California community bankers are buzzing with excitement over Washington Mutual Inc.'s proposed purchase of H.F. Ahmanson & Co.
With Seattle-based Washington Mutual expected to close 170 branches, small banks and thrifts are anticipating a wave of customer defections. Some bankers are boosting advertising budgets in hopes of landing customers fed up with big-bank mergers.
"How much longer does a customer want to put up with three or four changes in two years?" said Clayton C. Larson, president of Pacific Capital Bancorp in Salinas, Calif. He said that for community banks "I see this (merger) as nothing but positive."
But given Washington Mutual's knack for retail banking, some analysts are cautioning small banks not to get their hopes up.
Unlike commercial banks, which survive chiefly by making commercial loans, Wamu, as a thrift, makes most of its money on retail customers, said Robert J. Rogowski, principal at Seattle's Columbia Financial Advisors. In his view, Washington Mutual will not lose market share in California, but will gain it as consumers continue to defect from Bank of America and Wells Fargo & Co.
"Most of the big banks are basically focusing on the 20% of the customers that can make them the most money," Mr. Rogowski said. "Washington Mutual argues that it can make money on the other 80%."
The company's pledge to cut overhead by 40% could also spell trouble for many small banks.
Hans Schroeder, a community bank analyst at San Francisco's Hoefer & Arnett Inc., said closing branches and centralizing operations should allow Wamu to offer consumers lower loan rates and higher deposit yields than many small banks.
As a result, he said: "Washington Mutual is going to be much more aggressive in pricing. I see this creating more competition for community banks."
Louis H. Nevins, president of the Western League of Savings Institutions, agreed that Wamu has fared better than Wells Fargo and other large banks in retaining retail customers after completing megamergers.
Wamu has made 21 acquisitions since 1988, including last year's celebrated purchase of Great Western Financial Corp.
"They don't come in with the idea of making branches less friendly or less attractive places to do business," Mr. Nevins said.
Nevertheless, he said, some fallout is inevitable in mergers of this size. Combined, Wamu and Ahmanson, parent of Home Savings of America, would rank as the nation's largest thrift and seventh-largest financial institution.
"This will leave the smaller institutions with a larger share of the market, especially in areas where branches will be consolidated," Mr. Nevins said.
Some California banks and thrifts are positioning themselves to pounce.
Craig G. Blunden, chairman, president, and chief executive officer at Provident Savings Bank in Riverside, said the thrift is working on a new advertising campaign directly targeting customers affected by mergers.
"We're going after those customers that are tired of being traded and switched in all these transactions," Mr. Blunden said.
Others, such as Whittier's Quaker City Federal Savings and Hemet Federal Savings and Loan Association in Hemet, are eyeing not only customers but also branches that will be shuttered and employees who will be laid off.
"This is a tremendous opportunity," said Richard S. Cupp, president and chief executive officer at $1.1 billion-asset Hemet Federal. "If you don't capitalize on this, you many never get another chance."
