Jeffrey Rulis • D.A. Davidson & Co.

Question 1

Jeffrey Rulis's questions to Heritage Financial Corp (HFWA) leadership • Q2 2025

Jul 24, 2025

Question

Jeffrey Rulis of D.A. Davidson & Co. inquired about the securities loss trade, including its earn-back period and margin impact, the potential for future balance sheet restructuring, capital deployment priorities like buybacks and M&A, and the drivers behind the recent increase in credit downgrades.

Answer

EVP & CFO Donald Hinson detailed a roughly three-year earn-back for the Q2 trade and stated future trades depend on market conditions. He also noted buyback activity was opportunistic. President & CEO Bryan D. McDonald commented that organic loan growth is strong but offset by payoffs, and that the bank remains active in M&A conversations. EVP & Chief Credit Officer Tony Chalfant clarified that credit normalization, not a change in review aggressiveness, drove the downgrades.

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Question 2

Jeffrey Rulis's questions to Banner Corp (BANR) leadership • Q2 2025

Jul 17, 2025

Question

Jeffrey Rulis sought clarification on the expected Q3 loan growth 'pullback,' asking if it meant a slower pace or a net decline. He also asked about the net interest margin outlook given several positive drivers and questioned which loan categories contributed to the increase in nonperforming assets.

Answer

EVP & Chief Credit Officer Jill Rice clarified the 'pullback' refers to a moderation from Q2's 9% annualized growth rate, not a net loan decline, consistent with seasonal trends. EVP & CFO Rob Butterfield confirmed a positive margin outlook, expecting loan yields to rise 4-5 bps per quarter and funding costs to potentially decrease with seasonal deposit inflows. Jill Rice specified that the increase in nonperforming assets was almost exclusively from 1-4 family residential mortgages, while recent credit downgrades were more concentrated in the agricultural sector.