HERITAGE FINANCIAL CORP /WA/
For the period ended Dec 31, 2025. Filed Feb 27, 2026.
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FY2025 · Filed Feb 27, 2026
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INVESTMENT ACTIVITIES OVERVIEW
Our investment policy is established by the Board and monitored by the Risk Committee of the Board. It is designed primarily to provide and maintain liquidity, generate a favorable return on investments without incurring undue interest rate and credit risk, and complements the Company's lending activities. The policy permits investment in various types of liquid assets permissible under applicable regulations. Investment in sub-investment grade bonds is not permitted under the policy.
The following table provides information regarding our investment securities at the dates indicated:
| December 31, 2025 · December 31, 2024 · Change | ||||||
|---|---|---|---|---|---|---|
| Balance | % ofTotal | Balance | % ofTotal | $ | % | |
| (Dollars in thousands) | ||||||
| Investment securities available for sale, at fair value: | ||||||
| U.S. government and agency securities | $11,702 | 0.9% | $12,544 | 0.9% | $(842) | (6.7)% |
| Municipal securities | 51,423 | 4.0 | 50,942 | 3.5 | 481 | 0.9 |
| Residential CMO and MBS(1) | 275,268 | 21.5 | 369,331 | 25.2 | (94,063) | (25.5) |
| Commercial CMO and MBS(1) | 252,164 | 19.7 | 309,741 | 21.0 | (57,577) | (18.6) |
| Corporate obligations | 10,532 | 0.8 | 11,770 | 0.8 | (1,238) | (10.5) |
| Other asset-backed securities | 6,433 | 0.5 | 10,066 | 0.7 | (3,633) | (36.1) |
| Total | 607,522 | 47.4 | 764,394 | 52.1 | (156,872) | (20.5) |
| December 31, 2025 · December 31, 2024 · Change | ||||||
|---|---|---|---|---|---|---|
| Balance | % ofTotal | Balance | % ofTotal | $ | % | |
| (Dollars in thousands) | ||||||
| Investment securities held to maturity, at amortized cost: | ||||||
| U.S. government and agency securities | $151,319 | 11.8% | $151,216 | 10.3% | $103 | 0.1 |
| Residential CMO and MBS(1) | 217,707 | 17.0 | 244,309 | 16.6 | (26,602) | (10.9) |
| Commercial CMO and MBS(1) | 305,081 | 23.8 | 307,760 | 21.0 | (2,679) | (0.9) |
| Total | 674,107 | 52.6 | 703,285 | 47.9 | (29,178) | (4.1) |
| Total investment securities | $1,281,629 | 100.0% | $1,467,679 | 100.0% | $(186,050) | (12.7)% |
(1)U.S. government agency and government-sponsored enterprise CMO and MBS obligations.
Total investment securities decreased $186.1 million to $1.28 billion at December 31, 2025 from $1.47 billion at December 31, 2024 due to sales of investment securities available for sale in connection with a strategic repositioning of the Company's investment portfolio, as well as maturities and repayments of $153.8 million, offset partially by purchases of investment securities available for sale.
During the year ended December 31, 2025, the Company incurred a pre-tax loss of $10.7 million on the sale of investment securities available for sale due to the aforementioned strategic repositioning of its investment portfolio. The Company sold $152.4 million in investment securities with an estimated weighted average book yield of 2.62% and purchased $88.2 million of investment securities with an estimated weighted average book yield of 4.89%. The remaining proceeds were used for other balance sheet initiatives such as the funding of higher yielding loan growth.
The following table provides the weighted average yield of the Company's investment portfolio at December 31, 2025 calculated based upon the fair values of our investment securities available for sale and held to maturity, and excluding any income tax benefits of tax-exempt bonds:
| In one year or less | After one year through five years | After five years through ten years | After ten years | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Fair Value | Yield | Fair Value | Yield | Fair Value | Yield | Fair Value | Yield | Fair Value | Yield | |
| (Dollars in thousands) | ||||||||||
| Investment securities available for sale: | ||||||||||
| U.S. government and agency securities | $— | —% | $4,868 | 3.04% | $6,834 | 2.32% | $— | —% | $11,702 | 2.59% |
| Municipal securities | 571 | 5.81 | 3,781 | 4.16 | 21,813 | 3.36 | 25,258 | 2.58 | 51,423 | 3.03 |
| Residential CMO and MBS(1) | 6 | 1.93 | — | — | 25,708 | 4.07 | 249,554 | 3.42 | 275,268 | 3.48 |
| Commercial CMO and MBS(1) | 12,647 | 3.46 | 133,831 | 4.13 | 96,477 | 2.44 | 9,209 | 4.64 | 252,164 | 3.44 |
| Corporate obligations | — | — | — | — | 10,532 | 6.33 | — | — | 10,532 | 6.33 |
| Other asset-backed securities | — | — | — | — | — | — | 6,433 | 5.11 | 6,433 | 5.11 |
| Total | $13,224 | 3.56% | $142,480 | 4.10% | $161,364 | 3.04% | $290,454 | 3.41% | $607,522 | 3.47% |
| Investment securities held to maturity: | ||||||||||
| U.S. government and agency securities | $— | —% | $— | —% | $90,246 | 2.14% | $40,203 | 2.12% | $130,449 | 2.13% |
| Residential CMO and MBS(1) | — | — | — | — | 29,197 | 3.27 | 179,890 | 4.03 | 209,087 | 3.92 |
| Commercial CMO and MBS(1) | — | — | 168,589 | 2.88 | 104,291 | 1.77 | 12,871 | 3.52 | 285,751 | 2.49 |
| Total | $— | —% | $168,589 | 2.88% | $223,734 | 2.10% | $232,964 | 3.62% | $625,287 | 2.87% |
(1)U.S. government agency and government-sponsored enterprise CMO and MBS obligations.
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