Building on its strong presence in northern Ohio, FirstMerit Corp. of Akron said Tuesday that it would buy Signal Corp. for about $470 million in stock.

The deal for Signal, a $1.9 billion-asset thrift company based in Wooster, Ohio, is the second in-state acquisition agreement FirstMerit has announded in four months. In April, FirstMerit said it would buy Security First Corp. of Mayfield Heights for about $256 million in stock. FirstMerit would have $8.8 billion of assets and 177 branches, almost all in north central and northeastern Ohio.

"This is an excellent strategic fit," said John R. Cochran, chairman and chief executive officer of FirstMerit. "FirstMerit will increase its dominance in several key northeast Ohio communities as well as gain a strong entrance to contiguous markets."

Signal operates as Signal Bank and Summit Bank in Ohio and as First Federal Savings Bank of New Castle in Pennsylvania. The company also owns a mobile-home finance company, Mobile Consultants.

FirstMerit said it would close 11 of Signal's 32 branches. It said it plans to cut $16.7 million, or one-third, of Signal's operating costs and take a charge against earnings of about $52 million pretax to account for merger costs.

The Signal acquisition, which is expected to close in the first quarter, would be FirstMerit's largest. But Timothy Willi, an analyst with A.G. Edwards & Sons Inc., St. Louis, said it is consistent with the company's strategy. "They've been quite successful finding people to partner with them," Mr. Willi said.

But, he said, the market may question whether FirstMerit has "bitten off more than it could chew."

The company expects to close its acquisition of Security First, a $678 million-asset thrift company, in October.

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Like most midwestern states, Ohio is still filled with small banks that are ripe for takeovers, analysts said. But the field of potential buyers is dwindling, as regional giants like Banc One Corp. no longer want to buy $1 billion- to $2 billion-asset companies.

"Small banks are realizing their window of opportunity is closing," Mr. Willi said. "I think you're going to see more deals like this."

Still, another analyst said he was surprised Signal sold. "They appeared to have a solid plan for increasing earnings through 1999," said Ross Demmerle of McDonald & Co. Securities, Cleveland. "But you get an offer you can't refuse and you have to address it. And I think that's what they got."

FirstMerit is paying three times Signal's book value and 18 times its projected 1999 earnings. Analysts said the pricing was in line with comparable deals.

Asked if FirstMerit is still on the prowl for deals, Mr. Cochran said in a conference call, "We'll take those one case at a time. We'll not stretch ourselves. We're very comfortable with what we're able to bring on."

Cost savings and added revenue from the Signal deal would make the acquisition add to earnings within one year, FirstMerit officials said.

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