Crestar Financial Corp., in its largest deal ever, said Monday that it has agreed to buy one of the last independent banks in the District of Columbia area for $774 million in stock.

The acquisition of Citizens Bancorp of Laurel, Md., which has $4.2 billion of assets and 103 branches, will boost Crestar's standing in metro Washington, D.C., to first place in deposits from third, and in Maryland overall to second place from sixth.

"When you put the two of us together, we have a wonderful market share around the greater Washington, D.C., area," said Richard G. Tilghman, chairman and chief executive of the $18.5 billion-asset Crestar.

Crestar's expansion will come at a steep cost. The deal, valued at $51.25 a share based on Crestar's Friday closing price, represents a 59% premium over Citizens' Friday closing price of $32.25 a share. It also equals 2.3 times Citizens' book value and 19 times its estimated 1996 earnings.

Crestar's stock price fell $2.25 on Monday, closing at $59.125.

Mr. Tilghman shrugged off the price decline, noting that acquirers usually trade down following a deal and then recover during the next 30 days or so.

"There are always going to be people who'll trade a stock on news like this," he said. "The market reaction is kind of as expected." Analysts took the news in stride Monday, although Crestar said the acquisition would reduce next year's earnings by about 2.2%. The Richmond-based bank expects to take $43 million in nonrecurring merger charges in first quarter 1997.

"At the end of the day, you're going to have a franchise that's No. 1 in Virginia and No. 2 in Maryland," said George A. Bicher, with Alex. Brown & Sons Inc. "In a few months, people will forget about dilution and think maybe this wasn't such a bad deal."

Crestar said it expected to cut Citizens' annual operating expenses by a whopping 45%, because the two banks have heavy branch overlap primarily in Maryland. Analysts said they believe this goal is achievable, given Crestar's track record.

"I don't think you could have a lot of doubt about their ability to take out 45% of Citizens' operating expenses," said Dean Witter's Anthony R. Davis, adding that Crestar's average cost savings for an in-market deal is 55%.

Crestar's acquisition of Citizens is the largest in its history. The second-largest is last year's purchase of Loyola Capital Corp. of Baltimore, a $2.5 billion-asset thrift. Crestar has carried out 24 acquisitions over the past 10 years.

"Crestar is going to continue to do these kinds of acquisitions, because this is one of the ways they grow earnings," Mr. Davis said. "This is very similar to Loyola and the other deals they've done: to grow market share in their franchise area."

Crestar holds the No. 2 deposit market share in its native Virginia, with 13%, following NationsBank Corp.'s 14%. NationsBank will remain the top-ranked bank in Maryland after Crestar acquires Citizens.

The acquisition of Citizens, which is expected to close next March, will boost Crestar's deposit market share in metro Baltimore only slightly, to fifth from sixth place.

"Clearly, Baltimore remains a market in which we would consider we have less market share than we'd like to have," Mr. Tilghman said.

Mr. Tilghman said he expects Crestar to continue acquiring small banks and thrifts in Virginia and Maryland "for a while yet." He added he does not anticipate expanding into neighboring states such as Pennsylvania or North Carolina "for the foreseeable future."

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