Updated from 4:08 p.m. EDT

Shares of Matrix Bancorp. ( MTXC) plunged Friday after the Denver-based thrift and Southwest Securities Group ( SWS) announced that they had called off their merger plans.

Matrix ended Friday regular trading down 36%, dropping 3 13/16 at 6 13/16 after reaching a disappointing 52-week low of 5 1/2.

The news comes two years after Matrix was forced to abort efforts to merge with Fidelity National Financial ( FNF) of California. That announcement in August 1998 had an equally harsh affect on Matrix's stock, which plummeted about 39% in one day.

In a statement, Dallas-based Southwest Securities and Matrix said only that they had decided to go separate ways. But Southwest Securities has shopped itself around recently, hiring Bear Stearns to search for a partner. And observers have speculated that the deal with Matrix may only have complicated its months-long effort to find a buyer.

"The market has certainly concluded that that's the case," said Jeff Putterman, who follows Southwest Securities for George K. Baum and Co. The companies either found problems with each other during due diligence, he said, or a potential buyer of Southwest Securities insisted that it "didn't want to own Matrix at this time or at any other time."

Southwest Securities' shares, which have sagged since it unveiled its intentions last month to acquire Matrix, climbed 2 7/8, or 11%, at 29 7/8 Friday.

Underneath the Hood

It's unlikely, Putterman added, that the companies didn't like what they found after investigating a bit more. In an earlier conference call, he said, the companies assured analysts that they knew each other well and didn't expect to hit any snags.

Odds are greater, he said, that a potential suitor believed that Southwest Securities -- which already owns a savings bank -- didn't need the Colorado holding company to improve its business. In April, Southwest Securities finalized its purchase of First Savings Bank, based in Arlington, Texas.

Jim Bowman, a spokesman for Southwest Securities, would not say why the deal collapsed, adding that a confidentiality agreement prevented the two companies from publicly discussing the proposal in greater detail.

Guy Gibson, Matrix's 35-year-old president and chief executive, declined to elaborate on the termination in a telephone interview Friday afternoon. "I think they just decided that it made more sense not to go through with this transaction," he said.

Merger Attempts Nixed Before

It's not the first time Matrix's merger attempts have crashed. In 1998, the plan to be acquired by Fidelity National Financial was scrapped because of regulatory concerns. Apparently, the two doubted that Fidelity would gain approval to become a thrift holding company.

"The companies determined that the requirements for regulatory approval for the merger were burdensome and raised serious questions as to the feasibility of the merger," the companies said in a press release at the time.

Gibson, who co-founded the company in 1989 at the age of 24, sought to defuse concerns Friday that the latest setback was anything more than a mere coincidence. "There are two different sets of circumstances," he said. "It's an entirely different issue."

In mid-July, Southwest Securities had said it planned to acquire Matrix in a stock deal valued then at $110 million. The agreement was billed as a way for the combined company to broaden its customer base and boost earnings.

Yet Southwest Securities investors obviously were not pleased. The news on the day the deal was announced drove Matrix shares up nearly 80%. Southwest Securities headed in the opposite direction, falling 7%.