In a deal that would beef up its Northern California operations, BancWest Corp. of Honolulu said it has agreed to acquire SierraWest Bancorp for $194 million in stock.

The deal, announced late Thursday, would provide BancWest with 20 branches from Sacramento into Nevada. SierraWest, of Truckee, Calif., would also add a significant Small Business Administration lending operation to the $15 billion-asset company.

"SierraWest is very complementary with our existing strategy of building the Northern California franchise and focusing on niche lending strategies," said BancWest president Don J. McGrath in an interview Friday.

BancWest, the result of the Nov. 1 merger of First Hawaiian Bank of Honolulu and Bank of the West in San Francisco, has "made a few SBA loans, but now we'd like to focus on it companywide," Mr. McGrath said.

SierraWest, with $879 million of assets, is a top Small Business Administration lender with a total of 10 loan offices in six western states. SierraWest president and chief executive William T. Fike would join BancWest as the head of a new SBA lending department.

For months, acquisition rumors have circulated about SierraWest, for two major reasons.

First, several midsize western regionals, such as Zions Bancorp of Salt Lake City, have expressed the desire to beef up their SBA lending. This made SierraWest, which is among the nation's top 25 SBA lenders, an obvious target.

SierraWest stock surged 7%, to $26.50 a share, one day after U.S. Bancorp announced Feb. 18 that it would buy Bank of Commerce of San Diego, another large SBA lender.

Second, investors have been pressuring SierraWest to sell because of relatively slow earnings growth, marginal returns on equity, and high costs.

"SierraWest had established a nice niche, but they were very marginally profitable in core banking," said James R. Bradshaw, an analyst with Pacific Crest Securities in Portland, Ore. "They were the classic takeover target."

As a result, BancWest negotiated a relatively low price for SierraWest. The bank agreed to pay 15.6 times estimated 1999 earnings and 2.4 times SierraWest's book value.

In 1998, by comparison, bank deals valued at $100 million to $300 million were priced at an average 24.3 times estimated earnings and 3.0 times book, said David H. Winton, an analyst with Keefe, Bruyette & Woods Inc.

"From BancWest's standpoint, the pricing looks pretty good," Mr. Winton said.

For each share, SierraWest stockholders would receive 0.82 shares of BancWest stock. The pact, approved by both banks' boards, will be accounted for as a pooling of interests and is set to close at midyear.

BancWest said that aside from restructuring charges, it does not expect the acquisition to affect earnings in 1999. However, in 2000 the deal is expected to add 2% to earnings per share.

BancWest's two bank subsidiaries, Bank of the West and First Hawaiian Bank, operate 200 branches on the western mainland, in Hawaii, and on the Pacific Rim. Last month, First Hawaiian's mainland operations, which operated under the name Pacific One Bank, were folded into Bank of the West. The two banks' back-office operations are slated to be melded in early 2000, Mr. McGrath said.

After the SierraWest deal closes, assets at Bank of the West, the fifth- largest bank in California, will increase to $8.6 billion.

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