Regions Financial Corp. is facing a mounting pile of lawsuits from disgruntled ex-presidents of banks it acquired last year.
The suits claim mistreatment and denial of severance pay after the Birmingham, Ala., holding company's takeover of First National Bancorp, Gainesville, Ga.
With the filing in federal court this month of a suit by William DeVane and David C. King, who were presidents of former First National affiliates in Clayton and Winder, Ga., a total of six aggrieved executives are seeking at least $120,000 each in damages.
Though it is unusual for such disputes to erupt into lawsuits, they are indicative of the tension that occurs when independent-and independent- minded-bankers must adjust after mergers to the ways of larger organizations.
Regions chairman J. Stanley Mackin called the complaints groundless.
Each of the former presidents claims he had a "change of control" agreement with the prior owner that Regions refused to honor. The agreements reportedly stipulated that the presidents would be entitled to compensation if their duties or positions changed after the sale, according to documents filed in U.S. District Court in Atlanta.
The ex-presidents accused Regions of reducing their authority to approve loans, negotiate contracts, and make personnel decisions. They also said they lost authority over pricing, loan-loss reserves, and investment portfolios.
They allegedly retained their lofty titles as a "facade for the customers and communities" where the banks' offices were located, and thereby Regions could avoid paying millions of dollars in severance to First National's 18 local bank presidents.
"They call them presidents but basically they act as branch managers," said Richard L. Robbins, an attorney representing five of the six plaintiffs, who believe they should get severance because "there was a significant change of duties."
Mr. Mackin denied that Regions engaged in any subterfuge.
"They're just wrong," he said. "None of their responsibilities were changed. They were presidents of the banks. We did not want those fellows to leave."
Dennis W. Burnette, who was president of Pickens County Bank in Jasper, Ga., said he had to resign when his job duties were cut back so much that he couldn't even negotiate a contract with a longtime customer.
"I was essentially just a branch manager ... after I had run that bank for 20 years," this plaintiff said in an interview. "You've got to have a certain amount of authority to be effective. I was not willing to go forward in another capacity."
Regions' purchase last year of $3.1 billion-asset First National was the largest of 28 deals the company has completed since 1991. Regions has added more than $12 billion of assets in that time.
The First National deal gave Regions extensive coverage throughout northern Georgia and an expanded presence in Florida.
At the time, analysts applauded the deal, seeing revenue-enhancement opportunities in First National's decentralized structure. But the balance between centralization and decentralization can be hard to strike.
"There is a fine line between maintaining autonomy at the local level while achieving savings that can justify the price you pay for an acquisition," said John A. Pandtle, an analyst with Robinson-Humphrey Co.
Mr. Robbins, the attorney, said the five lawsuits he has filed against Regions to date are indicative of more to come. Other former presidents and top-ranking First National executives are equally disgruntled about their treatment, he said, adding executives at other recently acquired institutions are considering similar actions against Regions.
"It's starting to be a major litigation effort," said Mr. Robbins. Regions is "generating so much ill will among not only the people who left but also the people who are still there."