In an era when banks are devouring each other at a furious pace, First Security Corp.'s appetite has been as hearty as any.

The Salt Lake City-based bank company has completed 18 acquisitions in five western states since 1989. Five more are pending.

Until now, the deals have been little nibbles of banks and thrifts with less than $250 million of assets.

|By Far the Biggest'

But last May, First Security sank its teeth into a much larger morsel - Albuquerque-based First National Financial Corp. The company is the parent of First National Bank in Albuquerque, New Mexico's third-largest bank, with $1.1 billion of assets.

"It's by far the biggest [deal] we've ever done," said Spencer F. Eccles, First Security's chairman and chief executive.

Analysts say that so far First Security's expansion program has been strategically sound and well executed. But they note that the company has significantly raised the ante with its Albuquerque purchase.

"The acquisition strategy has worked out very well," said Felice Gelman of Dillon Read & Co. "But we'll have to see how New Mexico works out."

Began New Expansion in '89

First Security has a special place in banking history. Founded in 1928 by Marriner and George Eccles, uncles of the current CEO, it is the nation's oldest continuously operating multistate bank holding company.

In the mid-1980s, First Security's earnings went into a tailspin when the economy of the Rocky Mountain region slumped. But in 1989, as credit quality and earnings recovered, the company began a new expansion drive, solidifying its position as the dominant banking organization between Colorado and the Pacific Coast.

In addition to its core markets in Utah, southern Idaho, and southwestern Wyoming, First Security bought banks in Oregon's Willamette Valley region, the Idaho panhandle, and the Las Vegas area. In four years, its assets grew 55% to $8.2 billion,

Vibrant Economy

Meanwhile, the Rocky Moutain economy has emerged as the country's most vibrant, with Utah and Idaho leading the nation in rate of job growth. But the population of First Security's core markets is still less than four million. These two factors have led to a dual strategy of trying to cover existing markets more intensively while expanding to new ones within the region.

In an interview in San Francisco last week, Mr. Eccles said First Security's acquisition approach is based on a principle of concentric circles.

Top priority goes to purchases that fill in gaps in states where First Security already has a presence. Of 23 completed or pending acquisitions, 19 fall into this category.

Next in importance are acquisitions in states that border First Security's service area - like the market-entry deals in Oregon, Nevada, and New Mexico.

Finally, Mr. Eccles said, the company is interested in acquisitions in noncontiguous western states, though it has yet to carry one out.

|Don't Have to Reach Outside'

"We have a very attractive region," he explained. "We don't have to reach outside."

In sizing up a deal, Mr. Eccles said, he prefers established institutions in healthy markets. The key there, he added, is to find senior managers who are-enthusiastic about First Security's culture.

The Utah company has won a reputation as a gentle conqueror that keeps in place the managers of the institutions it acquires and moves slowly in imposing its procedures.

United Savings Bank, in Salem, Ore., was bought by First Security in 1990. M.J. Burford, the thrift's president, expected to leave after a few months but ended up staying more than two years until he reached retirement age.

"They said they would allow us to be autonomous, and they did exactly what they said they would do," he said.

Such a record serves First Security well. Mr. Eccles said he is often approached by small institutions "with management succession issues or a fatigue factor. ... Everybody in our trade area knows we are prepared to sit down with them."

Profitability Rising Steadily

As it has expanded, First Security, has improved its profitability. After dipping in 1990, returns on assets have steadily risen each year. Last year, First Security earned $86.6 million, equaling a 1.20 ROA. In the first half of 1993, the company netted $51.1 million, for an ROA of 1.34%

Still, the New Mexico acquisition has left some analysts a bit nervous, a factor reflected in the performance of First Security's stock. After nearly tripling in price in three years, shares have treaded water since the New Mexico deal was announced in May. Shares closed Monday at $28.88, up 38 cents, and had advanced another 12.5 cents in afternoon trading Tuesday.

The stock's unspectacular multiple - 1.67 times times book value - limits First Security's buying power.

A Quality Retail Franchise

Meanwhile, the bank company is focusing on First National, which analysts consider a quality retail banking franchise. With 23 of its 26 branches in Albuquerque, the company ranks No. 2 in market share in that growing city.

First National had a run of credit problems, and federal regulators ousted the company's former management in 1991. But by 1992 credit and earnings had recovered.

New Mexico's Maloof family holds a controlling interest in the company. When they decided to sell, First National officials talked to Banc One Corp. and BankAmerica Corp. as well as to First Security, according to sources familiar with the sale.

What concerns some analysts is the $193 million price that the Utah bank agreed to pay in the stock-swap deal. That equals a relatively steep 2.2 times the New Mexico company's book value.

The cost looks especially high because there are fewer expense savings than would be available in an in-market acquisition.

New Mexico Deal |Looks Rich'

R. Jay Tejera, an analyst at Dain Bosworth who has generally applauded First Security's expansion strategy, said the New Mexico deal "looks rich."

"If they don't do another acquisition in the state, it will be dilutive," he said.

He worries that First Security could stall in New Mexico as it did in Oregon. After entering the Beaver State in 1990, it bought just two tiny banks, failing to make acquisitions that would have multiplied the return on its initial investment.

First Security executives say they realize the importance of doing additional acquisitions in places like Oregon, Nevada, and New Mexico in order to reap the full benefits of their original purchases. "It's not that we haven't tried," M.J. Burford said of the company's failure to follow up its 1990 Oregon purchase.

Price |Within Our Capabilities'

Meanwhile, company officials insist they are not overpaying for First National. The price "is within our capabilities to absorb," Mr. Eccles said, predicting the deal will not dilute earnings in 1994 and will be accretive by the end of the first year.

The deal is scheduled to close early next year.

To avoid dilution, First Security will need to cut only about $5 million in costs, said chief financial officer Scott C. Ulbrich. Such savings can be achieved by operating more efficiently, he said, since First National has an expense-to-revenue ratio of approximately 73% compared with First Security's 61%.

In addition, First Security officials expect to find major revenue-boosting opportunities. They are particularly enthusiastic about First National's electronic banking and point of sale payment technology, which they plan to export to First Security's flagship Utah operation. The Utah bankers are especially interested in adopting a path breaking First National system that allows government agencies to offer welfare benefits through electronic debit cards.

Meanwhile, analysts wonder whether First Security, with its hearty appetite, could itself be swallowed.

Company officials privately dismiss stories that the Mormon Church, which has three representatives on First Security's board, would block any sale to outside interests.

All the same, Mr. Eccles clearly is not in a selling mood.

Asked about such a possibility, he talked instead about containing expenses and building revenue sources.

"We think we can do best by continuing to show value the way we do," he said.

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