Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Merger or Acquisition (March 2018)
17 slides from Heritage Financial's merger presentation, Mar 9, 2018
Slide 1: Heritage Financial Corporation to Acquire Premier Commercial Bancorp
ie | Heritage - =") Financial wl CORPORATION PREMI ER COMMERCIAL BANCORP NASDAG: HFA, OTC Pink PRCB Heritage Financial Corporation to Acquire Premier Commercial Bancorp Enhances Commercial Banking Platform in Attractive Portland MSA March 8, 2018
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements regarding Heritage, Premier, the proposed merger and the combined company after the close ofthe transaction that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Sec
Slide 3: Highly Attractive Strategic Acquisition
HIGHLY ATTRACTIVE STRATEGIC ACQUISITION = Expands HFWA's presence in the Portland-Vancouver-Hillsboro MSA = Augments our organic momentum = Executed a similar strategy in Seattle — organically built a presence, and completed an acquisition to accelerate our growth initiatives to create greater scale
Slide 4: Acquisition Transforms Presence in Portland
ACQUISITION TRANSFORMS PRESENCE IN PORTLAND $408 million of loans and $418 million of deposits, pro formna in the Portland MSA — combined funds under management of $826 million 11% of HFWA's loan portfolio and 10% of HFWA's deposit base is in Portland MSA on a pro forma basis Further accelerates HFV
Slide 5: Overview of Premier Commercial Bancorp
OVERVIEW OF PREMIER COMMERCIAL BANCORP = Founded in 1999 and headquartered in Hillsboro, Oregon = Strategically located branches — six locations in Portland MSA = Focused on delivering banking services to businesses, nonprofits, professionals and individuals = Commercial bankers which have been inth
Slide 6: Transaction Overview
TRANSACTION OVERVIEW * Fixed exchange ratio of 0.4863x Consideration + 100% stock consideration + HFWAwill issue 2,848,851 shares * Premier shareholders will have pro forma ownership of 7.7% + Aggregate consideration of $88.6 millon ar $15.12 per share of Premier comman stack) : + Price-to-LTM earin
Slide 7: Key Assumptions and Pro Forma Impact
KEY ASSUMPTIONS AND PRO FORMA IMPACT + Immediately accretive to EPS in 2018 and 3.2% accretive in 2019 + 0.9% dilutive to tangible book value per share at close; earnback of 1.8 years® ProForma eS). internal rate of return greater than 15% = Pro Forma TCE ratio of 9.4%, leverage ratio of 9.8%, total
Slide 8: Pro Forma Branch Footprint
PRO FORMA BRANCH FOOTPRINT HFWA Branch Footprint @ Heritage Branch @ Premier Branch = Acquisition is consistent with HEWA's focus on -5 strategy = Premier has 6 branch locations in the cities of Hillsboro, Beaverton, Forest Grove, Tigard, Newberg and Portland = On apro forma basis, HFWA will have 9
Slide 9: Strengthening Market Share
STRENGTHENING MARKET SHARE Portland.Vancouver-Hillsboro MSA, Iittion( = Premier has significant scarcity value in this market U5. Banco (ND “OTST Bark ot Ameren Cop.) ‘eaze00 Wels Faged.co. (CA) @ eee1053 = Premieris the largest commercial bank under “Piorgan chase Co.) 5420.70 fea sans $1 billion i
Slide 10: Vibrant, Diverse and Growing Economy
VIBRANT, DIVERSE AND GROWING ECONOMY a a 5 3 z x 3 g = iE i a rq m 3 = 5 2 3 2 g ES a 8 2 = a g in Oregon and 24 largest in the Pacific Northwest + Portland's population grew 11.3% fram 2010 to 2018 and is projected to grow 6.6% fram 2018 to 2023 + Household income in Oregon is expected to increase
Slide 11: Loan Portfolio Mix — Business Banking Focus
LOAN PORTFOLIO MIX — BUSINESS BANKING FOCUS = Attractive loan mix with 27.5% C&l, 31.2% owner occupied CRE and 22.9% non-owner occupied CRE = 58.8% of Premier's portfolio is for business loans, includes C&l and owner occupied CRE on a combined basis combined a Ovner-Oocupied CRE Non-Owner Occupied O
Slide 12: Deposit Mix — Attractive Core Deposit Franchise
DEPOSIT MIX —- ATTRACTIVE CORE DEPOSIT FRANCHISE = Core deposit franchise with 32.3% non-interest bearing demand deposits and 80.2% non-CDs a CS oe NOW & Interest. Bearing Demand Ha Den MM A, yy 18.0% LM i __-Savings Noninterest-Be ering (28% Demand 23.8% Certificates of Deposit 14% Nowa Interest. M
Slide 13: Historical Trends — Premier Commercial
HISTORICAL TRENDS — PREMIER COMMERCIAL = Loans increased $26.0 million, or 8.2% since 2016 = Nor-interest bearing deposits increased $14.2 million, or 15.3% since 2016 $351 aa 40 se0 ea 8 20 sor 2 000 900 200 220 200 260 20 a 02 a3 tea a 0 oe me at op zie 20% hte 2oo a aor at 2017 wis 210 zie anton
Slide 14: Historical Growth — Organic and Acquisitive
HISTORICAL GROWTH — ORGANIC AND ACQUISITIVE + This isthe 10! acquisition for HFWA since 1998 — in addition to 7 whole bank acquisitions and 2 FDIC-assisted acquisitions the acquisition of Premier Commercial Bancorp, HFWA has completed “Announced acquistion af Premier Commercial Bancorp $6,000 with $
Slide 15: Summary
SUMMARY Y¥ In-line with HFWA's strategic goals — Logical fit geographically, strategically and financially ¥ HFWA\has significant momentum in two of the most attractive banking markets in the Pacific Northwest ¥ Financial impact that adds to shareholder value ¥ Retain key personnel ¥ Expands HFWA's
Slide 16: Appendix
Appendix
Slide 17: Market Comparison
MARKET COMPARISON SEATTLE VS. SAN FRANCISCO VS: PORTLAND OFFICE MARKET COMPARISON ‘CROSS-MARKET TENANTS Google facebook Poracte | VAN pocusin, hae iS) amazon | yo \yanice BE Micrsott | vart00! |osnmoenine| F SEATTLE PORTLAND:
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