HERITAGE FINANCIAL CORP /WA/

Net Income

Net income increased $5.3 million, or 43.6%, to $17.5 million, or $0.42 per diluted common share, for the three months ended June 30, 2026, compared to $12.2 million, or $0.36 per diluted common share, for the same period in 2025.

The increase in net income was due primarily to a $19.8 million increase in net interest income and a $7.8 million increase in noninterest income. Net interest income increased primarily due to an increase in average interest earning assets, which increased substantially as a result of the Merger. Noninterest income increased due to a $6.9 million pre-tax loss on the sale of investment securities recognized during the three months ended June 30, 2025, compared to a $217,000 pre-tax loss on the sale of investment securities recognized during the three months ended June 30, 2026.

These improvements were partially offset by a $23.2 million increase in noninterest expense primarily due to expenses associated with the Merger, including increases related to compensation and employee benefits due to increased headcount, severance expense, occupancy and equipment expense primarily due to additional rent expense, and additional data processing expense due to an increase in transactional accounts and balances.

Comparison of the six months ended June 30, 2026 to the comparable period in the prior year.

Net income increased$10.4 million, or 39.7%, to$36.5 million, or $0.90 per diluted common share, for the six months ended June 30, 2026, compared to $26.1 million, or $0.76 per diluted common share, for the same period in 2025.

The increase in net income was due primarily toa $32.5 million increase in total interest incomeand a$12.6 million increase in noninterest income. Net interest income increased primarily due to an increase in average interest earning assets, which increased substantially as a result of the Merger. Noninterest income increased due to a $10.7 million pre-tax loss on the sale of investment securities recognized during the six months ended June 30, 2025, compared to a $217,000 pre-tax loss on the sale of investment securities recognized during thesix months ended June 30, 2026.

These improvements were partially offset by a$38.4 million increase in noninterest expense primarily due to expenses associated with the Merger, including increases related to compensation and employee benefits due to increased headcount, severance expense, occupancy and equipment expense primarily due to additional rent expense, and additional data processing expense due to an increase in transactional accounts and balances.