Acquisitions

South Valley Bank and Trust

Effective as of the close of business October 31, 2012, Washington Federal completed the acquisition of South Valley Bank and Trust, headquartered in Klamath Falls, Oregon (“South Valley”). The acquisition provided $383 million of net loans, $107 million of net covered loans, $735 million of deposit accounts, including $533 million in transaction deposit accounts and 24 branch locations in Central and Southern Oregon. Total consideration at closing of $44 million, including $33 million of Washington Federal, Inc. stock and $10 million of cash resulting from the collection of certain earn-out assets. If other earn out assets are collected over time, the total purchase price could be reduced by up to $14 million.

The acquisition was accounted for under the acquisition method of accounting. The purchased assets and assumed liabilities were recorded at their respective acquisition date estimated fair values. The purchase accounting for acquired assets and liabilities is subject to future adjustment based on the completion of valuations. All fair adjustment amounts currently recognized in the financial statements at December 31, 2012 were determined provisionally as the purchase accounting fair value analysis was incomplete as of December 31, 2012. The determination of whether a loan is impaired and accounted for under ASC 310 was still in process as part of the acquisition date loan valuation; therefore, all loans are categorized as acquired loans without differentiation between non-impaired and credit impaired at December 31, 2012.

Loans that were classified as non-performing loans by South Valley are no longer classified as non-performing because, at acquisition, the carrying value of the loans was adjusted to reflect fair value. Management believes that the new book value reflects an amount that will ultimately be collected.

The operating results of the Company include the operating results produced by the acquired assets and assumed liabilities for the period from November 1, 2012 to December 31, 2012.

The table below displays the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed:




	Fair Value Recorded by
	Washington Federal
	(In thousands)
Assets:
Cash and cash equivalents	$	212,711
Available for sale securities	43,899
FHLB stock	5,211
Loans receivable, net	343,510
Covered loans receivable, net	107,075
FDIC indemnification asset	17,364
Property and equipment, net	24,561
Core deposit intangible	3,000
Real estate held for sale	10,857
Covered real estate held for sale	6,031
Goodwill	8,692
Other assets	27,855
Total Assets	810,766

Liabilities:
Customer accounts	735,415
FHLB advances	22,471
Other liabilities	8,985
Total Liabilities	766,871

Net assets acquired	$	43,895

Consideration provided:
Equity Issued	$	33,492
Cash paid	10,403
	$	43,895