Association and America's Community Bankers canceled their proposed merger on Wednesday.
The eight-member negotiating committee, formed in late July when the planned merger was unveiled, concluded after 10 meetings that disagreements over control of the combined entity could not be resolved.
The failed deal represents the latest, and largest, example of banking trade groups that cannot overcome traditional political and institutional rivalries despite their avowed need to establish a unified front on Capitol Hill.
"Both associations found that there were hurdles that could not be overcome at this time as they relate to governance and leadership,'' ABA chairman R. Scott Jones said in a phone interview.
"We were all somewhat saddened," said Mr. Jones, who is also chairman and chief executive of Goodhue County National Bank in Red Wing, Minn. "But we all believe it was the right decision at this time."
The ABA had demanded a sizeable majority of seats on the new board because it has far larger financial resources than the ACB and more than four times as many members. ACB negotiators did not object to giving former ABA members more seats, Mr. Jones said, but sought a smaller majority than the ABA would accept.
The ABA negotiators also wanted to make ABA executive vice president Donald G. Ogilvie the head of the combined organization, but ACB negotiators insisted that an impartial outsider be hired to lead the new group.
David A. Bochnowski, ACB's second vice chairman as well as chairman and chief executive of Peoples Bank in Munster, Ind., declined to comment on Mr. Jones' explanation. Sources close to ACB confirmed the account, however, and said the thrift group's negotiators had sought either a 6-6 board split or a 7-5 split favoring the ABA.
Opponents of the deal celebrated the decision to end the talks and said objections from the rank and file forced the decision. Twenty thrift industry executives, including some ACB board members, had planned to criticize the merger proposal this week.
"There was growing opposition (among members) on both sides," said James R. Turner, president of Heartland Community Bankers.
"The merger of the ABA and the ACB is like a decision to merge the Catholics and the Baptists," said Dan Digby, president of the Community Bankers Association of Louisiana. "There were cultural differences that could just not be resolved ... The ACB officers were naive going into the negotiations."
Officials from both trade groups denied that policy disputes -- such as disagreement over whether unitary thrifts should be able to merge with commercial companies -- were a factor. But other industry representatives said matters such as board voting strength are particularly crucial, because thrifts want enough power to defend their interests.
"There was tremendous concern about being overwhelmed" by commercial bankers and "not having anyone at the national level to defend your charter and regulatory structure,'' said Lou Nevins, president of the Western League of Savings Institutions.
Such industry conflicts are not unusual. The Association of Financial Services Holding Companies last month rejected overtures by the Financial Services Roundtable because of clashes between bank and nonbank interests.
Yet merger supporters say the decision to cancel the ABA-ACB talks was only a temporary setback. "A merger is inevitable," said Thad Woodard, president of the North Carolina Bankers Association.
Meanwhile, the ACB must hire a new president to replace Paul A. Schosberg, who plans to step down by yearend. Mr. Bochnowski said the group has pared its search to fewer than 10 candidates and will begin interviewing them this month. Mr. Schosberg said Wednesday that he is willing to stay longer if necessary.
Internal disputes are confronting the ACB, too. Despite helping to defeat the merger, 11 state thrift groups still plan to meet in St. Louis on Sept. 16-17 to consider forming a rival trade group. "You need a trade association that is committed to being a thrift group that is not trying to be a commercial bank group," Mr. Turner said.