Walter E. Johnson: An Amazing Life

TO CATCH A THIEF 149 To Catch a Thief Over the years I have managed to avert a number of problems for my bank as well as our customers by sniffing out fraud, but three stories stand out big. Story #1 During the mid 90s, Teresa Rodriguez was a prominent Houstonian and a well-connected businesswoman. She was known for her insatiable appetite for clothes as well as her collection of jewelry and homes. Her 23-carat diamond solitaire ring put her in a class by herself, and her closest was full of gowns by Oscar de la Renta as well as a collection of shoes with unimaginable prices. Teresa was even Houston’s Hispanic Businesswoman of the Year, and as a close friend of the Mayor’s wife, she was appointed to the Houston Parks Board. I had never met Teresa, or even heard of her until one of my senior banking officers told me about a good customer that was making incredible money on an investment with her. Curious, I asked for more details and learned he was making an impressive 20% on his investment with Teresa. I also discovered that she was selling SBA loans to participant investors outside the USA. This raised red flags, and the more I heard, the more suspicious I became. I told my officer that this was absolutely a scam. It had all the signs of a Ponzi scheme and his customer was caught in it! My advice was to tell his customer to sell and take his money out ASAP. A few weeks later I was told that the customer heeded my warning and closed out his investments. In doing so, he got all of his money and his profits….so it initially appeared that I was wrong and that Teresa was legitimate. Approximately two months after this incident I received a call from Lloyd Davis, a reasonably wealthy customer and longtime friend. He was excited to tell me he had an amazing new prospect who promised him she would move all of her business to me at Southwest Bank (later named Amegy Bank). I quickly asked, “Lloyd is it possible that this lady’s name is Teresa

150 AN AMAZING LIFE Rodriguez?” Though Lloyd was flabbergasted that I mentioned her name, his reply was yes. I told Lloyd that the bank absolutely did not want her as a customer since I suspected fraud. I then asked Lloyd if he was investing with her and fortunately, he said he was not. As soon as I hung up the telephone, I called a private detective that I had relied on for 20 years and he delivered a comprehensive report the following day. It revealed that Ms. Rodriguez was engaged in every possible element of fraud. She owned over 25 homes, had huge credit card balances, and was behind at least 40 companies. She was even opening and closing companies almost every day, meaning that her assets were like a revolving door, very difficult to pin down. The list of evidence was long and made it obvious that she was committing fraud. Ronald Reagan had a saying: ‘Trust, but verify,’ and this is something that I have always tried to apply over the course of my career. When something seems too good to be true, or a potential partner is urging you to jump in right away, I have found that it is always prudent to step back, take your time to evaluate the situation, and try to use a fresh set of eyes. On the surface Ms. Rodriguez had everything going for her, but just below that it was obvious something was amiss. I believe that if more people had taken the time to look at her claims with a bit of skepticism, she wouldn’t have gotten as far as she did. I called Lloyd and told him he needed to come to my office and read the report, which he did the following morning. That morning, I was in a board meeting when Yvonne barged in and asked that I step out immediately as Teresa Rodriguez was at the teller window wanting to cash $500,000 in checks written by Lloyd Davis. A review of the checks showed multiple endorsements from a variety of companies. Yvonne also mentioned that Lloyd was in my office. There in my office was Lloyd, white as a ghost and in a state of shock. I showed him the checks and ask if he wanted me to stop payment on them. The answer was obvious. Lloyd left my office and went straight to the District Attorney. Fortunately, Lloyd was able to save his money, but his wife lost her $500,000, which she invested with Teresa. Teresa went to prison for running a Ponzi scheme with her investors losing a total of $40 million. There is no telling what would have occurred if I was not curious enough to call my detective. I learned that our customer lost it all, because after happily cashing out he turned around and reinvested with all his profits!

TO CATCH A THIEF 151 Story # 2 My bank was just getting started in 1990 when a Canadian man wired $1 million to our bank and asked if he could meet with the CEO. This was not an unusual request as it was something that we had been advertising to large depositors. This was a nice deposit for our little bank and obviously I was thrilled to meet him. However, just laying eyes on him immediately made my antennas go up! He was about 55 years old and extremely handsome, with well-manicured gray hair. In addition, he was wearing an athletic outfit that must have cost at least $1,000 and he probably had $1 million worth of jewelry on. The final accessory was a beautiful young lady, maybe 20 years old, hanging on him who was wearing the same outfit (though hers was much more revealing). We talked for nearly an hour, and I asked him a number of questions. I learned that he had just arrived in Houston and was planning to offer financial advice to small-to-medium sized businesses as well as arraigning loans for company mergers. His answers were prompt and he did not miss a beat. He was polished and articulate and extremely convincing… but I knew something was not right. His answers came a bit too fast, to the point where they seemed rehearsed. It was like he was expecting to be grilled on certain aspects of his business—the way he deflected made it obvious that he wasn’t interested in discussing these topics at length. Partnerships require transparency, and anyone who is unwilling to be open and upfront about their aims isn’t worth doing business with. Somewhat paradoxically, the more that a person like this is offering you, the more reason you have to steer clear! The minute that he left my office I called my detective and had him checked out. Sure enough he had a history of run ins with the law and was currently under indictment in Canada for nine cases of theft by fraud. I called him immediately and told him I had already closed his account and that he should come by and pick up his $1 million cashier check. He said that he was sad to hear this since he liked me so much and felt that we could have a great banking partnership. As flattering as this was, it was obvious that he was simply trying to pressure me into reconsidering. I simply replied by saying that I had nine reasons why I did not want to work together and that I preferred not to discuss them over the phone. He was there 10 minutes later to pick up his check. That was the last I saw of him. After he left, the first thing I did was call the District Attorney and

152 AN AMAZING LIFE explain what had happened and to let him know that I believed that this guy was going to defraud businesses in Houston. He agreed with my reasoning, but unfortunately the DA said he could not jail anyone that had not broken the law. I soon forgot about this incident until about two years later when I saw his picture on the front page of the newspaper. He had been caught scamming many local small businesses, and I wish I could say that I was shocked! I always get sad when I think of this story and those that he defrauded because I knew what was going to happen and there was nothing I could do! Story # 3 Allen Stanford, from Houston, is serving a 110-year life sentence for running a Ponzi scheme that defrauded investors and depositors of roughly $8 billion. Stanford ran a similar con to what Bernie Madoff did at around the same time—except Madoff’s victims got most of their money back, while Stanford’s investors got nothing. I saved several customers and friends from getting caught up in his scam by warning them ahead of time. I told them exactly what was going to happen if they trusted him with their money. Had I not gotten involved, the sum of their possible losses would have been over $20 million. I first met Stanford in his offices on Westheimer when he asked me to join with him and some important Washington politicians who held key offices in the White House. He even claimed that Joe Biden’s son had partnered with him to launch a company that was doing very well. Over the next few years I attended a few of his luncheons and even made some pretty good contacts. When our new bank was about a year old, Stanford said that he could move some significant deposits to us and that his Antigua Bank would send all US Citizens deposits and checks to our bank. Needless to say, that seemed like a possible opportunity. He invited us on a tour of his bank in Antigua, and told us that we could audit anything we wanted to, so I went and took my international banker, Laura McWilliams, as well as my bank auditor. We spent a day and half with Stanford and returned completely satisfied with what we had seen. Every single detail checked out, and it had the potential to be a significant checking account for our young bank. However, the night I returned home I could not sleep because I felt uneasy about the arrangement, though I couldn’t explain exactly why. So I called Stanford the next day and gave

TO CATCH A THIEF 153 him the bad news and suggested he should bank with someone like Citi Corp that had the real global reach that we lacked. To my surprise he took it well. For the next couple of years Stanford’s name kept popping up and he became famous. He was spending millions sponsoring cricket matches, and many more millions building exotic projects which seemed a bit like ego trips to me. Then he was “knighted” and changed his name to Sir Allen Stanford. Articles started to appear that described him as a jet setter who had made his riches in Houston… yet I never saw one single project in Houston connected to him, and no one I knew had ever heard of Allen Stanford. I was getting very suspicious of Sir Allen Stanford. Stanford had what I believe was a legitimate investment company in the United States and I knew of some key players he hired from major investment firms. What really set off the alarm for me was when I learned that his US-based bankers were getting huge commissions to entice their American customers to send money to his Antigua bank, and that this bank was paying CD rates at least 50% higher than American rates. There are a lot of really smart people in this business, and plenty of savvy fund managers who can consistently secure strong returns for their investors. But when somebody’s numbers are far outside the median it is only natural to be suspicious. Get-rich-quick schemes may make somebody rich, but rarely is it the person who is forking over their hard-earned money. My suspicions were confirmed when I learned that apparently Stanford had been using me as a reference, despite the fact that we were not working together. Some of my big depositors called me about moving as much as $10 million to Antigua and in all cases I told them not to do it and explained my concerns about Stanford’s practices. It was a year later that he was caught and was running an $8 billion Ponzi scheme. Sir Allen is now serving two life sentences in prison. I really think I have a “sixth sense” for judging character.

THE JOE ALBRITTON STORY—12 MONTHS OF HELL 155 The Joe Albritton Story— 12 Months of Hell It takes 20 years to build a reputation and five minutes to ruin it. Think about that and you will do things differently. —Warren Buffett Always look forward and be sure you are going in the right direction. —WEJ Your reputation is everything. Do not get sucked in the mud. —WEJ After the factoring business, my first banking job was with Bank of the Southwest, the third largest bank in Houston. Bank of the Southwest was a wonderful bank, very much like Amegy. It was the place where I cut my teeth and got to know the business. All the bank directors, of course, were quite famous in the city. However, Joe Albritton, an attorney and Houston billionaire businessman, was one of the key directors. Joe had a very good reputation in Houston. He stood almost five-foot-tall and was keenly smart, but I would soon to learn that his ego was taller than the Empire State Building. At the time, I was the fair-haired boy at the bank, assistant manager of the International Division. I was very active in Houston and was consistently getting calls from other banks. Ultimately, I got an appealing offer to join a small bank called the International Bank, which was owned by Vince Kickerillo. International Bank only had $30 million in assets. Today this would be equivalent to a bank with approximately $100 million in assets.

156 AN AMAZING LIFE Whims Soon after I joined International Bank, Joe Albritton started calling me. All the time. He needed me, he said, to come over to his bank, Houston Bank and Trust, which he had just purchased. Houston Bank and Trust, he made sure I knew, was ten times larger than International Bank. I thanked him but turn him down. I did this for months although he was persistent. Weekly, he would increase the pay until finally it got to the point where I could not say no. So, I left in good graces with the International Bank. Vince and I, by the way, have been good friends ever since. He has turned out to be one of Amegy Bank’s very best customers, a wonderful Houstonian and dear friend of mine. I had not been with Joe more than 60 days when he told me he was interested in buying the Houston Citizens Bank to merge it with his Houston Bank and Trust. Then we would have a $500 million bank, which I would run. We would call it Houston Citizens Bank and Trust. Joe asked me to go to examine the bank and see what I thought about him making such a purchase. I took a small team with me and spent a couple days examining the bank, mostly studying their loan portfolio, which was a mess. I returned to tell Joe that the purchase, in my opinion, would be a mistake. Joe, however, then told me, “Walter, I have some bad news. I’ve already bought the bank.” The reason Joe had bought the bank was because he owned half of it already, which I did not know, and the other half was owned by someone he considered to be a crook. Sure enough, he was right. Ultimately, one of them went to prison. In any case, now I had the challenge With Vince and Mary Kickerillo

THE JOE ALBRITTON STORY—12 MONTHS OF HELL 157 on my hands: merging the two banks. Fortunately, we had a person in our bank named Tom Wren, who was our Chief Operations Officer. Operations was not my strong suit; my strength was primarily in lending and managing. Tom and I became good friends, and we began the merger process immediately—even before the regulator’s approvals. Maybe 60 days after that, however, Joe came to my office to say he wanted me to quickly build an International Department. Joe suggested that we hire somebody to come in and help me build it. Since I was so involved with integrating Houston Citizens with Houston Bank and Trust, cleaning up the new bank’s loan portfolio, I agreed. We hired a search firm to find an experienced international banker. They were successful and presented several prospects within a few weeks, and I selected a man named Mike. I believed he and I could do great things together. The minute Mike met Joe however, I was out of the picture. Joe thought Mike was exceptionally good and had him leave his hotel and move into Joe’s apartment with Joe and his wife for a week so they could become better acquainted. A week later, Joe brought Mike to me and told me what a wonderful job I did in selecting this young man. Joe had hired him, negotiated a generous salary, and life was good. Approximately a month later, however, Joe came through the lobby of the bank, literally screaming at the top of his lungs, shouting that we had too many people working at the bank, proclaiming he wanted a big staff reduction of more than 30%. Now. Everyone in the lobby could hear Joe. It was embarrassing. “Joe,” I said, “Please calm down and don’t scream. Tom Wren and I have a plan in place. We are reducing staff daily to right size our staff.” Joe turned to me and said, “Do you know who owns this G** d*** Bank?” I assured him, he did. To that, Joe said, “I’ll fire anybody I want to. You hear me?” You can only imagine how upsetting this was to the staff. Joe then told me, “We are not hiring anybody, no one, not a new soul is coming to work at this bank.” I told Joe that I agreed with him. We had plenty of people working here to fill all the spots, and the only person coming on board was Mike, the new international banker. Joe then continued his rampage and went on to tell me, “We are not hiring anybody, Walter. Do you not understand—we are not hiring anybody.” I said, “Joe, you are right. We are not hiring anybody… although you

158 AN AMAZING LIFE have hired Mike. He’s coming to work here in about 30 days.” Joe looked at me and said, “Do you not understand what the word no means? We are not hiring anybody.” I thought about it a minute. Then I reached in my desk and pulled Mike’s card and handed it to Joe. I said, “Joe, this is Mike’s contact. Call him and tell him that you have changed your mind, tell him he cannot come to work here.” Joe looked at me and said, “Walter, I’m not running the bank. You are running the bank. You call him and tell him we don’t want him.” So, it was my ugly task, one that I will never forget. I did call Mike, and the poor guy cried on the phone. Mike had already given his bank notice and looked at houses and schools in the Houston area with his family. He was terribly distraught, and I felt really sorry for him. To this day, I do not know why Mike did not sue the bank. In any case, I then knew that Joe had no conscience or business acumen. Instant Loans A classic example of Joe’s ego and naivety was this: one day, he called me to his office and said he had a loan that he wanted me to make. So, I went to his office, and there was a man named Carey Crutcher. “Walter, do you know Carey?” Joe asked. I said, “Yes, as a matter of fact, I do know Carey. He’s pretty famous in Houston.” Of course, I did not tell Joe he was famous because he was wild and reckless and would not ever be a friend of mine! “Carey needs a loan that I think would really be good for our bank.” Then Joe shoved a book across his desk that had to be nearly two feet square and at least two inches thick. It probably weighed 40 pounds. Joe said, “This is Carey’s proposal. I would like for you to take a look at it. Let us see how we can meet Carey’s needs.” I opened it up and on the first page was a short summary. Carey was asking for $25 million to buy 50,000 cattle to put on a pasture in Australia. It was insane. Cary had no clue what he was doing, and I knew it. But like any good loan officer, I said, “Thank you. There is a lot of information here. I will spend the weekend studying it. I should be able to get with Carey Monday morning, and we can talk about what the bank might do.” Joe looked at me and said, “Walter, you do not understand. Carey is here now. He wants an answer now.” I replied, “Joe, if you want me to make a decision on $25 million loan

THE JOE ALBRITTON STORY—12 MONTHS OF HELL 159 now, that makes this very easy. The answer is no. We will not make a loan of any size on cattle in Australia.” Carey, I knew, was a hot head. Honestly, I thought he was going to give me a whipping right there. However, I stood my ground and told Joe that under no circumstances should this little Houston bank be making loans for cattle in Australia. I would not be a part of it. Joe put up a big ugly argument and finally I said, “Joe, as you know, you own the bank. If you make the loan, put your name on it. Under no circumstances will I be a part of it!” Then I left his office. Fortunately, Joe did not make the loan. That little story is one of many that I went through over the year I was with Joe. Here is another. One day, Joe came to my office and said, “Walter, you’re supposed to be helping me build an International Department.” I reminded Joe that he hired an international man and then fired him before he ever came to work, and things were pretty hectic right now. Joe said, “Well, I made up my mind over the weekend, and I want an International Department now, not later, OK? I want you to do it. Walter, Monday morning you are to meet Harry Merriweather in London. The two of you are going to find a place to charter an offshore bank for me.” I told Joe, “I cannot do this on Monday. I don’t even have a passport.” Joe replied, “I know you do not. Here are your tickets to New Orleans, where you will go to the customs department. They are expecting you. You will get a passport, and then Sunday night you will be on an airplane going to London, where you will meet Harry Merriweather.” The next three months proved to be an amazing experience for me. It was at a time when many of the big banks would soon start establishing offshore shadow banks. I went to British Virgin Islands, half a dozen European countries, the Bahamas, and Cayman. We talked to banks, accountants, and attorneys, and ultimately chartered an offshore banking company in Lichtenstein, which was a tax haven. Joe was ahead of his time. Finally, the three months were over, and I was to return back to Houston. Harry and I had accomplished all the goals and challenges that Joe had put in front of us. Joe was really thrilled and complimentary. But then Joe surprised us with another challenge. He wanted to own a building in London’s financial district with his name on it and an office for the bank. As I remember it, we met the request and purchased a bank building at 57 King William Street. On my return to Houston, I quickly discovered a huge problem. While I was gone, Joe had hired an international

160 AN AMAZING LIFE banker. He was a very interesting person, a loose cannon perhaps, and in 24 hours, I learned that his favorite spot was a bar on the top floor of the bank building. I joined him for a drink. I quickly learned that this guy could drink and drink, and every drink would be different. He went there every day at 4:00 p.m. If this was not bad enough, I soon discovered that he had made $45 million in loans that I never would have approved of. In those days (that is, 1970), there were no computers, no cell phones, and communications were very poor. But there was a teletype and the banker had it in his office. All day long, the teletype would be running presenting brokered loans. Different messages would come across the machine asking for people to participate in loans, and the entire presentation would fit on a 3x5 notecard. There were no files. The minute I discovered this crazy scheme, I went to Joe. I said, “Joe, do you have any idea what this international banker has done?” Joe did not. I explained it to him, and then I said, “Joe I want you to know I’m quitting the bank, and I’m leaving tomorrow.” I told him I would not be a party to such ridiculous banking. There was no way this bank can survive, and I did not want my name connected with it. Joe took the news really hard. He cried real tears and begged me not to quit, saying nobody ever quits him. He told me if I stayed, I would be a very rich man. He really needed me, he said. For 24 hours, he begged hard. The next day, Gibson Gayle—an extremely famous attorney, Joe’s personal attorney—with Fulbright Crooker Law Firm called and asked to take me to lunch. Gibson picked me up and took me to Galveston for lunch, so I was his captive for about four hours. Gibson explained that Joe realized how badly he needed me, and I would be in charge completely! Joe would put me in deals and make me rich. Also, he very well knew of Joe’s ego and his weaknesses. In any case, Gibson failed to make me change my mind. I often look back on my wise decision to cut and run when I realized that I could not work for someone I felt was an ego maniac. This proved to be not just a good decision, but a brilliant one. The same week I left Joe, I went to work for Bank of Texas, which had almost $100 million in total assets. The principal behind the bank, its chairman, was George Butler of Butler Binion Law Firm. I joined Bank of Texas and turned it into Allied Bank. Over the course of 18 years, my team grew the bank from $100 million to $5 billion. Then we sold to Wells Fargo. So, what happened to Joe? Unfortunately, Joe’s ego cost him millions.

THE JOE ALBRITTON STORY—12 MONTHS OF HELL 161 He purchased the Riggs National Bank in Washington DC, which was the largest bank in Washington at the time. He also had the bank buy him a Gulfstream jet that he used to fly all over the world. Joe attempted to solicit every foreign dignitary. His stated goal was to have every important person around the globe as a customer of Riggs Bank in Washington. As it turns out, however, he was banking dictators, presidents of countries with names we have seen in The Wall Street Journal. Joe marketed the bank as “the most important bank in the most important city in the world.” This was the start of a scandal, the beginning of his undoing. The bank was forced to pay one penalty of more than $30 million dollars for hiding assets of the former Chilean dictator Augusto Pinochet. There were many other such fines. Ten years after Joe bought Riggs, it was described in Forbes magazine as teetering on the brink of insolvency. Saddled with a dismal balance sheet, according to The Washington Post, Riggs was so determined to keep lucrative sovereign assets that he broke the law on their behalf. According to the story, one of the dictators that Joe had solicited was Teodoro Obiang Nguema of Equatorial Guinea, an oil rich country on the West central coast of Africa. The dictator deposited $100s of millions with Mr. Albritton’s bank. While it may have been legal to bank with current and former dictators, Riggs broke federal law when it attempted to hide their accounts in transactions. The violations had occurred over a period of years but were discovered only after the terrorist attacks on September 11, 2001. This prompted investigators to scrutinize banks connected with foreign clients. In 2004, the Office of the Controller of the Currency (OCC) leveled a $25 million dollar fine against the bank for failing to report $100s of millions of suspicious actions of overseas clients. The following year, the bank pleaded guilty to a federal criminal charge and paid a $16 million penalty. The judge who approved the fine called the bank a “greedy corporate henchman of dictators and their foreign corrupt regimes.” In another settlement involving Spain, the bank paid an $8 million settlement. The end of the story is the bank was forced to sell and was purchased by PNC. In my opinion, Joe was an OK guy. He was naïve and had set unrealistic targets. Also, he did not surround himself with strong enough people, like me, who would tell him no. Joe died at the age of 87 in 2012 and was still believed to be a billionaire with holdings in radio stations, news stations, and, according to the press, had turned a $35 million media investment into a $217 million asset when he sold it. He also was a huge collector of some of the finest art in the world. I have thought about this story at least

162 AN AMAZING LIFE a thousand times since I left Joe at the end of 1970. When it was all said and done, I was with Joe for less than 12 months. But it was the longest 12 months of my life and, probably, the most exasperating. The reader is probably wondering why I stayed a year. The answer: because I am not a quitter. I love a challenge, and Joe needed me desperately. But at some stage, “Enough is enough.” In any case, I probably have about 100 other Albritton stories. Maybe I will save those for the next book. In any case, the experience working for Joe taught me some incredible lessons that have been important to the rest of my banking career: 1. Be conservative. 2. Do not be reckless. 3. Do not be associated with somebody because of their wealth. 4. Do not work, or bank, with an ego maniac. 5. Stay away from people who are uncontrollable and will not listen to good advice. 6. Do not be impulsive when important decisions are to be made. 7. Being a brilliant self-made millionaire does not prevent one from being erratic, stupid, and untrustworthy. 8. To be successful, everyone needs an ego, but letting it grow too large can cripple one’s future. 9. Always look forward and be sure you are going in the right direction. 10. Do not be associated with a company in any capacity if the owners or management have no conscience. Quit! And the same goes for a customer, or even a friend. 11. If you see disaster ahead, cut and run. 12. Your reputation is everything. Do not get sucked into the mud.

JOE RUSSO AND TIMING IS KEY 163 Joe Russo and Timing is Key It takes courage to stick to your convictions and decline a deal… only because you believe timing is wrong. —WEJ Every day, I enjoy looking out the window of my high-rise home and seeing the many office towers that I have successfully financed over a 50-year banking career. However, it is equally rewarding to reflect on the ones I see that I refused to finance and tried to get the developer to abort his plans. There is nothing more important than timing when it comes to lending especially real estate. I mentioned earlier how certain I was that a crash was going to be happening in the next few years. I made every effort to get our bank ready. When an economy is facing a recession, financial risks increase as customers face business failure, perhaps even defaulting on loans and filing for bankruptcy. During such times, it is prudent to avoid increasing, and if possible, reduce, your exposure to these financial risks. You do not want to take on new debt, which means you might want to postpone new projects until the economy improves. The two following stories are examples of real estate disasters I avoided while CEO of Allied Bank in the early 1980s. Joe Russo’s Lyric Center J oe Russo was a prominent real estate developer around Houston for many years, and Allied had been chasing his business for a long time. One day, he called me and said, “Walter, I want to take you to lunch and show you something.” About lunch time, Joe picked me up in front of the bank and we headed out. While we were driving he said, “Walter, you have been after my business for a long time and I have decided I am going to give you a great deal that I’m currently working on.” We went not far from the bank, down to a corner where Joe pointed

164 AN AMAZING LIFE to the land and said, “Walter, do you see that spot? He then said he was going to build a multi-story building there and call it the Lyric Center. He planned to let me finance it. I replied, “No, Joe. You have done a lot of successful real estate projects, but timing is everything. Now is the time to de-leverage as rapidly as you can and not take on more debt by starting another building. Joe, Houston is definitely going to crash. There is no doubt about it.” Joe looked at me in the eye, pointed his finger at me and said, “Walter, you’re just another typical banker. If we developers, including Hines and Schnitzer, listened to bankers there would not be all these buildings that you see out your window. You bankers are always scared. Fortunately, we have the courage to build buildings and the people will come. This building will go up with you or without you.” I thanked Joe for the opportunity and he took me back to the bank. We never had lunch. Shortly thereafter, there was an announcement in the paper that First City was financing Joe’s building. There is a long story to it, but Joe went bankrupt and First City, according to rumor, took a $60 million dollar loss. Harold Farb’s Apartment Complex Harold Farb, another big name in Houston, came to see me soon after Joe Russo. He was focused on investing in apartments for many years. He had a lot of plans with him and he started spreading them out on my desk to show me the 60-story building he was going to build on San Felipe. I do not remember the amount, but it was a lot of money. I told Harold what I told Joe Russo, that this is a time to hunker down because this city was going to crash. I said, “Harold, your current income is $6 million a year on apartments and you have basically no debt. At your age it would be crazy to go into debt to try to build something you have never built. Your $6 million income won’t even pay the interest on the amount of money you’re talking about borrowing—and I don’t believe the project is going to work because of timing.” Again, to make a long story short, First City financed Harold’s project and he went broke. It is rumored that First City lost well over $50 million dollars. I have other examples, but two will do to make the point.

Part VI Amegy

AMEGY BANK STORY 167 Amegy Bank Story The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without a trace of casualties in your wake. —Alan Greenspan You don’t build a business. You build people, and people build the business. —Zig Ziglar I n 1988, Allied Bank of Texas, the bank that my team and I had been building over 18 years, merged with First Interstate of California. At the time, nearly every bank in the state of Texas had names that no one recognized because all the banks had been taken over by California, New York, and some places in between. To make matters worse, we were not in the best of times economically. Houston was coming out of the worst recession in its history with 250 thousand families without a breadwinner in our city alone, and the introduction of out-of-state banks did not improve things. The new banks, for one, did not know the people. They did not appreciate entrepreneurs or understand small-business lending or middlemarket lending. In most cases, they emphasized retail banking rather than commercial lending. In First Interstate’s case, which I witnessed firsthand, there were some absolutely comical decisions being made. Dark comedy. They were getting rid of customers that I had banked with for over 20 years, customers that were strong and well-managed, customers that carried significant deposits but—for whatever reason—were no longer wanted. Because of this, many long-time customers were begging me to do something since their credit had been effectively shut off. Likewise, my officers were begging me to start a bank. They could see the writing on the wall. They could see they were not going to be needed at First Interstate in the near future. This was not paranoia.

168 AN AMAZING LIFE

AMEGY BANK STORY 169 At the time, however, I was 54 years old and basically broke (see story on how stock grants can be treacherous). I had an IRA, a 65-year-old bay house on Galveston Bay in LaPorte, Texas, and a small 1,400 square foot townhouse on Sugar Hill Street, not far from the Galleria where Yvonne and I had moved after selling nearly everything we owned. Deciding to Build a Bank So, I called two banker friends, John Klein, owner of the Klein Banks that I would end up purchasing 15 years later, and Don Wigley, now a banker, whom I had worked with in the factoring business years earlier. I told them about the new venture I was planning to start and asked each to loan me $150,000, unsecured, adding that I would cash in my IRA and pay both of them if this did not pan out—though an IRA couldn’t be used as collateral legally speaking. In any case, I was hoping they would trust me. I needed money to invest in my new venture. At the same time, I was going to start raising capital, and I knew it was not possible to raise money from investors if I did not have “skin in the game.” Realistically, I needed to raise a lot. My goal was to raise $10 to $12 million to capitalize the new entity. Of course, I could have started a de novo bank, but that would have been harder and more time consuming and I was in a hurry. So, I started looking for an opportunity to find a small bank that I could take over, one that was well established and had some good operations, at least, a foundation. My first choice was one largely owned by my friend, Ned Holmes. He had a bank that would have been perfect for me to energize. Ned and I visited on the matter and agreed that it made sense. He knew me well and believed I could execute what was planned: to take his bank and make me the CEO, then to bring in my team, including my president. I told him we would build a great company. When we said our goodbyes, Ned told me he would consider it. About a week later, he called and said he liked the plan, but his current CEO had to continue as CEO. I could be president. I knew his staff, and they were good people, more than competent enough to run a little bank, but I did not believe they could carry the bucket for the team that I was going to put together. In his defense, Ned was extremely loyal to his team—understandably so—but he simply could not accept the proposal unless his staff continued with their titles. I explained to Ned this just would not work. In the end, we agreed to disagree, but to this day, we are good friends. I respect him very much for his decision and his loyalty.

170 AN AMAZING LIFE Plan B I tried to stay positive. I had another longtime customer named Travis Traylor, who was also a friend. Travis owned a bank that had about $30 million in assets, so I went to see him with the same plan. Travis was enthused. He loved the plan and felt it was a way for him to grow the bank significantly, especially considering the fact that his bank had not grown much since he had founded it some 10 years earlier. Then and there, Travis and I came to a mutual agreement to proceed. Of course, I was excited to have the chance to put the plan into action. As luck would have it, Travis called a few days later and told me the same thing as Ned had. He said he could not do it unless his guy kept his title in the new bank. Again, I explained that his guy was, no doubt, a good man, but he was running a very small bank, and he would not be able to carry the water bucket for the team I was putting together. Unfortunately, Travis backed out of our deal, saying he had to be loyal to his CEO, a nice family man, and he liked him a lot. Failure number two, I told myself. Approximately two years later, however, it was discovered that Travis’ president had been stealing from the bank, running a Ponzi scheme, of all things, with an automobile dealer. This, of course, was a monumental disaster. The FDIC closed the bank, and Travis lost all his investment and had to pay a considerable fine on top of that. It proved to be a significant blow to Travis’s financial worth. But thank goodness, I could have been in the middle of that mess, which would have presented a huge setback for my plans and maybe my career. An Opportunity Opens A few weeks after the Travis Traylor debacle, Don Brunson came to see me. Don had worked for me in the early 70s at Allied and was currently president of a bank called Northwest Crossing National Bank (NWC). He had been there well over ten years, and the bank had approximately $40 million in total assets, but it was also suffering from the recession. As a result, he asked me to consider coming in as CEO and let him be president. “We could build the bank together,” he said. I knew Don reasonably well and had the same thoughts in mind that I had with Ned Holmes and Travis Traylor. I honestly liked him. He was a great young man with a wonderful family, but I doubted that he could be president of what I was going to be building. I could not promise him such a title, so I had to turn him down.

AMEGY BANK STORY 171 It is easy to call it luck, but in reality, your reputation may be the reason people seek you out. —WEJ A few days after this meeting, however, Johnny Johnson and Eugene Mitchell came to see me. Both were from Don Brunson’s bank—Johnny, the chairman, Eugene, a director. In any case, they came to tell me that they really needed me. Of course, I was honored. But I explained to them how hard it would be since Don had already approached me, and how I had turned him down. I simply could not promise him the title that he wanted. Johnny and Eugene said, “Don’t worry.” They reiterated that they needed me in the bank. If I would come, they said, they would make their own deal with Don for his many years of loyalty. They promised that I could use Northwest Crossing Bank as the foundation of the bank that I had been wanting to build, that I could build my team and name all the positions. Basically, it would be my bank without any restrictions. So, I agreed. I went home and told Yvonne that our prayers had been answered, that this was our lucky day. NWC wanted me bad enough to give me the bank as a foundation for my plan. The thing that made NWC so strategic is that they had what I felt was the most impressive group of board members in Texas. They were all leaders—honorable, successful businesspeople. They were highly admired by their peers and community and maybe the most charitable people in Houston. Most importantly, however, we were on the same page. They shared my vision. The Most Important Day of My Professional Life The Houston Business Journal called it a “new bank formed out of the ashes.” Negotiating my terms with Johnny was easy. We did not need an attorney because we trusted each other. I simply told him the following stipulations: 1. I would raise $12 million in new capital, and they could participate if they wanted. (Actually, they invested a new $2 million.) 2. They would remain as directors (eight of them), but I could name as many new directors as I chose. (I ultimately named three.) 3. My team and I would be given 10% ownership of the bank—5% for me and 5% to spread as I saw fit. 4. As long as I was involved with the company, we would give 1% of all net income to charity (which is a total of about $45 million today).

172 AN AMAZING LIFE 5. I would examine the bank, and they would guarantee the loss or short fall in all loans I considered in jeopardy. Then we would settle up in three years. 6. I could rename the bank. When it was all said and done, negotiations took about seven minutes. After this, I asked one of my Allied officers Paul Murphy to join me in looking over the bank assets. Paul was eager to join me and probably would become president of the bank soon enough. He was a smart, hardworking young man who had been through Allied’s training program (I had a premier officer training program for 45 years—another key to my success.) Paul had great promise. So, the two of us scrubbed the portfolio. Then Yvonne and I drove around one weekend to see all the real estate the bank had financed, which made up the bulk of the bank’s assets. After doing this, I crunched the numbers and came back with some bad news. I had to tell the board that I thought they had $2 million in losses that they had not considered. If I was right, it would further reduce their equity—not the equity of my new shareholders. The board thought my prediction was absurd because they had written down all the portfolio a number of times— per the bank examiners’ suggestion—and they had current appraisals on all proprieties. It appeared that I was unrealistic! The bank, overall, was not in bad shape except for the $2 million— out of a portfolio worth approximately $30 million. The board, however, remained skeptical. They asked for an example, so I told them about a property that Yvonne and I had looked at the previous Sunday—a property out on old Westheimer Road that had an original loan of $150,000, which had been written down to $100,000. Oddly enough, I was the only person that had ever seen the property. I put a value of $25,000 on it. The place in

AMEGY BANK STORY 173 question was 25 acres, right under a huge Center Point transmission line. It was a disaster zone. The neighborhood had houses that were about to fall apart, cars were sitting on blocks without tires in the front yards, no one mowed their yard. Honestly, I could not imagine what we would do if we had to take that piece of property back. I would not take it if given to me for free! I felt generous giving it a value of $25,000. The board, however, thought that I was just a big bank lender that was being overly conservative after the stress of going through Houston’s recession. In any case, they agreed to guarantee the collection up to a $2 million short fall. We also agreed to work together in an effort to collect all those loans over a three-year period. As it turned out, one of the directors was able to sell the piece of property in question and got $25,000 for it from Teas Nursery, which had planned to use the property to store plants on. Moreover, my speculation regarding the $2 million loss (on the $30 million portfolio), turned out to be accurate within $100 thousand after the three-year period. The directors agreed to let me rename the bank and I selected “Southwest Bank of Texas,” which I chose because my first banking job was with Bank of the Southwest, and my future bank job was at Bank of Texas, later to become Allied. Because of this, there was a great deal of nostalgia in combining the names to become Southwest Bank of Texas. It went over amazingly well with the public. Of course, now that we had a name, I had a bigger job to do, namely, raising $12 million to capitalize the bank. The directors had agreed to put in $2 million, which they would lose under the current formula if they had to pick up the $2 million in losses. However, these directors already owned most of the bank stock and would have a significant stake in the new bank we were planning to build. Very quickly, the phone was ringing off the wall as news spread throughout the city that I was starting a bank. My secretary, Carol, from Allied joined me and so did my wife, Yvonne. After 35 years of marriage, she quit playing tennis and chasing the kids to come and help me for free by Our first logo: a big hit with Houstonians

174 AN AMAZING LIFE opening new accounts. Yvonne and Carol knew all my customers. But we had a lot of new ones calling. They knew my business-banking reputation from Allied, and their current banks were now run by the FDIC or some out-of-state bank. Around this time, I was also spending around 10 hours a day in my car, going to see friends, customers, and other potential investors, trying to raise $12 million dollars. This, I cannot stress enough, was just about the bleakest time in the history of banking. Basically, all the banks that everyone knew were in ashes. Many potential investors I sought out were losing money on bank investments. However, people came out of the fold to support my plan. Arthur Andersen, Houston’s largest accounting firm, for one, loaned me an analyst to put together a proforma that I could show to potential investors. The proforma showed that in five years we would be a $500 million bank, which proved to be ridiculously conservative. As I called on potential investors, I anticipated showing a very conservative proforma, so I had 250 copies printed. As it turned out, I do not think I gave away more than two because no one asked. They were placing their bets on me, not statistics. The minimum investment was $100,000 because I did not have time to raise $12 million at $10,000 a clip. On the flip side, the maximum investment I allowed was $100,000. I told everyone this could be the riskiest investment they would ever make. Houston, of course, was still in shambles. One potential investor, Ed Smith, a wealthy Houston businessman, called me to meet with him. He insisted on investing $2 million and wanted to be on the board of directors. When I told him, no, he replied, “If I can’t invest $2 million, then I’m not investing anything.” There was not much to say. “OK, we’ll miss you,” I told him. My thoughts have always been that no one can buy a board seat. That decision is up to the board. Some of my best friends also wanted to invest, but I would not let them because I knew they would have to borrow the money to invest in a startup bank. At the end of the day, I ended up letting about six people invest more than $100,000. Walter Mischer, my old boss, invested $300,000 dollars; Berdon Lawrence, $300,000; Bob McNair, $300,000; Doug Pitcock, $200,000; and my longtime friend Lewis Delhomme, $250,000. Truth be told, as it turned out I could have raised a lot more capital, but I have the theory that too much capital “burns a hole in your pocket.” When a

AMEGY BANK STORY 175 business is under pressure to give investors a return, it is normal to stretch on loan standards. Then mistakes happen. So, I raised $12 million, then $10 million more and later sold $7 million in bonds. After this, we went public in January 1997 and raised $20 million, and that was the last of the capital needed. Then we really got started. We leveraged the ability of our new public company and made a series of acquisitions. Our officers found the town hungry for a relationship-style of banking, and we grew rapidly. However, we were crippled by only having three branches. Early on, we had opened a branch on San Felipe in a location where another bank had failed. Then we did the same thing in a downtown location. Six years later, we made our first merger (with Pinemont Bank). An article in the paper said that we had grown 600%. We had six more mergers after Pinemont and most were friends or acquaintances of mine. We never failed to emphasize we were the only home-town bank on a growth trajectory and reaching for the stars. While Pinemont Bank was much smaller than we were, it had nine branches, and we only had eight at the time. So, this was a strategic merger. I dealt with Bubba Pfeffer, majority owner, and Nolan Bedford, president and CEO. They came to me and said they would like to join Southwest Bank of Texas now that we were public. I told Bubba that I had done a little research on his bank and showed him the figure that I thought he could sell it for if he went We never failed to emphasize we were the only home-town bank on a growth trajectory and reaching for the stars.

176 AN AMAZING LIFE out and did some shopping. But, I showed him a lesser number I’d like to buy it for. I explained that if I gave him the higher number, the public was not going to like it. Our stock would probably take a dip, but if I gave him the smaller number, the public was going to think that Walter Johnson was a genius and could buy banks better than anybody in the country. They would fall in love with the stock, and he would make a lot more money by taking less. Bubba looked at me and smiled. He quickly stuck out his hand, said, “Well, give me less then.” Beginning to end, it was about a thirty-minute negotiation. Again, we did not need attorneys or investment bankers to accomplish this. You would be hard pressed to find an easier acquisition than this first one with Nolan and Bubba. We were all thrilled to get Nolan Bedford and his team as well as the bank and its nine strategic branches with $235 million in assets. Growing Like a Weed One day after the bank was about four years old, Sam Golden, our head bank examiner, audited the bank. When we gave me the wrap up and his conclusion, he said, “I can’t find anything wrong. Your portfolio looks good.” “Good,” I said. Then he banged his fist on the desk and raised his voice. “But you’re growing too fast. I mean, you cannot keep this up. It’s dangerous, and I am not going to have another bank failure on my watch.” This was a very tense moment. However, I stood my ground and we did not slow our growth. We were growing like a weed. This was true. But Sam could not complain. He kept cl i mbi ng t he ladder in the offices of the OCC, and to this day, he is a believer and a friend.

AMEGY BANK STORY 177 Acquisition Program The chart above shows the acquisitions we made and how much of our growth was from acquisitions versus organic growth. The last acquisition before we sold to Zions Bank was with John Klein of Klein Bank. John had been an officer with me when I joined Bank of Texas in 1970, and his background was as a bank examiner. There was a joke all around town that the banks had gotten together and given Bank of Texas money to hire John to get him off the examining force because he was so tough, obstinate, and—frankly—hard to deal with. John and I were very good friends. Over the years, anytime I introduced him to a group, I would say, “This is my friend John Klein and he’s tough as nails.” When John worked for me he was one of our very best lenders—a little on the liberal side with his own credit and tough as the devil on others. John worked for me about five years. Then he left and started his own bank. He built a wonderful 30-branch franchise in Northwest Houston, Klein Bank. Over a period of 12 years, Amegy never put a branch in the Klein market. For one, I always knew that one day, we would acquire his banks, and sure enough, there came a time when he was ready to sell. When this transpired, he was concerned about all his employees. I had, of course, encountered this before. He chose to sell to us because he knew

178 AN AMAZING LIFE Location No. 1, founding of Southwest Bank Bragging about being a Texas home-grown bank vis-a-vis competitors from out of state banks.

AMEGY BANK STORY 179 that we would treat his staff as well as the other Amegy employees. A good example is Jill Vaughan, one of his senior officers, who went on to become an outstanding Amegy executive and Amegy’s chief credit officer. Most of the mergers that we made over the years were banks owned by friends of mine or acquaintances who were near my age. Consistently, their biggest concern in making a sale was the fate of their staff. These folks chose to be partners with us, I am proud to say, because they knew our goal was to keep their staff in place long term. This certainly was not happening to the ones that sold to the out-of-state banks. Two strategic turning points in Amegy’s life were the expansion by acquisition in Dallas in 2004 ($223 million in assets) and San Antonio in 2007 ($111 million in assets). In my Post Oak office with Yvonne

180 AN AMAZING LIFE Southwest Bank of Texas Picks a New Name One of the hardest exercises I experienced was selecting a new name—a change from Southwest Bank of Texas in March 2005. But we had no choice. Dallas already had a Southwest financial institution and threatened suit if we even put a branch there. Fi r s t , we h i r e d a n a m e consultant and they showed us a thousand different options. I did not like any of them—they all were names one would recognize but they were certainly not unique. Also, I wanted a name we could get trademarked so no one could ever use it. I remember in the early 1970s when my bank changed its name from Continental Bank of Texas to Allied and we started a major media program. Soon after, there was an Allied Plumbing, Allied Cleaners, and dozens of others capitalizing on our marketing. Yvonne and I ultimately invented “Amegy”—and actually it means nothing. However, people soon connected it with American Energy, or often Energy of the American People. Actually no one liked the strange sounding name, especially Yvonne and I, but I continually reminded my team of the fact that at one time no one ever heard of SONY, Exxon, Chevrolet, Jeep, Verizon or hundreds of other meaningless names that we now use often. The Amegy name brought some amazing advantages. On a branch billboard you cannot see at a distance small letters that spell “Southwest Bank of Texas,” whereas we could put “Amegy” in giant letters that were easily visible. There is no better example of that than the 27-foot “A” where Amegy is on display on the new Amegy Tower. A n even more incredible advantage is all of the powerful The news media gave us a lot of free publicity; they liked our story. Amegy Bank, the new company name

AMEGY BANK STORY 181 words starting with “A” that we used in hundreds of marketing ideas. We blasted the city with so many billboards, calling ourselves the “A-Bank” and we found clever ways to use other key “A” words such as: awesome, a ma zi ng, astounding, ambitious, ability, accuracy, action, aware, adaptable, addictive, accelerate, accommodate, achieve, assertive, above, absolutely, abundant, accomplished. (Actually, Yvonne and I had 40 ideas with different “A” words.) Also, for most of the 30 years at Allied and early on at Amegy, I created most of the advertising ideas—it is one of my passions. Amegy Sold to Zions I n 2004 and 2005, bank stocks were soaring high, reaching what seem like outrageous prices today. Good banks, such as ours, would sell at a price close to four times book value. Therefore, a million dollars that we had retained in capital would sell at four times that price. I had always told my good friend Harris Simmons that one day, we would sell, and hopefully it would be to him as the leader of Zions Bank. Harris always told me that he had to be in Texas, and there was only one bank that he wanted, Amegy. It did not happen immediately, but Harris and I stayed close and in touch for 30 years. Actually, Harris Simmons, LE Simmons, and the older brother Matt Simmons had all been good friends for what seemed like forever. LE called me one day to say that his younger brother, Harris, was graduating with an MBA from Harvard. He asked if I would consider letting him come to work for me to learn about Texas banking. Then he added, “By the way, you don’t have to pay him.” So, Harris joined our Allied Bank team in July 1980. Because of who he was, we spent a good bit of time together. We made calls together, and he got to know the key people very well at Allied. He was impressed with the culture of the bank. When Harris returned

182 AN AMAZING LIFE home to Salt Lake City, Utah, to work with his father—who had put together an investment group years earlier to buy Zions Bank from the Mormon Church and was now CEO—I went to Utah to meet Harris’ key customers. Allied became his correspondent bank in Houston, and Allied was significantly larger than Zions in Utah. Harris and I had numerous opportunities to work together and keep our strong friendship growing for some 50 years. There is no bank or banker I admire more. And amazingly, Harris has created and promoted a bank culture similar to Amegy’s. In 2005, I was approaching 70 years old and decided it was time to sell Amegy. At the time, the board was not convinced we should sell but changed their minds when I gave them the following reasons why I thought we should: 1. Prices of bank stocks were extremely high, higher than I had ever seen. We could not speculate on how long the premiums on bank stocks would last. 2. In my forty-five years of banking, I had been through many ups and downs, and I did not want to go through another down cycle at 70 years old because it takes a long time for cycles to turn. Walter and Yvonne featuring customer testimonials.

AMEGY BANK STORY 183 3. 9/11 had just occurred, and I felt Houston was a potential target if the terrorists were to strike again and cripple the nation by shutting down our oil and chemical refineries. 4. Every summer, Houston, faced a 9/11-like attack in the form of a hurricane. I related how Whitney had been crippled a few years earlier when a hurricane damaged a significant part of their market share. 5. I had a growing concern about the fact that our entire market was extremely energy dependent and we must restrict our future growth to diversify our portfolio. A merger with Zions would be strategic because their market was substantially non-energy. 6. I wanted to sell to Zions before Harris got tired of waiting and chose to merge with another Texas bank. Finally, the Board determined that my reasoning was sound. They agreed to sell Amegy. Of course, a public company cannot just decide to sell with only one buyer bidding. The bank had to go to the marketplace to see who would pay the highest price, so we enlisted Keith-Burette & Woods to represent us, as they were one of the leaders in the banking industry in mergers and acquisitions. Ultimately, we had about eighteen suitors that expressed interest, and we narrowed it to the three that we thought were best suited for Amegy Bank. Then those three made presentations to our board, and it was unanimous. Right off, everyone liked Zions Bank and Harris Simmons, the banking strategy, business culture and him personally. We were all Celebrating the closing merger with Zions Bank. Left to right: Scott McLean, Paul Murphy, Harris Simmons and Walter Johnson.

184 AN AMAZING LIFE confident in Amegy’s ability to prosper under his leadership. When the time came for us to make a choice, the decision was easy. Harris agreed to meet the price target that we had in mind, and we consummated the sale in 2005 with $9 billion in assets. Zions paid Amegy shareholders $1.7 billion, a whopping 4.2 times book, probably close to the highest price in history. The founding investors that put up $100,000 received $3.6 million 15 years later, probably more than any ever imagined, and a retirement package for most of them. I speculate there has never been a bank merger as perfect as in the Amegy-Zions case. Our entire staff, for one, loves Harris. He comes to see us regularly and even goes out to the branches and meets employees. He is in Houston quarterly for board meetings and communicates often. I think it is safe to say he genuinely loves Amegy Bank. Our CEO at the time was Paul Murphy, who I brought from Allied Bank in our beginning. But Paul in 2010 got the opportunity to leave and organize his own banking franchise. Paul leaving was a non-event because we had a deep and impressive management bench. Our new CEO became Scott McLean, who joined Amegy in 2002 and became our president in 2003. This proved to be a major turning point for our company. He had a distinguished banking career and was most recently President of Texas Commerce, Amegy’s largest and best competitor in Houston, Dallas, and San Antonio. Over the years, Scott has brought some incredible banking associates from Texas Commerce and made Ameg y a bank ing p owerhou s e . O u r current president for the entire state of Texas is Laif Afseth, one of the key people Scott brought from Texas Commerce. Other key officers are David Stevenson, President of Amegy Houston; Kirk Wiginton, President of Amegy Dallas; David McGee, President of Amegy San Antonio, and just retired is my close friend and associate Joe Argue, who joined me in 1972. David and Kirk have been with Steve Stephens, Walter E. Johnson, and Scott McLean

AMEGY BANK STORY 185 me since the early 80s. Steve Stephens is the current CEO of Amegy Bank, someone who has helped build our team from day one and was the first person I recruited. Words simply cannot express the quality of the team we have at Amegy, from top to bottom. We have so many long-time employees, and as much as 40% of our leaders have been with us 20 years or more—many for 30 years, that is, since our beginning. Scott and Steve agree that hindsight shows that our decision to sell to Zions was really brilliant! Looking back, I have no doubt about the decision. Harris was well aware of our team, our work ethic, and our culture. He knew how similar our bank was to Zions. Following the merger, he quickly tapped in and selected many key areas that Amegy could manage well and help the entire company, such as international, foreign exchange, treasury management, factoring, and mortgage lending. Harris selected Scott McLean to become president and COO of Zions in 2014. Then Steve Stephens became Amegy’s CEO. Steve is really amazing. I suspected such, considering I had selected him as the first person to call to join me and Paul in 1990. Steve was at Texas Commerce Bank, Regan branch, and was on a very good career path there. Yvonne and I love Steve. Not only is Steve a superstar, but he is a uniquely talented “people person,” a capable banker, and a great team player and leader. Steve and Scott have been key to building the incredible team we have. Both Steve and Scott, like the rest of our leaders, are tireless workers and incredibly committed to the staff. So, we stuck to our game plan. From day one, I said Amegy would never expand outside of Texas. I also held firm that we only wanted to bank in the most significant cities in the state, namely, Houston, San Antonio, Dallas, Fort Worth, and Austin. I felt we could do more for our customers and for our stock by concentrating our marketing, our leadership, our officers, our contacts, and all the influence that we exerted in the cities rather than spreading ourselves too thinly throughout the state or in neighboring states. Obviously, it worked. Today, with assets of $14 billion, we are a powerhouse in Houston and most of the cities we serve. Our team has no equals, and I marvel at what they have accomplished. I am so proud that today Amegy supports over 2,000 families who share our vision of charity, integrity, and always do the right thing. There are so many things that distinguish Amegy Bank from its competitors, which has allowed us to grow from $40 million to $14 billion in the span of 30 years.

186 AN AMAZING LIFE Senior Chairman Now I am 84, and Yvonne is 82. I am Senior Chairman, and she is still my executive assistant, as she has been for almost half of her life. We still go to the bank almost every day. We do this because we want to. As you probably know, Senior C h a i r m a n me a n s you do not have to do anything you do not want to, and I abide by that. After 55 years of banking, I do not like the trivia, the minutia, or the meetings, but I still produce new business. I still like making calls with our officers, especially with our young people. I enjoy i nt e r a c t i n g w i t h both young and old. There are still lots of successful “old timers” who know me in Houston. To them, I am still the face of the bank, something I am very proud to be. Walter discourages hierarchy and his office is similar in size to other member of his leadership team. My knife collection. I have been collecting knives since I was a little kid. All of these shown were given to me by friends and customers.

AMEGY BANK STORY 187 Praise Zions Fifteen years after our sale— we are still on our honeymoon. —WEJ Once again, I want to express my happiness with Zions and my admiration for Harris Simmons. Our relationship with Zions is solid. The fact that Harris Simmons and I have a relationship dating back to the early 80s is important to some customers. It is also important for them to know that of Amergy’s over 2000 employees in Texas, more than half of them wear the Zions hat. I would need to write a complete book about Amegy and Zions to really express all the reasons I am happy with Zions! In Ireland

THE CULTURE OF AMEGY BANK 189 The Culture of Amegy Bank Show me a business where everyone is a prospect, and I will show you a great career path. —WEJ To love what you do and feel that it matters… How could anything be more fun? —Kathern Graham Continual encouragement will motivate one to success while constant criticism will stifle productivity and results. —WEJ The culture of Amegy can be traced back to our company’s origins, back to our first branch on San Felipe in a building that was owned by an insurance company. They had a storage room full of old furniture, what many would consider to be a bunch of junk. But I looked around and saw potential. I asked them if I could have the discarded pieces of furniture if I leased the space, and they looked at me like I was half-crazy, then nodded. This is how we started. We made use of what we had and did not buy anything new—similar to when Yvonne and I furnished our first apartment in 1956. I took some slab doors and put a coat of paint on them, set them on a couple of two-drawer metal filing cabinets, and that

190 AN AMAZING LIFE became the workstation for two employees. After that, I went to the mail room and built some cabinets. My wife Yvonne became my executive assistant. We had been married then 34 years. I convinced her it was time for her to join the fun and come to work. But her job entailed a lot more than the duties of a typical executive assistant. We did not have a cleaning staff back then. So, it included running the vacuum after hours, moving furniture, picking up paper clips, and taking out the trash. We did it all. And before long, our staff saw this, and they started pitching in. We did not have to tell them to take out the trash. We worked side by side. Yvonne and I—from our point of view—were not the bosses. We were just leaders; we were a part of a team. And that is how it is today. Only now Amegy has grown considerably. Now we are part of a 2,000-person team, part of a work culture that has prevailed for 30 years.  Despite our enormous growth, you can find some core elements that tie us together. Ethics and integrity, for example, connect us all. These two things have been exemplified by every person on our leadership team, and they permeate the ranks of our company. I have certainly seen proof of this in Harris Simmons, “Our Supreme Leader.” I think if you look around the workplace, you will begin to notice what sets us apart from other businesses. I would like to share some of the most important elements that created the company culture that helped to make Amegy what it is today. Yvonne and Walter celebrating our new Fort Worth branch with team members

THE CULTURE OF AMEGY BANK 191 Our Core Values Anyone who thinks that he or she will achieve great things all by themselves has a mistaken understanding of what success means. You can only do so much as an individual. A recurring conflict comes from our lack of agreement about the role of the individual versus the group. The invasion of Normandy on D-Day in 1944, understood today to be a the turning point of the Second World War, required a complex, expensive and coordinated effort by thousands of people in multiple countries. They worked together and trusted each other to accomplish what seemed impossible. They certainly had strong leaders, but their victory was not achieved alone. This brings me to Core Value number one: A successful company is not about individuals. 1. At Amegy Bank, there are “no big shots.” This is number one for a reason. A lot of companies have clearly defined hierarchies and make it a point to differentiate employees by rank. I cannot understand this. At Amegy, it is a way of life that the bank is run by leaders, not bosses. A leader will pick up a broom and sweep with you, but a boss will simply tell you to do it as he or she walks out the door. My name, as you know, is Walter—always has been—and I will not permit anyone to call me “Mr.” This is not an odd hang-up. I believe it is the cornerstone of the work culture I have had a role in creating, a rule that applies to everyone on the Amegy payroll. When companies rely on too much of a vertical structure, departments are less likely to interact. Decisions are made top-down. Communication is stifled. We may not be vital to the survival of the planet, but all the same, we are in this together. As H.E. Luccock put it, “No one can whistle a symphony. It takes a whole orchestra to play it.” Similarly, when you elevate one person, you set up a negative culture that focuses on individual benefit rather than the team, and when this happens, a company’s chances of success diminish greatly. Universally, I find our leaders are humble, caring, and always more concerned about their team and their associates than themselves. 2. Our staff is really a team by any measure. Honestly speaking, I owe much of my success to the team around me. A lot of the time you hear this, but a lot of the time, the reality does not match; they are empty words. To use another point of reference, Amegy is like a baseball or basketball

192 AN AMAZING LIFE team. “Talent wins games,” Michael Jordan once said, “but teamwork and intelligence win championships.” In other words, teamwork carried out by intelligent individuals will achieve long-term success. If you want to succeed, you have to figure out how to work together. No doubt, the same holds true for business, where every team member is important. But it requires empathy and humility, two words you do not oftentimes hear people use when talking about business. Everyone at Amegy, however, exemplifies this. They know we can win more often when we play as a team. This is crucial. If you get a team together, and you get them working with you, believing with you, if they want to be part of the team, then it becomes contagious. Simply put, that is the only way you can ever be successful—through teamwork that somehow catches. In such an environment, the leader is simply the individual that motivates others to join in, to commit to this, to look beyond me and see we. 3. Amegy respects its staff and the community. Amegy management truly respects and admires its staff and appreciates the work ethic and dedication they exhibit towards their fellow employees. While on its

THE CULTURE OF AMEGY BANK 193 surface, this may seem straightforward, there are many components to this. For example, if a colleague is experiencing difficulty in their personal or family lives, we as an organization step in and try to help as a community in any way we can. There are so many examples of our organization rallying around each other. The many stories of how our staff pitched in to help their fellow associates during Hurricane Harvey are simply amazing. Amegy’s team spirit is contagious and the sacrifices they made to help one another were extremely heartwarming. This is extremely important and one of the things that I love about Amegy. I believe the staff, in turn, appreciates what all the bank and its management team do for the communities we serve. We rally as a team to help each other. We respect our personal differences. We appreciate each other’s work ethic and the dedication that they exhibit daily, towards their fellow employees and clients. On another level, I believe the staff appreciates what the bank and its management team do for the communities we serve. We believe if it is good for Houston, it is good for Amegy Bank. For most of the bank’s life, for instance, Amegy has given 1% of its earnings to charity, which represents more than $45 million dollars. In Houston alone, what is really amazing is our staff alone gives over $700,000 to the United Way annually—far more than any bank in Houston, even those 50 times our size. They care for their community the same way Amegy Bank does. In short, when business culture is in sync, you see your place within the organization as well as the community the organization is a part of. 4. I am convinced this team really likes each other. Every business leader worth a grain of salt understands the importance of a respectful work environment. No doubt, an appreciation for relationships and collaboration has been the driving force behind Amegy. But it goes beyond that. Many people do not realize the value of creating a culture that promotes friendship among colleagues. I believe friendship is the number one factor behind employee engagement. Unfortunately, for many businesses, this is lacking. One of the issues, of course, is that this is something you cannot manufacture. People can read through that. Business leaders cannot force friendships, but they can create a culture of authenticity where such friendships will be more likely to thrive.

194 AN AMAZING LIFE At Amegy, I can say we are all friends and each and every one supports their fellow associates. This, I believe, is one of the keys to teamwork. We may not be part of a platoon fighting a war, but when you care about the well-being of those around you, with time, you start to think of your coworkers as a second family. Then teamwork comes naturally. This also makes for a more satisfying work environment. The incredible long-time tenure of much of our staff, I think, is another indication that people feel happy to be a part of Amegy. 5. Amegy would probably rank at the very top of the industry in training. No doubt, the employee who receives quality training is more able to perform their job. Training gives the employee a greater understanding of their responsibilities and helps to build confidence. This confidence, in turn, will enhance overall performance. At Amegy, we believe employees who are competent and on top of their game help our company hold a position as a leader and strong competitor. At the same time, the investment in training shows employees that they are valued. This is an excellent way to achieve a more supportive workplace. Employees are more likely to feel valued if they are invested in and, therefore, less likely to change employers. 6. We strive to see the big picture. On one hand, our Amegy team appreciates the quality of our advisory boards, which we view as our face to the community. On another level, a real tangible positive is the fact that we are owned by such a quality parent as Zions, one the country’s finest financial services companies bar none—a company where we share the same mutual culture of confidence, respect, and humility. I cannot overstate that I am appreciative of Zions leadership and its long-term philosophy of conservatism, strength, liquidity, and loyalty to our markets. Looking at the big picture, we see ourselves as part of a much broader franchise covering most of the western states, which continually creates opportunity for growth of our key players. Being part of something bigger, I believe, provides us with a feeling of purpose. A higher sense of purpose is not about economic exchanges. It reflects something more aspirational. It explains how employees involved in our organization get a sense of meaning from what they do.

THE CULTURE OF AMEGY BANK 195 7. Our leadership has taught all associates that the best way for us to grow is to emphasize that best results are accomplished by a team. I have snuck this in twice for a reason. It does not matter who gets the credit. As a high school coach might say, There’s no “I” in “TEAM.” You have to check your ego at the door. You have to remind yourself that you and your coworkers are, in fact, working for shared goals. Fostering teamwork is part of creating a work culture that values collaboration. Rather than encouraging competition, a culture of teamwork creates opportunities for employees to work together and use all available resources and skills to reach business-wide goals. Success benefits everyone. So, you have to think like a team. Of course, your team may not be composed of soldiers on a beach, far from home—instead, they might be sitting across from you, contributing ideas in a meeting, asking for financial support through a difficult time, or offering solutions to a community concern. Whatever they look like, one thing is sure: a group of people coming together can accomplish something far greater than any individual could achieve alone. Alone we can do so little, together we can do so much. —Helen Keller “THE ‘A’ TEAM!” — As we continued to grow, we continued to brag!

WORDS AND PHRASES USED IN AMEGY’S ADVERTISING 197 Words and Phrases Used in Amegy’s Advertising Good advertising does not just circulate information. It penetrates the public mind with desires and belief. —Leo Burnett The more informative your advertising, the more persuasive it will be. —David Ogilvy Advertising is the ability to sense, interpret... to put the very heart throbs of a business into type, paper and ink. —Leo Burnett We all know why the firms we work for matter, the good that they do and the value that they provide. But in a crowded marketplace, it is difficult for the public to be intimately familiar with each business’ story, philosophy and impact. Advertising helps to bridge that gap, telling stories that the public needs to hear while providing a platform for businesses to connect with and inform a wider audience. We are bombarded with enough immediately forgettable advertising to know that good, memorable ads are a form of art. All successful ads have one thing in common, they are able to balance mass appeal with a unique insight or hook that keeps the viewer interested in learning

198 AN AMAZING LIFE more. We are curious by nature and ads that pique that sense of discovery are the ones that resonate. Even the most well-known companies can strike a chord with the public when they create an ad that leaves them wanting to know more. Brands that became household names long ago still invest heavily in advertising because they know the importance of keeping the public interested. This is because real advertising is more than just a way to earn brand recognition, it is a way to tell a story—to express what matters most to your company and why you deserve the viewer’s business over your rivals. A good ad does more than just tell people about a company, it inspires them. The following are examples of some of Amegy’s themes used in our advertising. To reinforce the Amegy name, we built a list of words beginning with A: THE ‘A’ BANK ACCOUNTABLE ABILITY AGILITY ACCESSIBLE APPRECIATE AVAILABLE ATTENTION The ‘A’ words are a rich source of messages for consistent, longterm marketing campaigns. Our story can often be defined with one word: COMMITMENT INDEPENDENCE STRENGTH SERVICE