OLYMPIA, Wash. and OAK HARBOR, Wash., Oct. 23, 2013 /PRNewswire/ -- Heritage Financial Corporation ("Heritage") (NASDAQ: HFWA) and Washington Banking Company ("Washington Banking") (NASDAQ: WBCO) jointly announced today 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 September 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, Washington to Portland, Oregon. On a pro forma basis, the combined company will rank 11 th in deposit market share in Washington and be ranked 3 rd 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 Chief Executive Officer of Heritage Financial Corporation. "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." Mr. 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 Chief Executive Officer of Washington Banking Company, 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 October 23, 2013, the consideration value per share for Washington Banking was $16.89, or approximately $265.1 million in aggregate. Upon consummation, the shareholders of Washington Banking will own approximately 46% of the combined company and the shareholders of Heritage will own approximately 54%. The leadership team of the combined company will be comprised of executives from both organizations. Brian Vance will serve as Chief Executive Officer 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 Chief Executive Officer 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, Washington. 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%.