HERITAGE FINANCIAL CORP /WA/

Net Income

Net income decreased $1.9 million, or 13.7%, to $12.2 million, or $0.36 per diluted common share, for the three months ended June 30, 2025, compared to $14.2 million, or $0.41 per diluted common share, for the same period in 2024.

The decrease in net income was primarily due to an increase in a pre-tax loss of $6.9 million on the sale of investment securities in connection with management's strategic repositioning of the Company's balance sheet during the three months ended June 30, 2025, compared to a pre-tax loss of $1.9 million on the sale of investment securities recognized during the same period in 2024. The decrease was also due to a $2.0 million increase in noninterest expense.

The decrease was partially offset by an increase in total interest income of $1.9 million due to increased yields earned on interest earning assets as a result of higher market interest rates and a $2.0 million decrease in total interest expense due to lower funding costs.

Comparison of the six months ended June 30, 2025 to the comparable period in the prior year.

Net income increased$6.2 million, or 31.2%, to$26.1 million, or $0.76 per diluted common share, for the six months ended June 30, 2025, compared to $19.9 million, or $0.57 per diluted common share, for the same period in 2024.

The increase in net income was due primarily toa $4.9 million increase in total interest income due to increased yields earned on interest earning assets as a result of higher market interest rates, a $1.1 million decrease in total interest expense due to lower funding costs and a$3.1 million increase in noninterest income.

These improvements were partially offset by an increase in noninterest expense of$3.0 million.