Heritage Financial Corporation reported net income of $22.2 million in Q4 2025, up from $11.9 million in Q4 2024 and $19.2 million in Q3 2025. Diluted earnings per share rose to $0.65, compared with $0.34 in the year-ago quarter and $0.55 in the prior quarter. Adjusted diluted EPS increased 29% year-over-year to $0.66. Return on average assets improved to 1.27% from 0.66% a year earlier, while return on average common equity climbed to 9.68% from 5.46%. These results significantly outpaced consensus estimates of $0.57 per share, underlining the strength of the company’s franchise and operational leverage in a rising rate environment.

Net interest income for Q4 rose by $1.0 million, or 1.7% (6.8% annualized), versus Q3 2025, driven by a net interest margin expansion to 3.72% from 3.64%. Compared to Q4 2024, net interest income increased by 8.6%, reflecting disciplined pricing and asset mix optimization. Cost of interest-bearing deposits declined to 1.83% from 1.89% in Q3, supporting margin improvement. The efficiency ratio improved to 61.9% on an adjusted basis, down from 64.4% in Q4 2024, as noninterest expense growth remained contained at 2.37% of average assets.

Heritage’s balance sheet remains well-positioned, with total loans receivable up 0.3% quarter-over-quarter to $4.78 billion. New loan originations totaled $173.1 million, offsetting prepayments and payoffs of $151.7 million. Non-owner occupied commercial real estate loans led growth with a 6.2% increase to $2.06 billion, while owner-occupied CRE rose 1.2% to $1.03 billion. Total deposits increased $62.7 million, or 1.1%, to $5.92 billion, with non-maturity balances up 1.5% driven by higher interest-bearing demand deposits. The loan-to-deposit ratio eased to 80.8% from 84.5% year-over-year, reflecting conservative liquidity management.

Heritage received regulatory and shareholder approvals to acquire Olympic Bancorp, Inc. (parent of Kitsap Bank) in a transaction expected to close by January 31, 2026, subject to customary conditions. Management highlighted that the deal will expand the company’s market footprint in western Washington, add approximately $800 million in deposits and $600 million in loans, and is projected to be immediately accretive to tangible book value per share. The acquisition aligns with Heritage’s stated goal of scalable growth and increased shareholder returns through targeted M&A.