New reports that Regions Financial Corp has ended its discussions to sell its Morgan Keegan brokerage unit to Stifel Financial Corp. continue to point to an uncertain outcome for both Regions and Morgan Keegan, industry observers said Tuesday.

Stifel’s exit from the discussion talks was reported by Bloomberg, citing unnamed sources, after the firms could not come agree on terms for a deal. At the same time, Raymond James is a contender, the Bloomberg story said. Stifel did not respond to requests for comment. Spokespersons for both Regions and Raymond James declined to comment.

The report follows months of negotiations, as Regions has reportedly moved through discussions with private equity and strategic buyers, but has yet to come up with a deal. Regions is still on the hook to pay $3.5 billion it received through the Troubled Assets Relief Program.

As months go by, Regions needs to update its shareholders as to where a possible deal for Morgan Keegan stands, according to analyst Dick Bove of Rochdale Securities. So far, the firm has not done that, he said.

“When it first leaked about a year ago, they said they expected to have some information shortly that they would share with investors, and they’ve made that statement now repeatedly,” Bove said. “They continue to push off discussing this issue with their shareholders, and I think it’s not appropriate.”

Selling Morgan Keegan could help Regions reduce its risk-weighted assets, increase its capital ratio and redeem the TARP preferred stock, Bove said. If Regions does not sell Morgan Keegan, then it is unclear if how it would handle the redemption of those TARP funds.

“It’s something that does really require some detailed discussion, and the company is not providing any information whatsoever,” Bove said.

Any difficulty Regions has had with its efforts to sell Morgan Keegan come down to its unrealistic expectations for the terms of the deal, according to Ron Edde, a senior executive recruiter at Carlsbad, Calif.-based Armstrong Financial Group.

Regions, which has reportedly moved the price on Morgan Keegan from more than $1 billion to $750 million, is still asking more than any firm is willing to or can pay, Edde said. That is because Edde estimates that a $750 million deal would come down to $625,000 per advisor for the firm’s approximate 1,200 financial advisors.

“That’s unprecedented, and it makes no economic sense whatsoever based on the production of that firm,” Edde said. “That’s without any retention bonuses, which they all naively believe were coming.”

The news that Stifel has exited the talks may not largely sway the uncommon loyalty of Morgan Keegan’s financial advisor force, Edde said. So far, he knows of 29 total financial advisors who have left the firm in the last six months, amounting to less than 5% of its force even as its future remains uncertain.

But more movement will likely come, according to Edde, who is personally working with about 36 Morgan Keegan financial advisors who are in some stages of discussions with other firms.

In previous months that interest has changed from week to week with Regions’ promises, Edde said. When reports surface that Raymond James could be interested in buying Morgan Keegan, Edde said he has seen the financial advisors pull back from recruitment discussions.

“I believe that most of those rumors are being propagated by Regions and Morgan Keegan management to try and keep advisors in their seats,” Edde said. “It’s not a good environment over there right now. They haven’t recruited anybody into that firm since June. A firm that is not growing is dying.”

At this point, the deal that most makes sense to Edde is for a buyer to snap up Regions as well as Morgan Keegan. But Morgan Keegan financial advisors should be aware that neither firm is in a position to guarantee the future of their financial advisors, he warned.

“I believe it was somewhat naïve from the very onset for Morgan Keegan people to believe that Regions is going to watch out for their best interest,” Edde said. “And Morgan Keegan management does not have a seat at the table. They don’t have a vote.”

Lorie Konish writes for On Wall Street.