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Washington Federal (WAFD)-Luther (LBC) Deal Gets Shareholder Nod
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Shareholders of Washington Federal, Inc. (WAFD - Free Report) and Luther Burbank Corporation have approved the merger agreement between the two. The all-stock deal, which was announced in November 2022, is still subject to regulatory approvals and customary closing conditions.
Under the terms of the transaction, Luther Burbank shareholders will receive 0.3353 shares of Washington Federal common stock for each share of LBC common stock they hold.
Brent Beardall, President and CEO of WAFD, said, “These voting results affirm our belief that the combination of Washington Federal and Luther Burbank will create significant opportunities to enhance the banking experience for our customers and drive increased long-term value for our shareholders.”
By acquiring Luther Burbank, WAFD will be foraying into the lucrative and “fast-growing” California market. The company intends to enhance multifamily loan origination capabilities and expand commercial banking activities to Northern and Southern California.
LBC operates in California, Washington and Oregon through 11 full-service branches and seven loan production offices. Upon closure (expected by June 2023-end), the combined entity will have almost $29 billion in assets, $23 billion in total loans and $22 billion in deposits across 212 locations in nine western states.
At the time of announcing the transaction, Washington Federal had noted that the deal will likely be 7.9% accretive to its earnings per share in fiscal 2024. Also, capital ratios, including leverage ratio and CET 1 ratio, will continue to be at a robust level on a proforma basis at closure.
Additionally, Washington Federal expects to incur one-time pre-tax merger-related charges of $37 million. Following the completion of the transaction, cost savings are projected to be 25% of LBC’s 2023 estimated non-interest expenses, with 50% phased in 2023 and 100% thereafter.
Washington Federal is also focused on its organic growth efforts. The company is expected to keep benefiting from higher interest rates. The LBC deal, announced amid a challenging macroeconomic environment, will likely support its financials going forward. By entering “attractive California markets”, WAFD will be able to bolster its loan and deposit market share.
Over the past year, shares of WAFD have lost 15%, while LBC plunged 36.4%.
Of late, the U.S. regional banking industry is facing huge turmoil. Since March, there have been four bank failures – Silvergate Capital, Signature Bank, Silicon Valley Bank and First Republic Bank. The collapse of these banks was largely due to the fastest rate hikes since the 1980s and internal risk management issues.
First Republic Bank, the second biggest bank failure in history, was subsequently acquired by JPMorgan (JPM - Free Report) earlier this week. The deal will complement JPM’s wealth business and result in increased penetration within the high-net-worth clients. The company expects the transaction to generate more than $500 million of “incremental net income” annually.
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Washington Federal (WAFD)-Luther (LBC) Deal Gets Shareholder Nod
Shareholders of Washington Federal, Inc. (WAFD - Free Report) and Luther Burbank Corporation have approved the merger agreement between the two. The all-stock deal, which was announced in November 2022, is still subject to regulatory approvals and customary closing conditions.
Under the terms of the transaction, Luther Burbank shareholders will receive 0.3353 shares of Washington Federal common stock for each share of LBC common stock they hold.
Brent Beardall, President and CEO of WAFD, said, “These voting results affirm our belief that the combination of Washington Federal and Luther Burbank will create significant opportunities to enhance the banking experience for our customers and drive increased long-term value for our shareholders.”
By acquiring Luther Burbank, WAFD will be foraying into the lucrative and “fast-growing” California market. The company intends to enhance multifamily loan origination capabilities and expand commercial banking activities to Northern and Southern California.
LBC operates in California, Washington and Oregon through 11 full-service branches and seven loan production offices. Upon closure (expected by June 2023-end), the combined entity will have almost $29 billion in assets, $23 billion in total loans and $22 billion in deposits across 212 locations in nine western states.
At the time of announcing the transaction, Washington Federal had noted that the deal will likely be 7.9% accretive to its earnings per share in fiscal 2024. Also, capital ratios, including leverage ratio and CET 1 ratio, will continue to be at a robust level on a proforma basis at closure.
Additionally, Washington Federal expects to incur one-time pre-tax merger-related charges of $37 million. Following the completion of the transaction, cost savings are projected to be 25% of LBC’s 2023 estimated non-interest expenses, with 50% phased in 2023 and 100% thereafter.
Washington Federal is also focused on its organic growth efforts. The company is expected to keep benefiting from higher interest rates. The LBC deal, announced amid a challenging macroeconomic environment, will likely support its financials going forward. By entering “attractive California markets”, WAFD will be able to bolster its loan and deposit market share.
Over the past year, shares of WAFD have lost 15%, while LBC plunged 36.4%.
One-year Price Performance
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At present, WAFD carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Of late, the U.S. regional banking industry is facing huge turmoil. Since March, there have been four bank failures – Silvergate Capital, Signature Bank, Silicon Valley Bank and First Republic Bank. The collapse of these banks was largely due to the fastest rate hikes since the 1980s and internal risk management issues.
First Republic Bank, the second biggest bank failure in history, was subsequently acquired by JPMorgan (JPM - Free Report) earlier this week. The deal will complement JPM’s wealth business and result in increased penetration within the high-net-worth clients. The company expects the transaction to generate more than $500 million of “incremental net income” annually.