Sound CU to acquire Washington Business Bank

Tacoma, Wash.-based Sound CU agreed to acquire Olympia, Wash.-based Washington Business Bank in the sixth credit union-bank deal this year.

Washington Business Bank shareholders will receive between $34 and $36 per share of the bank's stock, subject to certain adjustments at closing — a premium between 20.6% and 27.7% to the bank's closing price of $28.20 on March 8.

At announcement, S&P Global Market Intelligence calculates the deal value to be 165.75% of common equity and of tangible common equity, 32.45% of deposits, 24.75% of assets and 16.44x earnings. The tangible book premium-to-core deposits ratio is 18.41%.

Market Intelligence valuations for bank and thrift targets in the West region between March 11, 2023, and March 11, 2024, averaged 115.96% of book and 105.66% of tangible book and had a median of 9.17x last-12-months earnings on an aggregate basis. They averaged 111.71% of book and 95.26% of tangible book and had a median of 9.04x LTM earnings on a per-share basis.

The all-cash deal was unanimously approved by the boards of directors for both institutions. It is expected to close in the fourth quarter, subject to regulatory approval and the bank's shareholders' approval.

The combination will boost Sound CU's total assets to just above $3 billion, based on the credit union's $2.91 billion in assets and the bank's $104.8 million in assets at Dec. 31, 2023, according to Market Intelligence data.

With the deal, Sound CU will expand in Thurston County, Wash., by one branch to be ranked No. 18 with a 0.61% share of about $13.58 billion in total market deposits, Market Intelligence data showed.

Washington Business Bank's lone branch will expand the credit union's presence in the Olympia area, where it also only has one branch. The transaction will also "diversify its assets, and add talent and expertise," according to the press release.

ALM First Financial Advisors financially advised Sound CU, while Honigman LLP was its legal counsel. Washington Business Bank was financially advised by D.A. Davidson & Co., with Lane Powell PC as its legal counsel.

The Sound CU-Washington Business Bank deal is the sixth bank buy announced by a credit union this year. Two of those deals have involved Washington-based banks.

This transaction is the second time Washington Business Bank has struck a deal to sell in the past two years. The bank was set to be acquired by an investor group in a deal announced in May 2022, but that transaction was terminated in March 2023 as the regulatory approval process took longer than expected.

An S&P Global Market Intelligence analysis in October 2023 found that an increasing number of bank acquisitions by investor groups are being scuttled as regulators look at these deals with a sharper eye.

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