Washington Federal eyes Spokane market entrance
After big branch acquisition, Seattle-based bank likely to pursue further expansionAugust 15th, 2013
Washington Federal Inc.'s acquisition of 51 Bank of America branches will give the Seattle-based bank a presence in the Inland Northwest for the first time in its 96-year history.
After it takes ownership of branches in small markets in Eastern Washington and North Idaho late this year, the company expects to expand into the Spokane-Coeur d'Alene area, says Washington Federal President and CEO Roy Whitehead.
"It would seem odd to make the acquisition and not have a presence in Spokane," Whitehead says. "Once everything settles, we'll likely open an office in Spokane."
The 51-branch acquisition, which includes $1.8 billion in deposits and is by far the largest acquisition in Washington Federal history in terms of deposits and number of branches, includes 19 branches in Washington state, all of which are located east of the Cascade Mountains.
The office nearest to Spokane is a branch in Deer Park. Other Washington state branches are located in Chewelah, Colville, Clarkston, Cle Elum, Chelan, Colfax, Dayton, Leavenworth, Moses Lake, Newport, Odessa, Omak, Pullman, Quincy, Republic, Walla Walla, and two in Wenatchee.
Scheduled to be completed in this year's fourth quarter, the transaction also includes 15 branches in Idaho, 11 in New Mexico, and six in Oregon. Whitehead says Bank of America made the branches available to buy as a lot, and Washington Federal didn't select locations to acquire. The bank has stated that it plans to retain all Bank of America employees who work at the branches it bought.
In Idaho, Whitehead points out, Washington Federal currently doesn't have a presence north of McCall. In addition to 13 branches in southern and central Idaho, the transaction includes an office in Sandpoint and one in the Silver Valley town of Osburn.
"This gave us an opportunity to fill out our footprint in that state as well," Whitehead says.
The acquisition, once completed, will give Washington Federal a total of 236 branches in eight western U.S. states. In addition to the states mentioned, the company has a presence in Nevada, Utah, Arizona, and Texas.
In addition to expanding its footprint, the acquisition gives Washington Federal some additional deposits, something other banks aren't necessarily looking for right now, Whitehead says. He says most banks are "awash in liquidity" and have excess capital to lend, which means they aren't targeting deposits.
"We think deposits are undervalued right now," he says. "We think there will come a day where that is no longer the case, and we think we will be glad we picked up deposits when they were not expensive."
Whitehead says the bank's growth through the years has involved an even mix of acquisitions and organic branch expansions. Since 2007, however, the company has grown more through acquisition because, he says, "we've found it's a cheaper way to go."
Last year, the company opened a branch in Yakima, its first east of the Cascade Mountains. It had planned on expanding farther east into the state before talk of this acquisition started.
The Yakima branch was one of two new branches Washington Federal opened last year; the other was in Ahwatukee, Ariz., south of Phoenix.
The company doesn't have any plans to open additional branches this year.
Publicly traded on the Nasdaq market under the symbol WAFD, Washington Federal recently reported second-quarter net income of $37.3 million, or 36 cents a diluted share, up from $35.2 million, or 33 cents a share, in the year-earlier period.
When the company paid its shareholders dividends for the recently completed quarter, it marked the 122nd consecutive quarter for which it paid such a dividend. That dividend was 9 cents a common share, up slightly from 8 cents a share a year earlier.