Washington Mutual to Buy GNW Financial

In its largest acquisition to date, Washington Mutual Savings Bank has agreed to buy the savings bank unit of GNW Financial Corp., a Bremerton, Wash.-based thrift holding company, for a combination of stock and cash valued at about $64 million.

The price is about 1.3 times the thrift's book value. Shareholders will be paid 51% in Washington Mutual common stock and 49% in cash, but the purchase could change to an all-cash deal if Washington Mutual's share values decline. Washington Mutual has about $7 billion in assets; Great Northwest Bank, GNW's thrift unit, has assets of about $700 million.

Washington Mutual has been on an acquisition tear lately. If approved by shareholders and regulators, the Great Northwest purchase would be its seventh in the past two years.

Puget Sound Presence

Great Northwest has 17 branches, mostly in the Puget Sound and Olympic Peninsula regions west of Seattle. The company earned $2.1 million in the first half of the year, giving it a 0.61% return on assets and an 8.45% return on equity.

"Great Northwest has a good presence in a number of attractive markets," said Scott McAdams, analyst with Ragen MacKenzie Inc., Seattle. "It fits in with Washington Mutual's in-market acquisition strategy."

Washington Mutual has just raised about $80 million in a secondary stock offering.

The new capital "gives us quite a bit more flexibility for growth," Mr. Killinger noted.

Washington Mutual recently expanded into Oregon, opening a branch and a loan center in the Portland area. A pending agreement would provide the thrift 18 additional Portland branches of Crossland Savings.

For the foreseeable future, Washington Mutual will confine its acquisitions to Washington and Oregon, Mr. Killinger said.

Specifically, the thrift is considering bids for two federally seized thrifts: Far West Federal Bank, Portland, with just under $2 billion in deposits, and the Washington branches of Great American Bank, with about $700 million in deposits.

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