Heritage Financial reports $18.7 million Q3 net income, declares $0.25 dividend

Heritage Financial Corporation reported net income of $18.7 million for the third quarter of 2026, a figure that represents $0.46 per diluted share. The company also declared a regular cash dividend of $0.25 per share on October 21, 2026. These results followed the completion of the core conversion for Kitsap Bank customers, a process that concluded after the acquisition of Olympic Bancorp, Inc. closed on January 31, 2026.

The bank recognized $5.2 million in merger-related expenses during the quarter due to the core conversion and the closure of two branches. Bryan McDonald, President and Chief Executive Officer, stated that the company is pleased with the continued improvement in net interest margin and growth in loans and deposits. McDonald noted that the successful conversion of Kitsap Bank customers to the Heritage Bank system is an important step toward realizing full cost savings from the merger and operating with improved efficiency.

Net interest income increased by $2.4 million, or 3.3%, from the prior quarter, which annualizes to a 13.0% increase. The net interest margin rose to 4.05%, up 6 basis points from 3.99% in the second quarter of 2026. The yield on loans increased to 5.76%, while the cost of interest-bearing deposits decreased to 1.65% from 1.67% in the previous quarter.

Loans receivable grew by $133.5 million, or 2.3%, as of September 30, 2026. This growth was driven by new loans funded during the quarter totaling $255.4 million, an increase from $162.2 million in the second quarter of 2026. The increase was partially offset by higher loan prepayments of $133.7 million and payoffs of $73.4 million compared to the prior quarter.

Total deposits increased by $148.2 million, or 2.1%. The loan-to-deposit ratio remained stable at 81.8%, compared to 81.7% in the second quarter of 2026.

The company also approved a new stock repurchase program authorizing the buyback of up to 5% of its outstanding shares, or approximately 2.0 million shares. Adjusted diluted earnings per share were $0.55 for the third quarter, down from $0.57 in the second quarter of 2026.