With interest rates rising and its core mortgage-banking business drying up, Summit Savings Bank saw profits slipping and no prospect for a quick turnaround.
So today Summit Bancorp, the holding company for the $200 million Bellevue thrift, announced it will merge with Washington Mutual Savings Bank, the Seattle-based $16 billion giant.
For Summit, it appears to be a good deal, said Scott McAdams, a Ragen MacKenzie banking analyst. The bank's stock shot up $1.75 a share, or 21 percent, to $10.25 in early trading today.
Under the terms of the agreement, Washington Mutual will exchange each share of Summit common stock for an estimated $11.60 worth of Washington Mutual common stock. The price could be adjusted, based on the average closing price for the 10 trading days immediately preceding the third trading day before the effective date.
That represents a premium over Summit's book value, as of April, of $7.78 per share. Total value of the deal: about $25 million.
Washington Mutual will get Summit's branch offices in Bellevue, Bellingham, Tacoma and Vancouver. There was no word whether the branches will remain open. But more importantly, Washington Mutual will get Summit's $179 million in deposits.
"With deposits hard to come by these days, this is one way to get them," said McAdams, who described the deal as a "drop in the bucket" for Washington Mutual.
Washington Mutual operates 231 financial centers and 25
home-loan centers in Washington, Oregon and Idaho. As of March 31, it had assets of $16.1 billion, deposits of $9.2 billion and stockholders' equity of $1.2 billion. Summit's assets were $205.2 million.
In a statement, L. Mike Riley, Summit president and chief executive officer, said, "Our shareholders will have an opportunity to be part of an institution that is considered an industry leader both regionally and nationally."
Washington Mutual Chairman Kerry Killinger said the "transaction will further strengthen our competitive position in the Northwest consumer banking market."