In late January, Paul Murphy, the chief executive of Houston's largest independent bank, was adamant that he had no plans to sell.
His $7.6 billion-asset Southwest Bancorp of Texas had just unveiled a $6 million ad campaign for a new name, Amegy Bancorp.
"If we were thinking about selling the bank in two or three years, we wouldn't go through all this headache and expense," Mr. Murphy said in January.
The Amegy name became official in March, and on Wednesday the company announced it was being sold to Zions Bancorp. for $1.7 billion in cash and stock.
So what changed?
In a telephone interview Wednesday, Mr. Murphy called his company a victim of the interest rate environment. The Federal Reserve has raised rates three times since the name change.
"Now that interest rates have started to move up and we have not seen the margin expansion, it really cast a different light on the future of EPS growth," he said. "It required me to rethink the structure that is most appropriate for us in light of the fact that we were not seeing the margin improvement."
He called the deal with Zions "the best of both worlds" since Amegy is to retain its name and management team.
Amegy was said to be a target in recent weeks. In late June the $28.8 billion-asset Compass Bancshares of Birmingham, Ala., was rumored to be the favorite among companies looking to buy Amegy. Compass declined to comment Wednesday on the Zions-Amegy deal.
With the acquisition the $31.9 billion-asset Zions, of Salt Lake City, would enter Texas, a hot market.
"This adds a very strong leg to the growth story that has been our theme for quite some time," said Harris H. Simmons, Zions' chairman and chief executive, on a conference call Wednesday morning.
Buying Amegy will diversify Zions' revenue, Mr. Simmons said. Texas will represent 17% of its revenue, and revenue from Utah will fall to about 31% of the total, from 38%. Revenue from California, its second-largest market, will fall to 26%, from 31%.
Joseph Morford, an analyst at Royal Bank of Canada's RBC Capital Markets, said in a phone interview Tuesday, when rumors of an Amegy deal circulated in the market, that Zions "always had an interest in Texas" and that buying Amegy would give it "a good critical mass in a new market and certainly an attractive one that fits the Zions business model."
Zions' last bank acquisition was in late 2002, when it bought the $93 million-asset Frontier State Bank in Arizona.
It bought three banks in 2001, including the $1.26-billion-asset Eldorado Bancshares Inc. in California.
Amegy would be Zions' biggest bank acquisition. Its largest to date was in 1998, when it paid $548 million for the $5.1 billion-asset Sumitomo Bank of California.
In a telephone interview Wednesday, Jacqueline Reeves, an analyst with Ryan Beck & Co., called Texas "an extremely attractive market" for Zions.
While Zions will add a fast-growing state to its footprint, which already includes California, Arizona, Nevada, and Utah, Amegy expects to end up with a more asset-sensitive balance sheet and to operate more efficiently through technology integration and the consolidation of some back-office jobs.
Though it considers itself asset-sensitive, Amegy's net interest margin contracted from 3.99% at the end of last year to 3.87% at the end of the first quarter.
Zions' net interest margin was 4.53% at the end of the first quarter, versus 4.43% at the end of 2004 and 4.28% after the first quarter of 2004.
David Hemingway, Zions' executive vice president for capital markets and investments, said Amegy will adjust its balance sheet by reducing mortgage-backed securities and other long-term securities and replacing them with interest rate swap instruments.
Had those moves been made in the first quarter, Amegy's net interest margin would have been close to 4.5% rather than the 3.87% Amegy reported in its quarterly results.
Mr. Murphy said Zions "has done a much better job managing their margin than I have."
As for the rebranding, he said: "The decision to change the name, if I had it to do all over again, I wouldn't do that. If I had a time machine, I'd think differently about all of that."
Southwest spent two years considering about 3,000 names before settling on Amegy, a blending of America and energy.
