working for them been so stark as at merger partners U.S. Bancorp and West One Bancorp, the biggest banks, respectively, in Oregon and Idaho. For senior management at both companies, things could hardly be more pleasant. As a condition of the merger, each of West One's top six executives would get important jobs in the new bank, which will have assets of more than $30 billion. If for some reason they lose their jobs, these bankers would be entitled to golden parachutes worth millions of dollars. West One chairman Daniel Nelson initially will be president of the merged company, with U.S. Bancorp counterpart Gerry B. Cameron running the show. But should Mr. Nelson remain until Mr. Cameron's scheduled retirement in 1998, he is slotted to inherit the top job. Meanwhile, the mood of hundreds of employees in West One headquarters in Boise, could hardly be more glum. Many insiders reportedly were shocked when the merger was announced. They had thought the company would not be bought out as long as it continued to post strong profits. Many insiders also have complained that West One, with $9.2 billion of assets, sold out to an inferior company, since Portland-based U.S. Bancorp had posted mediocre returns in recent years. Some also have said that another bank, such as Norwest Corp., might have paid more and laid off fewer people. "One thing I don't buy anymore is that if you get yourself lean and mean you can stay independent," said one West One manager whose job is being eliminated. "That's right up there with the three biggest lies now," added the manager, who requested anonymity. Added Jack B. Little, a former West One director: "I think the deal was made strictly for the benefit of management, without regard for the stockholder, the employee, the customer, or the community." Mr. Little, a Boise native and West One director since 1980, was the only director from either bank to oppose the merger. He resigned shortly after the boards approved the deal. The hard feelings in Boise are understandable, since West One will bear the brunt of the 1,100 layoffs expected as a result of the deal. The job losses would affect about a fifth of West One's employees. Job losses in Boise will be painful, since West One is by far the biggest bank in town. The mood is especially bleak now, since pink slips are currently being distributed. Not that this has had any negative effect on the deal. In fact, both chairmen say they look forward to working together because they feel such compatibility, and have become friends. "We found there were a heck of a lot more things we had in common than not in common," Mr. Cameron said. During three days of golfing, grilling steaks, and drinking wine in the summer of 1994 at Mr. Cameron's Black Butte, Ore., vacation home, the chairmen learned that their backgrounds were remarkably similar. Both chairmen were born in Washington state, only a year apart - Mr. Nelson in 1937, Mr. Cameron in 1938. Each has been married more than 30 years. They also have spent their entire careers in banking, and have enjoyed remarkable advancement from decidedly low levels. Mr. Nelson got his start in the business as a repo man; Mr. Cameron, as a bookkeeper. Mr. Nelson and Mr. Cameron have argued persuasively that the merger is good for shareholders of both companies. For his part, Mr. Nelson maintains that West One was not big enough to make the investments in technology required to remain competitive. If, as planned, the two banks merge later this year, they will not only dominate Idaho and Oregon, but they will vie with BankAmerica Corp.'s Seafirst unit for market leadership in Washington. The combined bank also will have potentially lucrative operations in Northern California, Nevada, and Utah that management hopes to expand - possibly through acquisitions. In the meantime, Mr. Cameron and Mr. Nelson appear to have convinced initially dubious investors and analysts that they should at least give the deal a chance. "It's a great combination, with two well-performing companies coming together in an area of economic growth," Mr. Cameron said. Also, since so many West One managers will be going to the merged bank, West One investors will get stock in a company run to a large extent by managers they were already backing. Mr. Cameron touts the cost-cutting potential of the deal, and the benefits of expanding U.S. Bancorp's operations into new, fast-growing markets. Stockholders from both companies overwhelmingly approved the merger in proxy votes earlier this year. Just as important, the merger is no longer hurting U.S. Bancorp's stock price. The acquisition, which was announced May 8, calls for U.S. Bancorp to exchange 1.47 shares of its common stock for each share of West One common. The estimated price tag of $1.6 billion is approximately equal to twice West One's book value. The merger is expected to dilute U.S. Bancorp's earnings by about 2% next year, and to be accretive thereafter. The initial earnings dilution, and investor concern that U.S. Bancorp would not be able to cut expenses by $84 million as planned, caused its stock to drop by $3.25, to $23.50, in the two days following the acquisition announcement. But since then U.S. Bancorp's stock has rebounded, and has recently traded near its high for the year of $32.25, or just over 11 times this year's expected earnings. Many analysts at first criticized the deal. But in recent months the criticisms have diminished, and have been replaced by praise of U.S. Bancorp's recent turnaround. Analysts are enthusiastic about U.S. Bancorp's cost-cutting efforts, which in the quarter ended Sept. 30 enabled it to achieve its goal of an efficiency ratio under 59% This ratio, which measures the percentage of revenues consumed by noninterest expenses, fell to 57.47% in the quarter, due primarily to the elimination of more than 3,000 jobs over the past year. The cost-cutting boosted U.S. Bancorp's return on average assets to 1.52%, its highest ever, and its return on average equity to 17.63%, the highest level in 15 years. "I'm really high on those guys. I think they're doing a tremendous job," said James Marks, an analyst in San Francisco with Hancock Institutional Equity Services. West One also reported strong third quarter results, boosting net income 21% from the previous year to $32.9 million, as return on assets rose to 1.43% and return on equity rose to 18.04% U.S. Bancorp is often mentioned as a potential takeover candidate. But if the company manages to increase revenues while meeting its merger- related cost-cutting goals, it will make a compelling argument for remaining independent, said Sandra J. Flannigan, a bank stock analyst in New York with Merrill Lynch & Co. What's more, analysts and company insiders now say they have every reason to believe that U.S. Bancorp will meet its cost-cutting goals. The strength of the Oregon and Idaho economies also should help it increase revenues. "A lot of the early numbers were estimates, seat of the pants stuff," said Gary Duim, head of U.S. Bancorp's corporate banking group. But now that merger plans have been firmed up, "unless something really goes wrong, there is no question in my mind that they will be achieved something plus," Mr. Duim added. Analysts noted that, for U.S. Bancorp's sake, Mr. Duim better be right. "If they stumble, it makes them more vulnerable" to a takeover, Ms. Flannigan said. One risk is that management instability could knock the bank off track. Indeed, there is concern that designating Mr. Nelson as Mr. Cameron's successor three years early could prompt high-level departures and management instability. "With Nelson taking charge, I see a recipe for chaos in the next couple of years until the chain of command is clearly established," said R. Jay Tejera, a stock analyst in Seattle with Dain Bosworth Inc. But officials from both banks say that such speculation is groundless. "To me, they make those comments when they don't have a clue what's happening in this company," Mr. Cameron said. For his part, Mr. Nelson said that while he will be in charge of retail banking and commercial lending, he plans to spend most of his time meeting with customers. "You know, just because we're putting these companies together doesn't mean we're going to park it at the curb and celebrate," Mr. Nelson said. "We need to keep on moving. And that's the part I find exciting."

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