Heritage Financial Announces Fourth Quarter and Annual 2025 Results
Fourth Quarter 2025 Highlights
OLYMPIA, Wash., Jan. 22, 2026 /PRNewswire/ -- Heritage Financial Corporation (Nasdaq GS: HFWA) (the "Company", "we," or "us"), the parent company of Heritage Bank (the "Bank"), today reported net income of $22.2 million for the fourth quarter of 2025, compared to $19.2 million for the third quarter of 2025 and $11.9 million for the fourth quarter of 2024. Diluted earnings per share were $0.65 for the fourth quarter of 2025, compared to $0.55 for the third quarter of 2025 and $0.34 for the fourth quarter of 2024. Adjusted diluted earnings per share (1) were $0.66 for the fourth quarter of 2025, compared to $0.56 for the third quarter of 2025 and $0.51 for the fourth quarter of 2024.
Bryan McDonald, President and Chief Executive Officer of the Company, commented, "We are very pleased with our operating results for the fourth quarter, which included stronger profitability, deposit growth, margin expansion and lower cost of deposits. The improvement in net interest margin provided an 8.6% increase in net interest income over fourth quarter 2024 levels. This quarter showed the strength of our quality banking franchise with 29% growth in adjusted diluted earnings per share from the same period in the prior year. We remain focused on generating long-term financial results for our shareholders."
Mr. McDonald continued, "We are also pleased with the progress made in completing the pending acquisition of Olympic and its subsidiary, Kitsap Bank. Having received both regulatory and shareholder approvals, we look forward to closing the transaction at the end of January and bringing together our two organizations."
(1)
Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" section for a reconciliation to the comparable GAAP financial measure.
Financial Highlights
The following table provides financial highlights as of the dates and for the periods indicated:
As of or for the Quarter Ended
December 31,
2025
September 30,
2025
December 31,
2024
(Dollars in thousands, except per share amounts)
Net income
$ 22,237
$ 19,169
$ 11,928
Diluted earnings per share
0.65
0.55
0.34
Adjusted diluted earnings per share (1)
0.66
0.56
0.51
Return on average assets (2)
1.27 %
1.09 %
0.66 %
Return on average common equity (2)
9.68
8.52
5.46
Return on average tangible common equity (1)(2)
13.33
11.86
7.81
Adjusted return on average tangible common equity (1)(2)
13.51
12.16
11.59
Net interest margin (2)
3.72
3.64
3.36
Cost of total deposits (2)
1.32
1.37
1.39
Efficiency ratio
62.5
63.3
69.3
Adjusted efficiency ratio (1)
61.9
62.4
64.4
Noninterest expense to average total assets (2)
2.37
2.36
2.20
Total assets
$ 6,967,350
$ 7,011,879
$ 7,106,278
Loans receivable
4,783,266
4,769,160
4,802,123
Total deposits
5,920,199
5,857,464
5,684,613
Loan to deposit ratio (3)
80.8 %
81.4 %
84.5 %
Book value per share
$ 27.13
$ 26.62
$ 25.40
Tangible book value per share (1)
19.98
19.46
18.22
(1)
Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" section for a reconciliation to the comparable GAAP financial measure.
(2)
Annualized.
(3)
Loans receivable divided by total deposits.
Balance Sheet
Total investment securities decreased $31.2 million, or 2.4%, to $1.28 billion at December 31, 2025, from $1.31 billion at September 30, 2025. Investment maturities and repayments totaled $37.7 million during the fourth quarter of 2025. The decrease was partially offset by purchases of $3.5 million and a $2.9 million decrease in unrealized losses on available for sale securities.
The following table summarizes the composition of the Company's investment securities portfolio at the dates indicated:
December 31, 2025
September 30, 2025
Change
Balance
% of
Total
Balance
% of
Total
$
%
(Dollars in thousands)
Investment securities available for sale, at fair value:
U.S. government and agency securities
$ 11,702
0.9 %
$ 11,642
0.9 %
$ 60
0.5 %
Municipal securities
51,423
4.0
51,197
3.9
226
0.4
Residential CMO and MBS (1)
275,268
21.5
298,737
22.8
(23,469)
(7.9)
Commercial CMO and MBS (1)
252,164
19.7
255,995
19.5
(3,831)
(1.5)
Corporate obligations
10,532
0.8
7,019
0.5
3,513
50.0
Other asset-backed securities
6,433
0.5
6,641
0.5
(208)
(3.1)
Total
$ 607,522
47.4 %
$ 631,231
48.1 %
$ (23,709)
(3.8) %
Investment securities held to maturity, at amortized cost:
U.S. government and agency securities
$ 151,319
11.8 %
$ 151,297
11.5 %
$ 22
— %
Residential CMO and MBS (1)
217,707
17.0
224,654
17.1
(6,947)
(3.1)
Commercial CMO and MBS (1)
305,081
23.8
305,675
23.3
(594)
(0.2)
Total
$ 674,107
52.6 %
$ 681,626
51.9 %
$ (7,519)
(1.1) %
Total investment securities
$ 1,281,629
100.0 %
$ 1,312,857
100.0 %
$ (31,228)
(2.4) %
(1)
U.S. government agency and government-sponsored enterprise CMO and MBS.
Loans receivable increased $14.1 million, or 0.3%, during the fourth quarter of 2025 due to new loan production for the quarter offset partially by an elevated level of prepaid and closed loans. New loans funded during the fourth quarter of 2025 were $173.1 million, compared to $174.5 million during the third quarter of 2025. Loan prepayments increased to $77.2 million during the quarter, compared to $75.6 million during the prior quarter. Loan payoffs increased to $74.5 million, compared to $55.8 million in the prior quarter.
Commercial and industrial loans decreased $1.1 million, or 0.1%, during the fourth quarter of 2025, due primarily to pay downs on outstanding balances, partially offset by new loan production of $28.8 million. Owner-occupied commercial real estate ("CRE") loans increased $12.1 million, or 1.2%, during the fourth quarter of 2025, due primarily to new loan production of $40.0 million, partially offset by pay downs on outstanding balances. Non-owner occupied CRE loans increased $119.7 million, or 6.2%, during the quarter, due primarily to transfers from commercial and multifamily construction loans and new loan production of $76.5 million, partially offset by pay downs on outstanding balances. Residential real estate loans decreased by $16.0 million, or 4.3%, during the quarter, due to loan payoffs. Residential construction loans increased by $4.9 million, or 5.4%, during the quarter, due primarily to new loan production. Commercial and multifamily construction loans decreased $103.2 million, or 29.4%, during the quarter, due primarily to transfers to non-owner occupied CRE loans and paydowns on outstanding balances.
The following table summarizes the Company's loans receivable at the dates indicated:
December 31, 2025
September 30, 2025
Change
Balance
% of
Total
Balance
% of
Total
$
%
(Dollars in thousands)
Commercial business:
Commercial and industrial
$ 818,000
17.1 %
$ 819,076
17.2 %
$ (1,076)
(0.1) %
Owner-occupied CRE
1,034,829
21.6
1,022,727
21.4
12,102
1.2
Non-owner occupied CRE
2,057,844
43.0
1,938,190
40.6
119,654
6.2
Total commercial business
3,910,673
81.7
3,779,993
79.2
130,680
3.5
Residential real estate
358,834
7.5
374,875
7.9
(16,041)
(4.3)
Real estate construction and land development:
Residential
95,350
2.0
90,440
1.9
4,910
5.4
Commercial and multifamily
247,975
5.2
351,196
7.4
(103,221)
(29.4)
Total real estate construction and land
development
343,325
7.2
441,636
9.3
(98,311)
(22.3)
Consumer
170,434
3.6
172,656
3.6
(2,222)
(1.3)
Loans receivable
$ 4,783,266
100.0 %
$ 4,769,160
100.0 %
$ 14,106
0.3
Total deposits increased $62.7 million, or 1.1%, to $5.92 billion at December 31, 2025 from $5.86 billion at September 30, 2025. Non-maturity deposits increased by $75.1 million, or 1.5%, from September 30, 2025, due primarily to an increase in customer balances in interest bearing demand accounts. The increase in non-maturity deposits was partially offset by a decrease of $12.4 million in certificates of deposit accounts.
The following table summarizes the Company's total deposits at the dates indicated:
December 31, 2025
September 30, 2025
Change
Balance
% of
Total
Balance
% of
Total
$
%
(Dollars in thousands)
Noninterest demand deposits
$ 1,597,650
27.0 %
$ 1,617,909
27.6 %
$ (20,259)
(1.3) %
Interest bearing demand deposits
1,627,259
27.5
1,526,685
26.1
100,574
6.6
Money market accounts
1,334,904
22.5
1,332,501
22.7
2,403
0.2
Savings accounts
422,523
7.1
430,127
7.3
(7,604)
(1.8)
Total non-maturity deposits
4,982,336
84.1
4,907,222
83.7
75,114
1.5
Certificates of deposit
937,863
15.9
950,242
16.3
(12,379)
(1.3)
Total deposits
$ 5,920,199
100.0 %
$ 5,857,464
100.0 %
$ 62,735
1.1 %
Total borrowings decreased $118.0 million to $20.0 million at December 31, 2025, from $138.0 million at September 30, 2025. All outstanding borrowings at December 31, 2025 were with the Federal Home Loan Bank ("FHLB") and mature within one year.
Total stockholders' equity increased $17.4 million, or 1.9%, to $921.5 million at December 31, 2025, compared to $904.1 million at September 30, 2025, due primarily to $22.2 million of net income recognized for the quarter and a $2.2 million decrease in accumulated other comprehensive loss. These increases were partially offset by $8.2 million in dividends paid to common shareholders during the quarter.
The Company and Bank continued to maintain capital levels in excess of the applicable regulatory requirements for them both to be categorized as "well-capitalized" at December 31, 2025.
The following table summarizes the capital ratios for the Company at the dates indicated:
December 31,
2025
September 30,
2025
Stockholders' equity to total assets
13.2 %
12.9 %
Tangible common equity to tangible assets (1)
10.1
9.8
Common equity tier 1 capital ratio (2)
12.7
12.4
Leverage ratio (2)
10.8
10.5
Tier 1 capital ratio (2)
13.1
12.8
Total capital ratio (2)
14.1
13.8
(1)
Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" section for a reconciliation to the comparable GAAP financial measure.
(2)
Current quarter ratios are estimates pending completion and filing of the Company's regulatory reports.
Allowance for Credit Losses and Provision for Credit Losses
The allowance for credit losses ("ACL") on loans as a percentage of loans receivable was 1.10% at December 31, 2025 compared to 1.13% at September 30, 2025. The decrease in the ACL as a percentage of loans was due primarily to a change in the mix of loans due decreases in the real estate construction and land development segment which has a higher ACL as a percentage of loans, offset by an increase in other segments with a lower ACL as a percentage of loans. During the fourth quarter of 2025, the Company recorded a $0.9 million reversal of provision for credit losses on loans, compared to a $1.6 million provision during the third quarter of 2025.
During the fourth quarter of 2025, the Company recorded a $95,000 provision for credit losses on unfunded commitments compared to a $212,000 provision during the third quarter of 2025. The provision for credit losses on unfunded commitments during the fourth quarter of 2025 was due primarily to a decrease in utilization rates.
The following table provides detail on the changes in the ACL on loans and the ACL on unfunded commitments ("ACL on Unfunded"), and the related (reversal of) provision for credit losses for the periods indicated:
As of or for the Quarter Ended
December 31, 2025
September 30, 2025
December 31, 2024
ACL on
Loans
ACL on
Unfunded
Total
ACL on
Loans
ACL on
Unfunded
Total
ACL on
Loans
ACL on
Unfunded
Total
(Dollars in thousands)
Balance, beginning of
period
$ 53,974
$ 952
$ 54,926
$ 52,529
$ 740
$ 53,269
$ 51,391
$ 508
$ 51,899
(Reversal of) provision
for credit losses
(909)
95
(814)
1,563
212
1,775
1,104
79
1,183
(Net charge-offs) /
recoveries
(481)
—
(481)
(118)
—
(118)
(27)
—
(27)
Balance, end of period
$ 52,584
$ 1,047
$ 53,631
$ 53,974
$ 952
$ 54,926
$ 52,468
$ 587
$ 53,055
Credit Quality
Classified loans (loans rated substandard or worse) increased $22.4 million from the prior quarter, resulting in the percentage of classified loans to loans receivable increasing to 2.4% at December 31, 2025, compared to 2.0% at September 30, 2025.
The following table illustrates total loans by risk rating and their respective percentage of total loans at the dates indicated:
December 31, 2025
September 30, 2025
Balance
% of
Total
Balance
% of
Total
(Dollars in thousands)
Risk Rating:
Pass
$ 4,595,321
96.1 %
$ 4,574,623
95.9 %
Special Mention
71,122
1.5
100,160
2.1
Substandard
116,823
2.4
94,377
2.0
Total
$ 4,783,266
100.0 %
$ 4,769,160
100.0 %
Nonaccrual loans increased by $3.4 million during the fourth quarter of 2025 due primarily to the migration of three non-owner occupied CRE loans totaling $3.9 million, offset partially by principal payments received. The following table illustrates changes in nonaccrual loans during the periods indicated:
Quarter Ended
December 31,
2025
September 30,
2025
December 31,
2024
(Dollars in thousands)
Balance, beginning of period
$ 17,612
$ 9,865
$ 4,301
Additions
4,446
8,288
160
Net principal payments and transfers to accruing status
(1,082)
(207)
(250)
Payoffs
—
(137)
(132)
Charge-offs
—
(197)
—
Balance, end of period
$ 20,976
$ 17,612
$ 4,079
Nonaccrual loans to loans receivable
0.44 %
0.37 %
0.08 %
Liquidity
Total liquidity sources available at December 31, 2025 were $2.62 billion. This included on- and off-balance sheet liquidity. The Company has access to FHLB advances and the Federal Reserve Bank ("FRB") Discount Window. The Company's available liquidity sources at December 31, 2025 represented a coverage ratio of 44.2% of total deposits and 107.7% of estimated uninsured deposits.
The following table summarizes the Company's available liquidity as of the dates indicated:
Quarter Ended
December 31,
2025
September 30,
2025
(Dollars in thousands)
On-balance sheet liquidity
Cash and cash equivalents
$ 233,089
$ 245,491
Unencumbered investment securities available for sale (1)
606,968
630,666
Total on-balance sheet liquidity
$ 840,057
$ 876,157
Off-balance sheet liquidity
FRB borrowing availability
$ 346,307
$ 347,119
FHLB borrowing availability (2)
1,285,640
1,140,425
Fed funds line borrowing availability with correspondent banks
145,000
145,000
Total off-balance sheet liquidity
$ 1,776,947
$ 1,632,544
Total available liquidity
$ 2,617,004
$ 2,508,701
(1)
Investment securities available for sale at fair value.
(2)
Includes FHLB total borrowing availability of $1.31 billion at December 31, 2025 based on pledged assets, however, maximum credit capacity was 45% of the Bank's total assets one quarter in arrears or $3.15 billion.
Net Interest Margin and Net Interest Income
Net interest margin increased 8 basis points to 3.72% during the fourth quarter of 2025, from 3.64% during the third quarter of 2025.
The yield on interest earning assets decreased one basis point to 5.03% for the fourth quarter of 2025, compared to 5.04% for the third quarter of 2025. The yield on loans receivable increased one basis point to 5.54% during the fourth quarter of 2025, compared to 5.53% during the third quarter of 2025 as new loans were booked and adjustable rate loans repriced at higher rates, partially offset by the impacts of the three fed funds rate cuts occurring during the last four months of the year.
The cost of interest bearing deposits decreased six basis points to 1.83% for the fourth quarter of 2025, from 1.89% for the third quarter of 2025. This decrease was primarily due to a decrease in certificate of deposit rates.
Net interest income increased $1.0 million, or 1.7%, during the fourth quarter of 2025 compared to the third quarter of 2025 due to a decrease in interest expense of $1.6 million, offset partially by a $0.6 million decrease in total interest income.
Net interest margin increased 36 basis points to 3.72% during the fourth quarter of 2025, compared to 3.36% for the same period in the prior year. Net interest income increased $4.6 million, or 8.6%, during the fourth quarter of 2025 compared to the same period in the prior year. The increase was due primarily to a change in the mix of earning assets to higher yielding loan balances and a decrease in deposit and borrowing interest expense due to lower rates and lower borrowing balances.
The following table provides net interest income information for the periods indicated:
Quarter Ended
December 31, 2025
September 30, 2025
December 31, 2024
Average
Balance
Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance
Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance
Interest
Earned/
Paid
Average
Yield/
Rate (1)
(Dollars in thousands)
Interest Earning Assets:
Loans receivable (2)(3)
$ 4,770,300
$ 66,669
5.54 %
$ 4,762,648
$ 66,422
5.53 %
$ 4,717,748
$ 64,864
5.47 %
Taxable securities
1,285,948
10,546
3.25
1,314,374
11,102
3.35
1,514,210
12,510
3.29
Nontaxable securities (3)
15,578
135
3.44
15,242
138
3.59
16,138
146
3.60
Interest earning deposits
151,477
1,512
3.96
166,182
1,846
4.41
119,275
1,440
4.80
Total interest earning assets
6,223,303
78,862
5.03 %
6,258,446
79,508
5.04 %
6,367,371
78,960
4.93 %
Noninterest earning assets
730,807
747,694
781,923
Total assets
$ 6,954,110
$ 7,006,140
$ 7,149,294
Interest Bearing Liabilities:
Certificates of deposit
$ 950,097
$ 8,425
3.52 %
$ 955,737
$ 8,822
3.66 %
$ 947,929
$ 10,070
4.23 %
Savings accounts
424,214
277
0.26
428,256
296
0.27
432,287
280
0.26
Interest bearing demand and
money market accounts
2,876,278
10,874
1.50
2,833,048
11,003
1.54
2,631,577
9,622
1.45
Total interest bearing deposits
4,250,589
19,576
1.83
4,217,041
20,121
1.89
4,011,793
19,972
1.98
Junior subordinated debentures
22,312
455
8.09
22,239
474
8.46
22,019
512
9.25
Borrowings
43,228
470
4.31
136,582
1,542
4.48
373,493
4,713
5.02
Total interest bearing
liabilities
4,316,129
20,501
1.88 %
4,375,862
22,137
2.01 %
4,407,305
25,197
2.27 %
Noninterest demand deposits
1,635,539
1,625,945
1,703,357
Other noninterest bearing
liabilities
90,988
112,053
170,324
Stockholders' equity
911,454
892,280
868,308
Total liabilities and
stockholders' equity
$ 6,954,110
$ 7,006,140
$ 7,149,294
Net interest income and spread
$ 58,361
3.15 %
$ 57,371
3.03 %
$ 53,763
2.66 %
Net interest margin
3.72 %
3.64 %
3.36 %
(1)
Annualized; average balances are calculated using daily balances.
(2)
Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $1.0 million, $1.1 million and $0.9 million for the fourth quarter of 2025, third quarter of 2025 and fourth quarter of 2024, respectively.
(3)
Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
Noninterest Income
Noninterest income decreased $338,000 to $8.0 million during the fourth quarter of 2025 from $8.3 million during the third quarter of 2025. The decrease was due primarily to decreases in card revenue and a decrease in other income, offset partially by an increase in interest rate swap fees due to increased swap activity and an increase in bank owned life insurance ("BOLI") income due to the recognition of a death benefit.
Noninterest income increased $4.7 million during the fourth quarter of 2025 from the same period in 2024 due primarily to a $3.9 million loss recognized in the fourth quarter of 2024 resulting from the sale of investment securities as part of the strategic repositioning of the Company's balance sheet and an increase in BOLI income as the Company incurred $508,000 in costs related to the restructuring of the BOLI portfolio in the fourth quarter of 2024.
The following table presents the key components of noninterest income and the change for the periods indicated:
Quarter Ended
Quarter Over
Quarter Change
Prior Year
Quarter Change
December 31,
2025
September 30,
2025
December 31,
2024
$
%
$
%
(Dollars in thousands)
Service charges and other fees
$ 3,052
$ 3,046
$ 2,892
$ 6
0.2 %
$ 160
5.5 %
Card revenue
1,792
2,209
1,849
(417)
(18.9)
(57)
(3.1)
Loss on sale of investment securities
—
—
(3,903)
—
—
3,903
100.0
Interest rate swap fees
381
96
357
285
296.9
24
6.7
BOLI income
1,172
1,008
256
164
16.3
916
357.8
Gain on sale of other assets, net
—
—
23
—
—
(23)
(100.0)
Other income
1,590
1,966
1,816
(376)
(19.1)
(226)
(12.4)
Total noninterest income (loss)
$ 7,987
$ 8,325
$ 3,290
$ (338)
(4.1) %
$ 4,697
142.8 %
Noninterest Expense
Noninterest expense decreased $132,000, or 0.3%, to $41.5 million during the fourth quarter of 2025, compared to $41.6 million in the third quarter of 2025. Compensation and employee benefits increased due to an increase in the accrual for incentive compensation. Professional fees decreased due primarily to lower merger related costs recognized in the fourth quarter of 2025 associated with the acquisition of Olympic.
Noninterest expense increased $1.9 million, or 4.9%, during the fourth quarter of 2025 compared to the same period in 2024 due primarily to an increase in compensation and employee benefits due to annual merit increases in base pay, an increase in benefit expense and incentive compensation expense accruals.
The following table presents the key components of noninterest expense and the change for the periods indicated:
Quarter Ended
Quarter Over
Quarter Change
Prior Year
Quarter Change
December 31,
2025
September 30,
2025
December 31,
2024
$
%
$
%
(Dollars in thousands)
Compensation and employee
benefits
$ 26,675
$ 26,082
$ 24,236
$ 593
2.3 %
$ 2,439
10.1 %
Occupancy and equipment
4,450
4,665
4,742
(215)
(4.6)
(292)
(6.2)
Data processing
3,681
3,754
4,020
(73)
(1.9)
(339)
(8.4)
Marketing
296
284
405
12
4.2
(109)
(26.9)
Professional services
1,070
1,332
663
(262)
(19.7)
407
61.4
State/municipal business and use
taxes
1,247
1,235
1,180
12
1.0
67
5.7
Federal deposit insurance premium
789
796
829
(7)
(0.9)
(40)
(4.8)
Amortization of intangible assets
285
284
399
1
0.4
(114)
(28.6)
Other expense
2,990
3,183
3,066
(193)
(6.1)
(76)
(2.5)
Total noninterest expense
$ 41,483
$ 41,615
$ 39,540
$ (132)
(0.3) %
$ 1,943
4.9 %
Income Tax Expense
Income tax expense increased $305,000 to $3.4 million during the fourth quarter of 2025, compared to $3.1 million during the third quarter of 2025 due to an increase in pre-tax income.
Income tax expense and the effective income tax rate decreased in the fourth quarter of 2025, compared to same period in 2024 due primarily to additional tax expense of $2.4 million related to BOLI restructuring during the fourth quarter of 2024, partially offset by increased income tax expense on higher pre-tax income during the fourth quarter of 2025.
The following table presents the income tax expense and related metrics and the change for the periods indicated:
Quarter Ended
Change
December 31,
2025
September 30,
2025
December 31,
2024
Quarter Over
Quarter
Prior Year
Quarter
(Dollars in thousands)
Income before income taxes
$ 25,679
$ 22,306
$ 16,330
$ 3,373
$ 9,349
Income tax expense
$ 3,442
$ 3,137
$ 4,402
$ 305
$ (960)
Effective income tax rate
13.4 %
14.1 %
27.0 %
(0.7) %
(13.6) %
Dividends
On January 16, 2026, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend is payable on February 11, 2026 to shareholders of record as of the close of business on January 28, 2026.
Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on Thursday, January 22, 2026 at 10:00 a.m. Pacific time. To access the call, please dial (833) 470-1428 -- access code 927284 a few minutes prior to 10:00 a.m. Pacific time. The call will be available for replay through February 5, 2026 by dialing (866) 813-9403 -- access code 715393.
About Heritage Financial Corporation
Heritage Financial Corporation is an Olympia, Washington-based bank holding company with Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary. Heritage Bank has a network of 50 branches and one loan production office in Washington, Oregon and Idaho. Heritage Bank does business under the Whidbey Island Bank name on Whidbey Island, Washington. The Company's stock is traded on the Nasdaq Global Select Market under the symbol "HFWA." More information about Heritage Financial Corporation can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would," and "could," as well as the negative of such words. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements include, but are not limited to, the following: potential adverse impacts to economic conditions nationally or in our local market areas, other markets where we have lending relationships, or other aspects of our business operations or financial markets, including, without limitation, as a result of credit quality deterioration, pronounced and sustained reductions in real estate market values, employment levels, labor shortages and a potential recession or slowed economic growth; changes in the interest rate environment, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the level and impact of inflation and the current and future monetary policies of the Board of Governors of the Federal Reserve System in response thereto; legislative or regulatory changes that adversely affect our business, including changes in banking, securities, and tax law, in regulatory policies and principles, or the interpretation and prioritization of such rules and regulations; effects on the U.S. economy resulting from the threat or implementation of, or changes to existing, policies and executive orders, including tariffs, immigration policy, regulatory and other governmental agencies, DEI and ESG initiatives, consumer protection, foreign policy, and tax regulations; credit and interest rate risks associated with our business, customers, borrowings, repayment, investment, and deposit practices; fluctuations in deposits and deposit concentrations; liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; fluctuations in the value of our investment securities; credit risks and risks from concentrations (including by type of geographic area, collateral and industry) within our loan portfolio; disruptions, security breaches, insider fraud, cybersecurity incidents or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform critical processing functions for our business, including sophisticated attacks using artificial intelligence and similar tools; technological changes implemented by us and other parties, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers, including the development and implementation of tools incorporating artificial intelligence; increased competition in the financial services industry from non-banks such as credit unions and financial technology companies, including digital asset service providers; our ability to adapt successfully to technological changes to compete effectively in the marketplace, including as a result of competition from other commercial banks, mortgage banking firms, credit unions, securities brokerage firms, insurance companies, and financial technology companies; our ability to implement our organic and acquisition growth strategies, including the pending acquisition of Olympic, and our ability to successfully integrate Olympic's customers and operations following the acquisition; effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the commencement, costs, effects and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject; potential impairment to the goodwill we recorded in connection with our past acquisitions, including the pending acquisition of Olympic; loss of, or inability to attract, key personnel; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire, including as a result of the acquisition of Olympic, into our operations and our ability to realize related revenue synergies and cost savings within expected time frames or at all, and any goodwill charges related thereto and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, which might be greater than expected; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, foreign relations, and other external events on our business and the businesses of our clients; the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks; our success at managing and responding to the risks involved in the foregoing items; and other factors described in our latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission (the "SEC") which are available on our website at www.hf-wa.com and on the SEC's website at www.sec.gov. We caution readers not to place undue reliance on any forward-looking statements. Moreover, any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based only on information then actually known to us and upon management's beliefs and assumptions at the time they are made which may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. We do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except shares)
December 31,
2025
September 30,
2025
December 31,
2024
Assets
Cash on hand and in banks
$ 52,587
$ 74,030
$ 58,821
Interest earning deposits
180,502
171,461
58,279
Cash and cash equivalents
233,089
245,491
117,100
Investment securities available for sale, at fair value (amortized cost of
$647,505, $674,108 and $835,592, respectively)
607,522
631,231
764,394
Investment securities held to maturity, at amortized cost (fair value of
$625,287, $628,049 and $623,452, respectively)
674,107
681,626
703,285
Total investment securities
1,281,629
1,312,857
1,467,679
Loans receivable
4,783,266
4,769,160
4,802,123
Allowance for credit losses on loans
(52,584)
(53,974)
(52,468)
Loans receivable, net
4,730,682
4,715,186
4,749,655
Premises and equipment, net
74,690
70,382
71,580
Federal Home Loan Bank stock, at cost
5,163
10,473
21,538
BOLI
105,974
105,464
111,699
Accrued interest receivable
19,280
19,146
19,483
Prepaid expenses and other assets
273,925
289,677
303,452
Other intangible assets, net
1,979
2,264
3,153
Goodwill
240,939
240,939
240,939
Total assets
$ 6,967,350
$ 7,011,879
$ 7,106,278
Liabilities and Stockholders' Equity
Non-interest bearing deposits
$ 1,597,650
$ 1,617,909
$ 1,654,955
Interest bearing deposits
4,322,549
4,239,555
4,029,658
Total deposits
5,920,199
5,857,464
5,684,613
Borrowings
20,000
138,000
383,000
Junior subordinated debentures
22,350
22,277
22,058
Accrued expenses and other liabilities
83,297
90,074
153,080
Total liabilities
6,045,846
6,107,815
6,242,751
Common stock
531,100
529,949
531,674
Retained earnings
421,619
407,561
387,097
Accumulated other comprehensive loss, net
(31,215)
(33,446)
(55,244)
Total stockholders' equity
921,504
904,064
863,527
Total liabilities and stockholders' equity
$ 6,967,350
$ 7,011,879
$ 7,106,278
Shares outstanding
33,963,500
33,956,738
33,990,827
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
Year Ended
December 31,
2025
September 30,
2025
December 31,
2024
December 31,
2025
December 31,
2024
Interest Income
Interest and fees on loans
$ 66,669
$ 66,422
$ 64,864
$ 262,900
$ 247,472
Taxable interest on investment securities
10,546
11,102
12,510
44,966
54,972
Nontaxable interest on investment securities
135
138
146
549
651
Interest on interest earning deposits
1,512
1,846
1,440
5,821
6,617
Total interest income
78,862
79,508
78,960
314,236
309,712
Interest Expense
Deposits
19,576
20,121
19,972
79,336
75,069
Junior subordinated debentures
455
474
512
1,872
2,139
Borrowings
470
1,542
4,713
8,623
23,140
Total interest expense
20,501
22,137
25,197
89,831
100,348
Net interest income
58,361
57,371
53,763
224,405
209,364
(Reversal of) provision for credit losses
(814)
1,775
1,183
1,968
6,282
Net interest income after (reversal of)
provision for credit losses
59,175
55,596
52,580
222,437
203,082
Noninterest Income
Service charges and other fees
3,052
3,046
2,892
12,005
11,285
Card revenue
1,792
2,209
1,849
7,742
7,752
Loss on sale of investment securities, net
—
—
(3,903)
(10,741)
(22,742)
Gain on sale of loans, net
—
—
—
—
26
Interest rate swap fees
381
96
357
496
409
BOLI income
1,172
1,008
256
4,378
2,967
Gain on sale of other assets, net
—
—
23
8
1,552
Other income
1,590
1,966
1,816
7,844
6,224
Total noninterest income (loss)
7,987
8,325
3,290
21,732
7,473
Noninterest Expense
Compensation and employee benefits
26,675
26,082
24,236
104,023
98,527
Occupancy and equipment
4,450
4,665
4,742
18,881
19,289
Data processing
3,681
3,754
4,020
14,998
14,899
Marketing
296
284
405
1,251
988
Professional services
1,070
1,332
663
4,258
2,515
State/municipal business and use taxes
1,247
1,235
1,180
4,907
4,889
Federal deposit insurance premium
789
796
829
3,207
3,260
Amortization of intangible assets
285
284
399
1,174
1,640
Other expense
2,990
3,183
3,066
12,867
12,289
Total noninterest expense
41,483
41,615
39,540
165,566
158,296
Income before income taxes
25,679
22,306
16,330
78,603
52,259
Income tax expense
3,442
3,137
4,402
11,071
9,001
Net income
$ 22,237
$ 19,169
$ 11,928
$ 67,532
$ 43,258
Basic earnings per share
$ 0.66
$ 0.56
$ 0.35
$ 1.99
$ 1.26
Diluted earnings per share
$ 0.65
$ 0.55
$ 0.34
$ 1.96
$ 1.24
Dividends declared per share
$ 0.24
$ 0.24
$ 0.23
$ 0.96
$ 0.92
Average shares outstanding - basic
33,957,987
33,953,810
34,109,339
33,996,149
34,465,323
Average shares outstanding - diluted
34,405,793
34,413,386
34,553,139
34,456,904
34,899,036
HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Average Balances, Yields, and Rates Paid:
Year Ended December 31,
2025
2024
Average
Balance
Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance
Interest
Earned/
Paid
Average
Yield/
Rate (1)
Interest Earning Assets:
Loans receivable (2)(3)
$ 4,773,760
$ 262,900
5.51 %
$ 4,536,499
$ 247,472
5.46 %
Taxable securities
1,350,278
44,966
3.33
1,653,295
54,972
3.32
Nontaxable securities (3)
15,449
549
3.55
18,425
651
3.53
Interest earning deposits
135,603
5,821
4.29
125,036
6,617
5.29
Total interest earning assets
6,275,090
314,236
5.01 %
6,333,255
309,712
4.89 %
Noninterest earning assets
752,048
799,791
Total assets
$ 7,027,138
$ 7,133,046
Interest Bearing Liabilities:
Certificates of deposit
$ 966,429
$ 36,266
3.75 %
$ 857,079
$ 36,922
4.31 %
Savings accounts
426,124
1,154
0.27
451,528
920
0.20
Interest bearing demand and money market accounts
2,796,909
41,916
1.50
2,640,487
37,227
1.41
Total interest bearing deposits
4,189,462
79,336
1.89
3,949,094
75,069
1.90
Junior subordinated debentures
22,201
1,872
8.43
21,910
2,139
9.76
Borrowings
185,544
8,623
4.65
456,448
23,140
5.07
Total interest bearing liabilities
4,397,207
89,831
2.04 %
4,427,452
100,348
2.27 %
Noninterest demand deposits
1,623,952
1,669,301
Other noninterest bearing liabilities
118,300
182,121
Stockholders' equity
887,679
854,172
Total liabilities and stockholders' equity
$ 7,027,138
$ 7,133,046
Net interest income and spread
$ 224,405
2.97 %
$ 209,364
2.62 %
Net interest margin
3.58 %
3.31 %
(1)
Average balances are calculated using daily balances.
(2)
Average loans receivable includes loans held for sale and loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $3.7 million and $3.6 million for the year ended December 31, 2025 and 2024, respectively.
(3)
Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Nonperforming Assets and Credit Quality Metrics:
Quarter Ended
Year Ended
December 31,
2025
September 30,
2025
December 31,
2024
December 31,
2025
December 31,
2024
Allowance for Credit Losses on Loans:
Balance, beginning of period
$ 53,974
$ 52,529
$ 51,391
$ 52,468
$ 47,999
(Reversal of) provision for credit
losses on loans
(909)
1,563
1,104
1,508
6,983
Charge-offs:
Commercial business
(565)
(195)
(4)
(1,436)
(2,953)
Residential real estate
—
(27)
—
(27)
—
Consumer
(75)
(152)
(92)
(485)
(538)
Total charge-offs
(640)
(374)
(96)
(1,948)
(3,491)
Recoveries:
Commercial business
140
219
48
403
855
Residential real estate
—
1
—
1
—
Consumer
19
36
21
152
122
Total recoveries
159
256
69
556
977
Net (charge-offs) recoveries
(481)
(118)
(27)
(1,392)
(2,514)
Balance, end of period
$ 52,584
$ 53,974
$ 52,468
$ 52,584
$ 52,468
Net charge-offs on loans to average
loans receivable annualized
0.04 %
0.01 %
— %
0.03 %
0.06 %
December 31,
2025
September 30,
2025
December 31,
2024
Nonperforming Assets:
Nonaccrual loans:
Commercial business
$ 6,886
$ 3,418
$ 3,919
Residential real estate
1,196
1,290
—
Real estate construction and land development
12,408
12,760
—
Consumer
486
144
160
Total nonaccrual loans
20,976
17,612
4,079
Accruing loans past due 90 days or more
194
3,338
1,195
Total nonperforming loans
21,170
20,950
5,274
Other real estate owned
—
—
—
Nonperforming assets
$ 21,170
$ 20,950
$ 5,274
ACL on loans to:
Loans receivable
1.10 %
1.13 %
1.09 %
Nonaccrual loans
250.69 %
306.46 %
1,286.30 %
Nonaccrual loans to loans receivable
0.44 %
0.37 %
0.08 %
Nonperforming loans to loans receivable
0.44 %
0.44 %
0.11 %
Nonperforming assets to total assets
0.30 %
0.30 %
0.07 %
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Earnings:
Net interest income
$ 58,361
$ 57,371
$ 54,983
$ 53,690
$ 53,763
(Reversal of) provision for credit losses
(814)
1,775
956
51
1,183
Noninterest income
7,987
8,325
1,517
3,903
3,290
Noninterest expense
41,483
41,615
41,085
41,383
39,540
Net income
22,237
19,169
12,215
13,911
11,928
Basic earnings per share
$ 0.66
$ 0.56
$ 0.36
$ 0.41
$ 0.35
Diluted earnings per share
$ 0.65
$ 0.55
$ 0.36
$ 0.40
$ 0.34
Adjusted diluted earnings per share (1)
$ 0.66
$ 0.56
$ 0.53
$ 0.49
$ 0.51
Average Balances:
Loans receivable
$ 4,770,300
$ 4,762,648
$ 4,768,558
$ 4,793,917
$ 4,717,748
Total investment securities
1,301,526
1,329,616
1,390,064
1,443,662
1,530,348
Total interest earning assets
6,223,303
6,258,446
6,286,309
6,333,697
6,367,371
Total assets
6,954,110
7,006,140
7,046,943
7,103,227
7,149,294
Total interest bearing deposits
4,250,589
4,217,041
4,176,052
4,112,343
4,011,793
Total noninterest demand deposits
1,635,539
1,625,945
1,602,987
1,631,268
1,703,357
Stockholders' equity
911,454
892,280
879,808
866,629
868,308
Financial Ratios:
Return on average assets (2)
1.27 %
1.09 %
0.70 %
0.79 %
0.66 %
Return on average common equity (2)
9.68
8.52
5.57
6.51
5.46
Return on average tangible common
equity (1)(2)
13.33
11.86
7.85
9.22
7.81
Adjusted return on average tangible common
equity (1)(2)
13.51
12.16
11.59
11.21
11.59
Efficiency ratio
62.5
63.3
72.7
71.9
69.3
Adjusted efficiency ratio (1)
61.9
62.4
64.9
67.3
64.4
Noninterest expense to average total
assets (2)
2.37
2.36
2.34
2.36
2.20
Net interest spread (2)
3.15
3.03
2.89
2.79
2.66
Net interest margin (2)
3.72
3.64
3.51
3.44
3.36
(1)
Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" section for a reconciliation to the comparable GAAP financial measure.
(2)
Annualized.
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
As of or for the Quarter Ended
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Select Balance Sheet:
Total assets
$ 6,967,350
$ 7,011,879
$ 7,070,641
$ 7,129,862
$ 7,106,278
Loans receivable
4,783,266
4,769,160
4,774,855
4,764,848
4,802,123
Total investment securities
1,281,629
1,312,857
1,346,274
1,413,903
1,467,679
Total deposits
5,920,199
5,857,464
5,784,413
5,845,335
5,684,613
Noninterest demand deposits
1,597,650
1,617,909
1,584,231
1,621,890
1,654,955
Stockholders' equity
921,504
904,064
888,212
881,515
863,527
Financial Measures:
Book value per share
$ 27.13
$ 26.62
$ 26.16
$ 25.85
$ 25.40
Tangible book value per share (1)
19.98
19.46
18.99
18.70
18.22
Stockholders' equity to total assets
13.2 %
12.9 %
12.6 %
12.4 %
12.2 %
Tangible common equity to tangible
assets (1)
10.1
9.8
9.4
9.3
9.0
Loans to deposits ratio
80.8
81.4
82.5
81.5
84.5
Regulatory Capital Ratios: (2)
Common equity tier 1 capital ratio
12.7 %
12.4 %
12.2 %
12.2 %
12.0 %
Leverage ratio
10.8
10.5
10.3
10.2
10.0
Tier 1 capital ratio
13.1
12.8
12.6
12.6
12.4
Total capital ratio
14.1
13.8
13.6
13.6
13.3
Credit Quality Metrics:
ACL on loans to:
Loans receivable
1.10 %
1.13 %
1.10 %
1.09 %
1.09 %
Nonaccrual loans
250.7
306.5
532.5
1,175.3
1,286.3
Nonaccrual loans to loans receivable
0.44
0.37
0.21
0.09
0.08
Nonperforming loans to loans receivable
0.44
0.44
0.39
0.09
0.11
Nonperforming assets to total assets
0.30
0.30
0.26
0.06
0.07
Net charge-offs on loans to average
loans receivable (3)
0.04
0.01
0.04
0.03
0.00
Criticized Loans by Credit Quality Rating:
Special mention
$ 71,122
$ 100,160
$ 114,146
$ 113,704
$ 110,725
Substandard
116,823
94,377
99,715
64,387
68,318
Other Metrics:
Number of branches
50
50
50
50
50
Deposits per branch
$ 118,404
$ 117,149
$ 115,688
$ 116,907
$ 113,692
Average number of full-time equivalent
employees
742
749
745
757
751
Average assets per full-time
equivalent employee
9,372
9,354
9,459
9,383
9,520
(1)
See Non-GAAP Financial Measures section herein.
(2)
Current quarter ratios are estimates pending completion and filing of the Company's regulatory reports.
(3)
Annualized.
HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)
This earnings release contains certain financial measures not presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in addition to financial measures presented in accordance with GAAP. The Company has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company's capital, performance and asset quality reflected in the current quarter and comparable period results and to facilitate comparison of its performance with the performance of its peers. These non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for financial measures presented in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of the non-GAAP financial measures used in this earnings release to the comparable GAAP financial measures are presented below.
The Company believes that presenting the adjusted diluted earnings per share provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Diluted Earnings per Share and Adjusted Diluted Earnings per Share:
Net income (GAAP)
$ 22,237
$ 19,169
$ 12,215
$ 13,911
$ 11,928
Exclude loss on sale of
investment securities, net
—
—
6,854
3,887
3,903
Exclude merger related costs
385
635
—
—
—
Exclude gain on sale of premises
and equipment
—
—
(5)
(3)
(23)
Exclude tax effect of adjustment
(81)
(133)
(1,438)
(816)
(815)
Exclude BOLI restructuring costs
included in BOLI Income
—
—
—
—
508
Exclude tax expense related to
BOLI restructuring
—
—
515
—
2,371
Adjusted net income (non-GAAP)
$ 22,541
$ 19,671
$ 18,141
$ 16,979
$ 17,872
Average number of diluted shares
outstanding
34,405,793
34,413,386
34,446,710
34,506,238
34,553,139
Diluted earnings per share (GAAP)
$ 0.65
$ 0.55
$ 0.36
$ 0.40
$ 0.34
Adjusted diluted earnings per share
(non-GAAP)
$ 0.66
$ 0.56
$ 0.53
$ 0.49
$ 0.51
HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)
The Company considers the tangible common equity to tangible assets ratio and tangible book value per share to be useful measurements of the adequacy of the Company's capital levels.
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share:
Total stockholders' equity (GAAP)
$ 921,504
$ 904,064
$ 888,212
$ 881,515
$ 863,527
Exclude intangible assets
(242,918)
(243,203)
(243,487)
(243,789)
(244,092)
Tangible common equity (non-GAAP)
$ 678,586
$ 660,861
$ 644,725
$ 637,726
$ 619,435
Total assets (GAAP)
$ 6,967,350
$ 7,011,879
$ 7,070,641
$ 7,129,862
$ 7,106,278
Exclude intangible assets
(242,918)
(243,203)
(243,487)
(243,789)
(244,092)
Tangible assets (non-GAAP)
$ 6,724,432
$ 6,768,676
$ 6,827,154
$ 6,886,073
$ 6,862,186
Stockholders' equity to total assets
(GAAP)
13.2 %
12.9 %
12.6 %
12.4 %
12.2 %
Tangible common equity to tangible
assets (non-GAAP)
10.1 %
9.8 %
9.4 %
9.3 %
9.0 %
Shares outstanding
33,963,500
33,956,738
33,953,194
34,105,516
33,990,827
Book value per share (GAAP)
$ 27.13
$ 26.62
$ 26.16
$ 25.85
$ 25.40
Tangible book value per share (non-
GAAP)
$ 19.98
$ 19.46
$ 18.99
$ 18.70
$ 18.22
HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)
The Company considers the return on average tangible common equity ratio to be a useful measurement of the Company's ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the Company's ongoing business operations can be evaluated. The Company believes that presenting an adjusted return on tangible common equity ratio provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.
Quarter Ended
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Return on Average Tangible Common Equity, annualized:
Net income (GAAP)
$ 22,237
$ 19,169
$ 12,215
$ 13,911
$ 11,928
Add amortization of intangible
assets
285
284
302
303
399
Exclude tax effect of adjustment
(60)
(60)
(63)
(64)
(84)
Tangible net income (non-GAAP)
$ 22,462
$ 19,393
$ 12,454
$ 14,150
$ 12,243
Tangible net income (non-GAAP)
$ 22,462
$ 19,393
$ 12,454
$ 14,150
$ 12,243
Exclude loss on sale of
investment securities, net
—
—
6,854
3,887
3,903
Exclude merger related costs
385
635
—
—
—
Exclude gain on sale of premises
and equipment
—
—
(5)
(3)
(23)
Exclude tax effect of adjustment
(81)
(133)
(1,438)
(816)
(815)
Exclude BOLI restructuring costs
included in BOLI Income
—
—
—
—
508
Exclude tax expense related to
BOLI restructuring
—
—
515
—
2,371
Adjusted tangible net income (non-
GAAP)
$ 22,766
$ 19,895
$ 18,380
$ 17,218
$ 18,187
Average stockholders' equity (GAAP)
$ 911,454
$ 892,280
$ 879,808
$ 866,629
$ 868,308
Exclude average intangible assets
(243,069)
(243,350)
(243,651)
(243,945)
(244,302)
Average tangible common
stockholders' equity (non-GAAP)
$ 668,385
$ 648,930
$ 636,157
$ 622,684
$ 624,006
Return on average common equity,
annualized (GAAP)
9.68 %
8.52 %
5.57 %
6.51 %
5.46 %
Return on average tangible common
equity, annualized (non-GAAP)
13.33 %
11.86 %
7.85 %
9.22 %
7.81 %
Adjusted return on average tangible
common equity, annualized (non-
GAAP)
13.51 %
12.16 %
11.59 %
11.21 %
11.59 %
HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)
The Company believes that presenting an adjusted efficiency ratio provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter's results and facilitate the comparison of our performance with the performance of our peers.
Quarter Ended
December 31,
2025
September 30,
2025
June 30,
2025
March 31,
2025
December 31,
2024
Adjusted Efficiency Ratio :
Total noninterest expense (GAAP)
$ 41,483
$ 41,615
$ 41,085
$ 41,383
$ 39,540
Exclude merger related costs
$ 385
$ 635
$ —
$ —
$ —
Adjusted noninterest expense (non-
GAAP)
$ 41,098
$ 40,980
$ 41,085
$ 41,383
$ 39,540
Net interest income (GAAP)
$ 58,361
$ 57,371
$ 54,983
$ 53,690
$ 53,763
Total noninterest income (GAAP)
$ 7,987
$ 8,325
$ 1,517
$ 3,903
$ 3,290
Exclude loss on sale of
investment securities, net
—
—
6,854
3,887
3,903
Exclude gain on sale of premises
and equipment
—
—
(5)
(3)
(23)
Exclude BOLI restructuring costs
included in BOLI Income
—
—
—
—
508
Adjusted total noninterest income
(non-GAAP)
$ 7,987
$ 8,325
$ 8,366
$ 7,787
$ 7,678
Efficiency ratio (GAAP)
62.5 %
63.3 %
72.7 %
71.9 %
69.3 %
Adjusted efficiency ratio (non-GAAP)
61.9 %
62.4 %
64.9 %
67.3 %
64.4 %
SOURCE Heritage Financial Corporation