First Security Corp.'s decision to hook up with Zions Bancorp. illustrates how quickly fates can turn in the ever-accelerating process of banking consolidation.

A year ago, First Security Corp. was considered one of the few banking companies capable of remaining strong and independent in its regional niche.

Its decision to sell out to Zions was perceived as a shocking reversal.

"I was extremely surprised," said David Winton, a bank analyst at Keefe, Bruyette & Woods Inc. "Every time (First Security chairman) Spencer Eccles came to our offices, we always got the feeling that he would never, never, ever sell."

First Security did not necessarily stumble into acquisition deals the way Mercantile Bancshares, Republic New York Corp., BankBoston Corp., and First American Corp. did recently.

But the $22 billion-asset Salt Lake City institution, about $5 billion larger than Zions, was finding it increasingly difficult to compete with Zions' stock valuation. Zions was trading at 23 times 1999 estimated earnings, compared with First Security's multiple of 13, Mr. Winton said.

"First Security was behind in efforts to get its efficiency ratio down; its returns were not superlative; and its costs were high," said R. Jay Tejera, a bank analyst at Ragen MacKenzie Inc. in Seattle. "A lot of its business was also in auto lending and mortgages," two businesses the market does not like because of low margins.

The prospective end of pooling-of-interest accounting, which has facilitated most bank mergers in the last several years, is another force driving consolidation. But competition is seen as an equally important factor.

"The haves are taking advantage of the have-nots," said Michael Plodwick, a bank analyst at Lehman Brothers Inc. "The guys that have lagged are dropping by the wayside,"

The worst bank stock performers last year included Mercantile, Bankers Trust Corp., Republic, BankBoston, and First Security, and all have been or are being acquired, Mr. Plodwick noted.

By this yardstick, Union Planters Corp. of Tennessee and Summit Bancorp of New Jersey may also soon be gone, the analyst said.

Union Planters has long been considered takeover bait because of a string of dilutive acquisitions, Summit because of sluggish performance.

Midsize banks once considered predators are now looking more like prey, said Sean Ryan, a bank analyst at Bear, Stearns & Co. Even some very large banking companies' ability to survive consolidation has come into question.

First Union Corp. of Charlotte, N.C., has become a candidate for takeover, Mr. Ryan said. It has attractive franchise value, a cheap stock price, and dissipated management credibility, the analyst said. "Chase may be the most logical acquirer, since First Union's capital market business could give Chase much of the investment banking capability for which it has been shopping."

Other companies that are vulnerable because of low multiples include Regions Financial Corp., Colonial BancGroup, and Compass Bancshares of Alabama; Hibernia Corp. of Louisiana; and First Virginia Banks Inc., Mr. Ryan said.

In the wake of the Zions-First Security announcement, investors appeared to be buying on merger speculation. Hibernia gained 6.22%, to $16 a share, and Summit 1.95%, to $42.50.

First Union's shares were up 2.15%, to $44.50.

When banks with high multiples buy banks with low multiples, the deals add to earnings quickly, and the market generally reacts favorably. Zions said it expects immediate earnings accretion-10% next year.

Its shares fell on the news, by 10.37%, to $58.19.

"Acquiring banks have gotten their stock prices thrashed because the companies that they are buying are not in the most pristine condition," said Carole Berger, a principal at hedge fund Berger Jackson Capital Management.

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