WFSL Buys Failed Western National

On Friday, Washington Federal Inc. (WFSL) announced its decision to acquire Phoenix, Arizona-based failed Western National Bank. Though the acquisition would immediately be accretive to the company’s financials, no material impact is expected as the size of the transaction is relatively small.

On Friday, Western National was closed by the Office of the Comptroller of the Currency (OCC), which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Under the terms of the purchase and assumption agreement with the FDIC, WFSL agreed to an asset discount and no loss sharing or premium on deposits.

The terms of the deal states that WFSL will acquire almost all the loans and deposits of Western National. As of September 30, 2011, this failed bank had nearly $162.9 million in total assets and $144.5 million in total deposits.

Additionally, all the three branches of Western National in Maricopa County, Arizona will start operating under the name of WFSL from Monday. The acquisition will make it possible for WFSL to further expand its network in Arizona. The company already has 21 branches in the state with 13 in Phoenix itself.

Further, the depositors of Western National will automatically become the same for WFSL. Their deposits will continue to get insured by the FDIC. The FDIC insures deposits in banks and savings associations in the country, along with promoting the safety and soundness of these institutions. When a bank fails, the agency reimburses customer deposits of up to $250,000 per account.

This is not the first time that WFSL is acquiring a failed bank. In January 2010, the company had acquired all of the deposits of Horizon Bank of Bellingham, Washington, which had been shuttered by the U.S. regulators as part of the serial bank failures.

Considering WFSL’s success stories in integrating acquired companies as well as its strong capital and liquidity position, we think the company is poised to grow even more through further acquisitions.

WFSL currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. One of the peers of the company, Astoria Financial Corporation (AF - Snapshot Report) retains a Zacks #4 Rank (short term Sell rating).

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