Exhibit 99.1

HERITAGE FINANCIAL ANNOUNCES SECOND QUARTER 2010 RESULTS

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 quarter ended June 30, 2010 of $855,000 compared to net income of $91,000 for the quarter ended June 30, 2009. Including preferred stock dividends, the net income applicable to common shareholders for the quarter ended June 30, 2010 was $523,000, or $0.05 per diluted common share, compared with a net loss applicable to common shareholders of $239,000, or $0.04 per diluted common share for the quarter ended June 30, 2009. The increase in earnings from the quarter ended June 30, 2009 was substantially attributable to the decrease in provision for loan losses and the increase in net interest income.

Mr. Vance commented, “We are pleased that we are continuing to experience improving profitability trends over the last few quarters, even though we recognize our profitability still continues to be modest. Our net interest margin of 4.60% is an improvement over last year’s second quarter as well as an improvement over this year’s first quarter. While our total deposits declined slightly due to cyclical fluctuations, it is important to remember that we continue to focus more on growing relationship type accounts rather than increasing total deposits via certificates of deposit growth. The non-maturity deposit percentage remained strong at 64%.”

Mr. Vance added, “As I stated earlier this year, we expected asset quality to fluctuate for the next couple of quarters until we see improvement in the overall economy and we see loan demand return to normal levels. Our non-performing assets have improved from year-end but they remain above year-ago levels, however we are expecting our NPA levels to decrease as we move through the balance of this year. We continue to have one of the strongest coverage ratios of our peers with an allowance for loan losses to non-performing loans of 88.4% which is up from 86.0% at the end of the first quarter of this year. Our allowance for loan losses to total loans continues strong at 3.45% up from 3.27% at the end of the first quarter of this year and up from 2.56% at the end of last year’s second quarter. Additionally, our quarterly loan loss provision went down 16% from the prior quarter and we anticipate it will continue to decline as we go through the balance of the year.”

Mr. Vance concluded, “As I have implied, loan demand remains soft and we expect it to remain so. With the continuing uncertainty in the economy, our existing customers and potential new customers are reluctant to take on debt until the economic picture becomes clearer. However, Heritage is well positioned with strong liquidity and strong capital levels and we feel confident as we continue to evaluate various strategic growth opportunities that we will successfully execute our near-term growth strategies over the next 12 months.”

The Company’s total assets decreased $2.0 million to $1.010 billion at June 30, 2010 from $1.012 billion at March 31, 2010 and increased $43.0 million from $966.8 million at June 30, 2009. Total loans (including loans held for sale) increased $3.2 million to $761.2 million at June 30, 2010 from $758.0 million at March 31, 2010. This increase was due substantially to a $13.7 million increase in commercial loans partially offset by a $9.5 million decrease in real estate construction loans. The increase in the commercial loan balances was the result of increases in commercial term loans, agricultural loans and SBA loans. The decline in the real estate construction portfolio was the result of a combination of $1.6 million charge offs, $1.1 million of transfers to other real estate owned and loan payoffs. At June 30, 2010, real estate construction loan balances accounted for $73.8 million, or 9.7% of total loans, of which $34.7 million are within the single-family residential construction portfolio.

Deposits decreased $6.9 million to $829.0 million at June 30, 2010 from $835.9 million at March 31, 2010. Since March 31, 2010, non-maturity deposits (total deposits less certificate of deposit accounts) decreased $6.2 million.

At June 30, 2010, the Company’s stockholders’ equity to total assets was 15.9% compared to 15.8% at March 31, 2010. The Company and its subsidiary banks continue to maintain capital levels significantly in excess of the requirements to be categorized as “well-capitalized” under applicable regulatory standards. The Company had Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios at June 30, 2010 of 14.8%, 20.2% and 21.4%, respectively, as compared to 14.6%, 20.0% and 21.3% at March 31, 2010, respectively.

Net interest income increased $431,000, or 4.2%, to $10.8 million for the quarter ended June 30, 2010 compared with the same period in 2009 of $10.3 million. Heritage’s net interest margin for the quarter ended June 30, 2010 increased slightly to 4.60% from 4.59% for the same period in 2009 and from 4.58% for the prior quarter ended March 31, 2010.

The provision for loan losses decreased $1.3 million or 30.6% to $3.2 million for the quarter ended June 30, 2010 from $4.5 million for the quarter ended June 30, 2009 and decreased $600,000 or 16.0% from $3.8 million for the quarter ended March 31, 2010. The Company had net charge-offs of $1.7 million for the quarter ended June 30, 2010 compared to net charge-offs of $1.0 million for the quarter ended June 30, 2009 and $5.1 million for the quarter ended March 31, 2010.

The allowance for loan losses at June 30, 2010 increased by $1.5 million to $26.3 million from $24.8 million at March 31, 2010. Nonperforming assets were $31.3 million, or 3.10% of total assets, at June 30, 2010, an increase from $30.4 million, or 3.01% of total assets, at March 31, 2010. Potential problem loans decreased $7.6 million to $36.1 million at June 30, 2010 from $43.7 million at March 31, 2010. The Company believes that its allowance for loan losses is adequate to provide for probable losses based on an evaluation of known and inherent risk in the loan portfolio at June 30, 2010.

Nonperforming loans to total loans was 3.91% at June 30, 2010, an increase from 3.81% at March 31, 2010. The allowance for loan losses to nonperforming loans increased to 88.4% at June 30, 2010 from 86.0% at March 31, 2010. The increase of $897,000 in nonperforming loans during the three months ended June 30, 2010 was partially offset by charge-offs of $1.7 million and principal pay downs. Of these charge-offs, $101,000 related to nonperforming commercial loans and $1.6 million related to nonperforming construction loans. In addition, nonperforming construction loan balances totaling $1.1 million were transferred to other real estate owned and subsequently sold during the three months ended June 30, 2010. These decreases in total nonperforming loans were offset by a $10.0 million addition to nonperforming loans during the quarter ended June 30, 2010 of residential construction loans to a builder/developer of a condominium project in Pierce County, Washington. These loans were reported as potential problem loans at March 31, 2010 and are the primary reason for the decrease in potential problem loans during the three months ended June 30, 2010. Although the Company has appraisals that justify current carrying values, because of the slow rate at which the individual units are selling, these loans were placed on nonaccrual status. While we believe these loans are adequately reserved for, should property values continue to deteriorate, additional loss provisions may be necessary.

Non-interest income decreased $136,000, or 6.0%, to $2.1 million for the quarter ended June 30, 2010 compared to $2.3 million for the same period in 2009. The decrease was due substantially to a decrease of $70,000 in the gain on sale of loans as a result of fewer loan sales and a decrease of $142,000 in the gain on sale of other real estate owned associated with property sales made in the second quarter of 2009.

Non-interest expense increased $448,000 or 5.6% to $8.5 million during the quarter ended June 30, 2010 compared to $8.0 million for the quarter ended June 30, 2009. The increase for the three months was due to increased salaries and benefits expense in the amount of $503,000, increased marketing expense in the amount of $189,000 resulting from additional expense associated with a checking acquisition program and increased professional services in the amount of $156,000 from additional consultant expenses. These increases were partially offset by a $404,000 decline in Federal Deposit Insurance mostly due to a special assessment imposed in 2009.

On July 30, 2010, Heritage announced that its subsidiary, Heritage Bank, acquired most of the non-brokered deposits and certain assets of Cowlitz Bank, including its Bay Bank division, from the Federal Deposit Insurance Corporation (“FDIC”), which was appointed receiver of Cowlitz Bank. The FDIC and Heritage Bank entered into a modified whole bank loss-share transaction to acquire approximately $280 million of Cowlitz Bank’s assets and approximately $350 million in deposits. The FDIC excluded non-performing loans, other real estate owned and most brokered deposits from the transaction. As a result, Heritage Bank purchased only performing loans in the approximate amount of $152 million. The acquired loans (other than consumer loans) are subject to 80% loss coverage by the FDIC.

Heritage Bank participated in a competitive bid process with the FDIC. The accepted bid included a 1% deposit premium (excluding brokered and market place deposits) and a negative bid of $8.8 million on net assets acquired. Heritage Bank received regulatory approval to exercise trust powers and will continue to operate the Trust Division of Cowlitz Bank.

Earnings Conference Call

The Company will hold a telephone conference call to discuss this earnings release on August 2, 2010, at 11:00 a.m. Pacific time. To access the call, please dial (800) 230-1059 a few minutes prior to 11:00 a.m. Pacific time. The call will be available for replay ending August 16, 2010, by dialing (800) 475-6701 — access code 163737.

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. With the FDIC-assisted acquisition of Cowlitz Bank, Heritage Bank now serves western Washington and the greater Portland, Oregon area through its 23 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 they provide 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.

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 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 United States Department of Treasury Troubled Asset Relief Program 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 2010 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)

HERITAGE FINANCIAL CORPORATION

CONDENSED STATEMENTS OF INCOME (LOSS)

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

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

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

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

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

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands; unaudited)

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS

(Dollar amounts in thousands; unaudited)