Is there a future for a $10-billion-asset bank? Daniel R. Nelson cast a "no" vote when he decided to merge his Idaho-based company, West One Bancorp, with U.S. Bancorp in one of the year's biggest deals, initially valued at $1.6 billion, or twice West One's book value.

Asked what prompted the union, Nelson told analysts that "I'm not sure 10 (billion dollars) is survivable." The West One CEO noted that the highly profitable, $8.7-billion-asset West One was facing major expenditures to improve its back office, and "I'm not sure we could do (that) at our size."

Nelson said the merger came together very quickly in May--and a look at the company's recent annual report bears that out. In his chairman's letter, Nelson looks out five years and sees "the bank to be in the same basic geographic area (and) double its present size."

[Expanded Picture]Try almost four times, and by this year's final quarter. The combined bank will keep the U.S. Bancorp name and be headquartered in its current hometown of Portland, OR; it will have $30 billion in assets and the dominant franchise in the Northwest. "Anyone who wants to come to the Northwest has to come through us," asserted U.S. Bancorp chairman Gerry Cameron, who will remain chief executive through 1998, when he plans to retire and give Nelson his turn.

The deal could give analysts more reason to bark at U.S. Bancorp, which fell out of favor late in 1993 when its efficiency ratio ballooned to 75%. Cameron, who came in as CEO early in 1994, has been aggressively pruning headcount (it's down 24% since 1993) and selling off units in an effort to drive the ratio down to 59% by 1996.

He insisted that the deal won't keep U.S. Bancorp from hitting that target, though he conceded it won't be accretive to earnings until 1997. Both CEOs believe a "robust" market in the Northwest will serve them well on the revenue side as they cut costs; some $84 million in targeted expense reductions have been identified, with a loss of some 1,100 jobs.

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