After revving up its growth engine in Texas, Compass Bancshares of Alabama made a beeline for Arizona with an agreement to acquire that state's largest independent bank.

Once it concludes the deal announced late Monday for $758 million-asset Arizona Bank, Compass will have established retail banking outposts stretching from northeast Florida to the doorstep of California.

The Birmingham-based company is still far from blanketing the territory. It has not entered Louisiana, Mississippi, and New Mexico, and chairman and chief executive officer D. Paul Jones Jr. said it had not planned on entering Arizona this soon.

But Compass, with $14.5 billion of assets, is opportunistically building something of an empire in the shadows of megabank competitors like Banc One Corp. and NationsBank Corp.

"We learned (Arizona Bank) was available and knew it was probably one of the last opportunities to really gain market share in that state," Mr. Jones said. "We don't intend that this will divert our attention from continuing to grow in Texas," which Compass regards as its main focus of growth.

"But I hope we're smart enough to do more than one thing at once," Mr. Jones said, adding that Arizona expansion is in the offing. He wants to build a stronger presence particularly in Phoenix, where Arizona Bank has only four offices, and Flagstaff, where it has one.

Arizona Bank is based in Tucson and has 17 offices there and 29 overall, many in Albertson's Supermarkets and Super Kmart stores.

Except to say it is exchanging stock in a pooling of interests expected to close in the fourth quarter, Compass did not disclose how much it is paying for closely held Arizona Bank.

A source close to the transaction said Compass would pay about $170 million, or 3.2 times shareholders' equity.

"It is not a cheap deal, certainly," said Mr. Jones. "Nobody buys a good operation on the cheap these days. But we got full value."

Analysts' reactions were mixed. They generally favored Compass' move into one of the fastest-growing states but expressed concern about earnings dilution.

"The positives are that they get into a faster-growth market and expand their Southwest franchise to close to half the company," said Michael L. Mayo, an analyst with Credit Suisse First Boston.

Nevertheless, Mr. Mayo said he reduced his 1999 per-share earnings estimate of $3.05 to $3. Compass management's assertion that the acquisition would be "earnings neutral" next year after nipping 1998 earnings by 22 cents a share with a $16 million merger charge was not entirely reassuring to Mr. Mayo and others.

Even if the deal has no negative impact in 1999, waiting until 2000 to reap the benefits is unappealing, according to analysts.

"Investors might not envision that as a very quick payback," said Christopher T. Kelley, an analyst with Morgan Keegan & Co.

For the last decade Compass has distinguished itself from many of its midsize Southeast competitors by building a $6.3 billion-asset presence in Texas. After a flurry of recent acquisitions, more than 40% of the holding company's assets are in that state.

Arizona Bank would bring $671 million of deposits and offices in nine cities. Arizona Bank, which is to keep its name and senior management, controls the fourth-largest market share in Tucson, behind Banc One Corp., Norwest Corp., and BankAmerica Corp.

"It is a brand new market for Compass," said Morgan Keegan's Mr. Kelley. "They need the local management's knowledge about how to penetrate the market."

In a statement Monday, David T.C. Wright, president and chief executive officer of Arizona Bank, said Compass "will be a great complement to Arizona Bank. Being under the Compass umbrella will allow us to offer our customers many services we have not had available for them up to now. Many times we have lost our bid for large customers because we have not had the technology to compete with the larger institutions."

Mr. Jones described Arizona Bank as "a well-run, profitable bank with a major presence and outstanding reputation in one of the country's most attractive markets."

The acquiree reported net income for the second quarter of $2 million, up 18% from a year earlier, while the first-half net of $3.9 million jumped by 63%. The return on assets for the six months improved to 1.06% from 0.71%, but that was still short of the annualized 1.26% Compass reported in the first quarter this year.

Since it would be a newcomer to Arizona, the deal presents little opportunity for cost savings for Compass, which nevertheless said it could probably squeeze about 5% from noninterest expenses in 1999.

On the other hand, the company believes it can boost noninterest income by 20% in 1999 by injecting Arizona Bank with an array of fee-oriented products and services such as retail investment sales, asset management offerings, and corporate cash management.

Mr. Kelley and other observers said the deal not only improves Compass' growth prospects but also raises its profile as an attractive consolidation candidate.

"The danger with becoming a high-profit, high-growth bank is that that is what makes you attractive to other banks," said John B. Moore Jr., an analyst with Interstate/Johnson Lane.

First Union Corp. reportedly tried to buy Compass several years ago, precipitating a management dispute about whether the company should remain independent. That row and the speed at which the market is consolidating put pressure on Compass' management to keep investors happy or to face another potential sale, Mr. Moore said.

"If they screw it up, they don't get a second chance," he said.

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