Q4 Net Interest Margin Increases to 3.72%, Net Interest Income Grows 8.6%
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 22 2026
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Q4 net interest margin increased to 3.72%, an increase of 8 basis points from 3.64% for Q3. Tangible book value per share was $19.98 from $19.46 last quarter end. Common equity tier 1 capital ratio was 12.7% vs. 12.4% last quarter. CEO Bryan McDonald commented, "We are very pleased with our operating results for Q4, which included stronger profitability, deposit growth, margin expansion and lower cost of deposits. The improvement in net interest margin provided an 8.6% increase in net interest income over fourth quarter 2024 levels. This quarter showed the strength of our quality banking franchise with 29% growth in adjusted diluted earnings per share from the same period in the prior year. We remain focused on generating long-term financial results for our shareholders. We are also pleased with the progress made in completing the pending acquisition of Olympic and its subsidiary, Kitsap Bank. Having received both regulatory and shareholder approvals, we look forward to closing the transaction at the end of January and bringing together our two organizations."
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Analyst Views on HFWA
Wall Street analysts forecast HFWA stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for HFWA is 31.00 USD with a low forecast of 31.00 USD and a high forecast of 31.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
2 Analyst Rating
2 Buy
0 Hold
0 Sell
Moderate Buy
Current: 25.200
Low
31.00
Averages
31.00
High
31.00
Current: 25.200
Low
31.00
Averages
31.00
High
31.00
About HFWA
Heritage Financial Corporation is a bank holding company. The Company is primarily engaged in the business of planning, directing, and coordinating the business activities of its wholly owned subsidiary, Heritage Bank (the Bank). Its business consists primarily of commercial lending and deposit relationships with small and medium-sized businesses and their owners in its market areas and attracting deposits from the general public. It also makes real estate construction and land development loans, and consumer loans. It offers a full range of products and services to customers for personal and business banking needs designed to attract both short-term and long-term deposits. Its personal and business banking customers have the option of selecting from a variety of account types. It also offers investment advice through a wealth management department that provides objective advice from trusted advisers. The Bank conducts business from its approximately 50 branch offices.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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Heritage Financial Corporation (HFWA) Reports Q4 2025 Net Interest Margin Increase to 3.72%
- Profitability Improvement: Heritage Financial Corporation reported an 18% increase in adjusted diluted earnings per share for Q4 2025 compared to the previous quarter and a 29% increase year-over-year, reflecting successful adjustments in loan mix and net interest margin, thereby enhancing future growth potential.
- Loan and Deposit Growth: Total loan balances increased by $14 million in Q4, while total deposits rose by $63 million, primarily driven by a $100 million increase in interest-bearing demand deposits, indicating stronger customer attraction in a competitive market.
- Merger Progress: The company has secured regulatory and shareholder approval for its merger with Olympic Bancorp, expected to close by the end of January, which will further enhance profitability and strengthen its competitive position in the Puget Sound market.
- Robust Risk Management: Nonaccrual loans totaled $21 million at year-end, representing 0.44% of total loans; despite some downgrades, overall credit quality remains stable, with management expressing confidence in future credit management and risk control.
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