Heritage to announce new branch openings

OLYMPIA - Heritage Bank, which expects to open two more bank branches in South Sound, could announce one of those locations as early as today, the president and chief executive of the company said Wednesday.

If so, it will cap a busy week for the Olympia-based bank, which acquired Cowlitz Bank of Longview last Friday and reported a company-wide $523,000 second-quarter profit Monday.

The company has received approval from the Federal Deposit Insurance Corp. to announce one of the new bank branch locations, but it still must wait for approval from the state Department of Financial Institutions, President and Chief Executive Brian Vance said.

In the meantime, the bank remains busy with its Cowlitz Bank transition, he said. All nine of the Cowlitz bank branches, which includes a division called Bay Bank, reopened as Heritage Bank branches Monday. Bay Bank had branches in Seattle, Vancouver, Bellevue and Portland.

“It really was business as usual,” he said about the Monday morning change to Heritage Bank.

Still to be determined is how many of Cowlitz’s 105 employees will remain with Heritage. Vance acknowledged there is some duplication of positions and that the company won’t be keeping everyone, he said. Cowlitz Bank President and Chief Executive Richard Fitzpatrick and the chief financial officer were let go Friday evening, he said.

Vance said the Cowlitz bank acquisition makes sense for Heritage because Cowlitz was the market-share leader in Cowlitz County, and Heritage now has access to larger markets in Portland and Seattle.

“That’s the opportunity we see, to build the branches up” in those markets, Vance said.

D.A. Davidson senior research analyst Jeff Rulis, who tracks the company’s stock, praised the deal Wednesday. He said the company finally put some of its capital to work and acquired a network of branches that gives it a nice “contiguous fit” for the bank’s existing footprint, he said.

At the same time, the transition costs associated with acquiring Cowlitz likely will affect Heritage Financial Corp.’s earnings in the near term, but it is a positive move for the company in the long term, Rulis said. Heritage Financial Corp. owns Heritage Bank.

Based on a change to near-term earnings, Rulis has lowered his price target on the stock over the next 12 to 18 months to $18 from $19. He still has a buy rating on the stock, which trades under the ticker symbol HFWA, and expects the company to remain profitable. On Monday, Heritage Financial announced an $855,000 profit in the second-quarter of the year, although that fell to $523,000 after the payment of preferred dividends to the U.S. Treasury. The federal government invested $24 million into the company as part of the Troubled Asset Relief Program. Rulis expects Heritage to repay the TARP money at the end of the year.

Rolf Boone: 360-754-5403