Heritage Bank 2020 Community Investment Report

DOING GOOD IS PART OF OUR DNA. 2020 COMMUNITY INVESTMENT REPORT

2020 was a year for the books. No one could have imagined the change and upheaval we would experience—and we’re still not sure what the future holds. What we do know is that we’re doing everything we can to ensure our customers, employees and neighbors are cared for.

At the onset of the COVID-19 pandemic, we took swift action to protect the health and safety of our customers and employees. We transitioned nearly half of our employees to work remotely and limited in-person branch visits to appointment only. Our drive-ups became instrumental and essential in continuing to be able to serve our customers.

When the Coronavirus Aid, Relief and Economic Security (CARES) Act was passed on March 27, 2020, which included the Paycheck Protection Program (PPP), our bankers immediately stepped up to help their clients. At the conclusion of PPP on August 8, 2020, we had funded 4,642 PPP loans totaling $897.4 million. Our ability to get funds approved helped businesses retain their workers or rehire those who had been laid off.

Though, 2020 wasn’t just about a global health crisis. Social movements like Black Lives Matter brought renewed attention to equality issues. We recognized the importance of coming together as one to support the changes needed to improve our social structure. In this spirit, we accelerated the development of our Diversity, Equity and Inclusion plan, because we recognize the importance of coming together as one to support the changes needed to improve our social structure.

But while those are important words, more important are the actions we take as an organization to create real change. On the following pages, you’ll read about our continued support for the communities we serve; our commitment to environmental and social sustainability; our dedication to affordable housing; and the work we put in each day to help fuel economic prosperity and improve the lives of those around us for years to come.

Sincerely,

AWARDS

Ranked “Best Bank in Washington” by Newsweek Magazine “Best of the South Sound – Large Business” by South Sound Magazine

Jeff Deuel, President and CEO

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2020 Community Investment Report

“America’s Best Banks in Each State – #3” by Forbes “Top Corporate Philanthropists” by Puget Sound Business Journal

Our Mission Heritage Bank is committed to improving our communities by driving impact in the areas of:

Business & Economic Development

Education & Youth Environmental Development Stewardship

We will pursue all of our community work and support with a holistic focus on equity and inclusion. Our thriving company culture engages our employees and inspires them to serve our communities in the pursuit of positive change.

TYPES OF SUPPORT Sponsorships & donations Corporate match

Employee donations & volunteering

Health & Human Services

Social Equity

Social Responsibility

At Heritage, we place a high priority on operating in a responsible and respectful manner. We are committed to environmental and sustainability efforts, to our people, our customers and strengthening the communities and markets in which we operate our business. We use the Sustainability Accounting Standards Board Commercial Bank framework to identify specific areas of focus as well as industry guidance published by respected national and international organizations to identify risks and to further develop our Environmental, Social & Governance platform.

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Environment & Sustainability REDUCE, REUSE, RECYCLE We demonstrate environmental responsibility in various ways, including: Continually reducing our carbon footprint with the consolidation of facilities Using green janitorial products Replacing standard light bulbs with LED bulbs that have a longer life and use less energy Repurposing existing furniture whenever possible instead of buying new Recycling in most locations with a plan to implement recycling across our entire footprint STRATEGIC ENERGY MANAGEMENT PROGRAM In 2020, our Hillsboro location joined the Strategic Energy Management (SEM) Program offered through the Energy Trust of Oregon. The program provides tools and education that helps us track usage and energy savings. As a participant, we learn how our business uses energy and identify where waste is happening. We are excited for this opportunity to learn how to reduce our carbon footprint and expand to other Heritage locations in Washington and Oregon.

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2020 Community Investment Report

SUSTAINABLE PRACTICES

ECOCHALLENGE

We are focused on sustainability throughout our everyday business practices by:

From October 7-28, 2020, 20 employees participated in the People’s EcoChallenge.

They selected and created actions that aligned with their individual values and made a 21-day commitment to complete those actions. The actions could be done anywhere, any time— making it the perfect activity in a year where we stayed home more.

Using technology that provides for a paperless environment and transactional efficiencies eCycling old technology equipment (15 tons to date) to avoid filling landfills Energy-saving pilot program in partnership with Energy Trust of Oregon and SEM at our Hillsboro location Achieving a Gold Sustainability at Work Certification for the Portland office Having a management-led Green Team committee focused on bank-wide sustainability

Our team completed 351 actions.

622 pounds of CO2 saved 1,498 gallons of water saved 23 hours volunteered 56 miles not traveled by car 1,115 minutes spent outdoors 6 pounds of paper saved 3,439 minutes spent exercising 38 meatless or vegan meals consumed

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Our Culture & Our People Heritage’s success depends on the success of its people. As a result, we are focused on the following to enhance employee empowerment: Thorough human capital and talent management Compliance training offered through Heritage Bank University The awareness of diversity, equity and inclusion through a variety of educational opportunities Professional development opportunities, including the Ken Blanchard companies, Situational Leadership II program and Pacific Coast Banking School Leadership training that focuses on communication and employee engagement A collaborative culture that enables employees to reach their full potential A strong culture with mission and value statements Listening to our employees through various forms of communication, including a recent corporate culture survey and employee engagement survey Employee recognition through an online portal, Celebrate Great, and activities to show our appreciation Work-life balance, including telecommuting and virtual meetings Competitive pay and benefits Our management policies, systems and disclosures holding ourselves to high ethical standards 6

2020 Community Investment Report

We recognize and appreciate the importance of creating an environment where all employees feel valued, included and empowered to do their best work, and that each employee’s unique experiences, perspectives and viewpoints add value to our company.

We launched our Diversity, Equity and Inclusion (DEI) plan in 2019. It includes specific goals, strategies and actions to ensure our current practices of recruiting, hiring, promoting, educating and retaining a diverse workforce is a core value of who we are.

Part of the plan was to form a DEI Council that’s made up of a diverse group of employees who act on behalf of the bank to promote the diversity and inclusion process. The council is led by our CEO and DEI officer and will initially focus on the following three goals: 1. Workforce diversity – Recruit from a diverse, qualified group of potential applications to secure a highperforming workforce drawn from all segments of the communities we serve.

2. Workplace inclusion – Promote a culture that encourages collaboration, flexibility and fairness to enable individuals to contribute to their full potential.

3. Sustainability – Develop structures and strategies to equip leaders with the ability to manage diversity, be accountable, measure results, refine approaches on the basis of such data and foster a culture of inclusion.

We are committed to a culture of respect. We are defined by the combined life experiences of our team, and we are dedicated to fostering and cultivating an environment of diversity and inclusion. By celebrating and embracing our differences, we become stronger as an organization. We are then better able to support and represent the communities we serve.

- Jeff Deuel, President & CEO

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Our Customers & Our Communities We strive to improve our communities by driving positive economic growth for businesses and individuals of all income levels. We continuously demonstrate our commitment to our customers and the communities, as exemplified by the array of loan, deposit accounts and service options that we offer.

Digital banking services that are secure, cost-effective and sustainable: – Online banking

– Online bill pay

– Mobile banking

– Online statements

Deposit products, such as Fresh Start Checking, that provide our customers the opportunity to reestablish a positive checking account history Flexible mortgage lending options, such as RDA, FHA, VA and first-time homebuyer loans Flexible small business lending options: – In-house quick decision small business lending – Small Business Administration (SBA) lending (primarily 7(a) and 504 programs) Community development loans, investments and grants with a focus on: – Affordable housing and community services: Working with multiple stakeholders to maximize lending and tax credits to construct multi-family housing and wellness facilities for those most in need, such as struggling families, homeless youths, elders, disabled persons and veterans – Economic development: Partnering with the SBA for higher dollar small business lending – Revitalization and stabilization: Participating in the Main Street Tax Credit program and lending in opportunity zones Ensuring the privacy and security of customer information is a high priority

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2020 Community Investment Report

Heritage in the Community In September, Kim Carhee, loan operations manager, volunteered at the Food Lifeline Food Drive Parade.

They collected 661 pounds of food and raised $775 dollars, which equates to about 3,875 meals for families in need.

but last year looked a little different.

Instead, they held a fundraiser on-air through KXXO Mixx 96.1. Heritage pledged to match the first $2,500, which wasn’t hard to reach, with the event raising nearly $23,000! In tough times, it’s great to see our communities come together for those in need.

Our customer FASTSIGNS of OlympiaLacey created a thank-you sign as an appreciation for our employees and their work during the pandemic.

Due to the pandemic, the Skagit Habitat for Humanity was forced to temporarily close its doors.

Regardless, Heritage Bank was still able to donate tons of safes, file cabinets, bookcases, desks and more.

The Little Red Schoolhouse Project has been collecting and distributing school supplies to kids for over 25 years

Our sincerest appreciation goes out to Heritage Bank for this very generous donation—with a special shout out to Jim for organizing the donation in their warehouse, and Karen, facilities specialist, for arranging the donation. Heritage Bank, with branches throughout the Northwest, believes that ‘when banks and neighbors work together, great communities grow stronger.’ Clearly, they don’t just talk the talk, they walk the walk. Profits from the sale of their donated items will help Skagit Habitat for Humanity build local homes for local families right here in Skagit County, for which they have our heart-felt gratitude.

- Skagit Habitat for Humanity (Facebook post) HeritageBankNW.com

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Corporate Match Program Heritage Bank will match each employee’s donation dollarfor-dollar to the community organization of their choice, up to $100 each year.

In 2020, the bank matched $41,137 in employee donations through efforts such as these.

MATCH MADNESS For three weeks in March and November, employees’ donations were matched two to one. They donated to their favorite organizations or ones that may have been impacted by the pandemic.

– Employee Donations: $11,891 – Bank Match: $25,597 – Number of Employees: 132

UNITED WAY EMPLOYEE PLEDGE CAMPAIGN OCTOBER 21 – NOVEMBER 1

Our United Way Employee Pledge Campaign is a long-time tradition that started back when employees had to fill out a physical form and send it in. Today, our employees continue to give back in a big way, donating nearly $46,000 in 2020 to the local United Way chapters throughout Washington and Oregon.

– Goal: $45,000 – Employee Pledge: $45,402 – Bank Match: $15,000 – Number of Employees: 370

$60,000 $50,000

$40,000

Bank Match

$30,000

$30,000

$20,000

$20,000

$10,000

Employee Donations

$0

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$40,000

Heritage Helps 2020 Annual Report

$10,000 $0

Bank Match Employee Donations FUNDRAISING GOAL

Health & Human Services $507,004 Education & Youth Development $437,337 Business & Economic Development $317,007 Environmental Stewardship & Social Equity $190,300 Other $2,025

CORPORATE GIVING

$1,453,973 to 572 organizations including: – – – – – –

Evergreen Business Capital South Puget Sound Community College Thurston County Food Bank Mercy Corps Northwest Sea-Mar Community Health Centers United Way

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Large Grants BLACK UNITED FUND

UNITE OREGON

Heritage has committed $16,000 over two years to Black United Fund (BUF) to support their ongoing mission of assisting the social and economic development of Oregon’s low-income communities. BUF’s primary services include:

Heritage has committed $30,000 over three years to Unite Oregon in support of their East Portland Community Prosperity Initiative, which will address three objectives:

Mentor4Success, which helps students navigate the college enrollment process and identify opportunities for scholarships and other support.

Facilitating conversations about navigating high school, post-secondary and workplace experiences as a young adult of color; and exploring race and equity in our educational systems.

Awarding scholarships to low-income students and students of color (funded through workplace giving).

Providing grassroots grants (also funded through workplace giving) and mentoring opportunities to organizations increasing social and economic prosperity in underserved neighborhoods.

Heritage’s contribution will also support three new programs: Black United Fund Talks that will cover culturally specific content about career development Equity and Advocacy Workshops The launch of the Alumni Program to engage Black United Fund graduates

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2020 Community Investment Report

1. Create jobs and entrepreneurship opportunities for East Portland residents 2. Proactively address potential displacement as a result of development projects 3. Create an unprecedented, community-driven economic and cultural center—“International District”—in the heart of some of Portland’s most diverse neighborhoods Unite Oregon purchased a building that will serve as a catalyst for affordable housing and economic opportunity for people of color, low-income families, immigrants and refugees. Over the next few years, Unite Oregon will build and retain wealth for under-served communities, while revitalizing historically working-class neighborhoods to ensure a healthy and vibrant East Portland for all.

CHILDREN’S SAVINGS ACCOUNT PROGRAM TACOMA HOUSING AUTHORITY In 2017, Heritage Bank partnered with the Tacoma Housing Authority (THA) and committed $500,000 over seven years to support their Children’s Savings Account program. The program originally sponsored a group of students from Lister Elementary and First Creek Middle School. However, in 2020, the THA redesigned and expanded the program to make it available to all children in the Salishan community.

OTHER LARGE GRANTS Evergreen Business Capital $75,000 over three years Imagine Children’s Museum $30,000 over three years

About the program The program offers asset-building children’s savings accounts to help fund future goals. They can be started as early as birth and often pay for the child’s education after high school. Accounts typically start with an initial deposit and grow with the family’s deposits. Research shows that low-income children with these accounts are several times more likely to graduate from high school and college than their peers without these accounts.

Pierce College Foundation $50,000 over five years

Other key elements Family savings accounts through the Washington State 529 Guaranteed Education Tuition (GET) program

South Puget Sound Community College $95,000 over three years

Portland Homeless Family Solutions $30,000 over three years Saint Martin’s University $50,000 over five years

Families can earn dollars from THA by completing milestones through pathway planning and financial education

Lacey’s Food Bank $85,000 over three years

Access to the savings account contributions upon completion of the journey, high school and enrollment in a post-high school education or training program

Shelton YMCA $50,000 over five years

Access to financial literacy education and coaching

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COVID-19 Response PAYCHECK PROTECTION PROGRAM

AN ESTIMATED

The Paycheck Protection Program (PPP) is an SBA-backed loan that was created to provide relief for small businesses and their workers during the COVID-19 pandemic. As soon as the Coronavirus Aid, Relief and Economic Security (CARES) Act and PPP were passed on March 27, 2020, our bankers immediately stepped up to help their clients.

WERE IMPACTED

BY THESE LOANS

Our ability to get funds approved helped businesses retain their workers or rehire those who had been laid off, and many of these businesses have been open about how this program and the help of Heritage has saved their livelihood.

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AVERAGE LOAN SIZE ROUND 1: $193,000 ROUND 2: $172,000

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LOANS

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The program initially received $350 billion that was quickly exhausted after only two weeks. Funds were replenished for a second round in April. We were one of the only banks still accepting applications during all rounds of PPP funding, while many financial institutions were still working to get loans for businesses that had applied in the first round.

100,000+ JOBS

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While Eddyline Kayaks focused on pivoting their operations, Heritage Bank helped them navigate the financial challenges they faced. As a small business partner of Eddyline for the past three years, we helped with their recent ownership transition as well as the acquisition and renovation of their current building.

Our team reached out to Eddyline when the PPP was still in draft form to let them know about the upcoming opportunity, and we worked around the clock to help them through the application process.

Eddyline was approved within a day of submitting the application and funded within hours of getting approved. The PPP loan allowed Eddyline to keep their employees on the payroll and pivot to face shield production. “That was incredible. It was a lifeline,” says Scott Holley, president and co-owner.

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2020 Community Investment Report

HEALTH & SAFETY OF EMPLOYEES

Commercial banking officer Kathy Swift turned her craft room into her home branch, which is now called the “Swift Intergalactic Nonprofit Banking Commercial Center.” We love the creativity and positivity of our employees who ensure our customers are still taken care of from wherever they are.

The health and safety of our employees remains a top priority.

The COVID-19 pandemic presented a unique challenge with regard to maintaining employee safety while continuing to support our customers. Taking that into account, we acted quickly to implement the following measures as recommended by the Centers for Disease Control and state/local health authorities: Transitioned nearly 40% of our employees to remote work arrangements Most branch lobbies were closed to customers except by appointment Enforced social distancing, daily health screenings and required masks to be worn at all times Encouraged employees to stay home when sick

Ari Provencher in our digital services department made masks for co-workers who are in critical positions and need to service our branches and back offices. She took this upon herself because she cares about our company’s most valuable asset—our people.

Provided masks, hand sanitizer and disinfecting wipes to each location Limited essential business travel Launched a new internal parent resource community board through our intranet and partnered with a company that provides virtual enrichment courses for our employee’s children Provided additional sick time to full-time employees for COVID-19 related absences

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Affordable Housing With nearly half of all U.S. renters paying more than 30% of their income on housing, and nearly a third paying more than half, it’s becoming increasingly important to support the development and preservation of affordable living. Stable housing isn’t a luxury, it’s a necessity. It improves quality of life and is the foundation for better health, financial freedom, security and population diversity. Our teams are passionate about affordable housing because it’s an important need, and we want to improve the quality of our communities so they can thrive for years to come.

2ND & MERCER – SEATTLE, WA On January 13, 2020, Plymouth Housing celebrated the groundbreaking of an affordable housing development with 91 apartments for adults who have experienced chronic homelessness. This is the second site of eight new buildings planned by Plymouth Housing. Heritage Bank financed a $15,160,000 construction loan for the project.

CEDAR GROVE APARTMENTS – BEAVERTON, OR In the fall of 2020, Community Partners for Affordable Housing celebrated the opening of Cedar Grove, a four story building comprised of 44 apartments, with eight units set aside for homeless families. All units will be affordable for residents at 60% of Area Median Income or below. Cedar Grove is the first regulated affordable housing unit designated for homeless families in Beaverton. The building has an open community space as well as access to public transportation and a nearby park. Heritage Bank financed a $9,500,000 construction loan for the project.

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2020 Community Investment Report

ARLINGTON DRIVE YOUTH CAMPUS – TACOMA, WA On any given night, there are 90 or more unaccompanied youth or young adults who are homeless in Pierce County, so the Tacoma Housing Authority designed the Arlington Drive Youth Campus to serve them. The building was built next to its Salishan community and is comprised of two parts: a 12-bed crisis residential center for homeless youth, ages 12 to 17 years old, and 58 apartments for homeless young adults, ages 18 to 24 years old. The campus is in walking distance to schools, Metro Parks’ Eastside Community Center, a regional health clinic, public transportation and New Salishan. Heritage Bank financed a $11,800,000 construction loan for the project.

CHUCK AUSTIN PLACE – YAKIMA, WA The Yakima Housing Authority began construction in July 2020 on Chuck Austin Place, a $17 million project that will include 41 affordable housing apartments for veterans, a dental clinic and other support services. It’s anticipated to be complete in August 2021. The center’s name honors local veteran Chuck Austin who joined the Marines in 1943 when he was just 17 and served in World War II, the Korean War and the Vietnam war. Heritage Bank financed a $7,700,000 construction loan for the project.

Image courtesy of Edison Creative Group

Opposite page: (top) Rendering of 2nd & Mercer, Plymouth Housing; (bottom) Rendering of Arlington Drive Youth Campus (Construction progress on one of the buildings in Yakima Housing Authority’s Chuck Austin Place.

OTHER AFFORDABLE HOUSING PROJECTS Willowcrest Townhomes, Renton, WA Homestead Community Land Trust – 12 homes available for purchase by low-income families – $3,115,000 construction loan Village Gardens, Seattle, WA Homestead Community Land Trust – 10 homes available for purchase by low-income families – $5,759,000 construction loan Hillside Terrace, Tacoma, WA Tacoma Housing Authority – 64 apartments for low-income families, with units set aside for the homeless and people with disabilities – $14,875,000 construction loan

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HERITAGE VOLUNTEERS

In 2020, 91 Heritage employees donated 1,768 hours to 125 organizations to complete 768 acts of service within our local communities.

The organizations we donated the most hours to included local food banks and:

Club of Portland Charitable Trust

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2020 Community Investment Report

Our employees who volunteered the most hours included: Carmen Goers – 137.5 hours Daryl Fourtner – 113 hours Tamara Brown – 107 hours

Business & Economic Development 370 hours

Education & Youth Development 530 hours

Health & Human Services 573 hours

Environmental Stewardship & Social Equity 294 hours

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Heritage Bank believes in the possibilities for each and every person—and the power of community to improve the lives of those around us.

Learn more about our commitment to community at HeritageBankNW.com/community

CONNECT WITH US 800.455.6126

Support@HeritageBankNW.com HeritageBankNW.com

Equal Housing Lender | Member FDIC

When neighbors help neighbors, the whole community benefits.

And that’s true prosperity.