First Security Corp. of Salt Lake City said Thursday it had agreed to buy a business-oriented Southern California bank for $301 million in stock.

With $849 million-asset California State Bank of West Covina, First Security would establish a banking presence in its seventh state.

The $17.2 billion-asset First Security is paying 3.2 times book value to enter a region dominated by two of the biggest U.S. banking companies, BankAmerica Corp. and Wells Fargo & Co., as well as several major thrift institutions.

First Security chief financial officer Scott C. Ulbrich said the main attraction was California State's small-business and middle-market lending, though cross-selling and other opportunities should arise in consumer banking.

"We are not expecting to compete with the traditional branch platform of many of the big California institutions-we'd get lost in that kind of transaction," Mr. Ulbrich said in an interview.

California State finances home builders but does not make one- to four- family mortgage loans, Mr. Ulbrich said. He said one "strategic fit" is that First Security owns two mortgage subsidiaries and could market their loans through California State's 17 branches.

First Security's price is a hefty 31 times California State's 1997 earnings. West Coast institutions of comparable size have typically fetched closer to 2.5 times book value and 22 times earnings, analysts said.

The deal, which is expected to close in the third quarter, should not affect First Security earnings this year. But increased revenue and an unspecified amount of cost savings should boost profits by the end of 1999, the Utah company said.

First Security "paid a big tab ... but pursuing this niche strategy of entry into California is a good plan," said Joseph K. Morford, an analyst with BT Alex. Brown. "This will not be the last we hear from First Security in California."

Mr. Ulbrich said he expects First Security to make other acquisitions on the coast.

First Security banking subsidiaries have 294 branches and more than 60 business-banking offices in Utah, Nevada, Oregon, Idaho, New Mexico, and Wyoming. Earlier this month, the company completed its acquisition of Rio Grande Bancshares in Las Cruces, N.M..

Through the mortgage units-CrossLand Mortgage and Western Sunrise Mortgage-and First Security Bank, the corporation has 142 mortgage and construction lending offices in 26 states.

"This is just our initial entry" into California, Mr. Ulbrich said of Thursday's announcement. "It's a very attractive economic region."

Mr. Ulbrich said First Security eventually expects to attract new retail customers regardless of the existing competition in southern California. He noted that West Covina is a bedroom community about 40 miles east of Los Angeles with a burgeoning economy and a growing population-and plenty of potential depositors and borrowers.

"There are tremendous opportunities on the retail side," Mr. Ulbrich said.

California State approached First Security about a deal several months ago, according to California State chairman and chief executive officer Thomas A. Bishop.

Mr. Bishop, who will remain with the bank after the deal closes, said California State decided to take advantage of the high price levels in the bank acquisition market. "It looked like a very good window of opportunity for us to sell," Mr. Bishop said.

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