Heritage Financial Corporation · NASDAQ:HFWA
Heritage Financial — Merger or Acquisition (July 2017)
20 slides from Heritage Financial's merger presentation, Jul 27, 2017
Slide 1: Heritage Financial Corporation to Acquire Puget Sound Bancorp, Inc.
wiie.| Heritage Diu Financial PugetSound CORPORATION NASDAQ: HFWA OTCQB: PUGB Heritage Financial Corporation to Acquire Puget Sound Bancorp, Inc. “Pure Play” Business Banking Franchise in Desirable Seattle-Bellevue Market July 26, 2017
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements regarding Heritage, Puget Sound, 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
Slide 3: Merger Rationale
MERGER RATIONALE = This is a "pure play" on business banking in the Seattle metropolitan area — one of the strongest economic regions in the United States, which presents attractive growth prospects + Aligns with HEWaA's stated strategic goal of growing in the Seattle-Bellevue market and adds to HFW
Slide 4: Overview of Puget Sound Bancorp, Inc.
OVERVIEW OF PUGET SOUND BANCORP, INC. * 1 office location in downtown Bellevue, Washington + Founded in 2005 to meet the specialized needs of small and medium-sized businesses, select commercial real estate projects, professional service providers and high net worth individuals and provide a full su
Slide 5: Transaction Overview
TRANSACTION OVERVIEW Consideration = 100% stock consideration for Puget Sound ("PUGB") sharehalders * Fixed exchange ratio of 1.320 shares of HFWA for each share of PUGB, subjectto adjustments below Transaction Value Aggregate consideration of $128.1 million or $35.84 per share of PUGB comman stock)
Slide 6: Key Assumptions and Pro Forma Impact
KEY ASSUMPTIONS AND PRO FORMA IMPACT Cost Savings + Estimated cast savings of 26% of Puget Sound's non-interest expense + Cost savings of $3.2 million in 2018 (70% phased-in) and $4.8 million in 2019 (100% phased-in) Merger Expenses Approximately $9.0 million, pre-tax Pro Forma = Redemption of PUGB'
Slide 7: Pro Forma Branch Footprint
PRO FORMA BRANCH FOOTPRINT HFWA Branch Footprint worn... Titamooe POM WASHINGT We Souroe: HFWAand PUGB deposit data as of 6/90/2017 N = Strengthens HFWA's presence in the Seattle metropolitan area = Puget Sound operates 1 branch which is on the 15" floor of an office building in downtown Bellevue =
Slide 8: Larger Platform in Seattle and Bellevue
LARGER PLATFORM IN SEATTLE AND BELLEVUE = $846 million of loans and $589 million of deposits, pro forma in Seattle and Bellevue (combined cities) — combined funds under management of $1.4 billion = 27% of HFWA's loan portfolio and 16% of HFVVA's deposit base is in Seattle-Bellevue on a pro forma bas
Slide 9: Strengthening Market Share
STRENGTHENING MARKET SHARE Seattle, WA and Bellevue, WA (Combined Cities) Ran in arket Number of Depostsin Market = Puget Sound has significant scarcity value HQ. Institidon tate} Branches Market Share in this market Bark of ametia corp. (NC) 3 16529,100 20.9% ‘Wells Ferg & Co. (CA) 7aa5 087 137% US
Slide 10: Strong and Diverse Economic Landscape
STRONG AND DIVERSE ECONOMIC LANDSCAPE Thriving local economy with job growth in technology and aerospace sectors Washington named “America’s Top State for Business in 2017" by CNBC Washington state has the country's largest concentration of STEM workers (science, technology, education and rath) Seat
Slide 11: Loan Portfolio Mix — Business Banking Focus
LOAN PORTFOLIO MIX — BUSINESS BANKING FOCUS = Attractive Puget Sound loan mix with 37.1% C&l, 21.7% owner occupied CRE and 23.8% non-owner occupied CRE ‘Owner- Occupied CRE nae Sonali Tmt St otra nner ome Che ‘ | ene aes Wess ‘4am Consacions Sevlopnet Bo Owner. Occupied CRE, Owner-Ocoupied CRE Comme
Slide 12: Deposit Mix — Attractive Core Deposit Franchise
DEPOSIT MIX —- ATTRACTIVE CORE DEPOSIT FRANCHISE = Attractive Puget Sound low-cost, core deposits with 44.5% non-interest bearing demand deposits and 92.9% non-CDs NOT rest Dearng bem Nonitrest Beating Sia tomer om WMO aaxings Tine Depoats_/ ya% spe Balan NOW & Interest. Noninteres-Beaving, Ae eet D
Slide 13: Puget Sound — Historical Trends
PUGET SOUND — HISTORICAL TRENDS 40000 serra ‘3600.00 ‘Acouired Core Business Bank with 362 milion of assetsin June 2013 335000 9605136 :3600,000 0000 5400,000 260900 + seo0900 | ss200,000 60000 1808 s3200,000 100000 ‘y100,000 380000, all s . $ | ‘2005 2006 2007 ‘noe 20092070" 2011 2012 2019 2014 201
Slide 14: Attractive Position in Pacific Northwest
ATTRACTIVE POSITION IN PACIFIC NORTHWEST = HFWA is 1 of 9 commercial banks headquartered in Washington or Oregon and traded on NASDAQ/NYSE with total assets of $1.0 billion or more = Proforma company is a uniquely attractive franchise in this market = Low cost, core deposit base = Business banking e
Slide 15: Historical Growth — Organic and Acquisitive
HISTORICAL GROWTH — ORGANIC AND ACQUISITIVE + This is the 9 acquisition for HFWA since 1998 — in addition to the acquisition of Puget Sound, HFWA has completed & whole bank acquisitions and 2 FDIC-assisted $5,000, $4,500, $4,000, $3,500 $3,000, $2,500, $2,000, 1,500 1,000, $500 & ‘Acquistion of Puge
Slide 16: Summary
SUMMARY Y In-line with HFWA‘s strategic goals — Logical fit geographically, strategically and financially ¥ Expands HFWA‘s foothold in the Seattle-Bellevue market Y Attractive growth potential with this combined platform ¥ Retaining key leadership and relationship managers from Puget Sound ¥ Signifi
Slide 17: Appendix
Appendix
Slide 18: Property Types
PROPERTY TYPES. Retail He Convention Genter 2 ] ars = 2 ‘AMAZON ‘Amazon Amazon - Leased | Amazon - n-Development * ‘Amazon = Option to Buy (or right of frst offer) GOOGLE Googie FACEBOOK BH Facebook PROJECT STATUS @ Completed Projects @ Under Construction I Planned Projects LAKE UNION
Slide 19: Bellevue Development Pipeline
BELLEVUE DEVELOPMENT PIPELINE PROJECT TYPE Office Residential Residential Mixed-Use Retail Hotel Performance Hall ‘Convention Center ‘Transportation PROJECT STATUS Under Construction @ Planned Projects ‘Completed
Slide 20: Market Comparison
MARKET COMPARISON SEATTLE VS. SAN FRANCISCO VS: PORTLAND OFFICE MARKET COMPARISON ‘CROSS-MARKET TENANTS Google 20 facebook Poracte | VAN pocusin, hae iS) amazon | yo \yanice BE Micrsott | vart00! |osnmoenine| F SEATTLE PORTLAND:
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