A chain reaction of consolidation of second-tier thrifts on the West Coast may follow in the wake of Washington Mutual Inc.'s $9.9 billion merger agreement with H.F. Ahmanson & Co.

California institutions such as Bay View Capital Corp., San Mateo, with $3.3 billion of assets, or Newport Beach-based Downey Financial Corp., with $6 billion, may seriously contemplate putting out "for sale" signs, analysts said.

Firstfed Financial Corp. of Santa Monica, which has $4.1 billion of assets, is another possibility, according to Donald Destino, an analyst with Jefferies & Co., Los Angeles.

"These are the kinds of nuggets that will help build a critical mass for a slightly larger thrift," Mr. Destino said. "They would add incrementally to anyone trying to compete with the big guys."

Heftier institutions could offer themselves up as well. Golden West Financial Corp. of Oakland, which has $37.7 billion of assets, was also cited as a possible seller.

Golden State Bancorp, which is merging with First Nationwide Holdings, the parent of California Federal Bank, San Francisco, is another target in the making. Its deal with First Nationwide, slated to close in the third quarter, would create a thrift company with about $51 billion of assets.

The company will "be within reach of becoming a large enough thrift that an out-of-state acquirer like NationsBank or Banc One might take a serious look," Mr. Destino said.

Washington Mutual's megadeal was helped partly by Ahmanson's fear that it could not continue to swallow the rapidly rising costs of technology.

"We were competing with people that had much more resources to invest in those things," acknowledged Charles R. Rinehart, Ahmanson's chairman and chief executive officer. "It's the nature of this business."

This sort of thinking is likely to influence thrift CEOs up and down the West Coast, observers said.

If technology is "an issue for a $50 billion thrift, imagine what it is for a $3 billion to $4 billion thrift," said Thomas F. Theurkauf, an analyst with Keefe Bruyette & Woods Inc. in New York. "They are going to face some daunting investments in order to remain competitive."

Mr. Rinehart's agreement to sell will make it easier for thrift executives to pitch a sale to shareholders, others said.

"If you tell interested parties that it is time to sell out, now it's somewhat more legitimized," said Thomas O'Donnell, an analyst with Salomon Smith Barney in New York.

The need to update computers to properly register the year 2000 is also seen as a factor.

Even if regulators have signed off on an institution's systems, smaller banks and thrifts "can't be completely comfortable" that their computers will not go haywire on Jan. 1, 2000, Mr. O'Donnell said. Total preparedness-not just regulatory compliance-is likely to take a bigger investment, he insisted.

"Because of year-2000, as well as the fact that the high prices we've seen for the last three years may start to drop, managements are going to start wondering whether their window of opportunity is starting to shut," Mr. O'Donnell said.

The director of the Office of Thrift Supervision, Ellen S. Seidman, told lawmakers Wednesday that examiners are concerned about year-2000 efforts at 15% of thrifts, most of them small and midsize.

Mr. O'Donnell predicted a flurry of merger activity until the end of this year.

Probably fewer deals will be made in 1999, because merger partners next year would have to grapple with integration issues on top of year-2000 problems.

"Only the brave will step forward to make any moves in 1999," Mr. O'Donnell said.

Even the future of $98 billion-asset Wells Fargo & Co. is coming in for speculation. It could be either an acquirer or a target in the wake of the Washington Mutual-Ahmanson deal, analysts said.

Some argued that Wells-which Wamu would knock into second place in California market share with Ahmanson included-may seek to regain its position.

"Wells was real comfortable being behind BankAmerica Corp. as the No. 2 bank in California, and all of a sudden it is a distant third," Mr. Destino said.

Others suggested that Wells, which has been a less-than-stellar performer since its 1996 merger with First Interstate Bancorp, will become an even more attractive target.

"This deal makes it far more difficult for an entrant to come into California and establish itself among the top three competitors" by doing small deals, said Philip Erlanger, managing director of Lehman Brothers Inc. in Los Angeles. He believes that makes Wells particularly vulnerable.

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