SALT LAKE CITY — Nearly a year after its deal for hometown rival First Security Corp. unraveled, Zions Bancorp has taken a deep breath and set out to prove it is back in the game.

On Monday, Zions said it would take almost a 25% stake in Roth Capital Partners, a Newport Beach, Calif., investment banking boutique that specializes in emerging growth companies. Zions is paying $16.65 million for the stake in Roth Capital and will have an option to increase its ownership in the company.

Zions would gain access to the investment banking know-how of one of the biggest U.S. banking companies. Roth’s newly appointed president, Patrick J. Allen, is fresh from a six year stint at the former Chase H&Q, now J.P. Morgan H&Q.

Zions has been trying to regroup and rebuild employee morale, which was devastated in the events surrounding the abandoned First Security deal. Since last year, the company has instituted new sales incentives, stabilized its management, and set out to prove it can still make deals work.

Late last year the company announced a deal for Draper Bancorp in its home county of Salt Lake. Around the same time, it unveiled a deal for Eldorado Bancshares of Laguna Hills, Calif., and plans to purchase nine Arizona branches being sold by Honolulu-based Pacific Century Financial Corp.

Zions left the failed First Security deal last March vowing never to enter into a transaction that required the kind of concessions in terms of board membership and leadership that a merger of equals usually entails.

Harris H. Simmons said in an interview in late January at the company’s Salt Lake City headquarters that though he “wouldn’t count out a large transaction,” he would first want to be sure that it was “much more plain to everyone within the organizations involved, and on the outside, on how the governance was going to operate.”

“There were a lot of lessons learned in the First Security transaction that would temper and I think strengthen our thought processes in engaging in any large transaction,” Mr. Simmons said.

Wall Street seems to have accepted the idea of Zions’ going out on its own; its stock price has jumped more than 40% since the deal collapsed. But at the end of the day the bank must come to terms with a less illustrious figure — the 15% market share it has in its home state, where it fights for deposits with large credit unions as well as banks.

And it has a new competitor. Wells Fargo & Co. swooped in and bought First Security after the unraveling of the Zions/First Security transaction. San Francisco-based Wells Fargo now holds a 23% share of deposits in Utah, according to Sheshunoff Information Services.

“Utah is a very tough retail market; the credit union presence here is very large and they are very aggressive in terms of price,” Mr. Simmons said. “A lot of the focus is just helping the public understand the advantages of being with a bank.”

Home-state operations have absorbed much of management’s attention over the last year as Zions’ disentangled processes and structures that had already become enmeshed with First Security’s.

In the process, the company racked up $88 million in after-tax charges, mostly related to the unwinding of the deal. Executives are more than happy to point out that some of the rebound the company has enjoyed over the last two quarters came at the expense of rival and one-time merger partners.

Fourth-quarter deposit growth in Utah was higher than in any other state except Washington. Dale Gibbons, Zions’ chief financial officer, told analysts in the company’s annual conference call, that “perhaps a portion of that is due to the disruption” caused by Wells Fargo’s acquisition of First Security.

THE GREAT CROSS-SELL

At Zions’ Salt Lake City headquarters building, which overlooks the landmark statue of Brigham Young and the Church of Jesus Christ of Latter Day Saints’ Temple Square, the halls are humming with enough retail initiatives to bring tears to a management consultant’s eyes.

One major initiative, the Great Cross-Sell, put the onus on the 1,800 full-time employees of Zions First National Bank, its Idaho and Utah subsidiary, to bring in new accounts. A. Scott Anderson, the unit’s president and chief executive, said he wanted employees to be more than just assertive when a customer walks through the branch doors. In July, Zions started using cash incentives to encourage employees “to talk to their family members, neighbors, and hairdressers,” about opening an account with Zions.

A particular focus of the program was the 900 or so employees who usually have no customer interaction and who have rarely been coached to solicit new accounts. “We had people in items processing, who never saw a customer, bring in their grandfather’s accounts,” some totaling as much as $100,000, Mr. Anderson said.

Senior management was not immune. Mr. Anderson’s wife persuaded the family’s dry cleaner to switch banks, he said.

The Great Cross Sell generated 80,000 referrals for new accounts and a total of $70 million in deposits. Encouraged, Zions First National Bank reintroduced the program at the end of January. This time the stakes are higher. Employees who have no customer contact are being asked to generate two referrals a month; those who regularly interact with customers are asked to bring in 10.

Mr. Anderson said he wants to see deposits increase 14% from a base of $4.3 billion.

In mid-January, Mr. Anderson’s unit also initiated Quick Switch, which allows a customer to open a new account over the telephone and arrange a time for the following day when a courier can stop by the person’s home or business with the appropriate forms and pick up the initial deposit.

George B. Hofmann 3d, the head of retail banking for Zions First National and the mastermind behind the Quick Switch program, said the target audience is the 20% of banking consumers who are displeased with some aspect of their financial institution but think changing banks is too difficult. Zions First National has plastered advertisements across Utah depicting dinette sets and encouraging consumers to “Switch Banks from Here.”

The feedback so far: “There’s a lot of skepticism that we’re not serious about this,” Mr. Hofmann said.

Zions is also planning to roll out a courier service in Boise, Idaho, that will do more than open new accounts. In an effort to fatten its distribution points in a market where it only has 21 branches, Zions First National plans to send around its own armored truck — by appointment — to business customers. Starting March 1 the courier truck service will be able to pick up cash drops and other deposits, Mr. Hofmann said.

The company is hoping to attract business from customers who are affected by other mergers in the region. “We certainly think there will be a heightened awareness with Wells Fargo/First Security customers,” Mr. Hofmann said.

DESERT DERAILMENT

The company’s performance, though better than many analysts expected last year, bears some scars. Its operations in Nevada are a good example. Despite owning the third-largest commercial bank in one of the fastest growing states in the nation, growth there has been sluggish.

Executives blame the distraction of the failed merger. When the First Security deal was still on track, the two companies planned to combine three Nevada franchises with about $1 billion in assets each: First Security Bank of Nevada, Zions’ Nevada State Bank, and Pioneer Bancorp, a Las Vegas-based company that Zions bought in 1999. The combined entity would have been third in market share in the state.

The management musical chairs would have kept First Security’s top Nevada executive but not the top Zions executives. Mr. Hofmann, the head of Zions’ Nevada operations, had already decided before the merger deal was announced that he would return home to Salt Lake City. Pioneer chairman William Martin, who was tapped to take over the state from Mr. Hofmann, announced early retirement last March.

More departures followed. Mr. Martin estimates that Pioneer and Nevada State Bank lost 20 lending officers during the time the First Security merger was under way.

“This industry is used to thinking about what happens when you bring two banks together,” Mr. Simmons said. “Try bringing three banks and see what that does to the anxiety levels within the organization.”

When the First Security merger plans fell apart, Zions Bancorp tried to lure back some of its lost Nevada employees. Management started with Mr. Martin, who had just enough time to complete a trip to California before rejoining the company as the head of Nevada State Bank. “They begged and groveled for me to come back,” Mr. Martin said with a laugh.

HARRIS SIMMONS, REFEREE

Zions Bancorp’s decentralized structure also brings challenges. Unlike many of its larger competitors, Zions has followed a model similar to the “uncommon partnership” of affiliate community banks that became a hallmark of Bank One Corp.’s organization under its former leader, John B. McCoy.

Each of the six Zions subsidiaries has its own name, brand, and chief executive — many of whom joined the company when their institutions were acquired. Executives say the configuration facilitates closer customer relationships.

But the semi-autonomous structure puts Mr. Simmons at times in the role of referee. “I find myself involved a lot in terms of some of the intramural games that go on between affiliates, and helping establish the rules of engagement,” Mr. Simmons said.

Behind-the-scenes management would seem to suit Mr. Simmons, who in person does not exude the sales charm that marks many top bank executives. “He’s not maybe as outgoing as some,” said Robert Sarver, chief executive officer of Zions’ California Bank and Trust, who met Mr. Simmons in 1993 through a friend who had just sold his bank to Zions.

But what he lacks in schmooze he seems to make up for by keeping a close eye on the organization he is running. “He makes it a point to know what’s going on, and that makes it easier to communicate,” Mr. Sarver said.

And indeed, that interest in details is evident when it comes to Digital Signature Trust, the Internet authentication unit that Zions Bancorp has been developing since 1996.

When the subject came up during this interview, Mr. Simmons whipped out his laptop, a personal ID chip that plugged into the back of the computer, and — for extra security — a biometric mouse to scan his thumbprint.

“He’s a bit of a technology wonk,” says Danne L. Buchanan, chief information officer for Zions Bancorp.

This attention to detail — and control — may also have played a role in the dissolution of the First Security deal, which first started to unravel when First Security surprised the market with a pre-earnings warning about a drop in last year’s first quarter revenues.

Merging with a bank whose problems could have eaten into the combined company’s profits for several months was anathema to Zions Bancorp management, said analysts at the time.

At age 46, Mr. Simmons says he has no thoughts yet for the far-off date of 2021, when he would reach retirement age. If the path taken by his predecessor, his father, is to be any guide, he could very well stick around past 65.

In 1960, Roy W. Simmons was one of a group of businessmen who bought the bank from its founder, the Church of Jesus Christ of Latter Day Saints. Zions was established in 1873 by the church and Utah pioneer Brigham Young. Now 85, the elder Mr. Simmons, who retained the title of chairman after handing over management reins to his son Harris in 1990, still has an office on the executive floor of the headquarters office in Salt Lake City and comes to the bank regularly.

Though he is not active in the day-to-day strategy of the bank, “he remains very interested in it,” said his son. That is due in no small part to his personal stake in the company. As of Jan. 8 the elder Mr. Simmons owned a 1.6% stake, worth about $78 million.


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