Alabama Bank Agrees to Buy Regional Rival

Regions Financial Corp. said Thursday that it had agreed to acquire rival Alabama-based bank AmSouth Bancorp for nearly $10 billion, creating a top-10 U.S. bank that can better compete with bigger, national players.

The deal is the latest in a string of regional bank deals in the United States, with more expected as lenders seek ways to cut costs as they face thinner profit margins amid rising interest rates and a slowdown in mortgage business.

The combined bank, which would keep the Regions name, would have a market value of about $26 billion, nearly $140 billion in assets and 2,000 branches in 16 Southeast states. It would dominate Alabama with 30% of deposits and become Florida’s fourth-largest bank. Both banks are based in Birmingham.

“Competition in our industry increasingly requires greater size and greater diversification,” AmSouth Chief Executive Dowd Ritter said.

Regions expects to extract $400 million in cost savings, or about 10% of the combined bank’s expenses, and expects to incur restructuring costs of about $700 million.

Executives estimate they would cut staffing by 10%, or as many as 4,000 jobs, with the sale of about 150 branches.

Billed as a merger, AmSouth shareholders would get 0.797 Regions share for each AmSouth share, worth $28.33 a share based on Regions’ closing price Wednesday -- 2% below AmSouth’s $28.90 at the close of regular trading.

The proposed merger is the third-largest bank deal this year, behind Wachovia Corp’s purchase of Oakland-based Golden West Financial Corp. for $25 billion and Capital One Financial’s purchase of North Fork Bancorp Inc. for $15 billion.

Although Regions is the bigger bank and buyer, Ritter, 58, would be chief of the combined company. Regions’ CEO, Jackson Moore, who recovered from a stroke last year, would become chairman.

Some investors questioned whether Ritter settled for less in exchange for the top job.

The deal is the latest move by Regions to expand its presence in the southeastern U.S., a formerly rural section that now boasts several fast-growing markets.

Shares of Regions fell $1.09 to $34.44, and AmSouth fell 90 cents to $28.