Regions, AmSouth deal is blockbuster
New firm would hold 39% of local deposits; cost-cutting part of plan
Friday, May 26, 2006
The AmSouth building, prominent in the Huntsville skyline, may have a slight face-lift following Thursday's announcement of a merger between Regions and AmSouth banks.
The combined company will be called Regions Financial Corp. Bank officials said they hope the merger will be completed, with regulatory and shareholder approval, by year's end and the overall operation transition completed by next spring.
Regions Financial and AmSouth Bancorp have a combined 39 percent of the Madison County banking market, a number that probably will have to shrink for the proposed merger to be approved.
In the merger between the Birmingham-based banks, Regions agrees to pay AmSouth stockholders a 0.7974 share for every AmSouth share. The combined bank would be the nation's 10th-largest financial holding company, with 2,000 branches and 37,000 employees.
Bank officials said the deal will result in greater strength due to the increased capital for reinvestment or share buybacks and a dominant position in most of its markets.
The combined bank's share of the Huntsville market is close to three times that of the next largest competitor, Compass Bank.
Compass had nearly 15 percent of the local banking customers as of last June, according to Federal Deposit Insurance Corp. figures. Regions had 21.5 percent of the market, while AmSouth had 17.4 percent, the FDIC reported.
There are 16 Regions branches and 13 AmSouth branches in Huntsville, many near each other. That overlap is likely to lead to branch reductions, as the companies said they expect to save $400 million a year as a result of reductions. Regions has 224 employees in Madison County; an AmSouth spokesman said he could not provide an employee number.
Randy Smith, an Ardmore resident, said Thursday that he recently switched to AmSouth in Huntsville because the Ardmore branch had been taken over by a much smaller bank. He said the switch was based on convenience, so Thursday's announcement was welcome news.
"It helps me - my house payment is with Regions," Smith said. "I like AmSouth because they got one on every corner.
"This helps us even more."
The banks will have to sell some of their assets in markets where they have a dominant position, such as Huntsville, to appease federal regulators. It is not clear yet what portion of the Huntsville assets would need to be divested, a bank spokesman said Thursday.
Rick Swagler, an AmSouth spokesman, said the newly formed company would proceed carefully on determining what do with the various properties here and said no decisions have been made about closings, sales or layoffs.
Swagler said the hope is customers won't feel any effects from the merger. He said the banks are considering waiving ATM fees for customers of one bank using the other's machines. He said the new company would inform customers about changes but expects to take care of most issues without disruption.
Swagler said the company has made no decision about the future use or name of the AmSouth building downtown.
Dr. Dorla Evans, who chairs the University of Alabama in Huntsville's Finance and Information Systems Department, said the economic advantages of this kind of deal include reduced processing costs, the ability to provide larger loans and enough cash to reinvest in profitable operations or pay higher dividends.
Evans said customers may see those improved operating efficiencies lead to lower fees, and the banks are trying to become more of a one-stop financial center for customers by offering banking, financial planning and insurance.
"But you do lose some of that competition, and there will be employees looking for jobs," Evans said. "There will be fewer places to get quotes and different terms for loans.
"As banks get bigger, depending on the local market, those cost savings can flow through to you, or not."
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