Washington Mutual Inc. just can't get enough of California.
Less than four months after agreeing to buy the large American Savings Bank, the Seattle-based thrift is scouting for more companies in the Golden State. And the next deal might be even bigger.
"We would not exclude anything," Washington Mutual chief executive Kerry Killinger said in an interview. "We will be bold when the opportunities are there and the economics make sense."
The American Savings acquisition - slated to double Washington Mutual's assets, to $42 billion - could be followed by another California deal "anytime," Mr. Killinger said. He added that he would welcome another asset-doubling deal.
He is not ruling out a merger with either of the two California megathrifts - H.F. Ahmanson's Home Savings of America and Great Western Financial Corp.
In fact, the buzz in California is that Mr. Killinger "would really like to make a move" on $43.5 billion-asset Great Western, said analyst Charlotte Chamberlain of Wedbush Morgan Securities, Los Angeles.
With about $22 billion in deposits in California, Great Western Bank ranks fourth among all financial institutions there. It is generally thought to be furthest along among California thrifts in remaking itself into a consumer bank. The Chatsworth-based thrift declined to comment.
Buying more California banks or thrifts on the heels of the American Savings deal would fit Mr. Killinger's operating style to a T, according to analyst R. Jay Tejera of Dain Bosworth in Minneapolis.
In Mr. Killinger's six years as chief executive, Washington Mutual has acquired 17 institutions, including two in Utah that, along with American Savings, have still to close. It agreed in July to pay about $1.6 billion for American, which is based in Irvine, Calif.
Mr. Killinger, who is 47, likes to bulk up so that his company has enough market share to influence pricing and make sizable media buys, Mr. Tejera said. However, it's more likely that Washington Mutual will "fill in" with smaller acquisitions in California before doing another large deal, the analyst added.
In the interview, Mr. Killinger said Washington Mutual wants to make at least 15% of all home loans in California. That would be more than double the current share of the state's largest player, Bank of America.
Even without more purchases, Washington Mutual plans to make $7 billion in home loans in California through American Savings. That would be an increase of almost 30% from American's volume this year, and would be done largely by hiring more loan consultants, Mr. Killinger said.
In recent years, American has emerged as the most aggressive mortgage player among the California thrifts, but was forced to rein in its growth to match its capital.
Washington Mutual, by contrast, has lots of capital, Mr. Killinger said, and a "tremendous appetite" for more loans in its portfolio. The thrift wants to replace $7 billion of mortgage-backed securities with higher- yielding home loans.
"If we do a good job, we will get some share away from the very big top- of-the-market lenders," Mr. Killinger said. "We will also be a factor against mortgage bankers and smaller thrifts."
Mr. Killinger is unusual among thrift chief executives these days for his aggressive focus on the mortgage business.
Mortgage loans by themselves, particularly the conforming models that Fannie Mae and Freddie Mac buy, aren't enough to get the returns on equity - around 18% - that Washington Mutual seeks, Mr. Killinger said. But nonconforming mortgage loans, which have higher yields, as well as construction loans, home equity loans, and checking accounts, can be a winning package," he said.
To offer this package in California, Mr. Killinger said a traditional thrift is a good vehicle. Washington Mutual has found that it's relatively easy to convert a thrift into a consumer bank, he said.
But it uses a recently acquired small commercial bank, Western Bank of Coos Bay, Ore., for its commercial lending, and would want to use a similar formula in California, Mr. Killinger said.
There aren't many commercial banks of any size for sale in California, but Mr. Killinger said Washington Mutual was "constantly reviewing" bank - and thrift - deals in the state.
Mr. Tejera explains Mr. Killinger's deal-making prowess in these words: "He thinks like an owner" and makes sure that the thrift's new activities contribute their fair share to the bottom line.
And, "he is nonstop," Mr. Tejera said. "There are very few people who can keep up with him."
Indeed, when a reporter commented on Mr. Killinger's jet lag during last week's interview in Atlanta, at the annual convention of America's Community Bankers, Mr. Killinger compared himself to a windup toy that was "not allowed to be tired."
Besides being tireless, Mr. Killinger appears to be patient.
"If you get the right thrift acquisition, you do it, and if you find the right commercial bank acquisition, you do it," he said. "If you can't do either on profitable terms, that's fine. We're building our business and waiting for the opportunities to change. The world changes in six months or a year all the time."
