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0001046025False00010460252025-04-242025-04-24

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
Date of Report (Dated of earliest event reported): April 24, 2025
HERITAGE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter) 
 
Commission File Number 000-29480
Washington   91-1857900
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)
201 Fifth Avenue SW, Olympia WA   98501
(Address of principal executive offices)   (Zip Code)
(360) 943-1500
(Registrant’s telephone number, including area code) 

Not applicable
(Former name or former address, if changed since last report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Trading symbol Name of each exchange on which registered
Common stock, no par value HFWA The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1934 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐


Item 2.02    Results of Operations and Financial Condition
On April 24, 2025, Heritage Financial Corporation (“Heritage”) issued a press release announcing its first quarter 2025 results.
A copy of the release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The information furnished pursuant to this Item and the related exhibit is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by Heritage for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 7.01    Regulation FD Disclosure
Heritage is filing an investor presentation that it reviewed in conjunction with its earnings release conference call on April 24, 2025.
A copy of the presentation materials is attached hereto as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference. The information furnished pursuant to this Item and the related exhibit is being “furnished” and will not, except to the extent required by applicable law or regulation, be deemed “filed” by Heritage for purposes of Section 18 of the Exchange Act, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as may be expressly set forth by specific reference in such filing.

Item 8.01    Other Events
On April 24, 2025, Heritage issued a press release announcing a regular quarterly cash dividend of $0.24 per common share. The dividend will be paid on May 21, 2025 to shareholders of record at the close of business on May 7, 2025.
A copy of the release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Item 9.01     Financial Statements and Exhibits
(d) Exhibits
Exhibit 99.1  
Exhibit 99.2
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
HERITAGE FINANCIAL CORPORATION
Date:
April 24, 2025
/S/ JEFFREY J. DEUEL
Jeffrey J. Deuel
Chief Executive Officer
(Duly Authorized Officer)


EX-99.1 2 a8-kexhibit991q125.htm EX-99.1 Document

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FOR IMMEDIATE RELEASE
DATE: April 24, 2025

HERITAGE FINANCIAL ANNOUNCES FIRST QUARTER 2025 RESULTS AND DECLARES REGULAR CASH DIVIDEND OF $0.24 PER SHARE

First Quarter 2025 Highlights
•Net income was $13.9 million, or $0.40 per diluted share, compared to $11.9 million, or $0.34 per diluted share, for the fourth quarter of 2024.
Results included a pre-tax loss on sale of securities of $3.9 million resulting in a negative impact of $0.09 per diluted share, which is the same impact as for the fourth quarter of 2024.
•Net interest margin increased to 3.44%, from 3.36% for the fourth quarter of 2024.
•Deposits increased $160.7 million, or 2.8% (11.4% annualized).
•Cost of interest bearing deposits decreased to 1.92%, from 1.98% for the fourth quarter of 2024.
•Expanded into Spokane, Washington with the hiring of three experienced commercial bankers.
Declared a regular cash dividend of $0.24 per share on April 23, 2025.


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 $13.9 million for the first quarter of 2025, compared to $11.9 million for the fourth quarter of 2024 and $5.7 million for the first quarter of 2024. Diluted earnings per share for the first quarter of 2025 were $0.40 compared to $0.34 for the fourth quarter of 2024 and $0.16 for the first quarter of 2024.
In the first quarter of 2025, the Company incurred a pre-tax loss of $3.9 million on the sale of investment securities in connection with the strategic repositioning of its balance sheet, which decreased diluted earnings per share by $0.09 for the quarter. The Company sold $60.9 million of investment securities with a book yield of 2.60%. Proceeds were used to purchase $28.2 million in investment securities with a book yield of 4.55% and fund new loans originated during the quarter.

Jeff Deuel, Chief Executive Officer of the Company, commented, "We are very pleased with our operating results for the first quarter, which included solid deposit growth, margin expansion and lower cost of deposits. In addition, we have maintained strong credit quality metrics including low levels of net charge-offs and nonaccrual loan balances. We continue to strategically reposition our balance sheet to improve future profitability and invest in new production teams with the most recent in the Spokane market, where we see significant opportunity to grow our business. Although these actions may impact current earnings, we believe future earnings will be enhanced and we are optimistic that the combination of our strong balance sheet and prudent risk management will provide sustainable long-term returns for our shareholders." The following table provides financial highlights at the dates and for the periods indicated:
1

Financial Highlights
As of or for the Quarter Ended
March 31,
2025		 December 31,
2024		 March 31,
2024
(Dollars in thousands, except per share amounts)
Net income $ 13,911  $ 11,928  $ 5,748 
Diluted earnings per share $ 0.40  $ 0.34  $ 0.16 
Return on average assets(2)
 0.79  % 0.66  % 0.33  %
Return on average common equity(2)
 6.51  5.46  2.73 
Return on average tangible common equity(1)(2)
 9.22  7.81  4.07 
Adjusted return on average tangible common equity(1)(2)
 11.21  11.59  9.34 
Net interest margin(2)
 3.44  3.36  3.29 
Cost of total deposits(2)
 1.38  1.39  1.19 
Efficiency ratio 71.9  69.3  83.0 
Adjusted efficiency ratio(1)
 67.3  64.4  68.9 
Noninterest expense to average total assets(2)
 2.36  2.20  2.29 
Total assets $ 7,129,862  $ 7,106,278  $ 7,091,283 
Loans receivable
 4,764,848  4,802,123  4,428,165 
Total deposits 5,845,335  5,684,613  5,532,327 
Loan to deposit ratio(3)
 81.5  % 84.5  % 80.0  %
Book value per share $ 25.85  $ 25.40  $ 24.43 
Tangible book value per share(1)
 18.70  18.22  17.36 
(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.

Balance Sheet
Cash and cash equivalents increased $131.6 million to $248.7 million at March 31, 2025 from $117.1 million at December 31, 2024 primarily due to deposit growth during the quarter.
Total investment securities decreased $53.8 million, or 3.7%, to $1.41 billion at March 31, 2025 from $1.47 billion at December 31, 2024. As previously noted, the Company sold $60.9 million of investment securities at a pre-tax loss of $3.9 million during the quarter as part of its strategic balance sheet repositioning. In addition, there were investment maturities and repayments of $36.8 million during the first quarter of 2025. The decrease was partially offset by investment security purchases of $28.2 million during the first quarter of 2025 and a $15.5 million decrease in unrealized losses on available for sale securities, due primarily to changes in market rates.
The following table summarizes the composition of the Company's investment securities portfolio at the dates indicated:
  March 31, 2025 December 31, 2024 Change
  Balance % of
Total		 Balance % of
Total		 $ %
  (Dollars in thousands)
Investment securities available for sale, at fair value:
U.S. government and agency securities $ 11,436  0.8  % $ 12,544  0.9  % $ (1,108) (8.8) %
Municipal securities 50,725  3.6  50,942  3.5  (217) (0.4)
Residential CMO and MBS(1)
 356,860  25.2  369,331  25.2  (12,471) (3.4)
Commercial CMO and MBS(1)
 275,840  19.6  309,741  21.0  (33,901) (10.9)
Corporate obligations 11,830  0.8  11,770  0.8  60  0.5 
Other asset-backed securities 9,651  0.7  10,066  0.7  (415) (4.1)
Total $ 716,342  50.7  % $ 764,394  52.1  % $ (48,052) (6.3) %
2

  March 31, 2025 December 31, 2024 Change
  Balance % of
Total		 Balance % of
Total		 $ %
  (Dollars in thousands)
Investment securities held to maturity, at amortized cost:
U.S. government and agency securities $ 151,246  10.7  % $ 151,216  10.3  % $ 30  —  %
Residential CMO and MBS(1)
 239,351  16.9  244,309  16.6  (4,958) (2.0)
Commercial CMO and MBS(1)
 306,964  21.7  307,760  21.0  (796) (0.3)
Total $ 697,561  49.3  % $ 703,285  47.9  % $ (5,724) (0.8) %
Total investment securities $ 1,413,903  100.0  % $ 1,467,679  100.0  % $ (53,776) (3.7) %
    (1) U.S. government agency and government-sponsored enterprise CMO and MBS

Loans receivable decreased $37.3 million, or 0.8%, to $4.76 billion at March 31, 2025 from $4.80 billion at December 31, 2024. New loans funded declined during the first quarter of 2025 to $95.8 million, as compared to $181.0 million during the fourth quarter of 2024; however, new loan commitments increased during the first quarter of 2025 to $201.0 million compared to $179.4 million during the first quarter of 2024 and reflect the seasonality of loan originations. Loan prepayments increased to $79.9 million during the quarter, compared to $44.4 million the prior quarter. Loan payoffs also increased to $47.5 million, compared to $23.8 million the prior quarter.
Commercial and industrial loans increased $8.1 million, or 1.0%, due primarily to new loan production of $25.6 million during the quarter, partially offset by pay downs on outstanding balances. Owner-occupied commercial real estate ("CRE") loans decreased $18.0 million, or 1.8%, due primarily to pay downs on outstanding balances, offset partially by new loan production of $23.3 million during the quarter. Non-owner occupied CRE loans increased $6.7 million, or 0.3%, due primarily to new loan production of $33.3 million during the quarter, offset by pay downs on outstanding balances. Residential construction and commercial and multifamily construction loans decreased $26.2 million or 5.5% due to pay downs on outstanding balances.
The following table summarizes the Company's loans receivable at the dates indicated:
March 31, 2025 December 31, 2024 Change
Balance % of Total Balance % of Total $ %
(Dollars in thousands)
Commercial business:
Commercial and industrial $ 850,764  17.9  % $ 842,672  17.5  % $ 8,092  1.0  %
Owner-occupied CRE
 985,272  20.7  1,003,243  20.9  (17,971) (1.8)
Non-owner occupied CRE 1,915,788  40.1  1,909,107  39.9  6,681  0.3 
Total commercial business 3,751,824  78.7  3,755,022  78.3  (3,198) (0.1)
Residential real estate
 393,301  8.3  402,954  8.4  (9,653) (2.4)
Real estate construction and land development:
Residential
 76,108  1.6  83,890  1.7  (7,782) (9.3)
Commercial and multifamily
 377,100  7.9  395,553  8.2  (18,453) (4.7)
Total real estate construction and land development 453,208  9.5  479,443  9.9  (26,235) (5.5)
Consumer 166,515  3.5  164,704  3.4  1,811  1.1 
Loans receivable $ 4,764,848  100.0  % $ 4,802,123  100.0  % $ (37,275) (0.8)

Total deposits increased $160.7 million, or 2.8%, to $5.85 billion at March 31, 2025 from $5.68 billion at December 31, 2024. Non-maturity deposits increased by $152.7 million, or 3.2%, from December 31, 2024 due primarily to new accounts opened during the quarter and transfers of funds into existing accounts. Certificates of deposit increased $8.0 million, or 0.8%, to $985.3 million at March 31, 2025 from $977.3 million at December 31, 2024, primarily due to new accounts opened during the quarter.
3

The following table summarizes the Company's total deposits at the dates indicated:
March 31, 2025 December 31, 2024 Change
Balance
 % of Total Balance % of Total $ %
(Dollars in thousands)
Noninterest demand deposits $ 1,621,890  27.7  % $ 1,654,955  29.1  % $ (33,065) (2.0) %
Interest bearing demand deposits 1,525,522  26.1  1,464,129  25.8  61,393  4.2 
Money market accounts 1,281,891  21.9  1,166,901  20.5  114,990  9.9 
Savings accounts 430,749  7.4  421,377  7.4  9,372  2.2 
Total non-maturity deposits 4,860,052  83.1  4,707,362  82.8  152,690  3.2 
Certificates of deposit 985,283  16.9  977,251  17.2  8,032  0.8 
Total deposits $ 5,845,335  100.0  % $ 5,684,613  100.0  % $ 160,722  2.8  %
Total borrowings decreased $118.6 million to $264.4 million at March 31, 2025 from $383.0 million at December 31, 2024. All outstanding borrowings at March 31, 2025 were with the Federal Home Loan Bank ("FHLB") and mature within one year.
Total stockholders' equity increased $18.0 million, or 2.1%, to $881.5 million at March 31, 2025 compared to $863.5 million at December 31, 2024 due primarily to $13.9 million of net income recognized for the quarter and an $11.9 million decrease in accumulated other comprehensive loss as a result of changes in market rates, offset partially by $8.3 million in dividends paid to common shareholders.
The Company and Bank continued to maintain capital levels in excess of the applicable regulatory requirements for them both to be categorized as “well-capitalized” at March 31, 2025.
The following table summarizes the capital ratios for the Company at the dates indicated:
March 31,
2025		 December 31,
2024
Stockholders' equity to total assets 12.4% 12.2%
Tangible common equity to tangible assets (1)
 9.3 9.0
Common equity tier 1 capital ratio (2)
 12.2 12.0
Leverage ratio (2)
 10.2 10.0
Tier 1 capital ratio (2)
 12.6 12.4
Total capital ratio (2)
 13.6 13.3

(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 1.09% at March 31, 2025 and December 31, 2024. During the first quarter of 2025, the Company recorded a $9,000 reversal of provision for credit losses on loans, compared to a $1.1 million provision for credit losses on loans during the fourth quarter of 2024. The reversal of provision for credit losses on loans during the quarter was due primarily to a decline in loan balances. Net charge-offs for the first quarter of 2025 were $299,000.
During the first quarter of 2025, the Company recorded a $60,000 provision for credit losses on unfunded commitments compared to a $79,000 provision during the fourth quarter of 2024. The provision for credit losses on unfunded commitments during the first quarter of 2025 was due primarily to an increase in the unfunded exposure on loans.
4

The following table provides detail on the changes in the ACL on loans and the ACL on unfunded commitments, and the related provision for (reversal of) credit losses for the periods indicated:
As of or for the Quarter Ended
March 31, 2025 December 31, 2024 March 31, 2024
ACL on Loans ACL on Unfunded Total ACL on Loans ACL on Unfunded Total ACL on Loans ACL on Unfunded Total
(Dollars in thousands)
Balance, beginning of period $ 52,468  $ 587  $ 53,055  $ 51,391  $ 508  $ 51,899  $ 47,999  $ 1,288  $ 49,287 
(Reversal of) provision for credit losses (9) 60  51  1,104  79  1,183  1,704  (312) 1,392 
(Net charge-offs) / recoveries (299) —  (299) (27) —  (27) 33  —  33 
Balance, end of period $ 52,160  $ 647  $ 52,807  $ 52,468  $ 587  $ 53,055  $ 49,736  $ 976  $ 50,712 

Credit Quality
The percentage of classified loans to loans receivable remained stable at 1.4% at March 31, 2025 and December 31, 2024. Classified loans include loans rated substandard or worse.
The following table illustrates total loans by risk rating and their respective percentage of total loans at the dates indicated:
March 31, 2025 December 31, 2024
Balance % of Total Balance % of Total
(Dollars in thousands)
Risk Rating:
Pass $ 4,586,757  96.2  % $ 4,623,080  96.3  %
Special Mention 113,704  2.4  110,725  2.3 
Substandard 64,387  1.4  68,318  1.4 
Total $ 4,764,848  100.0  % $ 4,802,123  100.0  %
Changes in nonaccrual loans during the periods indicated were as follows:
Quarter Ended
March 31,
2025		 December 31,
2024		 March 31,
2024
(Dollars in thousands)
Balance, beginning of period $ 4,079  $ 4,301  $ 4,468 
Additions 832  160  593 
Net principal payments and transfers to accruing status (214) (250) (269)
Payoffs (38) (132) — 
Charge-offs (221) —  — 
Balance, end of period $ 4,438  $ 4,079  $ 4,792 
Nonaccrual loans to loans receivable 0.09  % 0.08  % 0.11  %

Liquidity
Total liquidity sources available at March 31, 2025 were $2.54 billion. This includes 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 March 31, 2025 represented a coverage ratio of 43.5% of total deposits and 109.3% of estimated uninsured deposits.
5

The following table summarizes the Company's available liquidity:
Quarter Ended
March 31,
2025		 December 31,
2024
(Dollars in thousands)
On-balance sheet liquidity
Cash and cash equivalents $ 248,660  $ 117,100 
Unencumbered investment securities available for sale (1)
 698,132  746,163 
Total on-balance sheet liquidity
 $ 946,792  $ 863,263 
Off-balance sheet liquidity
FRB borrowing availability $ 365,624  $ 360,104 
FHLB borrowing availability (2)
 1,084,304  976,288 
Fed funds line borrowing availability with correspondent banks 145,000  145,000 
Total off-balance sheet liquidity
 $ 1,594,928  $ 1,481,392 
Total available liquidity $ 2,541,720  $ 2,344,655 
(1) Investment securities available for sale at fair value.
(2) Includes FHLB total borrowing availability of $1.35 billion at March 31, 2025 based on pledged assets, however, maximum credit capacity is 45% of the Bank's total assets one quarter in arrears or $3.20 billion.

Net Interest Margin and Net Interest Income
The net interest margin increased eight basis points to 3.44% during the first quarter of 2025 from 3.36% during the fourth quarter of 2024.
The yield on interest earning assets increased two basis points to 4.95% for the first quarter of 2025 compared to 4.93% for the fourth quarter of 2024 due to the change in mix of earning assets to higher yielding assets as average loan balances increased by $76.2 million while average balances of investment securities declined by $86.7 million. The yield on loans receivable decreased two basis points to 5.45% during the first quarter of 2025 compared to 5.47% during the fourth quarter of 2024 as loans indexed to Prime or SOFR repriced at lower rates due to reductions in the federal funds rate occurring late in the fourth quarter of 2024.
The cost of interest bearing deposits decreased six basis points to 1.92% for the first quarter of 2025 from 1.98% for the fourth quarter of 2024. This decrease was primarily due to a decrease in certificate of deposit rates during the quarter.
Net interest income decreased $73,000, or 0.1%, during the first quarter of 2025 compared to the fourth quarter of 2024 due primarily to the first quarter of 2025 including fewer days than the fourth quarter of 2024. Total interest expense decreased $1.5 million during the quarter offset by a decrease in total interest income of $1.6 million.
The net interest margin increased 15 basis points to 3.44% from 3.29% compared to the same period in the prior year. Net interest income increased $2.2 million, or 4.2%, during the first quarter of 2025 compared to the first quarter of 2024. The increase was due primarily to an increase in yields earned on interest earning assets following increases in market interest rates and a decrease in borrowing interest expense due to lower average borrowing balances, partially offset by an increase in deposit interest expense resulting from increased deposit average balances and rates.
The following table provides relevant net interest income information for the periods indicated:
  Quarter Ended
  March 31, 2025 December 31, 2024 March 31, 2024
  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)
 $ 4,793,917  $ 64,436  5.45  % $ 4,717,748  $ 64,864  5.47  % $ 4,352,130  $ 57,862  5.35  %
Taxable securities 1,427,976  11,739  3.33  1,514,210  12,510  3.29  1,810,709  14,834  3.29 
Nontaxable securities (3)
 15,686  139  3.59  16,138  146  3.60  21,302  181  3.42 
Interest earning deposits 96,118  1,052  4.44  119,275  1,440  4.80  108,733  1,476  5.46 
Total interest earning assets 6,333,697  77,366  4.95  % 6,367,371  78,960  4.93  % 6,292,874  74,353  4.75  %
Noninterest earning assets 769,530  781,923  799,578 
Total assets $ 7,103,227  $ 7,149,294  $ 7,092,452 
Interest Bearing Liabilities:
Certificates of deposit $ 980,336  $ 9,670  4.00  % $ 947,929  $ 10,070  4.23  % $ 733,816  $ 7,671  4.20  %
6

  Quarter Ended
  March 31, 2025 December 31, 2024 March 31, 2024
  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)
Savings accounts 426,321  293  0.28  432,287  280  0.26  475,075  230  0.19 
Interest bearing demand and money market accounts 2,705,686  9,526  1.43  2,631,577  9,622  1.45  2,659,999  8,487  1.28 
Total interest bearing deposits 4,112,343  19,489  1.92  4,011,793  19,972  1.98  3,868,890  16,388  1.70 
Junior subordinated debentures 22,086  471  8.65  22,019  512  9.25  21,800  547  10.09 
Borrowings 320,286  3,716  4.71  373,493  4,713  5.02  500,660  5,888  4.73 
Total interest bearing liabilities 4,454,715  23,676  2.16  % 4,407,305  25,197  2.27  % 4,391,350  22,823  2.09  %
Noninterest demand deposits 1,631,268  1,703,357  1,657,132 
Other noninterest bearing liabilities 150,615  170,324  197,023 
Stockholders’ equity 866,629  868,308  846,947 
Total liabilities and stockholders’ equity $ 7,103,227  $ 7,149,294  $ 7,092,452 
Net interest income and spread $ 53,690  2.79  % $ 53,763  2.66  % $ 51,530  2.66  %
Net interest margin 3.44  % 3.36  % 3.29  %
(1) Annualized; average balances are calculated using daily balances.
(2) Average loans receivable includes loans held for sale and loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable includes the amortization of net deferred loan fees of $753,000, $878,000 and $809,000 for the first quarter of 2025, fourth quarter of 2024 and first quarter of 2024, respectively.
(3) Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.

Noninterest Income
Noninterest income increased $613,000 to $3.9 million during the first quarter of 2025 from $3.3 million during the fourth quarter of 2024. The increase was due primarily to an increase in bank owned life insurance ("BOLI") income as the fourth quarter of 2024 BOLI income included $508,000 in costs related to a BOLI restructuring. Interest rate swap fees declined due to lower activity during the first quarter of 2025.
Noninterest income increased $6.8 million from the same period in 2024 due primarily to the decrease in loss resulting from the above-referenced sale of investment securities recognized in the first quarter of 2025 as part of the strategic repositioning of the balance sheet, compared to the loss recognized in the same quarter in 2024 in connection with the prior balance sheet repositioning transaction.
The following table presents the key components of noninterest income and the change for the periods indicated:
Quarter Ended Quarter Over Quarter Change
Prior Year
Quarter Change
March 31,
2025		 December 31,
2024		 March 31,
2024		 $ % $ %
(Dollars in thousands)
Service charges and other fees $ 2,975  $ 2,892  $ 2,788  $ 83  2.9  % $ 187  6.7  %
Card revenue 1,733  1,849  1,839  (116) (6.3) (106) (5.8)
Loss on sale of investment securities (3,887) (3,903) (9,973) 16  0.4  6,086  61.0 
Gain on sale of loans, net —  —  26  —  —  (26) (100.0)
Interest rate swap fees —  357  —  (357) (100.0) —  — 
Bank owned life insurance income 918  256  920  662  258.6  (2) (0.2)
Gain on sale of other assets, net 3  23  —  (20) (87.0) 3  — 
Other income 2,161  1,816  1,500  345  19.0  661  44.1 
Total noninterest income (loss)
 $ 3,903  $ 3,290  $ (2,900) $ 613  18.6  % $ 6,803  234.6  %

Noninterest Expense
Noninterest expense increased $1.8 million, or 4.7%, during the first quarter of 2025 from the fourth quarter of 2024 due primarily to an increase in compensation and employee benefits due to an increase in benefit costs and higher payroll taxes paid in the first quarter each year.
7

Noninterest expense increased $1.0 million, or 2.5%, during the first quarter of 2025 compared to the same period in 2024. Data processing expense increased due to annual cost increases and a $230,000 refund recognized in the first quarter of 2024 related to a contract termination.
The following table presents the key components of noninterest expense and the change for the periods indicated:
Quarter Ended Quarter Over Quarter Change Prior Year Quarter Change
March 31,
2025		 December 31,
2024		 March 31,
2024		 $ % $ %
(Dollars in thousands)
Compensation and employee benefits $ 25,799  $ 24,236  $ 25,476  $ 1,563  6.4  % $ 323  1.3  %
Occupancy and equipment 4,926  4,742  4,932  184  3.9  (6) (0.1)
Data processing 3,897  4,020  3,331  (123) (3.1) 566  17.0 
Marketing 335  405  211  (70) (17.3) 124  58.8 
Professional services 734  663  567  71  10.7  167  29.5 
State/municipal business and use taxes
 1,220  1,180  1,300  40  3.4  (80) (6.2)
Federal deposit insurance premium 812  829  795  (17) (2.1) 17  2.1 
Amortization of intangible assets 303  399  421  (96) (24.1) (118) (28.0)
Other expense 3,357  3,066  3,337  291  9.5  20  0.6 
Total noninterest expense $ 41,383  $ 39,540  $ 40,370  $ 1,843  4.7  % $ 1,013  2.5  %

Income Tax Expense
Income tax expense decreased $2.2 million during the first quarter of 2025 to $2.2 million compared to $4.4 million for the fourth quarter of 2024. The decrease in income tax expense during the first quarter of 2025 compared to the prior quarter was primarily due to additional tax expense of $2.4 million related to the BOLI restructuring during the fourth quarter of 2024.
Income tax expense increased $1.1 million in the first quarter of 2025 compared to same period in 2024 due to higher pre-tax income during the first quarter of 2025.
The following table presents the income tax expense and related metrics and the change for the periods indicated:
Quarter Ended Change
March 31,
2025		 December 31,
2024		 March 31,
2024
Quarter Over Quarter
Prior Year Quarter
(Dollars in thousands)
Income before income taxes $ 16,159  $ 16,330  $ 6,868  $ (171) $ 9,291 
Income tax expense $ 2,248  $ 4,402  $ 1,120  $ (2,154) $ 1,128 
Effective income tax rate 13.9  % 27.0  % 16.3  % (13.1) % (2.4) %

Dividends
On April 23, 2025, the Company’s Board of Directors declared a quarterly cash dividend of $0.24 per share. The dividend is payable on May 21, 2025 to shareholders of record as of the close of business on May 7, 2025.

Earnings Conference Call
The Company will hold a telephone conference call to discuss this earnings release on Thursday, April 24, 2025 at 10:00 a.m. Pacific time. To access the call, please dial (833) 470-1428 -- access code 817868 a few minutes prior to 10:00 a.m. Pacific time. The call will be available for replay through May 1, 2025 by dialing (866) 813-9403 -- access code 202025.
About Heritage Financial Corporation
Heritage Financial Corporation is an Olympia, Washington-based bank holding company with Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary. Heritage Bank has a network of 50 branches and one loan production office in Washington, Oregon and Idaho. Heritage Bank does business under the Whidbey Island Bank name on Whidbey Island, Washington. The Company's stock is traded on the Nasdaq Global Select Market under the symbol “HFWA.” More information about Heritage Financial Corporation 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.


8

Contact
Jeff Deuel, Chief Executive Officer, (360) 943-1500
Bryan McDonald, President, (360) 943-1500
Don Hinson, Executive Vice President and Chief Financial Officer, (360) 943-1500

Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include 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. 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, a potential recession or slowed economic growth; effects on the U.S. economy resulting from the threat or implementation of, or changes to existing, policies and executive orders, including tariffs, immigration policy, regulatory and other governmental agencies, foreign policy, and tax regulations; changes in the interest rate environment 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 in response thereto; legislative or regulatory changes that adversely affect our business, including changes in banking, securities, and tax law, in regulatory policies and principles, or the interpretation and prioritization of such rules and regulations; credit and interest rate risks associated with our business, customers, borrowings, repayment, investment, and deposit practices; fluctuations in deposits and deposit concentrations; 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 (by type of geographic area, collateral and industry) within our loan portfolio; 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 our critical processing functions for our business, including sophisticated attacks using artificial intelligence and similar tools; rapid technological change in the financial services industry; 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, and financial technology companies; effects of critical accounting policies and judgments, including the use of estimates in determining the 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; loss of, or inability to attract, key personnel; the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business and the businesses of our clients; 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; 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. 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.
9

HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(Dollars in thousands, except shares)
March 31, 2025 December 31,
2024
Assets
Cash on hand and in banks $ 89,072  $ 58,821 
Interest earning deposits 159,588  58,279 
Cash and cash equivalents 248,660  117,100 
Investment securities available for sale, at fair value (amortized cost of $772,086 and $835,592, respectively)
 716,342  764,394 
Investment securities held to maturity, at amortized cost (fair value of $632,648 and $623,452, respectively)
 697,561  703,285 
Total investment securities 1,413,903  1,467,679 
Loans receivable 4,764,848  4,802,123 
Allowance for credit losses on loans (52,160) (52,468)
Loans receivable, net 4,712,688  4,749,655 
Premises and equipment, net 71,079  71,580 
Federal Home Loan Bank stock, at cost 16,160  21,538 
Bank owned life insurance 112,656  111,699 
Accrued interest receivable 19,651  19,483 
Prepaid expenses and other assets 291,276  303,452 
Other intangible assets, net 2,850  3,153 
Goodwill 240,939  240,939 
Total assets $ 7,129,862  $ 7,106,278 
Liabilities and Stockholders' Equity
Non-interest bearing deposits
 1,621,890  1,654,955 
Interest bearing deposits
 4,223,445  4,029,658 
Total deposits
 5,845,335  5,684,613 
Borrowings 264,400  383,000 
Junior subordinated debentures 22,131  22,058 
Accrued expenses and other liabilities 116,481  153,080 
Total liabilities 6,248,347  6,242,751 
Common stock 532,124  531,674 
Retained earnings 392,737  387,097 
Accumulated other comprehensive loss, net (43,346) (55,244)
Total stockholders' equity 881,515  863,527 
Total liabilities and stockholders' equity $ 7,129,862  $ 7,106,278 
Shares outstanding 34,105,516  33,990,827 

10

HERITAGE FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
Quarter Ended
March 31,
2025		 December 31,
2024		 March 31,
2024
Interest Income
Interest and fees on loans $ 64,436  $ 64,864  $ 57,862 
Taxable interest on investment securities 11,739  12,510  14,834 
Nontaxable interest on investment securities 139  146  181 
Interest on interest earning deposits 1,052  1,440  1,476 
Total interest income 77,366  78,960  74,353 
Interest Expense
Deposits 19,489  19,972  16,388 
Junior subordinated debentures 471  512  547 
Borrowings 3,716  4,713  5,888 
Total interest expense 23,676  25,197  22,823 
Net interest income 53,690  53,763  51,530 
Provision for credit losses 51  1,183  1,392 
Net interest income after provision for credit losses 53,639  52,580  50,138 
Noninterest Income
Service charges and other fees 2,975  2,892  2,788 
Card revenue 1,733  1,849  1,839 
Loss on sale of investment securities, net (3,887) (3,903) (9,973)
Gain on sale of loans, net —  —  26 
Interest rate swap fees —  357  — 
Bank owned life insurance income 918  256  920 
Gain on sale of other assets, net 3  23  — 
Other income 2,161  1,816  1,500 
Total noninterest income (loss) 3,903  3,290  (2,900)
Noninterest Expense
Compensation and employee benefits 25,799  24,236  25,476 
Occupancy and equipment 4,926  4,742  4,932 
Data processing 3,897  4,020  3,331 
Marketing 335  405  211 
Professional services 734  663  567 
State/municipal business and use taxes 1,220  1,180  1,300 
Federal deposit insurance premium 812  829  795 
Amortization of intangible assets 303  399  421 
Other expense 3,357  3,066  3,337 
Total noninterest expense 41,383  39,540  40,370 
Income before income taxes 16,159  16,330  6,868 
Income tax expense 2,248  4,402  1,120 
Net income $ 13,911  $ 11,928  $ 5,748 
Basic earnings per share $ 0.41  $ 0.35  $ 0.17 
Diluted earnings per share $ 0.40  $ 0.34  $ 0.16 
Dividends declared per share $ 0.24  $ 0.23  $ 0.23 
Average shares outstanding - basic 34,012,490 34,109,339 34,825,471
Average shares outstanding - diluted 34,506,238 34,553,139 35,227,138
11


HERITAGE FINANCIAL CORPORATION
FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands)
Nonperforming Assets and Credit Quality Metrics:
Quarter Ended
March 31, 2025 December 31,
2024		 March 31,
2024
Allowance for Credit Losses on Loans:
Balance, beginning of period $ 52,468  $ 51,391  $ 47,999 
(Reversal of) provision for credit losses on loans
 (9) 1,104  1,704 
Charge-offs:
Commercial business (222) (4) (77)
Consumer (154) (92) (123)
Total charge-offs (376) (96) (200)
Recoveries:
Commercial business 26  48  217 
Consumer 51  21  16 
Total recoveries 77  69  233 
Net (charge-offs) recoveries (299) (27) 33 
Balance, end of period $ 52,160  $ 52,468  $ 49,736 
Net charge-offs on loans to average loans receivable (1)
 0.03  % —  % —  %
(1) Annualized.
March 31, 2025 December 31,
2024
Nonperforming Assets:
Nonaccrual loans:
Commercial business $ 3,455  $ 3,919 
Residential real estate
 832  — 
Consumer 151  160 
Total nonaccrual loans 4,438  4,079 
Accruing loans past due 90 days or more
 —  1,195 
Total nonperforming loans
 4,438  5,274 
Other real estate owned —  — 
Nonperforming assets $ 4,438  $ 5,274 
ACL on loans to:
Loans receivable 1.09  % 1.09  %
Nonaccrual loans 1,175.30  1,286.30 
Nonaccrual loans to loans receivable
 0.09  0.08 
Nonperforming loans to loans receivable
 0.09  0.11 
Nonperforming assets to total assets 0.06  0.07 

12

HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
  Quarter Ended
  March 31,
2025		 December 31,
2024		 September 30,
2024		 June 30,
2024		 March 31,
2024
Earnings:        
Net interest income $ 53,690  $ 53,763  $ 52,958  $ 51,113  $ 51,530 
Provision for credit losses 51  1,183  2,439  1,268  1,392 
Noninterest income (loss)
 3,903  3,290  1,837  5,246  (2,900)
Noninterest expense 41,383  39,540  39,290  39,096  40,370 
Net income 13,911  11,928  11,423  14,159  5,748 
Basic earnings per share $ 0.41  $ 0.35  $ 0.33  $ 0.41  $ 0.17 
Diluted earnings per share $ 0.40  $ 0.34  $ 0.33  $ 0.41  $ 0.16 
Average Balances:    
Loans receivable (2)
 $ 4,793,917  $ 4,717,748  $ 4,606,856  $ 4,466,499  $ 4,352,130 
Total investment securities 1,443,662  1,530,348  1,622,011  1,704,607  1,832,011 
Total interest earning assets 6,333,697  6,367,371  6,379,251  6,292,645  6,292,874 
Total assets 7,103,227  7,149,294  7,182,921  7,106,791  7,092,452 
Total interest bearing deposits 4,112,343  4,011,793  3,997,496  3,916,977  3,868,890 
Total noninterest demand deposits 1,631,268  1,703,357  1,677,984  1,638,262  1,657,132 
Stockholders' equity 866,629  868,308  857,799  843,438  846,947 
Financial Ratios:    
Return on average assets (3)
 0.79  % 0.66  % 0.63  % 0.80  % 0.33  %
Return on average common equity (3)
 6.51  5.46  5.30  6.75  2.73 
Return on average tangible common equity (1)(3)
 9.22  7.81  7.62  9.74  4.07 
Adjusted return on average tangible common equity (1)(3)
 11.21  11.59  10.42  10.74  9.34 
Efficiency ratio 71.9  69.3  71.7  69.4  83.0 
Adjusted efficiency ratio (1)
 67.3  64.4  65.2  67.1  68.9 
Noninterest expense to average total assets (3)
 2.36  2.20  2.18  2.21  2.29 
Net interest spread (3)
 2.79  2.66  2.59  2.58  2.66 
Net interest margin (3)
 3.44  3.36  3.30  3.27  3.29 
(1) Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” section for a reconciliation to the comparable GAAP financial measure.
(2) Average loans receivable includes loans held for sale.
(3) Annualized.













13

HERITAGE FINANCIAL CORPORATION
QUARTERLY FINANCIAL STATISTICS (Unaudited)
(Dollars in thousands, except per share amounts)
  As of or for the Quarter Ended
  March 31,
2025		 December 31,
2024		 September 30,
2024		 June 30,
2024		 March 31,
2024
Select Balance Sheet:      
Total assets $ 7,129,862  $ 7,106,278  $ 7,153,363  $ 7,059,857  $ 7,091,283 
Loans receivable
 4,764,848  4,802,123  4,679,479  4,532,615  4,428,165 
Total investment securities 1,413,903  1,467,679  1,572,179  1,658,590  1,730,516 
Total deposits 5,845,335  5,684,613  5,708,492  5,515,652  5,532,327 
Noninterest demand deposits 1,621,890  1,654,955  1,682,219  1,599,367  1,637,111 
Stockholders' equity 881,515  863,527  874,514  850,507  847,580 
Financial Measures:  
Book value per share $ 25.85  $ 25.40  $ 25.61  $ 24.66  $ 24.43 
Tangible book value per share (1)
 18.70  18.22  18.45  17.56  17.36 
Stockholders' equity to total assets 12.4  % 12.2  % 12.2  % 12.0  % 12.0  %
Tangible common equity to tangible assets (1)
 9.3  9.0  9.1  8.9  8.8 
Loans to deposits ratio 81.5  84.5  82.0  82.2  80.0 
Regulatory Capital Ratios:(2)
Common equity tier 1 capital ratio
 12.2  % 12.0  % 12.3  % 12.6  % 12.6  %
Leverage ratio
 10.2  10.0  9.9  10.1  10.0 
Tier 1 capital ratio
 12.6  12.4  12.7  13.0  13.0 
Total capital ratio
 13.6  13.3  13.6  13.9  13.9 
Credit Quality Metrics:  
ACL on loans to:
Loans receivable 1.09  % 1.09  % 1.10  % 1.13  % 1.12  %
Nonaccrual loans
 1,175.3  1,286.3  1,194.9  1,338.7  1,037.9 
Nonaccrual loans to loans receivable
 0.09  0.08  0.09  0.08  0.11 
Nonperforming loans to loans receivable 0.09  0.11  0.21  0.18  0.17 
Nonperforming assets to total assets 0.06  0.07  0.13  0.12  0.10 
Net charge-offs (recoveries) on loans to average loans receivable (3)
 0.03  0.00  0.22  0.00  0.00 
Criticized Loans by Credit Quality Rating:
Special mention $ 113,704  $ 110,725  $ 99,078  $ 93,694  $ 102,232 
Substandard 64,387  68,318  71,977  82,496  70,183 
Other Metrics:
Number of branches 50  50  50  50  50 
Deposits per branch $ 116,907  $ 113,692  $ 114,170  $ 110,313  $ 110,647 
Average number of full-time equivalent employees 757  751  749  748  765 
Average assets per full-time equivalent employee 9,383  9,520  9,590  9,501  9,271 
(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.
14

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 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.
March 31,
2025		 December 31,
2024		 September 30,
2024		 June 30,
2024		 March 31,
2024
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share:
Total stockholders' equity (GAAP) $ 881,515  $ 863,527  $ 874,514  $ 850,507  $ 847,580 
Exclude intangible assets (243,789) (244,092) (244,491) (244,890) (245,311)
Tangible common equity (non-GAAP) $ 637,726  $ 619,435  $ 630,023  $ 605,617  $ 602,269 
Total assets (GAAP) $ 7,129,862  $ 7,106,278  $ 7,153,363  $ 7,059,857  $ 7,091,283 
Exclude intangible assets (243,789) (244,092) (244,491) (244,890) (245,311)
Tangible assets (non-GAAP) $ 6,886,073  $ 6,862,186  $ 6,908,872  $ 6,814,967  $ 6,845,972 
Stockholders' equity to total assets (GAAP) 12.4  % 12.2  % 12.2  % 12.0  % 12.0  %
Tangible common equity to tangible assets (non-GAAP)
 9.3  % 9.0  % 9.1  % 8.9  % 8.8  %
Shares outstanding 34,105,516  33,990,827  34,153,539  34,496,197  34,689,843 
Book value per share (GAAP) $ 25.85  $ 25.40  $ 25.61  $ 24.66  $ 24.43 
Tangible book value per share (non-GAAP) $ 18.70  $ 18.22  $ 18.45  $ 17.56  $ 17.36 























15

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
March 31,
2025		 December 31,
2024		 September 30,
2024		 June 30,
2024		 March 31,
2024
Return on Average Tangible Common Equity, annualized:
Net income (GAAP) $ 13,911  $ 11,928  $ 11,423  $ 14,159  $ 5,748 
Add amortization of intangible assets 303  399  399  421  421 
Exclude tax effect of adjustment (64) (84) (84) (88) (88)
Tangible net income (non-GAAP) $ 14,150  $ 12,243  $ 11,738  $ 14,492  $ 6,081 
Tangible net income (non-GAAP) $ 14,150  $ 12,243  $ 11,738  $ 14,492  $ 6,081 
Exclude loss on sale of investment securities, net
 3,887  3,903  6,945  1,921  9,973 
Exclude gain on sale of premises and equipment (3) (23) (1,480) (49) — 
Exclude tax effect of adjustment (816) (815) (1,148) (393) (2,094)
Exclude BOLI restructuring costs included in BOLI Income —  508  —  —  — 
Exclude tax expense related to BOLI restructuring —  2,371  —  —  — 
Adjusted tangible net income (non-GAAP) $ 17,218  $ 18,187  $ 16,055  $ 15,971  $ 13,960 
Average stockholders' equity (GAAP) $ 866,629  $ 868,308  $ 857,799  $ 843,438  $ 846,947 
Exclude average intangible assets (243,945) (244,302) (244,706) (245,106) (245,536)
Average tangible common stockholders' equity (non-GAAP) $ 622,684  $ 624,006  $ 613,093  $ 598,332  $ 601,411 
Return on average common equity, annualized (GAAP) 6.51  % 5.46  % 5.30  % 6.75  % 2.73  %
Return on average tangible common equity, annualized (non-GAAP) 9.22  % 7.81  % 7.62  % 9.74  % 4.07  %
Adjusted return on average tangible common equity, annualized (non-GAAP) 11.21  % 11.59  % 10.42  % 10.74  % 9.34  %











16

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

The Company believes that presenting an adjusted efficiency 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
March 31,
2025		 December 31,
2024		 September 30,
2024		 June 30,
2024		 March 31,
2024
Adjusted Efficiency Ratio :
Total noninterest expense (GAAP) $ 41,383  $ 39,540  $ 39,290  $ 39,096  $ 40,370 
Net interest income (GAAP) $ 53,690  $ 53,763  $ 52,958  $ 51,113  $ 51,530 
Total noninterest income (GAAP) $ 3,903  $ 3,290  $ 1,837  $ 5,246  $ (2,900)
Exclude loss on sale of investment securities, net
 3,887  3,903  6,945  1,921  9,973 
Exclude gain on sale of premises and equipment
 (3) (23) (1,480) (49) — 
Exclude BOLI restructuring costs included in BOLI Income —  508  —  —  — 
Adjusted total noninterest income (non-GAAP) $ 7,787  $ 7,678  $ 7,302  $ 7,118  $ 7,073 
Efficiency ratio (GAAP) 71.9  % 69.3  % 71.7  % 69.4  % 83.0  %
Adjusted efficiency ratio (non-GAAP) 67.3  % 64.4  % 65.2  % 67.1  % 68.9  %

17
EX-99.2 3 investorpresentationq125.htm EX-99.2 investorpresentationq125
INVESTOR PRESENTATION Q1 2025

 
2 This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include 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. 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 Heritage Financial Corporation (the "Company") has lending relationships, or other aspects of the Company’s 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 potential recession or slowed economic growth; • changes in the interest rate environment, 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 in response thereto; • 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; • legislative or regulatory changes that adversely affect our business, including changes in banking, securities, and tax law, in regulatory policies and principles, or the interpretation and prioritization of such rules and regulations; • effects on the U.S. economy resulting from the implementation of proposed policies and executive orders, including the imposition of tariffs, changes to immigration policy, changes to regulatory and other government agencies and changes to tax regulations; • credit and interest rate risks associated with the Company’s businesses, customers, borrowings, repayment, investment, and deposit practices; • fluctuations in deposits and deposit concentrations; • 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 (by type of geographic area, collateral and industry) within our loan portfolio; • 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; • rapid technological change in the financial services industry; • increased competition in the financial services industry from non-banks such as credit unions and Fintech 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, and financial technology companies; • 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 the Company may become subject; • loss of, or inability to attract, key personnel; • the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business and the businesses of our clients; • 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; and • our success at managing and responding to the risks involved in the foregoing items. You should also consider the risks, assumptions and uncertainties set forth in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2024, as well as those set forth in other reports we file with or furnish 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. These risks, assumptions and uncertainties should be considered in evaluating any forward-looking statements, and undue reliance should not be placed on such statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statement, whether to reflect events or circumstances after the date on which the statement is made, to reflect new information or the occurrence of unanticipated events, or otherwise. Except as otherwise indicated, this presentation speaks as of March 31, 2025. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company after such date. Certain of the information contained herein may be derived from information provided by industry sources. We believe that such information is accurate and that the sources from which it has been obtained are reliable. We cannot guarantee the accuracy of such information, however, and we have not independently verified such information. Non-GAAP Financial Information The Company reports its results in accordance with United States generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures used in managing the business may provide meaningful information about underlying trends in its business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP. Slides containing a discussion and reconciliation of non-GAAP financial measures are contained in the Appendix - Reconciliation of Non-GAAP Financial Measures and Quarterly Financial Statistics hereto. All dollars amounts presented throughout the entire presentation are in millions unless otherwise noted, except per share amounts. Percentages presented may not total 100% due to rounding. All tables and charts are as of March 31, 2025 unless otherwise indicated. FORWARD LOOKING STATEMENTS

 
HERITAGE FINANCIAL CORPORATION OVERVIEW

 
4 OVERVIEW General Overview Nasdaq symbol HFWA Stock price(2) $21.88 Market capitalization(2) $744 million Institutional ownership(2) 81.2% Headquarters Olympia, WA # of branches 50 Year established 1927 Q1 2025 Financial Highlights Assets $7.1 billion Deposits $5.8 billion Loans receivable $4.8 billion Net income $13.9 million Net interest margin 3.44% ROAE(3) 6.51% ROATCE(1)(4) 9.22% Adjusted ROATCE(1)(4) 11.21% Efficiency ratio 71.9% Adjusted efficiency ratio(1) 67.3% Leverage ratio 10.2% Total capital ratio 13.6% Map obtained from S&P Global Market Intelligence; certain locations of branches overlap on the map. (1) Represents a non-GAAP financial measure (2) Market information as of April 21, 2025. (3) Return on average equity (4) Return on average tangible common equity Metropolitan Statistical Areas Seattle-Tacoma-Bellevue, WA Portland-Vancouver-Hillsboro, OR-WA Eugene-Springfield, OR Boise–Nampa, ID Heritage Location Spokane

 
5 COMPANY STRATEGY Allocate capital to organically grow our core banking business Ÿ Successful hiring of individuals and teams of bankers in high-growth and dynamic Seattle and Portland markets as well as other key markets including our recent branch openings in Eugene, Oregon and Boise, Idaho and loan production office in Spokane, Washington Ÿ Disciplined approach to concentration risk and active portfolio management Improve operational efficiencies and rationalize branch network Ÿ Focused on achieving increased efficiencies with operational scale, internal focus on improving processes and technology solutions Ÿ Closed/Consolidated 36 branches since the beginning of 2010, including 12 branches in 2021 and one branch in 2023 Ÿ Full-time equivalent employee decreased to 757 at March 31, 2025 compared to 803 at December 31, 2023 Generate stable profitability and risk adjusted returns Ÿ Adjusted return on average tangible common equity(1) ("ROATCE") averaged 12.7% from 2022 to 2024. Ÿ Five-year growth in tangible book value(1) of $3.60, or 23.8%, to $18.70 at March 31, 2025 from $15.10 at March 31, 2020 Remain active and disciplined in M&A Ÿ Five acquisitions in Washington and Oregon since 2013 Ÿ Target metrics = IRR of >15% with earnbacks < 3 years Maintain conservative underwriting standards and actively manage the loan portfolio Ÿ Long track record of strong underwriting with conservative risk profile Ÿ Disciplined approach to concentration risk Ÿ Nonaccrual loans to loans receivable at 0.09% at March 31, 2025 Focus on core deposits to increase franchise value over the long term Ÿ 27.7% noninterest demand deposits to total deposits at March 31, 2025 Ÿ 1.38% cost of total deposits; top 10% performance among US publicly traded banks in Q4 2024 Engage in proactive capital management Ÿ History of increasing regular dividends and utilizing special dividends to manage capital Ÿ In April 2024, approved a stock repurchase plan up to 5% of the Company's outstanding common shares or approximately 1.7 million shares Ÿ Strong capital ratios: leverage ratio(3) = 10.2%; total capital ratio(3) = 13.6% (1) Represents a non-GAAP financial measure (2) Comparable cost of total deposits provided by S&P Global Market Intelligence for the fourth quarter of 2024 and includes banks nationwide with shares on Nasdaq or NYSE with total assets less than $100 billion excluding pending merger targets (3) Current quarter capital ratios are estimates pending completion and filing of the Company's regulatory reports

 
6 PROFITABILITY IMPROVEMENT MEASURES 2023 TOTAL 2024 TOTAL Q1 2025 GRAND TOTAL Quarterly Impact Investments Sold (Book Value) $161.8 $296.4 $60.9 $519.1 Weighted Average Book Yield of Sales 2.41% 2.23% 2.60% 2.33% Investments Purchased $140.7 $33.1 $28.2 $202.0 Weighted Average Book Yield of Purchases 6.08% 6.05% 4.55% 5.86% Loss on Sale of Investments $10.0 $22.7 $3.9 $36.6 Quarterly Estimated EPS Impact $(0.22) $(0.51) $(0.09) $(0.82) Estimated Annualized Profitability Improvement Estimated Annualized Pre-Tax Financial Impact $5.4 $11.9 $1.7 $19.0 Estimated Annualized EPS Impact $0.12 $0.26 $0.04 $0.42 Balance Sheet Repositioning The Company has completed investment sales over the past several quarters as part of strategic repositioning of the balance sheet. Estimated annualized profitability improvements assumes all proceeds invested in new loan fundings or investment purchases.

 
7 $113,456 $94,748 $86,463 $78,770 Median household income 4.1% 3.5% 9.9% 5.0% 0.3% 9.7% 3.8% 7.3% 13.3% 4.0% 2.4% 8.8% Seattle MSA Portland MSA Boise MSA USA Unemployment rate 2025-2030 Projected Population Growth 2025-2030 Projected Median Household Income Growth STRONG AND DIVERSE ECONOMIC LANDSCAPE Major Employers in the Pacific Northwest Data obtained from www.bls.gov, www.bea.gov and S&P Global Market Intelligence Unemployment data reflects the BLS's latest monthly Economic New Release - Employment & Unemployment Economic data as of January 2025 MSA Tie-out of websites used: https://www.bls.gov/web/metro/laulrgma.htm https://www.bls.gov/web/laus/laumstcm.htm https://data.bls.gov/timeseries/LNS14000000 https://www.zippia.com/advice/largest-companies-in-washington/https://www.zippia.com/advice/largest-companies-in-oregon/

 
8 LOANS AND DEPOSITS BY LOCATION MSA = Metropolitan or Micropolitan Statistical Area Location based upon branch or office location Loans by MSA Seattle WA $2,336 49.0% Portland OR-WA $705 14.8% Mount Vernon WA $261 5.5% Olympia WA $186 3.9% Yakima WA $101 2.1% Bellingham WA $183 3.9% Other $993 20.8% Deposits by MSA Seattle WA $2,583 44.2% Portland OR-WA $866 14.8% Mount Vernon WA $333 5.7% Olympia WA $497 8.5% Longview WA $149 2.5% Oak Harbor WA $547 9.4% Yakima WA $226 3.9% Bellingham WA $176 3.0% Other $468 8.0%

 
9 POTENTIAL GROWTH OPPORTUNITIES Map obtained from S&P Global Market Intelligence Certain locations of bank headquarters overlap on the map Financial information as of the most recent quarter publicly available Excluding banks with pending mergers and acquisitions • Long-term goal to build a Pacific Northwest ("PNW") regional commercial community bank; potential opportunities for M&A and production team lift-outs in WA, OR and ID. • Significant number of banks remaining in HFWA footprint; further consolidation is expected. – 10 banks between $200 million and $500 million in assets – 16 banks between $500 million and $1.0 billion in assets – 14 banks between $1.0 billion and $3.5 billion in assets • Target metrics include 15% IRR and earnback of < 3 years. Bank headquarters

 
10 $1,712 $3,651 $3,879 $4,113 $4,238 $5,553 $6,615 $7,432 $6,980 $7,175 $7,106 $7,130 $1,747 $1,079 $15.02 $15.68 $16.08 $16.88 $20.63 $22.10 $22.85 $24.34 $22.73 $24.44 $25.40 $25.85 $10.73 $11.41 $11.86 $12.70 $13.54 $15.07 $15.77 $17.19 $15.66 $17.40 $18.22 $18.70 Organic Assets Acquired Assets Book value per share Tangible book value per share (1) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Q1 2025 Acquired Puget Sound Bancorp $639MM in assets Premier Commercial Bancorp $440MM in assets HISTORICAL GROWTH ORGANIC AND ACQUISITIVE Merged with Washington Banking Company $1.7B in assets (1) Represents a non-GAAP financial measure

 
11 GROWTH STRATEGY YEAR ACTIVITY 2013 • Acquired Valley Community Bancshares - $254MM in assets • Acquired Northwest Commercial Bank - $65MM in assets 2014 • Merged with Washington Banking Company - $1.7B in assets 2015 • Added a commercial banking team in Seattle, Washington • Formed Capital Markets Group as result of the added expertise 2017 • Added commercial banking team in the greater Portland, Oregon area • Expanded expertise in non-profit lending and added a commercial position focused on deposit production 2018 • Acquired Puget Sound Bancorp - $639MM in assets • Acquired Premier Commercial Bancorp - $440MM in assets 2019 • Added commercial banking team in the greater Portland, Oregon area • Expanded expertise in the dental and healthcare fields 2022 • Added new commercial banking team in Vancouver, Washington • Added new commercial banking team in Portland, Oregon • Expanded into a new market with addition of commercial banking team and full service branch in Eugene, Oregon (branch opened August 2022) 2023 • Expanded into a new market with addition of commercial banking team and full service branch in Boise, Idaho (branch opened January 2023) 2024 • Expanded Builder Banking team with hiring of new SVP, Director of Builder Banking and sales position in greater Seattle, Washington area. 2025 • Expanded into a new market with addition of commercial banking team and loan production office in Spokane, Washington in January 2025 Bank Acquisitions and Team Additions Bank Acquisition Team Addition

 
FINANCIAL UPDATE

 
13 LOAN PORTFOLIO Loan Portfolio Composition $196 $171 $165 $167 $344 $375 $403 $393$294 $414 $479 $453 $693 $718 $843 $851$937 $959 $1,003 $985 $1,587 $1,698 $1,909 $1,916 Consumer Residential real estate Construction & land development Commercial and Industrial (C&I) Owner-occupied CRE Non-owner occupied CRE 2022 2023 2024 Q1 2025 New Loan Commitments $20 $25 $24 $21 $18$14 $27 $2 $— $— $39 $63 $35 $85 $64$60 $87 $128 $101 $59 $34 $68 $90 $130 $60 Consumer Residential real estate Construction & land development Commercial and Industrial (C&I) Commercial Real Estate (CRE) Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025

 
14 Construction Commitments $686 $769 $682 $666 $294 $414 $479 $453 $392 $355 $203 $213 Outstanding Balance Available Credit 2022 2023 2024 Q1 2025 LOC Utilization Rates 29.8% 28.2% 29.7% 30.7% 42.9% 53.8% 70.2% 68.0% 31.1% 31.1% 31.6% 32.3% Utilization Rate - Consumer LOCs Utilization Rate - Construction LOCs Utilization Rate - C&I LOCs 2022 2023 2024 Q1 2025 LINE OF CREDIT ("LOC") UTILIZATION

 
15 COMMERCIAL LOAN EXPOSURE Commercial Business Loans by Industry Exposure Industry Amount WARR at 03/31/25 Real estate, rental and leasing $2,070 4.5 Health care and social assistance 335 4.3 Accommodation and food services 187 5.1 Retail trade 151 4.7 Construction 155 4.8 Other services (except Public administration) 122 4.6 Manufacturing 95 4.7 All other industries 637 4.4 Total $3,752 4.5 CRE Loans only by Collateral Type Collateral Type Amount WARR at 03/31/25 Office $572 4.3 Industrial 499 4.5 Retail store / shopping center 301 4.6 Multi-family 441 4.6 Mixed use property 155 4.6 Motel / hotel 144 5.0 Single purpose 126 4.7 Warehouse 134 4.5 Mini-storage 160 4.1 Recreational / school 72 5.0 Other 296 4.6 Total $2,900 4.5 WARR = Weighted average risk rating Categorized by NAICS code. Office - Owner-occupied CRE 10.3% Office - Non-owner occupied CRE 9.4% Industrial 17.2% Retail store / shopping center 10.4% Multi-family 15.2% Mixed use property 5.3% Motel / hotel 4.9% Single purpose 4.4% Warehouse 4.6% Mini-storage 5.5% Recreational / school 2.5% Other 10.3% Real estate, rental and leasing 55.2% Health care and social assistance 8.9% Accommodation and food services 5.0% Retail trade 4.0% Construction 4.1% Other Services (except Public administration) 3.3% Manufacturing 2.5% All other industries 17.0%

 
16 CHANGES IN LOANS RECEIVABLE $4,802 $96 $(80) $(47) $(6) $4,765 Loans receivable at December 31, 2024 Loans originated Prepayments Maturities / Payoffs Net advances/ payments Loans receivable at March 31, 2025 $4,336 $626 $(177) $(136) $153 $4,802 Loans receivable at December 31, 2023 Loans originated Prepayments Maturities / Payoffs Net advances/ payments Loans receivable at December 31, 2024 Change in loans - Q1 2025 Change in loans - 2024

 
17 CRE OFFICE CRE Office Loans by Size Size WARR(2) # of Loans Total Balance(1) Average Balance Per Loan(1) >$10 Million 3.3 5 $ 75,187 $ 15,037 $5-$10 Million 4.0 15 94,011 6,267 $2-$5 Million 4.6 47 135,925 2,892 <$2 Million 4.6 459 266,805 581 TOTAL 4.3 526 $ 571,928 $ 1,087 Quality of CRE Office Portfolio: • 81.0% of loans have recourse to owner • 52.0% of loans are owner occupied which are considered to have a lower risk profile • 24.9% of loans are borrowers in the health care and social assistance sectors, who are less likely to reduce office space CRE Office Loans by Industry Type Health Care and Social Assistance 24.9% Professional, Scientific, and Technical Services 3.2% Finance and Insurance 2.7% Other Services (except Public Administration) 2.9% Accommodation and Food Services 1.1% All Other 65.2% (1) Dollars in thousands (2) Weighted average risk rating

 
18 Net charge-offs (recoveries) on loans to average loans, annualized (0.03)% (0.01)% 0.06% 0.00% 0.00% 0.22% 0.00% 0.03% 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 (0.10)% 0.00% 0.10% 0.20% 0.30% Nonaccrual Loans $6 $4 $4 $4 Nonaccrual loans Nonaccrual loans to loans receivable 2022 2023 2024 Q1 2025 0.15% 0.10% 0.08% 0.09% NONACCRUAL LOANS AND NET CHARGE-OFFS

 
19 CRITICIZED LOANS $135 $150 $179 $178 $60 $65 $64 $60 $69 $80 $111 $114 Substandard - nonaccrual Substandard - accrual Special mention 2022 2023 2024 Q1 2025 Criticized Loans by Loan Segment Commercial & industrial 26.7% Owner- occupied CRE 18.6% Non-owner occupied CRE 33.2% Residential real estate 1.0% Construction & land development 19.6% Consumer 0.9% Criticized Loans by Collateral Type Motel/Hotel 9.1% Office 8.1% Multi-Family 13.6%Retail Store/Shopping Center 9.0% Mixed Use Property 9.1% Elder Care 5.9% Farm-Bldgs/Land 1.9% Industrial 3.7% Duplex/Tri-Plex/4-Plex 3.2% Other CRE 19.8% Non-CRE 16.6% $6 $4 $4 $4

 
20 ACL on Loans $42,986 $47,999 $52,468 $52,160 1.06% 1.11% 1.09% 1.09% ACL on loans ($) ACL on loans / Loans (%) 2022 2023 2024 Q1 2025 ALLOWANCE FOR CREDIT LOSSES ("ACL") ON LOANS $52,468 $(710) $424 $(7) $(15) $52,160 December 31, 2024 Change in loan balance Change in collective rate Change in rate and balance Individually evaluated loans March 31, 2025 Change in ACL on Loans - Q1 2025 Dollars in thousands

 
21 CRITICIZED LOANS AND NET CHARGE-OFF HISTORY Criticized Loans to Total Loans 3.63% 3.79% 6.50% 4.81% 3.34% 3.45% 3.73% 2.19% 2.05% 3.47% 2.63% 1.96% 2.32% 2.66% Heritage Peer Median 2018 2019 2020 2021 2022 2023 2024 Net Chargeoffs to Average Loans 0.06% 0.09% 0.07% 0.01% (0.03)% (0.01)% 0.06% 0.07% 0.11% 0.05% 0.03% 0.02% 0.07% 0.05% Heritage Peer Median 2018 2019 2020 2021 2022 2023 2024 (1) Criticized loans includes loans graded special mention or worse (2) Peer Median is the median of 17 identified peer banks ranging in asset size from $4 billion to $15 billion and is as of December 31, 2024 Proactive Credit Management • Heritage proactively downgrades loans that are experiencing financial difficulty. • Criticized loans(1) to total loans higher than peer median(2) since 2018 • NCOs recognized during the same period were generally lower than peer median.

 
22 Average Deposit Balances and Cost of Total Deposits $6,322 $5,706 $5,618 $5,526 $5,555 $5,675 $5,715 $5,744 0.11% 0.69% 1.34% 1.19% 1.34% 1.42% 1.39% 1.38% 1.70% 1.89% 2.02% 1.98% 1.92% 0.17% 1.03% 1.90% Average deposits Cost of total deposits Cost of int-bearing deposits 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 DEPOSITS Deposit Composition 35.5% 30.6% 29.1% 27.7% 30.9% 28.7% 25.8% 26.1% 17.9% 19.5% 20.5% 21.9% 10.5% 8.7% 7.4% 7.4% 5.2% 12.4% 17.2% 16.9% Noninterest demand deposits Interest bearing demand deposits Money market accounts Savings accounts Certificates of deposit 2022 2023 2024 Q1 2025

 
23 DEPOSIT COMPOSITION Customer Deposits by Relationship Size $805 $349 $1,383 $1,494 $1,814 Over $10MM $5MM-$10MM $1MM-5MM $250K-$1MM Less than $250K Consumer Accounts vs. Business Accounts 25% 58% 17% Consumer Commercial CDs Insured vs. Uninsured 40% 60% Insured Uninsured Deposit portfolio as of March 31, 2025: • Majority of deposits are to customers with relationships of $1 million or less. • Uninsured deposits at 40% of total deposits. 12% of uninsured deposits are public deposits that are 100% pledged. • Mix of commercial and consumer accounts.

 
24 Investment Balances and Investment Yield $2,098 $1,874 $1,468 $1,731 $1,659 $1,572 $1,468 $1,414 $1,203 $178 $33 $33 $28 2.48% 3.02% 3.33% 3.30% 3.38% 3.34% 3.29% 3.34% Portfolio yield New purchases 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 INVESTMENT PORTFOLIO Portfolio Duration 4.93 4.85 4.55 4.08 3.37 2.33 4.80 4.81 4.56 4.55 4.59 2.33 4.04 Duration - total portfolio Duration - new purchases only (1) 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 (1) No investments were purchased during Q2 2024, Q3 2024 or Q4 2024

 
25 $37 $36 $37 $45 $55 $56 $42 $56 $41 $33 $28 $56 $26 $25 $26 $34 $44 $46 $32 $47 $32 $24 $19 $48 $11 $11 $11 $11 $11 $10 $10 $9 $9 $9 $9 $8 Interest Principal Q2 2025 Q3 2025 Q4 2025 Q1 2026 Q2 2026 Q3 2026 Q4 2026 Q1 2027 Q2 2027 Q3 2027 Q4 2027 Q1 2028 INVESTMENT CASHFLOWS Investment cashflows(1) are estimated to be $522 million through Q1 of 2028. (1) Cashflow estimates based on third-party bond accounting service

 
26 INVESTMENT PORTFOLIO HTM Investment by Type US government and agencies 19.9% Residential CMO and MBS 35.7% Commercial CMO and MBS 44.4% Available for sale ("AFS") and held to maturity ("HTM") investment securities percentages are based on fair value as of March 31, 2025 unless otherwise noted Strong Credit Quality of Portfolio: AFS Securities • 90.0% of AFS in U.S. government and agency securities • Only 1.7% of AFS are rated less than AA HTM Securities • All HTM investments are U.S. government and agency securities • 100% HTM portfolio pledged for public deposits and Federal Reserve Bank borrowings AFS Investments Pledged 2.5% 97.5% Pledged Not pledged AFS Investment by Type US government and agencies 1.6% Municipal securities 7.1% Residential CMO and MBS 49.8% Commercial CMO and MBS 38.5% Corporate obligations 1.7% Other asset-backed securities 1.3%

 
27 Net Interest Margin 3.33% 3.56% 3.31% 3.29% 3.27% 3.30% 3.36% 3.44% 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 NET INTEREST MARGIN Quarterly Change in Net Interest Margin 3.36% 0.08% (0.03)% (0.02)% —% 0.05% 3.44% QTD Q4 2024 Loans Investments Interest earning deposits Deposits Borrowings QTD Q1 2025 Net Interest Income $219,385 $225,155 $209,364 $51,530 $51,113 $52,958 $53,763 $53,690 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025

 
28 Adjustable Rate Loans - Repricing Schedule $1,065 $157 $195 $166 $238 $347 $117 6.89% 4.30% 3.99% 5.69% 6.21% 6.10% 4.97% 6.93% 6.68% 6.50% 6.32% 6.51% 6.38% 6.71% Floating and Adjustable Rate Loans Wtd Avg Rate (1) Wtd Avg Rate if Repriced (2) < 3 Months 3 - 12 Months 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years > 5 Years LOAN MATURITY AND REPRICING (1) Weighted Average Rate as of March 31, 2025 and repricing period signifies the sooner of the next scheduled reprice date or maturity (2) Weighted Average Rate if Repriced as of March 31, 2025 and assumes same index and margin Adjustable Rate Loans • $2.3 billion in total • 52% tied to FHLB index, 21% tied to Prime, 27% tied to SOFR Fixed Rate Loans - Maturity Schedule $63 $193 $130 $207 $182 $343 $1,354 5.15% 5.21% 4.77% 4.86% 5.14% 5.22% 4.36% Fixed Rate Loans Wtd Avg Rate (1) < 3 Months 3 - 12 Months 1 - 2 Years 2 - 3 Years 3 - 4 Years 4 - 5 Years > 5 Years Fixed Rate Loans • $2.5 billion in total

 
29 PROFITABILITY TRENDS ROAA and Adjusted ROAA(1) 1.12% 0.86% 0.61% 0.33% 0.80% 0.63% 0.66% 0.79% 1.12% 0.99% 0.88% 0.77% 0.89% 0.87% 0.99% 0.97% ROAA Adjusted ROAA (1) 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Noninterest Expense/Avg. Assets 2.06% 2.33% 2.22% 2.29% 2.21% 2.18% 2.20% 2.36% 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 ROAA = Return on average assets (1) Represents a non-GAAP financial measure

 
30 $81.9 $61.8 $43.3 $81.8 $70.9 $62.9 Net income Adjusted Net income (1) 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 $5.7 $14.2 $11.4 $11.9 $13.9 $13.6 $15.6 $15.7 $17.9 $17.0 PROFITABILITY TRENDS ROAE, ROATCE(1) and Adjusted ROATCE(1) Net Income and Adjusted Net Income(1), in millions 14.92% 12.76% 10.53% 9.34% 10.74% 10.42% 11.59% 11.21%14.94% 11.15% 7.31% 4.07% 9.74% 7.62% 7.81% 9.22% 10.08% 7.55% 5.06% 2.73% 6.75% 5.30% 5.46% 6.51% ROAE ROATCE (1) Adjusted ROATCE (1) 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 ROAE = Return on average equity ROATCE = Return on average tangible common equity (1) Represents a non-GAAP financial measure

 
31(1) Represents a non-GAAP financial measure (2) Current quarter ratios are estimates pending completion and filing of the Company's regulatory reports CAPITAL RATIOS Equity Ratios 11.4% 11.9% 12.2% 12.4% 8.2% 8.8% 9.0% 9.3% Stockholders' equity to total assets (GAAP) Tangible common equity to tangible assets(1) 2022 2023 2024 Q1 2025 12.8% 12.9% 12.0% 12.2% 9.7% 10.0% 10.0% 10.2% 14.0% 14.1% 13.3% 13.6% Total Risk Based Capital Tier 1 Leverage Ratio Common Equity Tier 1 2022 2023 2024 Q1 2025 Regulatory Capital Ratios(2)

 
32 LIQUIDITY POSITION (1) Includes FHLB borrowing availability of $1.35 billion at March 31, 2025 based on pledged assets, however, maximum credit capacity is 45% of the Bank's total assets one quarter in arrears or $3.20 billion Liquidity position at March 31, 2025: • Sufficient liquidity to cover estimated uninsured deposits of $2.3 billion. • Access to brokered deposits of $768 million per internal company policy. Liquidity Sources $2,499 $2,408 $2,525 $2,345 $2,542 $1,385 $943 $1,068 $976 $1,084 $71 $279 $288 $360 $366 $708 $927 $848 $746 $698 $190 $114 $176 $117 $249 $145 $145 $145 $145 $145 122.3% 116.2% 112.6% 103.1% 109.3% FHLB borrowing availability (1) FRB borrowing availability Unencumbered investment securities available for sale at fair value Cash and cash equivalents Fed funds lines % of uninsured deposits covered by liquidity sources Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025

 
SHAREHOLDER RETURN

 
34 TOTAL SHAREHOLDER RETURN Stock Summary(2) Ticker HFWA Exchange Nasdaq Stock price $21.88 Market capitalization (in millions) $743.8 Dividend yield (regular dividend only) 4.39 % Average Daily Volume (3 month) Average daily volume (shares) 208,082 Average daily volume ($000s) $4,553 52-Week High and Low Price 52-week high (November 25, 2024) $27.58 52-week low (June 17, 2024) $16.55 Per Share Tangible book value per share(1) $18.70 EPS - 2025E $2.02 EPS - 2026E $2.29 Number of research analysts 6 Valuation Ratios Price / Tangible book value(1) 117.0 % Price / 2025E EPS 10.8 Price / 2026E EPS 9.6 Dividends Per Share Declared(3) 0.72 0.61 0.72 0.84 0.80 0.81 0.84 0.88 0.92 0.48 $0.11 $0.12 $0.15 $0.18 $0.20 $0.20 $0.21 $0.22 $0.23 $0.24 $0.12 $0.13 $0.15 $0.18 $0.20 $0.20 $0.21 $0.22 $0.23 $0.24 $0.12 $0.13 $0.15 $0.19 $0.20 $0.20 $0.21 $0.22 $0.23 $0.12 $0.13 $0.17 $0.19 $0.20 $0.21 $0.21 $0.22 $0.23 $0.25 $0.10 $0.10 $0.10 Q1 Q2 Q3 Q4 Special dividends 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025(1) Represents a non-GAAP financial measure (2) Market information as of April 21, 2025 and earnings per share and valuation ratios are based on analysts consensus (3) Dividend information as of April 23, 2025 $2.31 $2.01 $1.80$2.31 $1.75 $1.24 $0.39 $0.45 $0.45 $0.51 $0.49 $0.16 $0.41 $0.33 $0.34 $0.40 Diluted EPS Adjusted Diluted EPS(1) 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Diluted EPS and Adjusted Diluted EPS(1)

 
APPENDIX - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND QUARTERLY FINANCIAL STATISTICS

 
36 NON-GAAP FINANCIAL MEASURES Dollars in thousands 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Adjusted Net Income and Adjusted Return on Average Assets ("ROAA"): Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 5,748 $ 14,159 $ 11,423 $ 11,928 $ 13,911 Exclude (gain) loss on sale of investment securities, net 256 12,231 22,742 9,973 1,921 6,945 3,903 3,887 Exclude gain on sale of branch including related deposits, net — (610) — — — — — — Exclude gain on sale of premise and equipment (403) — (1,552) — (49) (1,480) (23) (3) Exclude tax effect of adjustments 31 (2,440) (4,450) (2,094) (393) (1,148) (815) (816) Exclude BOLI restructuring costs included in BOLI Income $ — $ — $ 508 $ — $ — $ — $ 508 $ — Exclude tax expense related to BOLI restructuring — — 2,371 — — — 2,371 — Adjusted net income (non-GAAP) $ 81,759 $ 70,936 $ 62,877 $ 13,627 $ 15,638 $ 15,740 $ 17,872 $ 16,979 Average total assets $ 7,321,455 $ 7,140,024 $ 7,133,046 $7,092,452 $7,106,791 $7,182,921 $7,149,294 $7,103,227 ROAA, annualized (GAAP) 1.12 % 0.86 % 0.61 % 0.33 % 0.80 % 0.63 % 0.66 % 0.79 % Adjusted ROAA, annualized (non-GAAP) 1.12 % 0.99 % 0.88 % 0.77 % 0.89 % 0.87 % 0.99 % 0.97 %

 
37 NON-GAAP FINANCIAL MEASURES 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Return on Average Tangible Common Equity ("ROATCE") and Adjusted ROATCE: Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 5,748 $ 14,159 $ 11,423 $ 11,928 $ 13,911 Add amortization of intangible assets 2,750 2,434 1,640 421 421 399 399 303 Exclude tax effect of adjustment (578) (511) (344) (88) (88) (84) (84) (64) Tangible net income (non-GAAP) $ 84,047 $ 63,678 $ 44,554 $ 6,081 $ 14,492 $ 11,738 $ 12,243 $ 14,150 Tangible net income (non-GAAP) $ 84,047 $ 63,678 $ 44,554 $ 6,081 $ 14,492 $ 11,738 $ 12,243 $ 14,150 Exclude (gain) loss on sale of investment securities, net 256 12,231 22,742 9,973 1,921 6,945 3,903 3,887 Exclude gain on sale of branch including related deposits, net — (610) — — — — — — Exclude gain on sale of premise and equipment (403) — (1,552) — (49) (1,480) (23) (3) Exclude tax effect of adjustments 31 (2,440) (4,450) (2,094) (393) (1,148) (815) (816) Exclude BOLI restructuring costs included in BOLI Income — — 508 — — — 508 — Exclude tax expense related to BOLI restructuring — — 2,371 — — — 2,371 — Adjusted tangible net income (non-GAAP) $ 83,931 $ 72,859 $ 64,173 $ 13,960 $ 15,971 $ 16,055 $ 18,187 $ 17,218 Average stockholders' equity (GAAP) $ 811,942 $ 818,042 $ 854,172 $ 846,947 $ 843,438 $ 857,799 $ 868,308 $ 866,629 Exclude average intangible assets (249,566) (246,965) (244,910) (245,536) (245,106) (244,706) (244,302) (243,945) Average tangible common stockholders' equity (non- GAAP) $ 562,376 $ 571,077 $ 609,262 $ 601,411 $ 598,332 $ 613,093 $ 624,006 $ 622,684 ROAE, annualized (GAAP) 10.08 % 7.55 % 5.06 % 2.73 % 6.75 % 5.30 % 5.46 % 6.51 % ROATCE, annualized (non-GAAP) 14.94 % 11.15 % 7.31 % 4.07 % 9.74 % 7.62 % 7.81 % 9.22 % Adjusted ROATCE, annualized (non-GAAP) 14.92 % 12.76 % 10.53 % 9.34 % 10.74 % 10.42 % 11.59 % 11.21 % Dollars in thousands

 
38 NON-GAAP FINANCIAL MEASURES 2022 2023 2024 Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Diluted Earnings per Share and Adjusted Diluted Earnings per Share: Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 5,748 $ 14,159 $ 11,423 $ 11,928 $ 13,911 Exclude (gain) loss on sale of investment securities, net 256 12,231 22,742 9,973 1,921 6,945 3,903 3,887 Exclude gain on sale of branch including related deposits, net — (610) — — — — — — Exclude gain on sale of premise and equipment (403) — (1,552) — (49) (1,480) (23) (3) Exclude tax effect of adjustments 31 (2,440) (4,450) (2,094) (393) (1,148) (815) (816) Exclude BOLI restructuring costs included in BOLI Income — — 508 — — — 508 — Exclude tax expense related to BOLI restructuring — — 2,371 — — — 2,371 — Adjusted net income (non-GAAP) $ 81,759 $ 70,936 $ 62,877 $ 13,627 $ 15,638 $ 15,740 $ 17,872 $ 16,979 Average number of diluted shares outstanding 35,463,896 35,258,189 34,899,036 35,227,138 34,919,395 34,658,674 34,553,139 34,506,238 Diluted earnings per share (GAAP) $ 2.31 $ 1.75 $ 1.24 $ 0.16 $ 0.41 $ 0.33 $ 0.34 $ 0.40 Adjusted diluted earnings per share (non-GAAP) $ 2.31 $ 2.01 $ 1.80 $ 0.39 $ 0.45 $ 0.45 $ 0.51 $ 0.49 Dollars in thousands

 
39 2016 2017 2018 2019 2020 2021 2022 2023 2024 Tangible Book Value Per Share: Total stockholders' equity (GAAP) $ 481,763 $ 505,305 $ 760,723 $ 809,311 $ 820,439 $ 854,432 $ 797,893 $ 853,261 $ 863,527 Exclude intangible assets (126,403) (125,117) (261,553) (257,552) (254,027) (250,916) (248,166) (245,732) (244,092) Tangible common equity (non-GAAP) $ 355,360 $ 380,188 $ 499,170 $ 551,759 $ 566,412 $ 603,516 $ 549,727 $ 607,529 $ 619,435 Shares outstanding 29,954,931 29,927,746 36,874,055 36,618,729 35,912,243 35,105,779 35,106,697 34,906,233 33,990,827 Book value per share (GAAP) $ 16.08 $ 16.88 $ 20.63 $ 22.10 $ 22.85 $ 24.34 $ 22.73 $ 24.44 $ 25.40 Tangible book value per share (non-GAAP) $ 11.86 $ 12.70 $ 13.54 $ 15.07 $ 15.77 $ 17.19 $ 15.66 $ 17.40 $ 18.22 Moved to 2nd slide Tangible Book Value Per Share (cont'd): 2025 Q1 Total stockholders' equity (GAAP) $ 881,515 Exclude intangible assets (243,789) Tangible common equity (non-GAAP) $ 637,726 Shares outstanding 34,105,516 Book value per share (GAAP) $ 25.85 Tangible book value per share (non-GAAP) $ 18.70 NON-GAAP FINANCIAL MEASURES Dollars in thousands

 
40 NON-GAAP FINANCIAL MEASURES Q1 2024 Q2 2024 Q3 2024 Q4 2024 Q1 2025 Efficiency Ratio and Adjusted Efficiency Ratio Total noninterest expense (GAAP) $ 40,370 $ 39,096 $ 39,290 $ 39,540 $ 41,383 Net interest income (GAAP) $ 51,530 $ 51,113 $ 52,958 $ 53,763 $ 53,690 Total noninterest income (GAAP) $ (2,900) $ 5,246 $ 1,837 $ 3,290 $ 3,903 Exclude (gain) loss on sale of investment securities, net 9,973 1,921 6,945 3,903 3,887 Exclude gain on sale of branch including related deposits, net — — — — — Exclude gain on sale of premise and equipment — (49) (1,480) (23) (3) Exclude BOLI restructuring costs included in BOLI Income — — — 508 — Adjusted total non interest income (non-GAAP) $ 7,073 $ 7,118 $ 7,302 $ 7,678 $ 7,787 Efficiency ratio (GAAP) 83.01 % 69.37 % 71.70 % 69.30 % 71.85 % Adjusted efficiency ratio (non-GAAP) 68.89 % 67.14 % 65.20 % 64.35 % 67.31 % Dollars in thousands

 
41 As of Period End or for the Three Months Ended March 31, 2024 June 30, 2024 September 30, 2024 December 31, 2024 March 31, 2025 Profitability: Net income $ 5,748 $ 14,159 $ 11,423 $ 11,928 $ 13,911 Adjusted net income(1) $ 13,627 $ 15,638 $ 15,740 $ 17,872 $ 16,979 Diluted earnings per share $ 0.16 $ 0.41 $ 0.33 $ 0.34 $ 0.40 Adjusted diluted earnings per share (1) $ 0.39 $ 0.45 $ 0.45 $ 0.51 $ 0.49 Return on average assets 0.33 % 0.80 % 0.63 % 0.66 % 0.79 % Adjusted return on average assets(1) 0.77 % 0.89 % 0.87 % 0.99 % 0.97 % Return on average common equity 2.73 % 6.75 % 5.30 % 5.46 % 6.51 % Return on average tangible common equity(1) 4.07 % 9.74 % 7.62 % 7.81 % 9.22 % Adjusted return on average tangible common equity(1) 9.34 % 10.74 % 10.42 % 11.59 % 11.21 % Net interest margin 3.29 % 3.27 % 3.30 % 3.36 % 3.44 % Efficiency ratio 83.0 % 69.4 % 71.7 % 69.3 % 71.9 % Adjusted efficiency ratio(1) 68.9 % 67.1 % 65.2 % 64.4 % 67.3 % Noninterest expense to average total assets 2.29 % 2.21 % 2.18 % 2.20 % 2.36 % Balance Sheet: Total assets $ 7,091,283 $ 7,059,857 $ 7,153,363 $ 7,106,278 $ 7,129,862 Loans receivable $ 4,428,165 $ 4,532,615 $ 4,679,479 $ 4,802,123 $ 4,764,848 Total deposits $ 5,532,327 $ 5,515,652 $ 5,708,492 $ 5,684,613 $ 5,845,335 Loan to deposit ratio 80.0 % 82.2 % 82.0 % 84.5 % 81.5 % Capital: Book value per share $ 24.43 $ 24.66 $ 25.61 $ 25.40 $ 25.85 Tangible book value per share(1) $ 17.36 $ 17.56 $ 18.45 $ 18.22 $ 18.70 Leverage ratio 10.0 % 10.1 % 9.9 % 10.0 % 10.2 % Total capital ratio 13.9 % 13.9 % 13.6 % 13.3 % 13.6 % Credit Quality: Nonperforming assets to total assets 0.10 % 0.12 % 0.13 % 0.07 % 0.06 % ACL on loans to loans receivable 1.12 % 1.13 % 1.10 % 1.09 % 1.09 % Dollars in thousands (1) Represents a non-GAAP financial measure QUARTERLY FINANCIAL STATISTICS