Equibles

8-K

HERITAGE FINANCIAL CORP /WA/ (HFWA)

8-K 2023-01-27 For: 2023-01-26
View Original
Added on April 04, 2026

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities and Exchange Act of 1934

Date of Report (Dated of earliest event reported): January 26, 2023

HERITAGE FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

Commission File Number 000-29480

Washington 91-1857900
(State or other jurisdiction of<br>incorporation or organization) (I.R.S. Employer<br>Identification No.)
201 Fifth Avenue SW, Olympia WA 98501
(Address of principal executive offices) (Zip Code)

(360) 943-1500

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class Trading symbol Name of each exchange on which registered
Common stock, no par value HFWA NASDAQ

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1934 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02    Results of Operations and Financial Condition

On January 26, 2023, Heritage Financial Corporation (“Heritage”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2022.

A copy of the release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 7.01    Regulation FD Disclosure

Heritage is filing an investor slide presentation that it reviewed in conjunction with its earnings release conference call on January 26, 2023.

A copy of the presentation materials is furnished herewith as Exhibit 99.2 and is incorporated herein by reference.

Item 8.01    Other Events

On January 26, 2023, Heritage issued a press release announcing a regular quarterly cash dividend of $0.22 per common share. The dividend will be paid on February 22, 2023 to shareholders of record at the close of business on February 8, 2023.

A copy of the release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01     Financial Statements and Exhibits

(d) Exhibits

The following exhibit is being filed herewith and this list shall constitute the exhibit index:

Exhibit 99.1 Press Release dated January 26, 2023 announcing financial results for the fourth quarter and year ended December 31, 2022 and cash dividend
Exhibit 99.2 Heritage Financial Corporation Presentation Materials
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

HERITAGE FINANCIAL CORPORATION
Date:
January 26, 2023 /S/    JEFFREY J. DEUEL
Jeffrey J. Deuel
President and Chief Executive Officer
(Duly Authorized Officer)

Document

hfwarevisedlogoa01a02.jpg

FOR IMMEDIATE RELEASE

DATE: January 26, 2023

HERITAGE FINANCIAL ANNOUNCES FOURTH QUARTER AND ANNUAL 2022 RESULTS AND DECLARES REGULAR CASH DIVIDEND

•Net income was $22.5 million, or $0.64 per diluted share, for the fourth quarter of 2022 compared to $21.0 million, or $0.59 per diluted share, for the third quarter of 2022 and $19.4 million, or $0.55 per diluted share, for the fourth quarter of 2021.

•Loans receivable increased $49.6 million, or 1.2% (4.9% annualized), in the fourth quarter of 2022.

•Loans receivable increased $235.2 million, or 6.2% for the year ended December 31, 2022. Excluding SBA PPP loan repayments of $144.4 million, loans receivable increased $379.6 million for the year ended December 31, 2022.

•Net interest income increased $3.8 million, or 6.4%, to $63.1 million for the fourth quarter of 2022 compared to $59.3 million for the third quarter of 2022, and increased $15.2 million, or 31.7% compared to $47.9 million for the fourth quarter of 2021.

•Net interest margin increased to 3.98% for the fourth quarter of 2022 from 3.57% for the third quarter of 2022 and 2.85% for the fourth quarter of 2021.

•Cost of total deposits was 0.16% for the fourth quarter of 2022 compared to 0.09% for both the third quarter of 2022 and the fourth quarter of 2021.

•Expanded geographic footprint into Idaho with the opening of a branch in Boise on January 10, 2023.

•Declared a regular cash dividend of $0.22 per share on January 25, 2023, an increase of 4.8% from the $0.21 regular cash dividend per share declared in the third quarter of 2022.

Olympia, WA - Heritage Financial Corporation (NASDAQ GS: HFWA) (the “Company” or “Heritage”), the parent company of Heritage Bank (the "Bank"), today reported net income of $22.5 million for the fourth quarter of 2022 compared to $21.0 million for the third quarter of 2022 and $19.4 million for the fourth quarter of 2021. Diluted earnings per share for the fourth quarter of 2022 were $0.64 compared to $0.59 for the third quarter of 2022 and $0.55 for the fourth quarter of 2021. Net income for the year ended 2022 totaled $81.9 million, or $2.31 per diluted share as compared to $98.0 million, or $2.73 per diluted share for 2021.

Jeffrey J. Deuel, President and Chief Executive Officer of Heritage, commented, “We are very pleased with our profitability over the past year due to higher net interest margin, low-cost deposits and strong loan growth, along with our prudent expense management. Our net interest margin in the fourth quarter increased by 113 basis points from the fourth quarter of 2021, while our cost of total deposits only increased by 7 basis points. In addition, excluding the impacts of SBA PPP loan repayments, total loan balances increased by 10.3% from year end 2021. These achievements were made possible by our foundation of a strong balance sheet and a talented team of bankers.

We successfully expanded our teams in the Portland and Eugene MSAs in 2022, and we are excited to start 2023 by announcing our entry into the Boise MSA, which is our first branch in Idaho. We believe this will be an attractive market for Heritage to expand and continue to grow.

Further, we are proud that Heritage Bank is partnering with College Housing Northwest (“CHNW”) in financing 79 affordable student housing rental units located on the Eastside of Portland. CHNW works to provide innovative housing support to college students, especially to those aging out of the foster care system. Heritage Bank is providing $7.4 million of term loan financing for the project as well as assisting CHNW to acquire additional buildings with access to innovative funding from government and foundation sources.”

Financial Highlights

The following table provides financial highlights at the dates and for the periods indicated:

As of or for the Quarter Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
(Dollars in thousands, except per share amounts)
Net income $ 22,544 $ 20,990 $ 19,397
Pre-tax, pre-provision income (1) $ 29,299 $ 27,592 $ 19,282
Diluted earnings per share $ 0.64 $ 0.59 $ 0.55
Return on average assets (2) 1.26 % 1.13 % 1.04 %
Pre-tax, pre-provision return on average assets (1) (2) 1.64 % 1.49 % 1.03 %
Return on average common equity (2) 11.46 % 10.27 % 9.06 %
Return on average tangible common equity (1) (2) 17.21 % 15.20 % 13.27 %
Net interest margin (2) 3.98 % 3.57 % 2.85 %
Cost of total deposits (2) 0.16 % 0.09 % 0.09 %
Efficiency ratio 58.0 % 58.7 % 66.6 %
Noninterest expense to average total assets (2) 2.26 % 2.11 % 2.06 %
Total assets $ 6,980,100 $ 7,200,312 $ 7,432,412
Loans receivable, net $ 4,007,872 $ 3,959,206 $ 3,773,301
Total deposits $ 5,924,840 $ 6,237,735 $ 6,394,290
Loan to deposit ratio (3) 68.4 % 64.1 % 59.7 %
Book value per share $ 22.73 $ 22.13 $ 24.34
Tangible book value per share (1) $ 15.66 $ 15.04 $ 17.19
Tangible book value per share, excluding AOCI (1) (4) $ 18.50 $ 18.03 $ 16.92

(1) See Non-GAAP Financial Measures section herein.

(2) Annualized.

(3) Loans receivable divided by total deposits.

(4) Accumulated other comprehensive income or loss ("AOCI").

Balance Sheet

Cash and cash equivalents decreased $303.7 million, or 74.6%, to $103.6 million at December 31, 2022 from $407.3 million at September 30, 2022 due primarily to an increase in loans receivable and a decrease in deposits.

Total investment securities decreased $31.6 million, or 1.5%, to $2.10 billion at December 31, 2022 from $2.13 billion at September 30, 2022 due primarily to maturities and prepayments of $55.3 million and sales of $30.4 million, partially offset by purchases of $48.1 million.

The following table summarizes the Company's loans receivable, net at the dates indicated:

December 31, 2022 September 30, 2022 Change
Balance % of Total Balance % of Total %
(Dollars in thousands)
Commercial business:
Commercial and industrial $ 692,100 17.1 % $ 735,028 18.4 % (5.8) %
SBA PPP 1,468 — 3,593 0.1 (2,125) (59.1)
Owner-occupied commercial real estate ("CRE") 937,040 23.1 959,486 24.0 (22,446) (2.3)
Non-owner occupied CRE 1,586,632 39.2 1,547,114 38.6 39,518 2.6
Total commercial business 3,217,240 79.4 3,245,221 81.1 (27,981) (0.9)
Residential real estate 343,631 8.5 296,019 7.4 47,612 16.1

All values are in US Dollars.

December 31, 2022 September 30, 2022 Change
Balance % of Total Balance % of Total %
(Dollars in thousands)
Real estate construction and land development:
Residential 80,074 2.0 92,297 2.3 (12,223) (13.2)
Commercial and multifamily 214,038 5.3 160,723 4.0 53,315 33.2
Total real estate construction and land development 294,112 7.3 253,020 6.3 41,092 16.2
Consumer 195,875 4.8 207,035 5.2 (11,160) (5.4)
Loans receivable 4,050,858 100.0 % 4,001,295 100.0 % 49,563 1.2
Allowance for credit losses on loans (42,986) (42,089) (897) 2.1
Loans receivable, net $ 4,007,872 $ 3,959,206 1.2 %

All values are in US Dollars.

Loans receivable grew $49.6 million, or 1.2% (4.9% annualized), in the fourth quarter of 2022. New loans funded in the fourth and third quarter of 2022 were $203.1 million and $206.7 million, respectively. This includes purchased residential real estate loans of $40.5 million and $29.0 million, respectively, during the fourth and third quarter of 2022. Loan repayments also increased during the fourth quarter of 2022 to $147.0 million, as compared to $71.6 million during the third quarter of 2022, exclusive of SBA PPP loan repayments, net deferred fees, and net acquired discounts.

Commercial and industrial loans decreased primarily due to declines in line of credit utilization rates during the fourth quarter of 2022 compared to the third quarter of 2022. Commercial and multifamily construction loans increased by $53.3 million or 33.2% due to new loan originations and advances on outstanding loans during the fourth quarter of 2022. Total new commitments for commercial and multifamily construction loans increased to $173.4 million in the fourth quarter of 2022 as compared to $91.7 million in the third quarter of 2022.

Prepaid expenses and other assets increased $65.5 million or 28.4% to $296.2 million at December 31, 2022 from $230.7 million at September 30, 2022 due primarily to an increase in commitments for low income housing tax credits. Accrued expenses and other liabilities increased $65.3 million or 52.6% to $189.3 million at December 31, 2022 from $124.0 million at September 30, 2022 due to an increase in the unfunded portion of the commitment for these low income housing tax credits.

The following table summarizes the Company's total deposits at the dates indicated:

December 31, 2022 September 30, 2022 Change
Balance % of Total Balance % of Total %
(Dollars in thousands)
Noninterest demand deposits $ 2,099,464 35.5 % $ 2,308,583 37.0 % (9.1) %
Interest bearing demand deposits 1,830,727 30.9 1,997,989 32.0 (167,262) (8.4)
Money market accounts 1,063,243 17.9 996,214 16.0 67,029 6.7
Savings accounts 623,833 10.5 647,526 10.4 (23,693) (3.7)
Total non-maturity deposits 5,617,267 94.8 5,950,312 95.4 (333,045) (5.6)
Certificates of deposit 307,573 5.2 287,423 4.6 20,150 7.0
Total deposits $ 5,924,840 100.0 % $ 6,237,735 100.0 % (5.0) %

All values are in US Dollars.

Total deposits decreased $312.9 million, or 5.0%, from September 30, 2022. The decrease was due to competitive pricing pressures and customers moving excess funds to alternative higher yielding investments as well as general declines in individual customer balances. Money market account and certificate of deposit balances increased from the prior quarter due to marketing efforts to retain deposit accounts.

Total stockholders' equity increased $21.2 million during the fourth quarter of 2022 due primarily to net income recognized for the quarter. The Company and Bank continue to maintain capital levels in excess of the applicable regulatory requirements for them both to be categorized as “well-capitalized”.

The following table summarizes capital ratios for the Company at the dates indicated:

December 31,<br>2022 September 30,<br>2022 Change
Stockholders' equity to total assets 11.4 % 10.8 % 0.6 %
Tangible common equity to tangible assets (1) 8.2 7.6 0.6
Tangible common equity, excluding AOCI, to tangible assets, excluding UGL (1) 9.5 9.0 0.5
December 31,<br>2022 September 30,<br>2022 Change
--- --- --- ---
Common equity tier 1 capital ratio (2) 12.8 12.8 —
Leverage ratio (2) 9.7 9.2 0.5
Tier 1 capital ratio (2) 13.2 13.3 (0.1)
Total capital ratio (2) 14.0 14.0 —

(1) See Non-GAAP Financial Measures section herein.

(2) Current quarter ratios are estimates pending completion and filing of the Company’s regulatory reports.

Allowance for Credit Losses and Provision for Credit Losses

The following table provides detail on the changes in the allowance for credit losses ("ACL") on loans and the ACL on unfunded commitments ("Unfunded") and the related provision for (reversal of) credit losses for the periods indicated:

As of or for the Quarter Ended
December 31, 2022 September 30, 2022 December 31, 2021
ACL on Loans ACL on Unfunded Total ACL on Loans ACL on Unfunded Total ACL on Loans ACL on Unfunded Total
(Dollars in thousands)
Balance, beginning of period $ 42,089 $ 1,023 $ 43,112 $ 39,696 $ 997 $ 40,693 $ 48,317 $ 2,154 $ 50,471
Provision for (reversal of) credit losses 689 721 1,410 1,919 26 1,945 (5,490) 453 (5,037)
Net recoveries (charge-offs) 208 — 208 474 — 474 (466) — (466)
Balance, end of period $ 42,986 $ 1,744 $ 44,730 $ 42,089 $ 1,023 $ 43,112 $ 42,361 $ 2,607 $ 44,968

The ACL on loans increased compared to September 30, 2022 due primarily to an increase related to the growth in loans receivable. The ACL on unfunded increased compared to September 30, 2022 due primarily to an increase in unfunded commitment balances.

Credit Quality

Nonperforming assets decreased to 0.08% of total assets at December 31, 2022 compared to 0.09% of total assets at September 30, 2022. Nonperforming assets at both December 31, 2022 and September 30, 2022 consisted only of nonaccrual loans. Changes in nonaccrual loans during the periods indicated were as follows:

Quarter Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
(In thousands)
Balance, beginning of period $ 6,234 $ 10,475 $ 25,894
Additions 605 — 333
Net principal payments and transfers to accruing status (828) (4,016) (1,435)
Payoffs (105) (225) (540)
Charge-offs — — (498)
Balance, end of period $ 5,906 $ 6,234 $ 23,754

Net Interest Income and Net Interest Margin

Net interest income increased $3.8 million, or 6.4%, compared to the third quarter of 2022 and increased $15.2 million, or 31.7%, compared to the fourth quarter of 2021 due primarily to an increase in yields earned on interest earning assets following increases in market interest rates. The yield on interest earning assets increased to 4.16% as compared to 3.68% in the third quarter of 2022 and 2.95% in the fourth quarter of 2021.

The cost of interest bearing liabilities increased to 0.29%, compared to 0.18% in the third quarter of 2022 and 0.16% in the fourth quarter of 2021 primarily due to increased costs of interest bearing deposits due to competitive rate pressures on deposit accounts.

The following table presents the loan yield and the impact of SBA PPP loans and the incremental accretion on purchased loans on this financial measure for the periods presented below:

Quarter Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
Loan yield (GAAP) 4.86 % 4.51 % 4.42 %
Exclude impact from SBA PPP loans (0.01) (0.02) (0.29)
Exclude impact from incremental accretion on purchased loans (0.02) (0.05) (0.05)
Loan yield, excluding SBA PPP loans and incremental accretion on purchased loans (non-GAAP) (1) 4.83 % 4.44 % 4.08 %

(1) See Non-GAAP Financial Measures section.

Net interest margin increased to 3.98% for the fourth quarter of 2022 as compared to 3.57% for the third quarter of 2022 and 2.85% for the fourth quarter of 2021 due to a shift into higher yielding interest earning assets as well as higher average yields on all interest earning assets following increases in market interest rates while maintaining a low cost of deposits.

Noninterest Income

The following table presents the key components of noninterest income and the change for the periods indicated:

Quarter Ended Quarter Over Quarter Change Prior Year Quarter Change
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 % %
(Dollar amounts in thousands)
Service charges and other fees $ 2,651 $ 2,688 $ 2,479 (1.4) % 6.9 %
Card revenue 2,111 2,365 2,108 (254) (10.7) 3 0.1
Loss on sale of investment securities, net (256) — — (256) — (256) (100.0)
Gain on sale of loans, net 40 133 506 (93) (69.9) (466) (92.1)
Interest rate swap fees 19 78 174 (59) (75.6) (155) (89.1)
Bank owned life insurance income 565 723 500 (158) (21.9) 65 13.0
Gain on sale of other assets, net — 265 2,717 (265) — (2,717) (100.0)
Other income 1,454 1,201 1,355 253 21.1 99 7.3
Total noninterest income $ 6,584 $ 7,453 $ 9,839 (11.7) % (33.1) %

All values are in US Dollars.

Noninterest income decreased from the third quarter of 2022 due primarily to decreased card revenue, a loss on the sale of investment securities recognized during the fourth quarter of 2022 and a gain on sale of branches held for sale recognized during the third quarter of 2022.

Noninterest income decreased from the same period in 2021 due primarily to reduced gain on sale of loans, net as sales volume of secondary market mortgage loans declined, a loss on the sale of investment securities recognized during the fourth quarter of 2022 and a gain on sale of branches held for sale recognized during the fourth quarter of 2021.

Noninterest Expense

The following table presents the key components of noninterest expense and the change for the periods indicated:

Quarter Ended Quarter Over Quarter Change Prior Year Quarter Change
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 % %
(Dollar amounts in thousands)
Compensation and employee benefits $ 24,856 $ 24,206 $ 22,798 2.7 % 9.0 %
Occupancy and equipment 4,541 4,422 4,325 119 2.7 216 5.0
Data processing 4,369 4,185 4,694 184 4.4 (325) (6.9)
Marketing 675 358 577 317 88.5 98 17.0
Professional services 630 639 763 (9) (1.4) (133) (17.4)

All values are in US Dollars.

Quarter Ended Quarter Over Quarter Change Prior Year Quarter Change
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 % %
(Dollar amounts in thousands)
State/municipal business and use tax 1,008 963 850 45 4.7 158 18.6
Federal deposit insurance premium 490 500 628 (10) (2.0) (138) (22.0)
Amortization of intangible assets 671 671 759 — — (88) (11.6)
Other expense 3,152 3,203 3,071 (51) (1.6) 81 2.6
Total noninterest expense $ 40,392 $ 39,147 $ 38,465 3.2 % 5.0 %

All values are in US Dollars.

Noninterest expense increased from the third quarter of 2022 and the same period in 2021 due primarily to an increase in compensation and employee benefits due to an increase in the number of full-time equivalent employees including the addition of commercial and relationship banking teams in the second quarter of 2022 and an increase in salaries and wages due to upward market pressure. Marketing expenses increased from the third quarter of 2022 due to timing of marketing efforts.

Income Tax Expense

The following table presents the income tax expense and related metrics and the change for the periods indicated:

Quarter Ended Quarter Over Quarter Change Prior Year Quarter Change
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 % %
(Dollar amounts in thousands)
Income before income taxes $ 27,889 $ 25,647 $ 24,319 8.7 % 14.7 %
Income tax expense $ 5,345 $ 4,657 $ 4,922 14.8 % 8.6 %
Effective income tax rate 19.2 % 18.2 % 20.2 % 1.0 % 5.5 % (1.0) % (5.0) %

All values are in US Dollars.

Income tax expense increased compared to the third quarter of 2022 due primarily to a higher effective income tax rate during the fourth quarter of 2022 following an increase in annual pre-tax income for the year ended 2022, which decreased the impact of favorable permanent tax items such as tax-exempt investments, investments in bank owned life insurance and low-income housing tax credits as well as an increase in the effective state income tax rate.

Income tax expense increased compared to the same period in 2021 primarily due to higher estimated pre-tax income in the fourth quarter of 2022 as compared to the fourth quarter of 2021.

Dividends

On January 25, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share, a 4.8% increase from the $0.21 dividend per share declared in the third quarter of 2022. The dividend is payable on February 22, 2023 to shareholders of record as of the close of business on February 8, 2023.

Earnings Conference Call

The Company will hold a telephone conference call to discuss this earnings release on Thursday, January 26, 2023 at 10:00 a.m. Pacific time. To access the call, please dial (844) 200-6205 -- access code 603267 a few minutes prior to 10:00 a.m. Pacific time. The call will be available for replay through February 2, 2023 by dialing (866) 813-9403 -- access code 855414.

About Heritage Financial

Heritage Financial Corporation is an Olympia-based bank holding company with Heritage Bank, a full-service commercial bank, as its sole wholly-owned banking subsidiary. Heritage Bank has a branch network of 51 banking offices in Washington, Oregon and Idaho. Heritage Bank does business under the Whidbey Island Bank name on Whidbey Island. Heritage’s stock is traded on the NASDAQ Global Select Market under the symbol “HFWA”. More information about Heritage Financial Corporation can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.

Contact

Jeffrey J. Deuel, President and Chief Executive Officer, (360) 943-1500

Donald J. Hinson, Executive Vice President and Chief Financial Officer, (360) 943-1500

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could," or "may." Forward-looking statements are not historical facts but instead represent management's current expectations and forecasts regarding future events, many of which are inherently uncertain and outside of our control. Actual results may differ, possibly materially, from those currently expected or projected in these forward-looking statements. Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements, include but are not limited to, the following: changes in general economic conditions, either nationally or in our market areas, including as a result of employment levels, labor shortages and the effects of inflation, a potential recession or slowed economic growth caused by increasing political instability from acts of war including Russia’s invasion of Ukraine, as well as increasing oil prices and supply chain disruptions; changes in the interest rate environment; the quality and composition of our securities portfolio and the impact of any adverse changes including market liquidity within the securities markets; legislative and regulatory changes, including as a result of new COVID-19 variants; and other factors described in Heritage's latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other documents filed with or furnished to the Securities and Exchange Commission-which are available on our website at www.heritagebanknw.com and on the SEC's website at www.sec.gov. The Company cautions readers not to place undue reliance on any forward-looking statements. Moreover, any of the forward-looking statements that we make in this press release or the documents we file with or furnish to the SEC are based only on information then actually known to the Company and upon management's beliefs and assumptions at the time they are made which may turn out to be wrong because of inaccurate assumptions we might make, because of the factors described above or because of other factors that we cannot foresee. 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 2023 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 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(Dollar amounts in thousands, except shares)

December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
Assets
Cash on hand and in banks $ 74,295 $ 100,428 $ 61,377
Interest earning deposits 29,295 306,896 1,661,915
Cash and cash equivalents 103,590 407,324 1,723,292
Investment securities available for sale, at fair value (amortized cost of $1,460,033, $1,491,440 and $883,832, respectively) 1,331,443 1,356,142 894,335
Investment securities held to maturity, at amortized cost (fair value of $673,434, $677,335 and $376,331, respectively) 766,396 773,319 383,393
Total investment securities 2,097,839 2,129,461 1,277,728
Loans held for sale — — 1,476
Loans receivable 4,050,858 4,001,295 3,815,662
Allowance for credit losses on loans (42,986) (42,089) (42,361)
Loans receivable, net 4,007,872 3,959,206 3,773,301
Other real estate owned — — —
Premises and equipment, net 76,930 76,683 79,370
Federal Home Loan Bank stock, at cost 8,916 8,916 7,933
Bank owned life insurance 122,059 121,369 120,196
Accrued interest receivable 18,547 17,812 14,657
Prepaid expenses and other assets 296,181 230,704 183,543
Other intangible assets, net 7,227 7,898 9,977
Goodwill 240,939 240,939 240,939
Total assets $ 6,980,100 $ 7,200,312 $ 7,432,412
Liabilities and Stockholders' Equity
Deposits $ 5,907,420 $ 6,214,964 $ 6,394,290
Deposits held for sale 17,420 22,771 —
Total deposits 5,924,840 6,237,735 6,394,290
Junior subordinated debentures 21,473 21,399 21,180
Securities sold under agreement to repurchase 46,597 40,449 50,839
Accrued expenses and other liabilities 189,297 124,027 111,671
Total liabilities 6,182,207 6,423,610 6,577,980
Common stock 552,397 551,419 551,798
Retained earnings 345,346 330,284 293,238
Accumulated other comprehensive (loss) income, net (99,850) (105,001) 9,396
Total stockholders' equity 797,893 776,702 854,432
Total liabilities and stockholders' equity $ 6,980,100 $ 7,200,312 $ 7,432,412
Shares outstanding 35,106,697 35,104,248 35,105,779

HERITAGE FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollar amounts in thousands, except per share amounts)

Quarter Ended Year Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 December 31,<br>2022 December 31,<br>2021
Interest Income
Interest and fees on loans $ 48,513 $ 43,847 $ 42,695 $ 174,275 $ 189,832
Taxable interest on investment securities 14,655 12,362 5,197 40,627 17,492
Nontaxable interest on investment securities 843 892 1,063 3,488 3,899
Interest on interest earning deposits 2,010 4,009 633 9,067 1,608
Total interest income 66,021 61,110 49,588 227,457 212,831
Interest Expense
Deposits 2,457 1,478 1,464 6,772 6,160
Junior subordinated debentures 410 312 185 1,156 742
Other borrowings 47 34 31 144 140
Total interest expense 2,914 1,824 1,680 8,072 7,042
Net interest income 63,107 59,286 47,908 219,385 205,789
Provision for (reversal of) credit losses 1,410 1,945 (5,037) (1,426) (29,372)
Net interest income after provision for (reversal of) credit losses 61,697 57,341 52,945 220,811 235,161
Noninterest Income
Service charges and other fees 2,651 2,688 2,479 10,390 9,207
Card revenue 2,111 2,365 2,108 8,885 8,325
(Loss) gain on sale of investment securities, net (256) — — (256) 29
Gain on sale of loans, net 40 133 506 633 3,644
Interest rate swap fees 19 78 174 402 661
Bank owned life insurance income 565 723 500 3,747 2,520
Gain on sale of other assets, net — 265 2,717 469 4,405
Other income 1,454 1,201 1,355 5,321 5,824
Total noninterest income 6,584 7,453 9,839 29,591 34,615
Noninterest Expense
Compensation and employee benefits 24,856 24,206 22,798 92,092 88,765
Occupancy and equipment 4,541 4,422 4,325 17,465 17,243
Data processing 4,369 4,185 4,694 16,800 16,533
Marketing 675 358 577 1,643 2,143
Professional services 630 639 763 2,497 3,846
State/municipal business and use taxes 1,008 963 850 3,634 3,884
Federal deposit insurance premium 490 500 628 2,015 2,106
Amortization of intangible assets 671 671 759 2,750 3,111
Other expense 3,152 3,203 3,071 12,070 11,638
Total noninterest expense 40,392 39,147 38,465 150,966 149,269
Income before income taxes 27,889 25,647 24,319 99,436 120,507
Income tax expense 5,345 4,657 4,922 17,561 22,472
Net income $ 22,544 $ 20,990 $ 19,397 $ 81,875 $ 98,035
Basic earnings per share $ 0.64 $ 0.60 $ 0.56 $ 2.33 $ 2.75
Diluted earnings per share $ 0.64 $ 0.59 $ 0.55 $ 2.31 $ 2.73
Dividends declared per share $ 0.21 $ 0.21 $ 0.21 $ 0.84 $ 0.81
Average shares outstanding - basic 35,104,701 35,103,984 35,154,382 35,103,465 35,677,851
Average shares outstanding - diluted 35,480,848 35,468,890 35,439,998 35,463,896 35,973,386

HERITAGE FINANCIAL CORPORATION

FINANCIAL STATISTICS (Unaudited)

(Dollar amounts in thousands, except per share amounts)

Nonperforming Assets and Credit Quality Metrics:

Quarter Ended Year Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021 December 31,<br>2022 December 31,<br>2021
Allowance for Credit Losses on Loans:
Balance, beginning of period $ 42,089 $ 39,696 $ 48,317 $ 42,361 $ 70,185
Provision for (reversal of) credit losses on loans 689 1,919 (5,490) (563) (27,298)
Charge-offs:
Commercial business — — (519) (316) (1,276)
Residential real estate — — — (30) —
Real estate construction and land development — — — — (1)
Consumer (151) (138) (160) (547) (669)
Total charge-offs (151) (138) (679) (893) (1,946)
Recoveries:
Commercial business 53 455 81 929 816
Residential real estate — — — 3 —
Real estate construction and land development 210 107 4 384 32
Consumer 96 50 128 765 572
Total recoveries 359 612 213 2,081 1,420
Net recoveries (charge-offs) 208 474 (466) 1,188 (526)
Balance, end of period $ 42,986 $ 42,089 $ 42,361 $ 42,986 $ 42,361
Net (recoveries) charge-offs on loans to average loans, annualized (0.02) % (0.05) % 0.05 % (0.03) % 0.01 %
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
--- --- --- --- --- --- --- --- --- ---
Nonperforming Assets:
Nonaccrual loans:
Commercial business $ 5,869 $ 6,234 $ 23,107
Residential real estate — — 47
Real estate construction and land development 37 — 571
Consumer — — 29
Total nonaccrual loans 5,906 6,234 23,754
Other real estate owned — — —
Nonperforming assets $ 5,906 $ 6,234 $ 23,754
Restructured performing loans $ 50,441 $ 71,863 $ 59,110
Accruing loans past due 90 days or more 1,615 20 293
ACL on loans to:
Loans receivable 1.06 % 1.05 % 1.11 %
Loans receivable, excluding SBA PPP loans (1) 1.06 % 1.05 % 1.15 %
Nonaccrual loans 727.84 % 675.15 % 178.33 %
Nonperforming loans to loans receivable 0.15 % 0.16 % 0.62 %
Nonperforming assets to total assets 0.08 % 0.09 % 0.32 %

(1) See Non-GAAP Financial Measures section herein.

Average Balances, Yields, and Rates Paid:

Quarter Ended
December 31, 2022 September 30, 2022 December 31, 2021
Average<br>Balance Interest<br>Earned/<br>Paid Average<br>Yield/<br>Rate (1) Average<br>Balance Interest<br>Earned/<br>Paid Average<br>Yield/<br>Rate (1) Average<br>Balance Interest<br>Earned/<br>Paid Average<br>Yield/<br>Rate (1)
Interest Earning Assets:
Loans receivable, net (2)(3) $ 3,963,042 $ 48,513 4.86 % $ 3,859,839 $ 43,847 4.51 % $ 3,836,029 $ 42,695 4.42 %
Taxable securities 1,983,178 14,655 2.93 1,868,900 12,362 2.62 1,016,629 5,197 2.03
Nontaxable securities (3) 123,430 843 2.71 133,022 892 2.66 153,686 1,063 2.74
Interest earning deposits 222,538 2,010 3.58 730,600 4,009 2.18 1,665,640 633 0.15
Total interest earning assets 6,292,188 66,021 4.16 % 6,592,361 61,110 3.68 % 6,671,984 49,588 2.95 %
Noninterest earning assets 808,656 775,375 731,613
Total assets $ 7,100,844 $ 7,367,736 7,403,597
Interest Bearing Liabilities:
Certificates of deposit $ 299,364 $ 455 0.60 % $ 297,786 $ 290 0.39 % $ 349,708 $ 364 0.41 %
Savings accounts 632,536 107 0.07 654,697 99 0.06 631,531 93 0.06
Interest bearing demand and money market accounts 2,946,425 1,895 0.26 3,065,007 1,089 0.14 2,996,482 1,007 0.13
Total interest bearing deposits 3,878,325 2,457 0.25 4,017,490 1,478 0.15 3,977,721 1,464 0.15
Junior subordinated debentures 21,430 410 7.59 21,356 312 5.80 21,140 185 3.47
Securities sold under agreement to repurchase 43,694 41 0.37 42,959 34 0.31 46,942 31 0.26
FHLB advances and other borrowings 543 6 4.38 — — — — — —
Total interest bearing liabilities 3,943,992 2,914 0.29 % 4,081,805 1,824 0.18 % 4,045,803 1,680 0.16 %
Noninterest demand deposits 2,239,806 2,356,688 2,396,452
Other noninterest bearing liabilities 136,645 118,191 111,959
Stockholders’ equity 780,401 811,052 849,383
Total liabilities and stockholders’ equity $ 7,100,844 $ 7,367,736 $ 7,403,597
Net interest income and spread $ 63,107 3.87 % $ 59,286 3.50 % $ 47,908 2.79 %
Net interest margin 3.98 % 3.57 % 2.85 %

(1)Annualized; average balances are calculated using daily balances.

(2)Average loans receivable, net includes loans held for sale and loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable, net includes the amortization of net deferred loan fees of $723,000, $856,000 and $5.2 million for the fourth quarter of 2022, third quarter of 2022 and fourth quarter of 2021, respectively.

(3)Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.

Year Ended
December 31, 2022 December 31, 2021
Average<br>Balance Interest<br>Earned/<br>Paid Average<br>Yield/<br>Rate (1) Average<br>Balance Interest<br>Earned/<br>Paid Average<br>Yield/<br>Rate (1)
Interest Earning Assets:
Loans receivable, net (2) (3) $ 3,852,604 $ 174,275 4.52 % $ 4,181,464 $ 189,832 4.54 %
Taxable securities 1,646,058 40,627 2.47 846,892 17,492 2.07
Nontaxable securities (3) 135,004 3,488 2.58 158,968 3,899 2.45
Interest earning deposits 913,374 9,067 0.99 1,193,724 1,608 0.13
Total interest earning assets 6,547,040 227,457 3.47 % 6,381,048 212,831 3.34 %
Noninterest earning assets 774,415 745,202
Total assets $ 7,321,455 $ 7,126,250
Interest Bearing Liabilities:
Certificates of deposit $ 313,712 $ 1,407 0.45 % $ 372,279 $ 1,811 0.49 %
Savings accounts 646,565 381 0.06 598,492 367 0.06
Interest bearing demand and money market accounts 3,036,031 4,984 0.16 2,862,504 3,982 0.14
Total interest bearing deposits 3,996,308 6,772 0.17 3,833,275 6,160 0.16
Junior subordinated debentures 21,322 1,156 5.42 21,025 742 3.53
Securities sold under agreement to repurchase 46,209 138 0.30 45,655 140 0.31
FHLB advances and other borrowings 137 6 4.38 — — —
Total interest bearing liabilities 4,063,976 8,072 0.20 % 3,899,955 7,042 0.18 %
Noninterest demand deposits 2,326,178 2,269,921
Other noninterest bearing liabilities 119,359 114,307
Stockholders’ equity 811,942 842,067
Total liabilities and stockholders’ equity $ 7,321,455 $ 7,126,250
Net interest income and spread $ 219,385 3.27 % $ 205,789 3.16 %
Net interest margin 3.35 % 3.23 %

(1)Average balances are calculated using daily balances.

(2)Average loan receivable, net includes loans held for sale and loans classified as nonaccrual, which carry a zero yield. Interest earned on loans receivable, net includes the amortization of net deferred loan fees of $7.4 million and $28.4 million for the years ended December 31, 2022 and 2021, respectively.

(3)Yields on tax-exempt loans and securities have not been stated on a tax-equivalent basis.

HERITAGE FINANCIAL CORPORATION

QUARTERLY FINANCIAL STATISTICS (Unaudited)

(Dollar amounts in thousands, except per share amounts)

Quarter Ended
December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
Earnings:
Net interest income $ 63,107 $ 59,286 $ 50,048 $ 46,944 $ 47,908
Provision for (reversal of) credit losses 1,410 1,945 (1,204) (3,577) (5,037)
Noninterest income 6,584 7,453 7,016 8,538 9,839
Noninterest expense 40,392 39,147 35,707 35,720 38,465
Net income 22,544 20,990 18,584 19,757 19,397
Pre-tax, pre-provision net income (3) 29,299 27,592 21,357 19,762 19,282
Basic earnings per share $ 0.64 $ 0.60 $ 0.53 $ 0.56 $ 0.56
Diluted earnings per share $ 0.64 $ 0.59 $ 0.52 $ 0.56 $ 0.55
Average Balances:
Loans receivable, net (1) $ 3,963,042 $ 3,859,839 $ 3,812,045 $ 3,773,325 $ 3,836,029
Total investment securities 2,106,608 2,001,922 1,587,757 1,417,966 1,170,315
Total interest earning assets 6,292,188 6,592,361 6,612,958 6,694,578 6,671,984
Total assets 7,100,844 7,367,736 7,385,616 7,434,787 7,403,597
Total interest bearing deposits 3,878,325 4,017,490 4,041,706 4,049,357 3,977,721
Total noninterest demand deposits 2,239,806 2,356,688 2,349,746 2,359,451 2,396,452
Stockholders' equity 780,401 811,052 810,961 846,085 849,383
Financial Ratios:
Return on average assets (2) 1.26 % 1.13 % 1.01 % 1.08 % 1.04 %
Pre-tax, pre-provision return on average assets (2)(3) 1.64 1.49 1.16 1.08 1.03
Return on average common equity (2) 11.46 10.27 9.19 9.47 9.06
Return on average tangible common equity (2) (3) 17.21 15.20 13.68 13.83 13.27
Efficiency ratio 58.0 58.7 62.6 64.4 66.6
Noninterest expense to average total assets (2) 2.26 2.11 1.94 1.95 2.06
Net interest spread (2) 3.87 3.50 2.98 2.78 2.79
Net interest margin (2) 3.98 3.57 3.04 2.84 2.85

(1) Average loan receivable, net includes loans held for sale.

(2) Annualized.

(3) See Non-GAAP Financial Measures section herein.

As of or for the Quarter Ended
December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
Select Balance Sheet:
Total assets $ 6,980,100 $ 7,200,312 $ 7,316,467 $ 7,483,814 $ 7,432,412
Loans receivable, net 4,007,872 3,959,206 3,834,368 3,780,845 3,773,301
Total investment securities 2,097,839 2,129,461 1,803,241 1,462,137 1,277,728
Deposits 5,924,840 6,237,735 6,330,190 6,491,500 6,394,290
Noninterest demand deposits 2,099,464 2,308,583 2,325,139 2,393,972 2,343,909
Stockholders' equity 797,893 776,702 805,366 821,449 854,432
Financial Measures:
Book value per share $ 22.73 $ 22.13 $ 22.94 $ 23.40 $ 24.34
Tangible book value per share (1) 15.66 15.04 15.83 16.27 17.19
Tangible book value per share, excluding AOCI (1) 18.50 18.03 17.59 17.25 16.92
Stockholders' equity to total assets 11.4 % 10.8 % 11.0 % 11.0 % 11.5 %
Tangible common equity to tangible assets (1) 8.2 7.6 7.9 7.9 8.4
Tangible common equity, excluding AOCI, to tangible assets, excluding UGL (1) 9.5 9.0 8.7 8.3 8.3
Loans to deposits ratio 68.4 64.1 61.2 58.9 59.7
Regulatory Capital Ratios:
Common equity tier 1 capital ratio(2) 12.8 % 12.8 % 13.2 % 13.4 % 13.5 %
Leverage ratio(2) 9.7 9.2 8.9 8.8 8.7
Tier 1 capital ratio(2) 13.2 13.3 13.6 13.9 13.9
Total capital ratio(2) 14.0 14.0 14.4 14.7 14.8
Credit Quality Metrics:
ACL on loans to:
Loans receivable 1.06 % 1.05 % 1.02 % 1.06 % 1.11 %
Loans receivable, excluding SBA PPP loans (1) 1.06 1.05 1.03 1.07 1.15
Nonperforming loans 727.84 675.15 378.96 244.04 178.33
Nonperforming loans to loans receivable 0.15 0.16 0.27 0.43 0.62
Nonperforming assets to total assets 0.08 0.09 0.14 0.22 0.32
Net (recoveries) charge-offs on loans to average loans receivable (0.02) (0.05) — (0.05) 0.05
Criticized Loans by Credit Quality Rating:
Special mention $ 69,449 $ 84,439 $ 72,062 $ 63,269 $ 71,020
Substandard 65,765 66,376 94,419 111,300 112,450
Other Metrics:
Number of banking offices 50 50 49 49 49
Deposits per branch $ 118,497 $ 124,755 $ 129,188 $ 132,480 $ 130,496
Average number of full-time equivalent employees 813 790 765 751 782
Average assets per full-time equivalent employee 8,734 9,326 9,654 9,900 9,468

(1) See Non-GAAP Financial Measures section herein.

(2) Current quarter ratios are estimates pending completion and filing of the Company’s regulatory reports.

HERITAGE FINANCIAL CORPORATION

NON-GAAP FINANCIAL MEASURES (Unaudited)

(Dollar amounts in thousands, except per share amounts)

This earnings release contains certain financial measures not presented in accordance with Generally Accepted Accounting Principles ("GAAP") in addition to financial measures presented in accordance with GAAP. The Company 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, performance and asset quality reflected in the current quarter and comparable period results and to facilitate comparison of its performance with the performance of its peers. These non-GAAP measures have inherent limitations, are not required to be uniformly applied and are not audited. They should not be considered in isolation or as a substitute for financial measures presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures reported by other companies. Reconciliations of the GAAP and non-GAAP financial measures are presented below.

The Company considers the tangible common equity to tangible assets ratio and tangible book value per share to be useful measurements of the adequacy of the Company’s capital levels. Additionally, recent changes in market interest rates introduced significant volatility in the unrealized gain or loss of investment securities available for sale ("UGL") and the related AOCI. Management excluded AOCI and UGL from tangible common equity and tangible assets, respectively, to improve comparability of capital levels as AOCI and UGL are excluded from the calculation of regulatory capital ratios.

December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
Tangible Common Equity to Tangible Assets and Tangible Book Value Per Share:
Total stockholders' equity (GAAP) $ 797,893 $ 776,702 $ 805,366 $ 821,449 $ 854,432
Exclude intangible assets (248,166) (248,837) (249,508) (250,212) (250,916)
Tangible common equity (non-GAAP) 549,727 527,865 555,858 571,237 603,516
Exclude AOCI 99,850 105,001 61,783 34,228 (9,396)
Tangible common equity, excluding AOCI (non-GAAP) $ 649,577 $ 632,866 $ 617,641 $ 605,465 $ 594,120
Total assets (GAAP) $ 6,980,100 $ 7,200,312 $ 7,316,467 $ 7,483,814 $ 7,432,412
Exclude intangible assets (248,166) (248,837) (249,508) (250,212) (250,916)
Tangible assets (non-GAAP) 6,731,934 6,951,475 7,066,959 7,233,602 7,181,496
Exclude UGL, net of tax 99,850 105,001 61,783 34,228 (9,396)
Tangible assets, excluding UGL, net of tax (non-GAAP) $ 6,831,784 $ 7,056,476 $ 7,128,742 $ 7,267,830 $ 7,172,100
Stockholders' equity to total assets (GAAP) 11.4 % 10.8 % 11.0 % 11.0 % 11.5 %
Tangible common equity to tangible assets (non-GAAP) 8.2 % 7.6 % 7.9 % 7.9 % 8.4 %
Tangible common equity, excluding AOCI, to tangible assets, excluding UGL 9.5 % 9.0 % 8.7 % 8.3 % 8.3 %
Shares outstanding 35,106,697 35,104,248 35,103,929 35,102,372 35,105,779
Book value per share (GAAP) $ 22.73 $ 22.13 $ 22.94 $ 23.40 $ 24.34
Tangible book value per share (non-GAAP) $ 15.66 $ 15.04 $ 15.83 $ 16.27 $ 17.19
Tangible book value per share, excluding AOCI (non-GAAP) $ 18.50 $ 18.03 $ 17.59 $ 17.25 $ 16.92

The Company considers presenting the ratio of ACL on loans to loans receivable, excluding SBA PPP loans, to be a useful measurement in evaluating the adequacy of the Company's ACL on loans as the balance of SBA PPP loans was significant to the loan portfolio; however, since SBA PPP loans are guaranteed by the SBA, the Company has not provided an ACL for these loans.

December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
ACL on Loans to Loans Receivable, excluding SBA PPP Loans:
Allowance for credit losses on loans $ 42,986 $ 42,089 $ 39,696 $ 40,333 $ 42,361
Loans receivable (GAAP) $ 4,050,858 $ 4,001,295 $ 3,874,064 $ 3,821,178 $ 3,815,662
Exclude SBA PPP loans (1,468) (3,593) (11,334) (64,962) (145,840)
Loans receivable, excluding SBA PPP loans (non-GAAP) $ 4,049,390 $ 3,997,702 $ 3,862,730 $ 3,756,216 $ 3,669,822
ACL on loans to loans receivable (GAAP) 1.06 % 1.05 % 1.02 % 1.06 % 1.11 %
ACL on loans to loans receivable, excluding SBA PPP loans (non-GAAP) 1.06 % 1.05 % 1.03 % 1.07 % 1.15 %

The Company considers the return on average tangible common equity ratio to be a useful measurement of the Company’s ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the Company's ongoing business operations can be evaluated.

Quarter Ended
December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
Return on Average Tangible Common Equity, annualized:
Net income (GAAP) $ 22,544 $ 20,990 $ 18,584 $ 19,757 $ 19,397
Add amortization of intangible assets 671 671 704 704 759
Exclude tax effect of adjustment (141) (141) (148) (148) (159)
Tangible net income (non-GAAP) $ 23,074 $ 21,520 $ 19,140 $ 20,313 $ 19,997
Average stockholders' equity (GAAP) $ 780,401 $ 811,052 $ 810,961 $ 846,085 $ 849,383
Exclude average intangible assets (248,560) (249,245) (249,890) (250,593) (251,331)
Average tangible common stockholders' equity (non-GAAP) $ 531,841 $ 561,807 $ 561,071 $ 595,492 $ 598,052
Return on average common equity, annualized (GAAP) 11.46 % 10.27 % 9.19 % 9.47 % 9.06 %
Return on average tangible common equity, annualized (non-GAAP) 17.21 % 15.20 % 13.68 % 13.83 % 13.27 %

The Company believes that presenting pre-tax pre-provision income, which reflects its profitability before income taxes and provision for credit losses, and the pre-tax, pre-provision return on average assets, are useful measurements in assessing its operating income and expenses by removing the volatility that may be associated with credit loss provisions. The Company also believes that during a crisis such as the COVID-19 pandemic, this information has been useful as the impact of the pandemic on credit loss provisions of various institutions has varied based on the geography of the communities served by a particular institution and the decision to adopt or defer the current expected credit losses ("CECL") methodology required by Accounting Standards Update 2016-13.

Quarter Ended
December 31,<br>2022 September 30,<br>2022 June 30,<br>2022 March 31,<br>2022 December 31,<br>2021
Pre-tax, Pre-provision Income and Pre-tax, Pre-provision Return on Average Assets, annualized:
Net income (GAAP) $ 22,544 $ 20,990 $ 18,584 $ 19,757 $ 19,397
Add income tax expense 5,345 4,657 3,977 3,582 4,922
Add provision for (reversal of) credit losses 1,410 1,945 (1,204) (3,577) (5,037)
Pre-tax, pre-provision income (non-GAAP) $ 29,299 $ 27,592 $ 21,357 $ 19,762 $ 19,282
Average total assets (GAAP) $ 7,100,844 $ 7,367,736 $ 7,385,616 $ 7,434,787 $ 7,403,597
Return on average assets, annualized (GAAP) 1.26 % 1.13 % 1.01 % 1.08 % 1.04 %
Pre-tax, pre-provision return on average assets (non-GAAP) 1.64 % 1.49 % 1.16 % 1.08 % 1.03 %

The Company believes presenting loan yield excluding the effect of discount accretion on acquired loans is useful in assessing the impact of acquisition accounting on loan yield as the effect of loan discount accretion is expected to decrease as the acquired loans mature or roll off its balance sheet. Incremental accretion on acquired loans represents the amount of interest income recorded on acquired loans in excess of the contractual stated interest rate in the individual loan notes due to incremental accretion of purchased discount or premium. Purchased discount or premium is the difference between the contractual loan balance and the fair value of acquired loans at the acquisition date, or as modified by the adoption of CECL. The purchased discount is accreted into income over the remaining life of the loan. The impact of incremental accretion on loan yield will change during any period based on the volume of prepayments, but it is expected to decrease over time as the balance of the purchased loans decreases.

Similarly, presenting loan yield excluding the effect of SBA PPP loans is useful in assessing the impact of these special program loans that have substantially decreased within a short time frame.

Quarter Ended
December 31,<br>2022 September 30,<br>2022 December 31,<br>2021
Loan Yield, excluding SBA PPP Loans and Incremental Accretion on Purchased Loans, annualized:
Interest and fees on loans (GAAP) $ 48,513 $ 43,847 $ 42,695
Exclude interest and fees on SBA PPP loans (77) (275) (4,928)
Exclude incremental accretion on purchased loans (184) (398) (387)
Adjusted interest and fees on loans (non-GAAP) $ 48,252 $ 43,174 $ 37,380
Average loans receivable, net (GAAP) $ 3,963,042 $ 3,859,839 $ 3,836,029
Exclude average SBA PPP loans (2,250) (5,726) (204,436)
Adjusted average loans receivable, net (non-GAAP) $ 3,960,792 $ 3,854,113 $ 3,631,593
Loan yield, annualized (GAAP) 4.86 % 4.51 % 4.42 %
Loan yield, excluding SBA PPP loans and acquired accretion on purchased loans, annualized (non-GAAP) 4.83 % 4.44 % 4.08 %

17

investorpresentation1231

INVESTOR PRESENTATION Q4 2022

2 Factors that could cause the Company’s actual results to differ materially from those described in the forward-looking statements, include, but are not limited to, the following: • the U.S. and global economies, and consumer and corporate customers, including economic activity, market liquidity, employment levels and labor shortages, including the effects of inflation, a potential recession or slowed economic growth; • losses ("ACL") on loans and provision for credit losses on loans may be effected by deterioration in economic conditions, which may lead to increased losses and nonperforming assets in our loan portfolio, and may result in our ACL on loans no longer being adequate to cover actual losses, and require us to increase our ACL on loans; • changes in the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources; the transition away from LIBOR toward new interest rate benchmarks; • 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 bank regulators, including the possibility that any such regulatory authority may, among other things, initiate an enforcement action against the Company or our bank subsidiary which could require us to increase our ACL on loans, write-down assets, change our regulatory capital position, affect our ability to borrow funds or maintain or increase deposits, or impose additional requirements on us, any of which could affect our ability to continue our growth through mergers, acquisitions or similar transactions and adversely affect our liquidity and earnings; • 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; • staffing fluctuations in response to product demand or the implementation of corporate strategies that affect our workforce and potential associated charges; • disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems or on the third-party vendors who perform several of our critical processing functions; • our ability to retain key members of our senior management team; • costs and effects of litigation, including settlements and judgments; • our ability to successfully integrate any assets, liabilities, customers, systems, and management personnel we may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames or at all, and any goodwill charges related thereto and costs or difficulties relating to integration matters, including but not limited to customer and employee retention, which might be greater than expected; • risks related to acquiring assets in or entering markets in which we have not previously operated and may not be familiar; • increased competitive pressures among financial service companies; • 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 FASB, including additional guidance and interpretation on accounting issues and details of the implementation of new accounting methods; and • other economic, competitive, governmental, regulatory, and technological factors affecting our operations, pricing, products and services, and the other risks detailed from time to time in our filings with the SEC including our Annual Form 10-K and Quarterly Form 10-Qs. 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 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. All dollars throughout the entire presentation are in millions unless otherwise noted, except per share amounts. FORWARD LOOKING STATEMENTS

COMPANY OVERVIEW

4 OVERVIEW Overview NASDAQ symbol HFWA Stock price $29.45 Market capitalization $1.03 billion Institutional ownership 79.3% Headquarters Olympia, WA # of branches 51 Year established 1927 Q4 2022 Financial Highlights Assets $6.98 billion Deposits $5.92 billion Loans receivable $4.05 billion Net income (GAAP) $22.5 million Pre-tax, pre-provision income (non-GAAP) $29.3 million Net interest margin 3.98% ROAE (GAAP) 11.46% ROATCE (non-GAAP) 17.21% Efficiency ratio 58.0% Leverage ratio 9.7% Total capital ratio 14.0%– Map obtained from S&P Global Market Intelligence; certain locations of branches overlap on the map. – Market information as of January 10, 2023. – Refer to Appendix for calculation of non-GAAP financial measure. – Return on average equity ("ROAE"). Return on average tangible common equity ("ROATCE"). Metropolitan Statistical Areas Seattle-Tacoma-Bellevue, WA Portland-Vancouver-Hillsboro, OR-WA Eugene-Springfield, OR Boise–Nampa, Idaho Heritage Branch

5 COMPANY STRATEGY Allocate capital to organically grow our core banking business 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 included our recent branch openings in Eugene, Oregon and Boise, Idaho Ÿ Disciplined approach to concentration risk and active portfolio management Improve operational efficiencies and rationalize branch network Ÿ Achieving increased efficiencies with operational scale, internal focus on improving processes and technology solutions, including improvement in the efficiency ratio to 58.0% during Q4 2022 compared to 66.6% for the same quarter in 2021 Ÿ Closed/Consolidated 35 branches since the beginning of 2010, including 12 branches in 2021 Generate stable profitability and risk adjusted returns Ÿ 1.26% return on average assets and 11.46% return on average equity in Q4 2022, annualized Ÿ Five-year growth in tangible book value, excluding AOCI (non-GAAP) of $5.75, or 45.1%, to $18.50 at December 31, 2022 from $12.75 at December 31, 2017 Active and disciplined in M&A Ÿ Be the "acquirer of choice" in the Pacific Northwest Ÿ Most acquisitive bank in Oregon and Washington since 2013 with 5 acquisitions Ÿ Target Metrics = IRR of >15% with earnbacks < 3 years Maintain conservative underwriting standards and actively manage the loan portfolio Ÿ Long track record of strong underwriting with conservative risk profile Ÿ Disciplined approach to concentration risk Ÿ Nonaccrual loans decreased 75.1% since December 31, 2021 to 0.08% of total assets Focus on core deposits is key to franchise value over the long term Ÿ 35.5% noninterest demand deposits to total deposits Ÿ Noninterest demand deposit CAGR of 17% since 2017 Ÿ 0.16% cost of total deposits; top 25% performance among US publicly traded banks Proactive capital management Ÿ History of increasing regular dividends and utilizing special dividends to manage capital Ÿ Repurchases totaled $2.5 million, or 100,090 shares, of common stock in 2022. Repurchases in 2021 totaled $22.1 million, or 904,972 shares of common stock, and represented approximately 2.5% of common stock outstanding at December 31, 2020 Ÿ Strong capital ratios: Leverage ratio = 9.7%; Total capital ratio = 14.0% – 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 third 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.

6 TECHNOLOGY STRATEGY Objective: Invest in technologies that enable Community Banking @ Scale HeritageONE Technology convergence & omni- channel experiences Ÿ Cutting-edge, proprietary ecosystem providing Heritage the ability to develop custom business applications and systems integrations Ÿ Results in opportunity to integrate processes and technologies to create highly converged, omni-channel customer experiences Ÿ Designed to minimize the cost of internal solution development and accelerate the Bank’s ability to integrate with best of breed vendor solutions Ÿ Investment in JAM FINTOP Blockchain fund, providing access to early-stage opportunities across the spectrum of Fintech innovation to partner and extend the capabilities of the HeritageONE ecosystem 2022-2024 Roadmap Integration and process efficiency Ÿ Continued investment in HeritageONE based solutions, expanding the capabilities of existing tools and adding several new tools to drive efficiency and unified customer- experiences Ÿ Enhance digital account opening capabilities in partnership with Q2; unified call, chat and self-service IVR solution in partnership with Cisco Ÿ Customize online banking and call center platforms to leverage data to drive personalized and omni-channel experiences Key Outcomes Community Banking @ Scale Ÿ Heritage Bank positioned to be a technology leader among Community Banks Ÿ Next generation front & back office integration delivering efficiency, consistency and scalability Ÿ Bankers equipped with better sales and service tools to meet growth & profitability objectives Ÿ Vastly improved customer experience for on-boarding & managing complex banking relationships

7 HeritageONE Proprietary technology ecosystem for converging product and service solutions to enable Community Banking @ Scale TECHNOLOGY INNOVATION Build Our proprietary HeritageONE platform provides an API-based framework and set of tools for selective in-house development of applications and integrations to fill the gap in available solutions that create efficient, scalable, and well orchestrated business processes for Commercial Community Banks. HeritageONE business application development is focused on opportunities to create differentiated and value-added service experiences for our core customers: Commercial Loans 360 (CL360) • Streamlines Commercial Lending processes • Single platform for all credit actions Heritage 360 (H360) • “Single pain of glass” for relationship mgmt. • Keeps service and decisions close to the customer • Automates immediate service needs • 99% reduction in time to fill some service requests Treasury Management 360 (TM360) • Single platform for onboarding all TM services • Automates setup tasks • Customer gets immediate access to key services Partner Investment in the HeritageONE ecosystem frees us from sole dependency on our core provider, enabling the bank to pursue relationships with other third-party innovators. This in turn will allow us to bring to market new and creative solutions that ensure that our customers have access to the best options for when, where and how they want to bank with Heritage. Integrate Leveraging our proprietary HeritageONE middleware capabilities to create API-level integrations to maximize the value and effectiveness of in-house and third-party solutions and enable true omni-channel customer experiences.

8 ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") PRACTICES We are committed to environmental and sustainability efforts, our human capital, our customers and strengthening the communities and markets in which we operate. Environment and Sustainability Ÿ Have a Green Team Committee focused on sustainability. Ÿ Achieved a Gold Sustainability at Work certification for the Portland office. Ÿ Participating in an energy-saving pilot program with our Hillsboro branch in partnership with Energy Trust of Oregon and Strategic-Energy Management. Ÿ Continually reducing our carbon footprint through branch consolidations and focus on recycling. Ÿ Invested in solar tax credits in 2022 for a solar photovoltaic project with the capacity of 3 megawatts that produces clean energy, reduces greenhouse gas emissions, reduces harmful pollutant emissions, and creates jobs. Social Responsibility and Human Capital Ÿ Established a DEI ("Diversity, Equity, and Inclusion") Plan, a DEI Statement, a DEI Council and a DEI Officer who has been certified by the National Diversity Council and serves on the Washington Bankers Association DEI Committee. Ÿ In 2022, the company dedicated an afternoon to volunteering at organizations and nonprofits throughout our communities and closed all customer facing locations early. Over 500 employees participated and volunteered over 1,500 hours of service. Ÿ Donated $1.4 million in 2022 and $1.3 million in 2021, through our Heritage Helps community investment and giving program, focused on driving positive impact in the areas of: education and youth development; health and human services; business and economic development; environmental stewardship; and social equity. Ÿ Financed more than $166 million in 2022 and $152 million in 2021 of affordable housing projects and made equity investments of $83 million in 2022 and $29 million in 2021 to support low income housing. Ÿ Provided a $10 million loan to broaden the capacity of the Washington State Small Business Flex Fund. Ÿ Awarded the American Bankers Association Community Commitment Award for Affordable Housing. Ÿ The Bank formed the Heritage Bank Community Development Entity with $50 million in capitalization. Governance Ÿ Supervised by an engaged Board who actively monitor the policies and business strategies of the Company and are committed to the interests of the Company, its shareholders, employees and communities, including environmental, social, and governance practices. Ÿ Added two directors with technology industry experience during 2022 and one with financial expertise in Q1 2023. Ÿ Established the Board of Director's Technology Committee in 2022 to assist the Board in its oversight of the role of technology in executing the strategy and supporting the business and operational requirements of the Company. Ÿ Utilizes the Sustainability Accounting Standards Board Commercial Bank framework and industry guidance published by respected national and international organizations to identify risks and develop our ESG risk framework. Ÿ Maintain effective governance practices including Corporate Governance Guidelines, Committee Charters, Stock Ownership Guidelines, a Code of Ethics Policy and a Whistleblower Policy.

9 6.5% 15.2% 4.8% 12.6% $87,753 3.2% 12.1% $72,465 Seattle MSA Portland MSA USA 2022-2027 Proj, population growth 2022-2027 Proj. median household income growth Median household income $105,233 $87,753 $72,465 STRONG AND DIVERSE ECONOMIC LANDSCAPE Market Highlights Major Employers in the Pacific Northwest Market Demographics Seattle MSA Portland MSA 3.4% 14.2% Unemployment rate in November 2022 (compared to 4.0% for Washington state and 3.6% for USA) 2022-2027 proj. growth in household income for Washington state 4.0% 13.6% Unemployment rate in November 2022 (compared to 4.4% for Oregon state and 3.6% for USA) 2022-2027 proj. growth in household income for Oregon state – Economic data obtained from www.bls.gov, www.bea.gov and S&P Global Market Intelligence. Unemployment data reflects the BLS's latest monthly Economic New Release - Employment & Unemployment. MSA Tie-out of websites used: https://www.bls.gov/web/metro/laulrgma.htm https://www.bls.gov/web/laus/laumstcm.htm https://data.bls.gov/timeseries/LNS14000000

10 MAJOR MSA FUNDS UNDER MANAGEMENT Seattle MSA Funds Under Management = Loans + Deposits $2,770 $2,941 $3,845 $4,020 $4,960 $5,286 $5,322 $5,184 $5,062 $4,879 $1,294 $1,415 $1,850 $1,909 $1,936 $1,981 $2,009 $2,005 $2,016 $2,026 $1,476 $1,526 $1,995 $2,111 $2,650 $3,231 $3,274 $3,174 $3,046 $2,853 Total loans, excluding SBA PPP loans SBA PPP loans Deposits 2016 2017 2018 2019 2020 2021 Q12022 Q2 2022 Q3 2022 Q4 2022 – Prior period information includes branches that were closed or consolidated prior to December 31, 2022. – Loan information is provided gross of deferred fees and/or costs and acquired discount and/or premium. Oregon and Portland MSA Funds Under Management = Loans + Deposits $43 $112 $856 $973 $1,347 $1,256 $1,235 $1,245 $1,350 $1,388 $379 $475 $490 $499 $491 $522 $602 $664 $477 $498 $676 $723 $733 $719 $748 $724 Total loans, excluding SBA PPP loans SBA PPP loans Deposits 2016 2017 2018 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

11 POTENTIAL GROWTH OPPORTUNITIES – Map obtained from S&P Global Market Intelligence. – Certain locations of bank headquarters overlap on the map. – Financial information as of the most recent quarter publicly available. • Long-term goal to build a PNW regional commercial community bank; potential opportunities for M&A and production team lift-outs in OR and ID in addition to WA. • HFWA positioned to be the acquiror of choice in the Pacific Northwest. • Significant number of banks remaining in HFWA footprint; further consolidation is expected. – 11 banks between $200 million and $500 million in assets – 20 banks between $500 million and $1.0 billion in assets – 15 banks between $1.0 billion and $3.5 billion in assets • Financial parameters include 15% IRR and earnback of < 3 years. Bank headquarters

12 Completed 2 FDIC deals Pierce Commercial Bank $211MM in assets Cowlitz Bank $345MM in assets Acquired Puget Sound Bancorp $639MM in assets Premier Commercial Bancorp $440MM in assets $1,015 $812 $1,369 $1,346 $1,340 $1,712 $3,651 $3,879 $4,113 $4,238 $5,553 $6,615 $7,432 $7,484 $7,316 $7,200 $6,980 $556 $319 $1,747 $1,079 $12.21 $12.99 $13.10 $13.16 $13.31 $15.02 $15.68 $16.08 $20.63 $22.10 $22.85 $24.34 $23.40 $22.94 $22.13 $22.73 $11.00 $12.03 $12.16 $12.23 $11.40 $10.73 $11.41 $11.86 $12.70 $13.54 $15.07 $15.77 $17.19 $16.27 $15.83 $15.04 $15.66$13.74 $14.78 $15.08 $16.92 $17.25 $17.59 $18.03 $18.50 Organic Acquired Assets Book value per share (GAAP) Tangible book value per share (non-GAAP) Tangible book value per share, excluding AOCI (non-GAAP) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 HISTORICAL GROWTH ORGANIC AND ACQUISITIVE Merged with Washington Banking Company $1.7B in assets Acquired Valley Community Bancshares $254MM in assets Northwest Commercial Bank $65MM in assets – Refer to Appendix for calculation of non-GAAP financial measures. – Accumulated other comprehensive income or loss ("AOCI") – Tangible book value per share, excluding AOCI approximates tangible book value per share for the periods prior to 2018. $16.88

13 GROWTH STRATEGY YEAR ACTIVITY 2013 • Acquired Valley Community Bancshares - $254MM in assets • Acquired Northwest Commercial Bank - $65MM in assets 2014 • Aquired Washington Banking Company - $1.7B in assets 2015 • Added a commercial banking team in Seattle, Washington • Formed our Capital Markets Group as result of the added expertise 2017 • Added a commercial banking team in Portland, Oregon • Expanded expertise in non-profit lending and added a commercial position focused on deposit production 2018 • Acquired Puget Sound Bancorp - $639MM in assets • Acquired Premier Commercial Bancorp - $440MM in assets 2019 • Added a commercial banking team in the greater Portland, Oregon area • Expanded expertise in the dental and healthcare fields 2022 • Added new commercial banking team in Vancouver, Washington • Added new commercial banking team in Portland, Oregon • Expanded into a new market with addition of commercial banking team and full service branch in Eugene, Oregon 2023 • Expanded into a new market with addition of commercial banking team and full service branch in Boise, Idaho (branch opened January 10, 2023) • Expectation to continue to expand in this market Bank Acquisitions and Team Additions Over Past 10 Years Bank Acquisition Team Addition

14 DEPOSIT MARKET SHARE Washington & Oregon - 2008 Washington & Oregon - 2013 Washington & Oregon - 2022 Rank Institution (State) Deposits in Market Market Share Rank Institution (State) Deposits in Market Market Share Rank Institution (State) Deposits in Market Market Share 1 Bank of America Corporation (NC) $32,880 20.36% 1 Bank of America Corporation (NC) $34,290 19.44% 1 Bank of America Corporation (NC) $64,497 18.59% 2 U.S. Bancorp (MN) 18,200 11.27% 2 U.S. Bancorp (MN) 24,912 14.12% 2 U.S. Bancorp (MN) 47,190 13.60% 3 Washington Mutual Inc. (WA) 18,044 11.17% 3 Wells Fargo & Co. (CA) 22,985 13.03% 3 JPMorgan Chase & Co. (NY) 46,617 13.44% 4 Wells Fargo & Co. (CA) 13,983 8.66% 4 JPMorgan Chase & Co. (NY) 15,638 8.87% 4 Wells Fargo & Company (CA) 40,551 11.69% 5 KeyCorp (OH) 11,282 6.99% 5 KeyCorp (OH) 11,806 6.69% 5 KeyCorp (OH) 18,670 5.38% 6 Sterling Financial Corp. (WA) 6,315 3.91% 6 Washington Federal Inc. (WA) 6,217 3.52% 6 Umpqua Holdings Corporation (OR) 17,658 5.09% 7 Washington Federal Inc. (WA) 4,697 2.91% 7 Columbia Banking System Inc. (WA) 5,840 3.31% 7 Columbia Banking System, Inc. (WA) 15,407 4.44% 8 Umpqua Holdings Corp. (OR) 3,683 2.28% 8 Umpqua Holdings Corp. (OR) 5,499 3.12% 8 Banner Corporation (WA) 10,879 3.14% 9 Banner Corp. (WA) 3,511,650 2.17% 9 Sterling Financial Corp. (WA) 5,203 2.95% 9 Washington Federal, Inc. (WA) 10,190 2.94% 10 Frontier Financial Corp. (WA) 3,304 2.05% 10 Mitsubishi UFJ Financial Group Inc. 3,475 1.97% 10 W.T.B. Financial Corporation (WA) 8,045 2.32% 11 Columbia Banking System Inc. (WA) 2,401 1.49% 11 Banner Corp. (WA) 3,255 1.85% 11 Heritage Financial Corporation (WA) 6,338 1.83% 12 W.T.B. Financial Corp. (WA) 2,356 1.46% 12 W.T.B. Financial Corp. (WA) 3,180 1.80% 12 HomeStreet, Inc. (WA) 4,490 1.29% 13 West Coast Bancorp (OR) 2,082 1.29% 13 HomeStreet Inc. (WA) 1,613 0.91% 13 First Interstate BancSystem, Inc. (MT) 3,566 1.03% 14 HomeStreet Inc. (WA) 1,268 0.79% 14 SKBHC Holdings LLC (WA) 1,551 0.88% 14 BNP Paribas SA 2,714 0.78% 15 Cascade Bancorp (OR) 1,142 0.71% 15 Washington Banking Co. (WA) 1,411 0.80% 15 First Republic Bank (CA) 2,708 0.72% 16 AmericanWest Bancorp. (WA) 1,100 0.68% 16 Yakima Federal S&L Assoc. (WA) 1,402 0.79% 16 Coastal Financial Corporation (WA) 2,700 0.72% 17 Horizon Financial Corp. (WA) 1,097 0.68% 17 BNP Paribas SA 1,315 0.75% 17 Peoples Bancorp (WA) 2,500 0.59% 18 Yakima Federal S&L Assoc. (WA) 1,094 0.68% 18 Heritage Financial Corp. (WA) 1,227 0.70% 18 Mitsubishi UFJ Financial Group, Inc. 2,497 0.57% 19 BNP Paribas SA 1,002 0.62% 19 Peoples Bancorp (WA) 1,119 0.63% 19 FS Bancorp, Inc. (WA) 2,033 0.78% 20 Cascade Financial Corp. (WA) 993 0.62% 20 Cashmere Valley Bank (WA) 1,094 0.62% 20 Cashmere Valley Bank (WA) 1,964 0.29% 21 City Bank (WA) 955 0.59% 21 Pacific Continental Corp. (OR) 1,075 0.61% 21 East West Bancorp, Inc. (CA) 1,692 0.78% 22 Columbia Bancorp (OR) 940 0.58% 22 Opus Bank (CA) 968 0.55% 22 Timberland Bancorp, Inc. (WA) 1,665 0.49% 23 Venture Financial Group Inc. (WA) 917 0.57% 23 East West Bancorp Inc. (CA) 925 0.52% 23 First Northwest Bancorp (WA) 1,598 0.44% 24 First Financial Northwest Inc. (WA) 868 0.54% 24 Olympic Bancorp Inc. (WA) 807 0.46% 24 Zions Bancorp. NA (UT) 1,540 0.48% 25 Peoples Bancorp (WA) 846 0.52% 25 HSBC Holdings PLC 802 0.45% 25 Olympic Bancorp, Inc. (WA) 1,522 0.43% 26 Cashmere Valley Financial Corp. (WA) 842 0.52% 26 Cascade Bancorp (OR) 800 0.45% 26 Riverview Bancorp, Inc. (WA) 1,507 0.46% 27 Heritage Financial Corp. (WA) 802 0.50% 27 Zions Bancorp. NA (UT) 774 0.44% 27 Yakima Federal S&L Assoc. (WA) 1,498 0.44% 28 Liberty Financial Group Inc. (OR) 778 0.48% 28 Skagit Bancorp Inc. (WA) 667 0.38% 28 Pacific Financial Corporation (WA) 1,204 0.43% 29 Washington Banking Co. (WA) 734 0.45% 29 Riverview Bancorp Inc. (WA) 660 0.37% 29 First Financial Northwest, Inc. (WA) 1,194 0.34% 30 First Indep. Investment Group Inc. (WA) 684 0.42% 30 First Financial Northwest Inc. (WA) 642 0.36% 30 Glacier Bancorp, Inc. (MT) 1,049 0.35% 31 Pacific Continental Corp. (OR) 677 0.42% 31 First Fed. S&L Assoc. of Port Angeles (WA) 598 0.34% 31 HSBC Holdings plc 1,020 0.25% 32 PremierWest Bancorp (OR) 664 0.41% 32 Timberland Bancorp Inc. (WA) 596 0.34% 32 Citizens Bancorp (OR) 949 0.30% 33 Riverview Bancorp Inc. (WA) 630 0.39% 33 Pacific Financial Corp. (WA) 591 0.34% 33 Pacific Premier Bancorp, Inc. (CA) 867 0.27% 34 Olympic Bancorp Inc. (WA) 627 0.39% 34 Baker Boyer Bancorp (WA) 468 0.27% 34 Summit Bank Group, Inc. (OR) 861 0.23% 35 Zions Bancorp. NA (UT) 572 0.35% 35 Olympia Federal S&L Association (WA) 465 0.26% 35 Cathay General Bancorp (CA) 822 0.25% 36 Whitman Bancorp. Inc. (WA) 528 0.33% 36 Home Federal Bancorp Inc. (ID) 451 0.26% 36 Sound Financial Bancorp, Inc. (WA) 790 0.22% 37 Washington First Financial Group Inc. (WA) 515 0.32% 37 First Citizens BancShares Inc. (NC) 416 0.24% 37 First Citizens BancShares, Inc. (NC) 772 0.22% 38 First Fed. S&L Assoc. of Port Angeles (WA) 496 0.31% 38 Citizens Bancorp (OR) 404 0.23% 38 BEO Bancorp (OR) 771 0.21% 39 Skagit Bancorp Inc. (WA) 486 0.30% 39 Coastal Financial Corp. (WA) 349 0.20% 39 PBCO Financial Corporation (OR) 751 0.20% 40 Timberland Bancorp Inc. (WA) 480 0.30% 40 Evergreen Federal Bank (OR) 336 0.19% 40 Baker Boyer Bancorp (WA) 728 0.22% Total For Institutions In Market $161,492 Total For Institutions In Market $176,371 Total For Institutions In Market $346,970 Out of 148 Institutions Out of 120 Institutions Out of 84 Institutions – Data obtained from S&P Global Market Intelligence as of June 30 for the year indicated.

FINANCIAL UPDATE

16 FINANCIAL UPDATE - Q4 2022 • Net income was $22.5 million, or $0.64 per diluted share, for the fourth quarter of 2022 compared to $21.0 million, or $0.59 per diluted share, for the third quarter of 2022 and $19.4 million, or $0.55 per diluted share, for the fourth quarter of 2021. • Loans receivable increased $49.6 million, or 1.2% (4.9% annualized), in the fourth quarter of 2022. • Loans receivable increased $235.2 million, or 6.2% for the year ended December 31, 2022. Excluding SBA PPP loan repayments of $144.4 million, loans receivable increased $379.6 million for the year ended December 31, 2022. • Net interest income increased $3.8 million, or 6.4%, to $63.1 million for the fourth quarter of 2022 compared to $59.3 million for the third quarter of 2022, and increased $15.2 million, or 31.7% compared to $47.9 million for the fourth quarter of 2021. • Net interest margin increased to 3.98% for the fourth quarter of 2022 from 3.57% for the third quarter of 2022 and 2.85% for the fourth quarter of 2021. • Cost of total deposits was 0.16% for the fourth quarter of 2022 compared to 0.09% for both the third quarter of 2022 and the fourth quarter of 2021. • Expanded geographic footprint into Idaho with the opening of a branch in Boise on January 10, 2023. • Declared a regular cash dividend of $0.22 per share on January 25, 2023, an increase of 4.8% from the $0.21 regular cash dividend per share declared in the third quarter of 2022.

17 $3,669 $4,336 $4,181 $3,853 $3,836 $3,773 $3,812 $3,860 $3,963 5.17% 4.44% 4.54% 4.52% 4.34% 4.43% 4.42% 4.41% 4.30% 4.51% 4.86% 4.13% 4.20% 4.15% 4.49% 4.85% Average loans Loan yield Loan yield, excl. SBA PPP (non-GAAP) 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Average Loan Balances and Loan Yields Commercial & industrial 17.1% SBA PPP 0.0% Owner- occupied CRE 23.1% Non-owner occupied CRE 39.2% Residential real estate 8.5% Construction & land development 7.3% Consumer 4.8% LOAN PORTFOLIO Current Quarter Loan Portfolio Composition Loan Portfolio Repricing Schedule (excluding SBA PPP loans) 35.7% 33.9% 30.6% 28.6% 26.0% 25.5% 26.0% 22.0% 20.3% 21.3% 22.4% 23.9% 23.0% 21.7% 42.3% 45.8% 48.1% 49.0% 50.1% 51.5% 52.3% Fixed rate Floating (<3 month repricing) Adjustable (>3 month repricing) 2019 2020 2021 Q1 2022 Q2 2022 Q2 2022 Q4 2022 – Loan yield calculation incorporates the average balance of loans receivable, net and loans held for sale. – Refer to Appendix for calculation of non-GAAP financial measure. 4.62%

18 LOAN PORTFOLIO COMPOSITION $3,768 $4,469 $3,816 $3,821 $3,874 $4,001 $4,051 $852 $733 $622 $652 $699 $735 $692 $805 $857 $931 $936 $951 $959 $937 $1,289 $1,410 $1,493 $1,505 $1,516 $1,547 $1,587 $132 $123 $165 $223 $265 $296 $344 $275 $306 $227 $222 $219 $253 $294 $415 $325 $232 $218 $213 $207 $196 $715 $146 Commercial & industrial Owner-occupied CRE Non-owner occupied CRE Residential real estate Construction & land development Consumer SBA PPP 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

19 New Commitments Originated $23 $22 $43 $29 $21 $45 $75 $61 $47 $66 $329 $222 $283 $277 $329 Consumer Residential Commercial, excl. SBA PPP Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 LOAN PRODUCTION – Q1 2022, Q2 2022, Q3 2022, and Q4 2022 residential commitments originated include $42.2 million, $27.3 million, $29.0 million and $40.5 million of purchased loans, respectively.

20 Construction Commitments $580 $486 $488 $472 $489 $542 $686 $275 $306 $227 $222 $219 $253 $294 $305 $180 $261 $250 $270 $289 $392 Outstanding Balance Available Credit 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 35.06% 25.62% 25.17% 28.53% 30.90% 35.43% 29.83% 47.41% 62.96% 46.52% 47.03% 44.79% 46.68% 42.86% 36.28% 32.91% 31.37% 31.38% 31.35% 31.80% 31.14% Utilization Rate - Consumer LOCs Utilization Rate - Construction LOCs Utilization Rate - Commercial and Industrial Loan LOCs 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 LINE OF CREDIT ("LOC") UTILIZATION LOC Utilization Rates

21 CHANGES IN LOANS RECEIVABLE $4,001 $203 $(85) $(49) $(20) $4,051 Loans receivable at September 30, 2022 Loans originated Prepayments Maturities / Payoffs Net advances/ payments Loans receivable at December 31, 2022 $3,874 $207 $(80) $(55) $55 $4,001 Loans receivable at June 30,2022 Loans originated Prepayments Payoffs Net advances/ payments Loans receivable at September 30, 2022 Change in loans - Q4 2022 Change in loans - Q3 2022

22 COMMERCIAL LOAN EXPOSURE Commercial Business Loans by Industry Exposure Industry Amount WARR at 12/31/2021 WARR at 9/30/2022 WARR at 12/31/2022 Real estate, rental and leasing $1,712 4.4 4.4 4.4 Health care and social assistance 313 4.5 4.6 4.6 Accommodation and food services 165 6.3 5.8 5.4 Retail trade 158 4.6 4.5 4.4 Construction 129 4.6 4.6 4.7 Other services (except Public administration) 98 4.7 4.6 4.6 Manufacturing 92 5.1 5.1 5.0 All other industries 549 4.5 4.4 4.4 Total $3,216 4.6 4.5 4.5 CRE Loans only by Collateral Type Collateral Type Amount WARR at 12/31/2021 WARR at 9/30/2022 WARR at 12/31/2022 Office $580 4.3 4.3 4.3 Industrial 367 4.4 4.4 4.5 Retail store / shopping center 292 4.6 4.6 4.6 Multi-family 257 4.3 4.3 4.3 Mixed use property 155 4.7 4.6 4.5 Motel / hotel 129 6.1 5.7 5.4 Single purpose 113 4.3 4.6 4.5 Warehouse 147 4.6 4.6 4.6 Mini-storage 149 4.8 4.2 4.2 Recreational / school 71 5.1 4.9 4.9 Other 265 4.7 4.8 4.7 Total $2,525 4.6 4.5 4.5 – Categorized by NAICS code. – Excludes SBA PPP loans. – WARR = Weighted average risk rating. Office 23.0% Industrial 14.5% Retail store / shopping center 11.6%Multi-family 10.2% Mixed use property 6.1% Motel / hotel 5.1% Single purpose 4.5% Warehouse 5.8% Mini-storage 5.9% Recreational / school 2.8% Other 10.5% Real estate and rental and leasing 53.3% Health care and social assistance 9.7% Accommodation and food services 5.1% Retail trade 4.9% Construction 4.0% Other Services (except Public administration) 3.0% Manufacturing 2.8% All other industries 17.2%

23 $45 $58 $24 $17 $10 $6 $6 Nonaccrual loans OREO Nonperforming assets to total assets 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 0.82% 0.88% 0.32% 0.22% 0.14% 0.09% 0.08% NONPERFORMING ASSETS $1 0.09% 0.07% 0.01% (0.03)% 0.05% (0.05)% 0.00% (0.05)% (0.02)% Net charge-offs (recoveries) on loans to average loans, annualized 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

24 CRITICIZED LOANS $143 $291 $183 $175 $166 $150 $135 $45 $58 $24 $17 $10 $6 $6 $49 $100 $89 $95 $84 $60 $60 $49 $132 $71 $63 $72 $84 $69 Substandard - nonaccrual Substandard - accrual Special mention 2019 2020 2021 Q1 2022 Q2 2022 Q3 200 Q4 2022 Criticized Loans by Collateral Type Commercial & industrial 23.1% Owner- occupied CRE 28.6% Non-owner occupied CRE 40.3% Residential real estate 0.1% Construction & land development 6.2% Consumer 1.7% Criticized Loans by Loan Segment Motel / hotel 24.7% Office 17.0% Retail store / shopping center 9.3%Mixed use property 5.3% Elder care 6.2% Farms 3.4% Assisted Living 4.2% Restaurant 2.0% Industrial 6.7% Warehouse 3.1% Other CRE 5.6% Non-CRE 12.5%

25– Refer to Appendix for calculation of non-GAAP financial measure. $36 $70 $42 $40 $40 $42 $43 ACL on loans ($) ACL on loans / Loans (%) ACL on loans / Loans excl. SBA PPP (non-GAAP) (%) 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 0.96% 1.57% 1.11% 1.06% 1.02% 1.05% 1.06% 1.87% 1.15% 1.07% 1.03% 1.05% 1.06% ALLOWANCE FOR CREDIT LOSSES ("ACL") ON LOANS KD 1/11/23 This slide doesn't seem useful anymore. Thoughts? JN - Yes; they are looking at trends. At some point we can get rid of ACL ex PPP though.

26 $4,461 $5,298 $6,090 $6,398 $6,374 $6,409 $6,391 $6,374 $6,118 0.37% 0.23% 0.10% 0.11% 0.09% 0.09% 0.09% 0.09% 0.16% Average deposits Cost of total deposits 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Deposit Composition DEPOSITS Deposit Balances and Cost of Total Deposits 31.8% 35.5% 36.7% 36.9% 36.7% 37.0% 35.5% 29.3% 30.6% 30.4% 31.1% 31.3% 32.0% 30.9% 16.4% 17.2% 17.5% 16.9% 16.8% 16.0% 17.9% 11.1% 9.6% 10.0% 10.0% 10.3% 10.4% 10.5% 11.4% 7.1% 5.4% 5.1% 4.9% 4.6% 5.2% Noninterest demand deposits Interest bearing demand deposits Money market accounts Savings accounts Certificates of deposit 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022

27 $952 $802 $1,278 $2,098 $1,278 $1,462 $1,803 $2,129 $2,098 $243 $153 $757 $1,203 $268 $290 $427 $438 $48 2.75% 2.40% 2.13% 2.48% 2.12% 1.96% 2.15% 2.63% 2.92% Portfolio yield New purchases 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Investment Balances and Investment Yield INVESTMENT PORTFOLIO Investment Portfolio Composition (at fair value) US government and agencies 9.0% Municipal securities 7.6% Residential CMO and MBS 34.8% Commercial CMO and MBS 47.3% Corporate obligations 0.2% Other asset- backed securities 1.1% 3.15 2.69 4.85 4.93 3.59 5.64 6.76 4.08 4.85 5.52 5.28 4.98 4.935.20 4.51 3.96 4.09 2.39 Duration - total portfolio Duration - new purchases only 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Portfolio Duration Strong Credit Quality of Portfolio Invested: • 91.3% in U.S. government and agency securities • 8.4% AA rated or better • 0.3% less than AA rated

28 3.23% (0.42)% 0.11% 0.33% 0.11% (0.01)% 3.35% YTD Q4 2021 PPP loans Loan yield Investments Interest earning deposits Total interest bearing liabilities YTD Q4 2022 4.22% 3.63% 3.23% 3.35% 2.85% 2.84% 3.04% 3.57% 3.98% 4.12% 3.57% 3.18% 3.33% 2.83% 2.81% 3.02% 3.54% 3.97% NIM, excluding accretion on purchased loans (non-GAAP) Accretion 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 NET INTEREST MARGIN – Refer to Appendix for calculation of non-GAAP financial measures. 3.57% (0.02)% 0.44% 0.17% (0.11)% (0.07)% 3.98% QTD Q3 2022 PPP loans Loan yield Investments Interest earning deposits Total interest bearing liabilities QTD Q4 2022 Change in Net Interest Margin QTD Q4 2022 vs. QTD Q3 2022 Change in Net Interest Margin YTD Q4 2022 vs. YTD Q4 2021 Net Interest Margin (GAAP)

29 Asset Repricing Composition at December 31, 2022 Floating rate (<3 month repricing) Adjustable rate (>3 month repricing) Fixed rate Total Interest earning deposits $ 29 $ — $ — $ 29 Total investment securities, at fair value 103 9 1,893 2,005 Loans receivable (excluding SBA PPP) 878 1,052 2,121 4,051 Total interest earning assets $ 1,010 $ 1,061 $ 4,014 $ 6,085 % of total interest earning assets 16.6 % 17.4 % 65.9 % Total noninterest earning assets 895 Total assets $ 6,980 % of total assets 14.5 % 15.2 % 57.5 % INTEREST EARNING ASSETS Average Interest Earning Assets Composition 77.6% 67.6% 56.9% 58.3% 54.4% 54.7% 57.2% 58.4% 62.9% 10.7% 8.6% 0.6% 3.1% 1.6% 0.5% 0.1% 0.1% 20.3% 16.0% 15.8% 27.2% 17.5% 21.2% 24.0% 30.4% 33.5% 5.7% 18.7% 14.0% 25.0% 22.5% 18.3% 11.1% Interest earning deposits Investment securities SBA PPP loans Loans receivable, net, excl. SBA PPP 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 2.1% 3.5%

30 $67.6 $46.6 $98.0 $81.9 $85.4 $89.3 $91.1 $98.0 Net income (GAAP) PTPP income (non-GAAP) 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 $19.4 $19.8 $18.6 $21.0 $22.5 $19.3 $19.8 $21.4 $27.6 $29.3 PROFITABILITY TRENDS ROAE (GAAP) and ROATCE (non-GAAP) Noninterest Expense/Avg. Assets ROAA (GAAP) and PTPP ROAA (non-GAAP) 1.25% 0.74% 1.38% 1.12% 1.04% 1.08% 1.01% 1.13% 1.26% 1.58% 1.42% 1.28% 1.34% 1.03% 1.08% 1.16% 1.49% 1.64% ROAA (GAAP) PTPP ROAA (non-GAAP) 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Net Income (GAAP) and PTPP Income (non- GAAP), in millions 13.35% 8.98% 17.05% 14.94% 13.27% 13.83% 13.68% 15.20% 17.21% 8.56% 5.78% 11.64% 10.08% 9.06% 9.47% 9.19% 10.27% 11.46% ROAE (GAAP) ROATCE (non-GAAP) 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 2.71% 2.37% 2.09% 2.06% 2.06% 1.95% 1.94% 2.11% 2.26% 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 – Refer to Appendix for calculation of non-GAAP financial measures – ROAA - Return on average assets – PTPP - Pre-tax, pre-provision – ROAE - Return on average equity – ROATCE - Return on average tangible common equity

31 10.2% 8.5% 8.3% 8.3% 8.7% 9.5% 10.4% 8.9% 8.4% 7.9% 7.9% 7.6% 8.2% 14.6% 12.4% 11.5% 11.0% 11.0% 10.8% 11.4% Stockholders' equity to total assets (GAAP) Tangible common equity ("TCE") to tangible assets (non-GAAP) TCE, excluding AOCI, to tangible assets, excluding UGL (non-GAAP) 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 12.8% 14.0% 14.8% 14.7% 14.4% 14.0% 14.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 2.8% 4.0% 4.8% 4.7% 4.4% 4.0% 4.0% Well-capitalized Excess capital 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 – Current quarter ratios are estimates pending completion and filing of the Company's regulatory reports. – Refer to Appendix for calculation of non-GAAP financial measures. – Well-capitalized represents FDIC well-capitalized ratio threshold for banks. The minimum capital ratio requirement for Tier 1 leverage and Total risk based capital is 4.0% and 8.0%, respectively. – Brokered CD capacity limited to 15% of total deposits in accordance with Bank's Asset and Liability Management policy. 10.6% 9.0% 8.7% 8.8% 8.9% 9.2% 9.7% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.6% 4.0% 3.7% 3.8% 3.9% 4.2% 4.7% Well-capitalized Excess capital 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 CAPITAL AND SOURCES OF LIQUIDITY Tier 1 Leverage Ratio Total Risk Based Capital Equity Ratios Primary and Secondary Sources of Liquidity Source December 31, 2022 Cash and cash equivalents $104 Unencumbered investment securities 1,324 FHLB and FRB borrowing availability 1,273 Fed fund lines 215 Brokered CD capacity 889 Total $3,805 9.0%

SHAREHOLDER RETURN

33 TOTAL SHAREHOLDER RETURN Stock Summary Ticker HFWA Exchange NASDAQ Stock price $29.45 Market capitalization (in billions) $1,033.8 Dividend yield (regular dividend only) 2.85% Average Daily Volume (3 month) Average daily volume (shares) 191,985 Average daily volume ($000s) $5,654 52-Week High and Low Price 52-week high (November 10, 2022) 34.34 52-week low (January 31, 2022) 23.31 Per Share Tangible book value per share $15.66 EPS - 2022E $2.29 EPS - 2023E $2.61 Number of research analysts 6 Valuation Ratios Price / Tangible book value 188.1% Price / 2022E EPS 12.8x Price / 2023E EPS 11.3x Dividends Per Share Declared $0.50 $0.53 $0.72 $0.61 $0.72 $0.84 $0.80 $0.81 $0.84 $0.08 $0.10 $0.11 $0.12 $0.15 $0.18 $0.20 $0.20 $0.21$0.08 $0.11 $0.12 $0.13 $0.15 $0.18 $0.20 $0.20 $0.21 $0.09 $0.11 $0.12 $0.13 $0.15 $0.19 $0.20 $0.20 $0.21 $0.09 $0.11 $0.12 $0.13 $0.17 $0.19 $0.20 $0.21 $0.21 $0.16 $0.10 $0.25 $0.10 $0.10 $0.10 Q1 Q2 Q3 Q4 Special dividends 2014 2015 2016 2017 2018 2019 2020 2021 2022 Diluted Earnings Per Share – Market information as of January 10, 2023. – Dividend information as of January 26, 2023. $0.79 $1.25 $1.30 $1.39 $1.49 $1.83 $1.29 $2.73 $2.30 $0.16 $0.32 $0.30 $0.31 $0.27 $0.45 $0.34 $0.70 $0.56$0.16 $0.29 $0.30 $0.40 $0.35 $0.43 -$0.17 $0.90 $0.52 $0.23 $0.32 $0.37 $0.35 $0.42 $0.48 $0.46 $0.58 $0.59 $0.24 $0.32 $0.33 $0.33 $0.45 $0.47 $0.66 $0.55 $0.64 Q1 Q2 Q3 Q4 2014 2015 2016 2017 2018 2019 2020 2021 2022

APPENDIX - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND QUARTERLY FINANCIAL STATISTICS

35 NON-GAAP FINANCIAL MEASURES 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 PTPP Income and PTPP ROAA: Net income (GAAP) $67,557 $46,570 $98,035 $81,875 $19,397 $19,757 $18,584 $20,990 $22,544 Exclude income tax expense 13,488 6,610 22,472 17,561 4,922 3,582 3,977 4,657 5,345 Exclude provision for (reversal of provision for) credit losses 4,311 36,106 (29,372) (1,426) (5,037) (3,577) (1,204) 1,945 1,410 PTPP income (non-GAAP) $85,356 $89,286 $91,135 $98,010 $19,282 $19,762 $21,357 $27,592 $29,299 Average total assets $5,411,078 $6,293,622 $7,126,250 $7,321,455 $7,403,597 $7,434,787 $7,385,616 $7,367,736 $7,100,844 ROAA, annualized (GAAP) 1.25 % 0.74 % 1.38 % 1.12 % 1.04 % 1.08 % 1.01 % 1.13 % 1.26 % PTPP ROAA, annualized (non-GAAP) 1.58 % 1.42 % 1.28 % 1.34 % 1.03 % 1.08 % 1.16 % 1.49 % 1.64 % Loan Yield, excluding SBA PPP Loans, annualized: Interest and fees on loans (GAAP) $189,515 $192,417 $189,832 $174,275 $42,695 $41,025 $40,890 $43,847 $48,513 Exclude impact on loan yield from SBA PPP loan interest and fees — (19,472) (32,109) (5,215) (4,928) (3,081) (1,782) (275) (77) Adjusted interest and fees on loans (non- GAAP) $189,515 $172,945 $157,723 $169,060 $37,767 $37,944 $39,108 $43,572 $48,436 Average loans receivable, net (GAAP) $3,668,665 $4,335,564 $4,181,464 $3,852,604 $3,836,029 $3,773,325 $3,812,045 $3,859,839 $3,963,042 Exclude average SBA PPP loans — (589,635) (549,422) (37,533) (204,436) (109,594) (34,090) (5,726) (2,250) Adjusted average loans receivable, net (non-GAAP) $3,668,665 $3,745,929 $3,632,042 $3,815,071 $3,631,593 $3,663,731 $3,777,955 $3,854,113 $3,960,792 Loan yield, annualized (GAAP) 5.17 % 4.44 % 4.54 % 4.52 % 4.42 % 4.41 % 4.30 % 4.51 % 4.86 % Loan yield, excluding SBA PPP loans, annualized (non-GAAP) 5.17 % 4.62 % 4.34 % 4.43 % 4.13 % 4.20 % 4.15 % 4.49 % 4.85 % – Dollars in thousands – ROAA - Return on average assets – PTPP - Pre-tax, pre-provision

36 2019 2020 2021 2022 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 ROATCE: Net income (GAAP) $67,557 $46,570 $98,035 $81,875 $19,397 $19,757 $18,584 $20,990 $22,544 Add amortization of intangible assets 4,001 3,525 3,111 2,750 759 704 704 671 671 Exclude tax effect of adjustment (840) (740) (653) (578) (159) (148) (148) (141) (141) Tangible net income (non-GAAP) $70,718 $49,355 $100,493 $84,047 $19,997 $20,313 $19,140 $21,520 $23,074 Average stockholders' equity (GAAP) $789,502 $805,580 $842,067 $811,942 $849,383 $846,085 $810,961 $811,052 $780,401 Exclude average intangible assets (259,667) (255,898) (252,540) (249,566) (251,331) (250,593) (249,890) (249,245) (248,560) Average tangible common stockholders' equity (non-GAAP) $529,835 $549,682 $589,527 $562,376 $598,052 $595,492 $561,071 $561,807 $531,841 ROAE, annualized (GAAP) 8.56 % 5.78 % 11.64 % 10.08 % 9.06 % 9.47 % 9.19 % 10.27 % 11.46 % ROATCE, annualized (non-GAAP) 13.35 % 8.98 % 17.05 % 14.94 % 13.27 % 13.83 % 13.68 % 15.20 % 17.21 % Net Interest Margin, excluding Incremental Accretion on Purchased Loans, annualized: Net interest income (GAAP) $199,682 $200,997 $205,789 $219,385 $47,908 $46,944 $50,048 $59,286 $63,107 Exclude incremental accretion on purchased loans (4,876) (3,446) (2,638) (1,436) (387) (584) (270) (398) (184) Adjusted net interest income (non-GAAP) $194,806 $197,551 $203,151 $217,949 $47,521 $46,360 $49,778 $58,888 $62,923 Average total interest earning assets, net $4,729,885 $5,535,236 $6,381,048 $6,547,040 $6,671,984 $6,694,578 $6,612,958 $6,592,361 $6,292,188 Net interest margin, annualized (GAAP) 4.22 % 3.63 % 3.23 % 3.35 % 2.85 % 2.84 % 3.04 % 3.57 % 3.98 % Net interest margin, excluding incremental accretion on purchased loans, annualized (non-GAAP) 4.12 % 3.57 % 3.18 % 3.33 % 2.83 % 2.81 % 3.02 % 3.54 % 3.97 % NON-GAAP FINANCIAL MEASURES – Dollars in thousands – ROATCE - Return on average tangible common equity – ROAE - Return on average equity

37 2019 2020 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Tangible Common Equity to Tangible Assets and Tangible Common Equity to Tangible Assets, excluding AOCI: Total stockholders' equity (GAAP) $809,311 $820,439 $854,432 $821,449 $805,366 $776,702 $797,893 Exclude intangible assets (257,552) (254,027) (250,916) (250,212) (249,508) (248,837) (248,166) Tangible common equity (non-GAAP) $551,759 $566,412 $603,516 $571,237 $555,858 $527,865 $549,727 Exclude AOCI 10,378 25,018 9,396 (34,228) (61,783) (105,001) (99,850) Tangible common equity, excluding AOCI (non-GAAP) $541,381 $541,394 $594,120 $605,465 $617,641 $632,866 $649,577 Total assets (GAAP) $5,552,970 $6,615,318 $7,432,412 $7,483,814 $7,316,467 $7,200,312 $6,980,100 Exclude intangible assets (257,552) (254,027) (250,916) (250,212) (249,508) (248,837) (248,166) Tangible assets (non-GAAP) $5,295,418 $6,361,291 $7,181,496 $7,233,602 $7,066,959 $6,951,475 $6,731,934 Exclude unrealized gain or loss of investment securities available for sale, net of tax 10,378 25,018 9,396 (34,228) (61,783) (105,001) (99,850) Tangible assets, excluding AOCI (non-GAAP) $5,285,040 $6,336,273 $7,172,100 $7,267,830 $7,128,742 $7,056,476 $6,831,784 Stockholders' equity to total assets (GAAP) 14.6 % 12.4 % 11.5 % 11.0 % 11.0 % 10.8 % 11.4 % Tangible common equity to tangible assets (non-GAAP) 10.4 8.9 8.4 7.9 7.9 7.6 8.2 Tangible common equity, excluding AOCI, to tangible assets, excluding UGL 10.2 % 8.5 % 8.3 % 8.3 % 8.7 % 9.0 % 9.5 % ACL on Loans to Loans Receivable, excluding SBA PPP Loans: Allowance for credit losses on loans $36,171 $70,185 $42,361 $40,333 $39,696 $42,089 $42,986 Loans receivable (GAAP) $3,767,879 $4,468,647 $3,815,662 $3,821,178 $3,874,064 $4,001,295 $4,050,858 Exclude SBA PPP loans — (715,121) (145,840) (64,962) (11,334) (3,593) (1,468) Loans receivable, excluding SBA PPP (non-GAAP) $3,767,879 $3,753,526 $3,669,822 $3,756,216 $3,862,730 $3,997,702 $4,049,390 ACL on loans to loans receivable (GAAP) 0.96 % 1.57 % 1.11 % 1.06 % 1.02 % 1.05 % 1.06 % ACL on loans to loans receivable, excl. SBA PPP loans (non-GAAP) 0.96 % 1.87 % 1.15 % 1.07 % 1.03 % 1.05 % 1.06 % NON-GAAP FINANCIAL MEASURES – Dollars in thousands

38 2009 2010 2011 2012 2013 2014 2015 2016 Tangible Book Value Per Share: Total stockholders' equity (GAAP) $158,498 $202,279 $202,520 $198,938 $215,762 $454,506 $469,970 $481,763 Exclude intangible assets (13,358) (14,965) (14,525) (14,098) (30,980) (129,918) (127,818) (126,403) Exclude preferred stock (23,487) — — — — — — — Tangible common equity (non-GAAP) $121,653 $187,314 $187,995 $184,840 $184,782 $324,588 $342,152 $355,360 Exclude AOCI (233) 377 1,736 1,744 (1,162) 3,378 2,559 (2,606) Tangible common equity, excluding AOCI (non-GAAP) $ 121,886 $ 186,937 $ 186,259 $ 183,096 $ 185,944 $ 321,210 $ 339,593 $ 357,966 Shares outstanding 11,057,972 15,568,471 15,456,297 15,117,980 16,210,747 30,259,838 29,975,439 29,954,931 Book value per share (GAAP) $12.21 $12.99 $13.10 $13.16 $13.31 $15.02 $15.68 $16.08 Tangible book value per share (non-GAAP) $11.00 $12.03 $12.16 $12.23 $11.40 $10.73 $11.41 $11.86 Tangible book value per share, excluding AOCI (non-GAAP) $11.02 $12.01 $12.05 $12.11 $11.47 $10.62 $11.33 $11.95 NON-GAAP FINANCIAL MEASURES – Dollars in thousands

39 Tangible Book Value Per Share (continued): 2017 2018 2019 2020 2021 2022 Q1 Q2 Q3 Q4 Total stockholders' equity (GAAP) $505,305 $760,723 $809,311 $820,439 $854,432 $821,449 $805,366 $776,702 $797,893 Exclude intangible assets (125,117) (261,553) (257,552) (254,027) (250,916) (250,212) (249,508) (248,837) (248,166) Tangible common equity (non- GAAP) $380,188 $499,170 $551,759 $566,412 $603,516 $571,237 $555,858 $527,865 $549,727 Exclude AOCI (1,298) (7,455) 10,378 25,018 9,396 (34,228) (61,783) (105,001) (99,850) Tangible common equity, excluding AOCI (non-GAAP) 381,486 506,625 541,381 541,394 594,120 605,465 617,641 632,866 649,577 Shares outstanding 29,927,746 36,874,055 36,618,729 35,912,243 35,105,779 35,102,372 35,103,929 35,104,248 35,106,697 Book value per share (GAAP) $16.88 $20.63 $22.10 $22.85 $24.34 $23.40 $22.94 $22.13 $22.73 Tangible book value per share (non-GAAP) $12.70 $13.54 $15.07 $15.77 $17.19 $16.27 $15.83 $15.04 $15.66 Tangible book value per share, excluding AOCI (non-GAAP) $12.75 $13.74 $14.78 $15.08 $16.92 $17.25 $17.59 $18.03 $18.50 NON-GAAP FINANCIAL MEASURES – Dollars in thousands

40 As of Period End or for the Three Months Ended December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 Profitability: Net income (GAAP) $ 19,397 $ 19,757 $ 18,584 $ 20,990 $ 22,544 Pre-tax, pre-provision net income (non-GAAP) 19,282 19,762 21,357 27,592 29,299 Diluted earnings per share $ 0.55 $ 0.56 $ 0.52 $ 0.59 $ 0.64 Return on average assets (GAAP) 1.04 % 1.08 % 1.01 % 1.13 % 1.26 % Pre-tax, pre-provision return on average assets (non-GAAP) 1.03 1.08 1.16 1.49 1.64 Return on average common equity (GAAP) 9.06 9.47 9.19 10.27 11.46 Return on average tangible common equity (non-GAAP) 13.27 13.83 13.68 15.20 17.21 Net interest margin 2.85 2.84 3.04 3.57 3.98 Efficiency ratio 66.6 64.4 62.6 58.7 58.0 Noninterest expense to average total assets 2.06 % 1.95 % 1.94 % 2.11 % 2.26 % Balance Sheet: Total assets $ 7,432,412 $ 7,483,814 $ 7,316,467 $ 7,200,312 $ 6,980,100 Loans receivable, net 3,773,301 3,780,845 3,834,368 3,959,206 4,007,872 Total deposits $ 6,394,290 $ 6,491,500 $ 6,330,190 $ 6,237,735 $ 5,924,840 Loan to deposit ratio 59.7 % 58.9 % 61.2 % 64.1 % 68.4 % Capital: Book value per share (GAAP) $ 24.34 $ 23.40 $ 22.94 $ 22.13 $ 22.73 Tangible book value per share (non-GAAP) $ 17.19 $ 16.27 $ 15.83 $ 15.04 $ 15.66 Tangible book value per share, excluding AOCI (non-GAAP) $ 16.92 $ 17.25 $ 17.59 $ 18.03 $ 18.50 Leverage ratio 8.7 % 8.8 % 8.9 % 9.2 % 9.7 % Total capital ratio 14.8 % 14.7 % 14.4 % 14.0 % 14.0 % Credit Quality: Nonperforming assets to total assets 0.32 % 0.22 % 0.14 % 0.09 % 0.08 % ACL on loans to loans receivable (GAAP) 1.11 1.06 1.02 1.05 1.06 ACL on loans to loans receivable, excluding SBA PPP (non-GAAP) 1.15 % 1.07 % 1.03 % 1.05 % 1.06 % – Dollars in thousands – Refer to Appendix for calculation of non-GAAP financial measure. QUARTERLY FINANCIAL STATISTICS

Report a Problem

Category
Description
Email (optional, for follow-up)