A $40 million merger between two Washington State banks has collapsed after a 23% drop in the acquirer's stock price.

Heritage Financial Corp., Olympia, announced in August that it would buy Harbor Bancorp in Aberdeen for about $155 per share. At the time, Heritage stock was trading at about $13 per share.

But the two companies called off the deal last week because Heritage's stock price had slid.

Heritage, with $418 million of assets, had been seeking to buy $130 million-asset Harbor to strengthen its presence in the South Puget Sound area.

Donald V. Rhodes, Heritage's chairman, president, and chief executive officer, said the decision to scrap the deal would have no impact on his company's pending transaction with Washington Independent Bancshares in Toppenish.

- Matt Andrejczak

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