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VOL. 126 | NO. 251 | Monday, December 26, 2011

Key Storylines Emerge in 2011 Banking

By Andy Meek

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Much of the news that came out of the local banking and financial services sectors in 2011 fell into one of three buckets.

No new fees, please.

Smaller names are doing bigger business.

And, two heads are better than one.

High finance and Main Street banking still are getting used to a new regulatory framework (the so-called Dodd-Frank legislation), a low interest rate, high-cost environment and new expectations among customers about what spending, investing and managing money should entail.

The industry is by no means monolithic, but a few key themes emerged during 2011. One was a massive, consumer-driven response that forced a big and rare reversal among banks large and small that seemed to be grasping for new money streams.

In October, banks ranging in size from Bank of America Corp. down to First Tennessee Bank began rolling out new fees for customers who use plastic at the cash register.

Government regulations that kicked in Oct. 1 capped what banks can charge merchants when customers use their debit card, so banks began looking to make up that revenue loss somewhere else.

U.S. Sen. Bob Corker, R-Tenn., released a statement when the flurry of new fee announcements began. It basically amounted to a “See, I told you so” from Corker.

“Having warned about the consequences of flawed rules regulating debit card transactions, I’m not surprised banks are now charging new fees in response to the regulations,” Corker said. “These fees are a predictable consequence of government price fixing. When governments engage in price fixing, the consumer always loses.”

BofA sparked some of the earliest howls of protest when the bank said it would begin in 2012 charging a monthly fee of $5 for customers who make debit card purchases. Other banks like Regions Financial Corp. and SunTrust Banks Inc. followed suit.

First Tennessee took a different route and decided against a flat fee. The Memphis-based bank thought it made better sense to charge customers based on their individual debit card usage, up to a monthly maximum amount.

The outcry from consumers was so overwhelming, however – not to mention the competitive advantage that big banks practically handed to community banks with this move – that one by one they all staged a retreat.

“While consumer feedback about our debit fee plan was largely positive, we believe this change in plans will ensure that we remain competitive with both large and small players in our markets going forward,” said Dave Miller, head of consumer banking for First Tennessee.

Meanwhile, some of the fastest-growing and busiest names in banking and financial services in the Memphis area in 2011 were smaller players.

Evolve Bank & Trust, Iberiabank, Independent Bank, Shoemaker Financial and Metropolitan Bank were just some of the institutions that either opened or began work on branches and office developments during the year.

The poster child for this storyline about size in 2011 is the situation surrounding Morgan Keegan & Co. Inc. This summer, Regions Financial Corp. began shopping around its Memphis-based investment banking unit, eager to spin off that asset and direct the money raised by the sale to other uses.

At one time, Morgan Keegan needed the large capital base a bank like Regions provided. The Alabama-based bank, though, has decided it can now live without Morgan Keegan, though the sale process has now dragged on for six months.

Multiple sources said a period of exclusivity Stifel Financial Corp. had in which to bid for Morgan Keegan has now expired, and Raymond James Financial Inc. is in the bidding mix now, too, according to multiple sources.

Regions reports quarterly earnings Jan. 24. A writer for Forbes.com wrote last week that if Morgan Keegan is not sold by the end of the first quarter, he predicts that it will no longer be Morgan Keegan but Regions itself that’s on the auction block.

It also should be noted that while small is in style, so is the notion that two heads are better than one.

Almost anywhere a person looked in 2011, a story of an acquisition, alliance or merger could be found.

Thompson Dunavant PLC, the largest locally owned accounting firm in Memphis, was acquired by two separate firms that work together under what’s known as an alternative practice structure.

Cleveland, Ohio-based CBIZ Inc. acquired the tax side of Thompson Dunavant. Mayer Hoffman McCann PC got the audit side of Thompson Dunavant.

Similarly, accounting firms Dixon Hughes PLLC and Goodman & Co. LLP combined to form Dixon Hughes Goodman LLP. Both firms were based out of town, but Dixon Hughes had a major presence in Memphis that will remain here.

In other news along those lines, Bartlett-based First South Financial Credit Union acquired Dyersburg Credit Union, and Triumph Bank acquired the Arlington branch of Farmers Bank of Lynchburg.

Louisiana-based Argent Financial Group also acquired Sector Capital Management LLC of Memphis.

PROPERTY SALES 92 229 4,100
MORTGAGES 94 225 4,615
BUILDING PERMITS 170 538 9,806
BANKRUPTCIES 53 163 3,048