After costly purchase, First Interstate plans massive San Diego layoffs.

First Interstate Bancorp will eliminate up to 5 1 % of its work force in San Diego and close several branches in connection with its acquisition of San Diego Financial Corp., the bank company announced Friday.

The consolidations are needed to reduce expenses in a transaction that cost First Interstate dearly. The Los Angeles-based banking company agreed to pay $340 million, or 2.55 times book value, for San Diego Financial's $2 billion in assets. The deal is expected to close March 1.

The staff reductions and branch closings will not result in special charges over and above previously announced restructuring costs related to the acquisition, said a bank spokesman.

Saving $50 Million a Year

First Interstate expects to incur a $52 million restructuring charge in connection with the San Diego purchase. Consolidations is expected to produce $50 million in annual savings, half of which will result from the payroll reduction, the bank has said.

From 700 to 900 jobs, mostly in San Diego Financial's lead subsidiary, will be eliminated in the next six to nine months, the company said.

The layoffs will affect the bank's administrative and line support areas, such as finance, legal, human resources, corporate planning, marketing, audit, retail support, and operations. An unspecified number of jobs will be eliminated through attrition, the bank said.

7 Branches to Close

The support units will be closed and their functions performed by existing First Interstate departments.

After consolidations, the combined institution will have 950 to 1,150 employees. San Diego Trust and Savings Bank now employs 1,600. First Interstate has 250 employees in the city.

Meanwhile, First Interstate will consolidate its existing 15 branches in San Diego with San Diego Trust's 52 offices. Seven branches will be closed.

First Interstate shares traded Friday afternoon at $55.50, down $1.125.

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