Slide 1: Q2 2012 Investor Presentation
Exhibit 99.1 Q2 2012 Investor Presentation Q2 2012 Investor Presentation Brian L. Vance, President and CEO Jeffrey J. Deuel, Executive Vice President and COO Donald J. Hinson, Senior Vice President and CFO Heritage Financial Corporation
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains forward-looking statements that are subject to risks and uncertainties, including, but not limited to: The credit and concentration risks of lending activities Changes in general economic conditions, either nationally or in our market areas Compet
Slide 3: Overview
Overview • Company Information • Financial Performance • Corporate Strategies
Slide 4: Company Information
Company Information Company Information
Slide 5: Our Market Area
Total assets: $1.17 billion Branches: 27 Total assets: $164.1 million Branches: 6 Our Market Area Financial Data as of June 30, 2012
Slide 6: Award Recognition
Award Recognition Top Places to Work Business Examiner – 2012 - Large Company & Appreciation Awards and Large Company & Equity Award Washington Best Workplaces Puget Sound Business Journal – Gold Award 2011, Bronze Award 2010 and Silver Award 2009 The 100 Best Companies to Work For The Seattle Busin
Slide 7: Financial Performance
Financial Performance Financial Performance
Slide 8: Loans, Deposits and Total Assets
7 EE \ “Ta a 1 nae es l@iLoans t=iDeposits MmTotal Assets -t-% Loans to Deposits $1,600 - 105% $1,400 $1,200 } = $1,000 100% | =X j 95% a - $800 3 = 90% $600 pee $400 E $200 oats $ + + + - - | 75% 2007 2008 2009 2010 2011 Qi'12 Q2'12 (in millions)
Slide 9: Loan Portfolio
Loan Portfolio Financial data as of June 30, 2012
Slide 10: Credit Quality
Credit Quality * HFWA ratios relate to originated loan portfolios only. Regional Peer data not available for Q2’12 Regional Peer Group (12): Ticker Symbols – BANR, CACB, COLB, FFNW, HOME, NRIM, PCBK, PRWT, RVSB, TSBK, WBCO, WCBO Source: SNL Financial
Slide 11: Deposit Base
Deposit Base Total Deposits $1.1 billion Cost of Deposits 0.42% Non-Maturity Deposits / Total Deposits 72.4% Cost of Interest Bearing Deposits 0.53% Financial data as of June 30, 2012
Slide 12: Deposit Composition
Tt lh ee es $1,200 - + 25% $1,000 | | qe $800 | — | 20% 8 $600 E $400 | +—_ 15% = $200 | $- | = __=- ___ = 10% 2007 2008 2009 2010 2011 Qi'l2 Q2'12 liNon-Interest Demand Deposits isl NOW/Savings/MMA Certificates of Deposit =&% of Non-Interest Demand Deposits to Total Deposits
Slide 13: Total Equity and Tangible Common Equity
7 ou iTotal Equity <#=Tangible Common Equity/Tangible Assets $0023 $2025 ~~ $205.7 $9001 | 1°” 10%. 5% 2007 2008 2009 2010 2041 Qi '12 Qg2'12
Slide 14: Earnings
Earnings Annual Net Income Quarterly Net Income
Slide 15: Net Interest Margin
Net Interest Margin Annual NIM Quarterly NIM Adjusted Net Interest Margin removes the effects of “incremental accretion income” from net interest income in the net interest margin calculation. “Incremental accretion income” represents the amount of income recorded on the acquired loans above the con
Slide 16: Noninterest Expense and Efficiency Ratio
7 SO \ ~~ aa 1 nae es laiSalaries & Benefits taiOccupancy malOther =teEfficiency Ratio $16 75% $12 $10 = pO $8 | | 65% $4 $2 $- + 60% Q1 2011 Q2 2011 Q3 2011 Q4 2011. Qi 2012, Q2 2012 (in millions) bia fo)
Slide 17: Corporate Strategies
Corporate Strategies Corporate Strategies
Slide 18: Growth Initiatives
Growth Initiatives • Organic Growth – Lender recruitment – Strategic branching – Develop Southwest Washington – Wealth Management initiative • Targeted Acquisitions – Enhance Pacific Northwest footprint
Slide 19: Growth Initiatives: Lender Recruitment
Growth Initiatives • Lender Recruitment – During 2011 and 2012 we hired 9 new Lenders and a Market Executive • 4 lenders in King County (Seattle/Bellevue/Kent) • 2 lenders in Pierce County (Tacoma) • 1 lender in Thurston County (Olympia) • 1 lender in Clark County (Vancouver) • 1 lender in Portland,
Slide 20: Growth Initiatives: Loan Growth
Growth Initiatives • Loan Growth – Increased net loans $24.8 million, or 2.5%, in 2011 – Increased originated loans $95.9 million, or 12.9%, in 2011 – Originated loan growth was $15.7 million, or 1.9%, during first 6 months of 2012
Slide 21: Growth Initiatives: Wealth Management
Growth Initiatives • Wealth Management – Trust services added in Cowlitz Bank transaction – Wealth Management leader joined team in 2011 – Goal to align existing Trust and Brokerage Services with new Investment Management Services to create integrated Wealth Management platform – Serve the clients o
Slide 22: Leverage Capital
Leverage Capital • FDIC Acquisitions – Successfully completed two FDIC acquisitions – Continue to consider future FDIC assisted transactions – Expect very few closures in WA/OR in 2012 • Bank Mergers and Acquisitions – Actively seeking M&A opportunities
Slide 23: Capital Management Strategies
2011 2012 Q2 Q3 Q4 Q1 Q2 Q3 Capital Management Strategies Cash Dividends Stock Repurchases Announced 5% repurchase program in Q3 2011 Since inception, repurchased 590,832 shares (76% of repurchase program at an average price of $12.83) Quarterly Dividend $0.03 $0.05 $0.05 $0.06 $0.08 $0.08 Special D
Slide 24: Capital Return
Capital Return Total Capital Returned* Since Q1 (% of Tg. Common Equity in Q1 2011) HFWA has returned more capital to shareholders than most peers since Q1 2011 based on beginning balance of tangible common equity Total amount of capital returned through cash dividends and buybacks since Q1 2011, as
Slide 25: Capital Return
Capital Return HFWA has returned more capital to shareholders than accumulated net income since Q1 142.6% of net income has been returned to shareholders through dividends and buybacks 51.5% median Total Capital Returned* / Net Income (Since Q1 2011) Source: SNL Financial, as of 6/30/2012 unless not
Slide 26: Capital Return
Capital Return HFWA has returned capital through both dividends and stock buybacks 59.3% through dividends and 40.7% through buybacks vs. peer median 89.1% through dividends and 10.9% through buybacks More advantageous for shareholders from a tax perspective for stock buybacks vs. dividends None of
Slide 27: fae See mE Te A > Z ot —
fae See mE 9 Te A > Z ot — Staglh th Tinniweccly Baukeny “
Slide 28: Investment Value
Investment Value • Strong financial performance trends • Well-positioned to take advantage of the right opportunities • Continuing focus on building long-term franchise value • Disciplined approach to acquisitions • Experienced management team supported by a strong Board of Directors
Slide 29: Thank You
Thank You Thank You Questions? Questions? Heritage Financial Corporation Heritage Financial Corporation