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Heritage Financial
(NASDAQ:HFWA)
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Rating:68Neutral
Price Target:
$30.00
▲(4.68% Upside)
Action:Downgraded
Date:10/22/26
HFWA scores as a moderately attractive, financially stable regional bank: strong cash generation and conservative leverage are the primary positives, and valuation is supported by a reasonable P/E and a ~3.5% dividend yield. The score is held back by weakening recent operating momentum (revenue decline and margin compression), mixed technicals with negative MACD, and earnings-call credit and concentration risks (rising nonaccrual/criticized loans and elevated CRE concentration) despite improving NIM/NII guidance.
Positive Factors
Improving Banking Earnings Drivers
Higher loan yields, expanding net interest margin, and growth in loans and deposits strengthen Heritage Financial’s core banking engine. Continued repricing benefits and management’s mid-single-digit loan-growth outlook could support recurring net interest income over the next several quarters.
Negative Factors
Worsening Credit Indicators
Rising nonaccrual and criticized loans indicate increasing stress in parts of the commercial portfolio, including transportation and construction-related relationships. Even with low current charge-offs, further deterioration could raise provisions, constrain loan growth, and reduce future earnings quality.
Read all positive and negative factors
Positive Factors
Negative Factors
Improving Banking Earnings Drivers
Higher loan yields, expanding net interest margin, and growth in loans and deposits strengthen Heritage Financial’s core banking engine. Continued repricing benefits and management’s mid-single-digit loan-growth outlook could support recurring net interest income over the next several quarters.
Read all positive factors
Heritage Financial (HFWA) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.19B
Dividend Yield3.33%
Average Volume (3M)370.73K
Price to Earnings (P/E)14.4
Beta (1Y)0.68
Revenue Growth21.51%
EPS Growth20.75%
CountryUS
Employees755
SectorFinancial
Sector Strength70
IndustryBanks - Regional
Share Statistics
EPS (TTM)2.02
Shares Outstanding40,915,558
10 Day Avg. Volume308,124
30 Day Avg. Volume370,729
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 Cap0.99
Enterprise Value/Revenue3.30
Enterprise Value/Gross Profit4.35
Enterprise Value/Ebitda16.12
Forecast
1Y Price Target
$32.67Price Target Upside13.98% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)2.02
Revenue Forecast (FY)$336.03M
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 earns revenue through traditional banking activities. The largest driver is net interest income: the company collects interest and fees on loans (e.g., commercial loans, commercial real estate loans, residential mortga...
Heritage Financial Earnings Call Summary
Earnings Call Date:Oct 22, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Jan 28, 2027
Earnings Call Sentiment Positive
The call was predominantly positive, with strong loan and deposit growth, higher net interest margin and net interest income, successful completion of the Kitsap systems conversion, low net charge-offs, achieved merger cost savings, and confidence in mid-single-digit loan growth and continued asset repricing benefits. These positives were tempered by rising nonaccrual and criticized loans, higher CRE concentration, elevated payoffs, a declining loan pipeline, competitive pricing pressure, emerging deposit-cost increases, and expected core expense growth.Positive Updates
Successful Kitsap Bank Systems Conversion
The Kitsap Bank systems conversion was completed as planned in late September, with management saying the results were excellent. The company said the cost of carrying both platforms is largely behind it, and substantially all merger-related expenses have been recognized.
Negative Updates
Higher Nonaccrual Loans and Nonperforming Assets
Nonaccrual loans increased by $16.6 million to just over $32 million at quarter end, or 0.55% of total loans, compared with 0.27% at the end of Q1 and 0.44% at the end of 2025. The increase was primarily driven by an $11.8 million transportation-industry C&I relationship affected by economic stress and ongoing delinquency issues, along with three additional C&I relationships. The nonperforming-assets-to-total-assets ratio rose to 0.39% from 0.19% in Q2.
Read all updates
Q3-2026 Updates
Positive
Negative
Successful Kitsap Bank Systems Conversion
The Kitsap Bank systems conversion was completed as planned in late September, with management saying the results were excellent. The company said the cost of carrying both platforms is largely behind it, and substantially all merger-related expenses have been recognized.
Read all positive updates
Company Guidance
Management expects expense levels to decrease to a range of $55 million to $56 million in Q4, while core expenses are expected to rise; commercial online banking conversion costs will be probably like $500,000 in Q4 and about $1.5 million each of the first two quarters of '27, with completion by mid-'27. Based on the current pipeline and unfunded commitment levels, they expect an annualized growth rate in the mid-single-digit range for the next couple of quarters. Securities cash flows are expected to be $45 million to $50 million per quarter through next year, rolling off in the low 4s and reinvesting in the kind of low- to mid-5s, which management said will probably continue. Management expects net interest margin and net interest income to continue moving higher from here, estimated a 20% beta for one rate increase, and expects to be less active in Q4 on buybacks.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 | 357.88M | 335.97M | 317.19M | 303.13M | 257.05M | 247.45M |
| Gross Profit | 271.32M | 243.35M | 210.56M | 239.54M | 250.40M | 269.78M |
| EBITDA | 73.23M | 79.92M | 55.49M | 78.52M | 102.53M | 101.88M |
| Net Income | 77.45M | 67.53M | 43.26M | 61.76M | 81.88M | 98.03M |
Balance Sheet | ||||||
| Total Assets | 8.52B | 6.97B | 7.11B | 7.17B | 6.98B | 7.43B |
| Cash, Cash Equivalents and Short-Term Investments | 1.79B | 660.11M | 881.49M | 1.36B | 1.44B | 2.62B |
| Total Debt | 144.47M | 42.35M | 405.06M | 521.76M | 68.07M | 72.02M |
| Total Liabilities | 7.43B | 6.05B | 6.24B | 6.32B | 6.18B | 6.58B |
| Stockholders Equity | 1.08B | 921.50M | 863.53M | 853.26M | 797.89M | 854.43M |
Cash Flow | ||||||
| Free Cash Flow | 59.33M | 85.66M | 61.02M | 99.15M | 90.44M | 66.51M |
| Operating Cash Flow | 65.04M | 94.82M | 64.48M | 109.52M | 94.46M | 69.53M |
| Investing Cash Flow | 110.66M | 186.75M | -85.90M | -93.45M | -1.21B | 163.76M |
| Financing Cash Flow | -216.81M | -165.58M | -86.45M | 105.31M | -506.38M | 746.68M |
Heritage Financial Technical Analysis
Positive
28.66
Price Trends
28.29
Positive
28.75
Positive
27.44
Positive
Market Momentum
0.08
Negative
64.06
Neutral
91.38
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HFWA, the sentiment is Positive. The current price of 28.66 is above the 20-day moving average (MA) of 27.75, above the 50-day MA of 28.29, and above the 200-day MA of 27.44, indicating a bullish trend. The MACD of 0.08 indicates Negative momentum. The RSI at 64.06 is Neutral, neither overbought nor oversold. The STOCH value of 91.38 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 | $656.79M | 12.27 | 13.83% | 1.58% | 15.83% | 38.41% | |
79 Outperform | $364.68M | 11.70 | 11.72% | 2.47% | 6.41% | 17.50% | |
68 Neutral | $1.19B | 14.41 | 7.32% | 3.37% | 21.51% | 20.75% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
67 Neutral | $295.98M | 13.90 | 7.67% | ― | 6.45% | 67.38% | |
63 Neutral | $344.35M | 11.25 | 9.14% | 2.61% | 5.90% | -7.04% | |
56 Neutral | $689.11M | -180.32 | -0.80% | ― | 7.30% | -106.97% |
* Financial Sector Average
HFWA
Heritage Financial
29.11
6.84
30.71%
TSBK
Timberland Bancorp
46.90
15.83
50.94%
FSBW
FS Bancorp
43.77
5.83
15.38%
CCB
Coastal Financial
45.08
-61.66
-57.77%
MYFW
First Western Financial
30.31
7.50
32.88%
WCCB
West Coast Community Bancorp
62.47
21.81
53.62%
Heritage Financial Corporate Events
Business Operations and StrategyStock BuybackDividendsFinancial DisclosuresM&A Transactions
Heritage Financial Reports Strong Third-Quarter 2026 Results
Positive
Oct 22, 2026
On October 22, 2026, Heritage Financial reported third-quarter 2026 net income of $18.7 million, or $0.46 per diluted share, up from $17.5 million, or $0.42 per share, in the second quarter, amid strengthening core banking metrics. Net interest in...
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...
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.