Heritage Financial (HFWA) investor relations material

Executive summary

• Q2 2026 marked the first full quarter post-Olympic Bancorp acquisition, adding $1.6 billion in assets and $1.39 billion in deposits, with $38.1 million in goodwill and $50.3 million in core deposit intangibles recorded.

• Net income for Q2 2026 was $17.5 million ($0.42 per diluted share), with adjusted net income of $23.6 million and adjusted diluted EPS of $0.57.

• Net interest income and margin rose, driven by merger benefits and strong commercial demand, while noninterest expense increased due to $7.5 million in merger-related costs.

• Capital position remained strong, with leverage ratio at 10.4% and total capital ratio at 13.4%.

• Regular cash dividend increased to $0.25 per share, and 372,343 shares were repurchased for $10 million.

Financial highlights

• Total assets reached $8.43 billion, loans receivable $5.75 billion, and deposits $7.04 billion at June 30, 2026.

• Net interest margin improved to 3.99% in Q2 2026, up from 3.96% in Q1 and 3.51% in Q2 2025.

• Net interest income for Q2 2026 was $74.8 million, up 36.1% year-over-year and 8.1% from Q1.

• Noninterest income rose to $9.3 million, up 513.8% year-over-year, mainly due to lower losses on securities sales.

• Noninterest expense increased to $64.3 million, with $7.5 million in merger-related costs.

Outlook and guidance

• Non-interest expense expected at $64–$65 million in Q3, dropping to $56–$57 million in Q4 as merger costs subside.

• Management expects continued net interest margin improvement as fixed-rate loans reprice and additional cost savings post-systems conversion in Q3.

• Loan and deposit growth projected in the mid-single digit annualized range for the next quarters.

• EPS guidance for 2026 is $2.39 and for 2027 is $2.80.

• Long-term strategy focuses on organic growth, operational efficiency, disciplined M&A, and proactive capital management.