Exhibit 99.1

FOR IMMEDIATE RELEASE

DATE: January 28, 2010

CONTACT:	Brian L. Vance
	President and Chief Executive Officer
	(360) 943-1500

HERITAGE FINANCIAL ANNOUNCES FOURTH QUARTER AND

FULL YEAR 2009 RESULTS

• Strong capital position at December 31, 2009 with a tangible common equity to tangible assets ratio of 12.1% and a total capital to risk-weighted assets ratio of 20.7%

• Solid coverage ratios at December 31, 2009 including an allowance for loan losses to total loans of 3.4% and an allowance for loan losses to nonperforming loans of 79.3%

• Strong liquidity position at December 31, 2009 with over 10% of total assets in cash and cash equivalents

• Non-maturity deposits (total deposits less certificate of deposit accounts) as of December 31, 2009 increased 12.2% from December 31, 2008

• Average interest earning assets for the quarter ended December 31, 2009 increased 12.5% from the quarter ended December 31, 2008

• Efficiency ratio improved to 61.3% for the year ended December 31, 2009 from 64.5% for the year ended December 31, 2008

Olympia, WA-HERITAGE FINANCIAL CORPORATION (NASDAQ GS: HFWA) Brian L. Vance, President and CEO of Heritage Financial Corporation (“Company” or “Heritage”), today reported net income for the three months ended December 31, 2009 of $772,000 compared to a net loss of $194,000 for the quarter ended December 31, 2008. Including preferred stock dividends, the net income applicable to common shareholders for the quarter ended December 31, 2009 was $441,000, or $0.04 per diluted common share, compared with a net loss applicable to common shareholders of $337,000, or $0.05 per diluted common share for the quarter ended December 31, 2008. For the year ended December 31, 2009, the net loss, including preferred stock

dividends, applicable to common shareholders was $739,000, or $0.10 per diluted common share compared to net income applicable to common shareholders of $6.2 million, or $0.93 per diluted common share for the year ended December 31, 2008. The decrease in earnings from the year ended December 31, 2008 was substantially attributable to the increased provision for loan losses.

Mr. Vance commented, “As we look back on 2009, together with 2008, we see perhaps the most volatile and difficult period with regard to the financial services industry we have experienced in the last 80 years. As I evaluate our performance this past year, I believe Heritage has fared quite well on a relative and comparative basis. I will hasten to add that I am not satisfied that we posted a net loss for the year. There is no question that the economic difficulties that are affecting all other banks and most of our customers have also affected us. However, when we look at critical performance metrics such as capital, problem loans, loan loss allowance levels, pre-tax, pre-provision profitability, core deposit growth, and balance sheet liquidity, our performance ranks near the top in all of these metrics as compared to our Pacific Northwest peers.”

“The Pacific Northwest has yet to see measurable or sustainable economic growth, and I believe will likely not in the near term,” Mr. Vance continued. “I do believe, however, that Heritage’s overall performance will continue to improve. To emphasize this point, even though we posted a loss for 2009, our trend lines of profitability measurement show an improving trend in each of the successive quarters of 2009. We are cautiously optimistic that we can continue these positive trend lines. And more importantly, I believe our overall balance sheet structure is well-positioned to take advantage of future growth opportunities.”

“In conclusion, I would like to highlight our successful capital raise in September 2009 and welcome our newest shareholders to the Heritage family. We were very pleased with the success of our offering and I feel a strong sense of responsibility to wisely and profitably employ that new capital in growing our franchise as we work through 2010 and beyond.”

The Company’s total assets increased $68.7 million to $1.01 billion at December 31, 2009 from $946.1 million at December 31, 2008. At December 31, 2009, total loans decreased $36.5 million to $772.2 million from $808.7 million at December 31, 2008. The decrease in loans during 2009 was primarily a result of construction loan repayments and charge-offs. At December 31, 2009, real estate construction loan balances accounted for only 12.4% of total loans and only 6.0% of total loans are within the single-family residential construction sector.

Deposits increased $15.6 million to $840.1 million at December 31, 2009 from $824.5 million at December 31, 2008. Since December 31, 2008, non-maturity deposits (total deposits less certificate of deposit accounts) increased $58.1 million, or 12.2%. As a result, the percentage of certificate of deposit accounts to total deposits decreased to 36.2% at December 31, 2009 from 42.0% at December 31, 2008.

A significant amount of the change in the mix of deposit accounts was a result of the Company reducing its public deposits. In order to comply with new public deposit collateral requirements and reduce the Company’s exposure to uninsured public deposits, management implemented additional measures to manage public deposits. These measures included allowing some public certificate of deposit accounts to run-off

and converting others to insured deposit accounts. As a result, total public deposit balances decreased $63 million to $69 million at December 31, 2009 from $132 million at December 31, 2008. The Company’s uninsured public deposit accounts (which are fully collateralized) declined to $0.5 million at December 31, 2009 from $125 million at December 31, 2008.

At December 31, 2009, the Company’s stockholders’ equity to total assets was 15.6% compared to 12.0% at December 31, 2008. In addition, the Company had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at December 31, 2009 of 14.4%, 19.4% and 20.7%, respectively, as compared to 11.0%, 12.5% and 13.7% at December 31, 2008, respectively. The increase in capital was a result of the September 2009 sale of approximately 4.3 million shares of common stock in a public offering. The shares were sold at $11.50 per share and net proceeds from the offering were approximately $46.6 million. The net proceeds were utilized primarily to fund the increases in investment securities pending their allocation to specific uses.

Net interest income before provision for loan losses was $10.8 million for the quarter ended December 31, 2009 compared to $10.0 million for the quarter ended December 31, 2008, an increase of 7.2%. For the year ended December 31, 2009, net interest income before provision for loan losses was $41.7 million compared to $38.3 million for the year ended December 31, 2008, an increase of 8.7%. These increases were the result of growth in interest earning assets. Average interest earning assets increased 12.5% to $958.6 million for the quarter ended December 31, 2009 from $852.4 million for the quarter ended December 31, 2008. The net interest margin (net interest income divided by average interest earning assets) was 4.45% for the quarter ended December 31, 2009 compared to 4.67% for the quarter ended December 31, 2008.

The provision for loan losses in the fourth quarter of 2009 of $5.0 million increased $300,000 from $4.7 million in the third quarter of 2009 and increased $360,000 from $4.6 million in the prior year quarter ended December 31, 2008. The Company had net charge-offs in the fourth quarter of 2009 of $3.8 million compared to $3.3 million in the third quarter of 2009 and $1.8 million in the prior year quarter ended December 31, 2008. The net charge-offs in the fourth quarter of 2009 and throughout the year occurred primarily in the single-family residential construction sector. The allowance for loan losses as a percent of total loans increased to 3.39% at December 31, 2009 from 3.20% at September 30, 2009 and 1.91% at December 31, 2008. The increase in the allowance for loan losses was attributable to management’s continuing assessment of the increased risk in the loan portfolio as a result of the current economic environment, which has led to increases in potential problem loans and loan losses. Management continues to see weakness specifically within its residential construction portfolio, as well as some weakness in its commercial business loan portfolio. Management is committed to ongoing and careful review of all existing and new loans to seek to minimize loss exposure.

Nonperforming assets (nonperforming loans plus other real estate owned) at December 31, 2009 were $33.7 million, or 3.32% of total assets, a decrease from $35.8 million, or 3.52% of total assets at September 30, 2009 and an increase from $5.4 million, or 0.57% of total assets, at December 31, 2008. Slower sales and excess inventory in the housing market has been the primary cause of the increase in nonperforming assets. Residential construction and land development loans represented 76.7% of our nonperforming loans at December 31, 2009. At December 31, 2009, the Company’s

coverage of allowance for loan losses to nonperforming loans was 79.3%. Management expects the provision for loan losses to continue at elevated levels until there is measurable improvement in its local economic markets.

Non-interest income was $2.3 million for the three months ended December 31, 2009 compared to $2.1 million for the three months ended December 31, 2008. The increase was primarily due to increased SBA loan sales. Non-interest income decreased slightly to $8.7 million for the year ended December 31, 2009 from $8.8 million for the same period in 2008.

Non-interest expense was $7.4 million for the quarter ended December 31, 2009 compared to $7.9 million for the quarter ended December 31, 2008. For the year ended December 31, 2009, non-interest expense was $30.9 million compared to $30.4 million for the year ended December 31, 2008. The variances in non-interest expenses were primarily the result of the following:

• For the three months and year ended December 31, 2009, Federal deposit insurance expenses increased $211,000 and $1.2 million, respectively, from the same periods in the prior year.

• For the three months ended December 31, 2009, impairment loss on securities was $236,000 compared to $668,000 for the three months ended December 31, 2008. For the year ended December 31, 2009, impairment loss on securities was $500,000 compared to $1.9 million for the year ended December 31, 2008.

• For the three months and year ended December 31, 2009, salaries and employee benefits decreased $571,000 and $430,000, respectively, from the same periods in the prior year.

• An assessment attributable to uncollateralized public deposits of a failed bank of $184,000 during the year ended December 31, 2009 (included in other expense).

• For the year ended December 31, 2009, marketing expense increased $288,000 from the same period in the prior year. A significant amount of this increase was the result of the costs associated with a checking account acquisition program.

Earnings Conference Call

The Company will hold a telephone conference call to discuss this earnings release on January 28, 2010, at 11:00 a.m. Pacific time. To access the call, please dial (800) 230-1074 a few minutes prior to 11:00 a.m. Pacific time. The call will be available for replay ending February 11, 2010, by dialing (800) 475-6701 — access code 140793.

About Heritage Financial

Heritage Financial Corporation is a bank holding company headquartered in Olympia, Washington. The Company operates two community banks, Heritage Bank and Central Valley Bank. Heritage Bank serves Pierce, Thurston, south King and Mason Counties in the south Puget Sound region of Washington through its fourteen full-service banking offices and its Online Banking Website www.HeritageBankWA.com. Central Valley Bank serves Yakima and Kittitas Counties in central Washington through its six full-service banking offices and its Online Banking Website www.CVBankWA.com. Additional information about Heritage Financial Corporation is available on its Internet Website www.HF-WA.com.

Non-GAAP Financial Measures

This news release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (GAAP). These measures include average tangible common equity, tangible book value per share and tangible common equity to tangible assets. Tangible common equity (tangible book value) excludes preferred stock, goodwill and other intangible assets. Tangible assets exclude goodwill and other intangible assets. Management has presented these non-GAAP financial measures in this earnings release because it believes that it provides useful and comparative information to assess trends in the Company’s capital reflected in the current quarter and year-to-date results. Where applicable, the Company has also presented comparable capital information using GAAP financial measures. Reconciliation of the GAAP and non-GAAP financial measures are presented below.

(in thousands)	December 31, 2009		September 30, 2009		December 31, 2008
Stockholders’ equity	$	158,498	$	158,557	$	113,147
Less: goodwill and other intangible assets		13,358		13,377		13,436
Tangible equity		145,140		145,180		99,711
Less: preferred stock		23,487		23,456		23,367
Tangible common equity	$	121,653	$	121,724	$	76,344
Total assets	$	1,014,859	$	1,017,956	$	946,145
Less: goodwill and other intangible assets		13,358		13,377		13,436
Tangible assets	$	1,001,501	$	1,004,579	$	932,709

Forward-Looking Statements

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and write-offs and changes in our allowance for loan losses and provision for loan losses that may be impacted by deterioration in the housing and commercial real estate markets; changes in general economic conditions, either nationally or in our market areas; changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; fluctuations in the demand for loans, the number of unsold homes and other properties and fluctuations in real estate values in our market areas; results of examinations of us by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and of our bank subsidiaries by the Federal Deposit Insurance Corporation (the “FDIC”), the Washington State Department of Financial Institutions, Division of Banks (the “Washington DFI”) or other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our reserve for loan losses, write-down assets, change our regulatory capital position or affect our ability to borrow funds or maintain or increase deposits, which could adversely affect our liquidity and earnings; legislative or regulatory changes that adversely affect our business including changes in regulatory policies and principles, including the interpretation of regulatory capital or other rules; our ability to control operating costs and expenses; the use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation; difficulties in reducing risk associated with the loans on our balance sheet; staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; computer systems on which we depend could fail or experience a security breach; our ability to retain key members of our senior management team; costs and effects of litigation, including settlements and judgments; our ability to implement our branch expansion strategy; our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we have acquired or may in the future

acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; changes in consumer spending, borrowing and savings habits; the availability of resources to address changes in laws, rules, or regulations or to respond to regulatory actions; adverse changes in the securities markets; inability of key third-party providers to perform their obligations to us; changes in accounting policies and practices, as may be adopted by the financial institution regulatory agencies or the Financial Accounting Standards Board, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services; future legislative changes in the TARP Capital Purchase Program; and other risks detailed from time to time in our filings with the Securities and Exchange Commission.

The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, you should treat these statements as speaking only as of the date they are made and based only on information then actually known to the Company. The Company does not undertake and specifically disclaims any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. These risks could cause our actual results for 2009 and beyond to differ materially from those expressed in any forward-looking statements by, or on behalf of, us, and could negatively affect the Company’s operating and stock price performance.

HERITAGE FINANCIAL CORPORATION

CONDENSED STATEMENTS OF FINANCIAL CONDITION

(Dollar amounts in thousands; unaudited)

	December 31, 2009			September 30, 2009			December 31, 2008
Assets
Cash on hand and in banks	$	20,106		$	17,222		$	31,478
Interest earning deposits		87,125			121,850			29,156
Investment securities available for sale		90,736			60,416			31,922
Investment securities held to maturity		13,636			9,785			12,081
Loans held for sale		825			—			304
Loans receivable		772,247			783,175			808,726
Less: Allowance for loan losses		(26,164	)		(25,052	)		(15,423	)
Loans receivable, net		746,083			758,123			793,303
Other real estate owned		704			151			2,031
Premises and equipment, net		16,394			16,339			15,721
Federal Home Loan Bank stock		3,566			3,566			3,566
Accrued interest receivable		4,018			4,206			4,168
Prepaid expenses and other assets		18,308			12,921			8,979
Goodwill and other intangible assets		13,358			13,377			13,436
Total assets	$	1,014,859		$	1,017,956		$	946,145
Liabilities and Stockholders’ Equity
Deposits	$	840,128		$	845,147		$	824,480
Securities sold under agreement to repurchase		10,440			9,404			—
Accrued expenses and other liabilities		5,793			4,848			8,518
Total liabilities		856,361			859,399			832,998
Preferred stock		23,487			23,456			23,367
Common stock		73,534			73,546			26,546
Unearned compensation		(270	)		(292	)		(358	)
Retained earnings		61,980			61,539			63,240
Accumulated other comprehensive income (loss), net		(233	)		308			352
Total stockholders’ equity		158,498			158,557			113,147
Total liabilities and stockholders’ equity	$	1,014,859		$	1,017,956		$	946,145
Common stock, shares outstanding		11,057,972			11,055,658			6,699,550

HERITAGE FINANCIAL CORPORATION

CONDENSED STATEMENTS OF INCOME (LOSS)

(Dollar amounts in thousands, except per share amounts; unaudited)

	Three Months Ended									Year Ended
	December 31, 2009			September 30, 2009			December 31, 2008			December 31, 2009			December 31, 2008
Interest income:
Interest and fees on loans	$	12,452		$	12,583		$	13,553		$	50,567		$	54,919
Taxable interest on investment securities		692			598			455			2,295			1,649
Nontaxable interest on investment securities		68			63			52			244			197
Interest on federal funds sold and interest earning deposits		75			60			18			235			152
Dividends on Federal Home Loan Bank stock		—			—			—			—			31
Total interest income		13,287			13,304			14,078			53,341			56,948
Interest expense:
Deposits		2,514			2,753			4,021			11,598			18,321
Borrowed funds		19			22			23			47			285
Total interest expense		2,533			2,775			4,044			11,645			18,606
Net interest income		10,754			10,529			10,034			41,696			38,342
Provision for loan losses		4,950			4,650			4,590			19,390			7,420
Net interest income after provision for loan losses		5,804			5,879			5,444			22,306			30,922
Non-interest income:
Gain on sales of loans		178			42			52			422			435
Brokered mortgage income		36			28			19			156			212
Service charges on deposits		1,086			1,086			1,023			4,191			4,095
Rental income		36			37			45			144			285
Merchant Visa income		754			802			754			3,008			3,039
Other income		163			110			161			746			758
Total non-interest income		2,253			2,105			2,054			8,667			8,824
Non-interest expense:
Salaries & employee benefits		3,074			3,658			3,645			14,259			14,689
Occupancy and equipment		988			952			960			3,928			3,855
Data processing		412			433			406			1,681			1,575
Marketing		247			283			268			990			702
Merchant Visa		631			671			620			2,500			2,466
Professional services		269			230			218			823			710
State and local taxes		272			240			220			967			930
Impairment loss on securities		236			29			668			500			1,927
Federal deposit insurance		350			369			139			1,616			426
Other expense		898			747			761			3,631			3,139
Total non-interest expense		7,377			7,612			7,905			30,895			30,419
Income (loss) before federal income taxes		680			372			(407	)		78			9,327
Federal income tax expense (benefit)		(92	)		60			(213	)		(503	)		2,976
Net income (loss)	$	772		$	312		$	(194	)	$	581		$	6,351
Dividends accrued and discount accreted on preferred shares	$	331		$	330		$	143		$	1,320		$	143
Net income (loss) applicable to common shareholders	$	441		$	(18	)	$	(337	)	$	(739	)	$	6,208
Basic earnings/(loss) per common share	$	0.04		$	(0.00	)	$	(0.05	)	$	(0.10	)	$	0.93
Diluted earnings/(loss) per common share	$	0.04		$	(0.00	)	$	(0.05	)	$	(0.10	)	$	0.93
Average number of common shares outstanding		10,989,598			7,070,697			6,606,565			7,831,614			6,598,647
Average number of diluted common shares outstanding		11,016,089			7,070,697			6,606,565			7,831,614			6,647,420

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands, except per share amounts; unaudited)

	Three Months Ended									Year Ended
	December 31, 2009			September 30, 2009			December 31, 2008			December 31, 2009			December 31, 2008
Performance Ratios:
Net interest margin		4.45	%		4.58	%		4.67	%		4.57	%		4.59	%
Efficiency ratio		56.72	%		60.25	%		65.40	%		61.34	%		64.49	%
Return on average assets		0.30	%		0.13	%		(0.08	)%		0.06	%		0.71	%
Return on average common equity		1.28	%		(0.08	)%		(1.48	)%		(0.72	)%		6.98	%
Average Balances:
Average assets	$	1,022,564		$	975,500		$	914,322		$	978,199		$	893,574
Average earning assets		958,606			912,010			852,416			911,920			834,762
Average total loans		778,638			785,596			812,778			787,527			795,752
Average deposits		845,606			841,569			802,449			840,204			787,758
Average equity		160,478			117,635			101,068			126,467			91,594
Average common equity		137,020			94,208			90,374			103,055			88,906
Average tangible common equity		123,651			80,819			87,621			89,656			75,429

	As of Period End
	December 31, 2009			September 30, 2009			December 31, 2008
Financial Measures:
Book value per common share	$	12.21		$	12.23		$	13.40
Tangible book value per common share	$	11.00		$	11.02		$	11.40
Stockholders’ equity to total assets		15.62	%		15.58	%		11.96	%
Tangible common equity to tangible assets		12.15	%		12.12	%		8.19	%
Tier 1 leverage capital to average assets		14.40	%		15.12	%		11.03	%
Tier 1 capital to risk-weighted assets		19.41	%		18.94	%		12.52	%
Total capital to risk-weighted assets		20.69	%		20.22	%		13.73	%
Loans to deposits ratio		88.90	%		89.70	%		96.26	%

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands, except per share amounts; unaudited)

	Three Months Ended						Year Ended
	December 31, 2009		September 30, 2009		December 31, 2008		December 31, 2009		December 31, 2008
Allowance for Loan Losses:
Allowance balance, beginning of period	$	25,052	$	23,707	$	12,628	$	15,423	$	10,374
Provision for loan losses		4,950		4,650		4,590		19,390		7,420
Net charge-offs:
Commercial		69		1,137		10		2,667		143
Real estate mortgages		189		—		—		188		280
Real estate construction		3,564		2,157		1,743		5,724		1,818
Consumer		16		11		42		70		130
Total net charge-offs		3,838		3,305		1,795		8,649		2,371
Allowance balance, end of period	$	26,164	$	25,052	$	15,423	$	26,164	$	15,423

	As of Period End
	December 31, 2009			September 30, 2009			December 31, 2008
Nonperforming Assets:
Nonaccrual loans by type:
Commercial	$	7,266		$	4,362		$	1,176
Real estate mortgages		—			676			—
Real estate construction		25,288			30,644			2,221
Consumer		—			—			—
Total nonaccrual loans		32,554			35,682			3,397
Restructured loans		425			—			—
Total nonperforming loans		32,979			35,682			3.397
Other real estate owned		704			151			2,031
Nonperforming assets		33,683		$	35,833			5,428
Accruing loans past due 90 days or more	$	277		$	710		$	664
Potential problem loans(1)		45,848			37,346			43,061
Allowance for loan losses to:
Total loans		3.39	%		3.20	%		1.91	%
Nonperforming loans		79.34	%		70.21	%		454.02	%
Nonperforming loans to total loans		4.27	%		4.56	%		0.42	%
Nonperforming assets to total assets		3.32	%		3.52	%		0.57	%

(1) Potential problem loans are those loans that are currently accruing interest and are not considered impaired, but which are being monitored because the financial information of the borrower causes concern as to their ability to comply with their loan repayment terms.

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands; unaudited)

	Three months ended December 31, 2009						Three months ended December 31, 2008
	Average Balance		Interest Earned/ Paid		Average Rate		Average Balance		Interest Earned/ Paid		Average Rate
Interest Earning Assets:
Loans, net	$	753,460	$	12,452	6.56	%	$	799,312	$	13,553	6.73	%
Investments:
Taxable		79,893		692	3.43	%		35,205		455	5.13	%
Nontaxable		8,896		68	3.05	%		5,899		52	3.48	%
Interest earning deposits		112,791		75	0.27	%		8,461		18	0.84	%
Federal Home Loan Bank stock		3,566		—	—			3,539		—	—
Total interest earning assets		958,606		13,287	5.50	%		852,416		14,078	6.55	%
Non-interest earning assets		63,958						61,906
Total assets	$	1,022,564					$	914,322
Interest Bearing Liabilities:
Certificates of deposit	$	317,332		1,777	2.22	%	$	335,435		2,597	3.07	%
Savings accounts		79,390		150	0.75	%		101,915		423	1.65	%
Interest bearing demand and money market accounts		320,598		587	0.73	%		253,450		1,001	1.57	%
Total interest bearing deposits		717,320		2,514	1.39	%		690,800		4,021	2.31	%
FHLB advances and other borrowings		—		—	0.00	%		4,890		23	1.89	%
Securities sold under agreement to repurchase		9,990		19	0.75	%		—		—	—
Total interest bearing liabilities		727,310		2,533	1.38	%		695,690		4,044	2.31	%
Non-interest bearing deposits		128,286						111,649
Other non-interest bearing liabilities		6,490						5,915
Stockholders’ equity		160,478						101,068
Total liabilities & stockholders’ equity	$	1,022,564					$	914,322
Net interest income			$	10,754					$	10,034
Net interest spread					4.12	%					4.25	%
Net interest margin					4.45	%					4.67	%
Average interest earning assets to average interest bearing liabilities					131.80	%					122.53	%

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands; unaudited)

	December 31, 2009					September 30, 2009					December 31, 2008
	Balance			% of Total		Balance			% of Total		Balance			% of Total
Loan Composition
Commercial	$	408,622		52.8	%	$	443,553		56.6	%	$	443,821		54.9	%
Real estate mortgages:
One to four family residential		54,448		7.0	%		57,686		6.9	%		57,535		7.1	%
Five or more family residential and commercial real estate		194,613		25.2	%		158,670		20.2	%		157,542		19.5	%
Total real estate mortgages		249,061		32.2	%		212,356		27.1	%		215,077		26.6	%
Real estate construction:
One to four family residential		46,060		6.0	%		54,863		7.0	%		71,159		8.8	%
Five or more family residential and commercial real estate		49,665		6.4	%		52,057		6.7	%		59,572		7.3	%
Total real estate construction		95,725		12.4	%		106,920		13.7	%		130,731		16.1	%
Consumer		21,261		2.8	%		21,973		2.8	%		21,255		2.6	%
Gross loans		774,669		100.2	%		784,802		100.2	%		810,844		100.2	%
Deferred loan fees		(1,597	)	(0.2	)%		(1,627	)	(0.2	)%		(1,854	)	(0.2	)%
Total loans	$	773,072		100.0	%	$	783,175		100.0	%	$	809,030		100.0	%
Deposit Composition
Non-interest demand deposits	$	133,169		15.8	%	$	122,062		14.4	%	$	115,551		14.0	%
NOW accounts		211,509		25.2	%		206,361		24.4	%		122,104		14.8	%
Money market accounts		113,332		13.5	%		117,286		13.9	%		141,716		17.2	%
Savings accounts		78,205		9.3	%		78,672		9.3	%		98,715		12.0	%
Total non-maturity deposits		536,215		63.8	%		524,381		62.0	%		478,086		58.0	%
Certificate of deposit accounts		303,913		36.2	%		320,766		38.0	%		346,394		42.0	%
Total deposits	$	840,128		100.0	%	$	845,147		100.0	%	$	824,480		100.0	%