In its biggest acquisition to date, Seattle-based Washington Mutual Savings Bank has agreed to buy Pioneer Savings Bank for about $181 million in stock.

Pioneer, based in the Scattle suburb of Lynnwood, has $891.1 million in assets and 17 branches, mainly in communities north of Seattle.

The deal is Washington Mutual's ninth thrift acquisition in the past two years, reflecting a strategy of building market share by buying smaller institutions in Washington and Oregon.

But the deal may be only an appetizer for an even larger thrift purchase. One Possibility may be parts of Pacific First Bank, which has been put up for sale by its Canadian owner, Royal Trustco. Seattle-based Pacific First has $6.9 billion in assets.

Kerry K. Killinger, Washington Mutual's chairman and chief executive, declined to respond specifically to questions about Pacific First. But he noted that the Pioneer acquisition will generate extra capital that could support an additional $3 billion in assets.

"It gives us more, flexibility for further expansion" he said.

What's more, Mr. Killinger stressed that Washington Mutual is capable of moving quickly. "We will be able to complete consolidation [of Pioneer] in short order," he predicted. The acquisition is slated for completion in the first quarter, subject to regulatory approvals.

Analysts described Pioneer as a well-run organization, focused almost exclusively on deposit-taking and mortgage lending.

The thrift earned $7.3 million in the first half of this year, producing a 1.68% return on assets. Common equity equals a lofty 11.6% of assets, and capital far exceeds regulatory requirements.

The KeyCorp Model

Mr. Killinger's comments suggest that Washington Mutual may follow a capital-leveraging precedent set in Washington by KeyCorp, Albany, N.Y. KeyCorp is using capital from its purchase of Tacoma-based Puget Sound Bancorp to buy 48 branches in the state divested as part of the BankAmerica Corp.-Security Pacific Corp. merger.

With $8 billion in assets and 118 branches, Washington Mutual is already Washington's largest mortgage lender and the Pacific Northwest's biggest thrift. On a pro forma basis, acquisition of Pioneer would raise Washington Mutual's share of total deposits to 13.3% in the Seattle area and 20.3% in the Everett area north of Seattle.

Washington Mutual is paying a steep premium of more than 1.7 times Pioneer's book value.

But Mr. Killinger said the deal would cause "no significant dilution, even in the short run." The premium will be recovered through merger-related cost savings and extra revenue from the sale of Washington Mutual consumer products to Pioneer customers, he said.

Washington Mutual's shares rose 62.5 cents, to $26, on Friday. Pioneer's stock fell 37.5 cents, to $23.875.

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