American Corp. signed a letter of intent to purchase Smoky Mountain Bancorp, which is based in Gatlinburg, Tenn. Nashville-based First American agreed to pay $21 million in stock for Smoky Mountain - 18 times earnings and 2.1 times the acquired company's yearend-1994 book value. Smoky Mountain, with $175 million of assets, is the holding company for First National Bank of Gatlinburg, which operates eight branches in Sevier and Jefferson counties in the eastern part of the state. Since First American already has a presence in both counties, the deal will give it a 21% deposit share in Sevier County, tying it for first place, and 26% in Jefferson County, good for second place. Sevier County, which includes Gatlinburg, has a strong tourism industry, and the population is growing at four times the statewide rate. "We consider this an in-market transaction," said First American investor relations spokeswoman Carroll Kimball. She said First American expects to cut 30% from Smoky Mountain's $7 million annual expense base, mostly by consolidating back-office functions. One of Smoky Mountain's eight branches is likely to be closed. First American, which has $8.4 billion of assets, has been an active acquirer this year, having signed four agreements that would add $1.8 billion of assets when all are consummated by the middle of next year. Smoky Mountain will add to "the momentum we've built with our recent merger of Heritage Federal and the planned merger of Charter Federal," said Dennis C. Bottorff, First American's chairman and chief executive. First American acquired Heritage Federal Bancshares, a $525 million savings institution in Kingsport, Tenn., on Nov. 1, and the purchase of Charter Federal Savings, Bristol, Va., is one of the pending deals. First American anticipates signing a definitive agreement with Smoky Mountain, subject to a due diligence review. The transaction is expected to add to First American's earnings in 1996, although Ms. Kimball said an estimate of per-share accretion would have to await completion of the due diligence check. "We'll have a better sense after we get in and poke around a little bit," Ms. Kimball said.

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