Updated from 2:58 p.m. EST

Shares of both

First Security

(FSCO)

and

Zions Bancorporation

(ZION) - Get Report

plummeted Friday after First Security said it expected first-quarter revenue to fall well below fourth-quarter 1999 results and Wall Street's expectations.

First Security attributed the shortfall in part to a delay in its pending merger with Zions.

First Security dropped 8 17/32, or 38%, to close at 13 31/32; Zion declined 12 5/8, or 24.5%, to close at 38 13/16.

Salt Lake City-based First Security said it believes that its revenue and funding mix have been "adversely affected" by the delay in the Zions merger. Revenue is dropping in certain business lines, particularly in mortgage banking, due to rising interest rates, the company said.

For its pre-merger first quarter of 2000, First Security projects an 8% drop in revenue vs. fourth-quarter 1999.

The company said it expects earnings to be about 7 to 9 cents per share below the 33 cents per share reported for fourth-quarter 1999; analysts surveyed by

First Call/Thomson Financial

projected earnings of 32 cents per share for the first quarter.

First Security said it is also experiencing increased charge-offs in its indirect auto and consumer lending sectors, which it attributes to a temporary systems installation problem in October. The systems problem has since been corrected, but higher charge-offs are expected to persist through the first quarter and become normal for the balance of the year.

The company said the new merger schedule is on track, with both First Security and Zions planning to hold special shareholder meetings March 22 to vote on the merger proposal. The companies, the two biggest banks in Utah, expect to be able to close the transaction upon shareholder approvals.

The deal was first announced last June and had been scheduled to close at the end of 1999. The closing was postponed in December after the

Securities and Exchange Commission

disallowed Zions' accounting treatment of recent acquisitions under the "pooling-of-interests" method rather than the "purchase" method.

A conference call held Friday to discuss the banks' problems may have backfired and deepened investor concerns, said Sean Ryan, analyst at White Plains, N.Y.-based

Byrne Ryan

, a bank stock brokerage. Both banks' stock prices, already down a lot, were even lower after call ended around 12:15 pm EST.

Ryan said the executives on the call did not give good responses to investor and analysts questions, many of which were hostile. He said he asked what would happen to First Security's lending margin later in the year and "they just didn't have an answer."

Ryan thinks this merger has proved too large for Zions, which has bought a number of institutions in recent years that were smaller than First Security. "The merger was ill-conceived and poorly executed," he said.

Neither First Security nor Zions were immediately available for comment. Ryan does not have ratings on either stock; his firm has not done any underwriting for either bank.