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FOR IMMEDIATE RELEASE
DATE: October 22, 2026

Heritage Financial Announces Third Quarter 2026 Results and Declares Regular Cash Dividend of $0.25 Per Share

Third Quarter 2026 Highlights
•Net income was $18.7 million, or $0.46 per diluted share, compared to $17.5 million, or $0.42 per diluted share, for the second quarter of 2026.
•Adjusted diluted earnings per share (1) were $0.55, compared to $0.57 in the second quarter of 2026.
•Net interest income increased $2.4 million, or 3.3% (13.0% annualized) from the prior quarter.
•Net interest margin increased to 4.05%, an increase of 6 basis points from 3.99% for the second quarter of 2026.
•Yield on loans increased to 5.76%, an increase of 4 basis points from 5.72% for the second quarter of 2026.
•Cost of interest bearing deposits decreased to 1.65%, from 1.67% for the second quarter of 2026.
•Loans receivable increased $133.5 million, or 2.3% (9.2% annualized), from the second quarter of 2026.
•Deposits increased $148.2 million, or 2.1% (8.4% annualized), from the second quarter of 2026.
•Approved a new stock repurchase program authorizing the repurchase of up to 5% of the Company's outstanding shares, or approximately 2.0 million shares.
•Declared a regular cash dividend of $0.25 per share on October 21, 2026.


Olympia, WA - Heritage Financial Corporation (Nasdaq GS: HFWA) (the “Company," ”we," or "us"), the parent company of Heritage Bank (the "Bank"), today reported net income of $18.7 million for the third quarter of 2026, compared to $17.5 million for the second quarter of 2026 and $19.2 million for the third quarter of 2025. Diluted earnings per share were $0.46 for the third quarter of 2026, compared to $0.42 for the second quarter of 2026 and $0.55 for the third quarter of 2025. Adjusted diluted earnings per share(1) were $0.55 for the third quarter of 2026, compared to $0.57 for the second quarter of 2026 and $0.56 for the third quarter of 2025.
During third quarter of 2026, the Company completed the core conversion of customer accounts of Kitsap Bank from the acquisition of its parent company Olympic Bancorp, Inc. (the "Merger") which closed on January 31, 2026. As a result of the core conversion and closure of two branches, the Company recognized Merger-related expenses of $5.2 million in the third quarter of 2026.
Bryan McDonald, President and Chief Executive Officer of the Company, commented, “We are pleased with the continued improvement in our net interest margin and growth in loans and deposits during the third quarter. In addition, we completed the successful conversion of the Kitsap Bank customers to the Heritage Bank system. This was an important step for Heritage to achieve full realization of cost savings from the Merger and operate with improved efficiency going forward.”








(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
1

Financial Highlights
The following table provides financial highlights as of the dates and for the periods indicated:
As of or for the Quarter Ended
September 30,
2026		June 30,
2026		September 30,
2025
(Dollars in thousands, except per share amounts)
Net income$18,720 $17,546 $19,169 
Diluted earnings per share0.46 0.42 0.55 
Adjusted diluted earnings per share(1)
0.55 0.57 0.56 
Return on average assets(2)
0.88 %0.83 %1.09 %
Adjusted return on average assets(1)(2)
1.07 %1.12 %1.11 %
Return on average common equity(2)
6.71 6.33 8.52 
Return on average tangible common equity(1)(2)
10.67 10.17 11.86 
Adjusted return on average tangible common equity(1)(2)
12.75 13.29 12.16 
Net interest margin(2)
4.05 3.99 3.64 
Cost of total deposits(2)
1.19 1.21 1.37 
Efficiency ratio71.6 76.5 63.3 
Adjusted efficiency ratio(1)
62.2 63.9 61.9 
Noninterest expense to average total assets(2)
2.90 3.06 2.36 
Adjusted noninterest expense to average total assets(1)(2)
2.52 2.56 2.30 
Total assets$8,517,934 $8,430,566 $7,011,879 
Loans receivable
5,881,201 5,747,741 4,769,160 
Total deposits7,186,934 7,038,706 5,857,464 
Loan to deposit ratio(3)
81.8 %81.7 %81.4 %
Book value per share$26.71 $27.13 $26.62 
Tangible book value per share(1)
18.74 19.15 19.46 
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2) Annualized.
(3) Loans receivable divided by total deposits.

Investment Securities
Total investment securities decreased $31.8 million, or 1.9%, to $1.60 billion at September 30, 2026, from $1.63 billion at June 30, 2026. There were investment maturities and repayments of $45.9 million and a $32.4 million increase in unrealized losses on available for sale securities during the third quarter of 2026. These decreases to carrying value were partially offset by investment security purchases of $46.1 million during the third quarter of 2026.
The following table summarizes the composition of the Company's investment securities portfolio at the dates indicated:
September 30, 2026June 30, 2026Change
Balance% of
Total		Balance% of
Total		$%
(Dollars in thousands)
Investment securities available for sale, at fair value:
U.S. government and agency securities$11,272 0.7 %$11,823 0.7 %$(551)(4.7)%
Municipal securities55,203 3.4 64,390 3.9 (9,187)(14.3)
Residential CMO and MBS(1)
491,405 30.7 496,178 30.4 (4,773)(1.0)
Commercial CMO and MBS(1)
348,255 21.8 363,713 22.2 (15,458)(4.3)
Corporate obligations23,052 1.4 16,423 1.0 6,629 40.4 
Other asset-backed securities18,449 1.2 18,910 1.2 (461)(2.4)
Total$947,636 59.2 %$971,437 59.4 %$(23,801)(2.5)%
2

September 30, 2026June 30, 2026Change
Balance% of
Total		Balance% of
Total		$%
(Dollars in thousands)
Investment securities held to maturity, at amortized cost:
U.S. government and agency securities$151,385 9.5 %$151,363 9.3 %$22 — %
Residential CMO and MBS(1)
200,760 12.5 207,387 12.7 (6,627)(3.2)
Commercial CMO and MBS(1)
301,678 18.8 303,089 18.6 (1,411)(0.5)
Total$653,823 40.8 %$661,839 40.6 %$(8,016)(1.2)%
Total investment securities$1,601,459 100.0 %$1,633,276 100.0 %$(31,817)(1.9)%
    (1) U.S. government agency and government-sponsored enterprise CMO and MBS.

Loans Receivable
Loans receivable increased $133.5 million, or 2.3%, during the third quarter of 2026. New loans funded during the third quarter of 2026 were $255.4 million, an increase from new loans funded during the second quarter of 2026 of $162.2 million and new loans funded during the third quarter of 2025 of $174.5 million. Loan prepayments were higher at $133.7 million during the third quarter of 2026, compared to $102.5 million during the second quarter of 2026. Loan payoffs were also higher at $73.4 million during the third quarter of 2026, compared to $49.9 million in the second quarter of 2026.
Commercial and industrial loans increased $10.4 million, or 1.0%, during the third quarter of 2026, due primarily to new loan production of $40.9 million, offset partially by pay downs on outstanding balances. Owner-occupied commercial real estate ("CRE") loans decreased $15.9 million, or 1.3%, during the third quarter, due primarily to pay downs on outstanding balances, offset partially by new loan production of $36.7 million. Non-owner occupied CRE loans increased $56.5 million, or 2.3%, during the quarter, due primarily to new loan production of $122.8 million. Residential real estate loans increased $12.3 million, or 3.5% due primarily to the purchase of a $21.0 million pool of mortgage loans during the third quarter, offset partially by pay downs on outstanding balances. Commercial and multifamily construction loans increased $62.0 million, or 23.9%, during the third quarter, due primarily to advances on current commitments.
The following table summarizes the Company's loans receivable at the dates indicated:
September 30, 2026June 30, 2026Change
Balance% of TotalBalance% of Total$%
(Dollars in thousands)
Commercial business:
Commercial and industrial$1,061,712 18.1 %$1,051,269 18.3 %$10,443 1.0 %
Owner-occupied CRE
1,211,776 20.6 1,227,674 21.4 (15,898)(1.3)
Non-owner occupied CRE2,565,804 43.6 2,509,283 43.6 56,521 2.3 
Total commercial business4,839,292 82.3 4,788,226 83.3 51,066 1.1 
Residential real estate
361,177 6.1 348,838 6.1 12,339 3.5 
Real estate construction and land development:
Residential
139,669 2.4 136,595 2.4 3,074 2.3 
Commercial and multifamily
321,951 5.5 259,947 4.5 62,004 23.9 
Total real estate construction and land development461,620 7.9 396,542 6.9 65,078 16.4 
Consumer219,112 3.7 214,135 3.7 4,977 2.3 
Loans receivable$5,881,201 100.0 %$5,747,741 100.0 %$133,460 2.3 

3

Deposits
Total deposits increased $148.2 million, or 2.1%, to $7.19 billion at September 30, 2026, from $7.04 billion at June 30, 2026.
Non-maturity deposits increased by $189.6 million, or 3.2%, from June 30, 2026 due primarily to new deposits opened during the third quarter of 2026 as well as an increase in customer balances as is typical in the third quarter of each year. Certificates of deposit declined $41.4 million during the third quarter of 2026 due primarily to the transfer of a $39.3 million relationship to a money market account.
The following table summarizes the Company's total deposits at the dates indicated:
September 30, 2026June 30, 2026Change
Balance
% of TotalBalance% of Total$%
(Dollars in thousands)
Noninterest demand deposits$1,967,073 27.4 %$1,972,702 28.0 %$(5,629)(0.3)%
Interest bearing demand deposits1,974,016 27.5 1,854,634 26.3 119,382 6.4 
Money market accounts1,667,978 23.2 1,574,835 22.4 93,143 5.9 
Savings accounts563,965 7.8 581,259 8.3 (17,294)(3.0)
Total non-maturity deposits6,173,032 85.9 5,983,430 85.0 189,602 3.2 
Certificates of deposit1,013,902 14.1 1,055,276 15.0 (41,374)(3.9)
Total deposits$7,186,934 100.0 %$7,038,706 100.0 %$148,228 2.1 %

Borrowings
Total borrowings decreased $44.4 million to $121.9 million at September 30, 2026, compared to $166.3 million at June 30, 2026. All outstanding borrowings at September 30, 2026 were with the Federal Home Loan Bank ("FHLB") and mature in the fourth quarter of 2026.
Stockholders' Equity
Total stockholders' equity decreased $25.9 million, or 2.3%, to $1.08 billion at September 30, 2026, compared to $1.11 billion at June 30, 2026. This decrease was due primarily to an increase in other comprehensive loss of $25.3 million due to a change in market rates during the quarter, the repurchase of 341,483 shares of the Company's common stock, for an aggregate purchase price of $10.2 million, under the Company's stock repurchase program, and dividends declared of $10.3 million, offset partially by net income of $18.7 million.
The following table summarizes changes in stockholders' equity for the Company for the period indicated:
Quarter Ended
September 30,
2026
(In thousands)
Balance, beginning of period$1,109,692 
Net income18,720 
Cash dividends declared on common stock(10,341)
Common stock repurchased(10,302)
Other comprehensive loss
(25,276)
Other1,328 
Balance, end of period$1,083,821 
The Company and Bank continued to maintain capital levels in excess of the applicable regulatory requirements to be categorized as “well-capitalized” at September 30, 2026.

4


The following table summarizes the capital ratios for the Company at the dates indicated:
September 30,
2026		June 30,
2026
Stockholders' equity to total assets12.7%13.2%
Tangible common equity to tangible assets (1)
9.39.7
Common equity tier 1 capital ratio (2)
11.912.1
Leverage ratio (2)
10.310.4
Tier 1 capital ratio (2)
12.212.5
Total capital ratio (2)
13.113.4
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2) Current quarter ratios are estimates pending completion and filing of the Company’s regulatory reports.

Allowance for Credit Losses and Provision for Credit Losses
The allowance for credit losses ("ACL") on loans as a percentage of loans receivable was 1.04% at September 30, 2026, compared to 1.03% at June 30, 2026. The increase in the ACL as a percentage of loans was due primarily to specific reserves of $998,000 for individually evaluated loans.
During the third quarter of 2026, the Company recorded a $2.3 million provision for credit losses on loans, compared to an $844,000 reversal of provision during the second quarter of 2026. The provision for credit losses on loans was due primarily to loan growth during the quarter. During the third quarter of 2026, the Company recorded a $20,000 provision for credit losses on unfunded commitments, compared to a $77,000 reversal of provision for credit losses on unfunded commitments during the second quarter of 2026.
The following table provides detail on the changes in the ACL on loans and the ACL on unfunded commitments ("ACL on Unfunded"), and the related (reversal of) provision for credit losses for the periods indicated:
As of or for the Quarter Ended
September 30, 2026June 30, 2026September 30, 2025
ACL on LoansACL on UnfundedTotalACL on LoansACL on UnfundedTotalACL on LoansACL on UnfundedTotal
(Dollars in thousands)
Balance, beginning of period$59,473 $1,108 $60,581 $60,551 $1,185 $61,736 $52,529 $740 $53,269 
Provision for (reversal of) credit losses2,251 20 2,271 (844)(77)(921)1,563 212 1,775 
(Net charge-offs) / recoveries(381)— (381)(234)— (234)(118)— (118)
Balance, end of period$61,343 $1,128 $62,471 $59,473 $1,108 $60,581 $53,974 $952 $54,926 

Credit Quality
Classified loans (loans rated substandard or worse) increased $3.0 million from the prior quarter, while the percentage of classified loans to loans receivable remained at 1.8% at September 30, 2026 and June 30, 2026.
The following table illustrates total loans by risk rating and their respective percentage of total loans at the dates indicated:
September 30, 2026June 30, 2026
Balance% of TotalBalance% of Total
(Dollars in thousands)
Risk Rating:
Pass$5,634,705 95.9 %$5,517,189 96.0 %
Special Mention138,023 2.3 125,108 2.2 
Substandard108,473 1.8 105,444 1.8 
Total$5,881,201 100.0 %$5,747,741 100.0 %
Nonaccrual loans were $32.1 million at September 30, 2026, compared to $15.5 million at June 30, 2026. Four commercial and industrial loan relationships totaling $12.9 million and three commercial real estate loan relationships totaling $4.2 million were migrated to nonaccrual during the third quarter of 2026.
5

The following table illustrates changes in nonaccrual loans during the periods indicated:
Quarter Ended
September 30,
2026		June 30,
2026		September 30,
2025
(Dollars in thousands)
Balance, beginning of period$15,510 $14,958 $9,865 
Additions17,210 5,988 8,288 
Net principal payments
(336)(280)(207)
Payoffs(305)(5,156)(137)
Charge-offs(2)— (197)
Balance, end of period$32,077 $15,510 $17,612 
Nonaccrual loans to loans receivable0.55 %0.27 %0.37 %

Liquidity
Total liquidity sources available at September 30, 2026 totaled $3.25 billion. This included on- and off-balance sheet liquidity. The Company has access to FHLB advances and the Federal Reserve Bank ("FRB") Discount Window. The Company's available liquidity sources at September 30, 2026 represented a coverage ratio of 45.2% of total deposits and 114.2% of estimated uninsured deposits.
The following table summarizes the Company's available liquidity as of the dates indicated:
Quarter Ended
September 30,
2026		June 30,
2026
(Dollars in thousands)
On-balance sheet liquidity
Cash and cash equivalents$187,067 $204,375 
Unencumbered investment securities available for sale (1)
926,203 949,021 
Total on-balance sheet liquidity
$1,113,270 $1,153,396 
Off-balance sheet liquidity
FRB borrowing availability$322,158 $339,029 
FHLB borrowing availability (2)
1,671,170 1,635,593 
Fed funds line borrowing availability with correspondent banks145,000 145,000 
Total off-balance sheet liquidity
$2,138,328 $2,119,622 
Total available liquidity$3,251,598 $3,273,018 
(1) Investment securities available for sale at fair value.
(2) Includes FHLB total borrowing availability of $1.79 billion at September 30, 2026 based on pledged assets, however, maximum credit capacity was 45% of the Bank's total assets one quarter in arrears or $3.79 billion.

Net Interest Income and Net Interest Margin
Net interest income increased $2.4 million, or 3.3%, during the third quarter of 2026 compared to the second quarter of 2026 due to a $2.5 million increase in total interest income, offset partially by an increase in interest expense of $74,000. The increase in net interest income was primarily due to an increase in the net interest margin.
Net interest margin increased six basis points to 4.05% during the third quarter of 2026, from 3.99% during the second quarter of 2026. The increase in net interest margin was due primarily to the increase in yield on loans and a decrease in the cost of interest bearing deposits.
The yield on interest earning assets increased five basis points to 5.26% for the third quarter of 2026, compared to 5.21% for the second quarter of 2026. The increase was primarily due to an increase in yield on loans.
The yield on loans receivable increased four basis points to 5.76% during the third quarter of 2026, compared to 5.72% during the second quarter of 2026. The increase was due primarily to an increase in rates on loans originated during the third quarter of 2026. Loan yield also benefited from the incremental accretion on purchased loans in both the second and third quarters of 2026.
The following table presents the net interest margin and loan yield and the effect of the incremental accretion on purchased loans on these ratios for the periods indicated:
6

Quarter Ended
September 30,
2026		June 30,
2026		September 30,
2025
Net Interest Margin, excluding incremental accretion on purchased loans, annualized:
Net interest margin
4.05 %3.99 %3.64 %
Exclude impact from incremental accretion on purchased loans(2)
(0.07)%(0.09)%(0.01)%
Net interest margin, excluding incremental accretion on purchased
loans(1)
3.98 %3.90 %3.63 %
Loan yield, excluding incremental accretion on purchased loans, annualized:
Loan yield
5.76 %5.72 %5.53 %
Exclude impact from incremental accretion on purchased loans(2)
(0.10)(0.12)(0.01)
Loan yield, excluding incremental accretion on purchased loans(1)
5.66 %5.60 %5.52 %
Incremental accretion on purchased loans(1)
$1,456 $1,772 $123 
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2)Represents the amount of interest income recorded on purchased loans in excess of the contractual stated interest rate in the individual loan notes due to incremental accretion of purchased discount or premium. Purchased discount or premium is the difference between the contractual loan balance and the fair value of acquired loans at the acquisition date. The purchased discount is accreted into income over the remaining life of the loan. The impact of incremental accretion on loan yield will change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchased loans decreases.
The cost of interest bearing deposits decreased two basis points to 1.65% for the third quarter of 2026, from 1.67% for the second quarter of 2026. This decrease was primarily due to a decrease in rates on certificates of deposit.
Net interest margin increased 41 basis points to 4.05% during the third quarter of 2026, compared to 3.64% for the same period in the prior year. Net interest income increased $19.9 million, or 34.7%, during the third quarter of 2026 compared to the same period in the prior year, due to a combination of an increase in average interest earning assets, which increased substantially as a result of the Merger, and an increase in net interest margin.
The following table provides net interest income information for the periods indicated:
Quarter Ended
September 30, 2026June 30, 2026September 30, 2025
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
(Dollars in thousands)
Interest Earning Assets:
Loans receivable (2)(3)
$5,817,905 $84,470 5.76 %$5,740,927 $81,935 5.72 %$4,762,648 $66,422 5.53 %
Taxable securities1,609,163 14,456 3.56 1,635,979 14,464 3.55 1,314,374 11,102 3.35 
Nontaxable securities (3)
15,049 126 3.32 15,439 128 3.33 15,242 138 3.59 
Interest earning deposits121,352 1,139 3.72 124,969 1,147 3.68 166,182 1,846 4.41 
Total interest earning assets7,563,469 100,191 5.26 %7,517,314 97,674 5.21 %6,258,446 79,508 5.04 %
Noninterest earning assets917,141 920,006 747,694 
Total assets$8,480,610 $8,437,320 $7,006,140 
Interest Bearing Liabilities:
Certificates of deposit$1,033,482 $8,157 3.13 %$1,090,406 $8,817 3.24 %$955,737 $8,822 3.66 %
Savings accounts575,102 296 0.20 591,458 348 0.24 428,256 296 0.27 
Interest bearing demand and money market accounts3,528,494 12,916 1.45 3,444,901 12,226 1.42 2,833,048 11,003 1.54 
Total interest bearing deposits5,137,078 21,369 1.65 5,126,765 21,391 1.67 4,217,041 20,121 1.89 
7

Quarter Ended
September 30, 2026June 30, 2026September 30, 2025
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
(Dollars in thousands)
Junior subordinated debentures22,527 437 7.70 22,455 431 7.70 22,239 474 8.46 
Borrowings110,936 1,126 4.03 105,131 1,036 3.95 136,582 1,542 4.48 
Total interest bearing liabilities5,270,541 22,932 1.73 %5,254,351 22,858 1.74 %4,375,862 22,137 2.01 %
Noninterest demand deposits2,000,526 1,973,038 1,625,945 
Other noninterest bearing liabilities102,381 97,753 112,053 
Stockholders’ equity1,107,162 1,112,178 892,280 
Total liabilities and stockholders’ equity$8,480,610 $8,437,320 $7,006,140 
Net interest income and spread$77,259 3.53 %$74,816 3.47 %$57,371 3.03 %
Net interest margin4.05 %3.99 %3.64 %
(1) Annualized; average balances are calculated using daily balances.
(2) Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $1.4 million, $1.1 million and $1.0 million for the third quarter of 2026, second quarter of 2026 and third quarter of 2025, respectively, and the incremental accretion on purchased loans of $1.5 million, $1.8 million, and $123,000 for the third quarter of 2026, second quarter of 2026 and third quarter of 2025, respectively.
(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.

Noninterest Income
Noninterest income decreased $58,000 to $9.3 million during the third quarter of 2026. The decrease was due primarily to a decrease in bank owned life insurance ("BOLI") income.
Noninterest income increased $928,000 during the third quarter of 2026 from the same period in 2025 due primarily to increases in service charges and other fees, card revenue, and BOLI income due to income from the deposit portfolio and BOLI acquired from Olympic.
The following table presents the key components of noninterest income and the change for the periods indicated:
Quarter EndedQuarter Over Quarter Change
Prior Year
Quarter Change
September 30,
2026		June 30,
2026		September 30,
2025		$% $%
(Dollars in thousands)
Service charges and other fees$3,497 $3,592 $3,046 $(95)(2.6)%$451 14.8 %
Card revenue2,521 2,595 2,209 (74)(2.9)312 14.1 
Loss on sale of investment securities— (217)— 217 (100.0)— — 
Interest rate swap fees53 3 96 50 1666.7 (43)(44.8)
BOLI income
1,250 1,485 1,008 (235)(15.8)242 24.0 
Other income1,932 1,853 1,966 79 4.3 (34)(1.7)
Total noninterest income (loss)
$9,253 $9,311 $8,325 $(58)(0.6)%$928 11.1 %

Noninterest Expense
Noninterest expense decreased $2.4 million, or 3.7%, to $62.0 million during the third quarter of 2026, compared to $64.3 million in the second quarter of 2026. The decrease was primarily due to a decrease in Merger-related expenses.
Merger-related expenses consisted of severance expense, professional fees, core conversion costs, exit costs related to the consolidation of two branches, closure of one loan production office and one administration location, and contract termination costs. Merger-related expenses incurred in the third quarter of 2026 were $5.2 million compared to $7.5 million in the second quarter of 2026.
The following table presents Merger-related expenses included in noninterest expense and the change for the periods indicated:
8

Quarter EndedChange
September 30,
2026		June 30,
2026		$
(Dollars in thousands)
Compensation and employee benefits$669 $1,481 $(812)
Occupancy and equipment152 — 152 
Data processing2,524 4,924 (2,400)
Marketing126 — 126 
Professional services294 128 166 
Other expense1,420 960 460 
Total noninterest expense$5,185 $7,493 $(2,308)
Noninterest expense increased $20.3 million, or 48.9%, during the third quarter of 2026 compared to the same period in 2025 due primarily to an increase in expenses related to the Merger and the addition of Olympic's operations.
The following table presents the key components of noninterest expense and the change for the periods indicated:
Quarter EndedQuarter Over Quarter ChangePrior Year Quarter Change
September 30,
2026		June 30,
2026		September 30,
2025		$%$%
(Dollars in thousands)
Compensation and employee benefits$34,135 $35,769 $26,082 $(1,634)(4.6)%$8,053 30.9 %
Occupancy and equipment6,326 6,014 4,665 312 5.2 1,661 35.6 
Data processing8,337 10,218 3,754 (1,881)(18.4)4,583 122.1 
Marketing675 437 284 238 54.5 391 137.7 
Professional services1,109 939 1,332 170 18.1 (223)(16.7)
State/municipal business and use taxes
1,799 1,801 1,235 (2)(0.1)564 45.7 
Federal deposit insurance premium947 881 796 66 7.5 151 19.0 
Other real estate owned, net(55)44 — (99)(225.0)(55)— 
Amortization of intangible assets2,941 2,957 284 (16)(0.5)2,657 935.6 
Other expense5,744 5,264 3,183 480 9.1 2,561 80.5 
Total noninterest expense$61,958 $64,324 $41,615 $(2,366)(3.7)%$20,343 48.9 %

Income Tax Expense
Income tax expense increased $385,000 in the third quarter of 2026, compared to the second quarter of 2026 due to higher pre-tax income during the third quarter of 2026.
Income tax expense increased $426,000 in the third quarter of 2026, compared to the same period in 2025, due primarily to an increase in the effective income tax rate during the third quarter of 2026.
The following table presents the income tax expense and related metrics and the change for the periods indicated:
Quarter EndedChange
September 30,
2026		June 30,
2026		September 30,
2025
Quarter Over Quarter
Prior Year Quarter
(Dollars in thousands)
Income before income taxes$22,283 $20,724 $22,306 $1,559 $(23)
Income tax expense$3,563 $3,178 $3,137 $385 $426 
Effective income tax rate16.0 %15.3 %14.1 %0.7 %1.9 %

Dividends
On October 21, 2026, the Company’s Board of Directors declared a quarterly cash dividend of $0.25 per share. The dividend is payable on November 18, 2026 to shareholders of record as of the close of business on November 4, 2026.


9

Stock Repurchase Program
On October 21, 2026, the Company's Board of Directors approved a new stock repurchase program, authorizing the repurchase of up to 5% of the Company's outstanding common shares or approximately 2.0 million shares. The number, timing and price of shares repurchased will depend on business and market conditions, and other factors, including opportunities to deploy the Company's capital.
The new stock repurchase program supersedes a prior stock repurchase program, which was authorized in April 2024 and allowed for the buyback of approximately 1.7 million shares. The repurchase allowance under the prior stock repurchase program was substantially completed during the third quarter of 2026.
Earnings Conference Call
The Company will hold a telephone conference call to discuss third quarter of 2026 earnings on Thursday, October 22, 2026 at 9:00 a.m. Pacific time. Participants may register for the call at the following link: https://events.q4inc.com/analyst/562330083?pwd=MlXLXIj8. The call can also be accessed by dialing (833) 461-5787 -- Meeting ID: 562 330 083, a few minutes prior to 9:00 a.m. Pacific time. The conference call will be recorded and will be available for replay through November 5, 2026 by dialing (833) 309-1852 or by visiting the Company website https://www.hf-wa.com/.
About Heritage Financial Corporation
Heritage Financial Corporation (the “Company”) is an Olympia, Washington-based bank holding company for Heritage Bank, a full-service commercial bank and its sole wholly-owned banking subsidiary. Heritage Bank has a network of branches in Washington, Oregon and Idaho. Heritage Bank does business under the Whidbey Island Bank name on Whidbey Island, Washington and the Kitsap Bank name at certain branches acquired through the acquisition of Olympic Bancorp, Inc. The Company's stock is traded on the Nasdaq Global Select Market under the symbol “HFWA.” More information about the Company can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.
Contact
Bryan McDonald, President and Chief Executive Officer, (360) 943-1500
Don Hinson, Executive Vice President and Chief Financial Officer, (360) 943-1500

Forward-Looking Statements
This press release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements often include, among others, statements concerning plans, estimates, calculations, forecasts and projections with respect to the anticipated future performance of the Company. These statements are often, but not always, identified by words such as "believes," "expects," "anticipates," "estimates," “forecasts,” "intends," “plans,” “targets,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future or conditional verbs such as “may,” "will," “should,” "would," and "could," as well as the negative of such words. Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. These forward-looking statements are subject to inherent known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated or implied by forward-looking statements. Factors that could cause our actual results to differ materially from those described in the forward-looking statements include, but are not limited to, the following: potential adverse impacts to economic conditions nationally or in our local market areas, other markets where we have lending relationships, or other aspects of our business operations or financial markets, including, without limitation, as a result of credit quality deterioration, pronounced and sustained reductions in real estate market values, employment levels, labor shortages and a potential recession or slowed economic growth; changes in the interest rate environment, including as a result of the recent increase in the benchmark federal funds rate by the Federal Reserve, which could adversely affect our revenues and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; the level and impact of inflation and the current and future monetary policies of the Board of Governors of the Federal Reserve System and executive orders in response thereto; previous and potential future disruptions, security breaches, insider fraud, cybersecurity incidents or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform critical processing functions for our business, including sophisticated attacks using artificial intelligence and similar tools; legislative or regulatory changes that adversely affect our business, including changes in banking, securities, and tax laws, in regulatory policies and principles, or the interpretation and prioritization of such rules and regulations; effects on the U.S. economy resulting from actions taken by the federal government, including the threat or implementation of tariffs, immigration enforcement and changes in foreign policy; the effects of acts of war or terrorism, foreign relations, military conflicts, including the wars in Iran and Ukraine, ongoing conflicts in the Middle East, and other international military conflicts that can increase levels of political and economic unpredictability, contribute to rising energy and commodity prices, affect global supply chains, increase the volatility of financial markets, and other matters beyond our control; effects of other external events on our business and the businesses of our clients; credit and interest rate risks associated with our business, including our customers’ borrowing, repayment, and deposit practices; fluctuations in deposits and the concentration of large deposits from certain customers, who have deposit balances above current FDIC insurance limits; liquidity issues, including our ability to borrow funds or raise additional capital, if necessary; fluctuations in the value of our investment securities; credit risks and risks from concentrations (including by type of geographic area, collateral and industry) within our loan portfolio; the effectiveness of our risk management framework; rapid technological changes implemented by us and other parties, including third-party vendors, which may be more difficult to implement or more expensive than anticipated or which may have unforeseen consequences to us and our customers,
10

including the development and implementation of tools incorporating artificial intelligence; increased competition in the financial services industry from non-banks such as credit unions and financial technology companies, including digital asset service providers; our ability to adapt successfully to technological changes to compete effectively in the marketplace, including as a result of competition from other commercial banks, mortgage banking firms, credit unions, securities brokerage firms, insurance companies, financial technology companies, and digital asset service providers; emerging issues related to the development and use of artificial intelligence that could give rise to legal or regulatory action, damage our reputation or otherwise materially harm our business or customers; our ability to implement our organic and acquisition growth strategies, including the acquisition of Olympic, and our ability to successfully integrate Olympic's customers and operations following the acquisition; effects of critical accounting policies and judgments, including the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; the commencement, costs, effects and outcome of litigation and other legal proceedings and regulatory actions against us or to which we may become subject, including in connection with prior acquisitions; potential impairment to the goodwill we recorded in connection with our past acquisitions, including as a result of the acquisition of Olympic; loss of, or inability to attract, key personnel; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire, including as a result of the acquisition of Olympic, into our operations and our ability to realize related revenue synergies and cost savings within expected time frames or at all, and any goodwill charges related thereto and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, which might be greater than expected; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises; the impact of bank failures or adverse developments at other banks and related negative publicity about the banking industry in general on investor and depositor sentiment regarding the stability and liquidity of banks; the extensive and evolving regulatory framework that applies to us; the overall health of local and national real estate markets; the level of nonperforming assets on our balance sheet; risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar; changes in consumer spending, borrowing and saving habits; the availability of future equity and debt issuances and other capital raising opportunities on favorable terms; our success at managing and responding to the risks involved in the foregoing items; and other factors described in our latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission (the “SEC”) which are available on our website at www.hf-wa.com and on the SEC's website at www.sec.gov. We caution readers not to place undue reliance on any forward-looking statements. Moreover, any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based only on information then actually known to us and upon management's beliefs and assumptions at the time they are made which may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. Forward-looking statements speak only as of the date they are made, and we do not undertake and specifically disclaim any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.


11

HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except shares)
September 30,
2026		June 30,
2026		December 31,
2025
Assets
Cash on hand and in banks$103,026 $102,555 $52,587 
Interest earning deposits 84,041 101,820 180,502 
Cash and cash equivalents187,067 204,375 233,089 
Investment securities available for sale, at fair value (amortized cost of $1,028,761, $1,020,125 and $647,505, respectively)
947,636 971,437 607,522 
Investment securities held to maturity, at amortized cost (fair value of $577,974, $607,782 and $625,287, respectively)
653,823 661,839 674,107 
Total investment securities1,601,459 1,633,276 1,281,629 
Loans receivable5,881,201 5,747,741 4,783,266 
Allowance for credit losses on loans(61,343)(59,473)(52,584)
Loans receivable, net5,819,858 5,688,268 4,730,682 
Other real estate owned — 755 — 
Premises and equipment, net98,295 98,034 74,690 
Federal Home Loan Bank stock, at cost10,657 12,653 5,163 
BOLI
147,600 146,350 105,974 
Accrued interest receivable24,290 23,056 19,280 
Prepaid expenses and other assets305,351 297,501 273,925 
Other intangible assets, net44,328 47,269 1,979 
Goodwill 279,029 279,029 240,939 
Total assets$8,517,934 $8,430,566 $6,967,350 
Liabilities and Stockholders' Equity
Non-interest bearing deposits
$1,967,073 $1,972,702 $1,597,650 
Interest bearing deposits
5,219,861 5,066,004 4,322,549 
Total deposits7,186,934 7,038,706 5,920,199 
Borrowings121,900 166,250 20,000 
Junior subordinated debentures22,570 22,497 22,350 
Accrued expenses and other liabilities102,709 93,421 83,297 
Total liabilities7,434,113 7,320,874 6,045,846 
Common stock698,915 707,889 531,100 
Retained earnings448,178 439,799 421,619 
Accumulated other comprehensive loss, net(63,272)(37,996)(31,215)
Total stockholders' equity1,083,821 1,109,692 921,504 
Total liabilities and stockholders' equity$8,517,934 $8,430,566 $6,967,350 
Shares outstanding40,576,875 40,906,122 33,963,500 

12

HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter EndedNine Months Ended
September 30,
2026		June 30,
2026		September 30,
2025		September 30,
2026		September 30,
2025
Interest Income
Interest and fees on loans$84,470 $81,935 $66,422 $242,850 $196,231 
Taxable interest on investment securities14,456 14,464 11,102 41,490 34,420 
Nontaxable interest on investment securities126 128 138 383 414 
Interest on interest earning deposits1,139 1,147 1,846 3,817 4,309 
Total interest income100,191 97,674 79,508 288,540 235,374 
Interest Expense
Deposits21,369 21,391 20,121 63,507 59,760 
Junior subordinated debentures437 431 474 1,298 1,417 
Borrowings1,126 1,036 1,542 2,441 8,153 
Total interest expense22,932 22,858 22,137 67,246 69,330 
Net interest income77,259 74,816 57,371 221,294 166,044 
Provision for (reversal of) credit losses2,271 (921)1,775 320 2,782 
Net interest income after provision for (reversal of) credit losses74,988 75,737 55,596 220,974 163,262 
Noninterest Income
Service charges and other fees3,497 3,592 3,046 10,456 8,953 
Card revenue2,521 2,595 2,209 7,219 5,950 
Loss on sale of investment securities, net— (217)— (217)(10,741)
Interest rate swap fees53 3 96 56 115 
BOLI income
1,250 1,485 1,008 3,854 3,206 
Gain on sale of other assets, net— — — — 8 
Other income1,932 1,853 1,966 5,895 6,254 
Total noninterest income (loss)9,253 9,311 8,325 27,263 13,745 
Noninterest Expense
Compensation and employee benefits34,135 35,769 26,082 103,876 77,348 
Occupancy and equipment6,326 6,014 4,665 17,670 14,431 
Data processing8,337 10,218 3,754 23,648 11,317 
Marketing675 437 284 1,495 955 
Professional services1,109 939 1,332 4,890 3,188 
State/municipal business and use taxes1,799 1,801 1,235 5,274 3,660 
Federal deposit insurance premium947 881 796 2,865 2,418 
Other real estate owned, net(55)44 — (7)— 
Amortization of intangible assets2,941 2,957 284 7,956 889 
Other expense5,744 5,264 3,183 15,166 9,877 
Total noninterest expense61,958 64,324 41,615 182,833 124,083 
Income before income taxes22,283 20,724 22,306 65,404 52,924 
Income tax expense3,563 3,178 3,137 10,191 7,629 
Net income$18,720 $17,546 $19,169 $55,213 $45,295 
Basic earnings per share$0.46 $0.42 $0.56 $1.37 $1.33 
Diluted earnings per share$0.46 $0.42 $0.55 $1.36 $1.31 
Dividends declared per share$0.25 $0.24 $0.24 $0.73 $0.72 
Average shares outstanding - basic40,740,74241,079,78133,953,81040,175,50234,009,010
Average shares outstanding - diluted41,213,10541,541,76334,413,38640,642,49134,481,877
13

HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Average Balances, Yields, and Rates Paid:
Nine Months Ended September 30,
20262025
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Average
Balance		Interest
Earned/
Paid
Average
Yield/
Rate (1)
Interest Earning Assets:
Loans receivable(2)(3)
$5,658,741 $242,850 5.74 %$4,774,926 $196,231 5.49 %
Taxable securities1,577,611 41,490 3.52 1,371,957 34,420 3.35 
Nontaxable securities(3)
15,381 383 3.33 15,406 414 3.59 
Interest earning deposits139,494 3,817 3.66 130,253 4,309 4.42 
Total interest earning assets7,391,227 288,540 5.22 %6,292,542 235,374 5.00 %
Noninterest earning assets895,082 759,206 
Total assets$8,286,309 $7,051,748 
Interest Bearing Liabilities:
Certificates of deposit$1,062,740 $25,788 3.24 %$971,933 $27,841 3.83 %
Savings accounts569,115 959 0.23 426,767 877 0.27 
Interest bearing demand and money market accounts3,426,293 36,760 1.43 2,770,162 31,042 1.50 
Total interest bearing deposits5,058,148 63,507 1.68 4,168,862 59,760 1.92 
Junior subordinated debentures22,455 1,298 7.73 22,164 1,417 8.55 
Borrowings81,367 2,441 4.01 233,504 8,153 4.67 
Total interest bearing liabilities5,161,970 67,246 1.74 %4,424,530 69,330 2.10 %
Noninterest demand deposits1,936,229 1,620,047 
Other noninterest bearing liabilities98,436 127,505 
Stockholders’ equity1,089,674 879,666 
Total liabilities and stockholders’ equity$8,286,309 $7,051,748 
Net interest income and spread$221,294 3.48 %$166,044 2.90 %
Net interest margin4.00 %3.53 %
(1) Annualized; average balances are calculated using daily balances.
(2) Average loans receivable includes loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $3.2 million and $2.7 million for the nine months ended September 30, 2026 and 2025, respectively, and incremental accretion on purchased loans of $4.9 million and $352,000, for the nine months ended September 30, 2026 and 2025, respectively.
(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.
14

HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Nonperforming Assets and Credit Quality Metrics:
Quarter EndedNine Months Ended
September 30,
2026		June 30,
2026		September 30,
2025		September 30,
2026		September 30,
2025
Allowance for Credit Losses on Loans:
Balance, beginning of period$59,473 $60,551 $52,529 $52,584 $52,468 
Initial ACL recorded for PSL and PCD loans acquired during the period— — — 9,339 — 
(Reversal of) provision for credit losses on loans2,251 (844)1,563 587 2,417 
Charge-offs:
Commercial business(186)(180)(195)(766)(871)
Residential real estate
— — (27)(64)(27)
Consumer(219)(89)(152)(427)(410)
Total charge-offs(405)(269)(374)(1,257)(1,308)
Recoveries:
Commercial business3 4 219 11 263 
Residential real estate
— 2 1 2 1 
Consumer21 29 36 77 133 
Total recoveries24 35 256 90 397 
Net (charge-offs) recoveries (381)(234)(118)(1,167)(911)
Balance, end of period$61,343 $59,473 $53,974 $61,343 $53,974 
Net charge-offs on loans to average loans receivable annualized0.03 %0.02 %0.01 %0.03 %0.03 %


September 30,
2026		June 30,
2026		December 31,
2025
Nonperforming Assets:
Nonaccrual loans:
Commercial business$24,125 $7,437 $6,886 
Residential real estate
1,321 1,338 1,196 
Real estate construction and land development6,321 6,420 12,408 
Consumer310 315 486 
Total nonaccrual loans32,077 15,510 20,976 
Accruing loans past due 90 days or more
948 — 194 
Total nonperforming loans
33,025 15,510 21,170 
Other real estate owned— 755 — 
Nonperforming assets$33,025 $16,265 $21,170 
ACL on loans to:
Loans receivable1.04 %1.03 %1.10 %
Nonaccrual loans191.24 %383.45 %250.69 %
Nonaccrual loans to loans receivable
0.55 %0.27 %0.44 %
Nonperforming loans to loans receivable
0.56 %0.27 %0.44 %
Nonperforming assets to total assets0.39 %0.19 %0.30 %

15

HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Earnings:
Net interest income$77,259 $74,816 $69,219 $58,361 $57,371 
Provision for (reversal of) credit losses2,271 (921)(1,030)(814)1,775 
Noninterest income9,253 9,311 8,699 7,987 8,325 
Noninterest expense61,958 64,324 56,551 41,483 41,615 
Net income18,720 17,546 18,947 22,237 19,169 
Basic earnings per share$0.46 $0.42 $0.49 $0.66 $0.56 
Diluted earnings per share$0.46 $0.42 $0.48 $0.65 $0.55 
Adjusted diluted earnings per share (1)
$0.55 $0.57 $0.59 $0.66 $0.56 
Average Balances:
Loans receivable
$5,817,905 $5,740,927 $5,412,943 $4,770,300 $4,762,648 
Total investment securities1,624,212 1,651,418 1,502,005 1,301,526 1,329,616 
Total interest earning assets7,563,469 7,517,314 7,087,671 6,223,303 6,258,446 
Total assets8,480,610 8,437,320 7,935,002 6,954,110 7,006,140 
Total interest bearing deposits5,137,078 5,126,765 4,908,086 4,250,589 4,217,041 
Total noninterest demand deposits2,000,526 1,973,038 1,833,284 1,635,539 1,625,945 
Stockholders' equity1,107,162 1,112,178 1,049,044 911,454 892,280 
Financial Ratios:
Return on average assets (2)
0.88 %0.83 %0.97 %1.27 %1.09 %
Adjusted return on average assets (1)(2)
1.07 %1.12 %1.18 %1.29 %1.11 %
Return on average common equity (2)
6.71 6.33 7.32 9.68 8.52 
Return on average tangible common equity (1)(2)
10.67 10.17 11.14 13.33 11.86 
Adjusted return on average tangible common equity (1)(2)
12.75 13.29 13.36 13.51 12.16 
Efficiency ratio71.6 76.5 72.6 62.5 63.3 
Adjusted efficiency ratio (1)
62.2 63.9 63.3 61.5 61.9 
Noninterest expense to average total assets (2)
2.90 3.06 2.89 2.37 2.36 
Adjusted noninterest expense to average total assets(1)(2)
2.52 2.56 2.52 2.33 2.30 
Net interest spread (2)
3.53 3.47 3.43 3.15 3.03 
Net interest margin (2)
4.05 3.99 3.96 3.72 3.64 
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2) Annualized.









16





HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
As of or for the Quarter Ended
September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Select Balance Sheet:
Total assets$8,517,934 $8,430,566 $8,498,404 $6,967,350 $7,011,879 
Loans receivable
5,881,201 5,747,741 5,722,238 4,783,266 4,769,160 
Total investment securities1,601,459 1,633,276 1,669,411 1,281,629 1,312,857 
Total deposits7,186,934 7,038,706 7,248,537 5,920,199 5,857,464 
Noninterest demand deposits1,967,073 1,972,702 2,066,383 1,597,650 1,617,909 
Stockholders' equity1,083,821 1,109,692 1,115,691 921,504 904,064 
Financial Measures:
Book value per share$26.71 $27.13 $27.05 $27.13 $26.62 
Tangible book value per share (1)
18.74 19.15 19.07 19.98 19.46 
Stockholders' equity to total assets12.7 %13.2 %13.1 %13.2 %12.9 %
Tangible common equity to tangible assets (1)
9.3 9.7 9.6 10.1 9.8 
Loans to deposits ratio81.8 81.7 78.9 80.8 81.4 
Regulatory Capital Ratios:(2)
Common equity tier 1 capital ratio
11.9 %12.1 %12.2 %12.7 %12.4 %
Leverage ratio
10.3 10.4 10.3 10.8 10.5 
Tier 1 capital ratio
12.2 12.5 12.5 13.1 12.8 
Total capital ratio
13.1 13.4 13.5 14.1 13.8 
Credit Quality Metrics:
ACL on loans to:
Loans receivable1.04 %1.03 %1.06 %1.10 %1.13 %
Nonaccrual loans
191.2 383.4 404.8 250.7 306.5 
Nonaccrual loans to loans receivable
0.55 0.27 0.26 0.44 0.37 
Nonperforming loans to loans receivable0.56 0.27 0.26 0.44 0.44 
Nonperforming assets to total assets0.39 0.19 0.19 0.30 0.30 
Net charge-offs on loans to average loans receivable (3)
0.03 0.02 0.04 0.04 0.01 
Criticized Loans by Credit Quality Rating:
Special mention$138,023 $125,108 $103,699 $71,122 $100,160 
Substandard108,473 105,444 121,331 116,823 94,377 
Other Metrics:
Number of branches64 66 65 50 50 
Deposits per branch$112,296 $106,647 $111,516 $118,404 $117,149 
Average number of full-time equivalent employees978 976 905 742 749 
Average assets per full-time equivalent employee8,671 8,645 8,768 9,372 9,354 
(1) See Non-GAAP Financial Measures section herein.
(2) Current quarter ratios are estimates pending completion and filing of the Company’s regulatory reports.
(3) Annualized.
17

HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)

This earnings release contains certain financial measures not presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") in addition to financial measures presented in accordance with GAAP. The Company has presented these non-GAAP financial measures in this earnings release because it believes that they provide useful and comparative information to assess trends in the Company’s capital, performance and asset quality reflected in the current quarter and comparable period results and to facilitate comparison of its performance with the performance of its peers. These non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for financial measures presented in accordance with GAAP. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of the non-GAAP financial measures used in this earnings release to the comparable GAAP financial measures are presented below.

The Company believes that presenting the adjusted diluted earnings per share provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.

September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Diluted Earnings per Share and Adjusted Diluted Earnings per Share:
Net income (GAAP)$18,720 $17,546 $18,947 $22,237 $19,169 
Exclude loss on sale of investment securities, net
— 217 — — — 
Exclude merger-related costs5,185 7,493 5,178 385 635 
Exclude tax effect of adjustment(1,089)(1,619)(1,087)(81)(133)
Adjusted net income (non-GAAP)
$22,816 $23,637 $23,038 $22,541 $19,671 
Average number of diluted shares outstanding41,213,105 41,541,763 39,104,569 34,405,793 34,413,386 
Diluted earnings per share (GAAP)$0.46 $0.42 $0.48 $0.65 $0.55 
Adjusted diluted earnings per share (non-GAAP)$0.55 $0.57 $0.59 $0.66 $0.56 

The Company believes that presenting an adjusted return on average assets ratio provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.

September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Adjusted Return on Average Assets ("ROAA"):
Net income (GAAP)$18,720 $17,546 $18,947 $22,237 $19,169 
Exclude (gain) loss on sale of investment securities, net— 217 — — — 
Exclude merger-related costs5,185 7,493 5,178 385 635 
Exclude tax effect of adjustments(1,089)(1,619)(1,087)(81)(133)
Adjusted net income (non-GAAP)$22,816 $23,637 $23,038 $22,541 $19,671 
Average ("Avg") total assets$8,480,610 $8,437,320 $7,935,002 $6,954,110 $7,006,140 
ROAA, annualized (GAAP)0.88%0.83%0.97%1.27%1.09%
Adjusted ROAA, annualized (non-GAAP)1.07%1.12%1.18%1.29%1.11%


18


HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)

The Company considers the tangible common equity to tangible assets ratio and tangible book value per share to be useful measurements of the adequacy of the Company’s capital levels.
September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share:
Total stockholders' equity (GAAP)$1,083,821 $1,109,692 $1,115,691 $921,504 $904,064 
Exclude intangible assets(323,357)(326,298)(329,255)(242,918)(243,203)
Tangible common equity (non-GAAP)$760,464 $783,394 $786,436 $678,586 $660,861 
Total assets (GAAP)$8,517,934 $8,430,566 $8,498,404 $6,967,350 $7,011,879 
Exclude intangible assets(323,357)(326,298)(329,255)(242,918)(243,203)
Tangible assets (non-GAAP)$8,194,577 $8,104,268 $8,169,149 $6,724,432 $6,768,676 
Stockholders' equity to total assets (GAAP)12.7 %13.2 %13.1 %13.2 %12.9 %
Tangible common equity to tangible assets (non-GAAP)
9.3 %9.7 %9.6 %10.1 %9.8 %
Shares outstanding40,576,875 40,906,122 41,249,873 33,963,500 33,956,738 
Book value per share (GAAP)$26.71 $27.13 $27.05 $27.13 $26.62 
Tangible book value per share (non-GAAP)$18.74 $19.15 $19.07 $19.98 $19.46 































19

HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)

The Company considers the return on average tangible common equity ratio to be a useful measurement of the Company’s ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the Company's ongoing business operations can be evaluated. The Company believes that presenting an adjusted return on tangible common equity ratio provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.
Quarter Ended
September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Return on Average Tangible Common Equity, annualized:
Net income (GAAP)$18,720 $17,546 $18,947 $22,237 $19,169 
Add amortization of intangible assets2,941 2,957 2,058 285 284 
Exclude tax effect of adjustment(618)(621)(432)(60)(60)
Tangible net income (non-GAAP)$21,043 $19,882 $20,573 $22,462 $19,393 
Tangible net income (non-GAAP)$21,043 $19,882 $20,573 $22,462 $19,393 
Exclude loss on sale of investment securities, net
— 217 — — — 
Exclude merger-related costs5,185 7,493 5,178 385 635 
Exclude tax effect of adjustment(1,089)(1,619)(1,087)(81)(133)
Adjusted tangible net income (non-GAAP)$25,139 $25,973 $24,664 $22,766 $19,895 
Average stockholders' equity (GAAP)$1,107,162 $1,112,178 $1,049,044 $911,454 $892,280 
Exclude average intangible assets(325,085)(328,166)(300,391)(243,069)(243,350)
Average tangible common stockholders' equity (non-GAAP)$782,077 $784,012 $748,653 $668,385 $648,930 
Return on average common equity, annualized (GAAP)6.71 %6.33 %7.32 %9.68 %8.52 %
Return on average tangible common equity, annualized (non-GAAP)10.67 %10.17 %11.14 %13.33 %11.86 %
Adjusted return on average tangible common equity, annualized (non-GAAP)12.75 %13.29 %13.36 %13.51 %12.16 %















20

HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)

The Company believes that presenting an adjusted efficiency ratio and adjusted noninterest expense to average assets ratio provides useful and comparative information to assess trends in the Company's core operations reflected in the current quarter’s results and facilitate the comparison of our performance with the performance of our peers.
Quarter Ended
September 30,
2026		June 30,
2026		March 31,
2026		December 31,
2025		September 30,
2025
Adjusted Efficiency Ratio and Adjusted Noninterest Expense to Average Assets Ratio:
Total noninterest expense (GAAP)$61,958 $64,324 $56,551 $41,483 $41,615 
Exclude merger-related costs5,185 7,493 5,178 385 635 
Exclude amortization of intangible assets2,941 2,957 2,058 285 284 
Adjusted noninterest expense (non-GAAP)$53,832 $53,874 $49,315 $40,813 $40,696 
Net interest income (GAAP)$77,259 $74,816 $69,219 $58,361 $57,371 
Total noninterest income (GAAP)$9,253 $9,311 $8,699 $7,987 $8,325 
Exclude loss on sale of investment securities, net
— 217 — — — 
Adjusted total noninterest income (non-GAAP)$9,253 $9,528 $8,699 $7,987 $8,325 
Efficiency ratio (GAAP)71.6 %76.5 %72.6 %62.5 %63.3 %
Adjusted efficiency ratio (non-GAAP)62.2 %63.9 %63.3 %61.5 %61.9 %
Average Total assets$8,480,610 $8,437,320 $7,935,002 $6,954,110 $7,006,140 
Noninterest expense to average assets (GAAP) (1)
2.90 %3.06 %2.89 %2.37 %2.36 %
Adjusted noninterest expense to average assets (non-GAAP) (1)
2.52 %2.56 %2.52 %2.33 %2.30 %
(1) Annualized.
21

HERITAGE FINANCIAL CORPORATION
NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share amounts)

The Company believes presenting loan yield and net interest margin excluding the effect of discount accretion on purchased loans is useful in assessing the impact of acquisition accounting on loan yield as the effect of loan discount accretion is expected to decrease as the acquired loans mature or roll off our balance sheet.
Three Months Ended
September 30,
2026		June 30,
2026		September 30,
2025
(Dollar amounts in thousands)
Loan yield, excluding incremental accretion on purchased loans, annualized:
Interest and fees on loans (GAAP)$84,470 $81,935 $66,422 
Exclude incremental accretion on purchased loans1,456 1,772 123 
Adjusted interest and fees on loans (non-GAAP)$83,014 $80,163 $66,299 
Average loans receivable, net (GAAP)$5,817,905 $5,740,927 $4,762,648 
Loan yield, annualized (GAAP)5.76 %5.72 %5.53 %
Loan yield, excluding incremental accretion on purchased loans, annualized (non-GAAP)
5.66 %5.60 %5.52 %
Net Interest Margin, excluding incremental accretion on purchased loans, annualized:
Net interest income before provision (GAAP)$77,259 $74,816 $57,371 
Exclude incremental accretion on purchased loans1,456 1,772 123 
Adjusted net interest income before provision (non-GAAP)$75,803 $73,044 $57,248 
Average Interest earning assets (GAAP)$7,563,469 $7,517,314 $6,258,446 
Net interest margin (GAAP)4.05 %3.99 %3.64 %
Net interest margin, excluding incremental accretion on purchased loans (non-GAAP)3.98 %3.90 %3.63 %


22