In one of the Pacific Northwest's biggest financial transactions of its kind, Washington Mutual Savings Bank said today it won the sweepstakes to take control of Pacific First Financial Corp., parent company to Pacific First Bank.
The move will make Washington Mutual the second-largest financial institution in Washington and give it a huge initial presence in Oregon.
Washington Mutual said it will pay $663 million for the rival institution - both have Seattle headquarters. After the deal is done next May or June, Washington Mutual will be second in size here only to Seafirst Bank.
Just three years ago, then publicly held Pacific First was acquired by Royal Trustco of Toronto, Canada, for $212 million. But since then, Royal Trustco has run into problems elsewhere, and decided to abandon its strategy to string branches along the West Coast of the United States. It put Pacific First up for bid.
Norwest, a $40 billion Minneapolis banking operation, and First Interstate, a $50 billion Los Angeles based banker, were the losing bidders.
Analysts said the acquisition is a master stroke for Washington Mutual.
"In the metaphor of baseball, I see this as a home run ball for Washington Mutual and its shareholders," said Jay Tejera, an analyst at Dain Bosworth. "This takes Washington Mutual from being a Triple A team to the major leagues."
Because of the way the deal was structured, "Washington Mutual should be profitable from day one, and that is a pretty good showing for something of this size," said Scott McAdams, an analyst at Ragen MacKenzie.
"Strategically, what we're doing is a wonderful thing for the Northwest," said an enthusiastic Kerry Killinger, Washington Mutual chairman. "We're returning ownership of Pacific First back to Washington."
Washington Mutual stock was as ebullient, soaring $4 to $29.375 shortly before trading closed.
In state history, only BankAmerica's 1983 acquisition of Seafirst and BankAmerica/Seafirst's acquisition of Security Pacific this year are on a par with the bite Washington Mutual has taken.
Washington Mutual has been growing aggressively. It added 591 jobs last year, giving it 2,710 employees and assets of $8.4 billion as of Sept. 30. The company already is in the process of acquiring Lynnwood-based Pioneer Bank, with $913 million in assets.
But Pacific First is a step beyond, an institution of comparable size to Washington Mutual. Pacific First's assets stand at $6.9 billion. Add in Pioneer, and the combined bank's assets of Washington Mutual will be $16.2 billion, or just past Seafirst's $16.1 billion.
But Washington Mutual said some assets will be sold, reducing the final size to about $14 billion.
Because the operations of the two banks overlap in some places, Washington Mutual said some branches will be eliminated, and there likely will be some layoffs. But Killinger said the impact won't approximate in any way the scores of branches sold and closed when Security Pacific was acquired by Seafirst.
"It will be significantly less," Killinger said. "There will be some consolidations, but the overlap is significantly less than what you had in that case."
The arrangement with Royal Trustco, not expected to be completed until the middle of next year, includes provisions for Royal Trustco to retain ownership of the weaker assets. In fact, in an unusual twist, Washington Mutual has allowed Royal Trustco to borrow as much as $75 million to purchase those assets - at least $673 million - from Pacific First before the transaction closes.
"We're going to be buying a very strong and very clean bank in Pacific First," Killinger said. "The assets we're uncomfortable with are to be retained by Royal Trustco."
The deal will give Washington Mutual 17 percent of the state's deposits, second only to Seafirst/Security Pacific's 20 percent, and well ahead of KeyCorp's 10 percent after the latter's acquisition of Puget Sound Bancorp, Killinger said.
Washington Mutual, already No. 1 in mortgage lending with 9.5 percent of the state's share, will bolster that lead with a 13 percent share, Killinger said.
With Pioneer and Pacific First, Washington Mutual will have 151 branches in Western Washington, 31 in Eastern Washington and 83 in Oregon. There also will be 26 home-loan centers in Washington and Oregon.
-- Times business reporter Richard Buck contributed to this report.
-------------------------------------------- State's 2nd largest
The merger of Washington Mutual Savings Bank and Pacific First Financial Corp. would create a financial institution second only to Seafirst Bank, the state's largest bank.
Pacific First Financial Corp. Assets: $6.9 billion Deposits: $4.4 billion Branches: 127 in Washington, Oregon and California and eight mortgage lending centers in Washington and Oregon.
Washington Mutual Savings Bank Assets: $8.4 billion Deposits: $5.4 billion Branches: 118 financial centers and 17 home loan centers in Washington and Oregon.