in what is described as an "alliance" and "working relationship." No financial terms were disclosed, but AmSouth said the financial impact would be negligible. Morgan Keegan said last Friday that five employees from AmSouth's bond sales, trading, and public finance operation would become Morgan Keegan employees and, initially, continue operating from AmSouth's bond department in Birmingham, Ala. Eventually, the five employees - who are expected to be joined by three others - will work out of Morgan Keegan's brokerage office in Birmingham. Eleven other employees from the AmSouth bond unit defected last week to National Bank of Commerce of Birmingham, which has $391 million of assets, apparently in protest of the Morgan Keegan deal. Spokesmen for AmSouth and Morgan Keegan both declined to elaborate on the financial details of the transaction. But Sloan Gibson, a senior executive vice president with AmSouth's commercial banking group, said the bank could earn some income at a later date, depending on how much business "Morgan Keegan does over time." AmSouth did not receive any up-front payment, he added. "Rather than leave these banks high and dry, AmSouth has worked out an alternative with them so that they may take advantage of these services with Morgan Keegan," said Stephen E. Bradley, AmSouth's senior vice president for governmental affairs. The business of selling bonds to correspondent banks has become less profitable; recent changes in accounting rules penalized community banks for holding high-risk bonds and encouraged them to purchase less volatile government agency issues. The need to hold portfolios to maturity has also limited trading activity. "The portfolios have become more and more plain vanilla, so there's less trading opportunity," said Henry J. Coffey Jr., an analyst with J.C. Bradford & Co. An AmSouth spokesman said the bank would continue to provide asset- liability consulting, securities safekeeping, and other services for its correspondents. Morgan Keegan, which is based in Memphis, operates a major regional bond trading unit, with a 16-member fixed-income research department.

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