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Heritage Financial Corp

Heritage Financial Announces Fourth Quarter and Annual 2025 Results

Fourth Quarter 2025 Highlights

  • Net income was $22.2 million, or $0.65 per diluted share, compared to $19.2 million, or $0.55 per diluted share, for the third quarter of 2025.
  • Return on average assets increased to 1.27%, from 1.09% for the third quarter of 2025.
  • Net interest income increased $1.0 million, or 1.7% (6.8% annualized), from the third quarter of 2025.
  • Net interest margin increased to 3.72%, an increase of 8 basis points from 3.64% for the third quarter of 2025.
  • Deposits increased $62.7 million, or 1.1% (4.2% annualized), from the third quarter of 2025.
  • Cost of interest bearing deposits decreased to 1.83%, from 1.89% for the third quarter of 2025.
  • Declared a regular cash dividend of $0.24 per share on January 16, 2026.
  • Received regulatory and shareholder approvals to acquire Olympic Bancorp, Inc. ("Olympic"), which is expected to close on or about January 31, 2026, subject to the satisfaction of customary closing conditions.

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.

 

H ERITAGE 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 %

 

Cision View original content:https://www.prnewswire.com/news-releases/heritage-financial-announces-fourth-quarter-and-annual-2025-results-302667341.html

SOURCE Heritage Financial Corporation