UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Commission file number: 000-22007

Amegy Bancorporation, Inc.

(Exact name of Registrant as Specified in its Charter)

4400 Post Oak Parkway

Houston, Texas 77027

(Address of Principal Executive Offices, including zip code)

(713) 235-8800

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ     No o

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)     Yes þ          No o

      There were 70,165,782 shares of the Registrant’s Common Stock outstanding as of the close of business on May 4, 2005.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

Amegy Bancorporation, Inc.:

      We have reviewed the accompanying condensed consolidated balance sheet of Amegy Bancorporation, Inc. and Subsidiaries (“the Company”) as of March 31, 2005, and the related condensed consolidated statement of income for the three-month periods ended March 31, 2005 and 2004, the condensed consolidated statement of changes in shareholders’ equity for the three-month period ended March 31, 2005, and the condensed consolidated statement of cash flows for the three-month periods ended March 31, 2005 and 2004. These interim financial statements are the responsibility of the Company’s management.

      We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

      Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

      We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of income, of changes in shareholders’ equity, and of cash flows for the year then ended, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004 and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004; and in our report dated March 10, 2005, we expressed unqualified opinions thereon. The consolidated financial statements and management’s assessment of the effectiveness of internal control over financial reporting referred to above are not presented herein. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

May 6, 2005

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

      The unaudited condensed consolidated financial statements include the accounts of Amegy Bancorporation, Inc. (“the Bancorporation”) and all other entities in which the Bancorporation has a controlling financial interest (collectively referred to as the “Company”). All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the Company’s consolidated financial position at March 31, 2005 and December 31, 2004, consolidated net income for the three months ended March 31, 2005 and 2004, consolidated cash flows for the three months ended March 31, 2005 and 2004, and consolidated changes in shareholders’ equity for the three months ended March 31, 2005. Interim period results are not necessarily indicative of results of operations or cash flows for a full-year period. The accounting and financial reporting policies the Company follows conform, in all material respects, to accounting principles generally accepted in the United States of America and to general practices within the financial services industry.

      The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity under accounting principles generally accepted in the United States of America. Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. The Company consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. As defined in applicable accounting standards, variable interest entities (“VIEs”) are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest is present when an enterprise has a variable interest, or a combination of variable interests, that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The Company’s wholly owned subsidiaries, Statutory Trust I, Statutory Trust II, and Statutory Trust III (“the Trusts”), are VIEs for which the Company is not the primary beneficiary. Accordingly, the accounts of these entities are not consolidated in the Company’s financial statements.

      On March 7, 2005, Southwest Bank of Texas National Association (“the Bank”) changed its name to Amegy Bank National Association. The Bank’s subsidiary, Mitchell Mortgage Company, L.L.C., changed its name to Amegy Mortgage Company, L.L.C. (“Amegy Mortgage”) on the same date. On May 5, 2005, the name of the Company changed to Amegy Bancorporation, Inc.

      Substantially all of the Company’s revenue and income is derived from the operations of the Bank and Amegy Mortgage. The Bank provides a full range of commercial and private banking services to small and middle market businesses and individuals primarily in the Houston metropolitan area. Amegy Mortgage originates, sells and services single family residential mortgages, residential and commercial construction loans and commercial mortgages.

      On January 31, 2004, the Company completed its merger with Reunion Bancshares, Inc. (“Reunion”), whereby Reunion was merged into the Company. On October 1, 2004, the Company completed its merger with Klein Bancshares, Inc. (“Klein”), whereby Klein was merged into the Company. The results of operations of Reunion and Klein have been included in the consolidated financial statements since their respective acquisition dates. See “Note 2 — Merger Related Activity” for further discussion of the mergers.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. These financial statements and the notes thereto should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2004.

      Certain previously reported amounts have been reclassified to conform to the 2005 financial statement presentation. These reclassifications had no effect on net income, total assets, or shareholders’ equity.

      The Company applies the intrinsic value method in accounting for its stock-based compensation plans in accordance with Accounting Principles Board Opinion No. 25 (“APB No. 25”). Because the exercise price of the Company’s stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized on options granted.

      In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (“SFAS No. 123”) which, if fully adopted by the Company, would change the method the Company applies in recognizing the expense of its stock-based compensation plans for awards subsequent to 1994. Adoption of the expense recognition provisions of SFAS No. 123 is optional and the Company decided not to elect these provisions of SFAS No. 123. However, pro forma disclosures as if the Company adopted the expense recognition provisions of SFAS No. 123 are required by SFAS No. 123 and are presented below.

      If the fair value based method of accounting under SFAS No. 123 had been applied, the Company’s net income available for common shareholders and earnings per common share would have been reduced to the pro forma amounts indicated below (assuming that the fair value of options granted during the year are amortized over the vesting period):

      The effects of applying SFAS No. 123 in the above pro forma disclosure are not indicative of future amounts. The Company anticipates making awards in the future under its stock-based compensation plans.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The Company expects to adopt the provisions of Statement of Financial Accounting Standards No. 123, Share-Based Payment, (“SFAS No. 123R”) on January 1, 2006. See “Note 1 — New Accounting Pronouncements” for additional information.

      On December 16, 2003, the American Institute of Certified Public Accountants (“AICPA”) issued Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer (“SOP 03-3”). SOP 03-3 provides guidance on the accounting for differences between contractual and expected cash flows from the purchaser’s initial investment in loans or debt securities acquired in a transfer, if those differences are attributable, at least in part, to credit quality. Among other things, SOP 03-3:(1) prohibits the recognition of the excess of contractual cash flows over expected cash flows as an adjustment of yield, loss accrual, or valuation allowance at the time of purchase; (2) requires that subsequent increases in expected cash flows be recognized prospectively through an adjustment of yield; and (3) requires the subsequent decreases in expected cash flows be recognized as an impairment. In addition, SOP 03-3 prohibits the creation or carrying over of a valuation allowance in the initial accounting of all loans within its scope that are acquired in a transfer. SOP 03-3 becomes effective for loans or debt securities acquired in fiscal years beginning after December 15, 2004. The requirements of SOP 03-3 did not have a material impact on the Company’s financial condition or results of operations.

      On December 16, 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R. SFAS No. 123R eliminates the ability to account for stock-based compensation using APB No. 25 and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. The provisions of this statement become effective for all equity awards granted after January 1, 2006, as well as equity awards that are unvested on that date. Although the Company has not yet completed an analysis to quantify the exact impact the new standard will have on its future financial performance, the Stock-Based Compensation disclosures in “Note 1 — Nature of Operations and Summary of Significant Accounting Policies” provide detail as to the Company’s financial performance as if the Company had applied the fair value based method and recognition provision of SFAS No. 123 to stock-based compensation in the current reporting periods.

      On June 4, 2004, the Emerging Issues Task Force (“EITF”) issued EITF Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. Generally, an impairment is considered other-than-temporary unless: (i) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for an anticipated recovery of fair value up to or beyond the cost of the investment; and (ii) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If impairment is determined to be other-than-temporary, an impairment loss should be recognized equal to the difference between the investment’s cost and its fair value. Certain disclosure requirements of EITF 03-01 were adopted in 2003. The recognition and measurement provisions were initially effective for other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. In September 2004 the effective date of these provisions was delayed until the finalization of a FASB Staff Position to provide additional implementation guidance. The Company continues to follow the requirements of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and Staff Accounting Bulletin No. 59, Accounting for Noncurrent Marketable Equity Securities.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The mergers described below were accounted for as purchase transactions. The purchase prices have been allocated to the assets acquired and the liabilities assumed based on their estimated fair value at the date of the mergers. The excess of the purchase price over the estimated fair values of the net assets acquired was recorded as goodwill, none of which is expected to be deductible for tax purposes. Goodwill is evaluated annually for possible impairment under the provisions of SFAS No. 142, Goodwill and Other Intangible Assets.

      On January 31, 2004, the Company completed its merger with Reunion, whereby Reunion’s subsidiary, Lone Star Bank (“Lone Star”) was merged with and into the Bank. The addition of the five Lone Star branches expands the Company’s branch network to include the Dallas market and represents an attractive growth opportunity for the Company. The merger was a cash transaction with $43.5 million paid at closing and an additional $6.5 million deposited into an escrow account. The release of this account is contingent upon the performance of the loan portfolio and other potential liabilities over a three-year period. In addition, the Bank paid $600,000 to Reunion’s financial advisor in connection with this transaction. The purchase price was funded through the proceeds of $51.5 million of junior subordinated deferrable interest debentures issued in October 2003.

      On October 1, 2004, the Company completed its merger with Klein, whereby Klein’s subsidiary, Klein Bank & Trust was merged with and into the Bank. The addition of the 27 Klein branches expands the Company’s branch network in the northwest quadrant of the Houston metropolitan area. The merger was a cash and common stock transaction with $149.2 million of the $165.0 million purchase price paid in cash and the remainder paid through the issuance of 747,468 common shares of the Company. These shares were valued at the average of the closing price of the Company’s common stock for the fifteen business days ended five business days prior to the merger date. The cash portion of the purchase price was funded through the proceeds of $36.1 million of junior subordinated deferrable interest debentures and $75.0 million of senior subordinated debentures issued in September 2004.

      The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of the mergers.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Core deposit intangibles (“CDI”) are amortized using an economic life method based on deposit attrition projections derived from nationally-observed patterns within the banking industry. As a result, CDI amortization will decline over time with most of the amortization during the initial years. The Reunion CDI is being amortized over a weighted average period of thirteen and one-third years with no residual value. The Klein CDI is being amortized over a weighted average period of twelve years with no residual value.

      The pro forma combined historical results for the quarter ended March 31, 2004, as if Reunion and Klein had been included in operations at January 1, 2004, are estimated to be as follows:

      The amortized cost and approximate fair value of securities classified as available for sale and held to maturity are as follows:

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table displays the gross unrealized losses and fair value of investments as of March 31, 2005 that were in a continuous unrealized loss position for the periods indicated:

      Declines in the fair value of individual securities below their cost that are other than temporary would result in write-downs, as a realized loss, of the individual securities to their fair value. Management believes that based upon the credit quality of the debt securities and the Company’s intent and ability to hold the securities until their recovery, none of the unrealized loss on securities should be considered other than temporary.

      Total comprehensive income is reported in the accompanying condensed consolidated statement of changes in shareholders’ equity. Information related to net other comprehensive income (loss) is as follows:

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The components of accumulated other comprehensive loss, net of tax, are as follows:

      The Company originates residential and commercial mortgage loans both for its own portfolio and to sell to investors with servicing rights retained primarily through its ownership of Amegy Mortgage. Amegy Mortgage also purchases mortgage servicing rights.

      Mortgage servicing assets are periodically evaluated for impairment based upon the fair value of the rights as compared with amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and original loan term (primarily 15 and 30 years). Fair value is determined by using quoted market prices for mortgage servicing rights with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. In periods of falling market interest rates, accelerated loan prepayment speeds can adversely impact the fair value of these mortgage-servicing rights relative to their book value. In the event that the fair value of these assets were to increase in the future, the Company can recognize the increased fair value to the extent of the impairment allowance but cannot recognize an asset in excess of its amortized book value. Any provision and subsequent recovery would be recorded as a component of other fee income in the consolidated statement of income.

      The following table summarizes the changes in capitalized mortgage servicing rights for the periods indicated:

      Loans serviced for others totaled $945.3 million at March 31, 2005 and $905.7 million at March 31, 2004. Capitalized mortgage servicing rights represent 78 basis points and 88 basis points of the portfolio serviced at March 31, 2005 and 2004, respectively.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Earnings per common share is computed as follows:

      Stock options outstanding of 733,000 and 105,000 for the three months ended March 31, 2005 and 2004, respectively, have not been included in diluted earnings per share because to do so would have been antidilutive for the periods presented. Stock options are antidilutive when the exercise price is higher than the current market price of the Company’s common stock.

      The Company has two operating segments: the bank and the mortgage company. Each segment is managed separately because each business requires different marketing strategies and each offers different products and services.

      The Company evaluates each segment’s performance based on the revenue and expenses from its operations. Intersegment financing arrangements are accounted for at current market rates as if they were with third parties.

      Summarized financial information by operating segment for the three months ended March 31, 2005 and 2004 follows:

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Intersegment interest was paid to the bank by the mortgage company in the amount of $2.7 million and $1.3 million for the three months ended March 31, 2005 and 2004, respectively. Advances from the bank to the mortgage company of $420.1 million and $261.1 million were eliminated in consolidation at March 31, 2005 and 2004, respectively.

      In the normal course of business, the Company becomes a party to various financial transactions which, in accordance with generally accepted accounting principles, are not included in its consolidated balance sheet. These transactions involve various risks, including market and credit risk. Since these transactions generally are not funded, they do not necessarily represent future liquidity requirements. The Company offers these financial instruments to enable its customers to meet their financing objectives and to manage their interest rate risk. Supplying these instruments provides the Company with an ongoing source of fee income. These financial instruments include loan commitments and letters of credit. The Company has commitments to make additional equity investments in enterprises that primarily make investments in middle market businesses in the form of debt and equity capital. These financial instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the financial statements.

      The amount of the Company’s financial instruments with off-balance sheet risk as of March 31, 2005 and December 31, 2004 is presented below:

      The Company’s exposure to credit loss in the event of nonperformance by the other party to the loan commitments and letters of credit is limited to the contractual amount of those instruments. The Company uses the same credit policies in evaluating loan commitments and letters of credit as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments by the Company to guarantee the performance of a customer to a third party. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include certificates of deposit, accounts receivable, inventory, property, plant and equipment, and real property. As of March 31, 2005 and December 31, 2004, $314,000 and $402,000, respectively, has been recorded as a liability for the fair value of the Company’s potential obligations under these letters of credit.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Changes in the carrying amount of the Company’s goodwill and core deposit intangibles for the three months ended March 31, 2005 were as follows:

      The following table shows the estimated future amortization expense for core deposit intangibles:

      The Company has issued a total of $149.5 million of junior subordinated deferrable interest debentures to three wholly-owned statutory business trusts, Statutory Trust I, Statutory Trust II, and Statutory Trust III (collectively, “the Trusts”). The trusts are considered variable interest entities for which the Company is not the primary beneficiary. Accordingly, the accounts of the trusts are not included in the Company’s consolidated financial statements. See “Note 1 — Nature of Operations and Summary of Significant Accounting Policies” for additional information about the Company’s consolidation policy. Details of the Company’s transactions with these trusts are presented below.

      The Debentures are the sole assets of the Trusts and are subordinate to all of the Company’s existing and future obligations for borrowed or purchased money, obligations under letters of credit and certain derivative contracts, and any guarantees by the Company of any of such obligations. The proceeds, net of issuance costs, from these offerings were used to fund the cash purchase price for Reunion and Klein and

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to augment the Company’s capital ratios to support its loan growth. See “Note 2 — Merger Related Activity” for further discussion of the mergers.

      The Company’s obligations under the Debentures, the related indentures, the trust agreements relating to the trust securities, and the guarantees constitute full and unconditional guarantees by the Company of the obligations of the Trusts under the trust preferred securities.

      The Debentures are subject to redemption at the option of the Company, subject to prior regulatory approval, in whole or in part on or after the dates indicated in the table above, or in full within 90 days after the occurrence of certain events that either would have a negative tax effect on the Trusts or the Company, would cause the trust preferred securities to no longer qualify as Tier 1 capital, or would result in the Trusts being treated as an investment company. Upon repayment of the Debentures at their stated maturity or following their earlier redemption, the Trusts will use the proceeds of such repayment to redeem an equivalent amount of outstanding trust preferred securities and trust common securities.

      On September 22, 2004, the Company entered into a Subordinated Debenture Purchase Agreement. Under the terms of this agreement, the Company issued an aggregate principal amount of $75.0 million in floating rate subordinated debt. All amounts due and owed under the Subordinated Debenture are to be repaid in full on September 22, 2014. The Subordinated Debenture bears interest at LIBOR plus 125 basis points. The interest rate on the Subordinated Debenture was 3.81% at March 31, 2005. This agreement includes a financial covenant that the Company shall maintain such capital as may be necessary to cause the Company to be classified as “adequately capitalized” and the Bank shall maintain such capital as may be necessary to cause it to be classified as “well capitalized” as of the end of each calendar quarter. Upon declaration of or a continuing event of default, the Company will be restricted from declaring or paying or causing or permitting any subsidiary to pay a cash dividend or other distribution to parties that are ranked junior to the holders of the subordinated debt. The Company has agreed to certain restrictions on its ability to incur additional indebtedness that is senior to the Subordinated Debenture. If the subordinated debt ceases to qualify as Tier 2 capital under the applicable rules and regulations promulgated by the Board of Governors of the Federal Reserve System, the Company and the lender may restructure the debt as a senior unsecured obligation of the Company or the Company may repay the debt. The Company used the proceeds of the debenture to fund the cash purchase price for Klein and to augment the Company’s capital ratios to support its loan growth. See “Note 2 — Merger Related Activity” for further discussion of the merger.

      On February 2, 2005, the Company’s Board of Directors declared a cash dividend of $0.03 per common share paid on March 15, 2005 to shareholders of record as of March 1, 2005.

      On June 17, 2004, the Company declared a stock split effected by a stock dividend payable at the rate of one share of the Company’s common stock for each share of the Company’s common stock issued and outstanding as of July 1, 2004, payable on July 15, 2004, to the holders of record as of the close of business on July 1, 2004. This stock split has been given retroactive effect in the accompanying financial statements and related notes. In addition, earnings and dividends per share data has been restated for all periods presented.

AMEGY BANCORPORATION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      On January 31, 2004, the Company purchased all of the capital stock of Reunion for $50.0 million. In conjunction with this acquisition, liabilities were assumed as follows:

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

      Certain of the matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements.

      The Company’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation (a) the effects of future economic conditions on the Company and its customers; (b) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation; (c) governmental monetary and fiscal policies, as well as legislative and regulatory changes; (d) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters; (e) the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks; (f) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company’s market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; (g) technological changes; (h) acquisitions and integration of acquired businesses; (i) the failure of assumptions underlying the establishment of reserves for loan losses and estimations of values of collateral and various financial assets and liabilities; and (j) acts of war or terrorism. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by these cautionary statements.

      Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of the Company’s condensed consolidated financial statements and should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto and other detailed information appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Overview

      This overview of management’s discussion and analysis highlights selected information in this document and may not contain all of the information that is important to you. For a more complete understanding of trends, events, commitments, uncertainties, liquidity, capital resources, and critical accounting estimates, which have an impact on the Company’s financial condition and results of operations, you should carefully read this entire document.

Results of Operations

      Selected income statement data and other selected data for comparable periods was as follows:

      Net income was $16.9 million and $15.3 million and diluted earnings per common share was $0.24, and $0.22 for the three months ended March 31, 2005 and 2004, respectively. This increase in net income was primarily the result of strong loan growth, increases in fee income, and the maintenance of strong asset quality offset by increases in operating expenses resulting from the Company’s mergers with Reunion Bancshares, Inc. (“Reunion”) and Klein Bancshares, Inc. (“Klein”) during 2004. Returns on average assets were 0.91% and 1.02% and returns on average common shareholders’ equity were 11.66% and 12.04% for the three months ended March 31, 2005 and 2004, respectively. Return on average assets and return on average common shareholders’ equity in 2005 were negatively impacted by the decline in the net interest margin, merger-related expenses, and expenses related to the name change as discussed below. Return on average assets is calculated by dividing net income by the daily average of total assets. Return on average common shareholders’ equity is calculated by dividing net income by the daily average of common shareholders’ equity.

      Total assets at March 31, 2005 and December 31, 2004 were $7.56 billion and $7.51 billion, respectively. This growth was a result of a favorable local economy and the Company’s overall growth strategy. Loans were $4.72 billion at March 31, 2005, an increase of $70.0 million, or 1%, from $4.65 billion at December 31, 2004. Deposits increased to $5.81 billion at March 31, 2005 from $5.62 billion at December 31, 2004.

      Two principal components of the Company’s growth strategy are expansion through de novo branching and strategic merger transactions. During 2004, two new branches were opened in the Houston metropolitan area. The merger with Maxim Financial Holdings, Inc. (“Maxim”) was completed in July 2003, adding eight branches in Galveston County. The merger with Reunion closed on January 31, 2004. This transaction added five branch locations in Dallas and initiated the Company’s entry into the important Dallas-Fort Worth Metroplex market. The Company opened an operations center in Dallas during the second quarter of 2004 to enable it to offer its treasury management products to commercial businesses in that market. The merger with Klein was closed on October 1, 2004. This merger added 27 branches in the attractive northwest quadrant of the Houston metropolitan area to the Company’s branch network, bringing the total number of branches to 77 at March 31, 2005.

      Taxable-equivalent net interest income increased $10.1 million, or 19%, to $63.7 million for the quarter ended March 31, 2005 compared with $53.6 million for the quarter ended March 31, 2004. This increase was primarily the result of the Company’s strong internal loan growth coupled with loans acquired

through the mergers with Reunion and Klein. Average loans outstanding were $4.68 billion and $3.70 billion during the quarters ended March 31, 2005 and 2004, respectively. Average investment securities were $1.96 billion and $1.56 billion during the quarters ended March 31, 2005 and 2004, respectively, an increase of $401.5 million. This increase in investment securities also contributed to the increase in net interest income.

      Noninterest income was $28.8 million and $21.9 million for the three months ended March 31, 2005 and 2004, respectively. Noninterest income continues to be an important component of the Company’s net income and comprises 32% of total revenue, defined as net interest income plus noninterest income, for the quarter ended March 31, 2005. The primary drivers of the increase were increased income from the trust, investment, and foreign exchange groups, increased fee income from loan operations and retail services, and gains from the private equity investment portfolio. Other operating income was $4.2 million and $1.3 million for the three months ended March 31, 2005 and 2004, respectively. The $2.8 million increase in other operating income was due, in part, to an $863,000 gain on the sale of the Company’s interest in the PULSE network and a gain of $1.2 million on the sale of an unused drive-through facility in downtown Houston.

      Noninterest expenses were $64.2 million and $50.1 million for the three months ended March 31, 2005 and 2004, respectively. The primary causes of the increase in noninterest expenses were the Company’s merger activity, expenses related to the Dallas operations center which opened in the second quarter of 2004, expenses related to the name change, and normal operating expense increases to support the increase in the levels of the Company’s business. The Company incurred $711,000 of merger-related expenses and $2.2 million of expenses related to the change in its name in the first quarter of 2005. In addition, the Company continues to invest in its technology infrastructure and personnel to accommodate the growth in its various business activities, including the sale of treasury management products and services, and to continually upgrade its capabilities to meet customer and data security requirements.

      Credit quality is an area of importance to the Company, and asset quality indicators remain positive in the first quarter of 2005. Annualized net charge-offs were 0.28% of average loans compared with net recoveries of 0.11% for the corresponding period in the prior year. Nonperforming assets to total loans and other real estate was 0.48% at March 31, 2005, an improvement from 0.68% at March 31, 2004. The allowance for loan losses to nonperforming loans was 358.92% at March 31, 2005 compared to 224.88% at March 31, 2004. See “— Financial Condition — Loans Held for Investment” for information on the composition of the loan portfolio.

      The Company’s capital position remains strong and in excess of the regulatory minimums required to be classified as “well capitalized.” Its Tier 1 capital ratio of 9.18% and Total Capital ratio of 11.16% were augmented by the issuance of $35.0 million in trust preferred securities issued by SWBT Statutory Trust II in September 2004 and $60.0 million in trust preferred securities issued by SWBT Statutory Trust III in December 2004 (neither of which are consolidated for reporting purposes) and the issuance of $75.0 million of senior subordinated debentures in September 2004. The proceeds of these issuances were used to fund the merger with Klein and to augment the Company’s capital to support the growth in its loan portfolio. See “— Financial Condition — Liquidity.”

      Net interest income represents the amount by which interest income on interest-earning assets, primarily securities and loans, exceeds interest expense incurred on interest-bearing liabilities, including deposits and borrowed funds. Net interest income, the principal source of the Company’s earnings, provided 68% of the Company’s total revenues for the quarter ended March 31, 2005, compared with 71% for the corresponding period in the prior year. Changes in the level of interest rates, as influenced by the Federal Reserve Board’s monetary policies, as well as changes in the amount and type of interest-earning assets and interest-bearing liabilities, combine to affect net interest income.

      Taxable-equivalent net interest income was $63.7 million and $53.6 million for the three months ended March 31, 2005 and 2004, respectively, an increase of $10.1 million, or 19%. Growth in average

interest-earning assets, primarily loans, was $1.36 billion, or 25%, while taxable-equivalent yields on interest-earning assets increased 51 basis points to 5.39%. For the quarter ended March 31, 2005, the strong growth in interest-earning assets, primarily loans, generated a $16.9 million increase in interest income. The increase in the taxable-equivalent yield on interest-earning assets contributed an $8.0 million increase in interest income. The impact of the growth in average interest-earning assets and the increased yield was partially offset by an increase in the cost of average interest bearing liabilities of 86 basis points to 1.97% for the quarter ended March 31, 2005, compared with 1.11% during the corresponding period in 2004. This increase in rate generated $10.7 million in interest expense in the first quarter of 2005. The combined effect of the growth in interest-earning assets, the increase in the taxable-equivalent yield on interest-earning assets, and the increase in cost of interest-bearing liabilities was an 18 basis point decline in the taxable-equivalent net interest margin for the quarter ended March 31, 2005 to 3.87%, compared with 4.05% for the corresponding period in 2004.

      Net interest margin risk is typically related to a narrowing of the margin between the yield on interest-earning assets and the cost of interest-bearing liabilities as the level of market interest rates changes and changes occur both in the business mix and the rate of growth of the Company’s loan and securities portfolios and the mix and cost of its sources of liabilities used to fund its earnings assets. The Company mitigates this risk with asset and liability policies designed to maximize net interest income and the net present value of future cash flows within authorized risk limits by managing the changes in its deposit and loan pricing, seeking to manage the repricing profile of its interest-bearing liabilities and its interest-earning loan portfolio, and by managing the composition and maturity profile of its securities portfolio. The growth in interest-earning assets, primarily loans, continues to outpace the growth in internally generated deposits, resulting in an increased reliance on higher cost wholesale funding sources to support this growth. As the market level of interest rates changes, wholesale funding sources typically will reprice more rapidly than core deposits.

      The following table presents, for the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-earning liabilities, expressed both in dollars and rates. Income and yield on interest-earning assets include amounts to convert tax-exempt income to a taxable-equivalent basis, assuming a 35% tax rate. All average balances are daily average balances. Nonaccruing loans have been included in the table as loans carrying a zero yield. Interest on nonaccruing loans is included to the extent it is received. The yield on the securities portfolio is based on average historical cost balances and does not give effect to changes in fair value that are reflected as a component of consolidated shareholders’ equity.