Heritage Financial (HFWA) AI Stock Analysis

• Market Cap: $920.57M
• Dividend Yield: 3.91%
• Average Volume (3M): 200.76K
• Price to Earnings (P/E): 13.5
• Beta (1Y): 0.64
• Revenue Growth: 8.27%
• EPS Growth: 54.96%
• Country: US
• Employees: 757
• Sector: Financial
• Sector Strength: 70
• Industry: Banks - Regional
• EPS (TTM): 0.65
• 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: 0.99
• Enterprise Value/Revenue: 2.75
• Enterprise Value/Gross Profit: 3.91
• Enterprise Value/Ebitda: 12.70
• 1Y Price Target: $31.75
• Price Target Upside: 17.12% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 4
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 76 Outperform
• Price Target: $29.00 ▲(6.97% Upside)

HFWA scores well primarily on solid financial performance (strong cash generation and conservative leverage) and supportive technicals (price above major moving averages with positive momentum). Valuation is also favorable with a moderate P/E and a ~3.7% dividend yield. The earnings outlook is constructive with improving margin and expected loan growth recovery, partially tempered by merger-cost and integration risks.

Positive Factors

Strong free cash flow

Very strong free cash flow growth indicates durable cash generation that supports dividends, organic loan growth, and deal funding. Persistent FCF provides flexibility for capital allocation, buffers during credit cycles, and underpins sustainable shareholder returns over the medium term.

Prudent capital & low leverage

Low leverage and solid tangible common equity provide a strong capital foundation to absorb loan losses, fund lending expansion, and execute M&A. This structural capital strength supports long-term franchise credibility with regulators and counterparties.

NIM expansion & deposit improvement

Rising net interest margin coupled with deposit inflows and lower funding costs points to sustainable net interest income improvement. Asset repricing and cheaper deposits are structural drivers that should support margins and core profitability over the coming quarters.

Negative Factors

Share dilution from all-stock deal

Issuing ~7.17M shares is a lasting shareholder dilution that reduces EPS and per-share metrics. While the acquisition expands the franchise, dilution constrains per-share accretion and complicates long-term capital allocation until the deal’s earnings lift fully materializes.

Material merger integration costs

Significant, multi-quarter merger costs and elevated near-term run-rates will pressure reported efficiency and profitability. Prolonged integration expenses can slow operating leverage improvement and limit capital available for lending or buybacks during integration.

Rising asset-quality pressure

A meaningful sequential uptick in substandard loans and C&I downgrades signals emerging credit risk that can erode margins and require higher provisions. Combined with declining ROE trends, this can constrain sustainable profitability and capital deployment until asset quality stabilizes.

Heritage Financial Business Overview & Revenue Model

Company Description

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. The company accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. Its loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. The company also originates loans that are guaranteed by the U.S. Small Business Administration; and offers trust services, as well as objective advice. As of January 27, 2022, it had a network of 49 banking offices located in Washington and Oregon. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

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

Solid overall fundamentals driven by strong free cash flow growth (140.9% TTM) and prudent leverage (debt-to-equity 0.18). Offsetting factors include declining ROE (6.47%) and some margin/cost pressure signaled by a decreasing gross margin and weaker operating cash flow conversion.

Income Statement

Heritage Financial shows a steady revenue growth rate of 1.9% TTM, with a strong net profit margin of 17.71%. However, the gross profit margin has decreased over time, indicating potential cost management issues. The EBIT and EBITDA margins are healthy, reflecting efficient operations.

Balance Sheet

The company maintains a low debt-to-equity ratio of 0.18 TTM, suggesting prudent financial leverage. However, the return on equity has decreased to 6.47%, indicating a decline in profitability relative to shareholder equity. The equity ratio remains stable, showcasing a solid capital structure.

Cash Flow

Heritage Financial's free cash flow growth rate is robust at 140.9% TTM, and the free cash flow to net income ratio is nearly 1, indicating strong cash generation relative to earnings. However, the operating cash flow to net income ratio is low, suggesting potential cash flow management challenges.

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: 27.11
• 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 27.11 is above the 20-day moving average (MA) of 25.35, above the 50-day MA of 24.68, and above the 200-day MA of 23.42, indicating a bullish trend. The MACD of 0.62 indicates Negative momentum. The RSI at 63.49 is Neutral, neither overbought nor oversold. The STOCH value of 50.92 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
CPF	79 Outperform	$907.04M	11.78	11.65%	3.39%	1.22%	15.97%
AMAL	79 Outperform	$1.21B	11.84	13.88%	1.70%	4.33%	-2.20%
HFWA	76 Outperform	$920.57M	13.53	6.43%	3.91%	8.27%	54.96%
CFFN	74 Outperform	$997.62M	13.43	6.53%	4.73%	6.27%	79.25%
MCB	71 Outperform	$984.49M	14.34	8.80%	0.38%	6.48%	8.78%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
HBNC	57 Neutral	$931.65M	-5.77	-26.60%	3.50%	-78.64%	-913.67%

Heritage Financial Corporate Events

Heritage Financial Completes Olympic Bancorp Acquisition and Merger

On January 31, 2026, Heritage Financial Corporation completed its previously announced acquisition of Olympic Bancorp, Inc., merging Olympic into Heritage and combining Olympic’s subsidiary Kitsap Bank into Heritage Bank in a follow-on transaction. The all-stock deal, formally disclosed in a February 2, 2026 announcement, will see Heritage issue roughly 7.17 million new shares, with Olympic shareholders receiving 45 shares of Heritage common stock for each Olympic share, a structure that modestly dilutes existing Heritage investors while expanding the bank’s Pacific Northwest footprint and integrating Kitsap Bank’s customers, employees and branches into the Heritage platform.

The most recent analyst rating on (HFWA) stock is a Buy with a $30.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

Heritage Financial Posts Strong Quarter and Prepares Acquisition

On January 22, 2026, Heritage Financial reported significantly stronger fourth-quarter 2025 and full-year results, with quarterly net income rising to $22.2 million from $19.2 million in the prior quarter and $11.9 million a year earlier, and diluted earnings per share increasing to $0.65. The bank delivered higher profitability metrics, including a return on average assets of 1.27%, improved net interest income and margin, deposit growth of $62.7 million, and a lower cost of deposits, while also declaring a regular cash dividend earlier in January. Management highlighted robust year-over-year earnings growth, improved efficiency, and incremental strengthening of its balance sheet, positioning the company for further scale as it moves toward closing its approved acquisition of Olympic Bancorp at the end of January, a deal expected to enhance its competitive standing and broaden its regional presence.

The most recent analyst rating on (HFWA) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

Heritage Financial Shareholders Approve Stock Issuance for Merger

On January 21, 2026, Heritage Financial Corporation held a virtual special meeting of shareholders to vote on matters related to its previously announced merger agreement with Olympic Bancorp, Inc., under which Olympic will merge into Heritage with Heritage as the surviving corporation. Shareholders holding approximately 80 percent of Heritage’s outstanding common stock as of the November 26, 2025 record date were represented at the meeting, and they approved the issuance of Heritage common stock required to complete the merger, as well as the potential adjournment of the meeting to solicit additional votes, although no adjournment was ultimately needed. The strong shareholder support clears a key step toward closing the transaction, reinforcing Heritage’s strategic plan to expand its banking franchise and potentially strengthen its competitive position in the regional financial services market.

The most recent analyst rating on (HFWA) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

Heritage Financial Declares Early Quarterly Dividend Amid Merger

On January 16, 2026, Heritage Financial Corporation announced that its board declared a regular quarterly cash dividend of $0.24 per common share, to be paid on February 11, 2026, to shareholders of record as of January 28, 2026. The dividend was scheduled earlier than the company’s normal quarterly timetable in light of its anticipated merger with Olympic Bancorp, signaling continued shareholder payouts and suggesting management’s intent to maintain capital returns during the pending transaction, while also highlighting options for shareholders to receive dividends via direct deposit.

The most recent analyst rating on (HFWA) stock is a Hold with a $27.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

Heritage Financial Gains Regulatory Clearance for Olympic Bancorp Acquisition

On December 29, 2025, Heritage Financial Corporation announced it had received all required U.S. banking regulatory approvals, including from federal and Washington state authorities, for its previously announced acquisition of Olympic Bancorp, Inc. and the related merger of Olympic’s Kitsap Bank into Heritage Bank. The company said it plans to close the transaction on or about January 31, 2026, subject to customary closing conditions, notably shareholder approvals at both Heritage and Olympic, and highlighted that combining Kitsap Bank’s relationship-banking model with Heritage’s existing franchise is expected to create a stronger banking platform for communities across the Puget Sound region, potentially expanding the group’s regional footprint and competitive positioning while leaving completion risk tied to shareholder votes and integration execution.

The most recent analyst rating on (HFWA) stock is a Buy with a $28.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

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.

The most recent analyst rating on (HFWA) stock is a Buy with a $31.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.