WaFd buys Luther Burbank in $654 million deal to enter California

diving letter:

  • Seattle-based Washington Federal becomes Luther Burbank Corp. in an all-stock deal valued at about $654 million, the bank announced on Sunday.
  • The transaction, which is expected to close in the second quarter of 2023, will yield WaFd Entered California and created an institution with $29 billion in assets, $23 billion in loans and $22 billion in deposits.
  • “It checks all the boxes” WaFd Managing Director Brent Bartall said about the acquisition. “That creates scaling. It creates a contiguous footprint from Seattle to Austin. …One thing I’ve learned is that you don’t find the right deal — the right deal finds you.”

Dive insight:

Technically, WaFd already has a cohesive presence from Seattle to Austin, Texas. Oregon, Idaho and Nevada – three states where the bank already has offices – all border one another. But so far, California has been a missing piece.

Based in Santa Rosa, California, Luther Burbank operates 10 branches in the Golden State, in addition to a branch in Washington, six credit manufacturing offices in California and another in Oregon.

Home loans stand as a key motivator behind the deal. But that comes at a time when even big banks like Wells Fargo have downsized their home loan units significantly.

“Both organizations are committed to … serving as a powerhouse for our clients who are looking for appropriate leverage to buy their homes and control their long-term housing needs,” Beardall said.

Luther Burbank shareholders will receive 0.3353 WaFd shares for each Luther Burbank share they own as part of the transaction. That equates to about $654 million, according to WaFd’s Friday closing price.

“Honestly, the short-term positive impact on our financial health and physical footprint are bonuses, not our goal,” Beardall said. “Our goal is long-term value creation that only comes about when people, values ​​and culture are in harmony, which is what we believe in.”

In addition to value creation, Simone Lagomarsino, CEO of Luther Burbank, touted the ability to “offer excellent financial products and services to our clients and the communities we serve.”

WaFd has pledged $1 million to support communities in Luther Burbank’s California footprint.

Prior to the deal, WaFd already had 201 branches, along with $20.8 billion in assets, $16.3 billion in loans and $16.0 billion in deposits. In contrast, Luther Burbank had $7.9 billion in assets, $6.9 billion in loans and $5.8 billion in deposits.