What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-26 · 125 added, 222 removed, 271 unchanged (56% of the section changed)

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We are primarily engaged in the business of planning, directing, and coordinating the business activities of our wholly owned subsidiary and single reportable segment, Heritage Bank.

Heritage Bank is headquartered in Olympia, Washington and conducts business from its 53 branch offices located primarily along the I-5 corridor in the western Washington and the greater Portland, Oregon area.

Heritage Bank is headquartered in Olympia, Washington and conducts business from its 49 branch offices located primarily along the I-5 corridor in western Washington and the greater Portland, Oregon area.

We additionally have offices located in central Washington, primarily in Yakima County.

The deposits of the Bank are insured by the FDIC.

In October 2020, the Company announced a plan to consolidate nine branches to create a more efficient branch footprint, reducing the branch count to 53 from 62 at December 31, 2019.

One branch was consolidated during October 2020 and eight branches were consolidated during January 2021.

The Company integrated these locations into other branches within its network.

During the last two years, the Company consolidated 13 branches to create a more efficient branch footprint, reducing the branch count to 49 at December 31, 2021 from 62 at December 31, 2019.

The Bank integrated these locations into other branches within its network.

These actions were the result of the Bank’s increased focus on balancing physical locations and digital banking channels, driven by increased customer usage of online and mobile banking and a commitment to improve digital banking technology.

Our business consists primarily of commercial lending and deposit relationships with small and medium sized businesses and their owners in our market areas and attracting deposits from the general public.

We also make real estate construction and land development loans and consumer loans.

The Bank also originates for sale or investment purposes residential real estate loans on residential properties located primarily in our market.

We also make real estate construction and land development loans, consumer loans and residential real estate loans for sale or investment purposes on residential properties located primarily in our market.

General Development of Business

During the year ended December 31, 2020, the Bank participated in the SBA's PPP in accordance with the CARES Act.

Through the conclusion of the initial PPP on August 8, 2020, the Bank had funded 4,642 SBA PPP loans totaling $897.4 million with an average loan size of $193,000.

Of the funded loans, approximately 21% of both the count and the originated balance were loans to new customers.

As of December 31, 2020, SBA PPP loans totaled $715.1 million, including unamortized net deferred fees of $15.4 million.

The decrease in SBA PPP loans since origination was primarily due to principal and interest forgiveness payments from the SBA of $159.2 million during the fourth quarter of 2020 as the Bank began accepting and processing the forgiveness applications.

During the year ended December 31, 2020, SBA PPP loans provided an additional $19.5 million of interest and fee income on loans.

The CA Act was signed into law on December 27, 2020 and provides coronavirus emergency response and relief, including renewing and extending the PPP until March 31, 2021.

As a result, the Company began originating SBA PPP loans again starting in January 2021.

As of February 19, 2021, the Bank has funded 1,724 loans totaling $297.1 million.

The Bank accommodated COVID Modifications on 2,041 loans with a balance of $666.6 million at March 31, 2020, a date before the prolonged impacts of the COVID-19 pandemic.

COVID Modifications are not reported as TDR loans based on the CARES Act and regulatory guidance.

Instead, the Bank assesses TDR status, at a minimum, once the loan deferment period reaches 180-days.

At December 31, 2020, approximately 177 loans totaling $92.5 million were still in payment deferral

modification status, with 63.4% of those classified as a TDR and 36.6% as a COVID Modification.

Approximately 86.1% of total COVID Modifications with payment deferrals during the year ended December 31, 2020 are no longer on payment deferral status at December 31, 2020.

The CA Act extends relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

For additional discussion of impacts to our business from the COVID-19 pandemic, see also Item 1A.

Risk Factors—Risks Related to the COVID-19 Pandemic and Associated Economic Slowdown, and Item 7.

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations—COVID-19 Impacts.

Other significant events during include:

• The Bank adopted CECL effective January 1, 2020.

• During the first quarter of 2020, we ceased indirect auto loan originations.

• During the second quarter of 2020, the Bank completed the implementation of the Heritage Direct platform, a full suite of upgraded treasury management tools for commercial customers, including online banking, ACH, wires, positive pay, remote deposit capture and merchant services.

The related vendor implementation cost recorded within Professional services on the Consolidated Statements of Income during the year ended December 31, 2020 was $1.6 million.

• During the fourth quarter of 2020, we announced a branch consolidation plan and closed one branch in October 2020 and a further eight branches in January 2021.

During the last two years, the Bank participated in the SBA's PPP in accordance with the CARES Act and CA Act.

The CARES Act initially amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during the COVID-19 Pandemic.

Through the conclusion of the program on May 31, 2021, the Bank had funded 7,184 SBA PPP loans totaling $1.28 billion with an average loan size of $178,000.

As of December 31, 2021, total funded SBA PPP loans decreased to $145.8 million, net of unamortized net deferred fees of $4.9 million, due primarily to principal and interest forgiveness payments from the SBA as the Bank began accepting and processing the forgiveness applications during the three months ended December 31, 2020.

During the years ended December 31, 2021 and 2020, SBA PPP loans provided an additional $32.1 million and $19.5 million, respectively, of interest and fee income on loans.

A combination of new deposit relationships obtained in conjunction with the SBA PPP lending process and existing customers maintaining higher cash balances due to the COVID-19 Pandemic also caused a material impact to our deposit balances, which increased $1.80 billion, or 39.2%, to $6.38 billion at December 31, 2021 from $4.58 billion at December 31, 2019 and cash balances, which increased $1.49 billion, or 654.0%, to $1.72 billion at December 31, 2021 from $228.6 million at December 31, 2019, which was before the start of the COVID-19 Pandemic.

Business Strategy

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We have a well-developed credit approval structure that has enabled us to maintain a standard of asset quality that we believe has moderate risk while at the same time allowing us to achieve our lending objectives.

We will continue to focus on loan types and markets that we know well and where we have a historical record of success.

We will continue to focus on loan types and markets that we know well and where

we have a historical record of success.

We focus on loan relationships that are well-diversified in both size and industry types.

With respect to commercial business lending, which is our predominant lending activity, we view ourselves as cash-flow lenders obtaining additional support from realistic collateral values, personal guarantees and other secondary sources of repayment.

We have a problem loan resolution process that is focused on quick detection and implementing feasible solutions.

We seek to maintain strong internal controls and subject our loans to periodic internal loan reviews.

We have a problem loan resolution process that is focused on quick detection and implementing feasible solutions and subject our loans to periodic internal loan reviews.

Maintain a strong balance sheet.

In addition to our focus on underwriting, we believe that the strength of our balance sheet provides us with the flexibility to manage through a variety of scenarios including additional growth-related activities.

Our liquidity position was also strong, with $743.3 million in cash and cash equivalents as of December 31, 2020.

As of December 31, 2020, the regulatory capital ratios of our subsidiary bank were well in excess of the levels required for “well-capitalized” status, and our consolidated common equity tier 1 capital to risk-weighted assets, leverage capital, Tier 1 risk-based capital, and total risk-based capital ratios were 12.3%, 9.0%, 12.8% and 14.0%, respectively.

In addition to our focus on underwriting, we believe the strength of our balance sheet provides us with the flexibility to manage through a variety of scenarios including additional growth-related activities.

Our liquidity position was also strong, with $1.72 billion in cash and cash equivalents as of December 31, 2021.

As of December 31, 2021, the regulatory capital ratios of the Bank were well in excess of the levels required for “well-capitalized” status, and our consolidated common equity tier 1 capital to risk-weighted assets, leverage capital, Tier 1 risk-based capital, and total risk-based capital ratios were 13.5%, 8.7%, 13.9% and 14.8%, respectively.

Focused deposit growth.

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Recruit and retain highly competent personnel to execute our strategies.

Our compensation and staff development programs are aligned with our strategies to grow our loans and core deposits (which we define to include all deposits except

certificates of deposit) while maintaining our focus on asset quality.

Our compensation and staff development programs are aligned with our strategies to grow our loans and non-maturity deposits while maintaining our focus on asset quality.

Our incentive systems are designed to achieve balanced, high quality asset growth while maintaining appropriate mechanisms to reduce or eliminate incentive payments when appropriate.

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We have a strong corporate culture, which is supported by our commitment to internal development and promotion from within as well as the retention of management and officers in key roles.

There have been no material changes to our business strategy during the year ended December 31, 2020, except for our participation in the SBA's PPP.

The Bank was established in 1927 as a federally-charted mutual savings bank.

There have been no material changes to our business strategy during the years ended December 31, 2021 and 2020, except for our participation in the SBA's PPP.

The Bank was established in 1927 as a federally-chartered mutual savings bank.

In 1992, the Bank converted to a state-chartered mutual savings bank under the name Heritage Savings Bank.

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Effective September 1, 2004, Heritage Savings Bank switched its charter from a state-chartered savings bank to a state-chartered commercial bank and changed its legal name from Heritage Savings Bank to Heritage Bank.

The Company acquired North Pacific Bancorporation in June 1998 and Washington Independent Bancshares and its wholly-owned subsidiary, Central Valley Bank, in March 1999.

In June 2006, the Company completed the acquisition of Western Washington Bancorp and its wholly owned subsidiary, Washington State Bank, N.A., at which time Washington State Bank, N.A.

was merged into Heritage Bank.

Effective July 30, 2010, Heritage Bank entered into a definitive agreement with the FDIC, pursuant to which Heritage Bank acquired certain assets and assumed certain liabilities of Cowlitz Bank, a Washington state-chartered commercial bank headquartered in Longview, Washington.

The acquisition included nine branches of Cowlitz Bank, including its division Bay Bank, which opened as branches of Heritage Bank on August 2, 2010.

The acquisition also included the Trust Services Division of Cowlitz Bank.

Effective November 5, 2010, Heritage Bank entered into a definitive agreement with the FDIC, pursuant to which Heritage Bank acquired certain assets and assumed certain liabilities of Pierce Commercial Bank, a Washington state-chartered commercial bank headquartered in Tacoma, Washington.

The acquisition included one branch, which opened as a branch of Heritage Bank on November 8, 2010.

On September 14, 2012, the Company announced that it had entered into a definitive agreement along with Heritage Bank, to acquire Northwest Commercial Bank, a full-service commercial bank headquartered in Lakewood, Washington that operated two branch locations in Washington State.

The acquisition was completed on January 9, 2013, at which time Northwest Commercial Bank was merged with and into Heritage Bank.

On March 11, 2013, the Company entered into a definitive agreement to acquire Valley Community Bancshares, Inc.

and its wholly-owned subsidiary, Valley Bank, both headquartered in Puyallup, Washington, and its eight branches.

The acquisition was completed on July 15, 2013.

On April 8, 2013, the Company announced its intent to merge two of its wholly-owned bank subsidiaries, Central Valley Bank and Heritage Bank, with Central Valley Bank merging into Heritage Bank.

The common control merger was completed on June 19, 2013.

Central Valley Bank operated as a division of Heritage Bank until September 2018 at which time the five Central Valley Bank branches were renamed to Heritage Bank branches.

On October 23, 2013, the Company, the Bank, Washington Banking Company and its wholly-owned subsidiary bank, Whidbey Island Bank, jointly announced the signing of a definitive merger agreement pursuant to which Heritage and Washington Banking Company entered into a strategic merger with Washington Banking Company merging into Heritage.

Whidbey Island Bank branches adopted the Heritage Bank name in all markets, with the exception of six branches in Whidbey Island markets which continue to operate using the Whidbey Island Bank name, as a division of Heritage Bank.

The Washington Banking Merger was completed on May 1, 2014.

On July 26, 2017, the Company announced the execution of a definitive agreement to purchase Puget Sound Bancorp, Inc., the holding company of Puget Sound Bank, a one-branch business bank headquartered in Bellevue, Washington.

The Puget Sound Merger was completed on January 16, 2018.

On March 8, 2018, the Company announced the signing of a definitive agreement to purchase Premier Commercial Bancorp, the holding company for Premier Community Bank, both of Hillsboro, Oregon, and its six branches.

The Premier Merger was completed on July 2, 2018.

For additional information regarding the Puget Sound Merger and Premier Merger see Note (2) Business Combinations of the Notes to Consolidated Financial Statements included in Item 8.

Financial Statements And Supplementary Data.

The following table lists major combinations completed by the Company:

Type of Combination Date of Combination Acquired Holding Company Name Acquired Bank Name Total Assets Acquired

(in millions)

Purchase June 1998 North Pacific Bancorporation North Pacific Bank $ 85

Purchase March 1999 Washington Independent Bancshares, Inc.

Central Valley Bank 61

Purchase June 2006 Western Washington Bancorporation Washington State Bank, N.A.

FDIC Assisted August 2010 n/a Cowlitz Bank 345

FDIC Assisted November 2010 n/a Pierce Commercial Bank 211

Purchase January 2013 n/a Northwest Commercial Bank 65

Purchase July 2013 Valley Community Bancshares, Inc.

Valley Bank 237

Merger May 2014 Washington Banking Company Whidbey Island Bank 1,657

Purchase January 2018 Puget Sound Bancorp, Inc.

Puget Sound Bank 571

Purchase July 2018 Premier Commercial Bancorp Premier Community Bank 387

Description of Business

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The major categories of deposit accounts that we offer are described below.

These accounts, with the exception of noninterest demand accounts, generally earn interest at rates

established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits.

These accounts, with the exception of noninterest demand accounts, generally earn interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits.

Noninterest Demand Deposits.

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Savings Accounts.

Deposits are interest bearing and allow for unlimited deposits and withdrawals, provided that a minimum balance is maintained.

Deposits are interest bearing provided that a minimum balance is maintained to avoid service charges.

Certificate of Deposit Accounts.

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Lending Activities

Our lending activities are conducted through Heritage Bank.

Our lending activities are conducted through the Bank.

While our focus is on commercial business lending, we also originate consumer loans, real estate construction and land development loans and residential real estate loans.

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Commercial Business Lending

At December 31, 2021 we had $3.19 billion, or 83.7% of our loans receivable, in commercial business loans.

We offer different types of commercial business loans, including lines of credit, term equipment financing and term owner-occupied and non-owner occupied commercial real estate loans.

We also originate loans that are guaranteed by the U.S.

SBA, for which Heritage Bank is a “preferred lender”, the U.S.

SBA, for which the Bank is a “preferred lender”, the U.S.

Department of Agriculture and the Federal Agricultural Mortgage Corporation.

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Emphasis is placed on having a comprehensive understanding of the borrower’s global cash flow and performing necessary financial due diligence.

At December 31, 2020 we had $3.72 billion, or 83.1% of our loans receivable, in commercial business loans with an average outstanding loan balance of approximately $393,000 at December 31, 2020, excluding loans with no outstanding balance.

We originate commercial real estate loans within our primary market areas with a preference for loans secured by owner-occupied properties.

Our underwriting standards require that non-owner occupied and owner-occupied commercial real estate loans not exceed 75% and 80%, respectively, of the lower of appraised value at origination or cost of the underlying collateral.

Cash flow debt coverage requirements range from 1.15 times to 1.25 times, depending on the type of property.

We also stress test debt coverage using an “underwriting” interest rate that is higher than the note rate.

Cash flow debt coverage covenant requirements typically range from 1.15 times to 1.25 times, depending on the type of property.

Actual debt service coverage is usually higher than required covenant thresholds, as loan sizing requires sensitized coverage using an "underwriting" interest rate that is higher than the note rate.

Commercial real estate loans typically involve a greater degree of risk than residential real estate loans.

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We also generally obtain personal guarantees from the owners of the collateral after a thorough review of personal financial statements.

In addition, we review our commercial real estate loan portfolio annually for performance of individual loans, and stress-test loans for potential changes in interest rates, occupancy, and collateral values.

In addition, we review a majority of the individual loans within our commercial real estate loan portfolio annually for various performance related criteria and stress-test loans for potential changes in interest rates, occupancy and collateral values.

See also Item 1A.

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The majority of our residential real estate loans are secured by single-family residences located in our primary market areas.

underwriting standards require that residential real estate loans generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral.

Our underwriting standards require that residential real estate loans generally are owner-occupied and do not exceed 80% of the lower of appraised value at origination or cost of the underlying collateral.

Terms typically range from 15 to 30 years.

As part of our asset/liability management strategy, we typically sell a significant portion of our residential real estate loans in the secondary market with no recourse and servicing released.

Residential real estate loans intended for sale totaled $4.9 million at December 31, 2020 within Loans held for sale on the Consolidated Statements of Financial Condition.

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations—Asset and Liability Management.

We did not service any of these sold loans during the years ended December 31, 2020, 2019 or 2018.

As part of our asset/liability management strategy, we also sell originated residential real estate loans in the secondary market with no recourse and servicing released.

Real Estate Construction and Land Development

At December 31, 2021, we had $226.9 million, or 5.9% of our loans receivable, in real estate construction and land development loans, including residential construction loans and commercial and multifamily construction loans.

We originate residential construction loans for the construction of single-family custom homes (where the home buyer is the borrower).

We originate residential construction loans for the construction of single-family custom homes (where the home owner is the borrower).

We also provide financing to builders for the construction of pre-sold homes and speculative residential property.

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and we inspect the project prior to paying any draw requests.

Commercial and multifamily construction loans also have a higher risk because of construction element.

Commercial and multifamily construction loans also have a higher risk because of the construction element and lease-up, if not pre-leased.

As a result, this type of construction loan is made only to strong borrowers with sufficient equity into the project and additional resources they can draw on if needed.

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We originate consumer loans and lines of credit that are both secured and unsecured.

During the first quarter of 2020, we ceased indirect auto loan originations.

These indirect consumer loans were secured by new and used automobile and recreational vehicles and were originated indirectly by established and well-known dealers located in our market areas.

During the three months ended March 31, 2020, we ceased indirect auto loan originations, which are classified as consumer loans within loans receivable.

These indirect consumer loans are secured by new and used automobile and recreational vehicles and were originated indirectly by established and well-known dealers located in our market areas.

In addition, the indirect loans purchased were made to only prime borrowers.

At December 31, 2020, we had $212.2 million, or 4.7% of our loans receivable, in indirect auto loans.

At December 31, 2021, we had $117.3 million, or 3.1% of our loans receivable, in indirect auto loans remaining, which is a decrease of 58.7% from $284.0 million as of December 31, 2019, which approximates the balance of indirect auto loans before the runoff of this portfolio started.

The majority of our remaining consumer loans are for relatively small amounts disbursed among many individual borrowers.

Our primary sources of funds are deposits and loan repayments.

Scheduled loan repayments are a relatively stable source of funds, while deposits and unscheduled loan prepayments, which are influenced significantly by general interest rate levels, interest rates available on other investments, competition, economic conditions and other factors, may not be stable.

Customer deposits remain an important source of funding, but these balances have been influenced in the past by adverse market conditions in the industry and may be affected by future developments such as interest rate fluctuations and new competitive pressures.

In addition to customer deposits, management may utilize brokered deposits on an as-needed basis and securities sold under agreement to repurchase.

We had no brokered deposits as of December 31, 2020.

At December 31, 2020, securities sold under agreement to repurchase of $35.7 million which were secured by investment securities available for sale.

As secondary sources of funding, we might utilize other borrowings on a short-term basis to compensate for reductions in other sources of funds (such as deposit inflows at less than projected levels).

Borrowings may also be used on a longer-term basis to support expanded lending activities and match the maturity of repricing intervals of assets.

Other borrowings include advances from the FHLB and other credit facilities.

Federal Home Loan Bank:

The Bank is a member of the FHLB which is one of 11 regional Federal Home Loan Banks that administer the home financing credit function of savings institutions.

Each Federal Home Loan Bank serves as a reserve or central bank for its member financial institutions within its assigned region.

The FHLB is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank system.

It makes loans or advances to members in accordance with policies and procedures, established by the Board of Directors of the FHLB, which are subject to the oversight of the Federal Housing Finance Agency.

We rely upon advances from the FHLB as a secondary source of liquidity to supplement our supply of lendable funds and meet deposit withdrawal requirements.

Advances are made pursuant to several different programs.

Each credit program has its own interest rate and range of maturities.

Depending on the program, limitations on the amount of advances are based on a percentage of an institution’s assets or on the FHLB’s assessment of the institution’s creditworthiness.

Under its current credit policies, the FHLB limits advances to 45% of the Bank's assets.

At December 31, 2020, the Bank maintained a credit facility with the FHLB with availability in the amount of $991.7 million, of which there were no advances outstanding.

Advances from the FHLB are typically secured by our first lien residential real estate loans, commercial real estate loans and stock issued by the FHLB, which is owned by us.

For membership purposes, the Bank is required to maintain an investment in the stock of the FHLB in an amount equal to 0.12% of the Bank's assets as calculated on an annual basis.

In addition to the FHLB stock required for membership, the Bank must purchase activity stock equal to 4.0% of all outstanding borrowing balances.

The activity stock is automatically redeemed in amounts equal to the FHLB advance balances as they are repaid.

At December 31, 2020 the Bank had an investment in stock issued by the FHLB carried at a cost basis (par value) of $6.7 million, which entirely represented its FHLB membership stock.

The Bank was not required to purchase additional FHLB stock as it did not have any outstanding FHLB advances at December 31, 2020.

Other borrowings:

In addition to liquidity provided by the FHLB, the Bank maintained an uncommitted credit facility with the Federal Reserve Bank of $54.3 million, of which there were no advances or borrowings outstanding as of December 31, 2020.

The Bank also maintains advance lines with Wells Fargo Bank, US Bank, The Independent Bankers Bank, Pacific Coast Bankers’ Bank, and JP Morgan Chase to purchase federal funds of up to $215.0 million, of which there were no advances or borrowings outstanding as of December 31, 2020.

Supervision and Regulation

We are subject to extensive legislation, regulation, and supervision under federal law and the law of Washington State, which are primarily intended to protect depositors and the FDIC, and not shareholders.

The Dodd-Frank Act established additional laws and regulations affecting banks and bank holding companies, including the establishment of the Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve.

The Consumer Financial Protection Bureau assumed responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements.

See “—Other Regulatory Developments—The Dodd-Frank Act” herein for a discussion of this legislation.

We are subject to extensive legislation, regulation, and supervision under federal law and the law of Washington State, which are both primarily intended to protect depositors and the FDIC, and not shareholders.

Additionally, the Consumer Financial Protection Bureau is responsible for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements.

Any change in applicable laws, regulations, or regulatory policies may have a material effect on our business, operations, and prospects.

We cannot predict the nature or the extent of the effects on our business and earnings that any fiscal or monetary policies or new Federal or State legislation may have in the future.

The following is a summary discussion of certain laws and regulations applicable to Heritage and Heritage Bank which is qualified in its entirety by reference to the actual laws and regulations.

The following is a summary discussion of certain laws and regulations applicable to the Company and the Bank which is qualified in its entirety by reference to the actual laws and regulations.

Heritage Financial Corporation

As a bank holding company registered with the Federal Reserve, we are subject to comprehensive regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended, and the regulations of the Federal Reserve.

This regulation and supervision is generally intended to ensure that we limit our activities to those allowed by law and that we operate in a safe and sound manner without endangering the financial health of Heritage Bank.

We are required to file annual and periodic reports with the Federal Reserve and provide additional information as the Federal Reserve may require.

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Some violations may also result in criminal penalties.

The Dodd Frank Act and Federal Reserve policy provides that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.

Federal Reserve policy provides that a bank holding company is required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner.

A bank holding company’s failure to meet its obligation to serve as a source of strength by providing financial assistance to a subsidiary bank in financial distress is generally considered by the Federal Reserve to be an unsafe and unsound banking practice or a violation of the Federal Reserve’s regulations or both.

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Under the prompt corrective action provisions of the Federal Deposit Insurance Act, a bank holding company with an undercapitalized subsidiary bank must guarantee, within limitations, the capital restoration plan that is required to be implemented for its undercapitalized subsidiary bank.

If an undercapitalized subsidiary bank fails to file an acceptable capital restoration plan or fails to implement an accepted plan, the Federal Reserve may, among other restrictions, prohibit the bank holding company or its undercapitalized subsidiary bank from paying any dividend or making any other form of capital distribution

without the prior approval of the Federal Reserve.

Federal Reserve policy also provides that a bank holding company may pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividend and a rate of earnings retention that is consistent with the company’s capital needs, asset quality and overall financial condition.

A bank holding company or bank that does not meet the capital conservation buffer requirement is subject to restrictions on the payment of dividends.

See “—Capital Adequacy” below.

Bank regulations also require bank holding companies and banks to maintain minimum capital ratios and capital conservation buffer.

For additional information, see “Capital Adequacy” below.

In addition, under Washington corporate law, a company generally may not pay dividends if, after that payment, the company would not be able to pay its liabilities as they become due in the usual course of business or its total assets would be less than its total liabilities.

We, and any subsidiaries which we may control, are considered “affiliates” of the Bank within the meaning of the Federal Reserve Act, and transactions between our bank subsidiary and affiliates are subject to numerous restrictions.

Any subsidiaries which we may control are considered “affiliates” of the Company within the meaning of the Federal Reserve Act, and transactions between affiliates are subject to numerous restrictions.

With some exceptions, we and our subsidiaries are prohibited from tying the provision of various products or services, such as extensions of credit, to other products or services offered by us, or our affiliates.

Bank regulations require bank holding companies and banks to maintain minimum capital ratios.

For additional information, see “—Capital Adequacy” below.

Heritage Bank

Heritage Bank is a Washington state-chartered commercial bank;

the deposits of which are insured by the FDIC.

Heritage Bank is subject to regulation by the FDIC and the DFI.

The Bank is a Washington state-chartered commercial bank, the deposits of which are insured by the FDIC, and is subject to regulation by the FDIC and the DFI.

Applicable Federal and State statutes and regulations which govern a bank’s operations relate to minimum capital requirements, required reserves against deposits, investments, loans, legal lending limits, mergers and consolidation, borrowings, issuance of securities, payment of dividends, establishment of branches, privacy, anti-money laundering and other aspects of its operations, among other things.

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These examinations must be conducted at least every 12 months.

The Bank pays dividends to Heritage.

The FDIC and the DFI also have the general authority to restrict capital distributions by the Bank, including dividends paid by the Bank to Heritage.

The Bank pays dividends to the Company.

The FDIC and the DFI also have the general authority to restrict capital distributions by the Bank, including dividends paid by the Bank to the Company.

Such restrictions are generally tied to the Bank’s capital levels after giving effect to such distributions.

For additional information regarding the restrictions on the payment of dividends, see ”—Capital Adequacy" below and Note (17) Stockholders' Equity of the Notes to Consolidated Financial Statements included in Item 8.

Financial Statements And Supplementary Data.

Capital Adequacy

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retained earnings;

accumulated other comprehensive income (loss), net unless an institution elects to exclude accumulated other comprehensive income (loss), net from regulatory capital;

AOCI unless an institution elects to exclude AOCI from regulatory capital;

and certain minority interests;

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Total capital is the sum of Tier 1 and Tier 2 capital.

In addition to the minimum common equity Tier 1, Tier 1, leverage ratio and total capital ratios, the Company and the Bank must maintain a capital conservation buffer consisting of additional common equity Tier 1 capital greater than 2.5% above the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

the required minimum risk-based capital levels in order to avoid limitations on paying dividends, repurchasing shares, and paying discretionary bonuses.

To be considered "well capitalized," a bank holding company must have, on a consolidated basis, a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based capital ratio of 10.0% or greater and must not be subject to an individual order, directive or agreement under which the Federal Reserve requires it to maintain a specific capital level.

To be considered “well capitalized,” a depository institution must have a common equity Tier 1 capital ratio of at least 6.5%, a leverage ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 8%, a total risk-based capital ratio of at least 10% and not be subject to an individualized order, directive or agreement under which its primary federal banking regulator requires it to maintain a specific capital level.

The FDIC has not imposed such a requirement on Heritage Bank.

The Company’s and the Bank's required and actual capital levels as of December 31, 2021 are listed in Note (21) Regulatory Capital Requirements of the Notes to Consolidated Financial Statements included in Item 8.

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The FDIC announced that the Deposit Insurance Fund ratio surpassed 1.35% as of September 30, 2018 which triggered two changes under the regulations:

surcharges on large banks (total consolidated assets of $10 billion or more) ended and small banks (total consolidated assets of less than $10 billion, which includes the Bank) were awarded assessment credits for the portion of their assessments that contributed to the growth in the Reserve Ratio from 1.15% to 1.35% to be applied when the reserve ratio is at least 1.35%.

The Bank was awarded $1.2 million in small bank assessment credits to be used in future periods as assessments were incurred as part of this action.

The Bank applied the small bank credits to its quarterly deposit insurance assessments (during any quarter the reserve ratio met the 1.35% minimum) in the amounts of $518,000 and $726,000 during the years ended December 31, 2020 and 2019, respectively.

the reserve ratio is at least 1.35%.

The Bank was awarded $1.2 million in small bank assessment credits of which $518,000 and $726,000 was applied against quarterly FDIC assessments during the years ended December 31, 2020 and 2019, respectively.

Other Regulatory Developments

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While the Economic Growth Act maintains most of the regulatory structure established by the Dodd-Frank Act, it amends certain aspects of the regulatory framework for small depository institutions with assets of less than $10 billion and for large banks with assets of more than $50 billion.

The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a Community Bank Leverage Ratio.

In addition, the Economic Growth Act includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures and risk weights for certain high-risk commercial real estate loans.

The FDIC introduced the final rule applicable to the Community Bank Leverage Ratio which became effective January 1, 2020.

The Economic Growth Act, among other matters, expands the definition of qualified mortgages which may be held by a financial institution and includes regulatory relief for community banks regarding regulatory examination cycles, call reports, the Volcker Rule (proprietary trading prohibitions), mortgage disclosures, risk weights for certain high-risk commercial real estate loans and simplifies the regulatory capital rules for financial institutions and their holding companies with total consolidated assets of less than $10 billion by instructing the federal banking regulators to establish a Community Bank Leverage Ratio, which became effective January 1, 2020.

The new ratio is an optional framework that is designed to reduce regulatory burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework starting in the first quarter of 2020.

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The leverage ratio required for purposes of the new framework is calculated as Tier 1 capital divided by average total consolidated assets, consistent with how banking organizations calculate their leverage ratio under the current rules.

The Company and the Bank did not opt into the Community Bank Leverage Ratio for the year ended December 31, 2020.

The FASB issued a new accounting standard that the Bank adopted on January 1, 2020.

As of December 31, 2021, the Company and the Bank had not elected to be subject to the Community Bank Leverage Ratio.

The FASB issued a new accounting standard the Bank adopted on January 1, 2020.

This standard, referred to as CECL, requires FDIC-insured institutions and their holding companies (banking organizations) to recognize credit losses expected over the life of certain financial assets.

CECL covers a broader range of assets than the current method of recognizing credit losses and generally results in earlier recognition of credit losses.

CECL covers a broader range of assets than the prior method of recognizing credit losses and generally results in earlier recognition of credit losses.

Upon adoption of CECL, a banking organization must record a one-time adjustment to its credit loss allowances as of the beginning of the fiscal year of adoption equal to the difference, if any, between the amount of credit loss allowances under the current methodology and the amount required under CECL.

For a banking organization, implementation of CECL is generally likely to reduce retained earnings, and to affect other items, in a manner that reduces its regulatory capital.

See discussion of CECL Adoption on January 1, 2020 in Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements of the Notes to Consolidated Financial Statements included in Item 8.

Financial Statements And Supplementary Data

The federal banking regulators (the Federal Reserve, the OCC and the FDIC) have adopted a rule that gives a banking organization the option to phase in over a three-year period the day-one adverse effects of CECL on its regulatory capital.

CARES Act and CA Act .

In response to the COVID-19 pandemic, Congress, through the enactment of the CARES Act and the CA Act and the federal banking agencies, through rulemaking, interpretive guidance and modifications to agency policies and procedures, have taken a series of actions to provide national emergency economic relief measures including, among others, the following:

• The CARES Act allows banks to elect to suspend requirements under GAAP for loan modifications related to the COVID-19 pandemic (for loans that were not more than 30 days past due as of December 31, 2019) that would otherwise be categorized as a TDR, including impairment for accounting purposes, until the earlier of 60 days after the termination date of the national emergency or December 31, 2020.

The CA Act extended the relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022 or 60 days after the end of the national emergency declared by the President, whichever is earlier.

The suspension of GAAP is applicable for the entire term of the modification.

The federal banking agencies also issued guidance to encourage banks to make loan modifications for borrowers affected by COVID-19 by providing that short-term modifications made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented;

and such loan is not a TDR.

The Bank is applying this guidance to qualifying COVID-19 Modifications.

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations—COVID-19 Impacts” for further information about the COVID Modifications completed by the Bank.

• The CARES Act amended the SBA’s loan program, in which the Bank participates, to create a guaranteed, unsecured loan program, the PPP, to fund payroll and operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

The SBA PPP loans are provided through participating financial institutions, such as the Bank, that process loan applications and service the loans and are eligible for SBA repayment and loan forgiveness if the borrower meets the PPP conditions.

The application period for a SBA PPP loan closed on August 8, 2020.

The SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders on October 2, 2020.

The CA Act renews and extends the PPP until March 31, 2021.

As a participating lender, the Bank began originating SBA PPP loans again starting in January 2021 and will continue to monitor legislative, regulatory, and supervisory developments related to the PPP.

Concurrent with enactment of the CARES Act, federal banking agencies issued an interim final rule that delays the estimated impact on regulatory capital resulting from the adoption of CECL.

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The changes in the final rule apply only to those banking organizations that elect the CECL transition relief provided under the rule.

The Company elected this option.

• Pursuant to the CARES Act, the federal banking agencies authorities adopted an interim rule, effective until the earlier of the termination of the coronavirus emergency declaration by the President and December 31, 2020, to (i) reduce the minimum Community Bank Leverage Ratio from 9% to 8% percent and (ii) give community banks two-quarter grace period to satisfy such ratio if such ratio falls out of compliance by no more than 1%.

As the on-going COVID-19 pandemic evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that Congress will enact supplementary COVID-19 response legislation.

The Company continues to assess the impact of the CARES Act, CA Act and other statues, regulations and supervisory guidance related to the COVID-19 pandemic.

The Company and the Bank elected this option.

See discussion of CECL Adoption in Note (1) Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements of the Notes to Consolidated Financial Statements included in Item 8.

Financial Statements And Supplementary Data

Website Access to Company Reports

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Particularly in times of high or rising interest rates, we also face significant competition for investors’ funds from short-term money market securities and other corporate and government securities.

We compete for loans principally through the range and quality of the services we provide, interest rates and loan fees, and robust delivery channels of our products and services.

We compete for loans principally through the range and quality of the services we provide, interest rates and loan fees, and robust delivery channels for our products and services.

We actively solicit deposit-related clients and compete for deposits by offering depositors a variety of savings accounts, checking accounts, cash management and other services.

Human Capital

As of December 31, 2020, Heritage Bank employed 804 full-time and 52 part-time employees across Washington and Oregon.

As of December 31, 2021, the Bank employed 727 full-time and 40 part-time employees across Washington and

None of these employees are represented by a collective bargaining agreement.

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Our Culture and Our People

Heritage's success depends on the success of its people.

As a result, Heritage is focused on enhancing employee empowerment through human capital and talent management.

The Company's success depends on the success of its people.

As a result, the Company is focused on enhancing employee empowerment through human capital and talent management.

Our strong culture was built upon adherence to a well-defined company mission and values, which aligns employees across all levels of the Company to a common goal and enables them to reach their full potential.

Heritage views its employees as our most important assets, which makes training and professional development a worthy investment.

We offer an array of learning opportunities through virtual and in-house courses via “Heritage Bank University”, as well as sponsoring courses through external providers, such as Ken Blanchard Companies, Washington Bankers Association, and the Pacific Coast Banking School.

Additionally, in 2020 we rolled out situational leadership training that focuses on communication and employee engagement.

The Company views its employees as our most important assets, which makes training and professional development a worthy investment.

We offer an array of learning opportunities through virtual and in-house courses via “Heritage Bank University”, as well as sponsoring courses through external providers, such as Ken Blanchard Company, Washington Bankers Association, Oregon Bankers Association and the Pacific Coast Banking School.

We sponsor situational leadership training for leaders that focuses on communication and employee engagement.

The Company strives to maintain an environment of open communication with access to senior management, which includes quarterly all-employee virtual meetings, as well as New Employee Orientation hosted by the Chief Executive Officer.

To further enhance our “listening culture” and foster open communications, in 2020 we introduced a pulse survey platform to provide employees with a chance to share feedback directly with leadership throughout the year, including internal communications and pandemic-related surveys.

Survey results were shared with executive leadership and drove action planning.

To further enhance our “listening culture” and foster open communications, we utilize a pulse survey platform to provide employees with a chance to share feedback directly with leadership throughout the year, including internal communications and COVID-19 Pandemic-related surveys.

Survey results are shared with executive leadership and drive action planning.

We also host Celebrate Great, an active internal peer recognition platform, where managers and employees post appreciation and recognition for co-workers and teams.

The Company celebrates “Employee Appreciation Days” in the spring and fall which includes prizes, games, employee recognition and in-person events hosted by executive management.

During 2021, the Puget Sound Business Journal recognized Heritage Bank as one of the Top 100 Best Workplaces in the Puget Sound.

In addition to vacation and sick leave, all employees receive at least eight hours of paid time each year specifically to use for volunteer activities of their choice in the communities where they live and work.

The safety, health and wellness of our employees is a top priority.

The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while continuing successful operations.

Taking that into account, we acted

quickly to implement the following measures commensurate with guidance issued by the Centers for Disease Control and state/local health authorities:

• Transitioned a significant portion (~40%) of our workforce to remote work arrangements.

• Most branch lobbies were closed to foot traffic except by appointment.

• Enforced social distancing, daily health screening, and mask-wearing protocols for onsite employees.

• Encouraged employees to stay home when they are experiencing COVID-19-like symptoms.

• Provided a supply of masks, hand sanitizer, and disinfecting agents to each location.

• Limited essential business travel to those situations where business cannot reasonably be conducted without face-to-face interaction or visits to specific locations.

• Launched a Parent Resource Community Board on the Company Intranet and partnered with a company that provides virtual enrichment courses for the children of our employees at a discounted rate.

• Provided up to 80 hours of paid time off to full-time employees for COVID-19 related absences, to use in lieu of sick or vacation time, for the employee's own illness, to care for an ill family member, due to a required self-isolation/quarantine, or school/day care closures.

Heritage continues to monitor the situation and makes additional accommodations as necessary.

The COVID-19 Pandemic has presented a unique challenge with regard to maintaining employee safety while continuing successful operations.

Currently, a portion of our employees are working remotely, however, substantially all employees are expected to return to their go-forward working environments during the three months ended March 31, 2022.

The Company continues to monitor the situation and will continue to implement measures commensurate with guidance issued by the Centers for Disease Control and state/local health authorities.

Diversity, Equity, and Inclusion

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We recognize that each employee's unique experiences, perspectives, and viewpoints add value to our ability to be the leading commercial community bank in the Pacific Northwest.

Heritage has a DEI plan, a Diversity Council and a DEI Officer who has been certified by the National Diversity Council.

The Council is made up of a diverse group of employees that acts on behalf of the Bank to promote the diversity and inclusion process.

The Council works closely with senior leaders to ensure DEI initiatives align with the Bank's overall strategic goals and initiatives.

Both our Chief Executive Officer and Senior Vice President Chief Human Resources Officer serve as Executive Sponsors to the DEI Council.

The Council is a critical driver in fostering organizational change, establishing a dedicated focus on diversity, equity, and inclusion priorities.

The primary role of the Council is to connect DEI activities to a broader, business-driven and results-oriented strategy.

The objectives of the Bank's DEI plan include:

The Company has a DEI plan, a Diversity Council and a DEI Officer who has been certified by the National Diversity Council.

The Company's Diversity Council is made up of a diverse group of employees that acts on behalf of the Company to promote the diversity and inclusion process and works closely with senior leaders to ensure DEI initiatives align with the Company's overall strategic goals and initiatives.

Both our Chief Executive Officer and Senior Vice President Chief Human Resources Officer serve as Executive Sponsors to the Company's Diversity Council.

The Company's Diversity Council is a critical driver in fostering organizational change, establishing a dedicated focus on diversity, equity, and inclusion priorities.

The primary role of the Company's Diversity Council is to connect DEI activities to a broader, business-driven and results-oriented strategy.

Executive management and the Company's board of directors have received instructor-led, custom DEI training.

In addition, all employees receive ongoing diversity training.

The objectives of the Company's DEI plan include:

• Workforce Diversity :

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Executive Officers

The following table sets forth certain information with respect to the executive officers of the Company at December 31, 2020.

The following table sets forth information with respect to executive officers of the Company at December 31, 2021:

Name Age as of

2021 Position Has Served

the Company or Heritage

Deuel 62 Chief Executive Officer of Heritage 2010

Hinson 59 Executive Vice President and Chief Financial Officer of Heritage and Heritage Bank 2005

Tony Chalfant 59 Executive Vice President and Chief Credit Officer of Heritage and Heritage Bank 2018

Bryan McDonald 49 Executive Vice President and Chief Operating Officer of Heritage and Heritage Bank 2014

the Company or Bank Since

Deuel 63 Chief Executive Officer of Heritage Financial Corporation and Heritage Bank 2010

Hinson 60 Executive Vice President and Chief Financial Officer of Heritage Financial Corporation and Heritage Bank 2005

Tony Chalfant 60 Executive Vice President and Chief Credit Officer of Heritage Financial Corporation and Heritage Bank 2018

Bryan McDonald 50 Executive Vice President of Heritage Financial Corporation and President and Chief Operating Officer of Heritage Bank 2014

Cindy Huntley 58 Executive Vice President and Chief Banking Officer of Heritage Bank 1988

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Deuel is the Chief Executive Officer of Heritage Bank and Heritage Financial Corporation.

He was previously promoted to President and Chief Executive Officer of Heritage Bank and President of Heritage Financial Corporation effective

July 2018 and then promoted to Chief Executive Officer of Heritage Financial Corporation effective July 2019.

Deuel was promoted to President and Chief Executive Officer of Heritage Bank and President of Heritage Financial Corporation effective July 2018 and then promoted to Chief Executive Officer of Heritage Financial Corporation effective July 2019.

Deuel was promoted to President and Chief Operating Officer of Heritage Bank and Executive Vice President of Heritage Financial Corporation in September 2012.

In November 2010, Mr.

Deuel was named Executive Vice President and Chief Operating Officer of Heritage Bank and Executive Vice President of the Company after joining Heritage Bank in February 2010 as Executive Vice President.

Deuel came to the Company with 28 years of banking experience and previously held the position of Executive Vice President Commercial Operations with JPMorgan Chase, formerly Washington Mutual.

Deuel was named Executive Vice President and Chief Operating Officer of Heritage Bank and Executive Vice President of the Company.

Deuel joined Heritage Bank in February 2010 as Executive Vice President.

Prior to joining Heritage, Mr.

Deuel held the position of Executive Vice President Commercial Operations with JPMorgan Chase, formerly Washington Mutual.

Prior to joining Washington Mutual, Mr.

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Prior to that, he served in the banking audit practice of local and national accounting firms of Knight, Vale and Gregory and RSM McGladrey from 1994 to 2005.

Hinson holds a Bachelor's degrees in Accounting from Central Washington University and in Psychology from Western Washington University and is a licensed Certified Public Accountant.

Tony Chalfant became Executive Vice President and Chief Credit Officer of Heritage and Heritage Bank in July 2020.

Hinson holds a Bachelor's degree in Accounting from Central Washington University and a Bachelor's degree in Psychology from Western Washington University.

Tony Chalfant became Executive Vice President and Chief Credit Officer of Heritage Financial Corporation and Heritage Bank in July 2020.

Previously, Mr.

Chalfant held the title of Senior Vice President and Deputy Chief Credit Officer of Heritage Bank since July 2019.

Prior to that, he served as a Regional Credit Officer since January 2018 when Heritage acquired Puget Sound Bank.

Chalfant served as the Chief Credit Officer for Puget Sound Bank for 13 years and prior to joining Puget Sound Bank had held commercial lending and leadership positions with U.S.

Prior to that, he served as a Regional Credit Officer since January 2018 when Heritage Bank acquired Puget Sound Bank.

Chalfant served as the Chief Credit Officer for Puget Sound Bank for 13 years.

Prior to joining Puget Sound Bank, Mr.

Chalfant held commercial lending and leadership positions with U.S.

Bank for 11 years.

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Chalfant obtained his Bachelor's degree in Finance and Economics from Washington State University and is a graduate of the Pacific Coast Banking School.

Bryan McDonald was appointed Executive Vice President and Chief Operating Officer of Heritage Bank in July of 2018.

McDonald became Executive Vice President and Chief Lending Officer of Heritage Bank upon completion of the Washington Banking Merger effective on May 1, 2014.

McDonald had previously served as President and Chief Executive Officer of Whidbey Island Bank since January 1, 2012.

McDonald joined Whidbey Island Bank in 2006 as Commercial Banking Manager and he served as Senior Vice President and Chief Operating Officer of Whidbey Island Bank from April 1, 2010 until his promotion to Executive Vice President on August 26, 2010.

McDonald has been serving in the banking industry since 1994, including regional commercial lending management roles with Washington Mutual and Peoples Bank.

McDonald holds a Bachelor's and Master’s Degree in Business Administration from Washington State University.

Bryan McDonald is the President and Chief Operating Officer of Heritage Bank.

McDonald was promoted to Executive Vice President and Chief Operating Officer of Heritage Bank effective July 1, 2018 and then promoted to President and Chief Operating Officer of Heritage Bank effective July 1, 2021.

McDonald was promoted to Executive Vice President and Chief Lending Officer as a result of the merger between Heritage Financial and Washington Banking Company effective May 1, 2014.

Previously, with Whidbey Island Bank he held the position of President and Chief Executive Officer of Whidbey Island Bank from January 2012 to May 2014.

He joined Whidbey Island Bank in 2006 as Commercial Banking Manager and was promoted to Chief Operating Officer in 2010.

McDonald has extensive managerial experience in various sales, credit, operations, commercial banking and residential real estate areas.

Before joining the team at Whidbey Island Bank, he was Snohomish and King County Business Group Manager where he was responsible for developing all aspects of Peoples Bank's commercial banking operation in King and Snohomish County.

Cindy Huntley was appointed Executive Vice President and Chief Banking Officer in September of 2019.

Cindy has been with Heritage Bank since 1988 and previously served as a Director of Retail Banking in 2006 and a Senior Vice President in 2004.

Cindy has been with Heritage Bank since 1988 and previously served as a Director of Retail Banking since 2006 and a Senior Vice President since 2004.

During her tenure with Heritage, Ms.

Huntley has held numerous positions including marketing, retail and executive support positions.

She holds a Bachelor's degree in Management from the University of Northern Colorado and graduated from the Pacific Coast Banking School.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business