Zions Bancorporation Reports Earnings Of $0.48 Per Diluted Common Share For First Quarter 2013


SALT LAKE CITY, April 22, 2013 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported first quarter net earnings applicable to common shareholders of $88.3 million or $0.48 per diluted common share, compared to $35.6 million or $0.19 per diluted share for the fourth quarter of 2012, and $25.5 million or $0.14 per diluted share for the first quarter of 2012.

First Quarter 2013 Highlights


  • Loans and leases, excluding FDIC-supported loans, increased $148 million to $37.3 billion at March 31, 2013. Average loans and leases, excluding FDIC-supported loans, increased $413 million.
  • Gross loan and lease charge-offs declined 35% compared to the fourth quarter, while net loan and lease charge-offs declined 5%. Other improvements in credit quality were generally consistent with prior quarters. 
  • The continued improvement in credit quality resulted in first quarter negative provisions of $29.0 million for loan losses and $6.4 million for unfunded lending commitments.
  • Tangible common equity per common share improved $0.72 to $21.67 from $20.95 in the fourth quarter, driven by increased retained earnings and improvement in accumulated other comprehensive income ("AOCI").
  • Net interest income decreased compared to the prior quarter due to reduced day count and loan interest rates resetting at lower levels.

"We are again pleased with our improvement in credit quality, which we expect to continue, and by somewhat better loan growth over the past couple of quarters," said Harris H. Simmons, chairman and chief executive officer, "but we see some renewed signs of new loan pricing pressure. However, we do expect continued bottom line improvement as we take numerous actions over the next several quarters to reduce the cost of our capital and debt financing."

Loans

Loans and leases, excluding loans held for sale and FDIC-supported loans, increased $148 million on a net basis to $37.3 billion at March 31, 2013, compared to $37.1 billion at December 31, 2012. The increases were predominantly in commercial and industrial, construction and land development, and 1-4 family residential loans primarily in Texas and California. Decreases of $258 million primarily in commercial owner occupied, term commercial real estate, and home equity credit line loans partially offset increases in other loan categories. Average loans and leases, excluding FDIC-supported loans, increased $413 million to $37.1 billion during the first quarter of 2013, compared to $36.7 billion during the fourth quarter of 2012.

Deposits

Average total deposits for the first quarter of 2013 decreased $0.5 billion, or 1%, to $44.4 billion, compared to $44.9 billion for the fourth quarter of 2012. Average noninterest-bearing demand deposits declined $0.7 billion, to $17.2 billion in the first quarter from $17.9 billion in the fourth quarter, while average interest-bearing deposits increased $0.2 billion, to $27.2 billion from $27.0 billion quarter over quarter. The ratio of average loans excluding loans held for sale to average deposits was 85% at March 31, 2013, compared to 83% at December 31, 2012.

Debt and Shareholders' Equity

As previously reported, on January 31, 2013, the Company sold $171.8 million of its Series G Fixed/Floating Rate Non-Cumulative Perpetual Preferred Stock. Dividends are payable from the issuance date to March 14, 2023 at an annual rate of 6.30%. Beginning March 15, 2023 (date of earliest redemption) to maturity, dividends will be payable at an annual floating rate equal to three-month LIBOR plus 4.24%. Net of commissions and fees, the proceeds added $168.8 million to shareholders' equity and Tier 1 capital.

The tangible common equity ratio was 7.53% at March 31, 2013, compared to 7.09% at December 31, 2012. The increase was primarily due to increased retained earnings this quarter, a $39 million improvement in AOCI which resulted primarily from increased fair values on collateralized debt obligation ("CDO") securities, and lower cash-related balances. The estimated common equity Tier 1 capital ratio was 10.06% at March 31, 2013, compared to 9.80% at December 31, 2012.

As previously announced, on May 3, 2013, Zions Capital Trust B will redeem all of its 8.0% outstanding trust preferred securities, or 11.4 million shares, at 100% of their $25 per share liquidation amount for a total of $285 million.

Net Interest Income

Net interest income decreased to $418 million for the first quarter of 2013, compared to $430 million for the fourth quarter of 2012. The net interest margin decreased to 3.44% in the first quarter of 2013, compared to 3.47% in the fourth quarter of 2012. The major drivers of these declines were loan rate resets, expiration of in-the-money floors on loans, reduced day count (for net interest income), and lower yields on available-for-sale investment securities. The cost of interest-bearing deposits continued to decline and was 0.23% in the first quarter compared to 0.25% in the fourth quarter.

Noninterest Income

Noninterest income for the first quarter of 2013 was $121.2 million, compared to $54.2 million for the fourth quarter of 2012. The increase was primarily due to the reduced amount of other-than-temporary impairment ("OTTI") on CDO securities taken this quarter compared to the previous quarter.

CDO Investment Securities

During the first quarter of 2013, the Company recognized credit-related OTTI on CDOs of $10.1 million or $0.03 per diluted share, compared to $83.8 million or $0.28 per diluted share during the fourth quarter of 2012. Approximately $6.2 million of the OTTI this quarter was related to an event of default on one CDO. The higher amount of OTTI in the previous quarter resulted from increases to our assumed probabilities of default, primarily on bank issuers deferring payment of trust preferred interest, and to our near-term prepayment assumptions for some banks. Gains from cash principal payments on CDOs previously written down were $3.3 million in the first quarter of 2013, compared to $10.2 million in the fourth quarter of 2012.

The following table provides fair value and other information on the CDOs, stratified into performing tranches without credit impairment and nonperforming tranches at March 31, 2013:



March 31, 2013













Net unrealized losses recognized in AOCI 1




% of carrying value to par



(Amounts in millions)

No. of tranches


Par
amount


Amortized
cost


Carrying
value


Weighted average discount rate 2


 

March 31,
2013


December 31,
2012


 

Change

Performing CDOs


















Predominantly bank CDOs

27


$

774


$

694


$

560


$

(134)


5.9%


72%


66%


6%

Insurance-only CDOs

22


447


443


331


(112)


7.9%


74%


72%


2%

Other CDOs

6


51


40


37


(3)


9.6%


73%


70%


3%

Total performing CDOs

55


1,272


1,177


928


(249)


6.7%


73%


68%


5%



















Nonperforming CDOs 3


















CDOs credit impaired prior to last 12 months

19


394


275


126


(149)


10.1%


32%


30%


2%

CDOs credit impaired during last 12 months

39


732


432


179


(253)


11.4%


24%


25%


(1)%

Total nonperforming CDOs

58


1,126


707


305


(402)


11.0%


27%


26%


1%



















Total CDOs

113


$

2,398


$

1,884


$

1,233


$

(651)


8.7%


51%


49%


2%



Amounts presented are pretax.

Margin over related LIBOR index.

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

The net unrealized pretax losses in AOCI improved to $651 million in the first quarter of 2013 from $718 million in the fourth quarter of 2012 due to fair value increases that occurred primarily in senior tranches and were driven by continued improvement in credit spreads.

Noninterest Expense

Noninterest expense for the first quarter of 2013 was $397.3 million compared to $407.0 million for the fourth quarter of 2012. The decrease was due primarily to a $7.3 million reduction in the provision for unfunded lending commitments, and to reduced levels of other real estate expense and legal and professional services compared to the fourth quarter. These were partially offset by increased salaries and employee benefits due to increased payroll taxes and variable compensation accruals. Other noninterest expense was approximately $9.7 million higher this quarter than the previous quarter due to increased amortization of the FDIC indemnification asset from loan prepayments.

Asset Quality

Gross loan and lease charge-offs declined 35% to $35.5 million in the first quarter of 2013, compared to $54.7 million in the fourth quarter of 2012; gross charge-offs declined 56% from the first quarter of 2012. Net loan and lease charge-offs decreased 5% in the first quarter of 2013, compared to the fourth quarter of 2012. Net charge-offs declined primarily in consumer home equity credit line and term commercial real estate loans.

Nonperforming lending-related assets declined 8% to $684 million at March 31, 2013 from $746 million at December 31, 2012. Nonaccrual loans declined 8% to $594 million at March 31, 2013 from $648 million at December 31, 2012. The ratio of nonperforming lending-related assets to loans and leases and other real estate owned decreased to 1.80% at March 31, 2013, compared to 1.96% at December 31, 2012.

Classified loans, excluding FDIC-supported loans, decreased approximately 2% to $1.74 billion at March 31, 2013, compared to $1.77 billion at December 31, 2012. Approximately 80% of classified loans were current as to principal and interest for the first quarter of 2013, compared to 79% for the fourth quarter of 2012, and 73% for the first quarter of 2012.

The provision (credit) for loan losses was $(29.0) million for the first quarter of 2013, compared to $(10.4) million for the fourth quarter of 2012. The decline in the provision was driven by the continued improvement in credit quality, including continued improvement in loss severity from classified loans. The allowance for credit losses was $0.9 billion, or 2.50% of loans and leases at March 31, 2013, compared to $1.0 billion, or 2.66% of loans and leases at December 31, 2012.

Conference Call

Zions will host a conference call to discuss these first quarter results at 5:30 p.m. ET this afternoon (April 22, 2013). 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 24666556, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at www.zionsbancorporation.com. A replay of the call will be available from approximately 7:30 p.m. ET on Monday, April 22, 2013, until midnight ET on Monday, April 29, 2013, by dialing 855-859-2056 (domestic and international) and entering the same passcode. 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 480 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 might cause such differences include, but are not limited to: the Company's ability to successfully execute its business plans and achieve its objectives; changes in general economic and financial market conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including changes in securities markets and valuations in structured securities and other assets; changes in governmental policies and programs resulting from general economic and financial market conditions; changes in interest and funding rates; continuing consolidation in the financial services industry; new private and governmental legal actions or changes in existing private and governmental legal actions; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company's operations or business (including The Dodd-Frank Wall Street Reform and Consumer Protection Act); and changes in accounting policies, procedures or determinations as may be required by the Financial Accounting Standards Board or other regulatory agencies.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Zions Bancorporation's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q 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)

March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012


March 31,
2012

PER COMMON SHARE










Dividends

$

0.01


$

0.01


$

0.01


$

0.01


$

0.01

Book value per common share 1

27.43


26.73


26.05


25.48


25.25

Tangible common equity per common share 1

21.67


20.95


20.24


19.65


19.39











SELECTED RATIOS










Return on average assets

0.83%


0.43%


0.82%


0.70%


0.69%

Return on average common equity

7.18%


2.91%


5.21%


4.71%


2.21%

Tangible return on average tangible common equity

9.37%


4.07%


7.02%


6.41%


3.18%

Net interest margin

3.44%


3.47%


3.58%


3.56%


3.69%











Capital Ratios










Tangible common equity ratio 1

7.53%


7.09%


7.17%


6.91%


6.89%

Tangible equity ratio 1

9.97%


9.15%


9.32%


10.35%


10.24%

Average equity to average assets

11.54%


11.03%


12.22%


12.37%


13.31%











Risk-Based Capital Ratios 1,2










Common equity Tier 1 capital

10.06%


9.80%


9.86%


9.78%


9.71%

Tier 1 leverage

11.56%


10.96%


11.05%


12.31%


12.17%

Tier 1 risk-based capital

14.04%


13.38%


13.49%


15.03%


14.83%

Total risk-based capital

15.72%


15.05%


15.25%


16.89%


16.76%











Taxable-equivalent net interest income

$

422,252


$

434,252


$

442,595


$

430,967


$

442,340











Weighted average common and common-equivalent shares outstanding

183,655,129


183,456,109


183,382,650


183,136,631


182,963,828

Common shares outstanding 1

184,246,471


184,199,198


184,156,402


184,117,522


184,228,178



At period end.

Ratios for March 31, 2013 are estimates.

 

CONSOLIDATED BALANCE SHEETS
















(In thousands, except share amounts)

March 31,
2013


December 31,
2012


September 30,
2012


June 30,
2012


March 31,
2012


(Unaudited)




(Unaudited)


(Unaudited)


(Unaudited)

ASSETS










Cash and due from banks

$

928,817


$

1,841,907


$

1,060,918


$

1,124,673


$

1,082,186

Money market investments:










Interest-bearing deposits

5,785,268


5,978,978


5,519,463


7,887,175


7,629,399

Federal funds sold and security resell agreements

2,340,177


2,775,354


1,960,294


83,529


52,634

Investment securities:










Held-to-maturity, at adjusted cost (approximate fair value $684,668, $674,741, $655,768, $715,710, and $728,479)

736,158


756,909


740,738


773,016


797,149

Available-for-sale, at fair value

3,287,844


3,091,310


3,127,192


3,167,590


3,223,086

Trading account, at fair value

28,301


28,290


13,963


20,539


19,033


4,052,303


3,876,509


3,881,893


3,961,145


4,039,268











Loans held for sale

161,559


251,651


220,240


139,245


184,579











Loans, net of unearned income and fees:










Loans and leases

37,284,694


37,137,006


36,674,288


36,319,596


35,998,928

FDIC-supported loans

477,725


528,241


588,566


642,246


687,126


37,762,419


37,665,247


37,262,854


36,961,842


36,686,054

Less allowance for loan losses

841,781


896,087


927,068


973,443


1,011,786

Loans, net of allowance

36,920,638


36,769,160


36,335,786


35,988,399


35,674,268











Other noninterest-bearing investments

855,388


855,462


874,903


867,882


875,037

Premises and equipment, net

706,746


708,882


709,188


714,913


715,815

Goodwill

1,014,129


1,014,129


1,015,129


1,015,129


1,015,129

Core deposit and other intangibles

47,000


50,818


55,034


59,277


63,538

Other real estate owned

89,904


98,151


118,190


144,816


158,592

Other assets

1,208,635


1,290,917


1,335,963


1,420,829


1,405,862


$

54,110,564


$

55,511,918


$

53,087,001


$

53,407,012


$

52,896,307











LIABILITIES AND SHAREHOLDERS' EQUITY










Deposits:










Noninterest-bearing demand

$

17,311,150


$

18,469,458


$

17,295,911


$

16,498,248


$

16,185,140

Interest-bearing:










Savings and money market

22,760,397


22,896,624


21,970,062


21,945,230


22,220,405

Time

2,889,903


2,962,931


3,107,815


3,211,942


3,326,717

Foreign

1,528,745


1,804,060


1,398,749


1,504,827


1,366,826


44,490,195


46,133,073


43,772,537


43,160,247


43,099,088











Securities sold, not yet purchased

1,662


26,735


21,708


104,882


47,404

Federal funds purchased and security repurchase agreements

325,107


320,478


451,214


759,591


486,808

Other short-term borrowings


5,409


6,608


7,621


19,839

Long-term debt

2,352,569


2,337,113


2,326,659


2,274,571


2,283,121

Reserve for unfunded lending commitments

100,455


106,809


105,850


103,586


98,718

Other liabilities

489,923


533,660


484,170


507,151


474,551

Total liabilities

47,759,911


49,463,277


47,168,746


46,917,649


46,509,529











Shareholders' equity:










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

1,301,289


1,128,302


1,123,377


1,800,473


1,737,633

Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 184,246,471, 184,199,198, 184,156,402, 184,117,522, and 184,228,178 shares

4,170,888


4,166,109


4,162,001


4,157,525


4,162,522

Retained earnings

1,290,131


1,203,815


1,170,477


1,110,120


1,060,525

Accumulated other comprehensive income (loss)

(406,903)


(446,157)


(534,738)


(576,147)


(571,567)

Controlling interest shareholders' equity

6,355,405


6,052,069


5,921,117


6,491,971


6,389,113

Noncontrolling interests

(4,752)


(3,428)


(2,862)


(2,608)


(2,335)

Total shareholders' equity

6,350,653


6,048,641


5,918,255


6,489,363


6,386,778


$

54,110,564


$

55,511,918


$

53,087,001


$

53,407,012


$

52,896,307