US-based bank Washington Federal has signed a definitive agreement to buy Luther Burbank and its wholly-owned subsidiary, Luther Burbank Savings.

Based on the closing price of Washington Federal’s common stock on 11 November 2022, the all-stock transaction is valued at $654m.

Under the terms of the transaction, shareholders of Luther Burbank will receive 0.3353 shares of Washington Federal common stock for each share of Luther Burbank common stock they own

The transaction, which will expand Washington Federal’s footprint in California, has secured approval from the boards of directors of both entities.

Following the merger, the combined entity will have total assets worth around $29bn, $23bn in total loans and $22bn in total deposits.

With a team of 2,400 and a network of more than 210 branches, the merged bank will be present in Washington, California, Oregon, Idaho, Utah, Nevada, Arizona, Texas and New Mexico.

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Washington Federal president and CEO Brent 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 this strategic transaction.”

“Unlike many financial institutions, both WaFd Bank and Luther Burbank Savings are portfolio lenders, meaning that we originate mortgage loans to hold on our balance sheets because we fully appreciate the true value of investing in our clients and communities we serve over the long run.”

As part of the deal, Washington Federal is committing $1m to support communities in Luther Burbank’s service area in California.

Luther Burbank president and CEO Simone Lagomarsino said: “We are very pleased to partner with Washington Federal, which we believe will lead to long-term value creation for our shareholders and the delivery of superior financial products and services to our clients and the communities we serve.”