An Arkansas banking company has dropped acquisition plans, citing a lawsuit against the would-be seller.

United Bancshares of El Dorado said last week that it had terminated its $23 million deal for another Arkansas company, Mountain Bancshares of Yellville.

United has $2.4 billion of assets and owns 13 banks in Arkansas, Texas, and Louisiana. Mountain has $115 million of assets.

Their deal was announced in May. Shortly thereafter a local accounting firm, Ballard & Co., sued Mountain.

The firm accused the bank of conspiracy in connection with its October 1996 hiring of three Ballard employees to start a tax preparation service.

Ballard is asking for $12 million in damages. Mountain had $8.7 million of capital as of June.

Officials from Mountain denied any wrongdoing. "There is no merit to the case, and we intend to fight it in court," said Judy R. Loving, Mountain's chairman, president, and chief executive officer.

Still, she said she understands why United decided to call off the deal. "If I ran a publicly traded company, I would not want to enter into a deal that could affect the stock value," Ms. Loving said. "A $12 million lawsuit grabs headlines here in north-central Arkansas."

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