Zions should survive banking industry turmoil, experts say. For Utah’s sake it has to, Editorial Board writes

(Chris Samuels | The Salt Lake Tribune) A Zions Bank branch in Cottonwood Heights, Monday, March 13, 2023.

Utah’s first savings bank is going to mark its sesquicentennial — that’s 150 years — in July, and it’s hard to imagine the company has ever received the national scrutiny it’s getting today.

Zions Bancorporation, the financial services company that traces its history back to Brigham Young’s direction of the Zion’s Saving Bank and Trust Company formed in 1873, has been in the news lately in the ways a bank doesn’t want to be in the news — as a possible candidate for collapse, following the trail of three major regional banks that have gone under in the last two months.

These other banks’ problems don’t have a big effect on how most Zions customers do their banking. Just under half of the deposits in Zions Bank are in accounts with $250,000 or less — an important benchmark, because it’s the maximum insured by the Federal Deposit Insurance Corporation, or FDIC, the federal agency that protects investors from the dangers of a bank’s collapse.

Utahns who aren’t customers will recognize Zions Bank as a community leader, and a backbone for small business throughout the region.

We could fill this entire editorial with all the civic and cultural efforts Zions Bank supports in Utah and the Intermountain West, with its affiliate banks. It sponsors the Utah Museum of Fine Arts, the Utah Japan Festival, Sundance Institute, the Utah Pride Festival, and many other organizations and yes, even sustainable journalism (The bank has supported the nonprofit Salt Lake Tribune). The Zions name hangs over Interstate 15, in front of the Utah Jazz’s practice facility (Zions is the “official bank” of the team). The name is printed in the playbills at the Eccles Theater, as title sponsor of the Broadway at the Eccles subscription series.

There are also policy impacts, including support for affordable housing partnerships with state and federal governments that have grown unit capacity, bringing people together to find creative solutions to environmental issues, and enhancing opportunities for women.

“Their significance in our community is so great, and so impactful,” said Allan Landon, a professor specializing in finance and banking at the University of Utah’s David Eccles School of Business.

After the demise of California’s Silicon Valley Bank and New York’s Signature Bank in March, attention turned to other regional banks — and Zions Bank was a recipient of that scrutiny.

Zions’ stock crashed, dropping from around $40 a share to just under $30 a share in a day. Scott Anderson, Zions Bank’s president and CEO, sent a letter to his customers, acknowledging that the fall of those two banks has “rattled the markets as well as many people’s nerves,” but that Zions was in good shape financially, with “access to tens of billions of dollars of readily available liquidity.”

(Chris Samuels | The Salt Lake Tribune) Zions Bank president and chief executive officer Scott Anderson makes remarks during the opening of the Zions Technology Center in Midvale, Friday, July 15, 2022.

Banking experts in Utah agreed with Anderson’s assessment. They cited the lift Zions gets as a financial entity from the Intermountain West’s robust economy, Utah’s low unemployment rate, minimal layoffs and steady retail sales.

They also argued that Utah’s economy, because of its wider mix of industries, is more resilient to financial downturns than other places — and Zions benefits. Compare that to Silicon Valley Bank, which largely serviced the tech sector, and Signature Bank, which was deep in the volatile cryptocurrency market.

“That is a buffer that helps institutions broadly, including the banking sector,” Phil Dean, chief economist for the U.’s Kem C. Gardner Policy Institute, told The Tribune in March.

Another expert who seemed to find Zions in decent shape was Michael Burry, the hedge fund manager who famously predicted and profited from the subprime mortgage crisis of 2008. (In the movie “The Big Short,” he’s the guy played by Christian Bale.) Burry made some predictions in March, and so far they have been (forgive the pun) right on the money.

In a chart he posted on Twitter March 17 — and immediately deleted, though others copied it — Burry placed several banks in a risk-to-reward matrix. Silicon Valley Bank and Signature Bank were in Burry’s danger zone, and Zions was bunched in with other banks in safer territory.

And yet, Zions wasn’t out of the woods. In late April, Moody’s Investors Service downgraded the credit ratings for Zions Bancorp and 10 other regional banks — a move that could make it harder for Zions to borrow money in a pinch. Zions officials minimized the Moody’s report, saying other major credit rating agencies left Zions’ ratings unchanged.

This week, a third major bank, First Republic Bank, was closed by federal regulators, and quickly bought by J.P. Morgan Chase. The collapse caused some to wonder if another round of bank failures was in the air — though Jeanna Smialek, economy correspondent for The New York Times, called it “the last domino to fall after Silicon Valley Bank set off the cascading dominoes.” (Burry also predicted First Republic was in danger territory.)

First Republic’s fall didn’t help Zions Bancorp, and Zions’ stock dropped again on the news. On Thursday, Zions’ stock price was just under $20 a share when the market closed — though, in Friday trading, the share price bounced back up to $23.76, on the strength of a positive analysis from JP Morgan Chase.

This was, The Times reported, after 30 days, from March 31 to April 30, in which 10% of the stock activity for Zions was from investors short-selling the stock — in essence, people betting on Zions Bancorp to lose money.

Landon, from the Eccles School of Business, told The Tribune in mid-March that Utah’s banking industry was “in solid shape,” which was “a reflection of a good regulatory environment and a strong economy.”

Contacted this week, Landon held to that opinion. He also cited Zions’ first-quarter financial reports, which “had good earnings, though not as much as Scott [Anderson] or Harris [Simmons, Zions Bancorp’s chairman and CEO,] would have wanted.” (First-quarter net earnings came in at $198 million, or $1.33 per share, which was below the $1.54 per share Wall Street analysts were predicting.)

Silicon Valley Bank and Signature Bank saw their demise because large investors — ones with accounts too big to be insured by the FDIC (which accounted for nearly 90% of Silicon Valley Bank’s deposits) — got worried and pulled their money all at once.

That’s a bank run, something most Americans haven’t seen outside of movies, like in “It’s a Wonderful Life!,” where George and Mary Bailey use their honeymoon money to pay off the building and loan’s customers to prevent bankruptcy.

Many of those investors got spooked by rumors of the banks’ problems. Zions has been the subject of similar rumors and misinformation — another reminder that loose talk online can have real-life consequences.

Let’s use the “It’s a Wonderful Life!” analogy again: If Zions Bank were to go under, and get bought out by one of the national bank giants, it would be a bit like George Bailey losing Bedford Falls’ building and loan to mean old Mr. Potter.

“We’d lose, over time, the proximity and the focus” from a community-based bank, Landon said. “The big companies have so many other areas to pay attention to.”

What will prevent such a scenario is for everyone to stay calm. Misinformation abounds, principally on social media platforms. Instead, listen to the experts. Because we should all want Zions Bank to remain a vital part of the community for another 150 years or more.