Letter of Understanding



 Exhibit 10.19 
 Letter of Understanding between Heritage Financial Corporation and Donald V. Rhodes 
 

 
 September 21, 2006 
 Mr. Donald V. Rhodes 
 Chairman and Chief Executive Officer 
 Heritage Financial Corporation 
 201 5th Avenue SW 
 Olympia, WA 98501-1114 
 Dear Don: 
 This letter is a non-binding letter of understanding to outline
your employment by Heritage Financial Corporation (“HFC”), Heritage Bank, and Central Valley Bank. You will continue under your current Employment Agreement until December 31, 2006, with your Base Salary of $150,000 per annum,
continuing on a monthly basis until then. Beginning January 1, 2007, you will be an employee at will and serve as Chairman of the Board of HFC, Heritage Bank and Central Valley Bank. As such Chairman, you will perform the duties customarily
attributable to the position and as described in Exhibit A and preside over all meetings of the Board and the Executive Committee. This arrangement shall continue so long as the Board of HFC continues to elect you as Chairman. 
 The terms of your employment beginning January 1, 2007 are: 
 Annual
Base Salary of $75,000 payable under Heritage Bank’s payroll policies; 
 Bonuses as determined by HFC or the Banks’ Boards from time to time, in
those Boards’ sole discretion; 
 Benefits available to employees who work less than 1,000 hours each year; 
 Participation in the 401(k) ESOP allowing deferred compensation, but no eligibility for employer matching contributions; 
 Club memberships deemed appropriate; 
 Reimbursement of reasonable business
expenses; and 
 Automobile as is currently provided as of the date of this letter. 
  

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 Your employment is “at will” but will be terminated in the event of: 
 Death; 
 Disability defined as medically reimbursable physical or mental
impairment that may be expected to result in death, or to be of long, continued duration, and that renders you incapable of performing your duties; 
 Termination for Cause defined as (i) willful misfeasance or gross negligence in the performance of your duties, (ii) conduct demonstrably and significantly harm to the company (which would include willful violation of any final
cease and desist order applicable to employer or a financial institution subsidiary), or (iii) conviction of a felony; and 
 Failure to be elected as
Chairman of the Board of Directors of HFC. 
 In case of any such termination, you will not be entitled to any additional compensation or benefits.

 To indicate your acceptance of the terms described above, please sign below and return this letter to me. 
 Sincerely, 
  

			
	By:	 	 /s/ Peter Fluetsch

	Printed Name:	 	Peter N. Fluetsch
	Title:	 	Chairman, Compensation Committee

 I hereby agree to the above terms. 
  

			
	September 26, 2006	 	 /s/ Donald V. Rhodes

	Date	 	Donald V. Rhodes

  

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 Exhibit “A” 
 Position Description 
 For Donald V. Rhodes 
  

			
	POSITION:	  	CHAIRMAN OF THE BOARD
		  	HERITAGE FINANCIAL CORPORATION
		  	HERITAGE BANK
		  	CENTRAL VALLEY BANK

 REPORTS TO: BOARD OF DIRECTORS 
 FLSA STATUS: EXEMPT 
 Essential Functions: 
 Provides an exceptional level of customer service and customer satisfaction; enhancing and supporting the mission and vision statements of Heritage Financial Corporation. 
 Performs duties as necessary including keeping current with industry and investor trends and expectations to ensure continued safety and soundness of the corporation.

 Provides support, insight, and advice to HFWA CEO in developing a strategic vision for the corporation and for the management and overall profitability of
the corporation. 
 Provides support, insight, and advice to HFWA CEO in exploring new markets for future locations, as well as seeking strategic
alliances/joint ventures to optimize and leverage the corporation’s position. 
 Provides support, insight, and advice to HFWA CEO in planning and
gaining Board approval for all capital management strategies, including stock and cash dividend policies to provide adequate capital levels to support the future growth of the corporation and shareholder expectations. 
 Provides strategic financial input and advice on decision-making issues affecting the corporation such as evaluation of potential alliances, acquisitions and/or mergers
and new lines of business, products, or services. 
 Provides leadership representation for the corporation and subsidiary banks as Chairman of the Board of
Directors and member of various Board committees. Ensures that all policies and by-laws of the Board are observed. Responsible for overseeing reporting to the Board on the overall financial and operational conditions of the corporation and ensuring
that Board members are kept informed about important industry trends and developments. 
 Coordinates with corporate CEO and CFO on setting agendas for the
monthly Board meetings and annual shareholder meetings. 
  

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 Assists corporate CEO with shareholder relations to include representing Heritage Financial Corporation at corporate,
investor, and industry meetings in order to educate and generate market interest in the corporation. 
 Represents the corporation and its values in its
relationships with major customers, regulatory bodies, and shareholders. 
 Represents the corporation and provides leadership in key community activities
including business, charitable, civic, and social organizations. 
 In the absence of Executive management at subsidiary organizations, may act in their
capacity. 
 Other Responsibilities: 
 Must be able to travel
within region and nationally to perform job duties and represent the corporation. 
 Education, Skills, and Experience: 
 Ability to read, speak, and understand English well with effective written and oral business communication skills. Ability to make persuasive speeches and presentations
on controversial or complex topics to the Board and outside investors. 
 Prefer college degree in Business, Finance, or related field or applicable
experience. 
 A strategic visionary with sound technical skills, analytical ability, good judgment, and strong customer and growth focus. 
 Fifteen years finance/commercial banking experience at executive level with a demonstrated ability to lead a team and expand profitability. 
 Must have in-depth knowledge of and experience in Pacific Northwest markets, preferably the Puget Sound and Central Washington regions. 
 Desired personal characteristics include: professional sophistication, political awareness, creativity, energy, self-directed, and balanced ego. 
 Maintain a record of business development and participation in community activities. 
  

									
					
	Name:	  	  
	  		  	Date:	 	  


  

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