Heritage Financial (NASDAQ:HFWA) reported fourth-quarter results that surpassed Wall Street estimates, bolstered by a significant expansion in its net interest margin and steady deposit inflows.
The Olympia, Washington-based parent of Heritage Bank posted net income of $22.2 million, or $0.65 per diluted share, for the period ended Dec. 31, 2025.
On an adjusted basis, which excludes costs related to its pending merger with Olympic Bancorp, earnings reached $0.66 per share, beating the $0.57 consensus estimate from analysts surveyed by Zacks Investment Research.
The quarter’s performance was highlighted by a return on average assets of 1.27%, up from 1.09% in the prior quarter.
This profitability jump was largely fueled by the bank’s net interest margin, which widened by 8 basis points to 3.72%.
Total deposits also saw a boost, increasing by $62.7 million during the quarter to reach $5.92 billion, even as the bank successfully lowered the cost of its interest-bearing deposits to 1.83%.
"We are very pleased with our operating results for the fourth quarter, which included stronger profitability, deposit growth, and margin expansion," said President and CEO Bryan McDonald.
The results set a high bar as the company nears a major strategic milestone.
Heritage recently received all necessary regulatory and shareholder approvals to acquire Olympic Bancorp, the parent of Kitsap Bank.
The $176.6 million deal is expected to close on or about Jan. 31, 2026, creating a pro forma institution with approximately $8.8 billion in assets and a dominant market share in the Puget Sound and Olympic Peninsula regions.
For the full year 2025, Heritage reported a total profit of $67.5 million, or $1.96 per share, on revenue of $246.1 million.
The bank also maintained its quarterly dividend of $0.24 per share, signaling confidence in its capital position following the close of its latest acquisition.