Bank chief executive offers apology for merger delay

Spencer Eccles wants Nevadans banking -- or working -- at First Security Bank to know he's sorry for the uncertainty surrounding his bank's proposed merger with Zions Bancorporation.

However Eccles, the bank's chief executive officer, plans to offer something more tangible than just an apology to First Security and Zions-owned Nevada State Bank employees facing layoffs following completion of the banks' merger this spring.

"To our valued employees (facing layoffs), we will offer an enhanced severance package that will be among the top 10 percent in the industry," said Eccles. "We know the (merger's) delay has certainly upset our people internally."

Meanwhile, to his bank's customers, Eccles offered a plea for patience.

"We're sorry for the delay (of the proposed Zions merger), but please cut us a little slack while we get the moving parts together," he said.

Eccles said because of the delay, it was unclear exactly how many jobs will be cut and how many employees will be laid off when the union is completed later this quarter.

However, he said the most accurate calculation would be about 1,700 jobs cut -- "about 10 percent of combined staff levels of both banks, which would likely total about 17,000 people."

Attrition will be responsible for about half of the job cuts, due in part to a hiring freeze at the bank in place since last June.

Eccles declined to speculate as to how many of the layoffs will be in Nevada.

The delay in the merger of the two Salt Lake City-based banks was caused by a Securities and Exchange Commission ruling in late December; federal regulators said Zions had to re-account for previous acquisitions made during the period of 1996 to 1999.

The Commission ruled Zions mistakenly listed the acquisitions as purchases rather than pooling of interests.

The SEC decision came only days before a Dec. 28 shareholders' meeting to approve the merger's completion; that meeting has been re-scheduled to early March, pending Zions' receiving federal approval of its revised accounting filings.

Speaking at the bank's Outlook 2000 Symposium in Las Vegas on Friday, Eccles said 1999 was a "challenging year."

He said he was "surprised and upset" when the SEC announced its decision, adding that Zions had no choice but to comply with federal regulators' demands.

However, he said market analysts have taken the merger delay in stride, and it shouldn't affect the banks' stock price over the long-haul.

Separately, First Security officials say the 2000 economic forecast for Nevada remains strong.

"Nevada's unemployment rate will average 4 percent this year," said the bank's chief economist, Kelly Matthews. "In addition, non-agricultural job gains should be 44,650, an increase of 4.6 percent."

Matthews is also predicting this year Nevadans will see their personal income grow by 8 percent, the highest level nationwide.

There will also be more Nevadans to enjoy the economic prosperity; net migration to the state is predicted to reach 52,000 people in 2000.

Although he's also predicting the number of single-family building permits will decline to 22,880 from 23,345 in 1999, Matthews said total Nevada construction employment will increase by 2.5 percent to 90,200 this year.

When the final numbers are in, Matthews is predicting 1999 new home sales in Las Vegas will total 21,140, up 4.5 percent from the previous year.

The gaming sector can expect its revenue to grow, though at a more modest pace than last year. Matthews said that in 1999 gaming revenue rose 11 percent; this year's gain is expected to be 6 percent.

However, one cloud of uncertainly looming over both the Nevadan and national economy is the spectre of higher interest rates.

First Security is predicting the Federal Reserve Bank will raise interest rates twice in 2000, for a total of 50 basis points.

"Risks are abundant," said Sterling Jenson, president and chief executive officer of First Security Investment Management. "First and foremost, interest rates must remain below 7 percent. If global economic growth creates excessive demand for goods -- which percolates into rising inflation -- the Fed may react beyond our expectations causing bond values to sink further and yield rates to rise.

"This would cause a swift correction in stock valuations."

Still, the soaring stock market is expected to continue its flight, albeit at a slower speed than before.

"We believe the Dow has the potential of finishing 2000 at the 13,200 level, for a 15 percent total return," said Jenson. "Volatility will remain common place, with potential violent swings in the late summer and early fall period due to rising rates and a heated political environment."

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