Comerica Inc. of Detroit said Wednesday that it will acquire Imperial Bancorp of Inglewood, Calif., for $1.3 billion in stock.

The deal would double Comerica's lending to small and midsize businesses and technology firms in California, but it has raised concerns over credit risk. Comerica would become the state's fourth-largest bank, with $12 billion of assets and $10 billion of deposits there. Comerica California would become the state's largest small-business lender by volume and the largest lender to the entertainment industry. It would rank second in lending to emerging growth companies.

At a presentation announcing the agreement, Eugene Miller, chairman and chief executive officer of $41 billion-asset Comerica, said he had been searching for an acquisition in the fast-growing California market "for some time." He described Imperial as "a superb strategic fit."

The market's initial reaction was negative. Comerica's shares plunged 10% in early morning trading and ended the day down 8.6%. Imperial shares rose, but only slightly, closing at $24.44.

Analysts said the steep decline reflects concerns about credit risk. Imperial reported a 56% jump in nonperforming assets at the end of June, blaming much of the increase on its $13.5 million piece of troubled syndicated credits. Even though Imperial's nonperforming assets were flat in the third quarter, some analysts said Comerica could be taking on trouble.

"It is not a plain-vanilla acquisition," said Bradley Vander Ploeg, an analyst at First Union Securities.

"Imperial focuses on niches that are more "bubbly" - up-and-down credit quality [such as] entertainment, technology, tract housing construction lending," said James Bradshaw, senior research analyst with D.A. Davidson & Co. in Portland, Ore. "Those are cyclical businesses that from time to time end up with problems."

Mr. Miller said Comerica has scrutinized 80% of Imperial's loan book and is "satisfied." He did, however, acknowledge that Imperial does not maintain the same credit standards as Comerica, which would have to take steps to address that issue. Those steps might include adding reserves or restructuring the loan portfolio, he said.

"We feel strongly that their credit culture will migrate to our credit culture and our reserving policies," Mr. Miller said. "We have agreed that we will work through Imperial's syndicated credit portfolio and decide whether to keep some of it. There may be some restructuring on the asset side."

Analysts also raised questions during the presentation about Imperial's portfolio of warrants and other equity investments. During the third quarter, gains from warrants and equity investments were $15.8 million, roughly half of fee revenues. Imperial projected gains of $6 million to $8 million for the fourth quarter.

The portfolio "will introduce some volatility to the earnings stream," Mr. Vander Ploeg said.

Comerica agreed to exchange 0.46 of its shares for each share of Imperial, a premium of 14% over Imperial's closing share price Tuesday. The deal price represents 2.4 times book value and 14.8 times 2001 earnings. The company said it would take restructuring charges of $145 million when the deal closes, as it is scheduled in the first quarter.

Imperial's chairman, George L. Graziadio Jr., would become chairman of the board of Comerica California; Imperial's vice chairman, Norman P. Creighton, would become the unit's vice chairman. J. Michael Fulton, Imperial's president and chief executive officer, would hold those titles at Comerica California.

It is an "achievable combination which will allow us to deliver the results we say we will," Mr. Miller said during the presentation.

Comerica said it expects to complete the integration by the first quarter of 2002. The two-year phase-in is "a time line that allows us to make integration seamless," Mr. Miller said.

Comerica said it will implement a $60 million cost savings plan, mostly affecting back-room operations and overhead. Mr. Miller said there is little overlap in operations, though some back-office positions might be redundant. He declined to say how many jobs would be cut.

Ralph Babb Jr., Comerica's vice chairman and chief financial officer, said his company hopes the integration will be complete ahead of schedule. The company is being cautious because it does not want to disrupt momentum or the customer base, he said.

The two companies have long been competitors in the region, each with a focus on lending to the entertainment and technology industries and to the lower end of the middle-market business segment. Two-thirds of Comerica's California business is in Northern California. Most of Imperial's is in the Southern half of the state.

Mr. Miller said Comerica has been able to take advantage of turmoil caused by mergers in the state over the last few years, snapping up lending business left by bigger competitors.

Comerica has been building up by acquisition in California since 1991. "We like what we see out here," Mr. Miller said.

Katie Kuehner-Hebert contributed to this report.

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