Washington Federal in Seattle has agreed to buy Luther Burbank in Santa Rosa, Calif.
The $20.8 billion-asset Washington Federal said in a press release Monday that it will pay $654 million in stock for the $7.9 billion-asset parent of Luther Burbank Savings. The deal, which is expected to close as early as the second quarter, priced Luther Burbank at 97% of its tangible book value.
The move will allow Washington Federal to enter California. Luther Burbank has 11 branches, seven loan-production offices, $6.9 billion of loans and $5.8 billion of deposits.
“One thing I have learned is that you do not find the right deal – the right deal finds you,” Brent Beardall, Washington Federal’s president and CEO, said in the release.
The acquisition “checks all the boxes. It creates scale. It creates a contiguous footprint from Seattle to Austin,” Beardall added. “The near-term positive impact to our financial position and physical footprints are bonuses, not our objective. Our objective is long-term value creation, which only happens if there is a harmony of people, values and culture, which we believe to be the case in this strategic transaction.”
As part of the transaction, Washington Federal will commit $1 million to support communities in Luther Burbank’s California footprint. The company said it has no plans to close any of Luther Burbank’s branches.
The deal is expected to be 7.9% accretive to Washington Federal’s 2024 earnings per share. It is also expected to be immediately accretive to Washington Federal’s tangible book value.
Washington Federal expects to incur $37 million of merger-related expenses. It plans to cut about 25% of Luther Burbank’s 2023 noninterest expenses.
Two Luther Burbank directors are expected to join Washington Federal’s expanded board.
Washington Federal was advised by Keefe, Bruyette & Woods and Davis Wright Tremaine. Luther Burbank was advised by Piper Sandler and Holland & Knight.