Attempts to slap a bank and a thrift together can lead to culture clash, as one soured merger in Minnesota illustrates.

On Nov. 1, Redwood Financial Inc., a $51.1 million-asset thrift in Redwood Falls, announced its intent to acquire Olivia Bancorp. Two months later the deal was off - but the irritation remained.

Paul W. Pryor, Redwood's chief executive, declined to elaborate in a Jan. 8 interview: "I don't want to make a story of it," he said.

But George Tesch, majority shareholder of Olivia, with a 55% stake, was willing to comment - volubly. He said Redwood's management and board didn't understand how to work a deal or how a bank operates.

"They didn't know what the hell they wanted, or what they were doing," Mr. Tesch said in an interview.

The failed deal is a reminder that though distinctions between the two industries are fading, thrifts might do well to account for cultural issues when pursuing bank acquisitions. That gives an advantage to thrift buyers that are managed by former commercial bankers.

"It would be a difficult marriage if you had traditional thrift managers buying a commercial bank and trying to run it as a thrift," said David B. Barbour, president and chief executive of Ashland, Ky.-based Classic Bancshares, which bought a thrift in September.

"There are still differences," said Joseph A. Stieven, a banking analyst for Stifel, Nicolaus & Co., St. Louis. And "in an acquisition, a lot more than culture can get in the way; the personalities of CEOs can get in the way."

Merger talks broke down because Redwood wanted to lower its initial offer, $4.4 million in cash and assumption of $829,000 of debt, Mr. Tesch said.

"Upon completion of the due diligence examination, the board of directors of Redwood decided that Redwood could not offer the consideration disclosed in the letter of intent," the bank said in a release.

Redwood wanted to scale back its offer because Olivia held some devalued securities in its portfolio. The $28.9 million-asset bank refused to budge, Mr. Tesch said.

"We said we would not allow that - because if you held the securities to maturity" they would be worth full value, Mr. Tesch said.

Redwood also was confused by the fluctuating amount of participations in Olivia's loan portfolio, a phenomenon Mr. Tesch said is business as usual at the bank, which is heavily into agricultural lending.

"They thought a participation would be like a home loan and sit there and collect interest for eternity," Mr. Tesch said.

Furthermore, Mr. Tesch said, the thrift was tardy in providing the merger agreement.

Mr. Tesch said he called the bank to junk the deal on Christmas Eve.

Redwood's release said "no further negotiations between the parties will be conducted in the foreseeable future." That appears to go double for Mr. Tesch.

"They took a run at us, and we weren't interested in the first place," Mr. Tesch said. "They want to be a bank but they don't know how to go about it."

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