Heritage Financial (HFWA) investor relations material

Deal rationale and strategic fit

• The merger creates a leading community bank in the Puget Sound region, expanding into Kitsap, Jefferson, and Clallam counties, and building scale and density in key markets.

• Combined entity will be the largest community bank in Kitsap County and second largest in the Kitsap and Olympic Peninsulas, with about 14% deposit market share and a pro forma asset base of $9 billion.

• Both banks have a long history, clean credit portfolios, and a community-focused, relationship banking culture.

• The deal enhances market presence, strengthens the core deposit base, and supports strong community commitments.

• Opportunity to deploy excess liquidity into loans, enhancing profitability.

Financial terms and conditions

• All-stock transaction with a fixed exchange ratio of 45 shares of acquirer stock per target share, valued at $176.6 million, with approximately 7.2 million new shares to be issued.

• Price represents 151% of tangible book value (103% excluding AOCI); price/2025E core EPS of 20.4x, dropping to 7.8x with cost savings.

• Target shareholders will own about 17.4% of the combined company post-closing; acquirer shareholders will own 82.6%.

• Closing expected in Q1 2026, subject to shareholder and regulatory approvals.

• Boards of both companies have unanimously approved the merger and agreed to vote in favor.

Synergies and expected cost savings

• Targeting 35% cost savings from operational efficiencies, mainly from back-office and systems consolidation.

• $8.1 million in cost savings expected in 2026, with $18.7 million in 2027; 45% realized in 2026, full realization by 2027.

• Minimal branch overlap means limited closures; savings focus on systems and personnel.

• Transaction expected to enhance profitability, efficiency ratios, and balance sheet liquidity.

• Approximately 18% EPS accretion anticipated after full realization of operating efficiencies.