It is nearly impossible to do anything in this city's downtown without walking by the towering statue of Brigham Young, who stands, as locals say, with his "back to the church and his hand outstretched to the banks."
And in fact his hand is pointed roughly toward Utah's biggest bank, $13 billion-asset First Security Corp., the country's oldest multibank holding company. It was founded in 1928 by Marriner Eccles, father of the modern Federal Reserve and a chief architect of the New Deal.
To this day, members of the Eccles family continue to run the bank. But pressures unleashed by the bank's founder are returning to haunt his nephew, First Security's current chairman, 61-year-old Spencer F. Eccles, who took over in 1982. The relentless tide of bank consolidation, fueled by the multistate banking structure pioneered by Marriner Eccles, is making many wonder if First Security can remain independent.
"First Security is clearly going to make sense for somebody (to acquire), because it's got such a good presence and market share in an area where other banks would like to be," said Peter Thomas, managing director of the Thomas & Mack investment company in Las Vegas.
Through piecemeal acquisitions and internal growth First Security has become the largest banking company based in the Mountain West. It is No. 1 in deposit market share in Utah, No. 2 in Idaho, and No. 3 in New Mexico. First Security also has $900 million of deposits in Oregon, Nevada, and Wyoming.
The benefit of such positioning is that it puts First Security at the center of one of the country's hottest economic regions. Four of the states in which First Security operates - Nevada, Utah, New Mexico, and Oregon - rank among the country's five leaders in 1995 job growth, with payroll growth in each exceeding 4%.
Yet while the strong economies have given First Security strong revenue growth and few problem loans, the company also has an Achilles heel. It has been inefficient, with 1995 spending on non-interest expenses consuming 65% of revenues, well above the sub-60% ratios at the country's best banks. High costs are an open invitation for a takeover, which could be justified by cutting expenses.
Spencer Eccles and his top executives are as aware as anyone of the cost problem. Their response, announced last year, was an intensive restructuring, called Project Vision.
Like other banks, First Security put all other strategic efforts on hold, while employees and managers came up with thousands of cost-cutting and revenue-generating ideas.
The upshot, First Security told analysts in December, will be $51.4 million of cost-savings, $10.5 million of new revenues, and a 23% reduction of First Security's 6,739 full-time employees by 1997. The efficiency ratio should drop to 54%.
This round of job-cutting is the first time First Security has done such a thing on such a large scale.
But, from Spencer Eccles' perspective, the choice is clear: either First Security makes the cuts, or it risks failing shareholders and losing its prized independence.
"Certainly, if someone looks at us on the Vision redesign effort and makes an offer representative of the intrinsic value of the new First Security, we would have to consider that," Mr. Eccles said. "But that is not our purpose. We truly believe we can create higher shareholder value by remaining independent."
So far, about a third of the changes proposed for the cost-cutting project have been made, bank officials say. And already investors and analysts are bullish. First Security's stock has risen 26% since the cost- cutting project was announced. But takeover talk still lurks.
"Our investment thesis" for First Security "remains unchanged," J.P. Morgan & Co. analyst Catherine L. Murray wrote in a recent note to investors. "Either the Vision program works, boosting operating efficiency, earnings, and stock price," or First Security sells "in a consolidating banking environment to avoid missing the opportunity to realize the value of its franchise."
To fully understand Mr. Eccles' aversion to a potential takeover, one must look at his unique position in Utah.
His family's 19th century patriarch, David Eccles, was a self-made millionaire in the sugar, construction, and railroad industries. Money from this fortune allowed Marriner Eccles to construct First Security. The wealth that flowed from both men's endeavors has put the Eccles family among the state's leading philanthropists, with more than a half-dozen foundations with hundreds of millions of dollars.
Spencer Eccles is a director of most of these foundations. And their impact on Utah is clear. For instance, the Eccles name is ubiquitous at the University of Utah, thanks to more than $100 million of Eccles family grants. Spencer Eccles is the university's treasurer.
Another important civic endeavor, Salt Lake's bid to host the 2002 Winter Olympics, also bears the Eccles stamp. Spencer was a key and extremely active member of the organizing committee that bid to host the games. His family - and the bank - were among the committee's biggest financial backers.
The effort reflected a personal passion as well as Mr. Eccles' contention that the games will be good for the state and for business. Before becoming a banker, Mr. Eccles skied competitively on the international circuit. His son is an assistant coach of the U.S. Ski Team.
As a result, it is not surprising that people say Mr. Eccles is one of Utah's most influential people.
"He is really one of the movers and shakers in the community," said First Security executive vice president Mark D. Howell.
Mr. Eccles' colleagues say he is a tremendous asset on many levels. Not only is he a consummate schmoozer, who will skip tasting food at a public event so he can thoroughly work a room, he's solid with numbers, good at sharing authority, and an energetic leader. Indeed, his schedule is said to be frenetic, and he is almost never seen without a "110%" button on his lapel - a sign of his motto for the bank "currently giving 110%."
Rival bankers say that one of the hardest things about competing with First Security is the sense that it is the Eccles bank.
"They use the foundations very effectively as an arm of the bank to compete," grouses one rival banker.
A sense of community support makes First Security officials confident that should a hostile bid ever emerge, it wouldn't work. Even though the Eccles family only owns a 3% stake, and institutional investors own more than 40%, a senior official privately warned that there would be a "scorched earth" loss of customers if a hostile takeover were ever completed. He also said a hostile bidder would not be the winning bidder, since any number of other institutions could be used as white knights.
At a minimum, a takeover would mark yet another loss of the dwindling breed of bank chief executives who hail from a historic local family with a clear sense of noblesse oblige.
"I believe we are unique," Mr. Eccles said. "There are less of us around who have that sense of fire in their belly, commitment, and traditional pride in their community."
