2025 ANNUAL REPORT
March 20, 2026 Dear Fellow Shareholders, On behalf of the entire Board of Directors of Heritage Financial Corporation (“Heritage” or “we”) and Heritage Bank (“Bank”), thank you for your investment in Heritage. We continue to focus on shareholder value and were pleased with the overall 2025 performance. Following the Heritage fourth quarter 2025 earnings announcement, the stock price closed at $28.14 on January 22, 2026, compared to $24.50 on December 31, 2024. Heritage declared total dividends of $0.96 per common share in 2025 compared to $0.92 per common share in 2024, and during the first quarter of 2026, we also declared a dividend of $0.24 per common share. Net income was $67.5 million, or $1.96 per diluted share, for the year ended December 31, 2025, compared to $43.3 million, or $1.24 per diluted share, for the year ended December 31, 2024. During 2025, we continued to restructure the balance sheet to improve profitability and announced the acquisition of Olympic, Bancorp, Inc. (“Olympic”) and Kitsap Bank. As a result, pre-tax net income was reduced by $10.7 million related to investment securities losses and merger-related costs of $1.0 million. Adjusted diluted earnings per share for the year ended 2025 were $2.23 per diluted share and the adjusted overhead ratio was 2.34%. Although total loans remained flat, deposits grew 4.1% during 2025. We continue to maintain solid credit quality with net charge-offs to average loans of 0.03% for the year ended December 31, 2025, compared to 0.06% for the year ended December 31, 2024. Capital remained strong with a 14.1% total risk-based capital ratio as of December 31, 2025. Our net interest margin increased 27 basis points to 3.58% for the year ended December 31, 2025, compared to 3.31% for the year ended December 31, 2024. The net interest margin improved to 3.72% for the fourth quarter of 2025. Effective January 1, 2026, we welcomed a new director, Scott Allan, to the Board of Directors. Scott is an experienced business leader and board member with a diverse background spanning engineering, consulting, venture-backed startups, and consumer branding. The acquisition of Olympic and Kitsap Bank was completed January 31, 2026. We welcome the employees and customers to the Heritage family and expect the core systems conversion to be completed during the third quarter of 2026. We are focused on Heritage’s mission of being the leading commercial community bank in the Pacific Northwest by continuously improving customer satisfaction, employee empowerment, community investment, and shareholder value. As we look forward, we remain focused on executing our strategic initiatives, providing our employees with a collaborative and constructive culture, our customers with enhanced services and increasing satisfaction, and our shareholders with improved shareholder value. On behalf of the Board of Directors and management team, we thank you for your confidence in Heritage as we continue to execute our long-term strategies. Sincerely, Brian L. Vance Bryan D. McDonald Board Chair President and Chief Executive Officer Brian L. Vance Bryan D. McDonald
2025 FORM 10-K
BOARD OF DIRECTORS Scott Allan Partner, Cascade Growth Partners Brian S. Charneski President, L&E Bottling Company Trevor D. Dryer Managing Partner, Cedarline Lending Kimberly T. Ellwanger Retired Senior Director of Corporate Affairs and Associate General Counsel, Microsoft Corporation Gail B. Giacobbe Vice President of Product Management, Google Bryan D. McDonald President and CEO Jeffrey S. Lyon Retired Chairman and CEO, Kidder Mathews Frederick B. Rivera CEO and Founder, The Rivera Group Karen R. Saunders Retired Partner, KPMG LLP Brian L. Vance Board Chair Retired Chief Executive Officer Ann Watson Retired Chief Operating Officer, Cascadia Capital, LLC
201 5th Avenue SW Olympia, WA 98501 360.943.1500 | 800.455.6126 NASDAQ: HFWA | www.hf-wa.com Bryan D. McDonald President and Chief Executive Officer Nicholas M. Bley Executive Vice President Donald J. Hinson Executive Vice President Chief Financial Officer Kaylene M. Lahn Senior Vice President Corporate Governance Officer and Corporate Secretary SHAREHOLDER INFORMATION The annual meeting will be held virtually Thursday, May 7, 2026 at 9:00 a.m. All shareholders are invited to attend. TRANSFER AGENT Computershare PO BOX 43006 Providence, RI 02940-3006 800.962.4284 www.computershare.com
