Heritage Financial Corporation, the parent of Washington-based Heritage Bank, has reported higher year-over-year earnings and significant balance sheet growth for the first quarter of 2026, driven largely by its acquisition of Olympic Bancorp.
Net income for the first quarter was $18.9 million, up from $13.9 million a year earlier but down from $22.2 million in the fourth quarter of 2025. Diluted earnings per share were $0.48, compared with $0.40 in the first quarter of 2025 and $0.65 in the prior quarter.
“We successfully closed our strategic acquisition of Olympic Bancorp during the first quarter,” said Bryan McDonald, president and CEO. “This acquisition provides us with a stronger market position in the Puget Sound region, and has contributed to our improved profitability and net interest margin in the quarter. We are on track to complete the system conversion by the end of the third quarter 2026 at which time we will begin to recognize further cost savings, which aligns with our original timeline.”
In January, Heritage completed its all-stock acquisition of Olympic Bancorp.
The transaction added an estimated $1.55 billion of assets and $1.39 billion of deposits at fair value, along with $38.1 million of goodwill and $50.3 million of other intangible assets. The acquired loan portfolio totaled $954.3 million at the merger date, heavily weighted toward commercial and industrial lending and commercial real estate.
Total assets increased 22.0% during the quarter to $8.50 billion at March 31, 2026, from $6.97 billion at Dec. 31, 2025. Meanwhile, loans receivable rose 19.6% to $5.72 billion, and total deposits climbed 22.4% to $7.25 billion, largely reflecting the Olympic acquisition. Excluding acquired balances, deposits decreased by $60.7 million, mainly due to maturing brokered certificates of deposit.
The allowance for credit losses on loans was $60.6 million at quarter-end, or 1.06% of loans receivable, down from 1.10% three months earlier.
Heritage recorded an initial $9.3 million allowance for purchased credit deteriorated and purchased seasoned loans at acquisition. The quarter included a $0.8 million reversal of provision for credit losses on loans and a $210,000 reversal on unfunded commitments. Net charge-offs totaled $552,000.
Capital ratios remained well above regulatory “well-capitalized” thresholds. Stockholders’ equity rose 21.1% to $1.12 billion, driven mainly by shares issued in the merger and retained earnings, partly offset by dividends and other comprehensive loss. At March 31, 2026, estimated ratios included common equity tier 1 of 12.2%, a leverage ratio of 10.3% and a total capital ratio of 13.5%.
Within the Pacific Northwest regional bank peer group, Heritage’s metrics place it toward the stronger end on margin and capital, despite its smaller size.
Columbia Banking System, a much larger player with about $66 billion in assets, also reported a 3.96% net interest margin for the first quarter but did so with a higher cost of interest-bearing deposits and a similar allowance for credit losses of around 1.00% of loans. Meanwhile, WaFd, with roughly $27 billion in assets, reported a materially lower margin of about 2.8% for the same period on a higher-cost liability base.
Heritage’s allowance coverage of 1.06% and nonaccrual ratio of 0.26% of loans sit in line with, or modestly better than, many regionals of comparable risk profile, while its common equity tier 1 ratio above 12% provides a capital buffer that compares favorably with several larger peers. The combination of a strong margin, conservative credit metrics and ample liquidity suggests a relatively resilient balance sheet, even as the bank digests merger-related costs and integration risk from the Olympic transaction.
Heritage also declared a quarterly cash dividend of $0.24 per share, payable May 20 to shareholders of record on May 6.
