Zions Bancorporation Reports Annual Net Earnings for 2013 of $294 Million, With Strong Loan Growth in the Fourth Quarter

27 Jan, 2014, 16:10 ET from Zions Bancorporation

SALT LAKE CITY, Jan. 27, 2014 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported annual net earnings for 2013 of $294 million, or $1.58 per diluted common share, compared to $179 million, or $0.97 per diluted share, for 2012.

The Company reported a fourth quarter of 2013 net loss applicable to common shareholders of $(59.4) million or $(0.32) per diluted common share. The quarterly loss included impairment charges on collateralized debt obligation ("CDO") securities as a result of both the Company's decision to reduce risk within its CDO portfolio, and the impact of the final provisions of the Volcker Rule. The loss also included debt extinguishment costs that resulted from the Company's successful tender offer for some of its high cost subordinated debt. The total impairment charges and debt extinguishment costs were $222 million pretax or $0.74 per diluted share after-tax.

For comparative purposes, net earnings for the third quarter of 2013 were $209.7 million or $1.12 per diluted share, and $35.6 million or $0.19 per diluted share for the fourth quarter of 2012. The third quarter amount included a $126 million or $0.68 per diluted share increase to net earnings for the redemption of all of the Company's Series C preferred stock.

Fourth Quarter 2013 Highlights

  • Loans and leases held for investment, excluding FDIC-supported loans, increased $795 million compared to the prior quarter to $38.7 billion at December 31, 2013. Average loans and leases, excluding FDIC-supported loans, increased $442 million.
  • Net interest income, excluding the effect of income from FDIC-supported loans, increased modestly compared to the previous quarter.
  • Credit quality showed continued improvement, with nonperforming lending-related assets and classified loans declining 16% and 13%, respectively, compared to the prior quarter. This continued improvement resulted in a fourth quarter negative provision for loan losses of $31 million.
  • The fair value of the CDO portfolio increased by $137 million during the quarter, even as sales and paydowns reduced the par balance of the portfolio.
  • Tangible book value per share improved by 3% compared to the prior quarter, increasing to $23.88 from $23.16; compared to the year-ago period, tangible book value per share improved by approximately 14%, a significant portion of which is attributable to the improvement in fair values of CDOs.

"We are pleased with the improvement in loan growth, further strengthening of credit quality, and stabilization of the net interest margin during the quarter. Additionally, the steps we are taking to reduce risk in our securities portfolio, combined with continued strengthening of our capital ratios, positions us well to serve our customers and grow as the economy continues to improve," said Harris H. Simmons, chairman and chief executive officer.

Dividend Announcement In addition to announcing its fourth quarter financial results, the Company also announced today that its Board of Directors declared a regular quarterly dividend of $0.04 per common share. The dividend is payable February 27, 2014 to shareholders of record on February 20, 2014. The Board of Directors also declared the regular quarterly cash dividends on the Company's various perpetual preferred shares. The cash dividends on the Series A, F, G, H and J shares are payable on March 15, 2014 to shareholders of record on March 1, 2014. The cash dividends on the Series I shares are payable on June 15, 2014 to shareholders of record on June 1, 2014.

Loans Loans and leases held for investment, excluding FDIC-supported loans, increased $795 million, or 2%, to $38.7 billion at December 31, 2013 from $37.9 billion at September 30, 2013. The increases were predominantly in commercial and industrial loans primarily in Texas and California, and in 1-4 family residential loans primarily in Texas and Utah. Average loans and leases, excluding FDIC-supported loans, increased $442 million, or 1%, to $38.3 billion during the fourth quarter of 2013, compared to $37.8 billion during the third quarter of 2013. Unfunded lending commitments at December 31, 2013 increased by approximately $578 million during the fourth quarter of 2013 to a total of $17.2 billion at December 31, 2013, compared to a $488 million increase during the third quarter of 2013.

Deposits Average total deposits for the fourth quarter of 2013 increased $0.7 billion, or 1%, to $46.3 billion, compared to $45.6 billion for the third quarter of 2013. This increase was driven primarily by noninterest-bearing demand deposits, which increased to an average of $18.8 billion in the fourth quarter from $18.2 billion in the third quarter. The ratio of average loans to average deposits was 84% for the fourth quarter, unchanged from the third quarter.

Debt and Shareholders' Equity The Company completed the following debt transactions during the quarter, excluding those in its medium-term note program:

  1. On November 5, 2013, the Company issued $162 million of qualifying Tier 2 fixed/floating rate subordinated notes due November 15, 2023. Interest payments at a rate of 5.65% commence May 15, 2014 and continue semiannually to the earliest possible redemption date of November 15, 2018, after which they are payable quarterly at an annual floating rate equal to three-month LIBOR plus 4.19%. Net proceeds were approximately $160 million.
  2. Effective December 6, 2013, the Company completed the purchases of $250 million par amount of its 5.5% and 6.0% convertible and nonconvertible subordinated notes. The purchases were made as a result of separate cash tender offers totaling $250 million that were announced on November 6, 2013. The total debt extinguishment cost recorded by the Company as a result of these purchases was approximately $80 million pretax or $0.27 per diluted share after-tax.

The estimated common equity Tier 1 capital ratio was 10.15% at December 31, 2013, compared to 10.47% at September 30, 2013.

CDO Investment Securities As explained in the Company's press release issued January 21, 2014, the Company reached a decision to sell a portion of its CDO portfolio, which resulted in impairment charges of those securities to their fair values. This decision was the result of an analysis of the Company's CDO securities under the Volcker Rule (as subsequently modified by the Interim Final Rule) and other factors. The total OTTI adjustment reduced net earnings for the fourth quarter by approximately $142 million pretax or $0.47 per diluted share after-tax.

The following table provides selected information on the CDOs, stratified into performing tranches without credit impairment and nonperforming tranches at December 31, 2013:

December 31, 2013

Net

unrealized

losses

recognized

in AOCI 1

Weighted

average

discount

rate 2

% of carrying value

to par

(Amounts in millions)

No. of

tranches

Par

amount

Amortized

cost

Carrying

value

December 31,

2013

September 30,

2013

Change

Performing CDOs

Predominantly bank CDOs

23

$      687

$      617

$      499

$    (118)

5.6%

73%

71%

2%

Insurance CDOs

22

433

413

346

(67)

4.9%

80%

75%

5%

Other CDOs

3

43

26

26

10.6%

60%

75%

(15)%

Total performing CDOs

48

1,163

1,056

871

(185)

5.5%

75%

73%

2%

Nonperforming CDOs 3

CDOs credit impaired prior to last 12 months

32

614

369

285

(84)

7.0%

46%

42%

4%

CDOs credit impaired during last 12 months

23

448

187

150

(37)

6.5%

33%

27%

6%

Total nonperforming CDOs

55

1,062

556

435

(121)

6.8%

41%

30%

11%

Total CDOs

103

$    2,225

$    1,612

$    1,306

$     (306)

6.1%

59%

52%

7%

1 Amounts presented are pretax.

2 Margin over related LIBOR index.

3 Defined as either deferring current interest ("PIKing") or OTTI; the majority are predominantly bank CDOs.

 

The following table shows changes in selected information on the CDOs from December 31, 2012 to December 31, 2013:

Change from December 31, 2012 to December 31, 2013

Decrease

(increase) in net

unrealized losses

recognized in OCI

Weighted

average

discount

rate

(Amounts in millions)

No. of

tranches

Par

amount

Amortized

cost

Carrying

value

% of carrying

value to par

Performing CDOs

Predominantly bank CDOs

(5)

$    (124)

$    (110)

$     (39)

$       71

(2.2)%

7%

Insurance CDOs

(21)

(36)

19

55

(3.7)%

8%

Other CDOs

(3)

(11)

(17)

(12)

5

1.2%

(10)%

Total performing CDOs

(8)

(156)

(163)

(32)

131

(2.6)%

7%

Nonperforming CDOs

Credit impairment prior to last 12 months

14

245

118

176

58

(3.7)%

16%

Credit impairment during last 12 months

(16)

(284)

(254)

(31)

223

(3.1)%

8%

Total nonperforming CDOs

(2)

(39)

(136)

145

281

(3.2)%

15%

Total CDOs

(10)

$    (195)

$    (299)

$     113

$      412

(2.9)%

10%

The primary improvement to the Company's accumulated other comprehensive income ("AOCI") during the fourth quarter is attributable to the recognition in earnings of unrealized losses on CDO securities and to an increase in fair value of the CDO securities.

Net Interest Income Excluding income from FDIC-supported loans, net interest income increased slightly compared to the prior quarter due to stronger loan growth, partially offset by reduced yield in the loan portfolio. Interest income from FDIC-supported loans also improved by approximately $13 million due to payoffs. In total, net interest income increased to $432 million for the fourth quarter of 2013, compared to $416 million for the third quarter of 2013. The net interest margin increased to 3.33% in the fourth quarter of 2013, compared to 3.22% in the third quarter of 2013 primarily as a result of the strong performance of FDIC-supported loans.

Noninterest Income Noninterest income for the fourth quarter of 2013 was $(31) million, compared to $122 million for the third quarter of 2013. The significant majority of the linked quarter decline was attributable to the OTTI on CDO securities, as previously discussed. Loan sales and servicing income decreased primarily due to a lower volume of mortgage refinancing.

Noninterest Expense Noninterest expense for the fourth quarter of 2013 was $495 million compared to $371 million for the third quarter of 2013. Increases this quarter compared to the previous quarter were due primarily to (1) the debt extinguishment cost of $80 million, (2) the change in the provision for unfunded lending commitments to $5.6 million this quarter from a negative provision of $19.9 million in the third quarter, due in part to a higher volume of loan commitments, (3) the increase in professional and legal services to $23.9 million in the fourth quarter from $16.5 million in the third quarter, and (4) an increase in the amortization of the FDIC indemnification asset to $19.9 million, compared to the prior quarter amount of $13.0 million, included in other noninterest expense. The increase in professional and legal services was primarily due to consulting expense related to the Company's Comprehensive Capital Analysis and Review ("CCAR") submission.

Asset Quality Nonperforming lending-related assets declined 16% to $453 million at December 31, 2013 from $538 million at September 30, 2013, primarily due to favorable resolutions. Nonaccrual loans declined 14% to $407 million at December 31, 2013 from $472 million at September 30, 2013. The ratio of nonperforming lending-related assets to loans and leases and other real estate owned decreased to 1.15% at December 31, 2013, compared to 1.40% at September 30, 2013.

Classified loans, excluding FDIC-supported loans, decreased approximately 13% to $1.2 billion at December 31, 2013, compared to $1.4 billion at September 30, 2013. Consistent with recent quarters, approximately 84% were current as to principal and interest.

Net loan and lease charge-offs increased to $19 million in the fourth quarter of 2013, compared to $9 million in the third quarter of 2013.

The negative provision for loan losses was $31 million for the fourth quarter of 2013, compared to a negative provision of $6 million for the third quarter of 2013. The negative provision continues to result from the improvement in credit quality. The allowance for credit losses was $836 million, or 2.14% of loans and leases at December 31, 2013, compared to $882 million, or 2.30% of loans and leases at September 30, 2013. The Company's allowance for credit losses remains among the strongest of its peer regional banks.

Conference Call Zions will host a conference call to discuss these fourth quarter results at 5:30 p.m. ET this afternoon (January 27, 2014). Media representatives, analysts and the public are invited to listen to this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 29467185, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at www.zionsbancorporation.com. The webcast of the conference call will also be archived and available for 30 days.

About Zions Bancorporation Zions Bancorporation is one of the nation's premier financial services companies, consisting of a collection of great banks in select Western markets. Zions operates its banking businesses under local management teams and community identities through approximately 475 offices in 10 Western and Southwestern states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington. The Company is a national leader in Small Business Administration lending and public finance advisory services, and received 13 "Excellence" awards by Greenwich Associates for the 2012 survey. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to subsidiary banks can be accessed at www.zionsbancorporation.com.

Forward-Looking Information Statements in this press release that are based on other than historical data or that express the Company's expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, and its Current Report on Form 8-K dated January 21, 2014, filed with the Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov).

Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

 

FINANCIAL HIGHLIGHTS

(Unaudited)

 

Three Months Ended

(In thousands, except share, per share, and ratio data)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

PER COMMON SHARE

Dividends

$    0.04

$    0.04

$    0.04

$    0.01

$    0.01

Book value per common share 1

29.57

28.87

27.82

27.43

26.73

Tangible common equity per common share 1

23.88

23.16

22.09

21.67

20.95

SELECTED RATIOS

Return on average assets

(0.30)%

0.80%

0.61%

0.83%

0.43%

Return on average common equity

(4.51)%

16.03%

4.35%

7.18%

2.91%

Tangible return on average tangible common

equity

(5.45)%

20.34%

5.73%

9.37%

4.07%

Net interest margin

3.33%

3.22%

3.44%

3.44%

3.47%

Capital Ratios

Tangible common equity ratio 1

8.02%

7.90%

7.57%

7.53%

7.09%

Tangible equity ratio 1

9.85%

9.75%

10.78%

9.97%

9.15%

Average equity to average assets

11.20%

12.39%

12.11%

11.54%

11.03%

Risk-Based Capital Ratios 1,2

Common equity Tier 1 capital

10.15%

10.47%

10.03%

10.07%

9.80%

Tier 1 leverage

10.48%

10.63%

11.75%

11.55%

10.96%

Tier 1 risk-based capital

12.72%

13.10%

14.30%

14.08%

13.38%

Total risk-based capital

14.62%

14.82%

15.94%

15.75%

15.05%

Taxable-equivalent net interest income

$    435,714

$    419,236

$    434,579

$    422,252

$    434,252

Weighted average common and common-

equivalent shares outstanding

184,208,544

184,742,414

184,061,623

183,655,129

183,456,109

Common shares outstanding 1

184,677,696

184,600,005

184,436,656

184,246,471

184,199,198

1 At period end.

2 Ratios for December 31, 2013 are estimates.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

ASSETS

Cash and due from banks

$    1,175,083

$    1,365,082

$    1,183,097

$    928,817

$    1,841,907

Money market investments:

Interest-bearing deposits

8,175,048

8,180,639

8,180,010

5,785,268

5,978,978

Federal funds sold and security resell agreements

282,248

209,070

221,799

2,340,177

2,775,354

Investment securities:

Held-to-maturity, at adjusted cost (approximate fair value $609,547, $727,908, $734,292, $684,668, and $674,741)

588,981

777,849

783,371

736,158

756,909

Available-for-sale, at fair value

3,701,886

3,333,889

3,193,395

3,287,844

3,091,310

Trading account, at fair value

34,559

38,278

26,385

28,301

28,290

4,325,426

4,150,016

4,003,151

4,052,303

3,876,509

Loans held for sale

171,328

114,810

164,619

161,559

251,651

Loans, net of unearned income and fees:

Loans and leases

38,693,094

37,897,869

37,756,010

37,284,694

37,137,006

FDIC-supported loans

350,271

374,861

431,935

477,725

528,241

39,043,365

38,272,730

38,187,945

37,762,419

37,665,247

Less allowance for loan losses

746,291

797,523

813,912

841,781

896,087

Loans, net of allowance

38,297,074

37,475,207

37,374,033

36,920,638

36,769,160

Other noninterest-bearing investments

855,642

851,349

852,939

855,388

855,462

Premises and equipment, net

726,372

720,365

717,299

706,746

708,882

Goodwill

1,014,129

1,014,129

1,014,129

1,014,129

1,014,129

Core deposit and other intangibles

36,444

39,667

43,239

47,000

50,818

Other real estate owned

46,105

66,381

80,789

89,904

98,151

Other assets

926,228

1,001,597

1,069,436

1,208,635

1,290,917

$    56,031,127

$    55,188,312

$    54,904,540

$    54,110,564

$    55,511,918

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing demand

$    18,758,753

$    18,566,137

$    17,803,950

$    17,311,150

$    18,469,458

Interest-bearing:

Savings and money market

23,029,928

22,806,132

22,887,404

22,760,397

22,896,624

Time

2,593,038

2,689,688

2,810,431

2,889,903

2,962,931

Foreign

1,980,161

1,607,409

1,514,270

1,528,745

1,804,060

46,361,880

45,669,366

45,016,055

44,490,195

46,133,073

Securities sold, not yet purchased

73,606

21,183

15,799

1,662

26,735

Federal funds purchased and security repurchase agreements

266,742

252,591

240,816

325,107

320,478

Other short-term borrowings

5,409

Long-term debt

2,273,575

2,304,301

2,173,176

2,352,569

2,337,113

Reserve for unfunded lending commitments

89,705

84,147

104,082

100,455

106,809

Other liabilities

501,056

523,915

494,280

489,923

533,660

Total liabilities

49,566,564

48,855,503

48,044,208

47,759,911

49,463,277

Shareholders' equity:

Preferred stock, without par value, authorized 4,400,000 shares

1,003,970

1,003,970

1,728,659

1,301,289

1,128,302

Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 184,677,696, 184,600,005, 184,436,656, 184,246,471, and 184,199,198 shares

4,179,024

4,172,887

4,167,828

4,170,888

4,166,109

Retained earnings

1,473,670

1,540,455

1,338,401

1,290,131

1,203,815

Accumulated other comprehensive income (loss)

(192,101)

(384,503)

(374,556)

(406,903)

(446,157)

Controlling interest shareholders' equity

6,464,563

6,332,809

6,860,332

6,355,405

6,052,069

Noncontrolling interests

(4,752)

(3,428)

Total shareholders' equity

6,464,563

6,332,809

6,860,332

6,350,653

6,048,641

$    56,031,127

$    55,188,312

$    54,904,540

$    54,110,564

$    55,511,918

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

Three Months Ended

(In thousands, except per share amounts)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Interest income:

Interest and fees on loans

$    458,493

$    442,366

$    460,308

$    453,433

$    462,002

Interest on money market investments

5,985

6,175

5,764

5,439

6,004

Interest on securities:

Held-to-maturity

7,721

7,739

7,846

7,974

8,130

Available-for-sale

17,450

16,917

19,028

17,712

21,971

Trading account

368

210

287

190

150

Total interest income

490,017

473,407

493,233

484,748

498,257

Interest expense:

Interest on deposits

13,622

14,506

15,143

15,642

16,861

Interest on short-term borrowings

72

71

78

92

178

Interest on long-term debt

44,288

43,309

47,355

50,899

51,261

Total interest expense

57,982

57,886

62,576

66,633

68,300

Net interest income

432,035

415,521

430,657

418,115

429,957

Provision for loan losses

(30,538)

(5,573)

(21,990)

(29,035)

(10,401)

Net interest income after provision for loan losses

462,573

421,094

452,647

447,150

440,358

Noninterest income:

Service charges and fees on deposit accounts

43,729

44,701

44,329

43,580

44,492

Other service charges, commissions and fees

46,877

45,977

45,888

42,731

46,497

Trust and wealth management income

8,067

7,120

7,732

6,994

7,450

Capital markets and foreign exchange

6,516

7,309

6,740

7,486

7,708

Dividends and other investment income

9,898

12,101

11,339

12,724

13,117

Loan sales and servicing income

5,155

8,464

10,723

10,951

10,595

Fair value and nonhedge derivative loss

(5,347)

(4,403)

(2,957)

(5,445)

(4,778)

Equity securities gains (losses), net

314

3,165

2,209

2,832

(682)

Fixed income securities gains (losses), net

(6,624)

1,580

(1,153)

3,299

10,259

Impairment losses on investment securities:

Impairment losses on investment securities

(141,733)

(10,470)

(4,910)

(31,493)

(120,082)

Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income)

1,403

693

21,376

36,274

Net impairment losses on investment securities

(141,733)

(9,067)

(4,217)

(10,117)

(83,808)

Other

1,998

5,243

4,515

6,184

3,309

Total noninterest income (loss)

(31,150)

122,190

125,148

121,219

54,159

Noninterest expense:

Salaries and employee benefits

226,616

229,185

227,328

229,789

220,039

Occupancy, net

28,733

28,230

27,951

27,389

28,226

Equipment, software and furniture

27,450

26,560

26,545

26,074

27,774

Other real estate expense

(1,024)

(831)

1,590

1,977

5,266

Credit related expense

6,509

7,265

9,397

10,482

11,302

Provision for unfunded lending commitments

5,558

(19,935)

3,627

(6,354)

959

Professional and legal services

23,886

16,462

17,149

10,471

15,717

Advertising

5,571

6,091

5,807

5,893

5,969

FDIC premiums

8,789

9,395

10,124

9,711

10,760

Amortization of core deposit and other intangibles

3,224

3,570

3,762

3,819

4,216

Debt extinguishment cost

79,910

40,282

Other

79,528

64,671

78,116

78,097

76,786

Total noninterest expense

494,750

370,663

451,678

397,348

407,014

Income (loss) before income taxes

(63,327)

172,621

126,117

171,021

87,503

Income taxes (benefit)

(21,855)

61,107

43,091

60,634

29,817

Net income (loss)

(41,472)

111,514

83,026

110,387

57,686

Net loss applicable to noncontrolling interests

(336)

(566)

Net income (loss) applicable to controlling interest

(41,472)

111,514

83,026

110,723

58,252

Preferred stock dividends

(17,965)

(27,507)

(27,641)

(22,399)

(22,647)

Preferred stock redemption

125,700

Net earnings (loss) applicable to common shareholders

$    (59,437)

$    209,707

$    55,385

$    88,324

$    35,605

Weighted average common shares outstanding during the period:

Basic shares

184,209

184,112

183,647

183.396

183,300

Diluted shares

184,209

184,742

184,062

183,655

183,456

Net earnings (loss) per common share:

Basic

$    (0.32)

$    1.13

$   0.30

$    0.48

$    0.19

Diluted

(0.32)

1.12

0.30

0.48

0.19

 

CONSOLIDATED STATEMENTS OF INCOME

Year Ended

(In thousands, except per share amounts)

December 31,

2013

December 31,

2012

(Unaudited)

Interest income:

Interest and fees on loans

1,814,600

1,889,884

Interest on money market investments

23,363

21,080

Interest on securities:

Held-to-maturity

31,280

34,751

Available-for-sale

71,107

92,261

Trading account

1,055

746

Total interest income

1,941,405

2,038,722

Interest expense:

Interest on deposits

58,913

80,146

Interest on short-term borrowings

313

1,406

Interest on long-term debt

185,851

225,230

Total interest expense

245,077

306,782

Net interest income

1,696,328

1,731,940

Provision for loan losses

(87,136)

14,227

Net interest income after provision for loan losses

1,783,464

1,717,713

Noninterest income:

Service charges and fees on deposit accounts

176,339

176,401

Other service charges, commissions and fees

181,473

174,420

Trust and wealth management income

29,913

28,402

Capital markets and foreign exchange

28,051

26,810

Dividends and other investment income

46,062

55,825

Loan sales and servicing income

35,293

39,929

Fair value and nonhedge derivative loss

(18,152)

(21,782)

Equity securities gains, net

8,520

11,253

Fixed income securities gains (losses), net

(2,898)

19,544

Impairment losses on investment securities:

Impairment losses on investment securities

(188,606)

(166,257)

Noncredit-related losses on securities not expected to be sold

(recognized in other comprehensive income)

23,472

62,196

Net impairment losses on investment securities

(165,134)

(104,061)

Other

17,940

13,129

Total noninterest income

337,407

419,870

Noninterest expense:

Salaries and employee benefits

912,918

885,661

Occupancy, net

112,303

112,947

Equipment, software and furniture

106,629

108,990

Other real estate expense

1,712

19,723

Credit related expense

33,653

50,518

Provision for unfunded lending commitments

(17,104)

4,387

Professional and legal services

67,968

52,509

Advertising

23,362

25,720

FDIC premiums

38,019

43,401

Amortization of core deposit and other intangibles

14,375

17,010

Debt extinguishment cost

120,192

Other

300,412

275,151

Total noninterest expense

1,714,439

1,596,017

Income before income taxes

406,432

541,566

Income taxes

142,977

193,416

Net income

263,455

348,150

Net loss applicable to noncontrolling interests

(336)

(1,366)

Net income applicable to controlling interest

263,791

349,516

Preferred stock dividends

(95,512)

(170,885)

Preferred stock redemption

125,700

Net earnings applicable to common shareholders

$    293,979

$    178,631

Weighted average common shares outstanding during the year:

Basic shares

183,844

183,081

Diluted shares

184,297

183,236

Net earnings per common share:

Basic

$    1.58

$    0.97

Diluted

1.58

0.97

 

Loan Balances by Portfolio Type

(Unaudited)

(In millions)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Commercial:

Commercial and industrial

$    12,481

$    11,904

$    11,899

$    11,504

 

$    11,257

Leasing

388

375

388

390

423

Owner occupied

7,437

7,379

7,394

7,501

7,589

Municipal

449

449

454

484

494

Total commercial

20,755

20,107

20,135

19,879

19,763

Commercial real estate:

Construction and land development

2,183

2,240

2,191

2,039

1,939

Term

8,006

7,929

7,971

8,012

8,063

Total commercial real estate

10,189

10,169

10,162

10,051

10,002

Consumer:

Home equity credit line

2,133

2,124

2,124

2,125

2,178

1-4 family residential

4,737

4,637

4,486

4,408

4,350

Construction and other consumer real estate

325

321

322

320

321

Bankcard and other revolving plans

356

332

315

293

307

Other

198

208

212

208

216

Total consumer

7,749

7,622

7,459

7,354

7,372

FDIC-supported loans 1

350

375

432

478

528

Total loans

$    39,043

$    38,273

$    38,188

$    37,762

$    37,665

1 FDIC-supported loans represent loans acquired from the FDIC subject to loss sharing agreements.

FDIC-Supported Loans – Effect of Higher Accretion     and Impact on FDIC Indemnification Asset (Unaudited)

Three Months Ended

(In thousands)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Balance sheet:

Change in assets from reestimation of cash flows – increase (decrease):

FDIC-supported loans

$    28,502

$    15,018

$    28,424

$    18,977

$    12,970

FDIC indemnification asset (included in other assets)

(19,934)

(12,965)

(21,845)

(20,288)

(10,610)

Balance at end of period:

FDIC-supported loans

350,271

374,861

431,935

477,725

528,241

FDIC indemnification asset (included in other assets)

26,411

41,771

51,297

71,100

90,074

Three Months Ended

(In thousands)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Statement of income:

Interest income:

Interest and fees on loans

$    28,502

$    15,018

$    28,424

$    18,977

$    12,970

Noninterest expense:

Other noninterest expense

19,934

12,965

21,845

20,288

10,610

Net increase (decrease) in pretax income

$      8,568

$      2,053

$     6,579

$    (1,311)

$      2,360

 

Nonperforming Lending-Related Assets

(Unaudited)

(Amounts in thousands)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Nonaccrual loans

$ 402,219

$ 466,795

$ 515,708

$ 589,221

$ 630,810

Other real estate owned

42,817

58,295

70,031

80,701

90,269

Nonperforming lending-related assets, excluding

FDIC-supported assets

445,036

525,090

585,739

669,922

721,079

FDIC-supported nonaccrual loans

4,394

4,744

5,256

4,927

17,343

FDIC-supported other real estate owned

3,288

8,086

10,758

9,203

7,882

FDIC-supported nonperforming assets

7,682

12,830

16,014

14,130

25,225

Total nonperforming lending-related assets

$ 452,718

$ 537,920

$ 601,753

$ 684,052

$ 746,304

Ratio of nonperforming lending-related assets to loans 1 and leases and other real estate owned

1.15%

1.40%

1.57%

1.80%

1.96%

Accruing loans past due 90 days or more, excluding FDIC-supported loans

$ 9,957

$ 9,398

$ 10,685

$ 12,708

$ 9,730

Accruing FDIC-supported loans past due 90 days or more

30,391

22,450

33,410

47,208

52,033

Ratio of accruing loans past due 90 days or more to loans 1 and leases

0.10%

0.08%

0.11%

0.16%

0.16%

Nonaccrual loans and accruing loans past due 90 days or more

$ 446,961

$ 503,387

$ 565,059

$ 654,064

$ 709,916

Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans 1 and leases

1.14%

1.31%

1.47%

1.72%

1.87%

Accruing loans past due 30 - 89 days, excluding FDIC-supported loans

$ 104,760

$ 85,128

$ 103,075

$ 155,896

$ 185,422

Accruing FDIC-supported loans past due 30 - 89 days

11,752

10,983

6,522

11,571

11,924

Restructured loans included in nonaccrual loans

136,135

166,573

162,496

193,975

215,476

Restructured loans on accrual

345,299

384,793

385,428

416,181

407,026

Classified loans, excluding FDIC-supported loans

1,240,148

1,432,806

1,639,206

1,737,178

1,767,460

1 Includes loans held for sale.

 

Allowance for Credit Losses

(Unaudited)

Three Months Ended

(Amounts in thousands)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Allowance for Loan Losses

Balance at beginning of period

$    797,523

$    813,912

$    841,781

$    896,087

$     927,068

Add:

Provision for losses

(30,538)

(5,573)

(21,990)

(29,035)

(10,401)

Adjustment for FDIC-supported loans

(1,481)

(2,118)

(209)

(7,429)

(1,721)

Deduct:

Gross loan and lease charge-offs

(37,405)

(22,826)

(35,099)

(35,467)

(54,709)

Recoveries

18,192

14,128

29,429

17,625

35,850

Net loan and lease charge-offs

(19,213)

(8,698)

(5,670)

(17,842)

(18,859)

Balance at end of period

$    746,291

$    797,523

$    813,912

$   841,781

$     896,087

Ratio of allowance for loan losses to loans and leases, at period end

1.91%

2.08%

2.13%

2.23%

2.38%

Ratio of allowance for loan losses to nonperforming loans, at period end

183.54%

169.13%

156.23%

141.68%

138.25%

Annualized ratio of net loan and lease charge-offs to average loans

0.20%

0.09%

0.06%

0.19%

0.20%

Reserve for Unfunded Lending Commitments

Balance at beginning of period

$      84,147

$    104,082

$    100,455

$    106,809

$      105,850

Provision charged (credited) to earnings

5,558

(19,935)

3,627

(6,354)

959

Balance at end of period

$      89,705

$      84,147

$    104,082

$    100,455

$      106,809

Total Allowance for Credit Losses

Allowance for loan losses

$    746,291

$    797,523

$    813,912

$    841,781

$      896,087

Reserve for unfunded lending commitments

89,705

84,147

104,082

100,455

106,809

Total allowance for credit losses

$    835,996

$    881,670

$    917,994

$    942,236

$   1,002,896

Ratio of total allowance for credit losses to loans and leases outstanding, at period end

2.14%

2.30%

2.40%

2.50%

2.66%

 

Nonaccrual Loans by Portfolio Type

(Excluding FDIC-Supported Loans)

(Unaudited)

(In millions)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Commercial:

Commercial and industrial

$    98

$    100

$    94

$    100

$    91

Leasing

1

1

1

1

1

Owner occupied

136

158

186

195

206

Municipal

10

10

9

9

9

Total commercial

245

269

290

305

307

Commercial real estate:

Construction and land development

29

65

70

93

108

Term

60

61

71

102

125

Total commercial real estate

89

126

141

195

233

Consumer:

Home equity credit line

9

8

11

12

14

1-4 family residential

53

58

66

71

70

Construction and other consumer real estate

4

4

5

4

5

Bankcard and other revolving plans

1

1

2

1

1

Other

1

1

1

1

1

Total consumer

68

72

85

89

91

Total nonaccrual loans

$    402

$    467

$    516

$    589

$    631

 

Net Charge-Offs by Portfolio Type

(Unaudited)

Three Months Ended

(In millions)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Commercial:

Commercial and industrial

$    15

$   2

$   2

$    5

$   (1)

Leasing

2

Owner occupied

1

2

3

5

7

Municipal

Total commercial

16

4

5

10

8

Commercial real estate:

Construction and land development

(3)

(1)

(3)

(3)

(7)

Term

5

3

(2)

5

7

Total commercial real estate

2

2

(5)

2

Consumer:

Home equity credit line

1

2

2

6

1-4 family residential

1

3

3

4

Construction and other consumer real estate

1

(1)

Bankcard and other revolving plans

1

1

2

1

Other

Total consumer loans

1

3

6

6

11

Total net charge-offs

$   19

$   9

$   6

$    18

$    19

 

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)

Three Months Ended

December 31, 2013

September 30, 2013

June 30, 2013

(In thousands)

Average balance

Average rate

Average balance

Average rate

Average balance

Average rate

ASSETS

Money market investments

$

9,154,232

0.26%

$

9,454,131

0.26%

$

8,652,403

0.27%

Securities:

Held-to-maturity

770,168

4.75%

778,268

4.73%

740,839

5.07%

Available-for-sale

3,230,152

2.17%

3,071,039

2.22%

3,090,910

2.50%

Trading account

43,063

3.39%

25,959

3.21%

36,296

3.17%

    Total securities

4,043,383

2.68%

3,875,266

2.73%

3,868,045

3.00%

Loans held for sale

119,671

3.73%

131,652

3.70%

141,313

3.47%

Loans 1:

Loans and leases

38,259,795

4.41%

37,818,273

4.43%

37,518,549

4.55%

FDIC-supported loans

363,982

36.88%

405,316

20.52%

452,849

31.22%

    Total loans

38,623,777

4.72%

38,223,589

4.60%

37,971,398

4.87%

Total interest-earning assets

51,941,063

3.77%

51,684,638

3.66%

50,633,159

3.94%

Cash and due from banks

1,026,814

976,159

1,000,221

Allowance for loan losses

(790,361)

(810,290)

(837,651)

Goodwill

1,014,129

1,014,129

1,014,129

Core deposit and other intangibles

38,137

41,751

45,262

Other assets

2,470,837

2,608,252

2,808,640

    Total assets

$

55,700,619

$

55,514,639

$

54,663,760

LIABILITIES

Interest-bearing deposits:

Savings and money market

$

22,972,978

0.16%

$

22,982,998

0.17%

$

22,871,040

0.18%

Time

2,642,104

0.50%

2,749,985

0.56%

2,842,322

0.59%

Foreign

1,796,912

0.20%

1,675,256

0.20%

1,642,381

0.20%

    Total interest-bearing deposits

27,411,994

0.20%

27,408,239

0.21%

27,355,743

0.22%

Borrowed funds:

Federal funds purchased and other short-term

borrowings

271,501

0.11%

260,744

0.11%

287,766

0.11%

Long-term debt

2,352,748

7.47%

2,198,752

7.81%

2,214,215

8.58%

    Total borrowed funds

2,624,249

6.71%

2,459,496

7.00%

2,501,981

7.60%

Total interest-bearing liabilities

30,036,243

0.77%

29,867,735

0.77%

29,857,724

0.84%

Noninterest-bearing deposits

18,842,097

18,179,584

17,629,219

Other liabilities

584,887

591,735

559,219

    Total liabilities

49,463,227

48,639,054

48,046,162

Shareholders' equity:

Preferred equity

1,003,970

1,685,512

1,518,823

Common equity

5,233,422

5,190,073

5,102,082

    Controlling interest shareholders' equity

6,237,392

6,875,585

6,620,905

Noncontrolling interests

(3,307)

    Total shareholders' equity

6,237,392

6,875,585

6,617,598

    Total liabilities and shareholders' equity

$

55,700,619

$

55,514,639

$

54,663,760

Spread on average interest-bearing funds

3.00%

2.89%

3.10%

Net yield on interest-earning assets

3.33%

3.22%

3.44%

1 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

 

GAAP to Non-GAAP Reconciliation

(Unaudited)

Tangible Return on Average Tangible Common Equity

Three Months Ended

(Amounts in thousands)

December 31,

2013

September 30,

2013

June 30,

2013

March 31,

2013

December 31,

2012

Net earnings (loss) applicable to common shareholders (GAAP)

$      (59,437)

$      209,707

$        55,385

$        88,324

$        35,605

Adjustments, net of tax:

Impairment loss on goodwill

583

Amortization of core deposit and other intangibles

2,046

2,268

2,391

2,425

2,677

Net earnings (loss) applicable to common

shareholders, excluding the effects of the adjustments,

net of tax (non-GAAP) (a)

$       (57,391)

$       211,975

$         57,776

$         90,749

$         38,865

Average common equity (GAAP)

$    5,233,422

$    5,190,073

$    5,102,082

$    4,990,317

$    4,862,972

Average goodwill

(1,014,129)

(1,014,129)

(1,014,129)

(1,014,129)

(1,014,986)

Average core deposit and other intangibles

(38,137)

(41,751)

(45,262)

(49,069)

(53,083)

Average tangible common equity (non-GAAP) (b)

$    4,181,156

$    4,134,193

$    4,042,691

$    3,927,119

$    3,794,903

Number of days in quarter (c)

92

92

91

90

92

Number of days in year (d)

365

365

365

365

366

Tangible return on average tangible common equity (non-GAAP) (a/b/c*d)

(5.45)%

20.34%

5.73%

9.37%

4.07%

This press release presents the non-GAAP financial measure previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measure are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results.

The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measure provides a meaningful base for period-to-period and company-to-company comparisons, which will assist investors and analysts in analyzing the operating results of the Company and in predicting future performance. This non-GAAP financial measure is used by management and the Board of Directors to assess the performance of the Company's business for evaluating bank reporting segment performance, for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting this non-GAAP financial measure will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management and the Board of Directors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

SOURCE Zions Bancorporation



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