Issues with Bank Secrecy Act compliance have forced Washington Federal in Seattle to withdraw its regulatory applications to buy Anchor Bancorp in Lacey, Wash.
The companies announced Wednesday that they had agreed to extend the deal’s termination date from Dec. 31 to June 30. The amendment was needed because of “certain issues with respect to procedures, systems and processes” tied to the BSA program at Washington Federal’s bank.
The $15.1 billion-asset Washington Fed agreed in April to pay $63.9 million in stock for the $462 million-asset Anchor. The deal was expected to close in the third quarter.
Washington Federal said it is taking steps to address the issues, but those efforts would likely affect regulatory approvals for the deal. The company plans to refile its applications once its issues are resolved.
Other deals have had trouble getting approved due to BSA issues, including M&T Bank’s purchase of Hudson City Bancorp. In the Federal Reserve’s 2015 approval for that deal, officials said that they had “taken the unusual step” of shelving the application while M&T improved its anti-money-laundering and BSA practices.
The Fed also warned that in the future banks would have to formally withdraw their applications to resolve outstanding issues.
BancorpSouth in Tupelo, Miss., has also faced delays completing its deals to acquire Central Community Corp. in Temple, Texas, and Ouachita Bancshares in Monroe, La., over problems with Community Reinvestment Act and BSA compliance. The company refiled its applications in August.
The amendment to the Washington Federal and Anchor merger agreement also allows up to three additional six-month extensions beyond June 30, and “addresses certain Anchor operational matters in light of the extension.”
“We are disappointed that we will not be able to complete the Anchor transaction in the time-frame originally anticipated; however, we will use this opportunity to improve our processes and systems,” Brent Beardall, Washington Federal’s president and CEO, said in the release. “We have been very impressed with both the clients and employees of Anchor Bank and look forward to bringing our two banks together.”
Anchor still believes selling to Washington Federal will benefit shareholders, President and CEO Jerry Shaw said in the release.
“We could not have asked for a better strategic partner than Washington Federal as we continue to work together towards a successful outcome,” Shaw said.