There's conservative, and then there's conservative.

While it's true that the only good banker is a conservative banker, it's also possible to go too far down that road.

In this case, I'm talking about Zions Bancorp (NASDAQ:ZION).

A glance at Zions recent past would hardly lead one to believe that it's led by conservative bankers. You can see this in the figure below, which shows the performance of Zions' book value per share versus its outstanding share count -- the implication is that Zions' shareholders were massively diluted during the financial crisis.

ZION Book Value Per Share Chart

No genuinely good bank would have allowed this to happen to its shareholders, as performance like this is emblematic of a bank that got caught up in a cycle and imprudently took on too much risk. That is, a bank that did exactly what banks aren't supposed to do.

This is not to say that Zions hasn't seen the error of its ways. Indeed, it has. But the problem is, it may now be going too far in the opposite direction.

You can see the results of this on its balance sheet. At the end of the second quarter, it held $9.5 billion in cash or equivalents, equating to more than 17% of its total assets.

Although that may not seem unusual at first glance, a comparison to its peers makes it obvious how off the charts Zions is in this regard.

Take BB&T (NYSE:BBT) as an example, a regional lender operating principally in the mid-Atlantic. Its cash and equivalents equate to only 1.6% of its total assets. And the story is the same at Fifth Third Bancorp (NASDAQ:FITB), a regional lender based in Ohio, which allocates 1.9% of its assets to cash.

Zions' explanation is that it's doing this to protect itself in a rising interest rate environment, as the fixed-income securities that it would otherwise hold will fall in value as interest rates go up.

But one has to wonder whether the opportunity cost associated with complete abstention outweighs a less, shall we say, conservative approach? I can't help but think this may be the case.

John Maxfield has no position in any stocks mentioned. The Motley Fool owns shares of Fifth Third Bancorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.