Heritage Financial (HFWA) in Olympia, Wash., has agreed to buy Washington Banking (WBCO) in Oak Harbor.

Heritage will pay about $265 million in cash and stock for Washington Banking, the companies said Wednesday. The price values Washington Banking at about $16.89, or an 18% premium to the $1.6 billion-asset company's Wednesday closing share price of $14.25.

The acquisition would more than double Heritage's assets. It will have about $3.3 billion in assets, $2.9 billion in deposits, $2.3 billion in loans and 73 branches in Washington and Oregon. The companies expect to complete the transaction in the first half of next year.

Heritage Chief Executive Brian Vance would remain CEO; Washington Banking CEO Jack Wagner would serve as a special assistant. The board would include eight Heritage directors and seven Washington Banking directors.

"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," Vance said in a press release. "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."

D.A. Davidson advised Heritage; Sandler O'Neill advised Washington Banking.

Heritage agreed to buy Valley Community Bancshares in Puyallup, Wash., in March.

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