Shareholder Announcements

Annual Shareholders Meeting

May 7, 2015

Heritage Bank Main Branch, 2330 S. Virginia St. Reno

Message to Shareholders

Looking back on 2014, I am pleased to say it was another great year for Heritage Bancorp and our subsidiary Heritage Bank of Nevada. We completed the move of our corporate headquarters and main branch to the 23,500 square foot three story building located at 2330 South Virginia Street in Reno. The renovation of the new building inside and out was completed and reflects the beauty of the Northern Nevada and Tahoe areas.

Our customers were pleased with the smooth transition to the new location as we maintained uninterrupted service levels, and celebrated the move with a series of Grand Opening events. Adding to the success of the move was the sale of the previous headquarters building at 1401 South Virginia Street.

2014 proved to be another year of record profit. We continue to manage overhead far below our peers, maintaining an efficiency ratio of 45% as compared to our peers at 67%.  As a result, we were able to increase profitability by 38% from $4.98 a share to $6.86 a share. Those earnings were accomplished while continuing to maintain a 2.20% allowance for future loses to total loans at year end 2014, well above the peer level of 1.45%.

Total deposits grew 5% from $468 million at year end 2013 to $491 million at year end 2014, with growth largely in core deposits.  Our loan growth was exceptionally good as the gross loan portfolio grew 10% from $380 million outstanding year end 2013 to $419 million year end 2014.  

Heritage Bank continues to excel in providing SBA and other government guaranteed loan programs in Northern Nevada.  We have helped numerous Nevada families and small business owners achieve their goals and dreams through use of these programs. During fiscal 2014, we were named the #1 SBA 504 lender in Nevada., fas the largest processor of SBA 504 loans in the state. Funding 12 projects totaling $6,808,548.for Northern Nevada This funding enabled business owners to acquire their own buildings with minimal capital outlay.that needed financing to expand, purchase their own building or purchase equipment. In addition, we funded several SBA 7a and loans totaling $2,790,000.

We continue to improve our systems and service levels by incorporating the latest in technological advancements. This year we again increased our focus on security issues with few fraud problems occurring. In addition, we developed and introduced our very own Heritage Bank branded Mobile Banking App for our iPhone and Android users. Customers can access the website and their accounts and set upsetting alerts on their mobile devices to help them with fraud detection and prevention.

In 2006, Heritage Bancorp started a stock buy back program enabling us to provide liquidity for our shareholders. We continued the program in 2014 and to-date we have purchased 408,232 shares or about 25% of issued shares using $10,378,155 in of excess capital. With our current capital levels exceeding regulatory requirements, we anticipate continuing the buy back program during 2015.

In 2015, we are proudly celebrating our 20 year anniversary. Heritage Bank continues to be the only bank headquartered in Northern Nevada and the second largest state-chartered bank in the entire state. We are the largest community bank owned and operated in Nevada. We have local decision making, a feature our area customers appreciate. During 2015, we plan to continue to build on our community banking position and our 20-year history in Northern Nevada.

We are optimistic about 2015 as Heritage Bank of Nevada is well positioned to increase profitability during the year. We expect the national economy as well as the Northern Nevada economy to continue to improve. As always we remain focused on providing an outstanding customer service experience for our customers and a work environment in which our employees can be proud. We appreciate our team of employees, our customers, our stockholders, and our Board of Directors who continue to support the goals of Heritage Bancorp and our affiliate Heritage Bank of Nevada.