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Heritage Financial Corp. (HFWA)
NASDAQ:HFWA
US Market
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Heritage Financial (HFWA) AI Stock Analysis

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HFWA

Heritage Financial

(NASDAQ:HFWA)

Rating:72Outperform
Price Target:
$26.00
▲(10.69%Upside)
Heritage Financial's overall score reflects strong financial performance and a positive earnings outlook, supported by solid valuation metrics. The leadership transition further bolsters confidence. While technical indicators suggest caution, the company's long-term fundamentals remain strong.

Heritage Financial (HFWA) vs. SPDR S&P 500 ETF (SPY)

Heritage Financial Business Overview & Revenue Model

Company DescriptionHeritage Financial Corporation (HFWA) is a bank holding company headquartered in Olympia, Washington. It operates through its wholly-owned subsidiary, Heritage Bank, which provides a wide range of financial services including personal and commercial banking, mortgage lending, and investment services. The company primarily serves customers in the Pacific Northwest region of the United States, focusing on small to medium-sized businesses and retail clients.
How the Company Makes MoneyHeritage Financial makes money primarily through interest income generated from its loan portfolio, which includes commercial and consumer loans. The company also earns revenue from non-interest income sources such as service charges on deposit accounts, fees from mortgage banking activities, and income from investment securities. Additionally, Heritage Financial may benefit from partnerships with other financial institutions or service providers, enhancing its product offerings and revenue potential. Overall, the company's earnings are influenced by factors such as interest rate fluctuations, credit quality of its borrowers, and regional economic conditions.

Heritage Financial Earnings Call Summary

Earnings Call Date:Jul 24, 2025
(Q2-2025)
|
% Change Since: -5.89%|
Next Earnings Date:Oct 16, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance with significant growth in earnings per share, loan production, and net interest margin. However, there are challenges, including a seasonal decline in deposits and an increase in nonperforming loans. Despite these challenges, the bank maintains a strong capital position and continues to show consistent deposit growth.
Q2-2025 Updates
Positive Updates
Earnings Per Share Increase
Earnings per share were up 8.2% from the previous quarter and up 17.8% from the second quarter of 2024, indicating strong financial performance.
Loan Production Growth
The commercial lending group closed $248 million in new loan commitments this quarter, up from $183 million last quarter and $218 million in the same quarter of 2024.
Improved Net Interest Margin
Net interest margin increased to 3.51% from 3.44% in the prior quarter, driven by higher yields on loans and investment portfolios.
Consistent Deposit Growth
Average total deposits increased by $35.4 million from the prior quarter, marking the fifth consecutive quarter of growth.
Strong Capital Position
Regulatory capital ratios remain comfortably above well-capitalized thresholds, with a TCE ratio of 9.4%, up from 9.3% in the prior quarter.
Negative Updates
Deposit Decline
Total deposits decreased by $60.9 million in Q2 due to seasonal tax payment activities, despite an increase in average deposits.
Increase in Nonperforming Loans
Nonperforming loans increased from 0.09% of total loans at the end of the first quarter to 0.39%, with notable additions including a $6 million multifamily construction loan.
Provision for Credit Losses
A provision for credit losses amounting to $956,000 was recognized during the quarter due to loan growth and net charge-offs.
Investment Portfolio Loss
A pretax loss of $6.9 million was recognized on the sale of $91.6 million of securities as part of a strategic repositioning.
Company Guidance
During the Heritage Financial 2025 Q2 earnings call, guidance was provided on multiple financial metrics. Earnings per share increased by 8.2% compared to the previous quarter and by 17.8% from the same quarter in 2024. Total loan balances grew by $10 million, while yields on the loan portfolio rose to 5.50%, reflecting a 5 basis point increase. Despite a $60.9 million decline in total deposits due to tax-related seasonality, average deposits increased by $35.4 million. The cost of interest-bearing deposits slightly rose to 1.94%. The company executed a strategic repositioning of its balance sheet by recognizing a pre-tax loss of $6.9 million on the sale of $91.6 million in securities. Net interest income grew by 2.4%, driven by an increased net interest margin, which rose to 3.51%. Noninterest expenses decreased slightly, and the company maintained a TCE ratio of 9.4%. Heritage Financial repurchased 193,700 shares at a cost of $4.5 million, with 797,000 shares still available for repurchase. The credit quality of the loan portfolio remained strong, with nonaccrual loans totaling just under $9.9 million, representing 0.21% of total loans. The commercial lending group closed $248 million in new loan commitments, with a projected increase to $300 million in Q3. The average interest rate for new commercial loans was 6.55%, slightly down from the previous quarter. Overall, Heritage Financial remains well-capitalized and positioned for future growth.

Heritage Financial Financial Statement Overview

Summary
Heritage Financial maintains a stable financial position with a strong balance sheet and efficient operations. However, inconsistent revenue growth and declining profitability margins indicate areas for improvement. The cash flow is stable but shows signs of pressure.
Income Statement
75
Positive
Heritage Financial shows a mixed performance in its income statement. Gross profit margins are stable, indicating good cost management. However, net profit margin has decreased from the previous year, reflecting lower profitability. Revenue growth is inconsistent, with recent declines indicating potential challenges. EBIT margins are strong, suggesting efficient operations, although EBITDA margins are not applicable due to zero EBITDA reported.
Balance Sheet
85
Very Positive
The balance sheet for Heritage Financial is strong, with a zero total debt indicating no leverage risk. The equity ratio is robust, showcasing financial stability and a strong asset base. Return on equity is positive, albeit lower than previous years, suggesting some efficiency concerns. Overall, the company's balance sheet reflects solid financial health with ample equity support.
Cash Flow
70
Positive
Cash flow analysis reveals a slight decline in operating cash flow, yet free cash flow remains positive, indicating operational efficiency. Free cash flow growth is negative, reflecting challenges in maintaining cash generation levels. The operating cash flow to net income ratio is stable, but the declining free cash flow to net income ratio suggests potential pressure on liquidity.
Breakdown
Income Statement
Total Revenue
Gross Profit
EBITDA
Net Income
Balance Sheet
Total Assets
Cash, Cash Equivalents and Short-Term Investments
Total Debt
Total Liabilities
Stockholders Equity
Cash Flow
Free Cash Flow
Operating Cash Flow
Investing Cash Flow
Financing Cash Flow

Heritage Financial Technical Analysis

Technical Analysis Sentiment
Negative
Last Price23.49
Price Trends
50DMA
23.95
Negative
100DMA
23.44
Positive
200DMA
23.78
Negative
Market Momentum
MACD
>-0.01
Positive
RSI
40.36
Neutral
STOCH
21.90
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HFWA, the sentiment is Negative. The current price of 23.49 is below the 20-day moving average (MA) of 24.90, below the 50-day MA of 23.95, and below the 200-day MA of 23.78, indicating a bearish trend. The MACD of >-0.01 indicates Positive momentum. The RSI at 40.36 is Neutral, neither overbought nor oversold. The STOCH value of 21.90 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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

Overall Rating
UnderperformOutperform
Sector (68)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$943.09M9.1214.19%3.47%113.60%1224.71%
75
Outperform
$930.29M11.019.87%2.48%5.18%13.05%
72
Outperform
$824.69M13.225.92%5.48%6.49%
72
Outperform
$801.14M16.405.69%4.00%6.92%13.94%
68
Neutral
$17.09B11.269.71%3.70%11.16%-4.08%
67
Neutral
$847.87M1.26%1.78%-6.83%-131.00%
66
Neutral
$858.03M10.859.02%2.86%5.97%12.97%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
HFWA
Heritage Financial
23.49
1.25
5.62%
CFFN
Capitol Federal Financial
6.21
0.07
1.14%
UVSP
Univest Of Pennsylvania
29.71
2.26
8.23%
FMBH
First Mid-Illinois Bancshares
39.37
1.54
4.07%
AMTB
Amerant Bancorp
20.17
-1.79
-8.15%
BHRB
Burke & Herbert Bank & Company
61.58
-3.94
-6.01%

Heritage Financial Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures
Heritage Financial Reports Q2 2025 Earnings and Dividend
Neutral
Jul 24, 2025

On July 24, 2025, Heritage Financial Corporation announced its second quarter results, reporting a net income of $12.2 million, a decrease from the previous quarter’s $13.9 million. The company declared a regular quarterly cash dividend of $0.24 per share, to be paid on August 20, 2025. The quarter included a pre-tax loss of $6.9 million from the sale of investment securities as part of a strategic balance sheet repositioning, impacting earnings per share by $0.15. Despite these losses, Heritage Financial saw growth in core earnings, attributed to increased yields on loans and investment securities, and a $100 million increase in total deposits since the end of 2024. The company remains optimistic about future profitability and sustainable long-term returns for shareholders.

The most recent analyst rating on (HFWA) stock is a Buy with a $26.00 price target. To see the full list of analyst forecasts on Heritage Financial stock, see the HFWA Stock Forecast page.

Executive/Board Changes
Heritage Financial Announces New CEO Appointment
Positive
May 6, 2025

On May 6, 2025, Heritage Financial Corporation announced the completion of its CEO succession plan, with Bryan D. McDonald assuming the roles of President and CEO of both the company and Heritage Bank. This transition follows the retirement of Jeffrey J. Deuel, who will continue in an advisory role until 2027. The appointment aims to ensure a seamless leadership transition, enhancing shareholder value and maintaining the company’s focus on quality customer service and community support.

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.Date of analysis: Jul 25, 2025