Heritage Financial Q2 2026 Earnings Call: Complete Transcript

Heritage Financial (NASDAQ: HFWA ) released second-quarter financial results and hosted an earnings call on Thursday.

Read the complete transcript below.

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The full earnings call is available at Summary Heritage Financial Corporation reported a net interest margin increase to 3.99% in Q2, primarily due to improved yields on the investment portfolio and decreased deposit costs.

Total loan balances increased by $26 million, driven by higher loan originations despite elevated prepayments.

The yield on the loan portfolio slightly decreased to 5.72% due to interest recovery on nonaccrual loans in Q1.

Total deposits decreased by $210 million due to seasonal tax payments and the withdrawal of short-term funds by a large depositor.

Brokered CDs decreased by $48.5 million.

The company completed a small loss trade of securities, resulting in a pretax loss of $217,000 but reinvested into higher-yielding assets.

Noninterest expenses increased due to merger-related costs, which are expected to remain elevated in Q3 before decreasing significantly in Q4.

Credit quality remains strong, with nonaccrual loans at 0.27% of total loans and low levels of net charge-offs reported.

The integration with Kitsap Bank is on track, with system conversions scheduled for late September, leading to temporarily higher expenses.

Heritage Financial anticipates mid-single-digit annualized loan growth in the upcoming quarters and expects deposit growth to align with this.

Management indicated that future net interest margin growth will be moderate, driven by asset repricing and a stable deposit cost environment.

The company repurchased 372,000 shares for $10 million and has a remaining authorization for further buybacks, contingent on market conditions.

Full Transcript Kate, Operator Thank you for standing by.

My name is Kate and I will be your conference operator today.

At this time I would like to welcome everyone to the Heritage Financial Corp 2026 Q2 earnings call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question, press star one again.

Thank you.

I would now like to turn the call over to Brian McDonald, President and CEO.

Please go ahead.

Bryan McDonald, President and Chief Executive Officer Thank you, Kate.

Welcome and good morning to everyone who called in or those who may listen later.

This is Brian McDonald, CEO of Heritage Financial Corp.

Attending with me are Don Hinson, Chief Financial Officer, and Tony Chalfant, Chief Credit Officer.

Our second quarter earnings release went out this morning pre-market and hopefully you have had the opportunity to review it prior to the call.

In addition to the earnings release, we have also posted an updated second quarter investor presentation on the investor relations portion of our corporate website which includes more detail on our deposits, loan portfolio, liquidity, and credit quality.

We will reference this presentation during the call.

As a reminder, during this call we may make forward-looking statements which are subject to economic and other factors.

Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements are disclosed within the earnings release and the investor presentation.

A couple items to highlight as we look forward: the integration with Kitsap Bank is progressing as planned.