Usb, Wheatland Scrap Merger Banks Blame Soaring Stock Prices, Unbending Regulators

Stubborn regulators and soaring stock prices have scuttled a merger between two Inland Northwest banks.

United Security Bancorporation and The Wheatland Bank Monday announced they were scrapping the $12.5 million transaction.

Terms had called for the exchange of 2.5 shares of USB stock for each share of Wheatland stock. When the merger was disclosed in May, USB stock was selling for $13 per share.

Wheatland Chairman Roger Underwood said the exchange rate held as long as USB stock traded below $15.40 per share.

Since May, shares have traded as high as $19. They closed Tuesday at $18.

Underwood said USB and Wheatland representatives tried unsuccessfully to renegotiate the exchange rate. The team from Davenport-based Wheatland felt at least part of the price appreciation enjoyed by USB was due to news of the Wheatland merger, and members wanted any new terms to reflect that, he said.

“We were quite a few dollars apart,” Underwood said.

USB has also purchased five Wells Fargo branches, and a merger with Community Bancorporation, owner of Bank of Pullman, could close later this month.

William “Bud” Dashiell, USB’s president, said the U.S. Securities and Exchange Commission had its own reservations about the deal.

The Wheatland merger was to be handled as a pooling of interests, an accounting measure that would have minimized the impact on USB earnings.

Also, Wheatland shareholders would have avoided capital gains taxes.

But, Underwood said, the SEC would not permit a pooling of interests because Wheatland had paid its dividends in stock the last three years.

The SEC considers that any such dividends made within two years of a merger anticipate the deal. Pooling is not allowed unless there are documents that prove no merger was in the wind, Underwood said.

He said the minutes of Wheatland board of director meetings do not include an explanation for the decision to switch from cash to stock dividends.

Dashiell and Underwood were not able to convince SEC officials that the change was made to support share prices while making stock available to employees.

“It was like talking to a wall,” Underwood said.

He said the Wheatland board will now channel its efforts toward continued strengthening of the bank, which has branches in five communities.

The bank will have its best year ever in 1997, he said, and officials will look for expansion opportunities.

Although their merger is dead for now, Wheatland and USB will continue to see a lot of each other.

One of the Wells Fargo branches bought by USB is across the street from Wheatland’s Davenport headquarters.

Underwood and Dashiell said they expect tough but amiable competition.

“We look forward to the challenge,” Dashiell said.

“Competition is competition,” said Underwood. “We will try to be the better bank.”

Wheatland operates five branches. USB is the holding company for United Security Bank, with 11 branches in Eastern Washington, and Home Security Bank, with five branches in Central Washington.

, DataTimes