Heritage Financial Reports Strong Q1 Growth Post-Olympic Bancorp Acquisition
Heritage Financial Corporation, the parent company of Heritage Bank in Washington, has reported increased earnings and significant growth in its balance sheet for the first quarter of 2026. This positive performance stems largely from its recent acquisition of Olympic Bancorp, a strategic move aimed at enhancing its market presence in the Puget Sound region.
In the first quarter, Heritage achieved a net income of $18.9 million, an uptick from $13.9 million during the same period last year, though it marked a decline from the $22.2 million reported in the fourth quarter of 2025. Diluted earnings per share reached $0.48, a rise from $0.40 a year ago, but down from $0.65 in the preceding quarter, reflecting fluctuations in financial metrics post-acquisition.
Bryan McDonald, president and CEO of Heritage Financial, noted, “We successfully closed our strategic acquisition of Olympic Bancorp during the first quarter. This acquisition enhances our market position in the Puget Sound region, contributing to our improved profitability and net interest margin. We are on track to complete the system conversion by the end of the third quarter 2026, which aligns with our original timeline for achieving further cost savings.”
The acquisition, completed in January, added approximately $1.55 billion in assets and $1.39 billion in deposits at fair value. It also brought in $38.1 million in goodwill and $50.3 million in other intangible assets. The acquired loan portfolio valued at $954.3 million emphasizes commercial and industrial lending, as well as commercial real estate, indicating a strategic focus on robust lending segments.
As of March 31, 2026, Heritage reported a 22.0% rise in total assets, reaching $8.50 billion, up from $6.97 billion at the end of 2025. Loans receivable increased by 19.6% to $5.72 billion, while total deposits surged by 22.4% to $7.25 billion, primarily driven by the Olympic acquisition. Excluding these acquired balances, deposits declined by $60.7 million due to the maturity of brokered certificates of deposit.
The allowance for credit losses on loans was $60.6 million, representing 1.06% of loans receivable, slightly down from 1.10% three months prior. Heritage also noted a $9.3 million allowance related to purchased credit deteriorated loans and reversals in credit provisions, reflecting a strong risk management approach despite merger integration challenges.
Heritage's capital ratios continue to exceed regulatory "well-capitalized" thresholds, with stockholders’ equity soaring by 21.1% to $1.12 billion. Driven by shares issued during the merger and retained earnings, these figures provide a solid capital buffer. The bank declared a quarterly cash dividend of $0.24 per share, payable on May 20 to shareholders of record as of May 6, reinforcing its commitment to shareholder value in the evolving financial landscape.