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Positive impact from Regions-AmSouth deal anticipated

The proposed merger of Regions Financial Corp. and AmSouth Bancorporation, expected to be approved and finalized later this year, will probably result in layoffs at the some of the bank branches in Mississippi, but positive impacts are also expected in the state.

The merger could cost 10% to 15% of the 37,000 jobs at the two institutions, cuts that will help the company in a goal to reduce costs by $400 million by 2008. Many of the job cuts are expected to be in Alabama, where the two banks have the most overlap.

It is too early in the process to know how many jobs might be lost in Mississippi, said Sonya L. Smith, vice president and manager of national media relations and executive communications for Regions.

“We do have more overlap markets in Alabama,” Smith said. “But at this time, we are still waiting to hear from the Department of Justice regarding divestitures. As in any transaction of this kind, there is the unfortunate reality that some associates/employees from both companies may lose their jobs. However, we expect that the number of people directly affected will be reduced because the normal pace of attrition will address many of the position reductions. All of our decisions will be made carefully with consideration and respect for the people who have helped build two great companies.”

Regions mortgage headquarters will be moved from Memphis to Birmingham, but the servicing operations will remain in Hattiesburg — good news for Hattiesburg employees.

Smith said they expect that the growth of the company, that combined will have five million customers, will lead to expanded career opportunities for associates. And she said the new company will work diligently to place associates in open positions. Employees who lose their jobs as a result of the merger will receive severance and transition assistance to help them find new positions.

Smith said the combined company, which will retain the Regions name, will provide long-term benefits for shareholders by creating a regional financial powerhouse with a broad and balanced mix of business for sustained growth.

“This strategic partnership of Regions and AmSouth represents a powerful combination of a leading presence in our core markets and strong, complementary business lines like Morgan Keegan, one of the leading securities brokerage companies in the United States, and AmSouth’s successful trust and private banking businesses,” Smith said. “Regions and AmSouth share a common desire and dedication to improving the quality of life in the communities we serve. We will continue our support of the communities in which our customers and associates work and live.”

Consolidation, but…

Commissioner John Allison, Mississippi Department of Banking and Consumer Finance, said some bank branches in Mississippi are expected to be closed as a result of the merger.

“It would mean some consolidation in Mississippi, but not to the extent that would be seen in other states, like Alabama, where there is a lot of overlap in several markets,” Allison said. “In that situation where two merged institutions go together, if the resulting institution takes more than 50% of the market, there has to be some divestiture, and the institutions know that. They will have to put the excess deposits, if you will, on the market for bid by other institutions. There will be a couple of places in Mississippi where that will be required. Under our law, only Mississippi banks will be allowed to bid on those institutions because it will be just branches for sale.”

Under Mississippi law, an out-of-state bank can’t come in and buy just a branch. It must purchase the entire bank system.
While there might be some front end job losses in Mississippi as a result of the merger, Allison believes most of the employees won’t have a problem getting another job.
“It will be competent bankers and rank-and-file people who will be moved to other institutions,” Allison said. “They will be absorbed in the system. If one of these branches is sold, for example, the acquiring bank will need the personnel.”

Allison speculated that most of the downsizing might be at the big operations center in Alabama.

In the Jackson area, Allison doesn’t expect Regions will be mandated to divest. But there are several other locations in the state where there is more overlap, and some divestiture may be required.

The merger could end up being positive for the state.

“It will bring a huge financial institution to the market that can do some things some of the smaller companies can’t, without partnering with other institutions,” Allison said. “Regions consolidated institutions will be worth $145 billion, which will make it according to the press release, the 10th largest banking institution in America.”

Regions and AmSouth have committed to a $100-billion investment in the region over the next seven years to support community development, small business lending and mortgage lending for low-income communities and borrowers. That includes at least $50 billion in loans to small businesses; $40 billion in mortgages to low- and moderate-income families or families in low- and moderate-income neighborhoods; $10 billion in community development lending and investments; formation of the Regions Community Development Corporation to provide technical assistance to nonprofit organizations; promoting responsible lending practices and fair lending initiatives; and expanded homeownership and financial literacy programs.

While that will be spread out among the 16 states the bank will operate in, Allison said that is a very good commitment, and there should be some people in Mississippi who benefit.

“I know several of the institutions in the top tier of banking institutions, in the top 10 or 15, have very similar programs and they have worked very well,” Allison said. “It gives some people who might be struggling access to capital markets. They may be in good shape, but this helps them get over the hump.”

Continuing a trend

The merger of Regions and AmSouth continues a consolidation trend in banking. When Allison started in banking regulation 35 years ago, there were approximately 20,000 financial institutions in the country. Now there are less than 9,000.

“Is that better or worse?” Allison asks. “Usually mergers of this type, or even in state, spin off new institutions. It turns out to be good. Deposit Guarantee and First American out of Nashville merged, spurring several new charters in Mississippi for community banks. There are always going to be the new players who want to help the community. Bigger isn’t always better, but they do offer a lot of products and services.”

Allison expects the trend for consolidation to continue.

Little impact is expected on customers. Allison said situations like this are common in the banking industry, and it takes great pride in making sure acquiring customers are treated properly.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

About Becky Gillette

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