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Heritage Financial and Washington Banking Co. to Merge

 

Oct 24 - Heritage Financial Corp. (Nasdaq: HFWA) and Washington Banking Company (Nasdaq: WBCO) have jointly announced the signing of a definitive agreement under which Heritage  and Washington Banking will enter into a strategic merger to create one of the premier community banking franchises in Western Washington and the Pacific Northwest.

Based on financial results as of Sept. 30, 2013, the combined company will have approximately $3.3 billion in total assets, $2.9 billion in total deposits and $2.3 billion in total loans with 73 branch locations across Washington and Oregon from Bellingham, Wash., to Portland, Ore. On a pro forma basis, the combined company will rank 11th in deposit market share in Washington and be ranked 3rd in deposit market share among banks headquartered in Washington within the combined company's footprint. The combination will result in one of the largest bank mergers between two in-state Washington banks with a transaction valued at approximately $265.1 million.

"I am pleased to announce the combination of these two quality Washington community banks," said Brian Vance, president and CEO of Heritage Financial Corp. "Our respective organizations share a similar culture and approach to community banking which we believe will provide enhanced opportunities for the combined company to better serve our customers and communities and provide a rewarding experience for our employees. We welcome the Washington Banking employees and are honored to work with them as partners going forward." Vance continued, "Together we will be positioned to realize important synergies and be better positioned to benefit from future growth opportunities and generate enhanced financial performance for our shareholders."

Jack Wagner, president and CEO of Washington Banking Co., added, "We are very excited about this partnership between two of Western Washington's strongest community banks and we believe the combined company is better positioned for continued growth and success within our respective markets. The contiguous branch footprints along the I-5 corridor and complementary business models make this combination a natural fit."

Under the terms of the merger agreement, Washington Banking shareholders will receive 0.89000 shares of Heritage common stock and $2.75 in cash for each share of Washington Banking common stock. Based on the closing price of Heritage common stock of $15.89 on Oct. 23, 2013, the consideration value per share for Washington Banking was $16.89, or approximately $265.1 million in aggregate. On consummation, the shareholders of Washington Banking will own approximately 46 percent of the combined company and the shareholders of Heritage will own approximately 54 percent.

The leadership team of the combined company will be comprised of executives from both organizations. Brian Vance will serve as CEO with Jeff Deuel, Dave Spurling and Don Hinson from Heritage along with Bryan McDonald, Ed Eng, and Lynn Garrison from Washington Banking. Jack Wagner, current CEO of Washington Banking, will serve as a special advisor to the combined company. Additionally, the board of directors will be comprised of eight directors from Heritage and seven directors from Washington Banking. Tony Pickering, current chairman of Washington Banking will become chairman of the combined company at closing with Brian Charneski from Heritage serving as vice chairman. 

Washington Banking branches will adopt the Heritage Bank name in all markets, with the exception of six branches in Whidbey Island markets which will continue to operate using the Whidbey Island Bank name. The corporate headquarters of the combined company will be in Olympia, Wash.

The merger is expected to be significantly accretive to the combined company's earnings per share in 2014 and thereafter, excluding one-time deal related expenses. Further, it is anticipated that the combined company's capital ratios will be well in excess of regulatory minimums and its tangible common equity ratio will be in excess of 9 percent. 

The definitive agreement has been unanimously approved by the boards of directors of Heritage and Washington Banking. The merger is subject to regulatory approvals, approval by Heritage and Washington Banking shareholders, and certain other customary closing conditions and is expected to close in the first half of 2014. The transaction is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes and Washington Banking shareholders are not expected to recognize any taxable gain or loss in connection with the share exchange to the extent of the stock consideration received.

D.A. Davidson & Co. served as financial advisor and provided a fairness opinion to Heritage, and Breyer & Associates PC and Silver, Freedman & Taff, L.L.P. served as legal counsel to Heritage. Sandler O'Neill + Partners, L.P. served as financial advisor and provided a fairness opinion to Washington Banking, and Lane Powell PC served as legal counsel to Washington Banking.

About Heritage Financial Corp.
Heritage Financial Corp. is a bank holding company in Olympia, Wash.,, that operates Heritage Bank, a full-service commercial bank which was founded in 1927. Following two FDIC-assisted transactions, the acquisitions of Northwest Commercial Bank, the Central Valley Bank merger and the merger with Valley Bank, Heritage Bank now has 42 banking offices in Washington and Oregon. Heritage Bank does business under the Central Valley Bank name in the Yakima and Kittitas counties of Washington. Heritage's stock is traded on the Nasdaq Global Select Market under the symbol "HFWA." More information about Heritage can be found on its website at www.hf-wa.com and more information about Heritage Bank can be found on its website at www.heritagebanknw.com.

About Washington Banking Co.
Washington Banking Co. is a bank holding company based in Oak Harbor, Wash., that operates Whidbey Island Bank, a state-chartered full-service commercial bank. Founded in 1961, Whidbey Island Bank provides various deposit, loan and investment services to meet customers' financial needs. With its two FDIC-assisted acquisitions in 2010, Whidbey Island Bank currently operates 31 full-service branches located in six counties in Northwestern Washington. In 2009, Washington Banking was added to the Russell 2000 Index, a subset of the Russell 3000 Index.

 


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