First Savings Bank of Washington Bancorp, Walla Walla, has signed a definitive agreement to buy Whatcom State Bancorp, Bellingham, Wash., for about $12.5 million in stock, or 2.1 times book value.

The transaction would be the third acquisition for First Savings since August 1996 and expand its operations into northwestern Washington, along the Interstate 5 corridor. The $1.2 billion-asset multibank holding company operates 25 branches and five loan offices in Washington and Oregon. Privately held Whatcom, founded in 1980, has $89.4 million of assets and five branches. The sale is expected to close this year.

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