HERITAGE FINANCIAL ANNOUNCES SECOND QUARTER 2025 RESULTS AND DECLARES REGULAR CASH DIVIDEND OF $0.24 PER SHARE
Second Quarter 2025 Highlights
•Net income was $12.2 million, or $0.36 per diluted share, compared to $13.9 million, or $0.40 per diluted share, for the first quarter of 2025.
•Results included a pre-tax loss on sale of securities of $6.9 million resulting in a negative impact of $0.15 per diluted share.
•Net interest margin increased to 3.51%, from 3.44% for the first quarter of 2025.
•Yield on loans increased to 5.50%, from 5.45% for the first quarter of 2025.
•Cost of interest bearing deposits increased to 1.94%, from 1.92% for the first quarter of 2025.
•Declared a regular cash dividend of $0.24 per share on July 23, 2025.
Olympia, WA - Heritage Financial Corporation (Nasdaq GS: HFWA) (the “Company", ”we," or "us"), the parent company of Heritage Bank (the "Bank"), today reported net income of $12.2 million for the second quarter of 2025, compared to $13.9 million for the first quarter of 2025 and $14.2 million for the second quarter of 2024. Diluted earnings per share for the second quarter of 2025 were $0.36 compared to $0.40 for the first quarter of 2025 and $0.41 for the second quarter of 2024.
In the second quarter of 2025, the Company incurred a pre-tax loss of $6.9 million on the sale of investment securities in connection with the strategic repositioning of its balance sheet, which decreased diluted earnings per share by $0.15 for the quarter. The Company sold $91.6 million of investment securities with an average book yield of 2.63%. Net proceeds from the sale were used to purchase $56.4 million in investment securities with an average book yield of 5.06% and fund new loans originated during the quarter. The Company also incurred pre-tax losses on the sale of investment securities in connection with balance sheet repositioning during the first quarter of 2025 and second quarter of 2024 in the amounts of $3.9 million and $1.9 million, respectively, which decreased diluted earnings per share by $0.09 and $0.04, respectively, for such quarters.
In addition, the Company surrendered $8.5 million of its bank owned life insurance ("BOLI") portfolio during the second quarter of 2025, incurring tax expense related to the surrender of BOLI of $515,000 which decreased diluted earnings per share by $0.02 for the quarter.
Bryan McDonald, Chief Executive Officer of the Company, commented, "We are pleased with the continued growth in core earnings, both compared to the prior quarter and to the same quarter in the prior year. This is partly due to the ongoing expansion of our net interest margin, due mostly to increases in yields on loans and investment securities. Despite a seasonal decline in deposit balances in the second quarter, our total deposits have increased $100 million since year-end 2024. We continue to strategically reposition our balance sheet to improve future profitability and will consider investment in new production teams when favorable opportunities are presented. Although these actions may impact current earnings, we believe future earnings will be enhanced and we are optimistic that the combination of our strong balance sheet and prudent risk management will provide sustainable long-term returns for our shareholders."
1
Financial Highlights
The following table provides financial highlights at the dates and for the periods indicated:
As of or for the Quarter Ended
June 30, 2025
March 31, 2025
June 30, 2024
(Dollars in thousands, except per share amounts)
Net income
$
12,215
$
13,911
$
14,159
Diluted earnings per share
$
0.36
$
0.40
$
0.41
Adjusted diluted earnings per share (1)
$
0.53
$
0.49
$
0.45
Return on average assets(2)
0.70
%
0.79
%
0.80
%
Return on average common equity(2)
5.57
6.51
6.75
Return on average tangible common equity(1)(2)
7.85
9.22
9.74
Adjusted return on average tangible common equity(1)(2)
11.59
11.21
10.74
Net interest margin(2)
3.51
3.44
3.27
Cost of total deposits(2)
1.40
1.38
1.34
Efficiency ratio
72.7
71.9
69.4
Adjusted efficiency ratio(1)
64.9
67.3
67.1
Noninterest expense to average total assets(2)
2.34
2.36
2.21
Total assets
$
7,070,641
$
7,129,862
$
7,059,857
Loans receivable
4,774,855
4,764,848
4,532,615
Total deposits
5,784,413
5,845,335
5,515,652
Loan to deposit ratio(3)
82.5
%
81.5
%
82.2
%
Book value per share
$
26.16
$
25.85
$
24.66
Tangible book value per share(1)
18.99
18.70
17.56
(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 $67.6 million, or 4.8%, to $1.35 billion at June 30, 2025 from $1.41 billion at March 31, 2025. As previously noted, the Company sold $91.6 million of investment securities at a pre-tax loss of $6.9 million during the quarter as part of its strategic balance sheet repositioning. In addition, there were investment maturities and repayments of $40.8 million during the second quarter of 2025. The decrease was partially offset by investment security purchases of $56.4 million during the second quarter of 2025 and an $8.0 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:
June 30, 2025
March 31, 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
$
11,510
0.9
%
$
11,436
0.8
%
$
74
0.6
%
Municipal securities
50,215
3.7
50,725
3.6
(510)
(1.0)
Residential CMO and MBS(1)
317,214
23.6
356,860
25.2
(39,646)
(11.1)
Commercial CMO and MBS(1)
260,720
19.3
275,840
19.6
(15,120)
(5.5)
Corporate obligations
10,010
0.7
11,830
0.8
(1,820)
(15.4)
Other asset-backed securities
6,783
0.5
9,651
0.7
(2,868)
(29.7)
Total
$
656,452
48.7
%
$
716,342
50.7
%
$
(59,890)
(8.4)
%
2
June 30, 2025
March 31, 2025
Change
Balance
% of Total
Balance
% of Total
$
%
(Dollars in thousands)
Investment securities held to maturity, at amortized cost:
U.S. government and agency securities
$
151,274
11.2
%
$
151,246
10.7
%
$
28
—
%
Residential CMO and MBS(1)
232,244
17.3
239,351
16.9
(7,107)
(3.0)
Commercial CMO and MBS(1)
306,304
22.8
306,964
21.7
(660)
(0.2)
Total
$
689,822
51.3
%
$
697,561
49.3
%
$
(7,739)
(1.1)
%
Total investment securities
$
1,346,274
100.0
%
$
1,413,903
100.0
%
$
(67,629)
(4.8)
%
(1) U.S. government agency and government-sponsored enterprise CMO and MBS
Loans receivable increased $10.0 million, or 0.2%, to $4.77 billion at June 30, 2025 from $4.76 billion at March 31, 2025. New loans funded increased during the second quarter of 2025 to $139.9 million, compared to $95.8 million during the first quarter of 2025. New loan commitments increased during the second quarter of 2025 to $267.6 million compared to $201.0 million during the first quarter of 2025, reflecting the seasonality of loan originations. Loan prepayments decreased to $58.9 million during the quarter, compared to $79.9 million during the prior quarter. Loan payoffs increased to $51.0 million, compared to $47.5 million in the prior quarter.
Commercial and industrial loans decreased $19.7 million, or 2.3%, during the second quarter, due primarily to pay downs on outstanding balances, partially offset by new loan production of $18.7 million. Owner-occupied commercial real estate ("CRE") loans increased $29.6 million, or 3.0%, during the second quarter, due primarily to new loan production of $49.1 million, offset by pay downs on outstanding balances. Non-owner occupied CRE loans increased $24.0 million, or 1.3%, during the quarter, due primarily to new loan production of $57.8 million, offset by pay downs on outstanding balances. Residential construction and commercial and multifamily construction loans decreased $19.9 million or 4.4%, due primarily to pay downs on outstanding balances.
The following table summarizes the Company's loans receivable at the dates indicated:
June 30, 2025
March 31, 2025
Change
Balance
% of Total
Balance
% of Total
$
%
(Dollars in thousands)
Commercial business:
Commercial and industrial
$
831,096
17.4
%
$
850,764
17.9
%
$
(19,668)
(2.3)
%
Owner-occupied CRE
1,014,891
21.3
985,272
20.7
29,619
3.0
Non-owner occupied CRE
1,939,752
40.7
1,915,788
40.1
23,964
1.3
Total commercial business
3,785,739
79.4
3,751,824
78.7
33,915
0.9
Residential real estate
383,927
8.0
393,301
8.3
(9,374)
(2.4)
Real estate construction and land development:
Residential
78,070
1.6
76,108
1.6
1,962
2.6
Commercial and multifamily
355,268
7.4
377,100
7.9
(21,832)
(5.8)
Total real estate construction and land development
433,338
9.0
453,208
9.5
(19,870)
(4.4)
Consumer
171,851
3.6
166,515
3.5
5,336
3.2
Loans receivable
$
4,774,855
100.0
%
$
4,764,848
100.0
%
$
10,007
0.2
Total deposits decreased $60.9 million, or 1.0%, to $5.78 billion at June 30, 2025 from $5.85 billion at March 31, 2025. Non-maturity deposits decreased by $57.3 million, or 1.2%, from March 31, 2025 due primarily to a decline in customer balances in noninterest bearing demand and interest bearing demand accounts. The decrease in non-maturity deposits was partially offset by an increase of $27.1 million in money market accounts as customers transferred balances into these higher yielding accounts. Although total deposits at June 30, 2025 decreased from March 31, 2025, average total deposits increased $35.4 million during the second quarter of 2025.
3
The following table summarizes the Company's total deposits at the dates indicated:
June 30, 2025
March 31, 2025
Change
Balance
% of Total
Balance
% of Total
$
%
(Dollars in thousands)
Noninterest demand deposits
$
1,584,231
27.4
%
$
1,621,890
27.7
%
$
(37,659)
(2.3)
%
Interest bearing demand deposits
1,487,208
25.7
1,525,522
26.1
(38,314)
(2.5)
Money market accounts
1,308,952
22.6
1,281,891
21.9
27,061
2.1
Savings accounts
422,372
7.3
430,749
7.4
(8,377)
(1.9)
Total non-maturity deposits
4,802,763
83.0
4,860,052
83.1
(57,289)
(1.2)
Certificates of deposit
981,650
17.0
985,283
16.9
(3,633)
(0.4)
Total deposits
$
5,784,413
100.0
%
$
5,845,335
100.0
%
$
(60,922)
(1.0)
%
Total borrowings decreased $1.2 million to $263.2 million at June 30, 2025 from $264.4 million at March 31, 2025. All outstanding borrowings at June 30, 2025 were with the Federal Home Loan Bank ("FHLB") and mature within one year.
Total stockholders' equity increased $6.7 million, or 0.8%, to $888.2 million at June 30, 2025 compared to $881.5 million at March 31, 2025 due primarily to $12.2 million of net income recognized for the quarter. The increase in total stockholders' equity was also due to a $6.2 million decrease in accumulated other comprehensive loss as a result of losses recognized on sales of investment securities in connection with balance sheet repositioning efforts. These increases were partially offset by $8.3 million in dividends paid to common shareholders and $4.6 million of stock repurchases.
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 June 30, 2025.
The following table summarizes the capital ratios for the Company at the dates indicated:
June 30, 2025
March 31, 2025
Stockholders' equity to total assets
12.6%
12.4%
Tangible common equity to tangible assets (1)
9.4
9.3
Common equity tier 1 capital ratio (2)
12.2
12.2
Leverage ratio (2)
10.3
10.2
Tier 1 capital ratio (2)
12.6
12.6
Total capital ratio (2)
13.6
13.6
(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 June 30, 2025 compared to 1.09% at March 31, 2025. The increase in the ACL as a percentage of loans was due primarily to changes in the weighted average life of the loans in the real estate construction and land development segment. During the second quarter of 2025, the Company recorded an $863,000 provision for credit losses on loans, compared to a $9,000 reversal of provision for credit losses on loans during the first quarter of 2025. The provision for credit losses on loans recognized during the second quarter of 2025 was due primarily to charge-offs of $494,000 and secondarily to growth in balances of collectively evaluated loans.
During the second quarter of 2025, the Company recorded a $93,000 provision for credit losses on unfunded commitments compared to a $60,000 provision during the first quarter of 2025. The provision for credit losses on unfunded commitments during the second quarter of 2025 was due primarily to an increase in the unfunded exposure on construction loans.
4
The following table provides detail on the changes in the ACL on loans and the ACL on unfunded commitments, and the related provision for (reversal of) credit losses for the periods indicated:
As of or for the Quarter Ended
June 30, 2025
March 31, 2025
June 30, 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
$
52,160
$
647
$
52,807
$
52,468
$
587
$
53,055
$
49,736
$
976
$
50,712
Provision for (reversal of) credit losses
863
93
956
(9)
60
51
1,470
(202)
1,268
(Net charge-offs) / recoveries
(494)
—
(494)
(299)
—
(299)
13
—
13
Balance, end of period
$
52,529
$
740
$
53,269
$
52,160
$
647
$
52,807
$
51,219
$
774
$
51,993
Credit Quality
Classified loans (loans rated substandard or worse) increased $35.3 million from the prior quarter, resulting in the percentage of classified loans to loans receivable increasing to 2.1% at June 30, 2025 compared to 1.4% at March 31, 2025. The Company downgraded $38.2 million of loans to substandard during the second quarter of 2025, including, non-owner occupied CRE loans of $16.3 million, commercial and industrial loans of $9.7 million, commercial and multifamily construction loans of $6.0 million, and owner occupied CRE loans of $5.7 million.
The following table illustrates total loans by risk rating and their respective percentage of total loans at the dates indicated:
June 30, 2025
March 31, 2025
Balance
% of Total
Balance
% of Total
(Dollars in thousands)
Risk Rating:
Pass
$
4,560,994
95.5
%
$
4,586,757
96.2
%
Special Mention
114,146
2.4
113,704
2.4
Substandard
99,715
2.1
64,387
1.4
Total
$
4,774,855
100.0
%
$
4,764,848
100.0
%
Nonaccrual loans increased by $5.4 million during the second quarter of 2025 due primarily to the migration of a $6.0 million commercial and multifamily construction loan and a $1.7 million commercial and industrial loan. These increases were partially offset by a $2.0 million pay down on a commercial real estate loan. The following table illustrates changes in nonaccrual loans during the periods indicated:
Quarter Ended
June 30, 2025
March 31, 2025
June 30, 2024
(Dollars in thousands)
Balance, beginning of period
$
4,438
$
4,079
$
4,792
Additions
7,922
832
549
Net principal payments and transfers to accruing status
(2,041)
(214)
(483)
Payoffs
—
(38)
(769)
Charge-offs
(454)
(221)
(263)
Balance, end of period
$
9,865
$
4,438
$
3,826
Nonaccrual loans to loans receivable
0.21
%
0.09
%
0.08
%
Liquidity
Total liquidity sources available at June 30, 2025 were $2.38 billion. This includes 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 June 30, 2025 represented a coverage ratio of 41.1% of total deposits and 100.4% of estimated uninsured deposits.
5
The following table summarizes the Company's available liquidity:
Quarter Ended
June 30, 2025
March 31, 2025
(Dollars in thousands)
On-balance sheet liquidity
Cash and cash equivalents
$
254,096
$
248,660
Unencumbered investment securities available for sale (1)
655,876
698,132
Total on-balance sheet liquidity
$
909,972
$
946,792
Off-balance sheet liquidity
FRB borrowing availability
$
346,307
$
365,624
FHLB borrowing availability (2)
977,805
1,084,304
Fed funds line borrowing availability with correspondent banks
145,000
145,000
Total off-balance sheet liquidity
$
1,469,112
$
1,594,928
Total available liquidity
$
2,379,084
$
2,541,720
(1) Investment securities available for sale at fair value.
(2) Includes FHLB total borrowing availability of $1.24 billion at June 30, 2025 based on pledged assets, however, maximum credit capacity is 45% of the Bank's total assets one quarter in arrears or $3.21 billion.
Net Interest Margin and Net Interest Income
The net interest margin increased seven basis points to 3.51% during the second quarter of 2025 from 3.44% during the first quarter of 2025.
The yield on interest earning assets increased six basis points to 5.01% for the second quarter of 2025, compared to 4.95% for the first quarter of 2025. The yield on loans receivable increased five basis points to 5.50% during the second quarter of 2025, compared to 5.45% during the first quarter of 2025 as new loans were booked and adjustable rate loans repriced at higher rates.
The cost of interest bearing deposits increased two basis points to 1.94% for the second quarter of 2025 from 1.92% for the first quarter of 2025. This increase was primarily due to an increase in rates on interest bearing demand and money market accounts during the quarter, offset partially by a decrease in certificate of deposit rates.
Net interest income increased $1.3 million, or 2.4%, during the second quarter of 2025 compared to the first quarter of 2025 due to a $1.1 million increase in total interest income and a decrease in interest expense of $0.2 million.
The net interest margin increased 24 basis points to 3.51% from 3.27% compared to the same period in the prior year. Net interest income increased $3.9 million, or 7.6%, during the second quarter of 2025 compared to the second quarter of 2024. The increase was due to a change in the mix of earning assets to higher yielding loan balances and a decrease in borrowing interest expense due to lower average balances, partially offset by an increase in deposit interest expense resulting from increased average balances and rates.
The following table provides relevant net interest income information for the periods indicated:
Quarter Ended
June 30, 2025
March 31, 2025
June 30, 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)
$
4,768,558
$
65,373
5.50
%
$
4,793,917
$
64,436
5.45
%
$
4,466,499
$
60,608
5.46
%
Taxable securities
1,374,770
11,579
3.38
1,427,976
11,739
3.33
1,685,795
14,156
3.38
Nontaxable securities (3)
15,294
137
3.59
15,686
139
3.59
18,812
165
3.53
Interest earning deposits
127,687
1,411
4.43
96,118
1,052
4.44
121,539
1,653
5.47
Total interest earning assets
6,286,309
78,500
5.01
%
6,333,697
77,366
4.95
%
6,292,645
76,582
4.89
%
Noninterest earning assets
760,634
769,530
814,146
Total assets
$
7,046,943
$
7,103,227
$
7,106,791
Interest Bearing Liabilities:
Certificates of deposit
$
979,997
$
9,349
3.83
%
$
980,336
$
9,670
4.00
%
$
838,285
$
9,128
4.38
%
Savings accounts
425,703
288
0.27
426,321
293
0.28
453,099
190
0.17
6
Quarter Ended
June 30, 2025
March 31, 2025
June 30, 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 bearing demand and money market accounts
2,770,352
10,513
1.52
2,705,686
9,526
1.43
2,625,593
9,135
1.40
Total interest bearing deposits
4,176,052
20,150
1.94
4,112,343
19,489
1.92
3,916,977
18,453
1.89
Junior subordinated debentures
22,165
472
8.54
22,086
471
8.65
21,874
539
9.91
Borrowings
245,663
2,895
4.73
320,286
3,716
4.71
500,230
6,477
5.21
Total interest bearing liabilities
4,443,880
23,517
2.12
%
4,454,715
23,676
2.16
%
4,439,081
25,469
2.31
%
Noninterest demand deposits
1,602,987
1,631,268
1,638,262
Other noninterest bearing liabilities
120,268
150,615
186,010
Stockholders’ equity
879,808
866,629
843,438
Total liabilities and stockholders’ equity
$
7,046,943
$
7,103,227
$
7,106,791
Net interest income and spread
$
54,983
2.89
%
$
53,690
2.79
%
$
51,113
2.58
%
Net interest margin
3.51
%
3.44
%
3.27
%
(1) Annualized; 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 $903,000, $753,000 and $971,000 for the second quarter of 2025, first quarter of 2025 and second 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 $2.4 million to $1.5 million during the second quarter of 2025 from $3.9 million during the first quarter of 2025. The decrease was due primarily to higher losses resulting from the above-referenced sale of investment securities recognized in the second quarter of 2025 as part of the strategic repositioning of the balance sheet, compared to losses recognized in the prior quarter. The decrease was partially offset by an increase in BOLI income due to death benefit proceeds and an increase in card revenue due to increased card activity.
Noninterest income decreased $3.7 million from the same period in 2024 due primarily to higher losses resulting from the above-referenced sale of investment securities recognized in the second quarter of 2025 as part of the strategic repositioning of the balance sheet, compared to losses recognized in the same quarter in 2024. The decrease was partially offset by an increase in BOLI income as a result of BOLI restructuring which occurred in the fourth quarter of 2024 and an increase in other income primarily due to an increase in FHLB dividend income.
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
June 30, 2025
March 31, 2025
June 30, 2024
$
%
$
%
(Dollars in thousands)
Service charges and other fees
$
2,932
$
2,975
$
2,817
$
(43)
(1.4)
%
$
115
4.1
%
Card revenue
2,008
1,733
1,930
275
15.9
78
4.0
Loss on sale of investment securities
(6,854)
(3,887)
(1,921)
(2,967)
(76.3)
(4,933)
(256.8)
Interest rate swap fees
19
—
52
19
—
(33)
(63.5)
Bank owned life insurance income
1,280
918
931
362
39.4
349
37.5
Gain on sale of other assets, net
5
3
49
2
66.7
(44)
(89.8)
Other income
2,127
2,161
1,388
(34)
(1.6)
739
53.2
Total noninterest income (loss)
$
1,517
$
3,903
$
5,246
$
(2,386)
(61.1)
%
$
(3,729)
(71.1)
%
Noninterest Expense
Noninterest expense decreased $0.3 million, or 0.7%, to $41.1 million during the second quarter of 2025, compared to $41.4 million in the first quarter of 2025, due primarily to a decrease in compensation and employee benefits resulting from a decrease in payroll taxes, offset partially by an increase in salary expense due to annual merit increases in base pay. Data processing
7
expense decreased primarily due to a decline in ongoing costs resulting from technology-related contract renewals. Professional fees increased due primarily to consulting costs related to technology-related contract renewals.
Noninterest expense increased $2.0 million, or 5.1%, during the second 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. Professional fees increased due primarily to consulting costs related to technology-related contract renewals recognized in the second quarter of 2025.
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
June 30, 2025
March 31, 2025
June 30, 2024
$
%
$
%
(Dollars in thousands)
Compensation and employee benefits
$
25,467
$
25,799
$
24,448
$
(332)
(1.3)
%
$
1,019
4.2
%
Occupancy and equipment
4,840
4,926
4,765
(86)
(1.7)
75
1.6
Data processing
3,666
3,897
3,584
(231)
(5.9)
82
2.3
Marketing
336
335
244
1
0.3
92
37.7
Professional services
1,122
734
795
388
52.9
327
41.1
State/municipal business and use taxes
1,205
1,220
1,160
(15)
(1.2)
45
3.9
Federal deposit insurance premium
810
812
812
(2)
(0.2)
(2)
(0.2)
Amortization of intangible assets
302
303
421
(1)
(0.3)
(119)
(28.3)
Other expense
3,337
3,357
2,867
(20)
(0.6)
470
16.4
Total noninterest expense
$
41,085
$
41,383
$
39,096
$
(298)
(0.7)
%
$
1,989
5.1
%
Income Tax Expense
Income tax expense was $2.2 million during the second quarter of 2025 and first quarter of 2025. The Company recognized $515,000 in income tax expense related to the surrender of $8.5 million in BOLI policies during the second quarter of 2025.
Income tax expense increased $0.4 million in the second quarter of 2025 compared to same period in 2024 due primarily to a higher effective tax rate during the second quarter of 2025.
The following table presents the income tax expense and related metrics and the change for the periods indicated:
Quarter Ended
Change
June 30, 2025
March 31, 2025
June 30, 2024
Quarter Over Quarter
Prior Year Quarter
(Dollars in thousands)
Income before income taxes
$
14,459
$
16,159
$
15,995
$
(1,700)
$
(1,536)
Income tax expense
$
2,244
$
2,248
$
1,836
$
(4)
$
408
Effective income tax rate
15.5
%
13.9
%
11.5
%
1.6
%
4.0
%
Dividends
On July 23, 2025, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend is payable on August 20, 2025 to shareholders of record as of the close of business on August 6, 2025.
Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on Thursday, July 24, 2025 at 10:00 a.m. Pacific time. To access the call, please dial (833) 470-1428 -- access code 464904 a few minutes prior to 10:00 a.m. Pacific time. The call will be available for replay through July 31, 2025 by dialing (866) 813-9403 -- access code 276171.
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.
8
Contact
Bryan McDonald, President and Chief Executive Officer, (360) 943-1500
Don Hinson, Executive Vice President and Chief Financial Officer, (360) 943-1500
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 potential recession or slowed economic growth; effects on the U.S. economy resulting from the threat or implementation of, or changes to existing, policies and executive orders, including the imposition of tariffs, changes to immigration policy, regulatory and other governmental agencies, DEI and ESG initiatives, consumer protection, foreign policy, and tax regulations; 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; 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 (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; rapid technological changes implemented by us and other parties in the financial services industry; including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequence 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 Fintech companies; 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; loss of, or inability to attract, key personnel; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, 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.
9
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except shares)
June 30, 2025
March 31, 2025
December 31, 2024
Assets
Cash on hand and in banks
$
90,754
$
89,072
$
58,821
Interest earning deposits
163,342
159,588
58,279
Cash and cash equivalents
254,096
248,660
117,100
Investment securities available for sale, at fair value (amortized cost of $704,207, $772,086 and $835,592, respectively)
656,452
716,342
764,394
Investment securities held to maturity, at amortized cost (fair value of $629,658, $632,648 and $623,452, respectively)
689,822
697,561
703,285
Total investment securities
1,346,274
1,413,903
1,467,679
Loans receivable
4,774,855
4,764,848
4,802,123
Allowance for credit losses on loans
(52,529)
(52,160)
(52,468)
Loans receivable, net
4,722,326
4,712,688
4,749,655
Premises and equipment, net
71,111
71,079
71,580
Federal Home Loan Bank stock, at cost
16,107
16,160
21,538
Bank owned life insurance
104,456
112,656
111,699
Accrued interest receivable
18,559
19,651
19,483
Prepaid expenses and other assets
294,225
291,276
303,452
Other intangible assets, net
2,548
2,850
3,153
Goodwill
240,939
240,939
240,939
Total assets
$
7,070,641
$
7,129,862
$
7,106,278
Liabilities and Stockholders' Equity
Non-interest bearing deposits
$
1,584,231
$
1,621,890
$
1,654,955
Interest bearing deposits
4,200,182
4,223,445
4,029,658
Total deposits
5,784,413
5,845,335
5,684,613
Borrowings
263,200
264,400
383,000
Junior subordinated debentures
22,204
22,131
22,058
Accrued expenses and other liabilities
112,612
116,481
153,080
Total liabilities
6,182,429
6,248,347
6,242,751
Common stock
528,758
532,124
531,674
Retained earnings
396,643
392,737
387,097
Accumulated other comprehensive loss, net
(37,189)
(43,346)
(55,244)
Total stockholders' equity
888,212
881,515
863,527
Total liabilities and stockholders' equity
$
7,070,641
$
7,129,862
$
7,106,278
Shares outstanding
33,953,194
34,105,516
33,990,827
10
HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
Six Months Ended
June 30, 2025
March 31, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Interest Income
Interest and fees on loans
$
65,373
$
64,436
$
60,608
$
129,809
$
118,470
Taxable interest on investment securities
11,579
11,739
14,156
23,318
28,990
Nontaxable interest on investment securities
137
139
165
276
346
Interest on interest earning deposits
1,411
1,052
1,653
2,463
3,129
Total interest income
78,500
77,366
76,582
155,866
150,935
Interest Expense
Deposits
20,150
19,489
18,453
39,639
34,841
Junior subordinated debentures
472
471
539
943
1,086
Borrowings
2,895
3,716
6,477
6,611
12,365
Total interest expense
23,517
23,676
25,469
47,193
48,292
Net interest income
54,983
53,690
51,113
108,673
102,643
Provision for credit losses
956
51
1,268
1,007
2,660
Net interest income after provision for credit losses
54,027
53,639
49,845
107,666
99,983
Noninterest Income
Service charges and other fees
2,932
2,975
2,817
5,907
5,605
Card revenue
2,008
1,733
1,930
3,741
3,769
Loss on sale of investment securities, net
(6,854)
(3,887)
(1,921)
(10,741)
(11,894)
Gain on sale of loans, net
—
—
—
—
26
Interest rate swap fees
19
—
52
19
52
Bank owned life insurance income
1,280
918
931
2,198
1,851
Gain on sale of other assets, net
5
3
49
8
49
Other income
2,127
2,161
1,388
4,288
2,888
Total noninterest income (loss)
1,517
3,903
5,246
5,420
2,346
Noninterest Expense
Compensation and employee benefits
25,467
25,799
24,448
51,266
49,924
Occupancy and equipment
4,840
4,926
4,765
9,766
9,697
Data processing
3,666
3,897
3,584
7,563
6,915
Marketing
336
335
244
671
455
Professional services
1,122
734
795
1,856
1,362
State/municipal business and use taxes
1,205
1,220
1,160
2,425
2,460
Federal deposit insurance premium
810
812
812
1,622
1,607
Amortization of intangible assets
302
303
421
605
842
Other expense
3,337
3,357
2,867
6,694
6,204
Total noninterest expense
41,085
41,383
39,096
82,468
79,466
Income before income taxes
14,459
16,159
15,995
30,618
22,863
Income tax expense
2,244
2,248
1,836
4,492
2,956
Net income
$
12,215
$
13,911
$
14,159
$
26,126
$
19,907
Basic earnings per share
$
0.36
$
0.41
$
0.41
$
0.77
$
0.58
Diluted earnings per share
$
0.36
$
0.40
$
0.41
$
0.76
$
0.57
Dividends declared per share
$
0.24
$
0.24
$
0.23
$
0.48
$
0.46
Average shares outstanding - basic
34,028,592
34,012,490
34,609,900
34,037,067
34,717,685
Average shares outstanding - diluted
34,446,710
34,506,238
34,919,395
34,512,260
35,127,407
11
HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Average Balances, Yields, and Rates Paid:
Six Months Ended June 30,
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)
$
4,781,167
$
129,809
5.48
%
$
4,409,315
$
118,470
5.40
%
Taxable securities
1,401,226
23,318
3.36
1,748,252
28,990
3.33
Nontaxable securities(3)
15,489
276
3.59
20,057
346
3.47
Interest earning deposits
111,990
2,463
4.44
115,136
3,129
5.47
Total interest earning assets
6,309,872
155,866
4.98
%
6,292,760
150,935
4.82
%
Noninterest earning assets
765,058
806,861
Total assets
$
7,074,930
$
7,099,621
Interest Bearing Liabilities:
Certificates of deposit
$
980,166
$
19,019
3.91
%
$
786,050
$
16,799
4.30
%
Savings accounts
426,010
581
0.28
464,087
420
0.18
Interest bearing demand and money market accounts
2,738,197
20,039
1.48
2,642,796
17,622
1.34
Total interest bearing deposits
4,144,373
39,639
1.93
3,892,933
34,841
1.80
Junior subordinated debentures
22,126
943
8.59
21,837
1,086
10.00
Borrowings
282,768
6,611
4.71
500,445
12,365
4.97
Total interest bearing liabilities
4,449,267
47,193
2.14
%
4,415,215
48,292
2.20
%
Noninterest demand deposits
1,617,050
1,647,697
Other noninterest bearing liabilities
135,358
191,516
Stockholders’ equity
873,255
845,193
Total liabilities and stockholders’ equity
$
7,074,930
$
7,099,621
Net interest income and spread
$
108,673
2.84
%
$
102,643
2.62
%
Net interest margin
3.47
%
3.28
%
(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 $1.7 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively.
(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
12
HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Nonperforming Assets and Credit Quality Metrics:
Quarter Ended
Six Months Ended
June 30, 2025
March 31, 2025
June 30, 2024
June 30, 2025
June 30, 2024
Allowance for Credit Losses on Loans:
Balance, beginning of period
$
52,160
$
52,468
$
49,736
$
52,468
$
47,999
Provision for credit losses on loans
863
(9)
1,470
854
3,174
Charge-offs:
Commercial business
(454)
(222)
(312)
(676)
(389)
Consumer
(104)
(154)
(238)
(258)
(361)
Total charge-offs
(558)
(376)
(550)
(934)
(750)
Recoveries:
Commercial business
18
26
518
44
735
Consumer
46
51
45
97
61
Total recoveries
64
77
563
141
796
Net (charge-offs) recoveries
(494)
(299)
13
(793)
46
Balance, end of period
$
52,529
$
52,160
$
51,219
$
52,529
$
51,219
Net charge-offs on loans to average loans receivable annualized
0.04
%
0.03
%
—
%
0.03
%
—
%
June 30, 2025
March 31, 2025
December 31, 2024
Nonperforming Assets:
Nonaccrual loans:
Commercial business
$
2,916
$
3,455
$
3,919
Residential real estate
832
832
—
Real estate construction and land development
5,969
—
—
Consumer
148
151
160
Total nonaccrual loans
9,865
4,438
4,079
Accruing loans past due 90 days or more
8,613
—
1,195
Total nonperforming loans
18,478
4,438
5,274
Other real estate owned
—
—
—
Nonperforming assets
$
18,478
$
4,438
$
5,274
ACL on loans to:
Loans receivable
1.10
%
1.09
%
1.09
%
Nonaccrual loans
532.48
%
1,175.30
%
1,286.30
%
Nonaccrual loans to loans receivable
0.21
%
0.09
%
0.08
%
Nonperforming loans to loans receivable
0.39
%
0.09
%
0.11
%
Nonperforming assets to total assets
0.26
%
0.06
%
0.07
%
13
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Earnings:
Net interest income
$
54,983
$
53,690
$
53,763
$
52,958
$
51,113
Provision for credit losses
956
51
1,183
2,439
1,268
Noninterest income
1,517
3,903
3,290
1,837
5,246
Noninterest expense
41,085
41,383
39,540
39,290
39,096
Net income
12,215
13,911
11,928
11,423
14,159
Basic earnings per share
$
0.36
$
0.41
$
0.35
$
0.33
$
0.41
Diluted earnings per share
$
0.36
$
0.40
$
0.34
$
0.33
$
0.41
Adjusted diluted earnings per share (1)
$
0.53
$
0.49
$
0.51
$
0.45
$
0.45
Average Balances:
Loans receivable
$
4,768,558
$
4,793,917
$
4,717,748
$
4,606,856
$
4,466,499
Total investment securities
1,390,064
1,443,662
1,530,348
1,622,011
1,704,607
Total interest earning assets
6,286,309
6,333,697
6,367,371
6,379,251
6,292,645
Total assets
7,046,943
7,103,227
7,149,294
7,182,921
7,106,791
Total interest bearing deposits
4,176,052
4,112,343
4,011,793
3,997,496
3,916,977
Total noninterest demand deposits
1,602,987
1,631,268
1,703,357
1,677,984
1,638,262
Stockholders' equity
879,808
866,629
868,308
857,799
843,438
Financial Ratios:
Return on average assets (2)
0.70
%
0.79
%
0.66
%
0.63
%
0.80
%
Return on average common equity (2)
5.57
6.51
5.46
5.30
6.75
Return on average tangible common equity (1)(2)
7.85
9.22
7.81
7.62
9.74
Adjusted return on average tangible common equity (1)(2)
11.59
11.21
11.59
10.42
10.74
Efficiency ratio
72.7
71.9
69.3
71.7
69.4
Adjusted efficiency ratio (1)
64.9
67.3
64.4
65.2
67.1
Noninterest expense to average total assets (2)
2.34
2.36
2.20
2.18
2.21
Net interest spread (2)
2.89
2.79
2.66
2.59
2.58
Net interest margin (2)
3.51
3.44
3.36
3.30
3.27
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2) Annualized.
14
HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
As of or for the Quarter Ended
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Select Balance Sheet:
Total assets
$
7,070,641
$
7,129,862
$
7,106,278
$
7,153,363
$
7,059,857
Loans receivable
4,774,855
4,764,848
4,802,123
4,679,479
4,532,615
Total investment securities
1,346,274
1,413,903
1,467,679
1,572,179
1,658,590
Total deposits
5,784,413
5,845,335
5,684,613
5,708,492
5,515,652
Noninterest demand deposits
1,584,231
1,621,890
1,654,955
1,682,219
1,599,367
Stockholders' equity
888,212
881,515
863,527
874,514
850,507
Financial Measures:
Book value per share
$
26.16
$
25.85
$
25.40
$
25.61
$
24.66
Tangible book value per share (1)
18.99
18.70
18.22
18.45
17.56
Stockholders' equity to total assets
12.6
%
12.4
%
12.2
%
12.2
%
12.0
%
Tangible common equity to tangible assets (1)
9.4
9.3
9.0
9.1
8.9
Loans to deposits ratio
82.5
81.5
84.5
82.0
82.2
Regulatory Capital Ratios:(2)
Common equity tier 1 capital ratio
12.2
%
12.2
%
12.0
%
12.3
%
12.6
%
Leverage ratio
10.3
10.2
10.0
9.9
10.1
Tier 1 capital ratio
12.6
12.6
12.4
12.7
13.0
Total capital ratio
13.6
13.6
13.3
13.6
13.9
Credit Quality Metrics:
ACL on loans to:
Loans receivable
1.10
%
1.09
%
1.09
%
1.10
%
1.13
%
Nonaccrual loans
532.5
1,175.3
1,286.3
1,194.9
1,338.7
Nonaccrual loans to loans receivable
0.21
0.09
0.08
0.09
0.08
Nonperforming loans to loans receivable
0.39
0.09
0.11
0.21
0.18
Nonperforming assets to total assets
0.26
0.06
0.07
0.13
0.12
Net charge-offs on loans to average loans receivable (3)
0.04
0.03
0.00
0.22
0.00
Criticized Loans by Credit Quality Rating:
Special mention
$
114,146
$
113,704
$
110,725
$
99,078
$
93,694
Substandard
99,715
64,387
68,318
71,977
82,496
Other Metrics:
Number of branches
50
50
50
50
50
Deposits per branch
$
115,688
$
116,907
$
113,692
$
114,170
$
110,313
Average number of full-time equivalent employees
747
757
751
749
748
Average assets per full-time equivalent employee
9,434
9,383
9,520
9,590
9,501
(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.
15
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.
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Diluted Earnings per Share and Adjusted Diluted Earnings per Share:
Net income (GAAP)
$
12,215
$
13,911
$
11,928
$
11,423
$
14,159
Exclude loss on sale of investment securities, net
6,854
3,887
3,903
6,945
1,921
Exclude gain on sale of premises and equipment
(5)
(3)
(23)
(1,480)
(49)
Exclude tax effect of adjustment
(1,438)
(816)
(815)
(1,148)
(393)
Exclude BOLI restructuring costs included in BOLI Income
—
—
508
—
—
Exclude tax expense related to BOLI restructuring
515
—
2,371
—
—
Adjusted net income (non-GAAP)
$
18,141
$
16,979
$
17,872
$
15,740
$
15,638
Average number of diluted shares outstanding
34,446,710
34,506,238
34,553,139
34,658,674
34,919,395
Diluted earnings per share (GAAP)
$
0.36
$
0.40
$
0.34
$
0.33
$
0.41
Adjusted diluted earnings per share (non-GAAP)
$
0.53
$
0.49
$
0.51
$
0.45
$
0.45
16
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.
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share:
Total stockholders' equity (GAAP)
$
888,212
$
881,515
$
863,527
$
874,514
$
850,507
Exclude intangible assets
(243,487)
(243,789)
(244,092)
(244,491)
(244,890)
Tangible common equity (non-GAAP)
$
644,725
$
637,726
$
619,435
$
630,023
$
605,617
Total assets (GAAP)
$
7,070,641
$
7,129,862
$
7,106,278
$
7,153,363
$
7,059,857
Exclude intangible assets
(243,487)
(243,789)
(244,092)
(244,491)
(244,890)
Tangible assets (non-GAAP)
$
6,827,154
$
6,886,073
$
6,862,186
$
6,908,872
$
6,814,967
Stockholders' equity to total assets (GAAP)
12.6
%
12.4
%
12.2
%
12.2
%
12.0
%
Tangible common equity to tangible assets (non-GAAP)
9.4
%
9.3
%
9.0
%
9.1
%
8.9
%
Shares outstanding
33,953,194
34,105,516
33,990,827
34,153,539
34,496,197
Book value per share (GAAP)
$
26.16
$
25.85
$
25.40
$
25.61
$
24.66
Tangible book value per share (non-GAAP)
$
18.99
$
18.70
$
18.22
$
18.45
$
17.56
17
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
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Return on Average Tangible Common Equity, annualized:
Net income (GAAP)
$
12,215
$
13,911
$
11,928
$
11,423
$
14,159
Add amortization of intangible assets
302
303
399
399
421
Exclude tax effect of adjustment
(63)
(64)
(84)
(84)
(88)
Tangible net income (non-GAAP)
$
12,454
$
14,150
$
12,243
$
11,738
$
14,492
Tangible net income (non-GAAP)
$
12,454
$
14,150
$
12,243
$
11,738
$
14,492
Exclude loss on sale of investment securities, net
6,854
3,887
3,903
6,945
1,921
Exclude gain on sale of premises and equipment
(5)
(3)
(23)
(1,480)
(49)
Exclude tax effect of adjustment
(1,438)
(816)
(815)
(1,148)
(393)
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)
$
18,380
$
17,218
$
18,187
$
16,055
$
15,971
Average stockholders' equity (GAAP)
$
879,808
$
866,629
$
868,308
$
857,799
$
843,438
Exclude average intangible assets
(243,651)
(243,945)
(244,302)
(244,706)
(245,106)
Average tangible common stockholders' equity (non-GAAP)
$
636,157
$
622,684
$
624,006
$
613,093
$
598,332
Return on average common equity, annualized (GAAP)
5.57
%
6.51
%
5.46
%
5.30
%
6.75
%
Return on average tangible common equity, annualized (non-GAAP)
7.85
%
9.22
%
7.81
%
7.62
%
9.74
%
Adjusted return on average tangible common equity, annualized (non-GAAP)
11.59
%
11.21
%
11.59
%
10.42
%
10.74
%
18
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
June 30, 2025
March 31, 2025
December 31, 2024
September 30, 2024
June 30, 2024
Adjusted Efficiency Ratio :
Total noninterest expense (GAAP)
$
41,085
$
41,383
$
39,540
$
39,290
$
39,096
Net interest income (GAAP)
$
54,983
$
53,690
$
53,763
$
52,958
$
51,113
Total noninterest income (GAAP)
$
1,517
$
3,903
$
3,290
$
1,837
$
5,246
Exclude loss on sale of investment securities, net
6,854
3,887
3,903
6,945
1,921
Exclude gain on sale of premises and equipment
(5)
(3)
(23)
(1,480)
(49)
Exclude BOLI restructuring costs included in BOLI Income
