Washington Mutual Savings Bank got a lot more than it bargained for when it entered the investment products business a decade ago.

The $17 billion-asset thrift acquired a brokerage, a mutual fund management firm, and -- inadvertently - its next chairman, Kerry Killinger.

Mr. Killinger was a senior manager at Murphey Favre, the investment products unit that Washington Mutual bought in 1982.

Since then, both the soft-spoken executive and the brokerage have risen to prominence at the Seattle thrift.

Mr. Killinger, 47, now holds the titles of chairman, president, and chief executive of Wamu, as Washington Mutual is known. Two of his top lieutenants at Murphey Favre have also ascended the management ranks to become top retail executives at the thrift.

Not surprisingly, investment products have become a comer, stone of, Wamu's growing consumer drive.

"We're not going to stand still," Mr. Killinger said on a recent afternoon, while cargo ships plied Puget Sound outside his window. "We continue to watch customer trends for opportunities ."

Wamu's responses often take the form of innovation. The thrift was one of several early investors in GNA, a Seattle investment products marketing firm now wholly owned by GE Capital. Wamu sold its stake in the mid1980s, when it decided to concentrate on growing a wholly owned, in-house program.

Wamu was among the first financial institutions to create a proprietary variable annuity, in 1986.

And its state charter allows the thrift to underwrite its Own annuity contracts, something commercial banks cannot do.

Industry analysts say that Wamu's fixed and variable annuity assets now top $750 million, and are throwing off profits in the form of administrative and Other fees.

Another of Wamu's crown jewels is its proprietary mutual fund family, the Composite Funds. The eight funds - including one that invests exclusively in the Pacific Northwest's major corporations, such as Microsoft - hold $1 billion of assets.

Executives expect to add growth and international portfolios to the Composite Funds lineup early next year to meet consumers' growing appetite for these kinds of investments.

"We tailor products to our customers as much as possible," Mr. Killinger said.

Wamu sells investment products through 230 branches in Washington, Oregon, and Idaho. The institution uses 175 representatives who carry Series 6 or Series 7 securities licenses.

Competition for investors' dollars is fierce, with Keycorp and BankAmerica Corp. just two of the area's most aggressive players.

"We tend to think of ourselves with that crowd," said Michael L. Amato, senior vice president for retail services. "We consider ourselves a consumer bank."

Like Mr. Killinger, Mr. Amato and his boss, Michael Towers, executive vice president overseeing all retail services, came to the thrift from Murphey Favre.

"The concept was to create a financial center atmosphere, rather than simply a bank atmosphere," Mr. Amato said.

The approach appears to be working. Murphey Favre brokers sold $800 million of investment products last year, generating $24 million in commissions.

Now the executives want to fine-tune the operation.

They are considering changes to the mix of Series 6 and Series 7 brokers to better cover branches, and plan a greater emphasis on cross-selling.

But the changes are unlikely to be dramatic, given the program's success.

Murphey Favre has learned some lessons along the way.

The.brokerage has gradually deemphasized limited partnerships and individual securities in favor of mutual funds that bank customers are more comfortable with.

Murphey Favre also tapped an outside company to clear trades, since this business relies on economies of scale that come from heavy trading volumes.

And the thrift recently settled for $12 million a lawsuit in which a group of investors alleged "misrepresentations and omissions" on the part of Murphey Favre.

The action was taken in connection with bonds issued by a California thrift that subsequently failed.

Analysts say these matters do not fundamentally detract from Wamu's overall efforts as a consumer bank and investment products retailer."They're quite a powerful Northwest franchise," said Scott W. McAdams, a Seattle-based banking analyst with Ragen MacKenzie.

Mr. Killinger acknowledges that he has brought "a bit more of a sales approach" to the thrift. But he insists his goal is "a blending of our strengths," not investment product overkill.

Industry observers say Mr. Killinger is well on track, noting that after several flat years, the thrift is on the upswing.

"He has done a very good job at getting the entire bank back on its feet without an undue focus on investment products," Mr. McAdams said.

The analyst credits Mr. Killinger's analytic and management skills.

These attributes also caught the eye of Louis Pepper, Wamu's former chairman, according to thrift legend.

The executives got to know each other in 1981, when Mr. Killinger approached Mr. Pepper with a proposition.

Murphey Favre had a family of mutual funds and "we wanted to talk about having our customers access them through ATMs," Mr. Killinger recalled.

That arrangement did not come to fruition, but the two executives did find they had a common vision.

And Wamu's acquisition of Murphey Favre followed soon after.

"We both believed in the appropriateness of investment products for bank customers," Mr. Killinger said. "That's never changed."

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