HERITAGE FINANCIAL CORP /WA/
For the period ended Sep 30, 2025. Filed Nov 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 7, 2025
Extracted filing text, with the paragraph anchors used by the comparison.
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NET INTEREST INCOME AND MARGIN OVERVIEW
Net Interest Income and Margin
One of the Company's key sources of revenue is net interest income. Several factors affect net interest income, including, but not limited to: the volume, pricing, mix and maturity of interest earning assets and interest bearing liabilities; the volume of noninterest earning assets, noninterest bearing demand deposits, other noninterest bearing liabilities and stockholders' equity; market interest rate fluctuations; and asset quality.
The following table provides net interest income information for the periods indicated:
| Three Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · Change | |||||||||||
| AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) | |||||||||||
| (Dollars in thousands) | |||||||||||
| Interest Earning Assets: | |||||||||||
| Loans receivable (2)(3) | $4,762,648 | $66,422 | 5.53% | $4,606,856 | $64,138 | 5.54% | $155,792 | $2,284 | (0.01)% | ||
| Taxable securities | 1,314,374 | 11,102 | 3.35 | 1,604,529 | 13,472 | 3.34 | (290,155) | (2,370) | 0.01 | ||
| Nontaxable securities (3) | 15,242 | 138 | 3.59 | 17,482 | 159 | 3.62 | (2,240) | (21) | (0.03) | ||
| Interest earning deposits | 166,182 | 1,846 | 4.41 | 150,384 | 2,048 | 5.42 | 15,798 | (202) | (1.01) | ||
| Total interest earning assets | 6,258,446 | 79,508 | 5.04% | 6,379,251 | 79,817 | 4.98% | (120,805) | (309) | 0.06% | ||
| Noninterest earning assets | 747,694 | 803,670 | (55,976) | ||||||||
| Total assets | $7,006,140 | $7,182,921 | $(176,781) | ||||||||
| Interest Bearing Liabilities: | |||||||||||
| Certificates of deposit | $955,737 | $8,822 | 3.66% | $906,743 | $10,052 | 4.41% | $48,994 | $(1,230) | (0.75)% | ||
| Savings accounts | 428,256 | 296 | 0.27 | 445,926 | 220 | 0.20 | (17,670) | 76 | 0.07 | ||
| Three Months Ended September 30, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · Change | |||||||||||||||
| AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||
| Interest bearing demand and money market accounts | 2,833,048 | 11,003 | 1.54 | 2,644,827 | 9,984 | 1.50 | 188,221 | 1,019 | 0.04 | ||||||
| Total interest bearing deposits | 4,217,041 | 20,121 | 1.89 | 3,997,496 | 20,256 | 2.02 | 219,545 | (135) | (0.13) | ||||||
| Junior subordinated debentures | 22,239 | 474 | 8.46 | 21,946 | 541 | 9.81 | 293 | (67) | (1.35) | ||||||
| Borrowings | 136,582 | 1,542 | 4.48 | 452,364 | 6,062 | 5.33 | (315,782) | (4,520) | (0.85) | ||||||
| Total interest bearing liabilities | 4,375,862 | 22,137 | 2.01% | 4,471,806 | 26,859 | 2.39% | (95,944) | (4,722) | (0.38)% | ||||||
| Noninterest bearing demand deposits | 1,625,945 | 1,677,984 | (52,039) | ||||||||||||
| Other noninterest bearing liabilities | 112,053 | 175,332 | (63,279) | ||||||||||||
| Stockholders’ equity | 892,280 | 857,799 | 34,481 | ||||||||||||
| Total liabilities and stock-holders’ equity | $7,006,140 | $7,182,921 | $(176,781) | ||||||||||||
| Net interest income and spread | $57,371 | 3.03% | $52,958 | 2.59% | $4,413 | 0.44% | |||||||||
| Net interest margin | 3.64% | 3.30% | 0.34% | ||||||||||||
(1) Average balances are calculated using daily balances. Average yield/rate is annualized.
(2) Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $1,054,000 and $938,000 for the three months ended September 30, 2025 and 2024, respectively.
(3)Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
The following table provides the changes in net interest income for the three months ended September 30, 2025 compared to the same period in 2024, due to changes in average asset and liability balances (volume), changes in average yields/rates (rate) and changes attributable to the combined effect of volume and rates allocated proportionately to the absolute value of changes due to volume and changes due to rates:
| Increase (Decrease) Due to Changes In: | |||
|---|---|---|---|
| Volume | Yield/Rate | Total | |
| (Dollars in thousands) | |||
| Interest Earning Assets: | |||
| Loans receivable | $2,173 | $111 | $2,284 |
| Taxable securities | (2,451) | 81 | (2,370) |
| Nontaxable securities | (20) | (1) | (21) |
| Interest earning deposits | 200 | (402) | (202) |
| Total interest income | $(98) | $(211) | $(309) |
| Interest Bearing Liabilities: | |||
| Certificates of deposit | $521 | $(1,751) | $(1,230) |
| Savings accounts | (9) | 85 | 76 |
| Interest bearing demand and money market accounts | 725 | 294 | 1,019 |
| Total interest bearing deposits | 1,237 | (1,372) | (135) |
| Junior subordinated debentures | 7 | (74) | (67) |
| Borrowings | (3,688) | (832) | (4,520) |
| Total interest expense | $(2,444) | $(2,278) | $(4,722) |
| Net interest income | $2,346 | $2,067 | $4,413 |
Net interest income increased $4.4 million, or 8.3%, to $57.4 million for the three months ended September 30, 2025, compared to $53.0 million for the same period in 2024, due primarily to a $4.7 million decrease in total interest expense.
Total interest income decreased to $79.5 million for the three months ended September 30, 2025, compared to $79.8 million for the same period in 2024. The decrease was primarily due to a $2.4 million decrease in interest income on investment securities and a $0.2 million decrease in interest income on interest earning deposits, offset partially by a $2.3 million increase in interest income on loans receivable during the three months ended September 30, 2025, compared to the same period in 2024.
Interest income on securities decreased due to a decrease in the average balance of investment securities as of result of investment sales, maturities and repayments. Average balances of taxable securities decreased $290.2 million to $1.31 billion during the three months ended September 30, 2025, compared to $1.60 billion during the same period in 2024.
Interest income on loans receivable increased due to increases in the average outstanding balance of those assets. The average balance of loans receivable increased $155.8 million to $4.76 billion during the three months ended September 30, 2025, compared to $4.61 billion for the same period in 2024.
Total interest expense decreased to $22.1 million during the three months ended September 30, 2025, compared to $26.9 million for the same period in 2024. The decrease was due primarily to a $4.5 million decrease in interest expense on borrowings. The decrease in borrowing expense was due primarily to a $315.8 million decrease in the average balance of outstanding borrowings to $136.6 million during the three months ended September 30, 2025, compared to $452.4 million for the same period in 2024 and secondarily due to an 85 basis point decrease on the average rate to 4.48% for the three months ended September 30, 2025, compared to 5.33% for the same period in 2024.
Net interest margin increased 34 basis points to 3.64% for the three months ended September 30, 2025, compared to 3.30% for the same period in 2024.
Comparison of nine months ended September 30, 2025 to the comparable period in the prior year
The following table provides net interest income information for the periods indicated:
| Nine Months Ended September 30, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 · 2024 · Change | |||||||||||||||||
| AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate(1) · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate · AverageBalance(1) · InterestEarned/Paid · AverageYield/Rate | |||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Interest Earning Assets: | |||||||||||||||||
| Loans receivable (2)(3) | $4,774,926 | $196,231 | 5.49% | $4,475,642 | $182,608 | 5.45% | $299,284 | $13,623 | 0.04% | ||||||||
| Taxable securities | 1,371,957 | 34,420 | 3.35 | 1,699,995 | 42,462 | 3.34 | (328,038) | (8,042) | 0.01 | ||||||||
| Nontaxable securities (3) | 15,406 | 414 | 3.59 | 19,193 | 505 | 3.51 | (3,787) | (91) | 0.08 | ||||||||
| Interest earning deposits | 130,253 | 4,309 | 4.42 | 126,970 | 5,177 | 5.45 | 3,283 | (868) | (1.03) | ||||||||
| Total interest earning assets | 6,292,542 | 235,374 | 5.00% | 6,321,800 | 230,752 | 4.88% | (29,258) | 4,622 | 0.12% | ||||||||
| Noninterest earning assets | 759,206 | 805,790 | (46,584) | ||||||||||||||
| Total assets | $7,051,748 | $7,127,590 | $(75,842) | ||||||||||||||
| Interest Bearing Liabilities: | |||||||||||||||||
| Certificates of Deposit | $971,933 | $27,841 | 3.83% | $826,575 | $26,852 | 4.34% | $145,358 | $989 | (0.51)% | ||||||||
| Savings accounts | 426,767 | 877 | 0.27 | 457,989 | 640 | 0.19 | (31,222) | 237 | 0.08 | ||||||||
| Interest bearing demand and money market accounts | 2,770,162 | 31,042 | 1.50 | 2,643,478 | 27,605 | 1.39 | 126,684 | 3,437 | 0.11 | ||||||||
| Total interest bearing deposits | 4,168,862 | 59,760 | 1.92 | 3,928,042 | 55,097 | 1.87 | 240,820 | 4,663 | 0.05 | ||||||||
| Junior subordinated debentures | 22,164 | 1,417 | 8.55 | 21,874 | 1,627 | 9.94 | 290 | (210) | (1.39) | ||||||||
| Borrowings | 233,504 | 8,153 | 4.67 | 484,300 | 18,427 | 5.08% | (250,796) | (10,274) | (0.41) | ||||||||
| Total interest bearing liabilities | 4,424,530 | 69,330 | 2.10% | 4,434,216 | 75,151 | 2.26% | (9,686) | (5,821) | (0.16)% | ||||||||
| Noninterest bearing demand deposits | 1,620,047 | 1,657,867 | (37,820) | ||||||||||||||
| Other noninterest bearing liabilities | 127,505 | 186,081 | (58,576) | ||||||||||||||
| Stockholders’ equity | 879,666 | 849,426 | 30,240 | ||||||||||||||
| Total liabilities and stock-holders’ equity | $7,051,748 | $7,127,590 | $(75,842) | ||||||||||||||
| Net interest income and spread | $166,044 | 2.90% | $155,601 | 2.62% | $10,443 | 0.28% | |||||||||||
| Net interest margin | 3.53% | 3.29% | 0.24% | ||||||||||||||
(1) Average balances are calculated using daily balances. Average yield/rate is annualized.
(2) Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $2.7 million and $2.7 million for the nine months ended September 30, 2025 and 2024, respectively.
(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
The following table provides the changes in net interest income for the nine months ended September 30, 2025 compared to the same period in 2024, due to changes in average asset and liability balances (volume), changes in average yields/rates (rate) and changes attributable to the combined effect of volume and rates allocated proportionately to the absolute value of changes due to volume and changes due to rates:
| Increase (Decrease) Due to Changes In: | |||
|---|---|---|---|
| Volume | Yield/Rate | Total | |
| (Dollars in thousands) | |||
| Interest Earning Assets: | |||
| Loans receivable | $12,292 | $1,331 | $13,623 |
| Taxable securities | (8,229) | 187 | (8,042) |
| Nontaxable securities | (102) | 11 | (91) |
| Interest earning deposits | 131 | (999) | (868) |
| Total interest income | $4,092 | $530 | $4,622 |
| Interest Bearing Liabilities: | |||
| Certificates of deposit | $4,388 | $(3,399) | $989 |
| Savings accounts | (47) | 284 | 237 |
| Interest bearing demand and money market accounts | 1,361 | 2,076 | 3,437 |
| Total interest bearing deposits | 5,702 | (1,039) | 4,663 |
| Junior subordinated debentures | 22 | (232) | (210) |
| Borrowings | (8,865) | (1,409) | (10,274) |
| Total interest expense | $(3,141) | $(2,680) | $(5,821) |
| Net interest income | $7,233 | $3,210 | $10,443 |
Net interest income increased $10.4 million, or 6.7%, to $166.0 million for the nine months ended September 30, 2025, compared to $155.6 million for the same period in 2024, due primarily to an increase in total interest income and a decrease in total interest expense.
Total interest income increased $4.6 million, or 2.0%, to $235.4 million for the nine months ended September 30, 2025, compared to $230.8 million for the same period in 2024. The increase was primarily due to a $13.6 million increase in interest income on loans receivable, offset partially by an $8.1 million decrease in interest income on investment securities and a $0.9 million decrease in interest income on interest earning deposits during the nine months ended September 30, 2025, compared to the same period in 2024. Interest income on loans receivable increased due to increases in both the average yield earned on and the average outstanding balance of those assets. The average yield earned on loans receivable increased 4 basis points to 5.49% and the average balance of loans receivable increased $299.3 million to $4.77 billion during the nine months ended September 30, 2025, compared to $4.48 billion for the same period in 2024.
Interest income on investment securities decreased $8.1 million due primarily to a decrease in average balances as a result of investment sales, maturities and repayments. Average balances on taxable securities decreased $328.0 million to $1.37 billion during the nine months ended September 30, 2025, compared to $1.70 billion during the same period in 2024. Interest income on interest earning deposits decreased $0.9 million due primarily to a 103 basis point decrease in the yield earned on interest earning deposits to 4.42%, compared to 5.45% during the same period in 2024, as a result of decreases in market rates.
Total interest expense decreased $5.8 million, or 7.7%, to $69.3 million during the nine months ended September 30, 2025, compared to $75.2 million for the same period in 2024. The decrease was due primarily to a $10.3 million decrease in interest expense on borrowings, offset by a $4.7 million increase in interest expense on interest bearing deposits during the nine months ended September 30, 2025, compared to the same period in 2024. The decrease in borrowing expense was due primarily to a $250.8 million decrease in the average balance of outstanding borrowings to $233.5 million during the nine months ended September 30, 2025, compared to $484.3 million for the same period in 2024, and secondarily due to a 41 basis point decrease on the average rate to 4.67% for the nine months ended September 30, 2025, compared to 5.08% for the same period in 2024.
The increase in interest expense on interest bearing deposits was due primarily to a $240.8 million increase in the average balance of interest bearing accounts to $4.17 billion during the nine months ended September 30, 2025, compared to $3.93 billion for the same period in 2024, and a 11 basis point increase on the average rate of interest bearing demand and money market accounts to 1.50% for the nine months ended September 30, 2025, compared to 1.39% for the same period in 2024, due to competitive rate pressures. The increase was partially offset by a 51 basis point decline on the average rate of certificates of deposits to 3.83% for the nine months ended September 30, 2025, compared to 4.34% for the same period in 2024, due to repricing of certificates of deposits at lower rates.
Net interest margin increased 24 basis points to 3.53% for the nine months ended September 30, 2025, compared to 3.29% for the same period in 2024.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.