WaFd to buy Luther Burbank in $654M deal to enter California

Dive Brief:

Seattle-based Washington Federal will acquire Luther Burbank Corp. in an all-stock deal worth roughly $654 million, the bank announced Sunday.
The transaction, which is set to close in the second quarter of 2023, will give WaFd entry to California and create an institution with $29 billion in assets, $23 billion in loans and $22 billion in deposits.
“It checks all the boxes,” WaFd CEO Brent Beardall said of the acquisition. “It creates scale. It creates a contiguous footprint from Seattle to Austin. … One thing I have learned is that you do not find the right deal — the right deal finds you.”

Dive Insight:

Technically, WaFd already has a contiguous footprint from Seattle to Austin, Texas. Oregon, Idaho and Nevada — three states where the bank has existing branches — all border one another. But until now, California represented a missing piece.

Santa Rosa, California-based Luther Burbank operates 10 branches in the Golden State, in addition to a branch in Washington, six loan production offices in California and another in Oregon.

Home lending stands as a crucial motivator behind the deal. But that comes at a time when even large banks like Wells Fargo have significantly downsized their home-lending units.

“Both organizations are committed to … serving as a source of strength for our clients looking to appropriately utilize leverage to purchase their homes and control their long-term need for shelter,” Beardall said.

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

“Frankly, the near-term positive impact to our financial position and physical footprints are bonuses, not our objective,” Beardall said. “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 addition to value creation, Luther Burbank CEO Simone Lagomarsino touted the opportunity to deliver “superior financial products and services to our clients and the communities we serve.”

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

Before the deal, WaFd already boasted 201 branches, along with $20.8 billion in assets, $16.3 billion in loans and $16.0 billion in deposits. Luther Burbank, by contrast, counted $7.9 billion in assets of, $6.9 billion in loans and $5.8 billion in deposits.