Heritage Financial Corp., the holding company for Heritage Bank, and Olympic Bancorp Inc., the holding company for Kitsap Bank, jointly announced the signing of a definitive agreement under which Heritage will acquire Olympic in an all-stock transaction.
Kitsap Bank, established in 1908, is a privately owned community bank headquartered in Port Orchard with 17 banking offices and $1.7 billion in total assets, $941.6 million in total loans and $1.4 billion in total deposits as of June 30, 2025. On a combined basis following the transaction, Heritage will have total assets of approximately $8.8 billion, total loans of approximately $5.7 billion and total deposits of approximately $7.2 billion.
Highlights of the Announced Transaction
•Expected to meaningfully enhance Heritage’s pro forma financial metrics, improving profitability and efficiency ratios while also improving balance sheet liquidity.
•Natural geographic extension builds density and scale in the combined market footprint. After closing the transaction, Heritage will be the second largest community bank serving the Kitsap and Olympic Peninsulas with approximately 14% combined deposit market share.
•Heritage expects to realize approximately 18% earnings per share accretion following full realization of operating efficiencies.
“Kitsap Bank is one of the longest tenured banks in Washington state, and we have deep respect for the banking institution they have built over the last 117 years,” said Bryan McDonald, President and Chief Executive Officer of Heritage and Heritage Bank. “Their relationship banking strategy has created an exceptionally high-quality, low-cost core deposit franchise. This combination with Heritage will create a more robust banking platform for communities across the Puget Sound region.”
Steve Politakis, Chief Executive Officer of Olympic and Kitsap Bank, added, “We are proud of the team we have assembled and the organization we have built together. Kitsap Bank has always operated with a community-first mindset, building strong, trust-based relationships with our clients and the markets we serve. Going forward, we are excited for our customers, bankers, and shareholders to experience our next chapter as we join Heritage Bank. The combination of our two organizations provides the scale and capabilities of a larger bank while maintaining the high-touch community bank approach our customers have come to expect. We believe the like-minded culture at Heritage and manner in which they operate will create significant benefits for all stakeholders.”
McDonald continued, “We welcome the employees and customers of Kitsap Bank to Heritage Bank, and we look forward to our combined success. Further, we plan to continue operating with the Kitsap Bank name in certain markets on the Kitsap and Olympic peninsulas.”
Under the terms of the merger agreement, Olympic shareholders will receive 45.0 shares of Heritage common stock for each share of Olympic common stock based on a fixed exchange ratio. Based on the closing price of Heritage common stock of $24.64 on Sept. 24, 2025, the implied total deal value is approximately $176.6 million. The value of the merger consideration will fluctuate until closing based on the value of Heritage’s stock price. Upon consummation, the shareholders of Olympic will own approximately 17.4% of the combined company.
The merger agreement has been unanimously approved by the boards of directors of Heritage and Olympic. The merger is subject to regulatory approvals, approval by Olympic and Heritage shareholders, and certain other customary closing conditions and is expected to close in the first quarter of 2026. All of the respective members of the boards of directors of Heritage and Olympic have agreed to vote their shares in favor of the merger.