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Zions Bancorporation is the second largest multibank holding company in Utah. Through its various subsidiaries, the Salt Lake City-based Zions provides a full range of banking and related services primarily in Utah, Arizona, and Nevada. Its primary holding is Zions First National Bank based in Salt Lake City. The company has grown quickly since the early 1990s by acquiring other banks and expanding existing operations.
Keystone Insurance and Investment Co., the precursor to Zions Bancorporation, was incorporated in Utah in 1955 by a group of investors for the purpose of acquiring the Lockhart Corporation. In addition to Lockhart's financial holdings, during the next few years Keystone purchased an insurance agency and about 120 acres of land in an industrial park. When Keystone went public in 1960, it was worth about $2 million.
In 1960, a group of investors, the chief of which was Keystone, purchased a controlling share of Zions First National Bank. A holding company, Zions First National Investment Co., was incorporated in Nevada to own the bank. The holding company's name was changed to Zions Utah Bancorporation in 1965. The holding company went public in 1966 when existing stockholders sold their shares. In 1971 Zions Utah Bancorporation merged into Keystone, with Keystone becoming the surviving company. Keystone subsequently changed its name to Zions Utah Bancorporation.
Zions chief holding, Zions First National Bank, was a leading local bank in Salt Lake City. Prior to the buyout by Keystone and its associates, the bank was principally owned by the Latter-day Saints Church. Renowned Mormon leader Brigham Young had started the bank in 1873 to serve the church and local community. Throughout the late 1800s and through the mid-1900s Zions had close ties to the Mormon Church, taking deposits from, and providing loans to, church members, and handling many of the church's financial transactions.
The group of investors that bought out the church's ownership interest in First National in 1960 was Roy W. Simmons. Simmons was a Mormon with a strong banking background. Both his father and grandfather had worked in banking and had served as officers of the competing First National Bank of Layton, near Salt Lake City. Under Simmons's direction, First National prospered during the 1960s and 1970s. Besides emphasizing its core Salt Lake City market, the bank expanded into rural Utah and eventually amassed a regional network of branches throughout the northern part of the state.
By the 1980s, First National had cemented a position as the second largest banking organization in the state of Utah, earning Simmons a reputation as a savvy banker and businessman. "Roy has an uncanny knack for figures and sizing up a situation," Lawrence Adler, president of the Utah Bankers Association, told Knight-Ridder/Tribune Business News. "He's a banker from the old school."
In addition to running one of the region's most successful banks during the 1960s and 1970s, Simmons successfully helped raise his family, sending four sons to Harvard. One of his sons, Harris, would follow in the footsteps of the three generations before him. Harris Simmons was born in 1955, about five years before his father lead the buyout of First National and assumed leadership of the bank. He began his banking career at age 16 as a teller filing canceled checks. When he returned from Harvard, he went to work with First National and was named assistant vice president at Zions Utah Bancorporation in 1981.
Although Zions achieved steady gains during the 1960s and 1970s, it was during the 1980s that the bank would realize its heady expansion. Zions' success was due in part to management strategies and in part to trends in the banking industry. By the late 1970s, banks began to feel competition from nonbank financial institutions. The new competitors were vying for consumer dollars that had traditionally gone to bank deposits, and were also competing as lenders and financiers. Because of restrictive bank industry regulations passed through Congress in the wake of a flurry of bank failures during the Depression era, banks had been functioning at a disadvantage to their competitors. But during the mid 1960s and early 1970s, Congress eliminated some of the restrictions and created a variety of favorable tax incentives for specific banking activities. During that period, a number of Bank holding companies like Zions were created to take advantage of deregulation and to begin participating in a number of nonbanking-related financial markets.
Nevertheless, Zions and other banks suffered because of interstate banking restrictions. For example, General Motors was free to offer consumer financing for its vehicles throughout the United States, thus benefitting from various economies of scale. In contrast, most of the activities of Zions and other bank holding companies were confined to a single state or region. In the mid 1980s, Congress allowed bank holding companies to engage in interstate banking. That legislation, combined with other banking industry dynamics, set the stage for a period of rampant growth that would double Zions's size by the mid-1990s.
By the time interstate banking regulations were loosened, the industry was already experiencing rapid consolidation. The new legislation only served to intensify the trend. The percentage of U.S. assets held by commercial banks dropped from about 37 percent in the late 1970s to 25 percent by the late 1980s. That reduction left many competitors scrambling for business. To survive, banks began merging to achieve economies of scale. The number of independent banking entities in the United States dropped from about 13,000 in 1983 to less than 10,000 by 1990. Meanwhile, the number of multi-bank holding companies like Zions grew from about 300 to around 1,000.
Augmenting the consolidation trend was the fact that computers and electronic banking devices were increasingly making it easier for banks like Zions to operate across broad regions. Thus, Zions's growth strategy in the 1980s was relatively straight forward. It wanted to acquire smaller competitors and integrate them in the Zions Utah Bancorporation system. Besides working to improve the performance of the banks it purchased, Zions's managers would reduce aggregate operating costs by amassing a large network of branches in a multi-state region. The savings would result from economies of scale related to marketing, reporting, and management overhead at the executive level.
Harris Simmons assumed his father's position of president of Zions Bancorporation in 1986. Roy Simmons became chairman of the company and retained his chief executive title. In January of 1986, Zions entered the Arizona banking market by opening a commercial loan branch of its Zions First National Bank in Phoenix. The branch started out with one man, Clark Hinckley, in a hotel room and expanded rapidly with Zions's financial backing. In October of 1986, Zions purchased Mesa Bank and changed the name of its Arizona operations to Zions First National Bank of Arizona. Zions added a third branch to its Arizona operations with the 1987 acquisition of Camel Bank. Also in 1987, the holding company shortened its name to Zions Bancorporation reflecting expansion efforts outside of Utah.
After adding millions of dollars of assets to its portfolio in Utah, Nevada, and Arizona, Zions Bancorporation seemed to be growing at a healthy clip going into the late 1980s. Unfortunately, souring commercial real estate markets and general economic malaise in the late 1980s hurt Zions and many other banks. But problems at Zions were compounded by a downturn in the local copper industry.
Though some of Zions's properties remained profitable, the company struggled through the late 1980s. Zions's Nevada and Arizona operations sustained profitability, generating combined earnings of about $1.8 million in 1986 and $2 million in 1987. In contrast, Zions of Utah stumbled. It posted a profit of $24 million in 1986, but then reported a loss of $14.1 million in 1987. The next year brought a loss of $17.9 million. The losses were so bad that Roy Simmons suspended his $191,000 chairman's salary in 1988 and cut his officer's pay. Nevertheless, Zions continued to pay dividends to its shareholders throughout the slump.
As many of its competitors became mired in nonperforming real estate loans, Zions recovered in 1989 as local markets perked up and its loan portfolio improved. Zions's net income rose to nearly $18 million, and the company stepped up its acquisition efforts. Because the banking industry was in such a slump during the early 1990s and capital was hard to come by, Zions was presented with several good investment opportunities. Harris Simmons became chief executive in 1991. Under his direction, the bank cautiously took advantage of several of those opportunities.
Among Zions's most notable acquisitions during the early 1990s was National Bancorp of Arizona, a $435 million institution based in Tuscon. That purchase made Zions the seventh largest banker operating in the state. Zions moved up a notch in the rankings with the subsequent purchase of $107 million Rio Salado Bancorp. That purchase gave Zions a total asset base of about $630 million in Arizona by 1993 and extended its reach into Phoenix, Tuscon, and Flagstaff. Although it emphasized expansion in Arizona, Zions added holdings in Utah, as well. Similarly, Zions expanded its Nevada State Bank in Las Vegas, increasing its total number of branches to 19 by early 1994.
Perhaps Zions's most interesting purchase during the early 1990s was Discount Corporation of New York, a dealer in U.S. government securities. Observers questioned the deal, but Simmons believed it was a shrewd move. "I spent a couple of days explaining to analysts and stockholders that we weren't crazy," Simmons told Knight-Ridder/Tribune Business News. The subsidiary allowed Zions to begin repackaging and securitizing the loans that it made, rather than selling them in secondary markets. Most banks sell the home mortgages that they make to an investment house, which packages several mortgages and sells them as securities. The investment house makes money on the sales and the originating banks continue to make money servicing the loans. By bringing the securitizing process in-house, Zions was able to reap profits from both sides of the business. Discount Corporation made Zions one of only two primary dealers in government securities headquartered in the western United States. And it complemented Zions's expanding lending operations related to student loans, mortgages, credit card receivables, and other consumer financing.
The Discount Corporation acquisition revealed Simmons's penchant for innovation. For example, Zions was one of only a few lenders that had chased the accounts receivable lending business. Zions would extend credit to customers that was backed by the accounts receivables of their business. Viewing it as labor intensive, most banks shunned the niche. But Zions set up a separate division to serve the market, and found much new business in the mid-1990s. Another area where Zions was a recognized innovator was in opening branch offices in grocery stores. The bank was one of the first to begin securitizing small business loans.
Although Zions changed radically during the 1980s and early 1990s, one part of its business that did not change was its tie to the Mormon Church. Many people still thought of Zions as the "Mormon Bank" in the mid-1990s because of its long-time affiliation with the church. The church continued to be one of Zions's largest single customers. Zions had a separate "missionary remittance office" that handled electronic transfer funds to missionaries at the Mormon Church's 285 worldwide missions.
Besides expanding through acquisition, increasing its fee services, and innovating new profit centers, Zions achieved significant gains during the early 1990s by streamlining internal operations and tightening controls. The combined results of Zions's strategy was strong revenue growth and even greater profit gains, suggesting a bright future for the holding company. As Zions Bancorporation's asset base grew from $3 billion in 1989 to nearly $4.5 billion in 1993, the company's net income surged to $26.6 million in 1990 and to $53 million in 1993. By 1994, Zions was operating about 125 branches in its three states and was involved in negotiations to acquire other banks in Arizona and Utah. In addition, it provided insurance, data processing, credit, and consumer lending services through several subsidiaries.
Principal Subsidiaries: Nevada State Bank; Zions First National Bank; Zions First National Bank of Arizona.
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