Heritage Financial reports Q2 2025 earnings of $12.2 million

OLYMPIA, Wash. - Heritage Financial Corporation (NASDAQ:HFWA) reported net income of $12.2 million, or $0.36 per diluted share, for the second quarter of 2025, compared to $13.9 million, or $0.40 per diluted share, for the first quarter of 2025. The company, currently trading at a P/E ratio of 15.9x, is showing strong momentum with a 19.2% return over the past year. According to InvestingPro analysis, Heritage Financial appears undervalued based on its Fair Value estimates.

The quarterly results included a pre-tax loss of $6.9 million from the sale of investment securities as part of the company’s strategic balance sheet repositioning, which reduced earnings per share by $0.15. The company sold $91.6 million of securities with an average yield of 2.63% and used proceeds to purchase $56.4 million in securities yielding 5.06% and to fund new loans. With a market capitalization of $817 million and a moderate debt-to-equity ratio of 0.35, InvestingPro data shows the company maintains a healthy balance sheet structure.

Net interest margin improved to 3.51% from 3.44% in the previous quarter. The yield on loans increased to 5.50% from 5.45%, while the cost of interest-bearing deposits rose slightly to 1.94% from 1.92%.

Total deposits decreased $60.9 million, or 1.0%, to $5.78 billion at quarter-end. Despite this decline, the company reported that average total deposits increased $35.4 million during the quarter.

"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," said Bryan McDonald, Chief Executive Officer, in the press release. "This is partly due to the ongoing expansion of our net interest margin, due mostly to increases in yields on loans and investment securities."

Classified loans increased to 2.1% of total loans from 1.4% in the previous quarter, with the company downgrading $38.2 million of loans to substandard during the period. Nonaccrual loans increased by $5.4 million during the quarter.

The company’s board declared a quarterly cash dividend of $0.24 per share, payable on August 20, 2025, to shareholders of record as of August 6, 2025. Heritage Financial has maintained dividend payments for 15 consecutive years, with a current dividend yield of 3.85%. InvestingPro subscribers can access additional insights through the comprehensive Pro Research Report, which provides detailed analysis of Heritage Financial’s dividend sustainability and growth potential.

In other recent news, Heritage Financial Corporation reported its first-quarter 2025 earnings, which fell short of analyst expectations. The company posted an earnings per share (EPS) of $0.40, missing the anticipated $0.45, and reported revenue of $57.59 million, which did not meet the expected $61.74 million. These results have caught the attention of investors, particularly as the earnings miss indicates potential challenges. Additionally, Heritage Financial has appointed Bryan D. McDonald as its new President and Chief Executive Officer. McDonald has been with the company since 2014, initially joining after the merger with Whidbey Island Bank. His appointment follows a succession plan initiated in June 2024. These developments mark significant changes for the company as it navigates the current financial landscape.

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