Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Q3 2025 Earnings Presentation
41 slides from Heritage Financial's earnings presentation, Oct 23, 2025
Slide 1: Investor Presentation Q3 2025
INVESTOR PRESENTATION Q3 2025
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements often include words such as "believes," "expects," "anticipates," "estimates," “forecasts,” "intends," “plans,” “targets,” “p
Slide 3: Disclaimers
DISCLAIMERS Additional Information and Where to Find It The Company will file a registration statement on Form S-4 with the SEC in connection with the proposed transaction. The registration statement will include a joint proxy statement of the Company and Olympic that also constitutes a prospectus o
Slide 4: Heritage Financial Corporation Overview
HERITAGE FINANCIAL CORPORATION OVERVIEW
Slide 5: Overview
OVERVIEW General Overview Nasdaq symbol HFWA Heritage Location Stock price(2) $24.39 Market capitalization(2) $828 million Spokane Institutional ownership(2) 85.0% Headquarters Olympia, WA # of branches 50 Year established 1927 Q3 2025 Financial Highlights Assets $7.0 billion Deposits $5.9 billion L
Slide 6: Company Strategy
COMPANY STRATEGY Successful hiring of individuals and teams of bankers in high-growth and dynamic Seattle and Allocate capital to organically grow Portland markets as well as other key markets including branch openings in Eugene, Oregon and our core banking business Boise, Idaho and loan productio
Slide 7: Strong and Diverse Economic Landscape
STRONG AND DIVERSE ECONOMIC LANDSCAPE $113,456 13.3% $94,748 $86,463 Seattle MSA 9.9% 9.7% $78,770 8.8% Portland MSA 7.3% 5.3% Boise MSA 4.6% 4.3% 3.6% 3.5% 2.4% USA 0.3% Unemployment rate 2025-2030 Projected 2025-2030 Projected Median Median Population Growth Household Income Growth household incom
Slide 8: Loans and Deposits by Location
LOANS AND DEPOSITS BY LOCATION Loans by MSA Deposits by MSA Yakima WA Bellingham WA Longview WA Oak Harbor WA Olympia WA $107 $186 $155 $548 $189 Olympia WA 2.2% 3.9% 2.6% 9.4% Yakima WA 4.0% $488 Eugene OR $224 $83 8.3% 3.8% Mount Vernon WA 1.7% $257 Mount Vernon WA Bellingham WA 5.4% Boise ID $337
Slide 9: Potential Growth Opportunities
POTENTIAL GROWTH OPPORTUNITIES On September 25, • Long-term goal to build a Pacific 2025, entered into a Northwest ("PNW") regional definitive agreement commercial community bank; potential with Olympic Bancorp, Inc. - $1.7B in assets opportunities for M&A and production team lift-outs in WA, OR and
Slide 10: Historical Growth Organic and Acquisitive
HISTORICAL GROWTH ORGANIC AND ACQUISITIVE Acquired Merged with Puget Sound Bancorp $639MM in assets Washington Banking Company $1.7B in assets Premier Commercial Bancorp $440MM in assets $26.62 $25.85 $26.16 $25.40 $24.34 $24.44 $22.85 $22.73 $22.10 $20.63 $18.99 $19.46 $18.22 $18.70 $17.19 $17.40 $
Slide 11: Growth Strategy
GROWTH STRATEGY Bank Acquisitions and Team Additions YEAR ACTIVITY • Acquired Valley Community Bancshares - $254MM in assets 2013 • Acquired Northwest Commercial Bank - $65MM in assets 2014 • Merged with Washington Banking Company - $1.7B in assets • Added a commercial banking team in Seattle, Washi
Slide 12: Financial Update
FINANCIAL UPDATE
Slide 13: Loan Portfolio
LOAN PORTFOLIO Loan Portfolio Composition $1,909 $1,916 $1,940 $1,938 $1,698 $1,587 $1,003 $985 $1,015 $1,023 $937 $959 $843 $851 $831 $819 $693 $718 $479 $453 $442 $344 $294 $375$414 $403 $393 $384$433 $375 $196 $171 $165 $167 $172 $173 2022 2023 2024 Q1 2025 Q2 2025 Q3 2025 Consumer Residential re
Slide 14: Line of Credit (LOC) Utilization
LINE OF CREDIT ("LOC") UTILIZATION LOC Utilization Rates 70.2% 68.0% 64.7% 60.8% 53.8% 42.9% 33.9% 34.5% 31.1% 31.1% 31.6% 32.3% 30.7% 32.5% 31.0% 29.8% 28.2% 29.7% 2022 2023 2024 Q1 2025 Q2 2025 Q3 2025 Utilization Rate - Consumer LOCs Utilization Rate - Construction LOCs Utilization Rate - C&I LOC
Slide 15: Commercial Loan Exposure
COMMERCIAL LOAN EXPOSURE Health care and social assistance Commercial Business Loans by Industry Exposure 9.0% Accommodation and food services Industry Amount WARR at 4.7% 09/30/25 Retail trade Real estate, rental and leasing $2,122 4.5 3.8% Health care and social Construction 342 4.3 assistance 4.4
Slide 16: Changes in Loans Receivable
CHANGES IN LOANS RECEIVABLE Change in loans - Q3 2025 $174 $(76) $4,775 $(56) $4,769 $(48) Loans receivable at Loans originated Prepayments Maturities / Payoffs Net advances/ Loans receivable at June 30, 2025 payments September 30, 2025 Change in loans - YTD 2025 $410 $(214) $4,802 $4,769 $(154) $(7
Slide 17: CRE Office
CRE OFFICE Quality of CRE Office Portfolio: • 82.0% of loans have recourse to owner • 49.7% of loans are owner occupied CRE Office Loans by Industry Type which are considered to have a lower Other Services Accommodation (except Public and Food Services risk profile Administration) 1.0% • 24.3% of lo
Slide 18: Nonaccrual Loans and Net Charge-offs
NONACCRUAL LOANS AND NET CHARGE-OFFS Nonaccrual Loans 0.37% 0.21% 0.15% 0.10% 0.08% 0.09% $18 $10 $6 $4 $4 $4 2022 2023 2024 Q1 2025 Q2 2025 Q3 2025 Nonaccrual loans Nonaccrual loans to loans receivable Net charge-offs (recoveries) on loans to average loans, annualized 0.30% 0.20% 0.22% 0.10% 0.03%
Slide 19: Criticized Loans
CRITICIZED LOANS $213 $195 $179 $178 $150 $135 $114 $100 $111 $114 $69 $80 $89 $77 $60 $65 $64 $60 $6 $4 $4 $4 $10 $18 2022 2023 2024 Q1 2025 Q2 2025 Q3 2025 Substandard - nonaccrual Substandard - accrual Special mention Criticized Loans by Loan Segment Criticized Loans by Collateral Type Consumer 1
Slide 20: Criticized Loans and Net Charge-off History
CRITICIZED LOANS AND NET CHARGE-OFF HISTORY Criticized Loans to Total Loans Proactive Credit Management 6.50% • Heritage proactively 4.81% 4.48% downgrades loans that 3.63% 3.79% 3.45% 3.73% 3.34% are experiencing financial 3.47% difficulty. 2.63% 2.66% 3.19% 2.19% 2.32% • Criticized loans(1) to tot
Slide 21: Allowance for Credit Losses (ACL) on Loans
ALLOWANCE FOR CREDIT LOSSES ("ACL") ON LOANS Change in ACL on Loans - Q3 2025 $1,665 $53,974 $52,529 $31 $(213) $(38) June 30, 2025 Change in loan balance Change in collective Change in rate and Individually evaluated September 30, 2025 rate balance loans ACL on Loans 1.11% 1.13% 1.09% 1.09% 1.10% 1
Slide 22: Deposits
DEPOSITS Average Deposit Balances and Cost of Total Deposits $6,322 $5,706 $5,789 $5,675 $5,715 $5,744 $5,779 $5,843 $5,618 1.92% 2.02% 1.98% 1.92% 1.94% 1.90% 1.89% 1.03% 1.34% 1.38% 1.42% 1.39% 1.38% 1.40% 1.37% 0.17% 0.69% 0.11% 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Aver
Slide 23: Deposit Composition
DEPOSIT COMPOSITION Deposit portfolio as of September 30, 2025: Consumer Accounts vs. Business • Majority of deposits are to customers with relationships of Accounts $1 million or less. • Uninsured deposits at 43% of total deposits. 12% of uninsured deposits are public deposits that are 100% 16% ple
Slide 24: Investment Portfolio
INVESTMENT PORTFOLIO Investment Balances and Investment Yield $2,098 $1,203 $1,874 $178 $1,572 $1,468 $1,468 $1,414 $1,313 $1,346 $1,313 $33 $28 $85 $57 3.33% 3.36% 3.34% 3.29% 3.34% 3.38% 3.35% 3.02% 2.48% 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Portfolio yield New purchases
Slide 25: Investment Cashflows
INVESTMENT CASHFLOWS Investment cashflows(1) are estimated to be $561 million through Q3 of 2028. Q4 2025 $30 $11 $41 Q1 2026 $38 $10 $48 Q2 2026 $28 $10 $38 Q3 2026 $28 $10 $38 Q4 2026 $24 $9 $33 Q1 2027 $48 $9 $57 Q2 2027 $34 $9 $43 Q3 2027 $26 $9 $35 Q4 2027 $21 $8 $29 Q1 2028 $50 $8 $58 Q2 2028
Slide 26: Investment Portfolio
INVESTMENT PORTFOLIO Strong Credit Quality of Portfolio: AFS Securities • 89.8% of AFS in U.S. government and agency securities • Only 1.1% of AFS are rated less than AA • 99.9% of AFS portfolio are unpledged HTM Securities • All HTM investments are U.S. government and agency securities • 100% HTM p
Slide 27: Net Interest Margin
NET INTEREST MARGIN Quarterly Change in Net Interest Margin 0.08% 3.64% 0.04% 0.03% 0.02% 3.51% (0.04)% QTD Q2 2025 Loans Investments Interest earning Deposits Borrowings QTD Q3 2025 deposits Net Interest Income $219,385 $225,155 $209,364 $166,044 $52,958 $53,763 $53,690 $54,983 $57,371 2022 2023 20
Slide 28: Loan Maturity and Repricing
LOAN MATURITY AND REPRICING Adjustable Rate Loans - Repricing Schedule Fixed Rate Loans - Maturity Schedule 6.82% 6.40% 6.53% 6.22% 6.27% 6.28% 6.07% 5.21% 5.28% 5.27% 6.81% 5.05% 6.25% 4.68% 4.78% 6.02% 6.15% 4.45% 5.06% $1,265 4.63% $1,053 4.07% $324 $358 $240 $238 $285 $151 $153 $197 $159 $106 $1
Slide 29: Profitability Trends
PROFITABILITY TRENDS ROAA and Adjusted ROAA(1) 1.12% 1.11% 0.99% 1.04% 0.99% 1.03% 0.97% 0.88% 0.87% 1.12% 1.09% 0.86% 0.86% 0.79% 0.61% 0.63% 0.66% 0.70% 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 ROAA Adjusted ROAA (1) Noninterest Expense/Avg. Assets 2.35% 2.36% 2.34% 2.36% 2.
Slide 30: Profitability Trends
PROFITABILITY TRENDS ROAE, ROATCE(1) and Adjusted ROATCE(1) 14.92% 12.76% 12.16% 14.94% 11.67% 11.59% 11.21% 11.59% 10.53% 10.42% 7.85% 11.86% 11.15% 7.31% 7.62% 7.81% 10.08% 9.67% 9.22% 8.52% 7.55% 6.88% 6.51% 5.06% 5.30% 5.46% 5.57% 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 R
Slide 31: Capital Ratios
CAPITAL RATIOS Equity Ratios 12.4% 12.6% 12.9% 11.9% 12.2% 11.4% 9.3% 9.4% 9.8% 8.8% 9.0% 8.2% 2022 2023 2024 Q1 2025 Q2 2025 Q3 2025 Stockholders' equity to total assets (GAAP) Tangible common equity to tangible assets(1) Regulatory Capital Ratios(2) 14.0% 14.1% 13.8% 13.3% 13.6% 13.6% 12.8% 12.9%
Slide 32: Liquidity Position
LIQUIDITY POSITION Liquidity position at September 30, 2025: • Sufficient liquidity to cover estimated uninsured deposits of $2.5 billion. • Access to brokered deposits of $801 million per internal company policy. Liquidity Sources 112.6% 109.3% 103.1% 100.4% 100.6% $2,525 $2,542 $2,509 $145 $2,345
Slide 33: Shareholder Return
SHAREHOLDER RETURN
Slide 34: Total Shareholder Return
TOTAL SHAREHOLDER RETURN Diluted EPS and Adjusted Diluted EPS(1) Stock Summary(2) $0.56 Ticker HFWA $0.53 $2.31 Exchange Nasdaq $0.51 $2.01 $0.49 $1.80 $0.55 Stock price $24.39 $2.31 $0.45 $1.59 Market capitalization (in millions) $827.9 Dividend yield (regular dividend only) 3.94 % $1.75 $1.24 $1.3
Slide 35: Appendix - Reconciliation of Non-GAAP Financial Measures and Quarterly Financial Statistics
APPENDIX - RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND QUARTERLY FINANCIAL STATISTICS
Slide 36: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Adjusted Net Income and Adjusted Return on Average Assets ("ROAA"): Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 45,295 $ 11,423 $ 11,928 $ 13,911 $ 12,215 $ 19,169 Exclude (gain) loss on sale of investment
Slide 37: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Return on Average Tangible Common Equity ("ROATCE") and Adjusted ROATCE: Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 45,295 $ 11,423 $ 11,928 $ 13,911 $ 12,215 $ 19,169 Add amortization of intangible asset
Slide 38: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 2022 2023 2024 2025 YTD Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Diluted Earnings per Share and Adjusted Diluted Earnings per Share: Net income (GAAP) $ 81,875 $ 61,755 $ 43,258 $ 45,295 $ 11,423 $ 11,928 $ 13,911 $ 12,215 $ 19,169 Exclude (gain) loss on sale of investment
Slide 39: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 2016 2017 2018 2019 2020 2021 2022 2023 2024 Tangible Book Value Per Share: Total stockholders' equity (GAAP) $ 481,763 $ 505,305 $ 760,723 $ 809,311 $ 820,439 $ 854,432 $ 797,893 $ 853,261 $ 863,527 Exclude intangible assets (126,403) (125,117) (261,553) (257,552) (254,0
Slide 40: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES Q3 2024 Q4 2024 Q1 2025 Q2 2025 Q3 2025 Efficiency Ratio and Adjusted Efficiency Ratio Total noninterest expense (GAAP) $ 39,290 $ 39,540 $ 41,383 $ 41,085 $ 41,615 Exclude merger related costs $ — $ — $ — $ — $ 635 Adjusted noninterest expense (non-GAAP) $ 39,290 $ 39,54
Slide 41: Quarterly Financial Statistics
QUARTERLY FINANCIAL STATISTICS As of Period End or for the Three Months Ended September 30, December 31, March 31, June 30, September 30, 2024 2024 2025 2025 2025 Profitability: Net income $ 11,423 $ 11,928 $ 13,911 $ 12,215 $ 19,169 Adjusted net income(1) $ 15,740 $ 17,872 $ 16,979 $ 18,141 $ 19,67