10-Q · May 8, 2026
Heritage Financial Corporation reported Q1 2026 results with $77.9 million in revenues and diluted EPS of $0.59, reflecting a revenue decline of 4.4% quarter-over-quarter yet an increase in EPS of 47.5% year-over-year.…
Earnings analysis · 10-Q
HFWA earnings analysis
Filed August 7, 2026 · Our reading of the company's report
The latest report
Heritage Financial reported improving core banking trends in Q2 2026, with net interest income up 36.1% to $74.8 million, net interest margin up 48 basis points to 3.99%, and loans and deposits expanding 20.2% and…
Read full summary
Heritage Financial reported improving core banking trends in Q2 2026, with net interest income up 36.1% to $74.8 million, net interest margin up 48 basis points to 3.99%, and loans and deposits expanding 20.2% and 18.9%, respectively. GAAP diluted EPS of $0.42 declined from $0.48 in Q1 because merger-related expenses reached $7.493 million, although net income increased 43.6% year over year to $17.5 million. Liquidity and capital were strong, but integration costs, increased short-term borrowings of $166.3 million, uninsured deposits of $2.75 billion, and the eventual fade of purchase-accounting accretion temper the outlook.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Earnings per share
- $0.42
- Segment
- Heritage Bank: single reportable segment; segment revenue was not separately disclosed
What stood out
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Net income rose despite merger costs
GAAP net income increased 43.6% year over year to $17.5 million, while diluted EPS rose to $0.42 from $0.36 in Q2 2025. EPS declined from $0.48 in Q1 2026, reflecting merger-related costs.
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Merger expanded net interest income
Net interest income increased 36.1% year over year to $74.8 million, and net interest margin expanded 48 basis points to 3.99% from 3.51%. Average interest-earning assets increased by $1.23 billion to $7.52 billion, primarily due to the Olympic merger.
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Loans and deposits grew materially
Total deposits increased 18.9% to $7.04 billion from $5.92 billion at December 31, 2025, while loans receivable increased 20.2% to $5.75 billion from $4.78 billion. The increases were primarily attributable to balances acquired in the merger.
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Noninterest income rebounded
Noninterest income increased 513.8% year over year to $9.31 million, helped by the reduction in investment-security losses to $217,000 from $6.9 million in Q2 2025. Service charges and card revenue increased 22.5% and 29.2%, respectively.
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Asset quality metrics improved
Credit trends improved in aggregate: nonaccrual loans declined 26.1% to $15.5 million and nonperforming assets declined 23.2% to $16.3 million at June 30, 2026. The company recorded a $921,000 reversal of credit-loss provisions versus a $956,000 provision in the prior-year quarter.
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Liquidity and capital remained strong
Total available liquidity increased to $3.27 billion from $2.62 billion at December 31, 2025, including $1.15 billion of on-balance-sheet liquidity and $2.12 billion of off-balance-sheet availability. The Bank's June 30, 2026 leverage ratio was 10.2% and it remained well-capitalized.
What to watch
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Integration costs remain elevated
Merger-related expenses totaled $7.493 million in Q2 2026, including $4.924 million of data-processing costs, and noninterest expense increased 56.6% to $64.3 million. Management's additional cost savings depend partly on successful systems conversion and integration.
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Short-term borrowings increased
FHLB advances increased to $166.3 million from $20.0 million at December 31, 2025, a $146.3 million increase. The advances were short-term and mature in less than one year, increasing reliance on wholesale liquidity relative to year-end.
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Uninsured deposit exposure remains high
Uninsured deposits totaled approximately $2.75 billion, or 39.1% of total deposits, at June 30, 2026. Although brokered deposits declined to zero from $77.5 million at year-end, uninsured balances remain a meaningful deposit-run and liquidity exposure.
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Purchase-accounting accretion will fade
The company states that incremental accretion on purchased loans contributed $1.772 million to Q2 loan interest income and is expected to decrease as acquired loans mature or roll off. This creates a headwind to future loan yield and net interest margin absent offsetting growth.
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Down-rate sensitivity increased
Interest-rate simulation estimated a $9.691 million, or 3.3%, reduction in 12-month net interest income under a 200-basis-point rate decline scenario. Management also described the June 30, 2026 balance sheet as slightly less asset-sensitive than at December 31, 2025.
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Acquisition accounting adds estimation risk
Item 1A states there were no material changes to the risk factors in the 2025 Annual Form 10-K. However, the filing identifies fair-value measurement of acquired assets and liabilities as a new critical accounting estimate following the $1.59 billion Olympic acquisition.
Management's outlook
No formal numeric revenue or EPS outlook was provided. Management expects the impact of incremental accretion on purchased loans to decrease over time as acquired loan balances decline, and previously indicated additional acquisition cost savings after the Q3 2026 systems conversion.
Earlier filings 4
10-K · February 27, 2026
Heritage Financial (HFWA) reported a year of improving profitability and liquidity in 2025, with revenue of approximately $336.0 million (sum of quarterly revenue) and materially higher margins and EPS versus 2024.…
10-Q · November 7, 2025
Heritage reported a strong quarter: total revenue (net interest income plus noninterest income) rose to $65,696,000 and net income increased to $19,169,000, driving basic EPS of $0.56. Results were driven by higher net…
10-Q · August 8, 2025
Heritage Financial reported modestly higher net interest income but material weakness in noninterest income that weighed on profitability. Q2 2025 revenue (net interest income plus noninterest income) was $56.5M and…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.