Mercantile Bancorp. of St. Louis said its deal to buy closely held First Financial Bancorp. of Iowa City would move it up one notch, to second place in the Iowa deposit rankings.
Mercantile would have $2.4 billion of Iowa deposits, for a 6% share, when the deal closed in the third quarter. It would trail Norwest Corp., Minneapolis, which has a 10% share.
Mercantile said last week that it would buy First Financial for $169 million in stock. The price represents 22 times estimated 1998 earnings and 2.74 times book price.
Diana Yates, an analyst with A.G. Edwards of St. Louis, called the deal "rich" but said First Financial fits well with Mercantile's strategy.
First Financial, which operates as First National Bank Iowa, has $550 million of assets and 10 offices in eastern Iowa.
"This definitely solidifies their presence in Iowa," Ms. Yates said. "Iowa has been very successful for them."
The deal would also dovetail with Mercantile's pending purchase of Financial Services Corp., headquartered on the Iowa border in Rock Island, Ill.
Mercantile, which has assets of $32 billion, said one attraction of First Financial was its $780 million of trust assets.
The acquisition should add modestly to earnings in its first year, Mercantile said.