Northeast Bancorp of Connecticut has rejected a takeover bid from Shawmut National Corp., but Shawmut is continuing to negotiate with Boston-based UST Corp., sources said Wednesday.

The pending bid for Northeast delayed by one day - until today - the closing of a $150 million subordinated debt issue by Shawmut.

Share Prices Rise

Shawmut, based in Hartford, Conn., issued a statement that it had ended takeover talks with an undisclosed company. Shawmut's share price was up 31 cents on Wednesday, to $18.875; Northeast's was up 87.5 cents, to $7.625.

Shawmut this week offered to pay $65 million to $86.4 million for Northeast, a source said. Northeast's board reportedly rejected the offer Wednesday because it was substantially less than the company's $123.4 million book value.

That cleared the way for Shawmut to proceed with its debt deal.

Preliminary Talks

Meanwhile, early stage negotiations were underway with UST Corp., which has $2.3 billion in assets and banking operations in Shawmut's principal markets of Connecticut and Massachusetts.

UST's stock was at $9.25 a share late Wednesday, up 62.5 cents.

Officials at both Northeast, a $2.8 billion-asset company based in Stamford, Conn., and UST declined to comment.

Shawmut confirmed Wednesday that talks with an "in-market acquisition target" had been ended.

The company said it would continue to talk with other possible acquisition candidates in its three-state market, including deals that could involve government assistance.

Prime Territory

Northeast has been struggling with asset-quality problems but has a major presence in affluent Fairfield County, an area Shawmut has long coveted.

Talks between Shawmut and UST were "much more" preliminary than those between Shawmut and Northeast, a source said.

The source said Shawmut was reviewing UST's books but had made no offer.

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