WILMINGTON, Del. -- Lawrenceville, N.J.-based First Fidelity Bancorp. entered a definitive agreement to acquire $38 million-asset First State Bank for $7 million in cash.

Under the terms of the agreement, First State stockholders will receive $1.10 in cash for each of their shares.

First State has also granted First Fidelity the option to purchase 2.1 million shares of First State.

The transaction must be approved by First State's shareholders and regulators.

The deal is expected to close in the first quarter of 1995.

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