A Pennsylvania holding company says its ownership of a unionized bank is hindering the growth of a sister bank.
So $2.4 billion-asset USBancorp of Johnstown announced this week that it will spin off the nonunion subsidiary, $1 billion-asset Three Rivers Bank and Trust in Jefferson, Pa.
The company blames its flat stock price on the fact that most employees of its lead affiliate, U.S. Bank, belong to the United Steelworkers of America.
U.S. Bank is "a unionized bank in a nonunionized industry, and that has an impact on our stock," said Terry K. Dunkle, USBancorp's chairman and chief executive officer. "We have come to the conclusion that the business plans of the two banks are incompatible."
Three Rivers should be a hit with investors once the connection is severed, Mr. Dunkle said. Strong stock would give the bank the currency to make acquisitions, he said.
Mr. Dunkle would become chairman and CEO of the newly independent Three Rivers. He would remain CEO of USBancorp but relinquish its chairmanship.
Three Rivers operates 25 branches in the Pittsburgh suburbs. U.S. Bank, with $1.4 billion of assets and 21 branches, does business about 100 miles away, in less-populated central Pennsylvania.
The spinoff is expected to be completed in early 2000. USBancorp plans to issue one Three Rivers share for each share of USBancorp stock.
About 250 U.S. Bank employees belong to the steelworkers union. The affiliation dates to 1972, when the steel and coal industries ran Johnstown and the union represented almost every employee in town.
U.S. Bank has 25% of the deposits in its home county and does not need new capital to expand, Mr. Dunkle said. It has used its union affiliation as a marketing advantage.
But Three Rivers, which has just 2% of deposits in its native Allegheny County, would need a strong stock to buy other banks.
Aside from a brief spike last year when all bank stocks took off, USBancorp's stock has been trading at about the same price-adjusted for a stock split-since the spring of 1997.
The stock was trading at $16 at midday Tuesday.
The two banks intend to sign an agreement under which USBancorp would continue to provide back-office services, such as asset and liability management, for Three Rivers until the bank builds its own staff.
Mr. Dunkle does not expect the two banks to compete. He said U.S. Bank will look to expand into central Pennsylvania towns such as State College or Altoona, while Three Rivers focuses on suburban Pittsburgh.
Brock Vandervliet, with Keefe, Bruyette & Woods Inc. in New York, said he expects that the spinoff will earn Three Rivers the Wall Street attention it desires.
"Standing alone, Three Rivers is union-free and doing business in an attractive area," he said. "They are creating a very attractive franchise."