EXHIBIT 8.2

                               October 28, 1997



Board of Directors
Heritage Savings Bank
201 5th Avenue S.W.
Olympia, WA  98501

Dear Sirs:

You have asked for our opinion regarding the Washington State tax consequences
in connection with (i) the proposed conversion of Heritage Financial
Corporation, MHC, a Washington state chartered mutual holding company (the
"Mutual Holding Company" or "MHC"), from mutual to stock form by means of a
conversion to stock form ("Interim Bank A") and simultaneous merger with and
into Heritage Savings Bank, a Washington state chartered stock savings bank
("Bank"), and (ii) the acquisition of Bank by Heritage Financial Corporation, a
Washington state chartered stock corporation ("Holding Company"), by means of
the merger of Bank with a Washington chartered interim stock bank ("Interim Bank
B"), which will be organized as a wholly-owned subsidiary of the Holding
Company.

Except as defined herein all capitalized terms have the same meaning as in the
Plan of Conversion adopted by the Board of Directors of MHC and the Bank on July
1, 1997 as amended ("Plan of Conversion").

FACTS

For purposes of our opinion, we have relied upon the terms of the Plan of
Conversion, the opinions rendered in the federal income tax opinion prepared by
the certified public accounting offices of KPMG Peat Marwick LLP dated October
27, 1997, relating to the above described transactions under the Internal
Revenue Code of 1986 (the "Code") and the facts and assumptions set forth in the
Affidavit of management delivered to KPMG Peat Marwick in connection with the
federal tax opinion (the "Affidavit").

It is the opinion of KPMG Peat Marwick LLP that, for federal income tax
purposes: (1) the conversion of the Mutual Holding Company from mutual to stock
form as

 
October 28, 1997
Page 2

Interim Bank A should qualify as a reorganization within the meaning of
(S)368(a)(1)(F) of the Code and the simultaneous merger of Interim Bank A with
and into the Bank, with the Bank being the surviving institution, should qualify
as a reorganization within the meaning of Section 368(a)(1)(A) of the Code; (2)
no gain or loss will be recognized by Interim Bank A upon its merger, with and
into the Bank; (3) no gain or loss will be recognized by the Bank upon the
receipt of the assets of Interim Bank A in such merger; (4) the merger of
Interim Bank B, with and into Bank, will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code; (5) no gain or loss will be
recognized by Interim Bank B upon the transfer of its assets to the Bank; (6) no
gain or loss will be recognized by the Bank upon the receipt of the assets of
Interim Bank B; (7) no gain or loss will be recognized by Holding Company upon
the sale of its shares of common stock to investors; (8) no gain or loss will be
recognized by the Bank existing stockholders other than the MHC upon their
receipt of Holding Company stock; (9) the Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members will recognize gain, if any, upon the
issuance to them of (i) withdrawable savings accounts in the Bank following the
Conversion, (ii) Bank Liquidation Interest and (iii) nontransferable
Subscription Rights to purchase Holding Company common stock, but only to the
extent of the value, if any, of the Subscription Rights; and (10) the tax basis
to the holders of common stock purchased in the Offering will be the amount paid
therefor, and the holding period for such shares will begin on the date of
consummation of the Offerings if purchased through the exercise of Subscription
Rights.

OPINION

Based on the terms of the Plan of Conversion, the facts and assumptions set
forth in the Affidavit and the opinions rendered in the KPMG Peat Marwick LLP
opinion letter, all of which are incorporated herein by reference, and our
review and analysis of Washington State tax law, it is our opinion that if the
transaction is undertaken in accordance with the Plan of Conversion, the
following should be the result for Washington State business and occupation,
sales and use, and excise tax purposes:

1.   No Washington business and occupation, sales or use taxes should be
     incurred by either the Bank or its Eligible Account Holders, Supplemental
     Eligible Account Holders or Other Members as a result of the implementation
     of the Plan of Conversion.

2.   No Washington State real estate excise tax should be imposed in connection
     with the transaction.

 
October 28, 1997
Page 3

ANALYSIS

WAC 458-20-106 (Rule 106) provides that the business and occupation tax does not
apply to casual and isolated sales.  Rule 106 specifically provides under the
heading of "Retail Sales Tax," "a transfer of capital assets to or by a business
is deemed not taxable to the extent the transfer is accomplished through an
adjustment of the beneficial interest in the business."  The Department of
Revenue has previously held that this provision applies to the business and
occupation tax as well as the retail sales tax.  Det. No. 87-22,WTD 259 (1987).
Rule 106 contains six separate examples of instances when sales tax will not
apply, including:  transfers of capital assets pursuant to a reorganization
under 26 U.S.C. Section 368 (Internal Revenue Code, Section 368).

The Use Tax is also not applicable.  WAC 453-20-106 states:

     Where there has been transfer of the capital assets to or by a business,
     the use of such property is not deemed taxable to the extent the transfer
     was accomplished through an adjustment of the beneficial interest in the
     business, provided, the transferor previously paid sales or use tax on the
     property transferred.  (See the exempt situations listed under the retail
     sales tax subdivision of this rule.)

The State of Washington imposes an excise tax on real estate sales.  The term
"sale" includes the transfer or acquisition for valuable consideration within
any twelve-month period of a controlling interest in any entity that holds an
interest in real property located in Washington.  All acquisitions by persons
acting in concert are aggregated for purposes of determining whether a transfer
or acquisition of a controlling interest has taken place.  The term "sale,"
however, specifically excludes certain transactions including:

     (o) A transfer that for federal income tax purposes does not involve the
     recognition of gain or loss for entity formation, liquidation or
     dissolution, and reorganization, including but not limited to
     nonrecognition of gain or loss because of application of Section 332, 337,
     351, 368(a)(1), 721, or 731 of the Internal Revenue Code of 1986, as
     amended (RCW 82.45.010(3)(o)).

Based on KPMG Peat Marwick's opinion that the Conversion from a mutual to a
stock holding company format involves transactions that qualify under Section
368(a)(1) of the Code, the transaction should fall within the statutory
exemptions and the real estate excise tax should not be imposed on the Bank.

 
October 28, 1997
Page 4

ASSUMPTIONS AND LIMITATIONS

Our opinion is based solely upon:

     The representations, information, documents, and facts ("representations")
     referred to in this letter.

     Our assumption (without independent verification or review) that all of the
     representations and all of the original, copies, and signatures of
     documents are accurate, true and authentic.

     Our assumption (without independent verification or review) that there will
     be timely execution and delivery of, and performance as required by the
     representations and documents.

     Our assumption (without independent verification or review) that all
     documents pertaining to the proposed transaction and provided for our
     review are accurate, true and authentic.

Our opinion is limited to those expressed above and we express no opinion with
regard to any sections of Washington state law other than those referred to
above.  We express no opinion with regard to taxation of the proposed
transaction described herein under the laws of any other state or local
jurisdiction.  We express the opinions contained herein as on the date of this
letter only.

No opinion is expressed as to the federal income tax treatment of the
transaction as covered by the KPMG Peat Marwick LLP opinion letter or to the tax
treatment for Washington tax purposes of any existing conditions or effects of
the transaction which are not specifically set forth in the KPMG Peat Marwick
LLP opinion or in our opinion above.

This opinion letter is solely for your information and inclusion in Form S-1 as
filed with the Securities and Exchange Commission, in the Application for
Approval of Conversion filed with the Washington Department of Financial
Institutions and the Federal Deposit Insurance Corporation, and as incorporated
by reference into the Application to the Board of Governors of the Federal
Reserve System on Form F.R.Y-3 with regard to the transaction described herein.
Other than the uses indicated in the

 
October 28, 1997
Page 5

preceding sentence, our opinion may not be relied upon, distributed, or
disclosed by anyone without our prior written consent.

                         Very truly yours,

                         GORDON, THOMAS, HONEYWELL,
                         MALANCA, PETERSON & DAHEIM, P.L.L.C.

                         /S/ J. JAMES GALLAGHER