The Bank Slate

INSIGHTS INTO THE BANKING INDUSTRY

Washington Federal to buy Luther Burbank, enter California

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.

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