Sovereign Bancorp said it has agreed to purchase West Caldwell, N.J.-based First State Financial Services for $60.7 million in stock.

First State has $630 million in assets.

The purchase price equaled 1.41 times First State's book value and 15.5 times trailing 12-months earnings.

Sovereign said it expects to issue 5.8 million new shares to pay for the deal.

Sovereign will exchange a fixed price of $14.75 in common stock for each outstanding share of First State, but the price will be adjusted if the average Sovereign stock price goes below $9 or above $11.45 per share.

If the average price for Sovereign stock falls below $8 per share, shareholders with First State stock may terminate the transaction.

Sovereign said the deal is expected to close late in the fourth quarter or in early 1997.

Following the completion of the merger, Sovereign's lead bank would absorb First State's banking subsidiary, First Dewitt Bank, which has 13 branches in central and northen New Jersey.

"When combined with the recent completion of acquiring West Jersey Bancshares, the acquisition of First State will give Sovereign the No. 5 market share in Essex County, versus the No. 19 market share only one year ago," said Jay S. Sidhu, president and chief executive of Sovereign.

Separately, Sovereign Bancorp said it has elected Brian Hard to its board of directors.

Mr. Hard is the president of Penske Truck Leasing and Leaseway Transportation.

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