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 SECURITIES
(2)Investment Securities
The Company’s investment policy is designed primarily to provide and maintain liquidity, generate a favorable return on assets without incurring undue interest rate and credit risk and complement the Company’s lending activities.
There wereno investment securities classified as trading at December 31, 2025 or December 31, 2024.
(a) Investment Securities by Classification, Type and Maturity
The following tables present the amortized cost and fair value of investment securities and the corresponding amounts of gross unrealized and unrecognized gains and losses, including the corresponding amounts of gross unrealized gains and losses on investment securities available for sale recognized in AOCI, at the dates indicated:
| December 31, 2025 | ||||
|---|---|---|---|---|
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |
| (Dollars in thousands) | ||||
| Investment securities available for sale: | ||||
| U.S. government and agency securities | $13,276 | $— | $(1,574) | $11,702 |
| Municipal securities | 59,355 | 22 | (7,954) | 51,423 |
| Residential CMO and MBS(1) | 297,010 | 1,298 | (23,040) | 275,268 |
| Commercial CMO and MBS(1) | 260,953 | 917 | (9,706) | 252,164 |
| Corporate obligations | 10,500 | 72 | (40) | 10,532 |
| Other asset-backed securities | 6,411 | 30 | (8) | 6,433 |
| Total | $647,505 | $2,339 | $(42,322) | $607,522 |
| December 31, 2025 | ||||
|---|---|---|---|---|
| AmortizedCost | GrossUnrecognizedGains | GrossUnrecognizedLosses | FairValue | |
| (Dollars in thousands) | ||||
| Investment securities held to maturity: | ||||
| U.S. government and agency securities | $151,319 | $— | $(20,870) | $130,449 |
| Residential CMO and MBS(1) | 217,707 | 303 | (8,923) | 209,087 |
| Commercial CMO and MBS(1) | 305,081 | 22 | (19,352) | 285,751 |
| Total | $674,107 | $325 | $(49,145) | $625,287 |
| December 31, 2024 | ||||
|---|---|---|---|---|
| AmortizedCost | GrossUnrealizedGains | GrossUnrealizedLosses | FairValue | |
| (Dollars in thousands) | ||||
| Investment securities available for sale: | ||||
| U.S. government and agency securities | $14,934 | $— | $(2,390) | $12,544 |
| Municipal securities | 61,169 | 12 | (10,239) | 50,942 |
| Residential CMO and MBS(1) | 407,520 | 711 | (38,900) | 369,331 |
| Commercial CMO and MBS(1) | 330,249 | 134 | (20,642) | 309,741 |
| Corporate obligations | 11,700 | 181 | (111) | 11,770 |
| Other asset-backed securities | 10,020 | 47 | (1) | 10,066 |
| Total | $835,592 | $1,085 | $(72,283) | $764,394 |
| December 31, 2024 | ||||
|---|---|---|---|---|
| AmortizedCost | GrossUnrecognizedGains | GrossUnrecognizedLosses | FairValue | |
| (Dollars in thousands) | ||||
| Investment securities held to maturity: | ||||
| U.S. government and agency securities | $151,216 | $— | $(28,874) | $122,342 |
| Residential CMO and MBS(1) | 244,309 | — | (18,563) | 225,746 |
| Commercial CMO and MBS(1) | 307,760 | 27 | (32,423) | 275,364 |
| Total | $703,285 | $27 | $(79,860) | $623,452 |
The following table presents the amortized cost and fair value of investment securities by contractual maturity at the date indicated. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
| December 31, 2025 | ||||
|---|---|---|---|---|
| Securities Available for Sale | Securities Held to Maturity | |||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |
| (Dollars in thousands) | ||||
| Due in one year or less | $570 | $570 | $— | $— |
| Due after one year through five years | 8,797 | 8,650 | — | — |
| Due after five years through ten years | 42,839 | 39,179 | 101,562 | 90,246 |
| Due after ten years | 30,925 | 25,258 | 49,757 | 40,203 |
| Total investment securities due at a single maturity date | 83,131 | 73,657 | 151,319 | 130,449 |
| MBS and Other asset-backed securities(1) | 564,374 | 533,865 | 522,788 | 494,838 |
| Total investment securities | $647,505 | $607,522 | $674,107 | $625,287 |
(1)MBS and Other asset-backed securities, which have prepayment provisions, are not assigned to maturity categories due to fluctuations in their payment speed.
There wereno holdings of investment securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders’ equity, at December 31, 2025 and December 31, 2024.
(b)Unrealized Losses on Investment Securities Available for Sale
The following tables present the gross unrealized losses and fair value of the Company’s investment securities available for sale for which an ACL on investment securities available for sale has not been recorded, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position at the dates indicated:
| December 31, 2025 | ||||||
|---|---|---|---|---|---|---|
| Less than 12 Months | 12 Months or Longer | Total | ||||
| FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | |
| (Dollars in thousands) | ||||||
| U.S. government and agency securities | $— | $— | $11,702 | $(1,574) | $11,702 | $(1,574) |
| Municipal securities(1) | 1,241 | — | 45,785 | (7,954) | 47,026 | (7,954) |
| Residential CMO and MBS(2) | 2,330 | (9) | 169,621 | (23,031) | 171,951 | (23,040) |
| Commercial CMO and MBS(2) | 6,881 | (7) | 152,683 | (9,699) | 159,564 | (9,706) |
| Corporate obligations | — | — | 3,960 | (40) | 3,960 | (40) |
| Other asset-backed securities | 1,397 | (8) | — | — | 1,397 | (8) |
| Total | $11,849 | $(24) | $383,751 | $(42,298) | $395,600 | $(42,322) |
(1) The unrealized loss on municipal securities in a continuous unrealized loss position less than 12 months was less than one thousand dollars.
(2)U.S. government agency and government-sponsored enterprise CMO and MBS.
| December 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Less than 12 Months | 12 Months or Longer | Total | ||||
| FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | |
| (Dollars in thousands) | ||||||
| U.S. government and agency securities | $— | $— | $12,544 | $(2,390) | $12,544 | $(2,390) |
| Municipal securities | — | — | 45,157 | (10,239) | 45,157 | (10,239) |
| Residential CMO and MBS(1) | 25,126 | (321) | 232,903 | (38,579) | 258,029 | (38,900) |
| Commercial CMO and MBS(1) | 17,772 | (86) | 270,897 | (20,556) | 288,669 | (20,642) |
| Corporate obligations | — | — | 3,890 | (111) | 3,890 | (111) |
| December 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Less than 12 Months | 12 Months or Longer | Total | ||||
| FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | FairValue | UnrealizedLosses | |
| Other asset-backed securities | 1,568 | (1) | — | — | 1,568 | (1) |
| Total | $44,466 | $(408) | $565,391 | $(71,875) | $609,857 | $(72,283) |
(c)ACL on Investment Securities
The Company evaluated investment securities available for sale as of December 31, 2025 and December 31, 2024 and determined that any declines in fair value were attributable to changes in interest rates relative to where these investments fall within the yield curve and individual characteristics. Management monitors published credit ratings for adverse changes for all rated investment securities and none of these securities had a below investment grade credit rating as of both December 31, 2025 and December 31, 2024. In addition, the Company does not intend to sell these securities nor does the Company consider it more likely than not that it will be required to sell these securities before the recovery of the amortized cost basis, which may be upon maturity. Therefore, no ACL on investment securities available for sale was recorded as of December 31, 2025 or December 31, 2024.
The Company also evaluated investment securities held to maturity for current expected credit losses as of December 31, 2025 and December 31, 2024. There wereno investment securities held to maturity classified as nonaccrual or past due as of December 31, 2025 or December 31, 2024 and all were issued by the U.S. government and its agencies and either explicitly or implicitly guaranteed by the U.S. government, highly rated by major credit rating agencies and had a long history of no credit losses. Accordingly, the Company did not measure expected credit losses on investment securities held to maturity since the historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Therefore, no ACL on investment securities held to maturity was recorded as of December 31, 2025 or December 31, 2024.
(d) Realized Gains and Losses
The following table presents the gross realized gains and losses on the sale of investment securities available for sale determined using the specific identification method for the dates indicated:
| Year ended December 31, | |||
|---|---|---|---|
| 2025 | 2024 | 2023 | |
| (Dollars in thousands) | |||
| Gross realized gains | $— | $— | $36 |
| Gross realized losses | (10,741) | (22,742) | (12,267) |
| Net realized gains/(losses) | $(10,741) | $(22,742) | $(12,231) |
(e) Pledged Securities
The following table summarizes the amortized cost and fair value of investment securities that were pledged as collateral for the following obligations at the dates indicated:
| December 31, 2025 | December 31, 2024 | |||
|---|---|---|---|---|
| AmortizedCost | FairValue | AmortizedCost | FairValue | |
| (Dollars in thousands) | ||||
| State and local governments public deposits | $224,069 | $216,012 | $236,047 | $220,104 |
| FRB | 395,364 | 358,480 | 434,534 | 373,410 |
| Other securities pledged | 55,291 | 51,349 | 53,296 | 48,169 |
| Total | $674,724 | $625,841 | $723,877 | $641,683 |
(f) Accrued Interest Receivable
Accrued interest receivable excluded from theamortized cost of investment securities available for sale totaled $2.2 million and $2.7 million at December 31, 2025 and December 31, 2024, respectively. Accrued interest receivable excluded from theamortized cost on investment securities held to maturity totaled $2.2 million at December 31, 2025 and December 31, 2024.
No amounts of accrued interest receivable on investment securities available for sale or held to maturity were reversed against interest income on investment securities during the years ended December 31, 2025, 2024, and 2023.
(g) Non-Marketable Securities
At December 31, 2022, as a member bank of Visa U.S.A., the Company held 6,549 shares of Visa Inc. Class B common stock. These shares had a carrying value of zero and were restricted from resale to non-member banks of Visa U.S.A. until their conversion into Class A (voting) shares upon the termination of Visa Inc.'s Covered Litigation escrow account. During the year ended December 31, 2023, the Company sold all of its shares of Visa Inc. Class B common stock and recognized a $1.6 million gain which was included in "Other income" in the Consolidated Statements of Income.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.