Furthering its strategy of building a franchise in California, San Francisco-based First Nationwide Bank signed a definitive agreement to acquire Home Federal Financial Corp. for $70.6 million in cash, or 134% of the thrift's tangible book value.

Home Federal, which is also based in San Francisco, has $735 million of assets and $622 million of deposits. It operates 15 branches in Northern California under its subsidiary, Home Federal Savings and Loan Association.

First Nationwide chief executive Carl B. Webb said his company purchased Home Federal as part of a two-pronged strategy of building up its California franchise while divesting properties outside the Golden State.

During the past year, privately held First Nationwide has sold $4.3 billion of deposits and 79 branches in Illinois, Michigan, Ohio, New Jersey, and New York.

Just a few days ago, $14.4 billion-asset First Nationwide announced the sale of 21 Michigan branches, with $750 million in deposits, to Cleveland- based Charter One Financial Inc.

Meanwhile, on the acquisition front, First Nationwide agreed five months ago to pay $250 million in cash for SFFed Corp., a 35-branch, $4.1 billion- asset thrift company that owns San Francisco Federal Savings and Loan Association.

Mr. Webb said the California purchases help to balance out the divestitures in terms of maintaining adequate funding. "It goes a long way toward replacing our core deposit sources," he said. "We don't have to go to other funding sources."

Mr. Webb said the purchase of Home Federal would increase First Nationwide's earnings in 1996.

Mr. Webb said First Nationwide planned to cut 45% of Home Federal's $15 million annual noninterest expense base. He declined to estimate how many of Home Federal's 168 employees would be let go as part of the merger, but said most layoffs would involve corporate staff rather than branch personnel.

Formerly a subsidiary of Ford Motor Co., First Nationwide was purchased 14 months ago by an investment group led by Texas banker Gerald J. Ford and financier Ronald O. Perelman. From the beginning, Mr. Ford, the thrift company's new chief executive, said he intended to sell off the widely dispersed branch network outside California, a relic of Ford Motor's failed attempt to build a national retail bank.

But First Nationwide will retain 24 branches and $1.4 billion of deposits in Florida. "For the time being, we're just going to hold on to Florida," Mr. Webb said. "It's a good funding source for us."

The acquisition, announced Tuesday, is scheduled to close in the second quarter of 1996. The agreement provides for a cash transaction of $18.50 a share to Home Federal stockholders. It also calls for Home Federal to meet certain net income levels and, as a result, Home Federal is likely to suspend its regular 8 cents a share quarterly dividend.

Home Federal earned $1.7 million in the first nine months, or 45 cents a share, returning 0.46% on assets and 6.49% on equity.

Home Federal chairman and chief executive Stanley E. Bailey said his board believed it received "a very fair price" from First Nationwide.

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