Q2 2026 Heritage Financial Corp Earnings Call Transcript
Key Points
- Heritage Financial Corp (HFWA) reported an increase in net interest margin to 3.99%, reflecting improved financial performance.
- The integration with Kitsap Bank is progressing as planned, with system conversions scheduled for late September.
- Credit quality remains strong with nonaccrual loans at a low level of 0.27% of total loans.
- The company executed a strategic trade, selling $38 million of securities at a small loss to reinvest in higher-yielding securities, increasing the investment portfolio yield by 11 basis points.
- Heritage Financial Corp (HFWA) repurchased 372,000 shares of common stock totaling $10 million, indicating confidence in its financial position and commitment to returning value to shareholders.
- Total deposits decreased by $210 million in Q2, attributed to seasonal tax payments and a significant withdrawal from a single deposit relationship.
- Loan balances increased modestly by $26 million, with elevated prepayments offsetting higher loan originations.
- The cost of interest-bearing deposits decreased slightly, but future increases are expected due to competitive pressures.
- Merger-related costs remain high, with $7.5 million in Q2 and expected elevated expenses until Q4.
- Criticized loans increased by $5.5 million during the quarter, indicating some pressure on certain segments of the loan portfolio.
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 2026 Q2 earnings call. (Operator Instructions)
I would now like to turn the call over to Bryan McDonald, President and CEO. Please go ahead.
Thank you, Kate. Welcome, and good morning to everyone who called in or those who may listen later. This is Bryan McDonald, CEO of Heritage Financial. 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
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