Heritage Financial Announces Third Quarter 2025 Results and Declares Regular Cash Dividend of $0.24 Per Share

Core Insights - Heritage Financial Corporation reported a net income of $19.2 million for Q3 2025, a significant increase from $12.2 million in Q2 2025 and $11.4 million in Q3 2024, with diluted earnings per share rising to $0.55 from $0.36 and $0.33 respectively [1][6][24] Financial Performance - Net interest income increased by 8.3% year-over-year, driven by margin expansion as loan yields rose and deposit costs decreased [2][24] - The net interest margin improved to 3.64%, up 13 basis points from 3.51% in Q2 2025 and 34 basis points from 3.30% in Q3 2024 [21][24] - Total assets decreased slightly to $7.01 billion from $7.07 billion in Q2 2025, while total deposits increased by $73.1 million, or 1.3%, to $5.86 billion [3][10] Loan and Deposit Trends - Loans receivable decreased by $5.7 million, or 0.1%, primarily due to elevated prepayments, although new loan production increased to $174.5 million from $139.9 million in Q2 2025 [7][9] - Noninterest demand deposits rose by 2.1%, contributing to an overall increase in non-maturity deposits of $104.5 million, or 2.2% [10][11] Acquisition Plans - The company is preparing for the acquisition of Olympic Bancorp and its subsidiary, Kitsap Bank, expected to close in Q1 2026, which is anticipated to enhance the balance sheet and profitability [2][6] Noninterest Income and Expenses - Noninterest income surged to $8.3 million in Q3 2025, a substantial increase from $1.5 million in Q2 2025, primarily due to the absence of losses from the sale of investment securities [27][28] - Noninterest expenses rose by $0.5 million, or 1.3%, to $41.6 million, mainly due to increased compensation and professional fees related to merger activities [31][32] Capital and Liquidity - Total stockholders' equity increased by $15.9 million, or 1.8%, to $904.1 million, supported by net income and a decrease in accumulated other comprehensive loss [11] - The company maintained strong capital ratios, with a common equity tier 1 capital ratio of 12.4% and a leverage ratio of 10.5% as of September 30, 2025 [12] Credit Quality - The allowance for credit losses on loans increased to 1.13% of loans receivable, reflecting a provision for credit losses of $1.6 million during Q3 2025 [14][15] - Classified loans decreased to 2.0% of total loans, indicating improved credit quality [17]