FirstBank: Branch Buy Is Infusion

As banks across the country struggle to scrape up deposits, FirstBank of Lexington, Tenn., is getting a sudden injection of funding that will increase its deposit base by more than a third.

The windfall is a result of FirstBank's deal to buy seven branches with $400 million of deposits from AmSouth Bancorp of Birmingham, Ala., which had to divest 52 branches as a condition of its sale to hometown rival Regions Financial Corp., which closed Nov. 4.

The branch deal, which was announced Nov. 1 and is expected to close next quarter, would give FirstBank 32 branches in Tennessee and lift its assets from $1.4 billion to more than $1.9 billion. Most important, its deposits would increase by 36%, to more than $1.5 billion.

"Today we're over 100% loans to deposits," said Jim Ayers, FirstBank's chairman. "We vitally need those deposits."

Mr. Ayers also said he liked the deposit mix. "They're all pretty well core deposits," he said.

Douglas Cruickshanks Jr., FirstBank's president and chief executive, said there is more to the branches than deposits.

"We've also been pleased to see that AmSouth has done a pretty good job of cross-selling their customers," he said, "so these are not just low-cost depositors, these are pretty thorough relationships."

With one exception, the branches are in rural communities southeast of Nashville and would be new markets for FirstBank.

"If you look at the map of our existing offices, this is just a perfect natural extension as we move east across the state," Mr. Cruickshanks said. "Plus, our roots are in rural Tennessee and many of these branches are in small towns."

Mr. Ayers said FirstBank would not stand pat in its new markets. The seven branches have about 15,000 and 16,000 customers and $100 million of loans, he said, and "we fully intend, three or four years from now, for there to be a whole lot more than $100 million worth of loans in those communities."

Mr. Cruickshanks and Mr. Ayers said they would give lenders more decision-making authority than they had under AmSouth, which they expect will go a long way toward increasing commercial loans in those markets.

"They basically have people that take loan applications; they just type it in the computer and then it comes back either approved or disapproved," Mr. Ayers said. Lenders would be given decision-making power on loans up to $500,000, and "it could be higher than that depending upon the lending authority and the experience of the individuals at the individual locations," he said.

Both executives said they were aware of the potential for runoff but confident FirstBank would retain the majority of customers it inherits.

"We think that since we are a Tennessee-based bank, we're headquartered in rural Tennessee, that these customers will feel a sense of coming home to us when we change the brands," Mr. Cruickshanks said. "Going from a big, multiregional bank to a local bank will be far less disrupting than going in the other direction."

FirstBank is one of three banks with deals to acquire divested branches from AmSouth. The $21 billion-asset RBC Centura Bank in Raleigh, a Royal Bank of Canada subsidiary, is buying 39 in Alabama and the $841 million-asset Citizens Bank and Savings Co. in Russellville, Ala., is acquiring six in Mississippi.

The divestitures came about because of Department of Justice concerns that Regions' buying AmSouth could limit consumer choice in certain markets.

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