isn't going to happen. Facing delays in regulatory approval for their unusually structured transaction, Pennsylvania's Progress Financial Corp., Plymouth Meeting, and Roxborough-Manayunk Federal Savings Bank, Philadelphia, have terminated their merger agreement. Officials at the two institutions made their decision after it became clear that it would be approved only after revisions were made that were not acceptable to Progress. W. Kirk Wycoff, president and chief executive of Progress, explained that regulators were requiring Progress to issue more of its common stock than originally planned to comply with federal rules governing conversions. With the recent improvement in the company's earnings and capital, the Progress board felt that would have diluted the holdings of existing stockholders more than it was willing to accept, Mr. Wycoff said in a release. Officials were also concerned that the added shares would have left the combined company overcapitalized, he said. "This is a market where shareholders demand high returns on equity," Mr. Wycoff said in an interview. "Overcapitalization can be difficult." He added, however, that officials believed the transaction would have been approved by regulators otherwise. Under the original transaction, announced in May, Roxborough would have folded its mutual holding company and merged with the Progress subsidiary, which would have been the surviving entity. But Progress would also have issued enough stock to Roxborough depositors to give them control over the new company, while management would have been split between both institutions. The proposed deal had been viewed as a possible alternative to the controversial merger-conversions. Regulators have placed a moratorium on those transactions because of concerns that mutual directors were getting a significant payoff without benefit to depositors. Doug Faucette, partner with Muldoon, Murphy & Faucette in Washington, stressed that the deal fell through because of economic reasons, not regulatory concerns. "The deal got too rich for Progress," he said. "I think people should be careful not to read that as a signal that the deal couldn't move through the regulatory agencies."

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