Sky Financial Group of Bowling Green, Ohio, on Monday announced a $434 million interstate acquisition deal.

The combination of Sky with First Western Bancorp of New Castle, Pa., would create a $7 billion-asset bank serving four states.

Sky Financial was formed in October by the merger of MidAm Inc. and Citizens Bancshares of Salineville, Ohio.

The First Western deal is valued at 2.8 times book value and 22 times earnings. The stock transaction is expected to close in the third quarter.

Marty E. Adams, Sky Financial's president and chief operating officer, said the purchase would add to earnings after a year. But analysts questioned the price.

Brock Vandervliet of Keefe, Bruyette & Woods Inc., New York, called it "relatively rich for a franchise that wasn't growing terribly rapidly."

Still, Mr. Vandervliet and other analysts endorsed the deal.

"That price is on the high range of what I would expect, but I feel good about Marty Adams' ability to run a company," said Alan F. Morel, a bank analyst with Hilliard & Lyons Inc. of Louisville, Ky. "My feeling is, the more assets he can get under his belt, the more money he can make."

First Western would add $2.2 billion of assets to Sky Financial, raising its national rank to 54th. The merged company would have 210 branches in Ohio, Michigan, Pennsylvania, and West Virginia, and a market capitalization of $1.8 billion.

First Western operates 54 branches in western Pennsylvania and northeastern Ohio.

"They have large market shares in the counties they are in, and a great credit culture," Mr. Adams said. "With our larger operation spreading the costs around, we can increase returns."

First Western would become part of Sky Financial's Citizens Banking Co. Before the merger that created Sky Financial, Citizens had bought 11 banks this decade. MidAm was the parent of an additional six institutions.

In announcing a merger of equals last May, Mr. Adams promised that the combined company would continue to grow through acquisitions.

He did not wait long. In July-three months before the deal to form Sky was to close-Citizens announced plans to buy Ohio Bank, of Findlay, for $180 million.

Still, the First Western deal would be larger than any that Sky or its predecessors has ever attempted. With the company still digesting previous mergers, one analyst, who asked not to be identified, wondered whether Sky is ready to swallow more.

Mr. Adams said the integration of Ohio Bank into Sky is on track to be completed this month, leaving the company free to devote resources to First Western. Sky could even announce another deal next year, he said, "if the right opportunity comes up and we are satisfied the work we need to do on this deal is complete."

But Mr. Vandervliet said he expects Sky to take its time with First Western.

"I cover many banks that have a handful of deals pending at the same time," Mr. Vandervliet said. "This is going to be their one big deal of 1999."

"The holding company's job is to add banks," Mr. Morel said. "I don't think this deal will create hardships for them. It's what they do."

Sky's share price closed Monday at $29.125, down $1.625. First Western finished up $2.875, at $33.125.

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