Magazine article American Banker

Higher Expenses Offset AmSouth's Revenue Gains

Magazine article American Banker

Higher Expenses Offset AmSouth's Revenue Gains

Article excerpt

Investors got a chance to look under the hood at AmSouth Bancorp, which Regions Financial Corp. will buy later this year, when the company reported lukewarm second-quarter earnings Tuesday.

The $54 billion-asset Birmingham, Ala., company reported earnings that were flat compared with a year earlier, as higher expenses largely offset revenue gains. AmSouth's net income rose 2% from the first quarter but was virtually unchanged from a year earlier, at $184.7 million. Earnings per share of 53 cents matched the average of analysts' estimates, according to Thomson Financial.

AmSouth's quarterly report was the first since the company said on May 25 it would sell itself to Regions, which is also based in Birmingham.

The deal, which is valued at $9.8 billion, is set to close in the fourth quarter, and its success hinges largely on Regions' ability to follow through on $400 million in promised expense cuts.

AmSouth chairman, president, and chief executive C. Dowd Ritter used a conference call to discuss the quarter to again defend the deal, which values his company at a 2% discount to its closing price May 24.

"We've always run this company with an eye on long-term profitability and shareholder value in mind," he said. "We are confident that this is absolutely the right time and the right partner to help us create that value," he added.

Todd Hagerman, an analyst at Fox-Pitt, Kelton Inc., said that the quarter contained "very few surprises," as Wall Street expected a slowdown in balance-sheet growth. He said in an interview Tuesday that investors would be paying more attention to the acquisition.

Net interest income rose 1.3% from the first quarter and 6.4% from a year earlier, to $402.8 million.

The net interest margin shrank 3 basis points from the first quarter and 1 basis point from a year earlier, to 3. …

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