Heritage Financial (HFWA) Stock Forecast & Price Target

Heritage Financial Corp demonstrated a positive financial trajectory with a 1.7% increase in net interest income (NII) quarter-over-quarter, reaching $58.4 million, surpassing forecasts, and marking the sixth consecutive quarter of net interest margin (NIM) expansion to 3.72%. The outlook for net loan growth appears promising as economic conditions normalize following significant payoffs, with anticipated return on assets (ROA) and return on tangible common equity (ROTCE) approaching 1.30% and 14% respectively by year-end, showcasing superior credit quality relative to peers. Furthermore, the upward revision of the 2026 EPS estimate to $2.50, representing a 16% year-over-year increase, reinforces the bank's robust growth potential, particularly with the anticipated close of the Olympic transaction.

Heritage Financial Corp has experienced a notable decline in total borrowings, decreasing by $118.0 million quarter-over-quarter, resulting in borrowings of only $20.0 million. Additionally, the company reported a 4.1% drop in noninterest income, falling short of expectations, which raises concerns about its revenue generation capabilities. Furthermore, the potential for significant economic deterioration in the Pacific Northwest and associated risks, such as home price depreciation and a worsening employment situation, pose severe threats to the company’s credit quality and overall financial stability.