Memphis-based Union Planters Corp. said this week it has bought seven retail mortgage offices in Northern California from First City Financial Corp. of Denver.

The Tennessee banking company, which has been expanding rapidly in the Southeast, is going after the fee income these branches would generate, analysts said.

"They just bought these branches to sell their loans back into the secondary market," said Christopher Kelley, a bank analyst at Morgan Keegan & Co. "I don't think this is any kind of signal that they are trying to bank California."

He said Union Planters entered the mortgage business three years ago, buying a savings and loan.

Terms of the branch sale were not disclosed. The branches are expected to generate about $6 million of fee income in the next 12 months. Union Planters earned $225.6 million last year, compared with $339.8 million in 1997.

The market has reacted coolly to Union Planters' 1998 acquisition spree, and the banking company needs fee income to boost earnings, analysts said. Union Planters bought 18 financial institutions last year, increasing assets to $31.7 billion, from $18.1 billion.

Its stock price rose 12.5 cents Thursday, to $42.375 a share, down 31.9% from the 52-week high of $62.1875.

"Union Planters' plate is clearly full at the current time following a period of aggressive expansion," said Michael L. Mayo, managing director at Credit Suisse First Boston. "They need to get their house in order before expanding any further."

Douglas Miller, a senior vice president at Union Planters, said the expansion into California made good fiscal sense because the state's market is solid, even in rougher economic times. The company entered the California market in December by opening a wholesale branch in Irvine.

"We are not planning any other banking expansion there right now," Mr. Miller said.

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