in engineering, consulting, and consumer brand leadership, which aligns with Heritage's focus on relationship-driven banking [2] - Heritage Bank operates a network of 51 banking offices in Washington and Oregon, and is a full-service commercial bank [4] Company Overview - Heritage Financial Corporation is based in Olympia, Washington, and its stock is traded on the NASDAQ under the symbol "HFWA" [4] - Heritage Bank, the sole wholly-owned subsidiary of Heritage Financial, also operates under the name Whidbey Island Bank on Whidbey Island [4] Leadership Background - Scott T. Allan has held various significant roles, including CEO of Hydro Flask and senior vice president at Helen of Troy, and currently serves as a partner at Cascade Growth Partners [2][3] - Allan has a Bachelor of Science in Mechanical Engineering from the University of California, Berkeley, and an MBA from the Kellogg School of Management at Northwestern University [3]

Group 1 - Heritage Financial (HFWA) shares have increased by 0.5% over the past four weeks, closing at $22.2, with a mean price target of $27.8 indicating a potential upside of 25.2% [1] - The mean estimate consists of five short-term price targets with a standard deviation of $2.05, where the lowest estimate of $26.00 suggests a 17.1% increase, and the highest estimate of $31.00 indicates a 39.6% surge [2] - Analysts show strong agreement on HFWA's ability to report better earnings than previously predicted, which supports the view of potential upside [4][11] Group 2 - The Zacks Consensus Estimate for HFWA's current year earnings has increased by 1% over the last 30 days, with two estimates moving higher and no negative revisions [12] - HFWA holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates [13] - While consensus price targets may not be reliable for predicting the extent of HFWA's gains, they can provide a directional guide for price movement [14]

Financial Performance - Net income for the three months ended September 30, 2025, was $19,169 thousand, up from $11,423 thousand in 2024, indicating a significant increase of approximately 67.9%[16] - Basic earnings per share increased to $0.56 for the three months ended September 30, 2025, compared to $0.33 in 2024, representing a growth of approximately 69.7%[16] - Comprehensive income for the three months ended September 30, 2025, was $22,912 thousand, compared to $38,394 thousand in 2024, reflecting a decrease of approximately 40.0%[17] - Net income allocated to common shareholders for the three months ended September 30, 2025, was $19,169 thousand, an increase of 67.8% compared to $11,423 thousand in the same period in 2024[100] - Income before income taxes increased by $17.0 million to $52.9 million for the nine months ended September 30, 2025, compared to $35.9 million in 2024[172] Asset and Liability Management - Total assets decreased to $7,011,879 thousand as of September 30, 2025, from $7,106,278 thousand at December 31, 2024, representing a decline of approximately 1.33%[14] - Total liabilities decreased to $6,107,815 thousand as of September 30, 2025, from $6,242,751 thousand at December 31, 2024, a decline of about 2.16%[14] - Total stockholders' equity increased to $904,064 thousand as of September 30, 2025, up from $874,514 thousand a year earlier, reflecting a growth of 3.4%[19] - Cash and cash equivalents at the end of the period increased to $245,491 thousand as of September 30, 2025, from $175,572 thousand a year earlier[24] Deposits and Loans - Total deposits rose to $5,857,464 thousand as of September 30, 2025, compared to $5,684,613 thousand at December 31, 2024, marking an increase of about 3.04%[14] - Total loans originated and purchased for the nine months ended September 30, 2025, were $35,113 thousand, compared to a net outflow of $342,880 thousand in the same period of 2024[23] - Total loans receivable balance as of September 30, 2025, was $4,769,160,000, reflecting a conversion from revolving loans to non-revolving amortizing loans during the nine months ended September 30, 2025[61] - New loans funded declined to $410.2 million during the nine months ended September 30, 2025, compared to $445.3 million during the same period in 2024[178] Income and Expenses - Net interest income increased to $57,371 thousand for the three months ended September 30, 2025, compared to $52,958 thousand for the same period in 2024, reflecting a growth of about 8.3%[16] - Noninterest income for the three months ended September 30, 2025, was $8,325 thousand, compared to $1,837 thousand in 2024, showing a substantial increase of approximately 353.5%[16] - Noninterest expense increased by $2.3 million, primarily due to higher compensation and employee benefits[142] - Total interest expense decreased by $4.7 million, attributed mainly to lower borrowing costs, with a significant reduction in average borrowings from $452.4 million to $136.6 million[153] Credit Quality and Losses - The provision for credit losses decreased to $1,775 thousand for the three months ended September 30, 2025, from $2,439 thousand in 2024, a reduction of about 27.1%[16] - Nonaccrual loans totaled $17,612,000 as of September 30, 2025, with $15,227,000 classified as nonaccrual without allowance for credit losses (ACL)[63] - The allowance for credit losses (ACL) on loans increased by $2.6 million to $53.97 million at September 30, 2025, representing 1.13% of loans receivable[184] - The total gross charge-offs for the nine months ended September 30, 2025, were $1,308,000, compared to $3,395,000 for the same period in 2024, indicating a reduction in charge-offs[62] Regulatory and Compliance - The Company maintained a common equity Tier 1 capital ratio of 12.4% as of September 30, 2025, above the regulatory minimum of 4.5%[197] - The leverage ratio for the Company was 10.5% as of September 30, 2025, significantly higher than the regulatory minimum of 4.0%[197] - The Company’s total capital ratio was 13.8%, exceeding the regulatory minimum of 8.0% for "adequately capitalized" institutions[197] Strategic Initiatives and Future Outlook - Future outlook remains positive with ongoing efforts in new product development and market expansion strategies[61] - The company’s ability to execute its strategic plan for growth through organic means or acquisitions remains a critical factor for net income[139] - The proposed merger between Olympic Bancorp, Inc. and the Company may face litigation from shareholders seeking financial damages or injunctions[213]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Performance - Net income for Q3 2025 was $19.2 million, a 57.4% increase from $12.2 million in Q2 2025 and a 68.1% increase from $11.4 million in Q3 2024[2] - Diluted earnings per share rose to $0.55 in Q3 2025, compared to $0.36 in Q2 2025 and $0.33 in Q3 2024[4] - Noninterest income increased by $6.8 million to $8.3 million in Q3 2025, compared to $1.5 million in Q2 2025, primarily due to a previous loss from investment securities[26] - Net income for the quarter was $19,169,000, a 57.5% increase from $12,215,000 in the previous quarter[43] - Basic earnings per share rose to $0.56 for the quarter, compared to $0.36 in the previous quarter, reflecting strong profitability growth[43] - Adjusted net income (non-GAAP) for the quarter was $19,671 thousand, compared to $18,141 thousand in the previous quarter, reflecting an increase of 8.4%[55] - Net income (GAAP) for the quarter ended September 30, 2025, was $19,169 million, an increase from $12,215 million in the previous quarter[63] Interest Income and Margin - Net interest income increased by $2.4 million, or 4.3%, during the third quarter of 2025, attributed to a $1.0 million rise in total interest income[22] - Total interest income for the third quarter of 2025 was $57,371,000, representing a net interest margin of 3.64%[25] - Net interest margin improved to 3.64%, up 13 basis points from 3.51% in Q2 2025[4] - The yield on loans receivable increased to 5.53% in the third quarter of 2025, up from 5.50% in the previous quarter[21] - Net interest income (GAAP) increased to $57,371 million from $54,983 million in the prior quarter[66] Deposits and Loans - Total deposits increased by $73.1 million, or 1.3% (5.0% annualized), reaching $5.86 billion at the end of Q3 2025[9] - New loans funded in Q3 2025 increased to $174.5 million, up from $139.9 million in Q2 2025[7] - Total deposits increased to $5,857,464 thousand as of September 30, 2025, compared to $5,784,413 thousand as of June 30, 2025, reflecting a growth of approximately 1.26%[41] - The loans to deposits ratio was 81.4%, down from 82.5% in the previous quarter, indicating a tighter lending environment[51] Expenses and Efficiency - Noninterest expense rose by $0.5 million, or 1.3%, to $41.6 million in Q3 2025, driven by increased compensation and merger-related costs[29] - The efficiency ratio improved to 63.3%, down from 71.7% in Q3 2024[5] - The efficiency ratio improved to 63.3% in Q3 2025 from 72.7% in Q2 2025, indicating better cost management[49] - The adjusted efficiency ratio (non-GAAP) was 62.4%, compared to 64.9% in the previous quarter[66] Capital and Equity - Total stockholders' equity rose by $15.9 million, or 1.8%, to $904.1 million at September 30, 2025, driven by $19.2 million in net income for the quarter[11] - The common equity tier 1 capital ratio improved to 12.4% from 12.2% in the previous quarter, indicating stronger capital adequacy[51] - Tangible common equity to tangible assets ratio increased to 9.8% from 9.4% in the previous quarter, showing enhanced capital efficiency[59] Credit Quality - The allowance for credit losses on loans increased to 1.13% at September 30, 2025, up from 1.10% at June 30, 2025, with a provision for credit losses of $1.6 million recorded in the third quarter[13] - Nonaccrual loans increased by $7.7 million during the third quarter of 2025, primarily due to two residential construction loans totaling $6.7 million[17] - Total nonperforming loans increased to $20,950,000 as of September 30, 2025, from $18,478,000 at the end of June 2025[47] - Total charge-offs for the quarter were $374,000, a decrease from $558,000 in the previous quarter[47] Future Outlook - The company announced a definitive agreement to acquire Olympic Bancorp, expected to close in Q1 2026, enhancing balance sheet strength and profitability[3] - The company cautions that actual results may differ materially from forward-looking statements due to various economic and operational factors[37]

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 5.7% quarter-over-quarter and 24.4% year-over-year [3] - Return on assets (ROA) improved to 1.11% from 0.87% in the same quarter last year [3] - Net interest income rose by $2.4 million, or 4.3%, from the prior quarter [6] - Net interest margin increased to 3.64% from 3.51% in the prior quarter and from 3.30% in the third quarter of 2024 [7][17] - Total regulatory capital ratios remain above well-capitalized thresholds, with the tangible common equity (TCE) ratio rising to 9.8% from 9.4% [8] Business Line Data and Key Metrics Changes - Total loan balances decreased by $5.7 million, despite an increase in loan originations [4] - Commercial lending group closed $317 million in new loan commitments, up from $248 million last quarter [13] - The commercial loan pipeline ended the quarter at $511 million, up from $473 million last quarter [14] - Total deposits increased by $73 million in Q3, with non-interest-bearing deposits rising by $33.7 million [4][5] Market Data and Key Metrics Changes - The cost of interest-bearing deposits decreased to 1.89% from 1.94% in the prior quarter [5] - Average interest rate for new commercial loans was 6.67%, up 12 basis points from the previous quarter [16] - Average balances on new accounts opened during the quarter were estimated at $40 million, compared to $72 million in the second quarter [16] Company Strategy and Development Direction - The pending merger with Olympic Bank Corp is expected to enhance profitability and growth in the Puget Sound market [3][17] - The company aims to return to traditional loan growth rates of mid to high single digits in 2026 [25] - Focus on maintaining strong credit quality while navigating economic volatility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in credit quality despite economic volatility, with no material impact observed [12] - The company anticipates loan balances to remain flat in Q4 but expects growth to resume in 2026 as payoffs normalize [25][26] - Management is optimistic about the integration of Olympic Bank Corp and its potential to drive future growth [44][55] Other Important Information - Non-accrual loans totaled $17.6 million, representing 0.37% of total loans, an increase from 0.21% in the previous quarter [9] - Non-interest expense increased by $530,000, primarily due to compensation and benefits expenses [7] - The company has paused stock buybacks for the remainder of the year [8] Q&A Session Summary Question: What is the spot cost of deposits and NIM for September? - The spot rate on interest-bearing deposits was 1.87%, and the NIM for September was 3.66% [23] Question: How much opportunity is there to reduce rates on non-maturity deposits? - There is potential to reduce rates on approximately $1 billion in exception-priced deposits currently costing close to 3% [24] Question: What is the outlook for organic loan growth in 2026? - The company expects to return to mid to high single-digit growth rates in 2026, with positive net advances anticipated [25][26] Question: How has competition been trending in the markets? - Competition remains strong, with pricing competition on deposits varying by geography [42] Question: What are the capital priorities post-deal close? - The company plans to preserve capital during the transaction costs and anticipates earning back capital over time [62] Question: How is the loan-to-deposit ratio being managed? - The goal is to increase the loan-to-deposit ratio back to 85% and potentially higher [64]

Financial Data and Key Metrics Changes - Adjusted earnings per share increased by 5.7% quarter-over-quarter and 24.4% year-over-year [3] - Return on assets (ROA) improved to 1.11% from 0.87% in the same quarter last year [3] - Net interest income rose by $2.4 million, or 4.3%, from the prior quarter [6] - Net interest margin increased to 3.64% from 3.51% in the previous quarter [7] - Total capital ratios remain above well-capitalized thresholds, with the tangible common equity (TCE) ratio rising to 9.8% from 9.4% [8] Business Line Data and Key Metrics Changes - Total loan balances decreased by $5.7 million, despite an increase in loan originations [4] - Loan yields in the portfolio were 5.53%, up three basis points from the previous quarter [4] - Total deposits increased by $73 million, with non-interest-bearing deposits rising by $33.7 million [5] - Investment balances decreased by $33 million due to expected principal cash flows [5] Market Data and Key Metrics Changes - The average interest rate for new commercial loans was 6.67%, up 12 basis points from the previous quarter [16] - The deposit pipeline ended the quarter at $149 million, compared to $132 million in the second quarter [16] Company Strategy and Development Direction - The pending merger with Olympic Bank Corp is expected to enhance profitability and growth in the Puget Sound market [3] - The company aims to return to traditional loan growth rates of mid to high single digits in 2026 [25] - The focus remains on managing loan-to-deposit ratios, with a target of reaching 85% [64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in credit quality despite economic volatility, noting no material impact on credit metrics [12] - The company anticipates continued deposit growth and a positive outlook for loan production in the upcoming quarters [17] - Management is closely monitoring the economic environment but sees no immediate threats to loan demand [27] Other Important Information - Non-accrual loans totaled $17.6 million, representing 0.37% of total loans, an increase from 0.21% in the previous quarter [9] - The company halted lost trade activity and did not purchase any securities in Q3 to preserve capital for the acquisition [6] Q&A Session Summary Question: What is the spot cost of deposits and NIM for September? - The spot rate on interest-bearing deposits was 1.87%, and the NIM for September was 3.66% [23] Question: How much opportunity is there to reduce rates on non-maturity deposits? - There is potential to reduce rates on approximately $1 billion in exception-priced deposits currently costing close to 3% [24] Question: What is the outlook for organic loan growth in 2026? - The company expects to return to mid to high single-digit growth rates in 2026, with positive net advances anticipated [25][26] Question: How has competition been trending in the markets? - Competition remains strong, with pricing competition on deposits varying by geography [42] Question: What are the capital priorities post-deal approval and integration? - The focus will be on preserving capital during the transaction costs associated with the merger, with potential for future buybacks to be evaluated later [62]