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Heritage Financial
(NASDAQ:HFWA)
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Rating:70Outperform
Price Target:
$32.00
â–²(7.38% Upside)
Action:Reiterated
Date:08/08/26
HFWA scores well on financial stability and cash generation, supported by a constructive earnings outlook (improving NIM, strong loan production, and solid credit). The score is tempered by weakening top-line momentum and compressed operating margins, plus only mixed near-term technical signals, while reasonable valuation and dividend yield provide support.
Positive Factors
Cash Generation
Consistent, high free cash flow (~$84M TTM, ~93% of net income) indicates durable earnings quality and internal funding ability. This supports dividends, buybacks, and organic loan growth while providing a buffer for cyclical credit or margin stress without immediate reliance on external capital.
Negative Factors
Top-line Weakness
A declining TTM revenue trend (-5%) and notable operating margin compression indicate weakening top-line momentum and reduced operating leverage. If sustained, this can constrain profitability, limit reinvestment capacity, and make achieving prior ROE levels harder absent structural revenue recovery or material cost saves.
Read all positive and negative factors
Positive Factors
Negative Factors
Cash Generation
Consistent, high free cash flow (~$84M TTM, ~93% of net income) indicates durable earnings quality and internal funding ability. This supports dividends, buybacks, and organic loan growth while providing a buffer for cyclical credit or margin stress without immediate reliance on external capital.
Read all positive factors
Heritage Financial (HFWA) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.18B
Dividend Yield3.38%
Average Volume (3M)200.76K
Price to Earnings (P/E)13.5
Beta (1Y)0.71
Revenue Growth17.16%
EPS Growth47.28%
CountryUS
Employees976
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)2.12
Shares Outstanding40,915,558
10 Day Avg. Volume243,114
30 Day Avg. Volume200,762
Financial Highlights & Ratios
PEG Ratio0.21
Price to Book (P/B)0.87
Price to Sales (P/S)2.39
P/FCF Ratio9.38
Enterprise Value/Market Cap<0.01
Enterprise Value/Revenue<0.01
Enterprise Value/Gross Profit<0.01
Enterprise Value/Ebitda<0.01
Forecast
1Y Price Target
$32.67Price Target Upside9.62% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)2.09
Revenue Forecast (FY)$341.40M
Heritage Financial Business Overview & Revenue Model
Company Description
Heritage Financial Corporation operates as the parent company for Heritage Bank, providing a comprehensive range of financial services to individuals and small to mid-sized businesses throughout the United States. The company's deposit offerings i...
How the Company Makes Money
Heritage Financial primarily makes money through its banking subsidiary by earning net interest income and generating noninterest income. Net interest income is the largest driver for most banks and comes from the spread between (1) interest earne...
Heritage Financial Earnings Call Summary
Earnings Call Date:Jul 23, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Oct 15, 2026
Earnings Call Sentiment Positive
Overall the call conveyed a constructive outlook: underlying earnings power and credit quality are strong (improving NIM, robust loan production, low losses, and healthy capital), while near-term headwinds are manageable and largely related to merger integration, seasonality-driven deposit outflows, and competitive deposit pricing. Management provided clear expense and capital actions (buybacks, reinvestments) and expects margin upside from loan repricing and pipeline conversion even as deposit costs may rise modestly.Positive Updates
Net Interest Margin Improvement
NIM increased 3 basis points quarter-over-quarter to 3.99% (or +8 bps when adjusting out Q1 interest recovery) and improved from 3.51% in Q2 2025, reflecting higher investment yields and lower deposit costs.
Negative Updates
Quarterly Deposit Decline
Total deposits decreased $210 million in Q2, driven by seasonality (tax payments), a $67 million withdrawal from a single short-term commercial deposit relationship, and $48.5 million run-off of brokered CDs; adjusted deposits were down 1.3% in the quarter (vs. 1.0% decline in Q2 2025).
Read all updates
Q2-2026 Updates
Positive
Negative
Net Interest Margin Improvement
NIM increased 3 basis points quarter-over-quarter to 3.99% (or +8 bps when adjusting out Q1 interest recovery) and improved from 3.51% in Q2 2025, reflecting higher investment yields and lower deposit costs.
Read all positive updates
Company Guidance
Management guided to elevated merger-related expenses in Q3 with quarterly noninterest expense expected in the $64–65M range (with roughly $6M of incremental merger charges concentrated in Q3) before stepping down to a post-conversion run rate of $56–57M in Q4 (systems conversion late September; higher expenses until after conversion). They expect net interest margin to continue an upward but more moderate trajectory from 3.99% (up 3 bps q/q; +8 bps ex‑Q1 interest recovery), supported by asset repricing (loan portfolio yield 5.72%; new commercial loan rate 6.44%; all new loans 6.40%) and continued loan growth (annualized mid‑single digits given $339M of commercial commitments in Q2, a $628M pipeline and $26M QoQ loan balance increase despite $152M of prepayments). Deposits are expected to rebound seasonally in Q3/Q4 (management sees mid‑single‑digit annualized deposit growth), spot cost of interest‑bearing deposits was 1.64% (IBD cost 1.67% q/q), liquidity included ~$166M FHLB borrowings at quarter end, capital remains solid (TCE 9.7%), buybacks continue as appropriate (372k shares repurchased for $10M; 424k shares available), and credit metrics underpin the outlook (allowance 1.03% after a $921k provision reversal; nonaccrual loans $15.5M or 0.27%; net charge‑offs YTD $786k, ~0.03% annualized).Heritage Financial Financial Statement Overview
Summary
Income Statement
66
Positive
Balance Sheet
72
Positive
Cash Flow
74
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 336.27M | 335.97M | 317.19M | 303.13M | 257.05M | 247.45M |
| Gross Profit | 251.00M | 243.35M | 210.56M | 239.54M | 250.40M | 269.78M |
| EBITDA | 48.82M | 79.64M | 55.49M | 78.52M | 102.53M | 101.88M |
| Net Income | 77.90M | 67.53M | 43.26M | 61.76M | 81.88M | 98.03M |
Balance Sheet | ||||||
| Total Assets | 8.43B | 6.97B | 7.11B | 7.17B | 6.98B | 7.43B |
| Cash, Cash Equivalents and Short-Term Investments | 102.56M | 660.11M | 881.49M | 1.36B | 1.44B | 2.62B |
| Total Debt | 188.75M | 42.35M | 405.06M | 521.76M | 68.07M | 72.02M |
| Total Liabilities | 7.32B | 6.05B | 6.24B | 6.32B | 6.18B | 6.58B |
| Stockholders Equity | 1.11B | 921.50M | 863.53M | 853.26M | 797.89M | 854.43M |
Cash Flow | ||||||
| Free Cash Flow | 83.72M | 85.66M | 61.02M | 99.15M | 90.44M | 66.51M |
| Operating Cash Flow | 90.11M | 94.82M | 64.48M | 109.52M | 94.46M | 69.53M |
| Investing Cash Flow | 137.31M | 186.75M | -85.90M | -93.45M | -1.21B | 163.76M |
| Financing Cash Flow | -277.14M | -165.58M | -86.45M | 105.31M | -506.38M | 746.68M |
Heritage Financial Technical Analysis
Neutral
29.80
Price Trends
29.37
Negative
28.20
Positive
26.46
Positive
Market Momentum
-0.18
Positive
38.87
Neutral
15.07
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HFWA, the sentiment is Neutral. The current price of 29.8 is above the 20-day moving average (MA) of 29.42, above the 50-day MA of 29.37, and above the 200-day MA of 26.46, indicating a neutral trend. The MACD of -0.18 indicates Positive momentum. The RSI at 38.87 is Neutral, neither overbought nor oversold. The STOCH value of 15.07 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HFWA.
Heritage Financial Risk Analysis
Heritage Financial disclosed 42 risk factors in its most recent earnings report. Heritage Financial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Heritage Financial Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $1.45B | 12.83 | 14.12% | 1.25% | 9.56% | 12.20% | |
76 Outperform | $978.40M | 12.05 | 14.00% | 2.92% | 5.05% | 39.76% | |
70 Outperform | $1.18B | 13.52 | 7.69% | 3.22% | 17.16% | 47.28% | |
69 Neutral | $1.13B | 11.46 | 10.22% | 0.82% | 10.54% | 28.24% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $1.09B | 13.29 | 8.01% | 4.39% | 7.53% | 38.21% | |
62 Neutral | $1.01B | -6.18 | -20.76% | 3.19% | -72.33% | -366.87% |
* Financial Sector Average
HFWA
Heritage Financial
28.66
5.02
21.24%
CFFN
Capitol Federal Financial
8.64
2.51
41.04%
CPF
Central Pacific Financial
37.84
7.42
24.40%
HBNC
Horizon Bancorp
19.53
3.26
20.06%
MCB
Metropolitan Bank Holding
91.68
13.15
16.74%
AMAL
Amalgamated Bank
48.61
19.99
69.85%
Heritage Financial Corporate Events
Business Operations and StrategyDividendsFinancial DisclosuresM&A Transactions
Heritage Financial Raises Dividend After Olympic Bancorp Acquisition
Positive
Jul 23, 2026
Heritage Financial reported second-quarter 2026 net income of $17.5 million, or $0.42 per diluted share, down from the first quarter but up from a year earlier, with adjusted EPS at $0.57. The quarter, the first full period incorporating its Janua...
Executive/Board ChangesShareholder Meetings
Heritage Financial Shareholders Approve Directors and Executive Pay
Positive
May 8, 2026
Heritage held its annual meeting of shareholders on May 7, 2026, with 35,533,585 of 41,131,100 eligible common shares represented, establishing a quorum and underscoring strong investor participation. Shareholders elected 11 directors, including S...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.