Investor Presentation Q1 2021 1 Forward – Looking Statements The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Other factors that could cause or contribute to such impact include, but are not limited to: • the credit risks of lending activities, including changes in the level and trend of loan del ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 HERITAGE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) (State or ot ...

Financial Data and Key Metrics Changes - The company reported earnings of $0.66 per share in Q4 compared to $0.46 in Q3, reflecting a positive trend in profitability [9] - There was a $3.3 million or 15% increase in pretax pre-provision income from the prior quarter [9] - The net interest margin increased by 15 basis points in Q4, primarily due to the impact of PPP loan forgiveness [16] - Noninterest income increased by $3.1 million from the prior quarter, driven by various factors including gains from branch building sales [17] - Noninterest expense increased by $2.5 million, largely due to costs associated with the branch consolidation plan [18] Business Line Data and Key Metrics Changes - Loans receivable decreased by $198 million from Q3, mainly due to a $153 million decrease in SBA-PPP loans [10] - Consumer loans decreased by $32 million, primarily due to the cessation of indirect auto loans [11] - Commercial loan production for the quarter was $140 million, down from $181 million in the previous quarter [29] - The consumer production was $18 million for Q4, down from $19 million in Q3 [32] Market Data and Key Metrics Changes - Deposits decreased by $91 million in Q4, primarily due to a decrease in a public deposit relationship [12] - Nonaccrual loans increased by $5.5 million during Q4, ending the year at 1.3% of loans receivable [23] - Potential problem loans increased by $45.2 million during Q4, reflecting ongoing challenges from COVID-19 [24] Company Strategy and Development Direction - The company announced the consolidation and closure of 9 branches, or 15% of its branch footprint, to improve operating efficiency [6] - Focus on digital enhancements and the development of automated systems for commercial loan origination and customer relationship management [7] - The company is cautiously optimistic about loan volume in the second half of the year, driven by increased discussions on capital projects and expansion plans [30] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about borrowers in high-risk categories but noted that net credit losses have historically been low [36] - The company is comfortable with its current capital levels and robust liquidity, which provide a solid foundation for addressing challenges and seizing opportunities [38] - Management acknowledged uncertainties around vaccines, the economy, and social unrest but remains optimistic about the future performance of the loan portfolio [37] Other Important Information - The allowance for credit losses on loans was 1.57%, unchanged from Q3, with a decrease to 1.87% when excluding PPP loans [14] - The effective tax rate is expected to increase in 2021 due to the expiration of the new market tax credit [19] - The company lifted its self-imposed suspension of the stock repurchase program based on its strong capital position [20] Q&A Session Summary Question: Expense run rate and technology reinvestment - Management indicated that Q4 expense run rate tends to be the lowest of the year, with Q1 typically being the highest due to various factors [41] Question: Opportunities in the market and hiring plans - Management is open to considering high-performing teams and is in ongoing conversations with potential hires, but is cautious due to current uncertainties [43] Question: M&A activity and expectations - Management is hopeful for increased M&A activity later in the year and has maintained contact with industry peers throughout the pandemic [44] Question: Remaining net PPP fees from round one - The remaining amount of net PPP fees left from round one is a little over $15 million [46] Question: Trends in expenses and branch closures - Management clarified that expenses are expected to be closer to Q1 of 2020 for the next couple of quarters, with a focus on managing costs effectively [48] Question: Credit quality and reserve levels - Management noted that the increase in nonperforming assets did not require additional provisioning due to collateral valuations [56]

Company Overview - As of October 19, 2020, the company's NASDAQ symbol is HFWA, with a stock price of $2032 and a market capitalization of $7292 million[4] - As of Q3 2020, the company has total assets of $669 billion, deposits of $569 billion, and loans of $467 billion[4] - The company's net income for Q3 2020 was $166 million, with a pre-tax, pre-provision income of $218 million[4] - The company's net interest margin was 338% and the efficiency ratio was 6227%[4] - The Tier 1 Leverage Ratio was 88% and the Total Risk Based Capital Ratio was 134%[4] COVID-19 Response - Approximately 60% of employees have remote capabilities, with 37% being fully remote[5] - The company has implemented loan modification programs and fee waivers for customers[5] - The company has discontinued indirect consumer lending business[5] Company Strategy - The company aims to be the "acquirer of choice" in the Pacific Northwest, targeting an IRR of >15% with earnbacks < 3 years[6] - The company has closed/consolidated 22 branches since the beginning of 2010 and plans to consolidate nine branches, resulting in a 15% decrease in total branch locations[6,23] - The company's noninterest demand deposits represent 350% of total deposits[6] Financial Update - Q3 2020 - Net income was $166 million, or $046 per diluted share[21] - Total deposits increased by $1213 million, or 22%, to $569 billion[22] - The company declared a regular cash dividend of $020 per common share on October 21, 2020[22] Loan Portfolio - SBA PPP Commercial & Industrial loans make up 186% of the loan portfolio composition[24] - Owner-occupied CRE loans make up 184% of the loan portfolio composition[24] - Non-owner Occupied CRE loans make up 297% of the loan portfolio composition[24]

Company Overview - HFWA's market capitalization was $720.5 million as of April 27, 2020 [3] - Institutional ownership was 82.8% as of April 27, 2020 [3] - Total assets were $5.59 billion as of March 31, 2020 [3] - The company has 62 branches and was established in 1927 [3] COVID-19 Response - The company funded 3,356 PPP loans totaling $778.7 million [6] - 55% of the PPP loan count represents loans less than $100,000, and 83% less than $350,000 [6] - The average PPP loan size was $232,000 [6] - Commercial loans modifications totaled $348.1 million, representing 10.6% of the commercial portfolio [6] - Consumer/Mortgage loans modifications totaled $7.4 million, representing 2.7% of the consumer/mortgage portfolio [6] - Indirect Auto loans modifications totaled $21.1 million, representing 7.1% of the indirect portfolio [6, 7] Financial Performance (Q1 2020) - Net loans receivable increased by $73.1 million, or 2.0%, to $3.80 billion [22] - Total deposits increased by $35.3 million, or 0.8%, to $4.62 billion [23] - Net interest margin increased to 4.06% [23]

Financial Data and Key Metrics Changes - The reported diluted earnings per share for Q1 was $0.33, down from $0.47 in Q4 2019, primarily due to an increased provision for credit losses [12] - The net interest margin expanded to 4.06%, compared to 4.02% in Q4 2019 [12] - Net loan balances increased by $73 million in Q1, with deposits increasing by $35 million [13] Business Line Data and Key Metrics Changes - Commercial loan commitments for the quarter totaled $167 million, similar to Q1 2019, with a commercial loan pipeline ending at $506 million, up 30% from Q4 [27] - Consumer production during Q1 was $47 million, the same as Q4 2019 [28] - The mortgage department closed $26 million of new loans in Q1, compared to $52 million in Q4 2019 [29] Market Data and Key Metrics Changes - Potential problem loans increased by $14 million in Q1, primarily due to loans downgraded to special mention as a result of COVID-19 [15] - The bank's commercial exposure to high-risk categories includes $85 million in restaurants (2.2% of the total portfolio) and $124 million in hotels (3.2% of the total portfolio) [15] Company Strategy and Development Direction - The company is focused on conservative underwriting, active portfolio management, and avoidance of loan concentrations to manage credit losses [10] - The bank has implemented a loan modification program and is actively participating in the SBA PPP program to support customers [9][30] Management's Comments on Operating Environment and Future Outlook - Management expects credit quality deterioration due to COVID-19 but believes the company will outperform the industry median [10] - The company anticipates elevated provisions for credit losses for the remainder of 2020 due to ongoing economic uncertainty [22] Other Important Information - The allowance for credit losses on loans increased to 1.23% of total loans from 0.96% at the end of Q4 [20] - The company has been approved to use the Fed's PPP liquidity facility in conjunction with its PPP lending [13] Q&A Session Summary Question: Impact of interest recovery on net interest margin - Management indicated that interest recovery added a couple of basis points to the reported margin, but the full impact of rate cuts will be felt in future quarters [40] Question: Credit quality related to agricultural and C&I loans - Management clarified that the improvements in non-accrual loans were due to individual issues rather than a broader trend [42] Question: Expectations for reserve builds in upcoming quarters - Management expects to see higher reserves throughout 2020, particularly in Q2 and Q3 [53] Question: High-risk exposures and underlying metrics - Management reported that the average loan-to-value ratios for high-risk industries are conservative, around 55% to 60% [56] Question: Average loan size and pipeline for PPP loans - The average loan size for PPP loans was $244,000, with additional applications in the pipeline totaling around $885 million [58] Question: Treasury management system implementation costs - Management indicated that implementation costs for the new treasury management system have increased, with about $1.1 million remaining to be spent over the next two quarters [70]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 000-29480 HERITAGE FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) (State or other juris ...