Six Rivers National Bank in Eureka, Calif., rejected the second hostile takeover bid in two months from hometown rival Humboldt Bancorp late Wednesday night.
Humboldt had offered to pay $17.25 a share, or $26 million, for troubled Six Rivers, which lost $1.1 million in 1998. The bid would have given Six Rivers shareholders a 25% premium over the Wednesday closing price of $13.75.
But at Six Rivers' annual meeting Wednesday evening, chairman William T. Kay told shareholders the board is not ready to throw in the towel. He said the bank could fetch a higher price later if it remains committed to improving asset quality and earnings.
"To sell now would be to sell ourselves short," Mr. Kay said. "We have made great strides the past few months, but it is only the first step."
Humboldt, parent of Humboldt Bank and Capitol Valley Bank in Roseville, Calif., has $329 million of assets. Six Rivers has $203 million. Each operates eight branches in Northern California.
Six Rivers' stock price has soared 20% this month on rumors the bank may be sold. It was at $13.25 in midday trading Thursday.
Theodore S. Mason, Humboldt's president and chief executive officer, said Thursday that his bid remains on the table. He said the combined operations would be able to compete more effectively against bigger banks and credit unions.
"One community bank is better than two small banks," said Mr. Mason, noting that Humboldt County is a slow-growth market with a population of just 135,000.
Humboldt's unsolicited offer was its second this year and third since 1997. In March its bid, also for $17.25 per share, was rejected.
Humboldt had offered $21.75 a share in January 1997, but Six Rivers rejected the bid, saying "its value as an independent entity exceeded the value of Humboldt's offer."
But Six Rivers' fortunes have changed since then. Its president and CEO, John F. Burger, resigned last September after a $2.9 million loan went sour. That forced the bank to charge off $1.1 million and restate second- quarter 1998 earnings to reflect a $499,000 loss.
The bank has shown some improvement of late, reporting first-quarter earnings of $321,000. But analysts said any substantial improvement-if it occurs-could not be expected until later this year.
"I'm worried about loan growth," said James R. Bradshaw, an analyst at Pacific Crest Securities in Portland, Ore. "It is tough to find quality loans in Eureka."