Heritage Financial : Q1 2023 Investor Presentation

INVESTOR PRESENTATION

Q1 2023

FORWARD LOOKING STATEMENTS

This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward- looking statements are not statements of historical fact, are based on certain assumptions and often include the words "believes," "expects," "anticipates," "estimates," "forecasts," "intends," "plans," "targets," "potentially," "probably," "projects," "outlook" or similar expressions or future or conditional verbs such as "may," "will," "should," "would" and "could." These statements relate to our financial condition, results of operations, beliefs, plans, objectives, goals, expectations, assumptions and statements about future performance or business. Readers are cautioned 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 whether as a result of new information, future events or otherwise. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that could cause our actual results for future periods 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 results and stock price performance including:

• the uncertain impacts of quantitative tightening and current and future monetary policies of the Federal Reserve;
• legislative or regulatory changes that adversely affect our business, including changes in banking, securities and tax law, in regulatory policies and principles, or the interpretation of regulatory capital or other rules, and including changes as a result of the COVID-19 Pandemic;
• our ability to attract and retain deposits;
• liquidity issues, including our ability to borrow funds or raise additional capital, if necessary;
• the effects of climate change, severe weather events, natural disasters, pandemics, epidemics and other public health crises, acts of war or terrorism, and other external events on our business;

The Company reports its results in accordance with United States generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures used in managing the business may provide meaningful information about underlying trends in its business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. Slides containing a discussion and reconciliation of non-GAAP financial measures are contained at the end of this presentation.

All dollars throughout the entire presentation are in millions unless otherwise noted, except per share amounts.

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COMPANY OVERVIEW

OVERVIEW

Heritage Branch

Metropolitan Statistical Areas

Seattle-Tacoma-Bellevue, WA	Eugene-Springfield, OR
Portland-Vancouver-Hillsboro,OR-WA	Boise-Nampa, Idaho

• Map obtained from S&P Global Market Intelligence; certain locations of branches overlap on the map.
• Market information as of April 10, 2023.
• Refer to Appendix for calculation of non-GAAP financial measure.
• Return on average equity ("ROAE"). Return on average tangible common equity ("ROATCE").

Overview

NASDAQ symbol	HFWA
Stock price	$20.57
Market capitalization	$722.1 million
Institutional ownership	80.0%
Headquarters	Olympia, WA
# of branches	51
Year established	1927

Q1 2023 Financial Highlights

Assets	$7.24 billion
Deposits	$5.79 billion
Loans receivable	$4.13 billion
Net income (GAAP)	$20.5 million
Pre-tax,pre-provision	$26.5 million
income (non-GAAP)
Net interest margin	3.91%
ROAE (GAAP)	10.21%
ROATCE (non-GAAP)	15.05%
Efficiency ratio	61.1%
Leverage ratio	9.9%
Total capital ratio	14.1%

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			COMPANY STRATEGY
	Allocate capital to organically grow	Ÿ Successful hiring of individuals and teams of bankers in high-growth and dynamic Seattle and
		Portland markets as well as other key markets in and adjacent to our current footprint includes
	our core banking business		our recent branch openings in Eugene, Oregon and Boise, Idaho
		Ÿ Disciplined approach to concentration risk and active portfolio management
	Improve operational efficiencies and	Ÿ Achieving increased efficiencies with operational scale, internal focus on improving processes
		and technology solutions, including improvement in the efficiency ratio to 61.1% during Q1
	rationalize branch network		2023 compared to 64.4% for the same quarter in 2022
		Ÿ Closed/Consolidated 35 branches since the beginning of 2010, including 12 branches in 2021
	Generate stable profitability and risk	Ÿ	1.17% return on average assets and 10.21% return on average equity in Q1 2023, annualized
	Ÿ Five-year growth in tangible book value (non-GAAP) of $3.82, or 30.2%, to $16.48 at March 31,
	adjusted returns
		2023 from $12.66 at March 31, 2018
		Ÿ Be the "acquirer of choice" in the Pacific Northwest
	Active and disciplined in M&A	Ÿ	Five acquisitions in Washington and Oregon since 2013
		Ÿ	Target Metrics = IRR of >15% with earnbacks < 3 years
	Maintain conservative underwriting	Ÿ	Long track record of strong underwriting with conservative risk profile
	standards and actively manage the	Ÿ	Disciplined approach to concentration risk
	loan portfolio	Ÿ	Nonaccrual loans decreased 18.5% since December 31, 2022 to 0.07% of total assets
	Focus on core deposits is key to	Ÿ	34.3% noninterest demand deposits to total deposits
	Ÿ	Noninterest demand deposit CAGR of 9.2% since 2018
	franchise value over the long term
	Ÿ 0.31% cost of total deposits; top 25% performance among US publicly traded banks in 4Q23
	Proactive capital management	Ÿ	History of increasing regular dividends and utilizing special dividends to manage capital
	Ÿ Strong capital ratios: Leverage ratio = 9.9%; Total capital ratio = 14.1%

• Refer to Appendix for calculation of non-GAAP financial measure.
• Comparable cost of total deposits information provided by S&P Global Market Intelligence for the fourth quarter of 2022 and includes banks nationwide with shares on NASDAQ or NYSE and total

	assets less than $100 billion; excluding pending merger targets.
-	Current quarter capital ratios are estimates pending completion and filing of the Company's regulatory reports.	5