Stock market turmoil has subsided, but it is still foiling the expansion plans of some bankers.

Three proposed merger deals have been called off in recent days, all among smaller banks whose stock prices have failed to bounce back despite the market's recent rebound.

The latest move was by Skylands Community Bank and Little Falls Bancorp in New Jersey. They said Thursday that their merger was being canceled by "mutual agreement" because "certain conditions to the closing of the merger might not be satisfied."

Specifically, management feared shareholders would not approve the deal, according to a person familiar with the situation. Investors have registered their discontent by driving Skyland's stock price down 21.7% since the merger was announced Aug. 12, while Little Falls' is off 25.4%.

Such stock valuation slides have also apparently prompted other would-be partners to have second thoughts at the altar.

On Nov. 4, Flag Financial Corp. of LaGrange, Ga., called off its acquisition of Heart of Georgia Bancshares of Mount Vernon, Ga. Flag's stock has fallen 12.8% since the pact was unveiled Aug. 31.

"They didn't feel the timing was right. You'd have to ask them," said J. Daniel Speight Jr., Flag's chief executive. Heart of Georgia chief executive Donald Thigpen did not return a call.

And on Oct. 30 Peninsula Bank of San Diego scrapped a pending merger with Western Bancorp. of Newport Beach, Calif., citing the poor performance of Western's stock versus the Keefe bank index since the deal was announced July 24. Peninsula's chief executive said he doubted his shareholders would approve the deal.

Skylands and Little Falls billed their deal as a merger of equals, with the surviving company to assume the Skylands name. The deal could have perhaps created a takeover target for one the area's larger banks, such as Valley National Bancorp or Summit Bancorp.

But it was unveiled in a tumultuous investment climate, and shareholders disliked the plan from the start. "The conference call was a brutal experience," said a person familiar with the initial conversation between the banks' management and Wall Street analysts.

Larger companies have also been hurt by market fallout, but not to such dire extent. KeyCorp, Charter One Financial Inc., and Triangle Bancorp have sweetened offers to save proposed acquisitions.

Despite market uncertainty, however, deals are still being struck among smaller banks.

Oneida Valley (N.Y.) Bancshares is in the midst of a hostile takeover war. (See report on page 7.) And First Coastal Bankshares of Rocky Mount, N.C., agreed to sell last week to Centura Banks Inc. for a 26% premium over market price.

Still, dealmakers privately say it has been years since so many deals were in jeopardy at once.

Michael Halpin, president of Skylands, based in Hackettstown, N.J., said "overall market conditions are different," in explaining the demise of his deal. Little Falls president Leonard Romaine could not be reached.

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