Heritage Financial (NASDAQ: HFWA) expands buyback to 5% as net income rises

What happened

Heritage Financial Corporation (NASDAQ: HFWA) reported third quarter 2026 net income of $18.7 million on October 22, 2026. Diluted earnings per share were $0.46. Adjusted diluted earnings per share were $0.55, down from $0.57 in the second quarter of 2026.

Net interest income increased $2.4 million, or 3.3%, from the prior quarter. Net interest margin rose six basis points to 4.05% from 3.99%. The company also declared a regular cash dividend of $0.25 per share on October 21, 2026 and approved a new stock repurchase program for up to 5% of outstanding shares, or about 2.0 million shares.

During the quarter, Heritage completed the core conversion of customer accounts at Kitsap Bank after the Olympic Bancorp acquisition. Merger-related expenses were $5.2 million.

Key numbers

Metric	Latest	Change	Source
Net income	$18.72 million	from $19.17 million, -$0.45 million	SEC 8-K earnings release
Diluted EPS	$0.46	from $0.55, -$0.09	SEC 8-K earnings release
New loans funded	$255.4 million	from $174.5 million, +80.9 million	SEC 8-K earnings release
Net interest margin	4.05%	from 3.64%, +0.41 percentage points	SEC 8-K earnings release
Loans receivable	$5.88 billion	from $4.77 billion, +1.11 billion	SEC 8-K earnings release
Total deposits	$7.19 billion	from $5.86 billion, +1.33 billion	SEC 8-K earnings release

Read more: Heritage Financial (HFWA) stock analysis and investment case

Why it matters

Net income rose $1.17 million from the second quarter. Loans receivable increased $133.5 million to $5.88 billion, and deposits increased $148.2 million to $7.19 billion. New loans funded rose to $255.4 million from $162.2 million. Net interest margin widened to 4.05% from 3.99% as loan yield rose and the cost of interest bearing deposits fell.

OptimistFi's case is that Heritage can keep low-cost, stable funding and disciplined credit quality. This filing supports the funding side with deposit growth and a wider margin. But the earnings picture was mixed because adjusted diluted EPS slipped and nonaccrual loans rose to $32.1 million from $15.5 million. Nonaccrual loans were 0.55% of loans receivable at September 30, 2026, versus 0.27% at June 30, 2026.

Total liquidity sources available were $3.25 billion, equal to 45.2% of total deposits and 114.2% of estimated uninsured deposits.

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What's next

The dividend is payable on November 18, 2026 to shareholders of record as of November 4, 2026. Heritage Financial will discuss third-quarter results on Thursday, October 22, 2026 at 9:00 a.m. Pacific time, with replay available through November 5, 2026. If management shows deposits and margin holding, that would support the thesis. Another rise in nonaccrual loans would weaken it.

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