HFWA

This article first appeared on GuruFocus. - Total Loan Balances: Increased $133 million in Q3 2026. - Loan Portfolio Yield: 5.76% in Q3, up 4 basis points from Q2. - Total Deposits: Increased $148 million in Q3; non-maturity deposits rose $190 million. - Cost of Interest-Bearing Deposits: Decreased to 1.65% from 1.67% in the prior quarter. - Investment Balances: Decreased $32 million from the prior quarter; investment portfolio yield rose 2 basis points. - Net Interest Income: Increased $2.4 million from the prior quarter. - Net Interest Margin: 4.05%, up from 3.99% in Q2 and 3.64% in Q3 2025. - Provision for Credit Losses: $2.3 million in Q3, driven by strong loan growth and specific reserves on non-accrual loans. - Non-Interest Expense: Decreased $2.4 million from the prior quarter, including a $2.3 million decrease in merger-related expenses; Q4 expense range expected at $55 million to $56 million. - TCE Ratio: 9.3% at end of Q3, down from 9.7% in the prior quarter. - Share Repurchases: 341,000 shares repurchased for $10 million in Q3; new program approved for up to 5% of outstanding shares (~2 million shares). - Non-Accrual Loans: Increased $16.6 million to just over $32 million, or 0.55% of total loans. - Non-Performing Assets to Total Assets: 0.39%, up from 0.19% at end of Q2. - Criticized Loans: $246 million, or 4.19% of total loans, up from 4.00% in Q2. - Net Charge-Offs: $381,000 in Q3; $1.2 million through first nine months, or 0.03% of total loans annualized. - New Loan Commitments: $388 million closed in Q3, up from $339 million in Q2 and $316 million in Q3 2025. - Commercial Loan Pipeline: $399 million at quarter end, down from $628 million in Q2 and $511 million in Q3 2025. - Loan Prepayments and Payoffs: $207 million in Q3, up from $152 million in Q2 and $119 million in Q1. - New Deposit Accounts: Average balances estimated at $52 million versus $62 million last quarter; deposit pipeline ended at $97 million versus $78 million in Q2. - New Commercial Loan Rate: Average 6.46% in Q3, up 2 basis points from Q2. - All New Loan Rate: Average 6.45% in Q3, up 5 basis points from 6.40% last quarter. - Warning! GuruFocus has detected 6 Warning Sign with HFWA. - Is HFWA fairly valued? Test your thesis with our free DCF calculator. Release Date: October 22, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Strong loan growth with total loan balances increasing $133 million in Q3, driven by robust originations and advances. - Net interest margin improved to 4.05% from 3.99% in the prior quarter, and net interest income rose $2.4 million. - Deposits increased $148 million, with non-maturity deposits up $190 million, reflecting seasonal strength and new customer additions. - Successful completion of the Kitsap Bank systems conversion, with merger-related expenses substantially recognized, expected to reduce Q4 expenses to $55-56 million. - Credit quality remains solid with net charge-offs at 0.03% of total loans annualized, and a new stock repurchase program authorized for up to 5% of outstanding shares. - Non-accrual loans increased by $16.6 million to $32 million, or 0.55% of total loans, primarily due to one C&I relationship in the transportation industry. - Criticized loans rose $15.9 million to $246 million, or 4.19% of total loans, driven by C&I relationships in construction and a multifamily project. - Loan pipeline declined to $399 million from $628 million last quarter, partly due to $103 million in low-income housing projects leaving the pipeline. - Deposit costs likely hit an inflection point, with spot rate at 1.66% and potential for increase if Fed raises rates, impacting net interest margin. - Core expenses are expected to rise due to compensation and third-party cost increases, with additional $1.5 million per quarter in Q1 and Q2 2027 for commercial online banking conversion. Q: With the new $2 million share buyback program approved, how active does Heritage plan to be in Q4? A: CFO Donald Hinson said the company will likely be less active in Q4 than it has been, citing the CRE concentration ratio rising to about 308% at the end of Q3, along with market conditions and other capital priorities. He noted the Board approved the new program after the prior one was substantially completed in Q3, when Heritage repurchased 341,000 shares for $10 million. Q: What drove the $16.6 million increase in non-accrual loans, and what is the loss potential? A: Chief Credit Officer Tony Chalfant said the primary driver was one $11.8 million C&I relationship of transportation companies facing economic stress and delinquency, of which just over $4.4 million carries government guarantees. Three additional C&I relationships also moved to non-accrual. He said loss potential on the remainder is very low, with only one deal near liquidation, producing a $91,000 loss. Non-accruals now equal 0.55% of total loans. Q: What is the outlook for loan growth over the next few quarters? A: CEO Bryan McDonald expects an annualized growth rate in the mid-single-digit range for the next couple of quarters, based on the $399 million pipeline and unfunded commitments. He cautioned visibility is limited beyond that, noting $103 million of affordable housing projects left the pipeline (three shelved by borrowers as rates rose, four lost to competitors on pricing) and payoffs jumped to $207 million from $152 million. Q: How should investors think about core expenses into 2027, and what are the investment plans? A: CFO Donald Hinson said core expenses will rise with compensation, benefits, payroll taxes, medical premiums and third-party pricing adjustments, with the largest sequential increase typically from Q4 to Q1. A commercial online banking conversion will cost about $500,000 in Q4 and roughly $1.5 million in each of the first two quarters of 2027, finishing by mid-2027. Q4 expenses are guided to $55 million to $56 million after merger costs largely wound down. Q: Did Heritage hit its announced 35% cost savings target from the Kitsap deal? A: CFO Donald Hinson said the company hit the 35% target, though other investments in departmental staffing and technology over the past year added expense pressure. The Kitsap Bank systems conversion was completed as planned in late September, and Bryan McDonald said the cost of carrying both platforms is now largely behind the company. Q: What is the plan for FHLB borrowings maturing in Q4? A: CFO Donald Hinson said the decision depends on liquidity and whether deposits outpace loan growth. The plan is to reinvest principal payments from the investment portfolio and use FHLB borrowings to offset the remainder; if cash needs rise, Heritage may slow securities reinvestment. Q: What rates are securities cash flows coming off at, and what is the reinvestment spread? A: CFO Donald Hinson said the roughly $45 million to $50 million of quarterly securities cash flows are coming off in the low 4% range and being reinvested in the low-to-mid 5% range, picking up about 100 basis points. He expects that dynamic to continue. Q: Where did deposit costs end the quarter, and what deposit beta should be expected if rates rise? A: CFO Donald Hinson said the spot rate for interest-bearing deposits was 1.66% at quarter end, also the September cost, after the quarterly cost fell to 1.65% from 1.67%. He estimated a roughly 20% beta on the way up for a single Fed hike, similar to the downside, unless the Fed moves more aggressively. Q: What is driving the stronger loan production, and how competitive is the market? A: CEO Bryan McDonald credited broad calling activity across the footprint, a net 10 commercial bankers added this year, the new Spokane office and momentum from the completed Kitsap conversion. He said competition has become more aggressive on pricing as deal flow moderated from a June peak, but Heritage still posted $388 million in new commitments, up from $339 million in Q2. Q: How is Heritage defending its low-cost deposit base amid rising rates and competition? A: CEO Bryan McDonald said new interest-bearing deposits come in at roughly a 2% average cost (money markets at 2.11%, CDs at 3.50%), still producing a healthy margin against new loans at about 6.5%. He said winning incremental deposits on price is very hard, so Heritage relies on its long-standing calling strategy for operating relationships, service levels and digital offerings to win and retain core accounts. Q: What is the provision mix between loan growth and credit, and how are criticized loans trending? A: CFO Donald Hinson said about $1 million of the $2.3 million provision was tied to new non-accrual loans, with the rest driven by strong loan growth. Criticized loans rose $15.9 million to $246 million, or 4.19% of total loans, driven by two construction-industry C&I relationships and a multifamily project with slower lease-up, though substandard loans are down 7% since year-end 2025. Q: How much repricing uplift is coming on adjustable-rate loans, and could retention suffer? A: CEO Bryan McDonald said adjustable-rate loans are repricing into the low 7% range, more than 100 basis points above current rates, though indexes have eased somewhat since quarter end. He expects the market to be in similar ranges and believes some customers with liquidity will pay off loans rather than reprice, citing one professional-services loan paid off the prior day, but does not expect that to be the norm. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Successfully completed the Kitsap Bank systems conversion in late September, eliminating the operational burden and cost of carrying dual platforms. - Net interest margin expanded to 4.05% driven by higher yields on new loan originations and the repricing of adjustable-rate loans. - Loan growth of $133 million was supported by strong commercial production and construction advances, though partially offset by elevated prepayments and payoffs. - Deposit growth of $148 million benefited from typical third-quarter seasonality and new customer additions, maintaining a low-cost funding base despite rising market rates. - Management attributes the increase in nonaccrual loans primarily to a single $11.8 million C&I relationship in the transportation industry facing economic stress. - Strategic reinvestment of investment portfolio cash flows into higher-yielding securities added 2 basis points to portfolio yield during the quarter. - Management expects annualized loan growth in the mid-single-digit range for the next two quarters, supported by current pipeline visibility and unfunded commitments. - Net interest margin and net interest income are projected to continue trending higher due to an accelerating asset repricing tailwind as 5-year interest rates rise. - Operating expenses are forecasted to decrease to a range of $55 million to $56 million in Q4 following the completion of merger-related activities. - A commercial online banking conversion is scheduled for the first half of 2027, with anticipated costs of approximately $1.5 million in both Q1 and Q2. - The bank plans to slow stock repurchase activity in Q4 to prioritize capital retention as the nonowner-occupied CRE concentration ratio remains elevated at 308%. - Nonaccrual loans increased to 0.55% of total loans, largely driven by the migration of four C&I relationships totaling approximately $16.6 million. - The provision for credit losses of $2.3 million was split between supporting strong loan growth and establishing specific reserves for new nonaccrual status loans. - Criticized loans rose to 4.19% of total loans, influenced by two construction-related C&I relationships and a multifamily project with slower-than-expected lease-up. - A new stock repurchase program for up to 5% of outstanding shares was approved, though execution remains dependent on market conditions and CRE concentration levels. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management indicated the large transportation relationship is in early-stage workout but noted $4.4 million in government guarantees mitigate potential losses. - Most other new nonaccruals are viewed as having very little loss potential, with only one small liquidation-mode deal resulting in a $91,000 loss this quarter. - The interest-bearing deposit spot rate ended September at 1.66%, with management suggesting a 20% beta estimate for future rate increases. - Management noted that while they have likely hit an inflection point on deposit costs, they remain focused on winning full operating relationships rather than competing solely on price. - The pipeline decline from $628 million to $399 million was attributed to record closings, the removal of $103 million in affordable housing projects due to rate sensitivity, and tighter entry requirements. - Management observed more aggressive pricing from competitors as overall market deal flow has moderately decreased. - Adjustable-rate loans are repricing into the 7% range, which may lead some high-liquidity customers to pay off loans rather than re-finance. - Management does not expect this to be the behavior for most customers, as most lack the balance sheet liquidity to pay off debts in full.

Third Quarter 2026 Highlights - Net income was $18.7 million, or $0.46 per diluted share, compared to $17.5 million, or $0.42 per diluted share, for the second quarter of 2026. - Adjusted diluted earnings per share (1) were $0.55, compared to $0.57 in the second quarter of 2026. - Net interest income increased $2.4 million, or 3.3% (13.0% annualized) from the prior quarter. - Net interest margin increased to 4.05%, an increase of 6 basis points from 3.99% for the second quarter of 2026. - Yield on loans increased to 5.76%, an increase of 4 basis points from 5.72% for the second quarter of 2026. - Cost of interest bearing deposits decreased to 1.65%, from 1.67% for the second quarter of 2026. - Loans receivable increased $133.5 million, or 2.3% (9.2% annualized), from the second quarter of 2026. - Deposits increased $148.2 million, or 2.1% (8.4% annualized), from the second quarter of 2026. - Approved a new stock repurchase program authorizing the repurchase of up to 5% of the Company's outstanding shares, or approximately 2.0 million shares. - Declared a regular cash dividend of $0.25 per share on October 21, 2026. OLYMPIA, Wash., Oct. 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 $18.7 million for the third quarter of 2026, compared to $17.5 million for the second quarter of 2026 and $19.2 million for the third quarter of 2025. Diluted earnings per share were $0.46 for the third quarter of 2026, compared to $0.42 for the second quarter of 2026 and $0.55 for the third quarter of 2025. Adjusted diluted earnings per share(1) were $0.55 for the third quarter of 2026, compared to $0.57 for the second quarter of 2026 and $0.56 for the third quarter of 2025. During third quarter of 2026, the Company completed the core conversion of customer accounts of Kitsap Bank from the acquisition of its parent company Olympic Bancorp, Inc. (the "Merger") which closed on January 31, 2026. As a result of the core conversion and closure of two branches, the Company recognized Merger-related expenses of $5.2 million in the third quarter of 2026. Bryan McDonald, President and Chief Executive Officer of the Company, commented, "We are pleased with the continued improvement in our net interest margin and growth in loans and deposits during the third quarter. In addition, we completed the successful conversion of the Kitsap Bank customers to the Heritage Bank system. This was an important step for Heritage to achieve full realization of cost savings from the Merger and operate with improved efficiency going forward." (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 | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | (Dollars in thousands, except per share amounts) Net income | $ 18,720 | | $ 17,546 | | $ 19,169 Diluted earnings per share | 0.46 | | 0.42 | | 0.55 Adjusted diluted earnings per share(1) | 0.55 | | 0.57 | | 0.56 Return on average assets(2) | 0.88 % | | 0.83 % | | 1.09 % Adjusted return on average assets(1)(2) | 1.07 % | | 1.12 % | | 1.11 % Return on average common equity(2) | 6.71 | | 6.33 | | 8.52 Return on average tangible common equity(1)(2) | 10.67 | | 10.17 | | 11.86 Adjusted return on average tangible common equity(1)(2) | 12.75 | | 13.29 | | 12.16 Net interest margin(2) | 4.05 | | 3.99 | | 3.64 Cost of total deposits(2) | 1.19 | | 1.21 | | 1.37 Efficiency ratio | 71.6 | | 76.5 | | 63.3 Adjusted efficiency ratio(1) | 62.2 | | 63.9 | | 61.9 Noninterest expense to average total assets(2) | 2.90 | | 3.06 | | 2.36 Adjusted noninterest expense to average total assets(1)(2) | 2.52 | | 2.56 | | 2.30 Total assets | $ 8,517,934 | | $ 8,430,566 | | $ 7,011,879 Loans receivable | 5,881,201 | | 5,747,741 | | 4,769,160 Total deposits | 7,186,934 | | 7,038,706 | | 5,857,464 Loan to deposit ratio(3) | 81.8 % | | 81.7 % | | 81.4 % Book value per share | $ 26.71 | | $ 27.13 | | $ 26.62 Tangible book value per share(1) | 18.74 | | 19.15 | | 19.46 | (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. Investment Securities Total investment securities decreased $31.8 million, or 1.9%, to $1.60 billion at September 30, 2026, from $1.63 billion at June 30, 2026. There were investment maturities and repayments of $45.9 million and a $32.4 million increase in unrealized losses on available for sale securities during the third quarter of 2026. These decreases to carrying value were partially offset by investment security purchases of $46.1 million during the third quarter of 2026. The following table summarizes the composition of the Company's investment securities portfolio at the dates indicated: | September 30, 2026 | | June 30, 2026 | | Change | Balance | | % ofTotal | | Balance | | % ofTotal | | $ | | % | (Dollars in thousands) Investment securities available for sale, at fair value: U.S. government and agency securities | $ 11,272 | | 0.7 % | | $ 11,823 | | 0.7 % | | $ (551) | | (4.7) % Municipal securities | 55,203 | | 3.4 | | 64,390 | | 3.9 | | (9,187) | | (14.3) Residential CMO and MBS(1) | 491,405 | | 30.7 | | 496,178 | | 30.4 | | (4,773) | | (1.0) Commercial CMO and MBS(1) | 348,255 | | 21.8 | | 363,713 | | 22.2 | | (15,458) | | (4.3) Corporate obligations | 23,052 | | 1.4 | | 16,423 | | 1.0 | | 6,629 | | 40.4 Other asset-backed securities | 18,449 | | 1.2 | | 18,910 | | 1.2 | | (461) | | (2.4) Total | $ 947,636 | | 59.2 % | | $ 971,437 | | 59.4 % | | $ (23,801) | | (2.5) % | | | | | | | | | | | Investment securities held to maturity, at amortized cost: U.S. government and agency securities | $ 151,385 | | 9.5 % | | $ 151,363 | | 9.3 % | | $ 22 | | — % Residential CMO and MBS(1) | 200,760 | | 12.5 | | 207,387 | | 12.7 | | (6,627) | | (3.2) Commercial CMO and MBS(1) | 301,678 | | 18.8 | | 303,089 | | 18.6 | | (1,411) | | (0.5) Total | $ 653,823 | | 40.8 % | | $ 661,839 | | 40.6 % | | $ (8,016) | | (1.2) % | | | | | | | | | | | Total investment securities | $ 1,601,459 | | 100.0 % | | $ 1,633,276 | | 100.0 % | | $ (31,817) | | (1.9) % | (1) | U.S. government agency and government-sponsored enterprise CMO and MBS. Loans Receivable Loans receivable increased $133.5 million, or 2.3%, during the third quarter of 2026. New loans funded during the third quarter of 2026 were $255.4 million, an increase from new loans funded during the second quarter of 2026 of $162.2 million and new loans funded during the third quarter of 2025 of $174.5 million. Loan prepayments were higher at $133.7 million during the third quarter of 2026, compared to $102.5 million during the second quarter of 2026. Loan payoffs were also higher at $73.4 million during the third quarter of 2026, compared to $49.9 million in the second quarter of 2026. Commercial and industrial loans increased $10.4 million, or 1.0%, during the third quarter of 2026, due primarily to new loan production of $40.9 million, offset partially by pay downs on outstanding balances. Owner-occupied commercial real estate ("CRE") loans decreased $15.9 million, or 1.3%, during the third quarter, due primarily to pay downs on outstanding balances, offset partially by new loan production of $36.7 million. Non-owner occupied CRE loans increased $56.5 million, or 2.3%, during the quarter, due primarily to new loan production of $122.8 million. Residential real estate loans increased $12.3 million, or 3.5% due primarily to the purchase of a $21.0 million pool of mortgage loans during the third quarter, offset partially by pay downs on outstanding balances. Commercial and multifamily construction loans increased $62.0 million, or 23.9%, during the third quarter, due primarily to advances on current commitments. The following table summarizes the Company's loans receivable at the dates indicated: | September 30, 2026 | | June 30, 2026 | | Change | Balance | | % of Total | | Balance | | % of Total | | $ | | % | (Dollars in thousands) Commercial business: | | | | | | | | | | | Commercial and industrial | $ 1,061,712 | | 18.1 % | | $ 1,051,269 | | 18.3 % | | $ 10,443 | | 1.0 % Owner-occupied CRE | 1,211,776 | | 20.6 | | 1,227,674 | | 21.4 | | (15,898) | | (1.3) Non-owner occupied CRE | 2,565,804 | | 43.6 | | 2,509,283 | | 43.6 | | 56,521 | | 2.3 Total commercial business | 4,839,292 | | 82.3 | | 4,788,226 | | 83.3 | | 51,066 | | 1.1 Residential real estate | 361,177 | | 6.1 | | 348,838 | | 6.1 | | 12,339 | | 3.5 Real estate construction and land development: | | | | | | | | | | | Residential | 139,669 | | 2.4 | | 136,595 | | 2.4 | | 3,074 | | 2.3 Commercial and multifamily | 321,951 | | 5.5 | | 259,947 | | 4.5 | | 62,004 | | 23.9 Total real estate construction and land development | 461,620 | | 7.9 | | 396,542 | | 6.9 | | 65,078 | | 16.4 Consumer | 219,112 | | 3.7 | | 214,135 | | 3.7 | | 4,977 | | 2.3 Loans receivable | $ 5,881,201 | | 100.0 % | | $ 5,747,741 | | 100.0 % | | $ 133,460 | | 2.3 Deposits Total deposits increased $148.2 million, or 2.1%, to $7.19 billion at September 30, 2026, from $7.04 billion at June 30, 2026. Non-maturity deposits increased by $189.6 million, or 3.2%, from June 30, 2026 due primarily to new deposits opened during the third quarter of 2026 as well as an increase in customer balances as is typical in the third quarter of each year. Certificates of deposit declined $41.4 million during the third quarter of 2026 due primarily to the transfer of a $39.3 million relationship to a money market account. The following table summarizes the Company's total deposits at the dates indicated: | September 30, 2026 | | June 30, 2026 | | Change | Balance | | % of Total | | Balance | | % of Total | | $ | | % | (Dollars in thousands) Noninterest demand deposits | $ 1,967,073 | | 27.4 % | | $ 1,972,702 | | 28.0 % | | $ (5,629) | | (0.3) % Interest bearing demand deposits | 1,974,016 | | 27.5 | | 1,854,634 | | 26.3 | | 119,382 | | 6.4 Money market accounts | 1,667,978 | | 23.2 | | 1,574,835 | | 22.4 | | 93,143 | | 5.9 Savings accounts | 563,965 | | 7.8 | | 581,259 | | 8.3 | | (17,294) | | (3.0) Total non-maturity deposits | 6,173,032 | | 85.9 | | 5,983,430 | | 85.0 | | 189,602 | | 3.2 Certificates of deposit | 1,013,902 | | 14.1 | | 1,055,276 | | 15.0 | | (41,374) | | (3.9) Total deposits | $ 7,186,934 | | 100.0 % | | $ 7,038,706 | | 100.0 % | | $ 148,228 | | 2.1 % Borrowings Total borrowings decreased $44.4 million to $121.9 million at September 30, 2026, compared to $166.3 million at June 30, 2026. All outstanding borrowings at September 30, 2026 were with the Federal Home Loan Bank ("FHLB") and mature in the fourth quarter of 2026. Stockholders' Equity Total stockholders' equity decreased $25.9 million, or 2.3%, to $1.08 billion at September 30, 2026, compared to $1.11 billion at June 30, 2026. This decrease was due primarily to an increase in other comprehensive loss of $25.3 million due to a change in market rates during the quarter, the repurchase of 341,483 shares of the Company's common stock, for an aggregate purchase price of $10.2 million, under the Company's stock repurchase program, and dividends declared of $10.3 million, offset partially by net income of $18.7 million. The following table summarizes changes in stockholders' equity for the Company for the period indicated: | Quarter Ended | September 30, 2026 | (In thousands) Balance, beginning of period | $ 1,109,692 Net income | 18,720 Cash dividends declared on common stock | (10,341) Common stock repurchased | (10,302) Other comprehensive loss | (25,276) Other | 1,328 Balance, end of period | $ 1,083,821 The Company and Bank continued to maintain capital levels in excess of the applicable regulatory requirements to be categorized as "well-capitalized" at September 30, 2026. The following table summarizes the capital ratios for the Company at the dates indicated: | September 30, 2026 | | June 30, 2026 Stockholders' equity to total assets | 12.7 % | | 13.2 % Tangible common equity to tangible assets (1) | 9.3 | | 9.7 Common equity tier 1 capital ratio (2) | 11.9 | | 12.1 Leverage ratio (2) | 10.3 | | 10.4 Tier 1 capital ratio (2) | 12.2 | | 12.5 Total capital ratio (2) | 13.1 | | 13.4 | (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 1.04% at September 30, 2026, compared to 1.03% at June 30, 2026. The increase in the ACL as a percentage of loans was due primarily to specific reserves of $998,000 for individually evaluated loans. During the third quarter of 2026, the Company recorded a $2.3 million provision for credit losses on loans, compared to an $844,000 reversal of provision during the second quarter of 2026. The provision for credit losses on loans was due primarily to loan growth during the quarter. During the third quarter of 2026, the Company recorded a $20,000 provision for credit losses on unfunded commitments, compared to a $77,000 reversal of provision for credit losses on unfunded commitments during the second quarter of 2026. 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 | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | 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 | $ 59,473 | | $ 1,108 | | $ 60,581 | | $ 60,551 | | $ 1,185 | | $ 61,736 | | $ 52,529 | | $ 740 | | $ 53,269 Provision for (reversal of) credit losses | 2,251 | | 20 | | 2,271 | | (844) | | (77) | | (921) | | 1,563 | | 212 | | 1,775 (Net charge-offs) / recoveries | (381) | | — | | (381) | | (234) | | — | | (234) | | (118) | | — | | (118) Balance, end of period | $ 61,343 | | $ 1,128 | | $ 62,471 | | $ 59,473 | | $ 1,108 | | $ 60,581 | | $ 53,974 | | $ 952 | | $ 54,926 Credit Quality Classified loans (loans rated substandard or worse) increased $3.0 million from the prior quarter, while the percentage of classified loans to loans receivable remained at 1.8% at September 30, 2026 and June 30, 2026. The following table illustrates total loans by risk rating and their respective percentage of total loans at the dates indicated: | September 30, 2026 | | June 30, 2026 | Balance | | % of Total | | Balance | | % of Total | (Dollars in thousands) Risk Rating: | | | | | | | Pass | $ 5,634,705 | | 95.9 % | | $ 5,517,189 | | 96.0 % Special Mention | 138,023 | | 2.3 | | 125,108 | | 2.2 Substandard | 108,473 | | 1.8 | | 105,444 | | 1.8 Total | $ 5,881,201 | | 100.0 % | | $ 5,747,741 | | 100.0 % Nonaccrual loans were $32.1 million at September 30, 2026, compared to $15.5 million at June 30, 2026. Four commercial and industrial loan relationships totaling $12.9 million and three commercial real estate loan relationships totaling $4.2 million were migrated to nonaccrual during the third quarter of 2026. The following table illustrates changes in nonaccrual loans during the periods indicated: | Quarter Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | (Dollars in thousands) Balance, beginning of period | $ 15,510 | | $ 14,958 | | $ 9,865 Additions | 17,210 | | 5,988 | | 8,288 Net principal payments | (336) | | (280) | | (207) Payoffs | (305) | | (5,156) | | (137) Charge-offs | (2) | | — | | (197) Balance, end of period | $ 32,077 | | $ 15,510 | | $ 17,612 Nonaccrual loans to loans receivable | 0.55 % | | 0.27 % | | 0.37 % Liquidity Total liquidity sources available at September 30, 2026 totaled $3.25 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 September 30, 2026 represented a coverage ratio of 45.2% of total deposits and 114.2% of estimated uninsured deposits. The following table summarizes the Company's available liquidity as of the dates indicated: | Quarter Ended | September 30, 2026 | | June 30, 2026 | (Dollars in thousands) On-balance sheet liquidity | | | Cash and cash equivalents | $ 187,067 | | $ 204,375 Unencumbered investment securities available for sale (1) | 926,203 | | 949,021 Total on-balance sheet liquidity | $ 1,113,270 | | $ 1,153,396 Off-balance sheet liquidity | | | FRB borrowing availability | $ 322,158 | | $ 339,029 FHLB borrowing availability (2) | 1,671,170 | | 1,635,593 Fed funds line borrowing availability with correspondent banks | 145,000 | | 145,000 Total off-balance sheet liquidity | $ 2,138,328 | | $ 2,119,622 Total available liquidity | $ 3,251,598 | | $ 3,273,018 | (1) | Investment securities available for sale at fair value. (2) | Includes FHLB total borrowing availability of $1.79 billion at September 30, 2026 based on pledged assets, however, maximum credit capacity was 45% of the Bank's total assets one quarter in arrears or $3.79 billion. Net Interest Income and Net Interest Margin Net interest income increased $2.4 million, or 3.3%, during the third quarter of 2026 compared to the second quarter of 2026 due to a $2.5 million increase in total interest income, offset partially by an increase in interest expense of $74,000. The increase in net interest income was primarily due to an increase in the net interest margin. Net interest margin increased six basis points to 4.05% during the third quarter of 2026, from 3.99% during the second quarter of 2026. The increase in net interest margin was due primarily to the increase in yield on loans and a decrease in the cost of interest bearing deposits. The yield on interest earning assets increased five basis points to 5.26% for the third quarter of 2026, compared to 5.21% for the second quarter of 2026. The increase was primarily due to an increase in yield on loans. The yield on loans receivable increased four basis points to 5.76% during the third quarter of 2026, compared to 5.72% during the second quarter of 2026. The increase was due primarily to an increase in rates on loans originated during the third quarter of 2026. Loan yield also benefited from the incremental accretion on purchased loans in both the second and third quarters of 2026. The following table presents the net interest margin and loan yield and the effect of the incremental accretion on purchased loans on these ratios for the periods indicated: | Quarter Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 Net Interest Margin, excluding incremental accretion on purchased loans, annualized: Net interest margin | 4.05 % | | 3.99 % | | 3.64 % Exclude impact from incremental accretion on purchased loans(2) | (0.07) % | | (0.09) % | | (0.01) % Net interest margin, excluding incremental accretion on purchasedloans(1) | 3.98 % | | 3.90 % | | 3.63 % | | | | | Loan yield, excluding incremental accretion on purchased loans, annualized: Loan yield | 5.76 % | | 5.72 % | | 5.53 % Exclude impact from incremental accretion on purchased loans(2) | (0.10) | | (0.12) | | (0.01) Loan yield, excluding incremental accretion on purchased loans(1) | 5.66 % | | 5.60 % | | 5.52 % | | | | | Incremental accretion on purchased loans(1) | $ 1,456 | | $ 1,772 | | $ 123 | (1) | Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" section for a reconciliation to the comparable GAAP financial measure. (2) | Represents the amount of interest income recorded on purchased loans in excess of the contractual stated interest rate in the individual loan notes due to incremental accretion of purchased discount or premium. Purchased discount or premium is the difference between the contractual loan balance and the fair value of acquired loans at the acquisition date. The purchased discount is accreted into income over the remaining life of the loan. The impact of incremental accretion on loan yield will change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchased loans decreases. The cost of interest bearing deposits decreased two basis points to 1.65% for the third quarter of 2026, from 1.67% for the second quarter of 2026. This decrease was primarily due to a decrease in rates on certificates of deposit. Net interest margin increased 41 basis points to 4.05% during the third quarter of 2026, compared to 3.64% for the same period in the prior year. Net interest income increased $19.9 million, or 34.7%, during the third quarter of 2026 compared to the same period in the prior year, due to a combination of an increase in average interest earning assets, which increased substantially as a result of the Merger, and an increase in net interest margin. The following table provides net interest income information for the periods indicated: | Quarter Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | AverageBalance | | InterestEarned/Paid | | Average Yield/ Rate (1) | | AverageBalance | | InterestEarned/Paid | | Average Yield/ Rate (1) | | AverageBalance | | InterestEarned/Paid | | Average Yield/ Rate (1) | (Dollars in thousands) Interest Earning Assets: | | | | | | | | | | | | | | | | | Loans receivable (2)(3) | $ 5,817,905 | | $ 84,470 | | 5.76 % | | $ 5,740,927 | | $ 81,935 | | 5.72 % | | $ 4,762,648 | | $ 66,422 | | 5.53 % Taxable securities | 1,609,163 | | 14,456 | | 3.56 | | 1,635,979 | | 14,464 | | 3.55 | | 1,314,374 | | 11,102 | | 3.35 Nontaxable securities (3) | 15,049 | | 126 | | 3.32 | | 15,439 | | 128 | | 3.33 | | 15,242 | | 138 | | 3.59 Interest earning deposits | 121,352 | | 1,139 | | 3.72 | | 124,969 | | 1,147 | | 3.68 | | 166,182 | | 1,846 | | 4.41 Total interest earning assets | 7,563,469 | | 100,191 | | 5.26 % | | 7,517,314 | | 97,674 | | 5.21 % | | 6,258,446 | | 79,508 | | 5.04 % Noninterest earning assets | 917,141 | | | | | | 920,006 | | | | | | 747,694 | | | | Total assets | $ 8,480,610 | | | | | | $ 8,437,320 | | | | | | $ 7,006,140 | | | | Interest Bearing Liabilities: | | | | | | | | | | | | | | | | | Certificates of deposit | $ 1,033,482 | | $ 8,157 | | 3.13 % | | $ 1,090,406 | | $ 8,817 | | 3.24 % | | $ 955,737 | | $ 8,822 | | 3.66 % Savings accounts | 575,102 | | 296 | | 0.20 | | 591,458 | | 348 | | 0.24 | | 428,256 | | 296 | | 0.27 Interest bearing demand and money market accounts | 3,528,494 | | 12,916 | | 1.45 | | 3,444,901 | | 12,226 | | 1.42 | | 2,833,048 | | 11,003 | | 1.54 Total interest bearing deposits | 5,137,078 | | 21,369 | | 1.65 | | 5,126,765 | | 21,391 | | 1.67 | | 4,217,041 | | 20,121 | | 1.89 Junior subordinated debentures | 22,527 | | 437 | | 7.70 | | 22,455 | | 431 | | 7.70 | | 22,239 | | 474 | | 8.46 Borrowings | 110,936 | | 1,126 | | 4.03 | | 105,131 | | 1,036 | | 3.95 | | 136,582 | | 1,542 | | 4.48 Total interest bearing liabilities | 5,270,541 | | 22,932 | | 1.73 % | | 5,254,351 | | 22,858 | | 1.74 % | | 4,375,862 | | 22,137 | | 2.01 % Noninterest demand deposits | 2,000,526 | | | | | | 1,973,038 | | | | | | 1,625,945 | | | | Other noninterest bearing liabilities | 102,381 | | | | | | 97,753 | | | | | | 112,053 | | | | Stockholders' equity | 1,107,162 | | | | | | 1,112,178 | | | | | | 892,280 | | | | Total liabilities and stockholders' equity | $ 8,480,610 | | | | | | $ 8,437,320 | | | | | | $ 7,006,140 | | | | Net interest income and spread | | | $ 77,259 | | 3.53 % | | | | $ 74,816 | | 3.47 % | | | | $ 57,371 | | 3.03 % Net interest margin | | | | | 4.05 % | | | | | | 3.99 % | | | | | | 3.64 % | (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 $1.4 million, $1.1 million and $1.0 million for the third quarter of 2026, second quarter of 2026 and third quarter of 2025, respectively, and the incremental accretion on purchased loans of $1.5 million, $1.8 million, and $123,000 for the third quarter of 2026, second quarter of 2026 and third quarter of 2025, respectively. (3) | Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis. Noninterest Income Noninterest income decreased $58,000 to $9.3 million during the third quarter of 2026. The decrease was due primarily to a decrease in bank owned life insurance ("BOLI") income. Noninterest income increased $928,000 during the third quarter of 2026 from the same period in 2025 due primarily to increases in service charges and other fees, card revenue, and BOLI income due to income from the deposit portfolio and BOLI acquired from Olympic. The following table presents the key components of noninterest income and the change for the periods indicated: | Quarter Ended | | Quarter Over Quarter Change | | Prior YearQuarter Change | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | | $ | | % | | $ | | % | (Dollars in thousands) Service charges and other fees | $ 3,497 | | $ 3,592 | | $ 3,046 | | $ (95) | | (2.6) % | | $ 451 | | 14.8 % Card revenue | 2,521 | | 2,595 | | 2,209 | | (74) | | (2.9) | | 312 | | 14.1 Loss on sale of investment securities | — | | (217) | | — | | 217 | | (100.0) | | — | | — Interest rate swap fees | 53 | | 3 | | 96 | | 50 | | 1666.7 | | (43) | | (44.8) BOLI income | 1,250 | | 1,485 | | 1,008 | | (235) | | (15.8) | | 242 | | 24.0 Other income | 1,932 | | 1,853 | | 1,966 | | 79 | | 4.3 | | (34) | | (1.7) Total noninterest income (loss) | $ 9,253 | | $ 9,311 | | $ 8,325 | | $ (58) | | (0.6) % | | $ 928 | | 11.1 % Noninterest Expense Noninterest expense decreased $2.4 million, or 3.7%, to $62.0 million during the third quarter of 2026, compared to $64.3 million in the second quarter of 2026. The decrease was primarily due to a decrease in Merger-related expenses. Merger-related expenses consisted of severance expense, professional fees, core conversion costs, exit costs related to the consolidation of two branches, closure of one loan production office and one administration location, and contract termination costs. Merger-related expenses incurred in the third quarter of 2026 were $5.2 million compared to $7.5 million in the second quarter of 2026. The following table presents Merger-related expenses included in noninterest expense and the change for the periods indicated: | Quarter Ended | Change | September 30, 2026 | | June 30, 2026 | | $ | (Dollars in thousands) Compensation and employee benefits | $ 669 | | $ 1,481 | | $ (812) Occupancy and equipment | 152 | | — | | 152 Data processing | 2,524 | | 4,924 | | (2,400) Marketing | 126 | | — | | 126 Professional services | 294 | | 128 | | 166 Other expense | 1,420 | | 960 | | 460 Total noninterest expense | $ 5,185 | | $ 7,493 | | $ (2,308) Noninterest expense increased $20.3 million, or 48.9%, during the third quarter of 2026 compared to the same period in 2025 due primarily to an increase in expenses related to the Merger and the addition of Olympic's operations. 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 | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | | $ | | % | | $ | | % | (Dollars in thousands) Compensation and employee benefits | $ 34,135 | | $ 35,769 | | $ 26,082 | | $ (1,634) | | (4.6) % | | $ 8,053 | | 30.9 % Occupancy and equipment | 6,326 | | 6,014 | | 4,665 | | 312 | | 5.2 | | 1,661 | | 35.6 Data processing | 8,337 | | 10,218 | | 3,754 | | (1,881) | | (18.4) | | 4,583 | | 122.1 Marketing | 675 | | 437 | | 284 | | 238 | | 54.5 | | 391 | | 137.7 Professional services | 1,109 | | 939 | | 1,332 | | 170 | | 18.1 | | (223) | | (16.7) State/municipal business and use taxes | 1,799 | | 1,801 | | 1,235 | | (2) | | (0.1) | | 564 | | 45.7 Federal deposit insurance premium | 947 | | 881 | | 796 | | 66 | | 7.5 | | 151 | | 19.0 Other real estate owned, net | (55) | | 44 | | — | | (99) | | (225.0) | | (55) | | — Amortization of intangible assets | 2,941 | | 2,957 | | 284 | | (16) | | (0.5) | | 2,657 | | 935.6 Other expense | 5,744 | | 5,264 | | 3,183 | | 480 | | 9.1 | | 2,561 | | 80.5 Total noninterest expense | $ 61,958 | | $ 64,324 | | $ 41,615 | | $ (2,366) | | (3.7) % | | $ 20,343 | | 48.9 % Income Tax Expense Income tax expense increased $385,000 in the third quarter of 2026, compared to the second quarter of 2026 due to higher pre-tax income during the third quarter of 2026. Income tax expense increased $426,000 in the third quarter of 2026, compared to the same period in 2025, due primarily to an increase in the effective income tax rate during the third quarter of 2026. The following table presents the income tax expense and related metrics and the change for the periods indicated: | Quarter Ended | | Change | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | | Quarter Over Quarter | Prior Year Quarter | (Dollars in thousands) Income before income taxes | $ 22,283 | | $ 20,724 | | $ 22,306 | | $ 1,559 | | $ (23) Income tax expense | $ 3,563 | | $ 3,178 | | $ 3,137 | | $ 385 | | $ 426 Effective income tax rate | 16.0 % | | 15.3 % | | 14.1 % | | 0.7 % | | 1.9 % Dividends On October 21, 2026, the Company's Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend is payable on November 18, 2026 to shareholders of record as of the close of business on November 4, 2026. Stock Repurchase Program On October 21, 2026, the Company's Board of Directors approved a new stock repurchase program, authorizing the repurchase of up to 5% of the Company's outstanding common shares or approximately 2.0 million shares. The number, timing and price of shares repurchased will depend on business and market conditions, and other factors, including opportunities to deploy the Company's capital. The new stock repurchase program supersedes a prior stock repurchase program, which was authorized in April 2024 and allowed for the buyback of approximately 1.7 million shares. The repurchase allowance under the prior stock repurchase program was substantially completed during the third quarter of 2026. Earnings Conference Call The Company will hold a telephone conference call to discuss third quarter of 2026 earnings on Thursday, October 22, 2026 at 9:00 a.m. Pacific time. Participants may register for the call at the following link: https://events.q4inc.com/analyst/562330083?pwd=MlXLXIj8. The call can also be accessed by dialing (833) 461-5787 -- Meeting ID: 562 330 083, a few minutes prior to 9:00 a.m. Pacific time. The conference call will be recorded and will be available for replay through November 5, 2026 by dialing (833) 309-1852 or by visiting the Company website https://www.hf-wa.com/. About Heritage Financial Corporation Heritage Financial Corporation (the "Company") is an Olympia, Washington-based bank holding company for Heritage Bank, a full-service commercial bank and its sole wholly-owned banking subsidiary. Heritage Bank has a network of branches in Washington, Oregon and Idaho. Heritage Bank does business under the Whidbey Island Bank name on Whidbey Island, Washington and the Kitsap Bank name at certain branches acquired through the acquisition of Olympic Bancorp, Inc. The Company's stock is traded on the Nasdaq Global Select Market under the symbol "HFWA." More information about the Company 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. 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 may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements often include, among others, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by 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. These forward-looking statements are subject to inherent known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by 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, including as a result of the recent increase in the benchmark federal funds rate by the Federal Reserve, 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 and executive orders in response thereto; previous and potential future 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; legislative or regulatory changes that adversely affect our business, including changes in banking, securities, and tax laws, in regulatory policies and principles, or the interpretation and prioritization of such rules and regulations; effects on the U.S. economy resulting from actions taken by the federal government, including the threat or implementation of tariffs, immigration enforcement and changes in foreign policy; the effects of acts of war or terrorism, foreign relations, military conflicts, including the wars in Iran and Ukraine, ongoing conflicts in the Middle East, and other international military conflicts that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, affect global supply chains, increase the volatility of financial markets, and other matters beyond our control; effects of other external events on our business and the businesses of our clients; credit and interest rate risks associated with our business, including our customers' borrowing, repayment, and deposit practices; fluctuations in deposits and the concentration of large deposits from certain customers, who have deposit balances above current FDIC insurance limits; 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; the effectiveness of our risk management framework; rapid 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, financial technology companies, and digital asset service providers; emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business or customers; our ability to implement our organic and acquisition growth strategies, including the 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, including in connection with prior acquisitions; potential impairment to the goodwill we recorded in connection with our past acquisitions, including as a result of the 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; 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; the extensive and evolving regulatory framework that applies to us; the overall health of local and national real estate markets; the level of nonperforming assets on our balance sheet; risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar; changes in consumer spending, borrowing and saving habits; the availability of future equity and debt issuances and other capital raising opportunities on favorable terms; 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. Forward-looking statements speak only as of the date they are made, and we do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. HERITAGE FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) (Dollars in thousands, except shares) | September 30, 2026 | | June 30, 2026 | | December 31, 2025 Assets | | | | | Cash on hand and in banks | $ 103,026 | | $ 102,555 | | $ 52,587 Interest earning deposits | 84,041 | | 101,820 | | 180,502 Cash and cash equivalents | 187,067 | | 204,375 | | 233,089 Investment securities available for sale, at fair value (amortized cost of $1,028,761, $1,020,125 and $647,505, respectively) | 947,636 | | 971,437 | | 607,522 Investment securities held to maturity, at amortized cost (fair value of $577,974, $607,782 and $625,287, respectively) | 653,823 | | 661,839 | | 674,107 Total investment securities | 1,601,459 | | 1,633,276 | | 1,281,629 Loans receivable | 5,881,201 | | 5,747,741 | | 4,783,266 Allowance for credit losses on loans | (61,343) | | (59,473) | | (52,584) Loans receivable, net | 5,819,858 | | 5,688,268 | | 4,730,682 Other real estate owned | — | | 755 | | — Premises and equipment, net | 98,295 | | 98,034 | | 74,690 Federal Home Loan Bank stock, at cost | 10,657 | | 12,653 | | 5,163 BOLI | 147,600 | | 146,350 | | 105,974 Accrued interest receivable | 24,290 | | 23,056 | | 19,280 Prepaid expenses and other assets | 305,351 | | 297,501 | | 273,925 Other intangible assets, net | 44,328 | | 47,269 | | 1,979 Goodwill | 279,029 | | 279,029 | | 240,939 Total assets | $ 8,517,934 | | $ 8,430,566 | | $ 6,967,350 | | | | | Liabilities and Stockholders' Equity | | | | | Non-interest bearing deposits | $ 1,967,073 | | $ 1,972,702 | | $ 1,597,650 Interest bearing deposits | 5,219,861 | | 5,066,004 | | 4,322,549 Total deposits | 7,186,934 | | 7,038,706 | | 5,920,199 Borrowings | 121,900 | | 166,250 | | 20,000 Junior subordinated debentures | 22,570 | | 22,497 | | 22,350 Accrued expenses and other liabilities | 102,709 | | 93,421 | | 83,297 Total liabilities | 7,434,113 | | 7,320,874 | | 6,045,846 | | | | | Common stock | 698,915 | | 707,889 | | 531,100 Retained earnings | 448,178 | | 439,799 | | 421,619 Accumulated other comprehensive loss, net | (63,272) | | (37,996) | | (31,215) Total stockholders' equity | 1,083,821 | | 1,109,692 | | 921,504 Total liabilities and stockholders' equity | $ 8,517,934 | | $ 8,430,566 | | $ 6,967,350 | | | | | Shares outstanding | 40,576,875 | | 40,906,122 | | 33,963,500 HERITAGE FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share amounts) | Quarter Ended | | Nine Months Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | | September 30, 2026 | | September 30, 2025 Interest Income | | | | | | | | | Interest and fees on loans | $ 84,470 | | $ 81,935 | | $ 66,422 | | $ 242,850 | | $ 196,231 Taxable interest on investment securities | 14,456 | | 14,464 | | 11,102 | | 41,490 | | 34,420 Nontaxable interest on investment securities | 126 | | 128 | | 138 | | 383 | | 414 Interest on interest earning deposits | 1,139 | | 1,147 | | 1,846 | | 3,817 | | 4,309 Total interest income | 100,191 | | 97,674 | | 79,508 | | 288,540 | | 235,374 Interest Expense | | | | | | | | | Deposits | 21,369 | | 21,391 | | 20,121 | | 63,507 | | 59,760 Junior subordinated debentures | 437 | | 431 | | 474 | | 1,298 | | 1,417 Borrowings | 1,126 | | 1,036 | | 1,542 | | 2,441 | | 8,153 Total interest expense | 22,932 | | 22,858 | | 22,137 | | 67,246 | | 69,330 Net interest income | 77,259 | | 74,816 | | 57,371 | | 221,294 | | 166,044 Provision for (reversal of) credit losses | 2,271 | | (921) | | 1,775 | | 320 | | 2,782 Net interest income after provision for (reversal of) credit losses | 74,988 | | 75,737 | | 55,596 | | 220,974 | | 163,262 Noninterest Income | | | | | | | | | Service charges and other fees | 3,497 | | 3,592 | | 3,046 | | 10,456 | | 8,953 Card revenue | 2,521 | | 2,595 | | 2,209 | | 7,219 | | 5,950 Loss on sale of investment securities, net | — | | (217) | | — | | (217) | | (10,741) Interest rate swap fees | 53 | | 3 | | 96 | | 56 | | 115 BOLI income | 1,250 | | 1,485 | | 1,008 | | 3,854 | | 3,206 Gain on sale of other assets, net | — | | — | | — | | — | | 8 Other income | 1,932 | | 1,853 | | 1,966 | | 5,895 | | 6,254 Total noninterest income (loss) | 9,253 | | 9,311 | | 8,325 | | 27,263 | | 13,745 Noninterest Expense | | | | | | | | | Compensation and employee benefits | 34,135 | | 35,769 | | 26,082 | | 103,876 | | 77,348 Occupancy and equipment | 6,326 | | 6,014 | | 4,665 | | 17,670 | | 14,431 Data processing | 8,337 | | 10,218 | | 3,754 | | 23,648 | | 11,317 Marketing | 675 | | 437 | | 284 | | 1,495 | | 955 Professional services | 1,109 | | 939 | | 1,332 | | 4,890 | | 3,188 State/municipal business and use taxes | 1,799 | | 1,801 | | 1,235 | | 5,274 | | 3,660 Federal deposit insurance premium | 947 | | 881 | | 796 | | 2,865 | | 2,418 Other real estate owned, net | (55) | | 44 | | — | | (7) | | — Amortization of intangible assets | 2,941 | | 2,957 | | 284 | | 7,956 | | 889 Other expense | 5,744 | | 5,264 | | 3,183 | | 15,166 | | 9,877 Total noninterest expense | 61,958 | | 64,324 | | 41,615 | | 182,833 | | 124,083 Income before income taxes | 22,283 | | 20,724 | | 22,306 | | 65,404 | | 52,924 Income tax expense | 3,563 | | 3,178 | | 3,137 | | 10,191 | | 7,629 Net income | $ 18,720 | | $ 17,546 | | $ 19,169 | | $ 55,213 | | $ 45,295 | | | | | | | | | Basic earnings per share | $ 0.46 | | $ 0.42 | | $ 0.56 | | $ 1.37 | | $ 1.33 Diluted earnings per share | $ 0.46 | | $ 0.42 | | $ 0.55 | | $ 1.36 | | $ 1.31 Dividends declared per share | $ 0.25 | | $ 0.24 | | $ 0.24 | | $ 0.73 | | $ 0.72 Average shares outstanding - basic | 40,740,742 | | 41,079,781 | | 33,953,810 | | 40,175,502 | | 34,009,010 Average shares outstanding - diluted | 41,213,105 | | 41,541,763 | | 34,413,386 | | 40,642,491 | | 34,481,877 HERITAGE FINANCIAL CORPORATION FINANCIAL STATISTICS (Unaudited) (Dollars in thousands) Average Balances, Yields, and Rates Paid: | Nine Months Ended September 30, | 2026 | | 2025 | AverageBalance | | InterestEarned/Paid | | Average Yield/ Rate (1) | | AverageBalance | | InterestEarned/Paid | | Average Yield/ Rate (1) Interest Earning Assets: | | | | | | | | | | | Loans receivable(2)(3) | $ 5,658,741 | | $ 242,850 | | 5.74 % | | $ 4,774,926 | | $ 196,231 | | 5.49 % Taxable securities | 1,577,611 | | 41,490 | | 3.52 | | 1,371,957 | | 34,420 | | 3.35 Nontaxable securities(3) | 15,381 | | 383 | | 3.33 | | 15,406 | | 414 | | 3.59 Interest earning deposits | 139,494 | | 3,817 | | 3.66 | | 130,253 | | 4,309 | | 4.42 Total interest earning assets | 7,391,227 | | 288,540 | | 5.22 % | | 6,292,542 | | 235,374 | | 5.00 % Noninterest earning assets | 895,082 | | | | | | 759,206 | | | | Total assets | $ 8,286,309 | | | | | | $ 7,051,748 | | | | Interest Bearing Liabilities: | | | | | | | | | | | Certificates of deposit | $ 1,062,740 | | $ 25,788 | | 3.24 % | | $ 971,933 | | $ 27,841 | | 3.83 % Savings accounts | 569,115 | | 959 | | 0.23 | | 426,767 | | 877 | | 0.27 Interest bearing demand and money market accounts | 3,426,293 | | 36,760 | | 1.43 | | 2,770,162 | | 31,042 | | 1.50 Total interest bearing deposits | 5,058,148 | | 63,507 | | 1.68 | | 4,168,862 | | 59,760 | | 1.92 Junior subordinated debentures | 22,455 | | 1,298 | | 7.73 | | 22,164 | | 1,417 | | 8.55 Borrowings | 81,367 | | 2,441 | | 4.01 | | 233,504 | | 8,153 | | 4.67 Total interest bearing liabilities | 5,161,970 | | 67,246 | | 1.74 % | | 4,424,530 | | 69,330 | | 2.10 % Noninterest demand deposits | 1,936,229 | | | | | | 1,620,047 | | | | Other noninterest bearing liabilities | 98,436 | | | | | | 127,505 | | | | Stockholders' equity | 1,089,674 | | | | | | 879,666 | | | | Total liabilities and stockholders' equity | $ 8,286,309 | | | | | | $ 7,051,748 | | | | Net interest income and spread | | | $ 221,294 | | 3.48 % | | | | $ 166,044 | | 2.90 % Net interest margin | | | | | 4.00 % | | | | | | 3.53 % | (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 $3.2 million and $2.7 million for the nine months ended September 30, 2026 and 2025, respectively, and incremental accretion on purchased loans of $4.9 million and $352,000, for the nine months ended September 30, 2026 and 2025, 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 | | Nine Months Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | | September 30, 2026 | | September 30, 2025 Allowance for Credit Losses on Loans: | | | | Balance, beginning of period | $ 59,473 | | $ 60,551 | | $ 52,529 | | $ 52,584 | | $ 52,468 Initial ACL recorded for PSL and PCD loans acquired during the period | — | | — | | — | | 9,339 | | — (Reversal of) provision for credit losses on loans | 2,251 | | (844) | | 1,563 | | 587 | | 2,417 Charge-offs: | | | | | | | | | Commercial business | (186) | | (180) | | (195) | | (766) | | (871) Residential real estate | — | | — | | (27) | | (64) | | (27) Consumer | (219) | | (89) | | (152) | | (427) | | (410) Total charge-offs | (405) | | (269) | | (374) | | (1,257) | | (1,308) Recoveries: | | | | | | | | | Commercial business | 3 | | 4 | | 219 | | 11 | | 263 Residential real estate | — | | 2 | | 1 | | 2 | | 1 Consumer | 21 | | 29 | | 36 | | 77 | | 133 Total recoveries | 24 | | 35 | | 256 | | 90 | | 397 Net (charge-offs) recoveries | (381) | | (234) | | (118) | | (1,167) | | (911) Balance, end of period | $ 61,343 | | $ 59,473 | | $ 53,974 | | $ 61,343 | | $ 53,974 Net charge-offs on loans to average loans receivable annualized | 0.03 % | | 0.02 % | | 0.01 % | | 0.03 % | | 0.03 % | September 30, 2026 | | June 30, 2026 | | December 31, 2025 Nonperforming Assets: | | | | | Nonaccrual loans: | | | | | Commercial business | $ 24,125 | | $ 7,437 | | $ 6,886 Residential real estate | 1,321 | | 1,338 | | 1,196 Real estate construction and land development | 6,321 | | 6,420 | | 12,408 Consumer | 310 | | 315 | | 486 Total nonaccrual loans | 32,077 | | 15,510 | | 20,976 Accruing loans past due 90 days or more | 948 | | — | | 194 Total nonperforming loans | 33,025 | | 15,510 | | 21,170 Other real estate owned | — | | 755 | | — Nonperforming assets | $ 33,025 | | $ 16,265 | | $ 21,170 | | | | | ACL on loans to: | | | | | Loans receivable | 1.04 % | | 1.03 % | | 1.10 % Nonaccrual loans | 191.24 % | | 383.45 % | | 250.69 % Nonaccrual loans to loans receivable | 0.55 % | | 0.27 % | | 0.44 % Nonperforming loans to loans receivable | 0.56 % | | 0.27 % | | 0.44 % Nonperforming assets to total assets | 0.39 % | | 0.19 % | | 0.30 % HERITAGE FINANCIAL CORPORATION QUARTERLY FINANCIAL STATISTICS (Unaudited) (Dollars in thousands, except per share amounts) | Quarter Ended | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Earnings: | | | | | | | | | Net interest income | $ 77,259 | | $ 74,816 | | $ 69,219 | | $ 58,361 | | $ 57,371 Provision for (reversal of) credit losses | 2,271 | | (921) | | (1,030) | | (814) | | 1,775 Noninterest income | 9,253 | | 9,311 | | 8,699 | | 7,987 | | 8,325 Noninterest expense | 61,958 | | 64,324 | | 56,551 | | 41,483 | | 41,615 Net income | 18,720 | | 17,546 | | 18,947 | | 22,237 | | 19,169 Basic earnings per share | $ 0.46 | | $ 0.42 | | $ 0.49 | | $ 0.66 | | $ 0.56 Diluted earnings per share | $ 0.46 | | $ 0.42 | | $ 0.48 | | $ 0.65 | | $ 0.55 Adjusted diluted earnings per share (1) | $ 0.55 | | $ 0.57 | | $ 0.59 | | $ 0.66 | | $ 0.56 Average Balances: | | | | | | | | | Loans receivable | $ 5,817,905 | | $ 5,740,927 | | $ 5,412,943 | | $ 4,770,300 | | $ 4,762,648 Total investment securities | 1,624,212 | | 1,651,418 | | 1,502,005 | | 1,301,526 | | 1,329,616 Total interest earning assets | 7,563,469 | | 7,517,314 | | 7,087,671 | | 6,223,303 | | 6,258,446 Total assets | 8,480,610 | | 8,437,320 | | 7,935,002 | | 6,954,110 | | 7,006,140 Total interest bearing deposits | 5,137,078 | | 5,126,765 | | 4,908,086 | | 4,250,589 | | 4,217,041 Total noninterest demand deposits | 2,000,526 | | 1,973,038 | | 1,833,284 | | 1,635,539 | | 1,625,945 Stockholders' equity | 1,107,162 | | 1,112,178 | | 1,049,044 | | 911,454 | | 892,280 Financial Ratios: | | | | | | | | | Return on average assets (2) | 0.88 % | | 0.83 % | | 0.97 % | | 1.27 % | | 1.09 % Adjusted return on average assets (1)(2) | 1.07 % | | 1.12 % | | 1.18 % | | 1.29 % | | 1.11 % Return on average common equity (2) | 6.71 | | 6.33 | | 7.32 | | 9.68 | | 8.52 Return on average tangible common equity (1)(2) | 10.67 | | 10.17 | | 11.14 | | 13.33 | | 11.86 Adjusted return on average tangible common equity (1)(2) | 12.75 | | 13.29 | | 13.36 | | 13.51 | | 12.16 Efficiency ratio | 71.6 | | 76.5 | | 72.6 | | 62.5 | | 63.3 Adjusted efficiency ratio (1) | 62.2 | | 63.9 | | 63.3 | | 61.5 | | 61.9 Noninterest expense to average total assets (2) | 2.90 | | 3.06 | | 2.89 | | 2.37 | | 2.36 Adjusted noninterest expense to average total assets(1)(2) | 2.52 | | 2.56 | | 2.52 | | 2.33 | | 2.30 Net interest spread (2) | 3.53 | | 3.47 | | 3.43 | | 3.15 | | 3.03 Net interest margin (2) | 4.05 | | 3.99 | | 3.96 | | 3.72 | | 3.64 | (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 | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Select Balance Sheet: | | | | | | | | | Total assets | $ 8,517,934 | | $ 8,430,566 | | $ 8,498,404 | | $ 6,967,350 | | $ 7,011,879 Loans receivable | 5,881,201 | | 5,747,741 | | 5,722,238 | | 4,783,266 | | 4,769,160 Total investment securities | 1,601,459 | | 1,633,276 | | 1,669,411 | | 1,281,629 | | 1,312,857 Total deposits | 7,186,934 | | 7,038,706 | | 7,248,537 | | 5,920,199 | | 5,857,464 Noninterest demand deposits | 1,967,073 | | 1,972,702 | | 2,066,383 | | 1,597,650 | | 1,617,909 Stockholders' equity | 1,083,821 | | 1,109,692 | | 1,115,691 | | 921,504 | | 904,064 Financial Measures: | | | | | | | | | Book value per share | $ 26.71 | | $ 27.13 | | $ 27.05 | | $ 27.13 | | $ 26.62 Tangible book value per share (1) | 18.74 | | 19.15 | | 19.07 | | 19.98 | | 19.46 Stockholders' equity to total assets | 12.7 % | | 13.2 % | | 13.1 % | | 13.2 % | | 12.9 % Tangible common equity to tangible assets (1) | 9.3 | | 9.7 | | 9.6 | | 10.1 | | 9.8 Loans to deposits ratio | 81.8 | | 81.7 | | 78.9 | | 80.8 | | 81.4 Regulatory Capital Ratios:(2) | | | | | | | | | Common equity tier 1 capital ratio | 11.9 % | | 12.1 % | | 12.2 % | | 12.7 % | | 12.4 % Leverage ratio | 10.3 | | 10.4 | | 10.3 | | 10.8 | | 10.5 Tier 1 capital ratio | 12.2 | | 12.5 | | 12.5 | | 13.1 | | 12.8 Total capital ratio | 13.1 | | 13.4 | | 13.5 | | 14.1 | | 13.8 Credit Quality Metrics: | | | | | | | | | ACL on loans to: | | | | | | | | | Loans receivable | 1.04 % | | 1.03 % | | 1.06 % | | 1.10 % | | 1.13 % Nonaccrual loans | 191.2 | | 383.4 | | 404.8 | | 250.7 | | 306.5 Nonaccrual loans to loans receivable | 0.55 | | 0.27 | | 0.26 | | 0.44 | | 0.37 Nonperforming loans to loans receivable | 0.56 | | 0.27 | | 0.26 | | 0.44 | | 0.44 Nonperforming assets to total assets | 0.39 | | 0.19 | | 0.19 | | 0.30 | | 0.30 Net charge-offs on loans to average loans receivable (3) | 0.03 | | 0.02 | | 0.04 | | 0.04 | | 0.01 Criticized Loans by Credit Quality Rating: Special mention | $ 138,023 | | $ 125,108 | | $ 103,699 | | $ 71,122 | | $ 100,160 Substandard | 108,473 | | 105,444 | | 121,331 | | 116,823 | | 94,377 Other Metrics: | | | | | | | | | Number of branches | 64 | | 66 | | 65 | | 50 | | 50 Deposits per branch | $ 112,296 | | $ 106,647 | | $ 111,516 | | $ 118,404 | | $ 117,149 Average number of full-time equivalent employees | 978 | | 976 | | 905 | | 742 | | 749 Average assets per full-time equivalent employee | 8,671 | | 8,645 | | 8,768 | | 9,372 | | 9,354 | (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. | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Diluted Earnings per Share and Adjusted Diluted Earnings per Share: Net income (GAAP) | $ 18,720 | | $ 17,546 | | $ 18,947 | | $ 22,237 | | $ 19,169 Exclude loss on sale of investment securities, net | — | | 217 | | — | | — | | — Exclude merger-related costs | 5,185 | | 7,493 | | 5,178 | | 385 | | 635 Exclude tax effect of adjustment | (1,089) | | (1,619) | | (1,087) | | (81) | | (133) Adjusted net income (non-GAAP) | $ 22,816 | | $ 23,637 | | $ 23,038 | | $ 22,541 | | $ 19,671 | | | | | | | | | Average number of diluted shares outstanding | 41,213,105 | | 41,541,763 | | 39,104,569 | | 34,405,793 | | 34,413,386 | | | | | | | | | Diluted earnings per share (GAAP) | $ 0.46 | | $ 0.42 | | $ 0.48 | | $ 0.65 | | $ 0.55 Adjusted diluted earnings per share (non-GAAP) | $ 0.55 | | $ 0.57 | | $ 0.59 | | $ 0.66 | | $ 0.56 The Company believes that presenting an adjusted return on average assets 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. | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Adjusted Return on Average Assets ("ROAA"): Net income (GAAP) | $ 18,720 | | $ 17,546 | | $ 18,947 | | $ 22,237 | | $ 19,169 Exclude (gain) loss on sale of investment securities, net | — | | 217 | | — | | — | | — Exclude merger-related costs | 5,185 | | 7,493 | | 5,178 | | 385 | | 635 Exclude tax effect of adjustments | (1,089) | | (1,619) | | (1,087) | | (81) | | (133) Adjusted net income (non-GAAP) | $ 22,816 | | $ 23,637 | | $ 23,038 | | $ 22,541 | | $ 19,671 | | | | | | | | | Average ("Avg") total assets | $ 8,480,610 | | $ 8,437,320 | | $ 7,935,002 | | $ 6,954,110 | | $ 7,006,140 | | | | | | | | | ROAA, annualized (GAAP) | 0.88 % | | 0.83 % | | 0.97 % | | 1.27 % | | 1.09 % Adjusted ROAA, annualized (non-GAAP) | 1.07 % | | 1.12 % | | 1.18 % | | 1.29 % | | 1.11 % 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. | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share: Total stockholders' equity (GAAP) | $ 1,083,821 | | $ 1,109,692 | | $ 1,115,691 | | $ 921,504 | | $ 904,064 Exclude intangible assets | (323,357) | | (326,298) | | (329,255) | | (242,918) | | (243,203) Tangible common equity (non-GAAP) | $ 760,464 | | $ 783,394 | | $ 786,436 | | $ 678,586 | | $ 660,861 | | | | | | | | | Total assets (GAAP) | $ 8,517,934 | | $ 8,430,566 | | $ 8,498,404 | | $ 6,967,350 | | $ 7,011,879 Exclude intangible assets | (323,357) | | (326,298) | | (329,255) | | (242,918) | | (243,203) Tangible assets (non-GAAP) | $ 8,194,577 | | $ 8,104,268 | | $ 8,169,149 | | $ 6,724,432 | | $ 6,768,676 | | | | | | | | | Stockholders' equity to total assets (GAAP) | 12.7 % | | 13.2 % | | 13.1 % | | 13.2 % | | 12.9 % Tangible common equity to tangible assets (non-GAAP) | 9.3 % | | 9.7 % | | 9.6 % | | 10.1 % | | 9.8 % | | | | | | | | | Shares outstanding | 40,576,875 | | 40,906,122 | | 41,249,873 | | 33,963,500 | | 33,956,738 | | | | | | | | | Book value per share (GAAP) | $ 26.71 | | $ 27.13 | | $ 27.05 | | $ 27.13 | | $ 26.62 Tangible book value per share (non-GAAP) | $ 18.74 | | $ 19.15 | | $ 19.07 | | $ 19.98 | | $ 19.46 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 | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Return on Average Tangible Common Equity, annualized: Net income (GAAP) | $ 18,720 | | $ 17,546 | | $ 18,947 | | $ 22,237 | | $ 19,169 Add amortization of intangible assets | 2,941 | | 2,957 | | 2,058 | | 285 | | 284 Exclude tax effect of adjustment | (618) | | (621) | | (432) | | (60) | | (60) Tangible net income (non-GAAP) | $ 21,043 | | $ 19,882 | | $ 20,573 | | $ 22,462 | | $ 19,393 | | | | | | | | | Tangible net income (non-GAAP) | $ 21,043 | | $ 19,882 | | $ 20,573 | | $ 22,462 | | $ 19,393 Exclude loss on sale of investment securities, net | — | | 217 | | — | | — | | — Exclude merger-related costs | 5,185 | | 7,493 | | 5,178 | | 385 | | 635 Exclude tax effect of adjustment | (1,089) | | (1,619) | | (1,087) | | (81) | | (133) Adjusted tangible net income (non-GAAP) | $ 25,139 | | $ 25,973 | | $ 24,664 | | $ 22,766 | | $ 19,895 | | | | | | | | | Average stockholders' equity (GAAP) | $ 1,107,162 | | $ 1,112,178 | | $ 1,049,044 | | $ 911,454 | | $ 892,280 Exclude average intangible assets | (325,085) | | (328,166) | | (300,391) | | (243,069) | | (243,350) Average tangible common stockholders' equity (non-GAAP) | $ 782,077 | | $ 784,012 | | $ 748,653 | | $ 668,385 | | $ 648,930 | | | | | | | | | Return on average common equity, annualized (GAAP) | 6.71 % | | 6.33 % | | 7.32 % | | 9.68 % | | 8.52 % Return on average tangible common equity, annualized (non-GAAP) | 10.67 % | | 10.17 % | | 11.14 % | | 13.33 % | | 11.86 % Adjusted return on average tangible common equity, annualized (non-GAAP) | 12.75 % | | 13.29 % | | 13.36 % | | 13.51 % | | 12.16 % HERITAGE FINANCIAL CORPORATION NON-GAAP FINANCIAL MEASURES (Unaudited) (Dollars in thousands, except per share amounts) The Company believes that presenting an adjusted efficiency ratio and adjusted noninterest expense to average assets 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 | September 30, 2026 | | June 30, 2026 | | March 31, 2026 | | December 31, 2025 | | September 30, 2025 Adjusted Efficiency Ratio and Adjusted Noninterest Expense to Average Assets Ratio: Total noninterest expense (GAAP) | $ 61,958 | | $ 64,324 | | $ 56,551 | | $ 41,483 | | $ 41,615 Exclude merger-related costs | 5,185 | | 7,493 | | 5,178 | | 385 | | 635 Exclude amortization of intangible assets | 2,941 | | 2,957 | | 2,058 | | 285 | | 284 Adjusted noninterest expense (non-GAAP) | $ 53,832 | | $ 53,874 | | $ 49,315 | | $ 40,813 | | $ 40,696 | | | | | | | | | Net interest income (GAAP) | $ 77,259 | | $ 74,816 | | $ 69,219 | | $ 58,361 | | $ 57,371 | | | | | | | | | Total noninterest income (GAAP) | $ 9,253 | | $ 9,311 | | $ 8,699 | | $ 7,987 | | $ 8,325 Exclude loss on sale of investment securities, net | — | | 217 | | — | | — | | — Adjusted total noninterest income (non-GAAP) | $ 9,253 | | $ 9,528 | | $ 8,699 | | $ 7,987 | | $ 8,325 | | | | | | | | | Efficiency ratio (GAAP) | 71.6 % | | 76.5 % | | 72.6 % | | 62.5 % | | 63.3 % Adjusted efficiency ratio (non-GAAP) | 62.2 % | | 63.9 % | | 63.3 % | | 61.5 % | | 61.9 % | | | | | | | | | Average Total assets | $ 8,480,610 | | $ 8,437,320 | | $ 7,935,002 | | $ 6,954,110 | | $ 7,006,140 | | | | | | | | | Noninterest expense to average assets (GAAP) (1) | 2.90 % | | 3.06 % | | 2.89 % | | 2.37 % | | 2.36 % Adjusted noninterest expense to average assets (non-GAAP) (1) | 2.52 % | | 2.56 % | | 2.52 % | | 2.33 % | | 2.30 % | (1) | Annualized. HERITAGE FINANCIAL CORPORATION NON-GAAP FINANCIAL MEASURES (Unaudited) (Dollars in thousands, except per share amounts) The Company believes presenting loan yield and net interest margin excluding the effect of discount accretion on purchased loans is useful in assessing the impact of acquisition accounting on loan yield as the effect of loan discount accretion is expected to decrease as the acquired loans mature or roll off our balance sheet. | Three Months Ended | September 30, 2026 | | June 30, 2026 | | September 30, 2025 | (Dollar amounts in thousands) Loan yield, excluding incremental accretion on purchased loans, annualized: Interest and fees on loans (GAAP) | $ 84,470 | | $ 81,935 | | $ 66,422 Exclude incremental accretion on purchased loans | 1,456 | | 1,772 | | 123 Adjusted interest and fees on loans (non-GAAP) | $ 83,014 | | $ 80,163 | | $ 66,299 | | | | | Average loans receivable, net (GAAP) | $ 5,817,905 | | $ 5,740,927 | | $ 4,762,648 | | | | | Loan yield, annualized (GAAP) | 5.76 % | | 5.72 % | | 5.53 % Loan yield, excluding incremental accretion on purchased loans, annualized (non-GAAP) | 5.66 % | | 5.60 % | | 5.52 % | | | | | Net Interest Margin, excluding incremental accretion on purchased loans, annualized: Net interest income before provision (GAAP) | $ 77,259 | | $ 74,816 | | $ 57,371 Exclude incremental accretion on purchased loans | 1,456 | | 1,772 | | 123 Adjusted net interest income before provision (non-GAAP) | $ 75,803 | | $ 73,044 | | $ 57,248 | | | | | Average Interest earning assets (GAAP) | $ 7,563,469 | | $ 7,517,314 | | $ 6,258,446 | | | | | Net interest margin (GAAP) | 4.05 % | | 3.99 % | | 3.64 % Net interest margin, excluding incremental accretion on purchased loans (non-GAAP) | 3.98 % | | 3.90 % | | 3.63 % View original content:https://www.prnewswire.com/news-releases/heritage-financial-announces-third-quarter-2026-results-and-declares-regular-cash-dividend-of-0-25-per-share-302916324.html

Heritage Financial (HFWA) came out with quarterly earnings of $0.55 per share, missing the Zacks Consensus Estimate of $0.57 per share. This compares to earnings of $0.56 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -3.51%. A quarter ago, it was expected that this bank holding company would post earnings of $0.54 per share when it actually produced earnings of $0.57, delivering a surprise of +5.56%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Heritage Financial, which belongs to the Zacks Financial - Savings and Loan industry, posted revenues of $86.51 million for the quarter ended September 2026, surpassing the Zacks Consensus Estimate by 0.37%. This compares to year-ago revenues of $65.7 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Heritage Financial shares have added about 17% since the beginning of the year versus the S&P 500's gain of 13.3%. While Heritage Financial has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Heritage Financial was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.62 on $87.7 million in revenues for the coming quarter and $2.34 on $336.06 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Savings and Loan is currently in the bottom 29% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, West Bancorp (WTBA), has yet to report results for the quarter ended September 2026. The results are expected to be released on October 29. This holding company for West Bank is expected to post quarterly earnings of $0.65 per share in its upcoming report, which represents a year-over-year change of +18.2%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. West Bancorp's revenues are expected to be $28.7 million, up 14.8% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Heritage Financial Corporation (HFWA) : Free Stock Analysis Report West Bancorporation, Inc. (WTBA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

- Interested in Heritage Financial Corporation? Here are five stocks we like better. - Operating momentum improved: Heritage Financial grew loans by $133 million and deposits by $148 million in the third quarter, while net interest margin expanded to 4.05%. Management expects mid-single-digit annualized loan growth in the next several quarters and further margin support from asset repricing. - Credit risk increased: Non-accrual loans rose $16.6 million to just over $32 million, primarily due to a $11.8 million transportation-related commercial and industrial relationship. Criticized loans also increased, though net charge-offs remained low at 0.03% of loans on an annualized basis through nine months. - Integration and capital actions advanced: The Kitsap Bank systems conversion was completed as planned, merger-related expenses declined, and the company achieved its 35% cost-savings target. Heritage repurchased $10 million of shares and authorized a new program for up to 5% of outstanding shares, but expects fewer buybacks amid higher commercial real estate concentration. Heritage Financial (NASDAQ:HFWA) reported third-quarter operating trends marked by loan and deposit growth, expanding net interest margin and the completion of its Kitsap Bank systems conversion, while also disclosing higher non-accrual loans tied primarily to commercial and industrial relationships. President and CEO Bryan McDonald said the Kitsap Bank conversion was completed in late September as planned. "The results were excellent," McDonald said, adding that the company is now largely past the costs of maintaining both platforms. → Aurora Rejects Curaleaf's Higher Bid, But the Takeover Fight Isn't Over Total loans increased by $133 million during the third quarter, supported by strong originations and additional advances on existing loans, according to Chief Financial Officer Don Hinson. Loan growth was partly offset by higher prepayments and payoffs. Heritage's loan portfolio yield rose four basis points from the second quarter to 5.76%, reflecting higher rates on new lending and the repricing of adjustable-rate loans. Commercial teams closed $388 million in new loan commitments during the quarter, up from $339 million in the second quarter and $316 million in the year-earlier quarter. → Could Quantinuum's Breakthrough Make Its Sell-Off a Bargain? The company's commercial loan pipeline ended the quarter at $399 million, down from $628 million in the prior quarter. McDonald attributed the decline to higher loan closings, the departure of seven low-income housing projects totaling $103 million from the pipeline, and tighter standards for including loans in the pipeline for forecasting purposes. Of the seven housing projects that left the pipeline, McDonald said three were shelved by borrowers and four were lost to competitors that offered better pricing. He said the lending market remained competitive, particularly as a more moderate volume of new opportunities led banks to price aggressively for business. → IonQ's Bold Expansion Could Leave Shareholders Paying the Price Loan prepayments and payoffs reached $207 million in the third quarter, compared with $152 million in the second quarter and $119 million in the first quarter. McDonald said the elevated payoff activity constrained growth but also indicated that customers had been able to sell businesses and real estate. Based on its pipeline and unfunded commitments, Heritage expects annualized loan growth in the mid-single-digit range over the next couple of quarters. McDonald said visibility is strongest through the fourth quarter and first quarter, while the outlook beyond that period is less certain given interest-rate movements and payoff activity. Total deposits increased $148 million in the third quarter, while non-maturity deposits rose $190 million. Hinson said the third quarter is typically seasonally strong for deposits, and new customer additions also contributed to growth. The cost of interest-bearing deposits declined to 1.65% from 1.67% in the second quarter, though Hinson said the company likely reached an inflection point as deposit costs increased during the quarter. The spot rate for interest-bearing deposits was 1.66% at the end of September. Net interest income increased $2.4 million from the preceding quarter, driven by higher average earning assets and an improved net interest margin. Net interest margin expanded to 4.05%, from 3.99% in the second quarter and 3.64% in the third quarter of 2025. McDonald said higher five-year interest rates have increased the asset-repricing tailwind for the company. Heritage expects that dynamic to support further increases in both net interest margin and net interest income. Chief Credit Officer Tony Chalfant said non-accrual loans increased $16.6 million during the quarter to just over $32 million, representing 0.55% of total loans. That compared with 0.27% at the end of the first quarter and 0.44% at year-end 2025. The main driver was one commercial and industrial relationship totaling $11.8 million involving several transportation companies. Chalfant said economic stress had contributed to ongoing delinquency issues for those businesses. The relationship includes more than $4.4 million of government guarantees, while the broader group of new non-accrual relationships includes $10.2 million in government guarantees. Most of the remaining increase in non-accrual loans stemmed from three additional C&I relationships moved to non-accrual status because of delinquency issues. Chalfant said management viewed the larger transportation relationship as being in the earlier stages of workout, while the companies remained operational. He said the other relationships carried very limited loss potential, with one loan closer to liquidation resulting in a $91,000 loss. The ratio of non-performing assets to total assets rose to 0.39% from 0.19% in the second quarter. Criticized loans increased $15.9 million to $246 million, or 4.19% of total loans, compared with 4% in the prior quarter. The increase was primarily associated with two C&I construction-related relationships and a multifamily construction project experiencing a slower-than-expected lease-up period. Heritage recorded a $2.3 million provision for credit losses, reflecting strong loan growth and specific reserves for loans placed on non-accrual status. Hinson said about $1 million of the provision was attributable to the newly non-accrual loans. Net charge-offs remained low at $381,000 for the quarter after $405,000 of charge-offs and $24,000 of recoveries. Through the first nine months of the year, net charge-offs totaled $1.2 million, or 0.03% of total loans on an annualized basis. Non-interest expense declined $2.4 million from the second quarter, primarily because merger-related expenses fell by $2.3 million. With most merger-related costs recognized, Heritage expects expenses of $55 million to $56 million in the fourth quarter. Hinson said the company achieved its previously announced 35% cost-savings target related to the transaction. However, he expects core expenses to rise as compensation, benefits, payroll taxes, medical premiums and third-party costs increase. The company also expects costs tied to a commercial online banking conversion, including about $500,000 in the fourth quarter and approximately $1.5 million in each of the first two quarters of 2027. Hinson said the project should be completed by mid-2027. Heritage's tangible common equity ratio was 9.3% at the end of the third quarter, down from 9.7% in the prior quarter, primarily because of increased net unrealized losses in the available-for-sale investment portfolio. Regulatory capital ratios remained above well-capitalized thresholds. During the quarter, Heritage repurchased 341,000 common shares for $10 million and substantially completed its prior authorization. The board approved a new repurchase program covering up to 5% of outstanding shares, or about 2 million shares. Hinson said the company expects to be less active with buybacks in the fourth quarter, citing its commercial real estate concentration ratio, which rose to 308% from 300% in the second quarter. Heritage Financial Corporation (NASDAQ: HFWA) is a bank holding company headquartered in Olympia, Washington. The company operates primarily through Heritage Bank, a community-focused financial institution serving businesses, individuals and organizations in Washington and Oregon. Heritage Bank provides commercial and residential real estate lending, business and consumer loans, deposit accounts, cash-management and treasury services, online and mobile banking, and other traditional banking products. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Heritage Financial Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Heritage Financial (HFWA) reported $86.51 million in revenue for the quarter ended September 2026, representing a year-over-year increase of 31.7%. EPS of $0.55 for the same period compares to $0.56 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $86.2 million, representing a surprise of +0.37%. The company delivered an EPS surprise of -3.51%, with the consensus EPS estimate being $0.57. While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations to determine their next move, some key metrics always offer a more accurate picture of a company's financial health. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Heritage Financial performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: - Efficiency Ratio: 71.6% versus 66.5% estimated by five analysts on average. - Net Interest Margin: 4.1% versus the five-analyst average estimate of 4%. - Net charge-offs (recoveries) on loans to average loans receivable, net: 0% versus 0.1% estimated by five analysts on average. - Average Balance - Total interest earning assets: $7.56 billion compared to the $7.53 billion average estimate based on three analysts. - Total Nonperforming Assets: $33.03 million compared to the $16.09 million average estimate based on three analysts. - Total Nonaccrual Loans: $32.08 million versus the three-analyst average estimate of $15.25 million. - Leverage Ratio: 10.3% versus 9.7% estimated by two analysts on average. - Total Capital Ratio: 13.1% versus the two-analyst average estimate of 13.6%. - Tier 1 Capital Ratio: 12.2% compared to the 12.7% average estimate based on two analysts. - Total Noninterest Income: $9.25 million versus the five-analyst average estimate of $9.63 million. - Net Interest Income: $77.26 million versus the five-analyst average estimate of $76.56 million. View all Key Company Metrics for Heritage Financial here>>> Shares of Heritage Financial have returned -1% over the past month versus the Zacks S&P 500 composite's no change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Heritage Financial Corporation (HFWA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, Oct. 22, 2026 - President and Chief Executive Officer - Bryan McDonald - Executive Vice President and Chief Financial Officer - Donald Hinson - Chief Credit Officer - Tony Chalfant Operator: Hello, everyone. Thank you for joining us, and welcome to the Heritage Financial 2026 Q3 Earnings Call. [Operator Instructions] I will now hand the conference over to Bryan McDonald, President and CEO. Bryan, please go ahead. Bryan McDonald: Thank you, Jen. Welcome, and good morning to everyone who called in and those who may listen later. This is Bryan McDonald, CEO of Heritage Financial. Attending with me are Don Hinson, Chief Financial Officer; and Tony Chalfant, Chief Credit Officer. Our third quarter earnings release went out this morning premarket, and hopefully, you had the opportunity to review it prior to the call. In addition to the earnings release, we have also posted a third quarter investor presentation on the Investor Relations portion of our corporate website, which includes more detail on our deposits, loan portfolio, liquidity and credit quality. We will reference this presentation during the call. As a reminder, during this call, we may make forward-looking statements, which are subject to economic and other factors. Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements are also disclosed within the earnings release and the investor presentation. A couple of items to highlight as we look forward. The Kitsap Bank systems conversion was completed as planned in late September. The results were excellent, and we are glad to be through this important milestone. We are also happy to have the cost of carrying both platforms largely behind us. Business trends were also favorable in the quarter with strong growth in loans, deposits and another quarter of incremental improvement in our net interest margin and net interest income. We'll now move to Don, who will take a few minutes to cover our financial results. Donald Hinson: Thank you, Bryan. I will be reviewing some of the main drivers of our performance for Q3. As I walk through our financial results, unless otherwise noted, all of the prior period comparisons will be with the second quarter of 2026. Starting with the balance sheet. Total loan balances increased $133 million in the third quarter. This increase was due to strong loan originations and increased advances on existing loans, partially offset by increased levels of prepayments and loan payoffs. Q3 yields on the loan portfolio were 5.76%, which was 4 basis points higher than Q2. This increase is due to the higher rates on new loans and the repricing of adjustable rate loans. Bryan McDonald will have an update on loan production and loan rates in a few minutes. Total deposits increased $148 million in Q3 and non-maturity deposits increased $190 million. The third quarter is typically a strong quarter for growth in deposit balances, and it was good to see this trend continue. The cost of interest-bearing deposits decreased to 1.65% from 1.67% in the prior quarter. However, we have likely hit an inflection point on deposit costs as we saw an increase in costs as we moved through the quarter. Investment balances decreased $32 million from the prior quarter due to an increase in the net unrealized loss position of the available-for-sale portfolio. In general, we are using principal payments on the existing portfolio to reinvest in securities with higher rates and a similar duration. As a result, the yield on the investment portfolio increased 2 basis points from the prior quarter. Moving on to the income statement. Net interest income increased $2.4 million from the prior quarter due to a combination of growth in average earning assets and continued improvement in our net interest margin. The net interest margin increased to 4.05% from 3.99% in the prior quarter and from 3.64% in the third quarter of 2025. The increase was due primarily to the previously mentioned increase in yields on the loan and investment portfolios and the decrease in cost of deposits. We recognized the provision for credit losses in the amount of $2.3 million in Q3. This provision was due to the strong loan growth in Q3 as well as specific reserves related to loans put on nonaccrual status during the quarter. However, net charge-offs remained at very low levels. Tony will have additional information on credit quality metrics in a few moments. Noninterest expense decreased $2.4 million from the prior quarter due primarily to a $2.3 million decrease in merger-related expenses. As Bryan mentioned, the systems conversion for Kitsap Bank was successfully completed in late Q3. As a result of having recognized substantially all of our merger-related expenses, we expect our expense levels to decrease to a range of $55 million to $56 million in Q4. And finally, moving on to capital. All of our regulatory capital ratios remain comfortably above well-capitalized thresholds. And our TCE ratio was 9.3% at the end of Q3 compared to 9.7% in the prior quarter. This decrease in the TCE ratio was due mostly to the impacts from the increase in net unrealized losses on the investment portfolio. In addition, during Q3, we repurchased 341,000 shares of common stock totaling $10 million. Since we substantially completed the previous stock repurchase program in Q3, the Board of Directors has approved a new program for the repurchase of up to 5% of outstanding shares or approximately 2 million shares. We will continue to consider stock buybacks depending on market conditions and other priorities. I will now pass the call to Tony who will have an update on our credit quality. Tony Chalfant: Thank you, Don. During the third quarter, we saw a meaningful increase in our level of nonaccrual loans, increasing by $16.6 million to just over $32 million at quarter end. This represents 0.55% of total loans and compares to 0.27% at the end of the first quarter and 0.44% at the end of 2025. The primary driver of the increase was the migration of one C&I relationship totaling $11.8 million to nonaccrual status. This relationship is comprised of several companies in the transportation industry, and financial stress from the economy has led to ongoing delinquency issues. Most of the remaining increase was tied to three additional C&I relationships that were also moved to nonaccrual status due to delinquency issues. Within this portfolio, there are $10.2 million in government guarantees. With the increase in nonaccrual loans, the ratio of nonperforming assets to total assets rose to 0.39% versus 0.19% at the end of the second quarter. During the quarter, we were successful in selling our only OREO property and realized a modest gain on the sale. Criticized loans, those rated special mention or worse, moved higher during the quarter by $15.9 million and now totaled $246 million. As a percentage of total loans, criticized loans rose modestly to 4.19% versus the 4% that we experienced at the end of the second quarter. $12.9 million of the increase was in the special mention category with substandard loans increasing by $3 million. The primary drivers of the net increase were two C&I relationships tied to the construction industry and a multifamily construction project experiencing slower-than-anticipated lease up to stabilization. It is important to note that we have seen substandard loans decline by 7% since year-end 2025. Our ratio of total nonowner-occupied CRE loans to total loans moved modestly higher to 308% at quarter end versus 300% at the end of the second quarter. As we have discussed previously, this higher-than-historical concentration level is largely due to the inclusion of the Olympic portfolio in the first quarter. We expect the ratio to continue moving lower over time with normalized levels of capital retention. During the quarter, total charge-offs remained low at $405,000. The losses were partially offset by $24,000 recoveries, leading to net charge-offs of $381,000 for the quarter. Net charge-offs through the first 9 months of the year were $1.2 million. On an annualized basis, this represents 0.03% of total loans and is consistent with our performance for the full year 2025. Page 18 in the investor presentation illustrates the correlation between our active management of the portfolio and the low level of loan losses we've experienced over the last 7 years. We are closely watching the increase in our nonaccrual loans and believe they remain at a manageable level. As expected, the majority of the pressure has been in segments of our C&I portfolio most impacted by challenges in the economy. We remain confident that our consistent conservative underwriting and portfolio management practices will continue to maintain strong credit quality through a wide range of business cycles. I'll now turn the call over to Bryan for an update on our production. Bryan McDonald: Thanks, Tony. Let me provide details on our third quarter production results. For the quarter, our commercial teams closed $388 million in new loan commitments, up from $339 million last quarter, $166 million in the first quarter and $316 million closed in the third quarter of 2025. Please refer to Page 12 in the investor presentation for additional detail on new originated loans over the past 5 quarters. The commercial loan pipeline ended the third quarter at $399 million, down from $628 million last quarter and $511 million at the end of the third quarter of 2025. The decline is primarily the result of three factors. Loan closings were higher than last quarter and at a peak level for the year, we had 7 low-income housing projects totaling $103 million leave the pipeline, and we tightened up our requirements for loans to enter the pipeline in an effort to better forecast closing volumes. Loan balances increased $133 million during the quarter due to elevated production and higher balances from advances on construction loans closed over the past year. Although growth was strong, it continues to be constrained by a couple of factors. First, loan prepayment and payoffs continue to increase. They were $207 million during the quarter, up from $152 million during the second quarter and $119 million in the first quarter. And second, the loan mix in the quarter included a higher level of construction loans where balances will continue to increase over time. Please see Slide 13 in the investor presentation, which shows construction commitments and utilization rates. Based on the current pipeline and unfunded commitment levels, we expect an annualized growth rate in the mid-single-digit range for the next couple of quarters. Deposits increased $148 million during the quarter. Third quarter is typically a seasonally strong quarter, which, combined with new customer additions this year, drove the result. Moving on to deposit production and pipeline. Average balances on new deposit accounts opened during the quarter are estimated at $52 million versus $62 million last quarter, and the deposit pipeline ended the quarter at $97 million versus $78 million at the end of the second quarter. Moving to interest rates. Our average third quarter interest rate for new commercial loans was 6.46%, which is up 2 basis points from the 6.44% average rate in the second quarter. In addition, the third quarter rate for all new loans was 6.45%, up 5 basis points from 6.40% last quarter. In closing, we are optimistic heading into the fourth quarter and looking out to 2027. With 5-year interest rates moving higher over the past few months, the trajectory of the asset repricing tailwind we have been experiencing has also moved higher. These factors position us well for both our net interest margin and net interest income to continue moving higher from here. For these reasons, we see Heritage being well positioned to navigate what is ahead and to take advantage of various opportunities to continue to grow the bank. With that said, Jen, we will now open the line for questions from call attendees. Operator: [Operator Instructions] Your first question comes from the line of Matthew Clark with Piper Sandler. Matthew Clark: Just on the FHLB borrowings, it looks like all of them mature here in the fourth quarter. What do you plan to do with those? Bryan McDonald: Don, do you want to take that? Donald Hinson: Yes. Well, Matthew, a lot will depend on just where we are on a liquidity basis, deposits going to outpace loans or the other way around. So again, we're just -- it's just a funding mechanism for the rest of our balance sheet. At this point, we're probably -- if you think about the balance sheet and liquidity, we're probably -- our plan is to probably reinvest the principal payments of the investment portfolio. So unless things change a lot, we'll just use the FHLB borrowings to offset the remainder. If for some reason our cash needs are more, we may slow down the reinvestment on our investment portfolio. Matthew Clark: Okay. And then just along those lines, the $45 million to $50 million of securities cash flows you're expected to get per quarter here through next year. What's the average rate that they're coming off at? Donald Hinson: I believe the average rate is in the low 4s, like they're probably pretty similar to what we have been doing. They came off, they rolled off in the low 4s, and they went on in the kind of low- to mid-5s. So we picked up about 100 basis points in the last quarter. So I think we'll probably -- that will probably continue. Matthew Clark: Okay. And then you talked about deposit costs kind of increasing throughout the quarter. Do you have the spot rate at the end of September? And then what are your thoughts around the deposit beta on the way up here? I think you did about 20% on the way down. Just wondering if you think you will see something similar on the way up? Donald Hinson: Well, I'll start with the spot rate. That's an easier one. The spot rate was 1.66% for interest-bearing deposits at the end of the quarter, which was also the cost for all of September. As far as the beta, I think it will really depend on how much -- what the Fed does. One rate increase, there will be some reaction, but not a lot, maybe 20% is probably a decent beta estimate unless for some reason, the Fed really heats up and then, of course, everybody gets a little more sensitive. Operator: Your next question comes from the line of Jeff Rulis with D.A. Davidson. Jeff Rulis: Maybe a couple of questions on the credit side for Tony. The provision -- I don't know if you could explicitly break out what was added kind of on the NPA or loss side versus the -- well, losses were minimal, but more on the credit versus the growth weighted kind of the mix of the provision. Tony Chalfant: Yes. Don, I don't know if you want to take that one with the ACL? Donald Hinson: Yes. For the provision expense, about $1 million was due to the new nonaccrual loans. Jeff Rulis: Got it. And then on the new nonaccruals, just wanted to check in on maybe the resolution time line potentially and expected loss content, if any, on those brought in. Tony Chalfant: Yes, when we do move something into nonaccrual status, we take a pretty deep look at that. And I would say the larger one that I mentioned in the transportation industry is still in a kind of the earlier stages of workout. The companies are operating, some modest improvement, just very undercapitalized. I would note, too, if we did move into a liquidation mode on that, I think it's important to note that of that $11.8 million, we have just a little over $4.4 million in government guarantees. So we feel pretty comfortable that there's not loss potential there. But as is the case with C&I deals, particularly as you move further into the workout, that can change. But for now, we feel pretty good about that. The remainder of the deals that moved in during the quarter, very little loss potential. I think of all the deals we've moved in there this quarter, there was only one deal that we felt like was closer to a liquidation mode. So we did take a $91,000 loss, which is part of our loss for the quarter. But otherwise, feeling pretty good about what's in that nonaccrual bucket right now. Jeff Rulis: And if I can just talk to the expense side, pretty flat on a core basis. And I guess, with Kitsap conversion complete and -- I guess any thoughts on kind of the run rate or growth into '27 and maybe in the investment plans or try to hold the line? Any color on the expense side? Donald Hinson: Sure, Jeff. We're actually in the middle of developing our '27 budget right now, getting all the inputs into it. Due to the merger-related activities, that process has been delayed. Core expenses are expected to rise. We're going to see increases in compensation and benefit costs, including payroll taxes, medical premiums, all of that, as well as some increases in our third-party expenses as a result of the annual pricing adjustments. And just as a reminder, we tend to see our largest increase quarter-over-quarter from a Q4 to a Q1 in the prior quarter just due to -- a lot of that's due to the payroll taxes and some other increases. So just be aware of that. So I don't have any other guidance on a core basis except we're going to see increases. You can look in the past, again, we're still working on that. I will say from an investment point of view, we are in the process of going through a commercial online banking conversion. And those costs are going to hit mostly in Q1 and Q2 of next year. We're going to probably have some of it in Q4, probably like $500,000 in Q4. And we're going to have about $1.5 million each of the first two quarters of '27. That should be done by mid-'27. Jeff Rulis: Okay. So no offset kind of savings on the conversion that's kind of baked in if captured. This is a pretty good core, I guess, in the fourth -- third quarter is fair? Donald Hinson: Yes. On a core basis, again, like I said, with increases for standard inflationary issues. Operator: Your next question comes from the line of Andrew Terrell with Stephens. Andrew Terrell: I just wanted to stick on expenses quickly. Do you have relative to the -- I think it was 35% announced cost savings. Do you have performance relative to that initial metric? Did you guys hit the target or outperform, underperform? Donald Hinson: Yes, I would say we hit that target. I think we've had some other factors come into play, other investments either in departmental staffing or technology over the last year that I know in the past, we've looked at it and that has caused a little bit more increases in expense on the expense side. But as far as hitting the 35%, yes, we feel we hit that. Andrew Terrell: Okay. Got it. And then I think you mentioned earlier kind of mid-single-digit loan growth expectations. I would just love to maybe hear some color on what gives you kind of the confidence behind that. It feels like from our seat, maybe a little less certainty with a lot of move in rates. But what are you guys seeing on the ground? What kind of drives the confidence in the mid-single-digit expectation? Bryan McDonald: Yes, Andrew, just our visibility is pretty good out a couple of quarters. And then obviously, it's harder to see beyond that. But the pipeline at the end of Q3 plus the unfunded commitments, I feel pretty confident looking at Q4 and out into Q1. It's hard to tell beyond that period of time. I mean interest rates have moved up. And then, of course, the rates of the customer have moved up. I mentioned in my prepared comments that we had $103 million leave the pipeline on the -- on our affordable housing business, and those were all opportunities that didn't close out of that group, three of them were shelved by the borrower, and then we lost another four of them to competitors, primarily offering better pricing than Heritage. So the market has been pretty competitive out there from a pricing standpoint. But you also see in my example there that we had three projects drop out, and that was largely due to rates moving up and the customer deciding not to move ahead. So that's the piece that I think it's hard to tell right now, particularly with the movement in the 5-year over the last few months, and what's the translation there in terms of the pipeline as we look out into Q4. But certainly, for the next couple of quarters, I think that mid-single digit makes sense. The other thing I would say is that payoff activity has continued to be strong, which, of course, is a drag on growth, but we had excellent production in the quarter, but then payoffs were a couple hundred million, which was up from last quarter. So although it hurts us on the loan growth side, it's also an indication that customers have been able to sell businesses and sell real estate, which, of course, is positive from an economic standpoint. So that was a long answer. I think what happens with the loan demand based on rate increases, we're not seeing it overly dampen the pipeline to the point where I don't think single-digit growth is reasonable now, but we'll keep monitoring that. And then the other is, of course, on this level of payoffs. So if it was to come down, it would make it much easier to maintain that mid-single-digit range. Operator: [Operator Instructions] Your next question comes from the line of David Feaster with Raymond James. David Feaster: I just wanted to follow up kind of on that same line of question. Just we talked about the increase in production. I'm just curious, what are you seeing as driving that? I mean, is it increasing productivity from your existing bankers, capitalizing on some disruption across the footprint? You've also hired a bunch. Is it some of those bankers starting to hit stride? And then if you could just maybe elaborate on your commentary about the competitive landscape and just kind of some of the trends that you're seeing across your footprint as it relates to competition, if it's just pricing? Or are you starting to see that stretch in underwriting as well? Bryan McDonald: Yes. Thanks, David. It's a combination of factors. I would say, across our footprint, we've had really good activity levels. We have added a net 10 bankers this year. Total FTE on the commercial side hasn't gone up just due to some other -- just attrition that's occurred during that period of time and other roles, but that's benefited. And then also our new office in Spokane that we opened last year, has also had good production. So it's across the board, just a strong level of calling activity. I wouldn't say any of the markets are overly disrupted in terms of large blocks of clients moving out of any particular organization. And then also getting through the systems conversion with the new team members that came across in Kitsap. Of course, they were still calling and producing over the last year since we closed, but it's always more challenging to bring clients on when you're going to convert to a new system. So additional momentum picking up there. In terms of the competitive marketplace, we have -- the market is always competitive in the segments that we're looking to grow in. So that's not new. But we did see elevated more aggressive pricing as competitors were looking to win deals with, I would say, a relatively lower volume of new opportunities in the market. Kind of our peak pipeline was kind of in that June time frame, and then it's moderated since then. So as the deal flow has decreased, I'll say, moderately, we have banks becoming more aggressive to win business. And that's always a tough call on our side. But as you saw in the quarter, we still had strong growth even with those competitive pressures and a couple of hundred million worth of prepayments and payoffs, which was up pretty significantly even from the prior quarter that was $152 million. So that's a lot of color, David. A lot of moving pieces, but a number of factors contributing to it. David Feaster: That's helpful. And maybe just on the deposit side, could you touch on some of the underlying trends that you're seeing, and how you think about deposit flows, especially as rates continue to rise, and competition is intensifying. And just high level, how do you think about defending your low-cost core deposit base versus growing deposits? So just kind of curious how you think about some of those things? Bryan McDonald: I think a good place to start, David. Don, if you have it -- do you have the average cost of new deposits -- interest-bearing deposits or deposits during the quarter? Donald Hinson: I do. So for instance, interest-bearing was -- the average cost was 1.68%, money markets 2.11%, but CDs were 3.50%. So obviously, the core is in the more interest-bearing demand and money markets. So those combined were probably the high 1s is -- was the rate. So I'd say 2% is a good proxy. Bryan McDonald: So that gives you a little bit of a sense, David, on the new relationships that we bring in. There's folks with excess funds. So of course, we're getting the operating relationship but then having to compete at market pricing on any of those extra funds that the customer has. So relatively higher than what we have in total at the bank, but still 2% average cost coming in when you look at where we're putting new loans on in that 6.5% range, that still produces a nice margin position for us. So that's kind of the new business. I would say we have a well-developed calling strategy that we've been deploying for a lot of years going after operating relationships, and that's really the key. It's super hard to win business right now on price. There's just a lot of banks trying to win deposits and bring in deposits. And those incremental dollars, kind of the customer's extra money, super hard to win it. So it's really that strategy of going after operating accounts, and it's a different decision on the customers -- from the customer's perspective, largely influenced by the relationship and the expectation of services and your digital offering that you can provide them and still really well positioned all across the footprint to win on that basis. And that's what's in the portfolio. And in terms of defending the existing portfolio, again, that's service level and technology and feel good about that as well. Operator: Your next question comes from the line of Kelly Motta with KBW. Kelly Motta: Most of mine have been asked and answered at this point. But I did want to touch on the buyback. Clearly, it's been a part of your capital return arsenal here. I'm wondering about the appetite on the new buyback. Donald Hinson: Thanks for the question, Kelly. So again, we needed new programs, so we put one in place. I will say that we're probably going to be less active in Q4 than we have been. We are -- our CRE concentration percentage did rise to about 308% at the end of Q3. So I think we're going to slow down buybacks some. So -- and obviously always looking at what the market conditions are and other capital priorities, so those are factors. But I would expect to have -- be less active in Q4. We'll see what 2027 holds, but that's where we're at right now. Operator: Your next question comes from the line of Tim Coffey with Brean Capital. Timothy Coffey: I apologize if I missed this, but once you complete the investments on the loan platform in the first half of '27, what happens to those expenses in the back half? Do they roll off, or do you think they get replaced? Donald Hinson: Well, as I mentioned, we're still kind of going through the budgeting process. That one project itself would be complete. And it's not -- it was -- yes, it was online banking system. It's a commercial online banking system. So not necessarily a loan system. So that one project would be complete. Now could there be other projects that we do next year? Yes, so we're still working through, again, all of our kind of capital budget for next year. Timothy Coffey: Okay, okay. I appreciate that. And Bryan, as you look at the kind of the portfolio is going to come up for maturity in the next handful of quarters, current loans that are going to reprice, what is your expectation on retention of those loans if you had [ the ] percentage on it? Bryan McDonald: Yes. And Tim, we have a slide in the deck, Slide 26, that's probably what you're looking at. And if you look at the adjustable rate loan repricing schedule on the left side of that, those rates repricing have moved up into the 7s, 7.25%, 7.35%, that sort of thing. Now I will mention that we are running these numbers right out of quarter end, and that was a bit of a peak in terms of where the indexes were there. They're down somewhat from there, but certainly up over 100 basis points on average from where the current rates are. I feel pretty confident that the market is going to be in those same ranges. I think we'll see customers that have liquidity use that liquidity to pay off loans in some cases. Of course, most customers don't have that level of liquidity on their balance sheet just to pay it off. But on the margin, I do think we'll see more customers just opting if they have the cash or liquidity to pay some of those loans. So I think that's where we'll see it. We actually had a loan yesterday, professional service that came up and was repricing in the 7s, and they had enough cash and just paid it off. So that's an example. But I don't think it's going to be most customers, but I think we'll see a little bit more of that just based on the change. Operator: There are no further questions at this time. I will now turn the call back to Bryan McDonald for closing remarks. Bryan McDonald: Thanks, Jen. If there are no more questions, then we'll wrap up this quarter's earnings call. We thank you for your time, your support and your interest in our ongoing performance. We look forward to talking to many of you over the coming weeks. Goodbye. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Heritage Financial, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Heritage Financial wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $350,756!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,363,905!* Now, it's worth noting Stock Advisor's total average return is 922% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of October 22, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Heritage Financial (HFWA) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

The market expects OceanFirst Financial (OCFC) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended September 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The earnings report, which is expected to be released on October 27, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This holding company for OceanFirst Bank is expected to post quarterly earnings of $0.40 per share in its upcoming report, which represents a year-over-year change of +11.1%. Revenues are expected to be $178.69 million, up 73.6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 1.46% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For OceanFirst, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -1.81%. On the other hand, the stock currently carries a Zacks Rank of #4. So, this combination makes it difficult to conclusively predict that OceanFirst will beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that OceanFirst would post earnings of $0.42 per share when it actually produced earnings of $0.43, delivering a surprise of +2.38%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. OceanFirst doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Another stock from the Zacks Financial - Savings and Loan industry, Heritage Financial (HFWA), is soon expected to post earnings of $0.57 per share for the quarter ended September 2026. This estimate indicates a year-over-year change of +1.8%. Revenues for the quarter are expected to be $86.2 million, up 31.2% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for Heritage Financial has been revised 1.2% down to the current level. Nevertheless, the company now has an Earnings ESP of -10.53%, reflecting a lower Most Accurate Estimate. This Earnings ESP, combined with its Zacks Rank #3 (Hold), makes it difficult to conclusively predict that Heritage Financial will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates three times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report OceanFirst Financial Corp. (OCFC) : Free Stock Analysis Report Heritage Financial Corporation (HFWA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

The market expects Heritage Financial (HFWA) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended September 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on October 22. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This bank holding company is expected to post quarterly earnings of $0.57 per share in its upcoming report, which represents a year-over-year change of +1.8%. Revenues are expected to be $86.2 million, up 31.2% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 1.18% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Heritage Financial, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -10.53%. On the other hand, the stock currently carries a Zacks Rank of #3. So, this combination makes it difficult to conclusively predict that Heritage Financial will beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Heritage Financial would post earnings of $0.54 per share when it actually produced earnings of $0.57, delivering a surprise of +5.56%. Over the last four quarters, the company has beaten consensus EPS estimates three times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Heritage Financial doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Heritage Financial Corporation (HFWA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research