HERITAGE FINANCIAL CORP /WA/

Equity-based compensation is intended to more closely align the financial interests of our executives with those of our shareholders in the creation of long-term shareholder value, and to assist in the retention of key executives. Equity awards are granted using a mix of service-based and performance-based vesting awards. Performance-based awards are linked to the achievement of pre-defined performance goals relative to a pre-defined peer group. The Compensation Committee reviews and approves or disapproves the equity-based compensation recommendations from management, and the equity-based compensation awards are ultimately discretionary.

The Heritage Financial Corporation 2023 Omnibus Equity Plan allows for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, restricted performance stock, unrestricted stock and performance unit awards to directors, officers and other employees of Heritage and its subsidiaries.

Heritage provides the NEOs with target award opportunities expressed as a percentage of salary, as described in the table below. Each NEO's target opportunity is based upon factors such as the executive's role and scope of responsibilities. If an NEO did not meet the performance goals under the MIP for the prior year, the officer may also receive a reduced equity award or no award. Additionally, each NEO is required to maintain a satisfactory performance rating to receive an equity award. The Compensation Committee also may make discretionary grants of equity awards, based on factors relating primarily to the responsibilities of individual executives, their expected future contributions to Heritage and the recruitment and development of new officers.