ATLANTA (Dow Jones) -- United Parcel Service Inc. (UPS) will buy First International Bancorp Inc. (FNCE) for about $78 million in UPS Class B common shares, based on the stock's Friday closing price of $58.94.

In a press release Tuesday, UPS said it expects the acquisition to be non-dilutive to earnings per share in 2001 and slightly accretive in 2002.

A First Call/Thomson Financial survey of 19 analysts produced a mean earnings estimate for UPS of $2.64 a share for 2001, and a survey of eight analysts produced a mean earnings estimate of $2.99 a share for the company's fiscal year 2002.

UPS said First International shareholders will receive UPS Class B common stock in exchange for shares of First International common shares, based on the number of shares of First International outstanding at closing.

As of Sept. 30, First International had about 8.3 million shares outstanding. Based on this figure, UPS would issue about 1.3 million shares of UPS Class B common shares in the merger, or about 0.160 shares of UPS Class B common stock for each share of First International.

First International's shares closed Friday at $7.22 on Nasdaq trading.

The exchange ratio is subject to a "collar" if the transaction is completed after July 31, 2001.

The total price paid by UPS is subject to reduction based on the net book value of First International when the deal closes.

Based on UPS' Friday closing price, about 10% of the stock to be issued in the merger will be placed in escrow pending the performance of First International's loan portfolio during the 12 months following the closing.

UPS expects the deal to close mid-to-late second quarter 2001, pending regulatory and shareholder approval.

However, First International shareholders controlling 53% of the outstanding shares have agreed to vote in favor of the transaction.

UPS said First International's expertise in government-backed lending will expand the capabilities of UPS' financial services arm, UPS Capital Corp.First International, parent company of First International Bank, provides credit, trade and financial solutions for small and medium-sized industrial businesses. As of Sept. 30, it managed a loan portfolio of $1.2 million, about two-thirds of which is substantially guaranteed or insured by U.S. government agencies.

As a condition to the completion of the acquisition, prior to closing, First International will sell all of its deposits, roughly $260 million, to a third party.

As a result, First International's operating unit will cease to be a federally insured depository institution regulated by the FDIC and the parent company will cease to be a bank holding company regulated by the Federal Reserve Board.