Expanding its Indiana foothold, Norwest Corp. on Thursday agreed to buy Lincoln Financial Corp., Fort Wayne, in a stock swap valued at $170 million.

The purchase price equals a modest 1.15 times Lincoln Financial's book value. The company, with $2.25 billion in assets, reported losses of $26.4 million during the past 18 months. At midyear, it was saddled with $100 million of problem assets equaling 7.1% of gross loans.

The Lincoln Financial transaction goes somewhat against the grain of many recent interstate acquisitions, where buyers went after dominant market share statewide.

Community-Oriented Strategy

Upon completion of the deal, expected in the first quarter of next year, Minneapolis-based Norwest will have the fifth-largest franchise in Indiana, lagging behind the positions of Banc One Corp., NBD Bancorp, and National City Corp. And there are few large takeover targets left.

But Richard M. Kovacevich, Norwest's president and chief operating officer, said the company still can do well with the 85 offices it will have in northern Indiana.

"We tend to focus on market share in communities, rather than on statewide rankings," he said.

Norwest gained a presence in Indiana in 1990 when it acquired First Interstate Corporation of Wisconsin, which owned a $225 million asset banking company in the Hoosier state.

Minimal Dilution Foreseen

Although Mr. Kovacevich conceded that the Lincoln Financial deal represents a turn-around project, the executive said the transaction at most will cause "a couple of pennies per share" of dilution in the first year. Analysts shared that view.

Under the terms of the transaction, Norwest will issue 0.588 shares of common stock for each share of Lincoln Financial stock.

In late trading Thursday, Norwest shares were down 25 cents to $37,125. Lincoln Financial fell 62.5 cents to $20.375.

Lincoln Financial last December retained Goldman, Sachs & Co. to help it find a buyer, but analysts say numerous potential acquirers backed off after looking at the books.

Mission: Find a Buyer

"It seems that after looking at the loan portfolio they came walking out holding their noses," said Kenneth Puglisi, an analyst at Chicago Corp.

Lincoln Financial in March named Douglas Ebert, former chief executive of the failed Southeast Banking Corp., Miami, as acting chief executive.

Mr. Ebert was given the mission of finding a buyer. In an interview, he said the issue he had to surmount was "getting people to understand where we were in terms of asset quality."

Norwest's current Indiana operation of 26 offices is concentrated in South Bend. Lincoln Financial will give the $40 billion-asset superregional access to an intercity corridor with a population of over 1.2 million.

Indiana's Largest Player

Norwest's entry comes late on the heels of a flurry of merger activity in the state. Once it has acquired INB Financial Corp., Indianapolis, NBD will control $11.6 billion of assets in Indiana, making it the largest player in the state.

Banc One will rank second with $6.9 billion of assets. National City will rank third with about $5.5 billion of assets.

Among the institutions remaining independent in Indiana are Fort Wayne National Bank; 1st Source Corp., South Bend; Old National Bancorp, Evansville; Irwin Financial Corp., Columbus; and CNB Bancshares, Evansville.The PartnersAt a Glance Norwest Lincoln Corp. FinancialHead- Minne- Fort Wayne,quarters apolis Ind.CEO Lloyd P. Douglas Johnson E. EbertAssets $40.6 $2.25 billion billionDeposits $25.5 $1.9 billion billionBranches 341 60Employees 27,000 1,300ROA(*) 1.25% NMROE (*) 18.6% NM(*)Six months ended June 30Sources: Company reports

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