HERITAGE FINANCIAL CORP /WA/

Provision for Credit Losses

The aggregate of the provision for (reversal of) credit losses on loans and on unfunded commitments is presented on the unaudited Condensed Consolidated Statements of Income as the provision for credit losses. The ACL on unfunded commitments is included on the unaudited Condensed Consolidated Statements of Financial Condition within accrued expenses and other liabilities.

The following table presents the provision for (reversal of) credit losses for the periods indicated:

The provision for credit losses on loans reflects the amount required to maintain the ACL on loans at an appropriate level based upon management’s evaluation of the adequacy of collective and individual loss reserves and is impacted by quarterly charge-offs and recoveries. The $2.3 million provision for credit losses on loans recognized during the three months ended September

30, 2026 was due primarily to loan growth during the quarter. Future assessments of expected credit losses will be impacted not only by changes in the composition of and amount of loans and to the reasonable and supportable forecast, but also by an updated assessment of qualitative factors, as well as consideration of any changes in the reasonable and supportable forecast reversion period.

The $1.6 million provision for credit losses on loans recognized during the three months ended September 30, 2025 was due primarily to an increase in the weighted average life of residential real estate and real estate construction and land development loans, which increased the calculated reserves, and an increase in real estate construction and land development loan balances.

Comparison of the nine months ended September 30, 2026 to the comparable period in the prior year

The following table presents the provision for (reversal of) credit losses for the periods indicated:

The $587,000 provision for credit losses on loans recognized during the nine months ended September 30, 2026 was due primarily to loan growth. The $267,000 reversal of provision for credit losses on unfunded commitments recognized during the nine months ended September 30, 2026 was due primarily to an increase in utilization rates which resulted in a smaller unfunded capacity.

The $2.4 million provision for credit losses recognized during the nine months ended September 30, 2025 was due primarily to $911,000 in net charge-offs and an increase in the weighted average life of residential real estate and real estate construction and land development loans, which increased the calculated reserves. The $365,000 provision for credit losses on unfunded commitments recognized during the nine months ended September 30, 2025 was due primarily to an increase in the unfunded exposure on construction loans.