Heritage Financial (HFWA) AI Stock Analysis

• Market Cap: $848.24M
• Dividend Yield: 3.84%
• Average Volume (3M): 200.76K
• Price to Earnings (P/E): 14.8
• Beta (1Y): 0.66
• Revenue Growth: 8.27%
• EPS Growth: 54.96%
• Country: US
• Employees: 757
• Sector: Financial
• Sector Strength: 70
• Industry: Banks - Regional
• EPS (TTM): 0.55
• Shares Outstanding: 33,956,738
• 10 Day Avg. Volume: 243,114
• 30 Day Avg. Volume: 200,762
• PEG Ratio: -0.69
• Price to Book (P/B): 0.98
• Price to Sales (P/S): 2.66
• P/FCF Ratio: 13.84
• Enterprise Value/Market Cap: 1.08
• Enterprise Value/Revenue: 2.77
• Enterprise Value/Gross Profit: 3.95
• Enterprise Value/Ebitda: 12.82
• 1Y Price Target: $29.50
• Price Target Upside: 20.02% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3
• EPS Forecast (FY): 1.87
• Revenue Forecast (FY): $252.25M

• Rating: 79 Outperform
• Price Target: $28.00 ▲(13.91% Upside)

Heritage Financial's strong financial performance, positive technical indicators, and strategic corporate events, including a merger, contribute to a favorable outlook. While the valuation is reasonable, the company's growth prospects and strategic initiatives are the most significant factors driving the score.

Positive Factors

Merger with Olympic Bancorp

The merger with Olympic Bancorp will expand Heritage Financial's market presence and is projected to improve financial metrics, enhancing long-term profitability and competitive positioning.

Strong Cash Flow Generation

Robust cash flow growth indicates strong operational efficiency and financial health, providing the company with flexibility for investments and debt management.

Improved Net Interest Margin

An improved net interest margin reflects better profitability from core banking operations, enhancing the company's ability to generate income from its assets.

Negative Factors

Flat Loan Balances

Flat loan balances indicate potential challenges in loan growth, which could limit future revenue expansion and affect the company's ability to capitalize on interest income.

Increased Nonaccrual Loans

Rising nonaccrual loans suggest deteriorating credit quality, which could lead to higher loan losses and impact the company's financial stability over time.

Higher Noninterest Expenses

Increased noninterest expenses can pressure profit margins, reducing overall profitability and potentially limiting funds available for strategic investments.

Heritage Financial Business Overview & Revenue Model

Company Description

Heritage Financial (HFWA) is a diversified financial services company based in the United States, primarily focused on providing comprehensive banking and wealth management solutions. Operating through various sectors, including commercial banking, residential mortgage lending, and investment advisory services, HFWA aims to cater to both individual and business clients. Their core products encompass checking and savings accounts, loans, mortgages, and a suite of investment services designed to help clients achieve their financial goals.

How the Company Makes Money

Heritage Financial generates revenue through multiple key streams. Primarily, the company earns interest income from loans issued to consumers and businesses, including personal loans, commercial loans, and mortgages. Additionally, HFWA collects fees from various banking services, such as account maintenance fees, transaction fees, and penalties. Another significant revenue source is wealth management services, where the firm charges advisory fees for managing investment portfolios and providing financial planning. Strategic partnerships with other financial institutions and service providers also enhance HFWA's earnings by facilitating cross-selling opportunities and expanding their product offerings. Overall, the combination of interest income, service fees, and investment management fees forms the foundation of Heritage Financial's revenue model.

Heritage Financial Financial Statement Overview

Summary

Heritage Financial demonstrates a solid financial position with strong profitability and cash flow management. Despite a decline in revenue growth, the company maintains robust margins and a stable balance sheet with low leverage. Positive cash flow trends further enhance its financial health.

Income Statement

Heritage Financial's income statement shows a mixed performance. The TTM data reveals a decline in revenue growth rate, indicating potential challenges in revenue generation. However, the company maintains a healthy gross profit margin of 68.06% and a net profit margin of 15.21%, which are strong indicators of profitability. The EBIT and EBITDA margins are also solid, reflecting efficient operational management. Despite the recent revenue decline, the company has demonstrated resilience in maintaining profitability.

Balance Sheet

The balance sheet of Heritage Financial is stable with a manageable debt-to-equity ratio of 0.32 in the TTM period, indicating a conservative approach to leveraging. The return on equity is modest at 5.64%, suggesting room for improvement in generating returns for shareholders. The equity ratio is strong, reflecting a solid capital structure with a significant portion of assets financed by equity. Overall, the balance sheet reflects financial stability with low leverage risk.

Cash Flow

The cash flow statement indicates positive trends, with a notable free cash flow growth rate of 22.28% in the TTM period. The operating cash flow to net income ratio is low, suggesting potential inefficiencies in converting income to cash. However, the free cash flow to net income ratio is high at 94.79%, indicating effective cash generation relative to net income. The company shows strong cash flow management, supporting its operational and investment activities.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	331.37M	317.19M	303.13M	257.05M	247.45M	251.55M
Gross Profit	232.88M	210.56M	239.54M	250.40M	269.78M	202.12M
EBITDA	71.67M	55.49M	78.52M	102.53M	101.88M	53.09M
Net Income	57.22M	43.26M	61.76M	81.88M	98.03M	46.57M
Balance Sheet
Total Assets	7.01B	7.11B	7.17B	6.98B	7.43B	6.62B
Cash, Cash Equivalents and Short-Term Investments	807.37M	881.49M	1.36B	1.44B	2.62B	1.55B
Total Debt	160.28M	405.06M	521.76M	68.07M	72.02M	56.57M
Total Liabilities	6.11B	6.24B	6.32B	6.18B	6.58B	5.79B
Stockholders Equity	904.06M	863.53M	853.26M	797.89M	854.43M	820.44M
Cash Flow
Free Cash Flow	83.20M	61.02M	99.15M	90.44M	66.51M	63.33M
Operating Cash Flow	87.45M	64.48M	109.52M	94.46M	69.53M	70.33M
Investing Cash Flow	119.69M	-85.90M	-93.45M	-1.21B	163.76M	-538.55M
Financing Cash Flow	-137.22M	-86.45M	105.31M	-506.38M	746.68M	982.97M

Heritage Financial Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 24.58
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

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 24.58 is below the 20-day moving average (MA) of 24.65, above the 50-day MA of 23.32, and above the 200-day MA of 23.22, indicating a bullish trend. The MACD of 0.61 indicates Negative momentum. The RSI at 58.81 is Neutral, neither overbought nor oversold. The STOCH value of 58.64 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HFWA.

Heritage Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AMAL	82 Outperform	$982.81M	9.88	13.88%	1.71%	4.33%	-2.20%
HFWA	79 Outperform	$848.24M	14.81	6.43%	3.84%	8.27%	54.96%
CPF	78 Outperform	$870.82M	13.21	11.65%	3.39%	1.22%	15.97%
MCB	74 Outperform	$822.81M	13.60	8.80%	0.38%	6.48%	8.78%
CFFN	71 Outperform	$933.21M	13.45	6.53%	4.73%	6.27%	79.25%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
HBNC	58 Neutral	$912.69M	-4.50	-26.60%	3.50%	-78.64%	-913.67%

Heritage Financial Corporate Events

Heritage Financial Appoints Scott Allan to Board of Directors

On December 18, 2025, Heritage Financial Corporation’s board approved the appointment of Scott T. Allan, an experienced executive and board member with a background spanning engineering, consulting, venture-backed startups, and consumer brands, to its board of directors and to the board of Heritage Bank, effective January 1, 2026. Allan, who currently is a partner at Cascade Growth Partners and previously led Hydro Flask as CEO and held senior roles at Helen of Troy and several technology companies, will serve as an independent director on Heritage’s Audit and Risk and Technology Committees, reinforcing the bank’s governance, strategic oversight, and technology and risk capabilities as it pursues long-term, relationship-focused growth in its Pacific Northwest markets.

Heritage Financial Reports Strong Q3 Results and Dividend

On October 23, 2025, Heritage Financial Corporation announced its third-quarter results, reporting a net income of $19.2 million, a significant increase from the previous quarter. The company also declared a regular quarterly cash dividend of $0.24 per share, payable on November 19, 2025. Heritage Financial’s financial performance was marked by an increase in net interest income and a decrease in borrowing costs, contributing to an improved net interest margin. Additionally, the company is set to acquire Olympic Bancorp, Inc., which is expected to strengthen its balance sheet and enhance profitability.

Heritage Financial Announces Merger with Olympic Bancorp

On September 25, 2025, Heritage Financial Corporation announced a merger agreement to acquire Olympic Bancorp, Inc., the holding company for Kitsap Bank, in an all-stock transaction valued at approximately $176.6 million. The merger, expected to close in the first quarter of 2026, will see Kitsap Bank’s operations integrated into Heritage Bank, enhancing Heritage’s market presence in the Puget Sound region and making it the second largest community bank in the area. The merger is anticipated to improve Heritage’s financial metrics and provide significant benefits for stakeholders, including an 18% earnings per share accretion post-merger.