Zions Bancorporation Reports Earnings Of $1.12 Per Diluted Common Share For Third Quarter 2013


SALT LAKE CITY, Oct. 21, 2013 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported third quarter net earnings applicable to common shareholders of $209.7 million or $1.12 per diluted common share, compared to $55.4 million or $0.30 per diluted share for the second quarter of 2013, and $62.3 million or $0.34 per diluted share for the third quarter of 2012. In the third quarter, the Company redeemed the entire $800 million par amount of its Series C preferred stock that had a carrying value of $926 million, which increased net earnings applicable to common shareholders by $126 million after-tax, or $0.68 per diluted common share.


Third Quarter 2013 Highlights

  • The Company completed several debt and equity transactions this quarter that continued the Company's efforts to reduce its cost of capital and debt financing. The redemption of the Series C preferred stock, along with issuances this year of replacement preferred stock, will result in a net reduction in preferred stock dividends of approximately $26 million annually, or $0.14 per share. 
  • Credit quality showed continued improvement, with gross charge-offs and nonperforming lending-related assets declining 35% and 11%, respectively, compared to the prior quarter. This continued improvement resulted in a third quarter negative provision for loan losses of $6 million.
  • Loans and leases held for investment, excluding FDIC-supported loans, increased $142 million compared to the prior quarter to $37.9 billion at September 30, 2013. Average loans and leases, excluding FDIC-supported loans, increased $300 million.
  • Net interest income decreased primarily as a result of lower income from FDIC-supported loans.

"We are encouraged with the cumulative progress made in reducing the cost of our capital, and expect that this will contribute to future improvement in our return on equity," said Harris H. Simmons, chairman and chief executive officer. "Net loan growth, although not significantly different from the industry, was disappointing despite an increase in production volume and unfunded lending commitments over the prior quarter, as prepayment activity remained high. Nevertheless, the strength of our funding base continued to improve, with average noninterest-bearing deposits reaching 40% of average total deposits."

Loans

Loans and leases held for investment, excluding FDIC-supported loans, increased $142 million on a net basis from the prior quarter to $37.9 billion at September 30, 2013. The increases were predominantly in moderate duration 1-4 family residential loans (primarily in Texas, Utah, Nevada, and Colorado) and multi-family construction loans (primarily in Texas, California and Nevada). Commercial and industrial loans – a source of strong growth over the past several quarters – were relatively unchanged compared to the prior quarter. Decreases in term commercial real estate, commercial owner occupied, and commercial leasing, partially offset increases in other loan categories. Average loans and leases, excluding FDIC-supported loans, increased $300 million to $37.8 billion during the third quarter of 2013, compared to $37.5 billion during the second quarter of 2013. Unfunded lending commitments at September 30, 2013 increased by approximately $458 million during the third quarter of 2013 to a total of $16.7 billion, compared to a $606 million increase during the second quarter of 2013.

Deposits

Average total deposits for the third quarter of 2013 increased $0.6 billion, or 1%, to $45.6 billion, compared to $45.0 billion for the second quarter of 2013. This increase was driven by noninterest-bearing demand deposits, which increased $0.6 billion to an average of $18.2 billion in the third quarter from $17.6 billion in the second quarter. The ratio of average loans to average deposits was 84% for the third quarter, unchanged from the second quarter.

Debt and Shareholders' Equity

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

1. On August 2, 2013, the Company issued an additional $5.9 million of its Series A Non-Cumulative Perpetual Preferred Stock wherein dividends are payable quarterly at the greater of three-month LIBOR plus 0.52% or 4.0%. 

2. On August 13, 2013, the Company issued $195.2 million of its Series J Fixed/Floating Non-Cumulative Perpetual Preferred Stock. Dividends are payable semiannually at 7.20% to September 15, 2023, at which time the interest rate resets to three-month LIBOR plus 4.44%.

Net of commissions and fees, the proceeds from these preferred stock issuances added approximately $196 million to shareholders' equity and Tier 1 capital.   

3. On September 12, 2013, the Company issued $87.9 million of fixed/floating rate subordinated notes. Interest is payable quarterly at 6.95% to September 15, 2023, at which time it resets to three-month LIBOR plus 3.89%. Net proceeds were $85.9 million.

4. On September 15, 2013, the Company redeemed all of its outstanding $800 million par amount of 9.5% Series C preferred stock at 100% of the $25 per depositary share redemption amount. The weighted average dividend rate on all of the preferred stock issued in 2013 to fund this redemption was 6.23%. The redemption reduced preferred stock by its carrying value of $926 million, with the difference from the par amount, or $126 million, relating to the beneficial conversion feature. This beneficial conversion feature had been transferred over several quarters from common stock to preferred stock as holders of convertible subordinated debt exercised rights to convert to the Series C preferred stock. The total beneficial conversion feature of $203 million was included in common stock when the subordinated debt was modified in 2009 to convertible subordinated debt. The $126 million portion of the total redemption was recorded as a preferred stock redemption that increased net earnings applicable to common shareholders in the third quarter.

The estimated common equity Tier 1 capital ratio was 10.43% at September 30, 2013, compared to 10.03% at June 30, 2013.

Net Interest Income

Net interest income decreased to $416 million for the third quarter of 2013, compared to $431 million for the second quarter of 2013. The net interest margin decreased to 3.22% in the third quarter of 2013, compared to 3.44% in the second quarter of 2013. Net interest income was primarily impacted this quarter by lower income from FDIC-supported loans, which accounted for nearly 95% of the sequential quarterly decline. However, other factors included loan rates resetting at lower levels and lower yields on available-for-sale securities. Interest income from FDIC-supported loans is decreasing as the portfolio is liquidated.

Noninterest Income

Noninterest income for the third quarter of 2013 was $122 million, compared to $125 million for the second quarter of 2013. Loan sales and servicing income decreased primarily due to a lower volume of mortgage refinancing.

Other-than-temporary impairment ("OTTI") on collateralized debt obligation ("CDO") securities increased this quarter compared to the previous quarter.

CDO Investment Securities

During the third quarter of 2013, the Company recognized credit-related OTTI on CDOs of $9 million, compared to $4 million during the second quarter of 2013. The majority of the third quarter OTTI is attributable to the Company further increasing its assumed probabilities of default ("PDs") for bank holding company issuers of trust preferred securities that are still deferring and nearing the end of the allowed five-year deferral period.

The following table provides fair value and other information on the CDOs, stratified into performing tranches without credit impairment and nonperforming tranches at September 30, 2013:



September 30, 2013





(Amounts in millions)

No. of

tranches


Par
amount


Amortized

cost


Carrying

value


Net
unrealized
losses
recognized
in AOCI 1


Weighted
average
discount
rate 2


% of carrying value to par


Change

September 30,
 2013


June 30,
2013

Performing CDOs


















Predominantly bank CDOs

25


$

745


$

670


$

532


$

(138)


5.8%


71%


71%


—%

Insurance CDOs

22


437


434


327


(107)


8.0%


75%


75%


—%

Other CDOs

4


44


34


33


(1)


10.5%


75%


73%


2%

Total performing CDOs

51


1,226


1,138


892


(246)


6.8%


73%


73%


—%



















Nonperforming CDOs 3


















CDOs credit impaired prior to last 12 months

13


233


172


98


(74)


10.1%


42%


40%


2%

CDOs credit impaired during last 12 months

46


891


519


242


(277)


9.6%


27%


29%


(2)%

Total nonperforming CDOs

59


1,124


691


340


(351)


9.7%


30%


31%


(1)%



















Total CDOs

110


$

2,350


$

1,829


$

1,232


$

(597)


8.2%


52%


53%


(1)%



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 net unrealized pretax losses in accumulated other comprehensive income ("AOCI") were relatively unchanged from the previous quarter.


The following table shows the changes in fair value and other information on the CDOs from September 30, 2012 to September 30, 2013:























Change from September 30, 2012 to September 30, 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)


$

(142)


$

(122)


$

(105)


$

17


0.5%


(1)%

Insurance CDOs

1


(13)


(10)


5


15


(0.5)%


3%

Other CDOs

(3)


(35)


(34)


(29)


5


3.2%


(3)%

Total performing CDOs

(7)


(190)


(166)


(129)


37


0.3%


1%















Nonperforming CDOs














Deferring interest, but no credit impairment

(3)


(72)


(72)


(19)


53


(13.7)%


(26)%

Credit impairment prior to last 12 months

(19)


(360)


(265)


(30)


235


(3.4)%


20%

Credit impairment during last 12 months

23


447


244


179


(65)


(5.3)%


13%

Total nonperforming CDOs

1


15


(93)


130


223


(4.4)%


11%















Total CDOs

(6)


$

(175)


$

(259)


$

1


$

260


(1.6)%


3%

Noninterest Expense

Noninterest expense for the third quarter of 2013 was $371 million compared to $452 million for the second quarter of 2013. The decrease this quarter was due primarily to (1) the debt extinguishment cost of $40 million incurred in the second quarter, (2) the provision for unfunded lending commitments of $(19.9) million, or an increase to net income of $0.07 per share, compared to $3.6 million in the previous quarter, and (3) the amortization of the FDIC indemnification asset, included in other noninterest expense, of $13 million in the third quarter, compared to $22 million in the second quarter. The indemnification asset is being amortized due to the expiration of most FDIC indemnification agreements in the third quarter of 2014. The overall decrease in the provision for unfunded lending commitments resulted primarily from refinements in the process of estimating the rate at which such commitments are likely to convert into funded balances, and from ongoing improvements in credit quality; these factors were partially offset by a moderate increase in unfunded lending commitments.

Asset Quality

Gross loan and lease charge-offs decreased 35% to $23 million in the third quarter of 2013, compared to $35 million in the second quarter of 2013; gross charge-offs declined 61% from $59 million in the third quarter of 2012. Due to a smaller recovery on loans previously charged off, net loan and lease charge-offs increased $3 million to $9 million in the third quarter of 2013, compared to $6 million in the second quarter of 2013.

Nonperforming lending-related assets declined 11% to $538 million at September 30, 2013 from $602 million at June 30, 2013. Nonaccrual loans declined 9% to $472 million at September 30, 2013 from $521 million at June 30, 2013. The ratio of nonperforming lending-related assets to loans and leases and other real estate owned decreased to 1.40% at September 30, 2013, compared to 1.57% at June 30, 2013.

Classified loans, excluding FDIC-supported loans, decreased approximately 13% to $1.4 billion at September 30, 2013, compared to $1.6 billion at June 30, 2013. Approximately 66% of the decline was the result of refinements in the Company's risk grading methodology for certain smaller balance loans. Of the classified loans, 84% were current as to principal and interest for both the third and second quarters of 2013.

The negative provision for loan losses was $6 million for the third quarter of 2013, compared to a negative provision of $22 million for the second quarter of 2013. The negative provision continues to result from the improvement in credit quality. The allowance for credit losses was $882 million, or 2.30% of loans and leases at September 30, 2013, compared to $918 million, or 2.40% of loans and leases at June 30, 2013.

Conference Call

Zions will host a conference call to discuss these third quarter results at 5:30 p.m. ET this afternoon (October 21, 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 68098093, 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, 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)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

PER COMMON SHARE










Dividends

$

0.04


$

0.04


$

0.01


$

0.01


$

0.01

Book value per common share 1

28.87


27.82


27.43


26.73


26.05

Tangible common equity per common share 1

23.16


22.09


21.67


20.95


20.24











SELECTED RATIOS










Return on average assets

0.80%


0.61%


0.83%


0.43%


0.82%

Return on average common equity

16.03%


4.35%


7.18%


2.91%


5.21%

Tangible return on average tangible common equity

20.34%


5.73%


9.37%


4.07%


7.02%

Net interest margin

3.22%


3.44%


3.44%


3.47%


3.58%











Capital Ratios










Tangible common equity ratio 1

7.90%


7.57%


7.53%


7.09%


7.17%

Tangible equity ratio 1

9.75%


10.78%


9.97%


9.15%


9.32%

Average equity to average assets

12.39%


12.11%


11.54%


11.03%


12.22%











Risk-Based Capital Ratios 1,2










Common equity Tier 1 capital

10.43%


10.03%


10.07%


9.80%


9.86%

Tier 1 leverage

10.63%


11.75%


11.55%


10.96%


11.05%

Tier 1 risk-based capital

13.04%


14.30%


14.08%


13.38%


13.49%

Total risk-based capital

14.77%


15.94%


15.75%


15.05%


15.25%











Taxable-equivalent net interest income

$

419,236


$

434,579


$

422,252


$

434,252


$

442,595











Weighted average common and common-equivalent shares outstanding

184,742,414


184,061,623


183,655,129


183,456,109


183,382,650

Common shares outstanding 1

184,600,005


184,436,656


184,246,471


184,199,198


184,156,402



1 At period end.

2 Ratios for September 30, 2013 are estimates.

 



CONSOLIDATED BALANCE SHEETS
















(In thousands, except share amounts)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012


(Unaudited)


(Unaudited)


(Unaudited)




(Unaudited)

ASSETS










Cash and due from banks

$

1,365,082


$

1,183,097


$

928,817


$

1,841,907


$

1,060,918

Money market investments:










Interest-bearing deposits

8,180,639


8,180,010


5,785,268


5,978,978


5,519,463

Federal funds sold and security resell agreements

209,070


221,799


2,340,177


2,775,354


1,960,294

Investment securities:










Held-to-maturity, at adjusted cost (approximate fair value $727,908, $734,292, $684,668, $674,741, and $655,768)

777,849


783,371


736,158


756,909


740,738

Available-for-sale, at fair value

3,333,889


3,193,395


3,287,844


3,091,310


3,127,192

Trading account, at fair value

38,278


26,385


28,301


28,290


13,963


4,150,016


4,003,151


4,052,303


3,876,509


3,881,893











Loans held for sale

114,810


164,619


161,559


251,651


220,240











Loans, net of unearned income and fees:










Loans and leases

37,897,869


37,756,010


37,284,694


37,137,006


36,674,288

FDIC-supported loans

374,861


431,935


477,725


528,241


588,566


38,272,730


38,187,945


37,762,419


37,665,247


37,262,854

Less allowance for loan losses

797,523


813,912


841,781


896,087


927,068

    Loans, net of allowance

37,475,207


37,374,033


36,920,638


36,769,160


36,335,786











Other noninterest-bearing investments

851,349


852,939


855,388


855,462


874,903

Premises and equipment, net

720,365


717,299


706,746


708,882


709,188

Goodwill

1,014,129


1,014,129


1,014,129


1,014,129


1,015,129

Core deposit and other intangibles

39,667


43,239


47,000


50,818


55,034

Other real estate owned

66,381


80,789


89,904


98,151


118,190

Other assets

1,001,597


1,069,436


1,208,635


1,290,917


1,335,963


$

55,188,312


$

54,904,540


$

54,110,564


$

55,511,918


$

53,087,001











LIABILITIES AND SHAREHOLDERS' EQUITY










Deposits:










Noninterest-bearing demand

$

18,566,137


$

17,803,950


$

17,311,150


$

18,469,458


$

17,295,911

Interest-bearing:










    Savings and money market

22,806,132


22,887,404


22,760,397


22,896,624


21,970,062

    Time

2,689,688


2,810,431


2,889,903


2,962,931


3,107,815

    Foreign

1,607,409


1,514,270


1,528,745


1,804,060


1,398,749


45,669,366


45,016,055


44,490,195


46,133,073


43,772,537











Securities sold, not yet purchased

21,183


15,799


1,662


26,735


21,708

Federal funds purchased and security repurchase agreements

252,591


240,816


325,107


320,478


451,214

Other short-term borrowings




5,409


6,608

Long-term debt

2,304,301


2,173,176


2,352,569


2,337,113


2,326,659

Reserve for unfunded lending commitments

84,147


104,082


100,455


106,809


105,850

Other liabilities

523,915


494,280


489,923


533,660


484,170

Total liabilities

48,855,503


48,044,208


47,759,911


49,463,277


47,168,746











Shareholders' equity:










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

1,003,970


1,728,659


1,301,289


1,128,302


1,123,377

Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 184,600,005, 184,436,656, 184,246,471, 184,199,198, and 184,156,402 shares

4,172,887


4,167,828


4,170,888


4,166,109


4,162,001

Retained earnings

1,540,455


1,338,401


1,290,131


1,203,815


1,170,477

Accumulated other comprehensive income (loss)

(384,503)


(374,556)


(406,903)


(446,157)


(534,738)

    Controlling interest shareholders' equity

6,332,809


6,860,332


6,355,405


6,052,069


5,921,117

Noncontrolling interests



(4,752)


(3,428)


(2,862)

    Total shareholders' equity

6,332,809


6,860,332


6,350,653


6,048,641


5,918,255


$

55,188,312


$

54,904,540


$

54,110,564


$

55,511,918


$

53,087,001

 



CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

















Three Months Ended

(In thousands, except per share amounts)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Interest income:










Interest and fees on loans

$

442,366


$

460,308


$

453,433


$

462,002


$

473,162

Interest on money market investments

6,175


5,764


5,439


6,004


5,349

Interest on securities:










    Held-to-maturity

7,739


7,846


7,974


8,130


8,337

    Available-for-sale

16,917


19,028


17,712


21,971


22,042

    Trading account

210


287


190


150


110

        Total interest income

473,407


493,233


484,748


498,257


509,000











Interest expense:










Interest on deposits

14,506


15,143


15,642


16,861


19,049

Interest on short-term borrowings

71


78


92


178


193

Interest on long-term debt

43,309


47,355


50,899


51,261


51,597

    Total interest expense

57,886


62,576


66,633


68,300


70,839











    Net interest income

415,521


430,657


418,115


429,957


438,161

Provision for loan losses

(5,573)


(21,990)


(29,035)


(10,401)


(1,889)

    Net interest income after provision for loan losses

421,094


452,647


447,150


440,358


440,050











Noninterest income:










Service charges and fees on deposit accounts

44,701


44,329


43,580


44,492


44,951

Other service charges, commissions and fees

45,977


45,888


42,731


46,497


44,679

Trust and wealth management income

7,120


7,732


6,994


7,450


6,521

Capital markets and foreign exchange

7,309


6,740


7,486


7,708


6,026

Dividends and other investment income

12,101


11,339


12,724


13,117


11,686

Loan sales and servicing income

8,464


10,723


10,951


10,595


10,695

Fair value and nonhedge derivative loss

(4,403)


(2,957)


(5,445)


(4,778)


(5,820)

Equity securities gains (losses), net

3,165


2,209


2,832


(682)


2,683

Fixed income securities gains (losses), net

1,580


(1,153)


3,299


10,259


3,046

Impairment losses on investment securities:










    Impairment losses on investment securities

(10,016)


(4,910)


(31,493)


(120,082)


(3,876)

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

949


693


21,376


36,274


1,140

    Net impairment losses on investment securities

(9,067)


(4,217)


(10,117)


(83,808)


(2,736)

Other

5,243


4,515


6,184


3,309


3,495

        Total noninterest income

122,190


125,148


121,219


54,159


125,226











Noninterest expense:










Salaries and employee benefits

229,185


227,328


229,789


220,039


220,223

Occupancy, net

28,230


27,951


27,389


28,226


28,601

Equipment, software and furniture

26,560


26,545


26,074


27,774


27,122

Other real estate expense

(831)


1,590


1,977


5,266


207

Credit related expense

7,265


9,397


10,482


11,302


13,316

Provision for unfunded lending commitments

(19,935)


3,627


(6,354)


959


2,264

Professional and legal services

16,462


17,149


10,471


15,717


12,749

Advertising

6,091


5,807


5,893


5,969


7,326

FDIC premiums

9,395


10,124


9,711


10,760


11,278

Amortization of core deposit and other intangibles

3,570


3,762


3,819


4,216


4,241

Debt extinguishment cost


40,282




Other

64,671


78,116


78,097


76,786


67,648

    Total noninterest expense

370,663


451,678


397,348


407,014


394,975











    Income before income taxes

172,621


126,117


171,021


87,503


170,301

Income taxes

61,107


43,091


60,634


29,817


60,704

    Net income

111,514


83,026


110,387


57,686


109,597

Net loss applicable to noncontrolling interests



(336)


(566)


(254)

    Net income applicable to controlling interest

111,514


83,026


110,723


58,252


109,851

Preferred stock dividends

(27,507)


(27,641)


(22,399)


(22,647)


(47,529)

Preferred stock redemption

125,700





    Net earnings applicable to common shareholders

$

209,707


$

55,385


$

88,324


$

35,605


$

62,322











Weighted average common shares outstanding during the period:









Basic shares

184,112


183,647


183.396


183,300


183,237

Diluted shares

184,742


184,062


183,655


183,456


183,383











Net earnings per common share:










Basic

$

1.13


$

0.30


$

0.48


$

0.19


$

0.34

Diluted

1.12


0.30


0.48


0.19


0.34

 


Loan Balances by Portfolio Type

(Unaudited)





















(In millions)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Commercial:















Commercial and industrial


$

11,904



$

11,899



$

11,504



$

11,257



$

10,840

Leasing


375



388



390



423



405

Owner occupied


7,379



7,394



7,501



7,589



7,669

Municipal


449



454



484



494



469

    Total commercial


20,107



20,135



19,879



19,763



19,383
















Commercial real estate:















Construction and land development


2,240



2,191



2,039



1,939



1,956

Term


7,929



7,971



8,012



8,063



8,140

    Total commercial real estate


10,169



10,162



10,051



10,002



10,096
















Consumer:















Home equity credit line


2,124



2,124



2,125



2,178



2,175

1-4 family residential


4,637



4,486



4,408



4,350



4,181

Construction and other consumer real estate


321



322



320



321



320

Bankcard and other revolving plans


332



315



293



307



295

Other


208



212



208



216



224

    Total consumer


7,622



7,459



7,354



7,372



7,195
















FDIC-supported loans 1


375



432



478



528



589

    Total loans


$

38,273



$

38,188



$

37,762



$

37,665



$

37,263


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)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Balance sheet:






























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















FDIC-supported loans


$

15,018



$

28,424



$

18,977



$

12,970



$

17,594

FDIC indemnification asset (included in other assets)


(12,965)



(21,845)



(20,288)



(10,610)



(14,401)
















Balance at end of period:















FDIC-supported loans


374,861



431,935



477,725



528,241



588,566

FDIC indemnification asset (included in other assets)


41,771



51,297



71,100



90,074



100,004

















Three Months Ended

(In thousands)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Statement of income:






























Interest income:















Interest and fees on loans


$

15,018



$

28,424



$

18,977



$

12,970



$

17,594
















Noninterest expense:















Other noninterest expense


12,965



21,845



20,288



10,610



14,401

    Net increase (decrease) in pretax income


$

2,053



$

6,579



$

(1,311)



$

2,360



$

3,193

 





Nonperforming Lending-Related Assets

(Unaudited)
















(Amounts in thousands)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012











Nonaccrual loans

$

466,795


$

515,708


$

589,221


$

630,810


$

699,952

Other real estate owned

58,295


70,031


80,701


90,269


106,356

Nonperforming lending-related assets, excluding FDIC-supported assets

525,090


585,739


669,922


721,079


806,308











FDIC-supported nonaccrual loans

4,744


5,256


4,927


17,343


19,454

FDIC-supported other real estate owned

8,086


10,758


9,203


7,882


11,834

FDIC-supported nonperforming assets

12,830


16,014


14,130


25,225


31,288

Total nonperforming lending-related assets

$

537,920


$

601,753


$

684,052


$

746,304


$

837,596











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

1.40%


1.57%


1.80%


1.96%


2.23%











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

$

9,398


$

10,685


$

12,708


$

9,730


$

14,508

Accruing FDIC-supported loans past due 90 days or more

22,450


33,410


47,208


52,033


60,913

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

0.08%


0.11%


0.16%


0.16%


0.20%











Nonaccrual loans and accruing loans past due 90 days or more

$

503,387


$

565,059


$

654,064


$

709,916


$

794,827

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

1.31%


1.47%


1.72%


1.87%


2.12%











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

$

85,128


$

103,075


$

155,896


$

185,422


$

143,539

Accruing FDIC-supported loans past due 30 - 89 days

10,983


6,522


11,571


11,924


15,462











Restructured loans included in nonaccrual loans

166,573


162,496


193,975


215,476


207,088

Restructured loans on accrual

384,793


385,428


416,181


407,026


421,055











Classified loans, excluding FDIC-supported loans

1,432,806


1,639,206


1,737,178


1,767,460


1,810,099



1 Includes loans held for sale.

 






Allowance for Credit Losses

(Unaudited)
















Three Months Ended

(Amounts in thousands)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Allowance for Loan Losses










Balance at beginning of period

$

813,912


$

841,781


$

896,087


$

927,068


$

973,443

Add:










Provision for losses

(5,573)


(21,990)


(29,035)


(10,401)


(1,889)

Adjustment for FDIC-supported loans

(2,118)


(209)


(7,429)


(1,721)


(5,908)

Deduct:










Gross loan and lease charge-offs

(22,826)


(35,099)


(35,467)


(54,709)


(58,781)

Recoveries

14,128


29,429


17,625


35,850


20,203

    Net loan and lease charge-offs

(8,698)


(5,670)


(17,842)


(18,859)


(38,578)

Balance at end of period

$

797,523


$

813,912


$

841,781


$

896,087


$

927,068











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

2.08%


2.13%


2.23%


2.38%


2.49%











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

169.13%


156.23%


141.68%


138.25%


128.87%











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

0.09%


0.06%


0.19%


0.20%


0.41%











Reserve for Unfunded Lending Commitments










Balance at beginning of period

$

104,082


$

100,455


$

106,809


$

105,850


$

103,586

Provision charged (credited) to earnings

(19,935)


3,627


(6,354)


959


2,264

Balance at end of period

$

84,147


$

104,082


$

100,455


$

106,809


$

105,850











Total Allowance for Credit Losses










Allowance for loan losses

$

797,523


$

813,912


$

841,781


$

896,087


$

927,068

Reserve for unfunded lending commitments

84,147


104,082


100,455


106,809


105,850

Total allowance for credit losses

$

881,670


$

917,994


$

942,236


$

1,002,896


$

1,032,918











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

2.30%


2.40%


2.50%


2.66%


2.77%

 


Nonaccrual Loans by Portfolio Type
(Excluding FDIC-Supported Loans)

(Unaudited)





















(In millions)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012
















Commercial:















Commercial and industrial


$

100



$

94



$

100



$

91



$

103

Leasing


1



1



1



1



1

Owner occupied


158



186



195



206



223

Municipal


10



9



9



9



6

    Total commercial


269



290



305



307



333
















Commercial real estate:















Construction and land development


65



70



93



108



125

Term


61



71



102



125



155

    Total commercial real estate


126



141



195



233



280
















Consumer:















Home equity credit line


8



11



12



14



12

1-4 family residential


58



66



71



70



66

Construction and other consumer real estate


4



5



4



5



6

Bankcard and other revolving plans


1



2



1



1



1

Other


1



1



1



1



2

    Total consumer


72



85



89



91



87

    Total nonaccrual loans


$

467



$

516



$

589



$

631



$

700



Net Charge-Offs by Portfolio Type
(Unaudited)





















(In millions)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Commercial:















Commercial and industrial


$

2



$

2



$

5



$

(1)



$

3

Leasing








2



Owner occupied


2



3



5



7



10

Municipal










    Total commercial


4



5



10



8



13
















Commercial real estate:















Construction and land development


(1)



(3)



(3)



(7)



Term


3



(2)



5



7



16

    Total commercial real estate


2



(5)



2





16
















Consumer:















Home equity credit line


1



2



2



6



2

1-4 family residential


1



3



3



4



4

Construction and other consumer real estate




1



(1)





1

Bankcard and other revolving plans


1





2



1



2

Other










    Total consumer loans


3



6



6



11



9

    Total net charge-offs


$

9



$

6



$

18



$

19



$

38

 



CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)

















Three Months Ended


September 30, 2013


June 30, 2013


March 31, 2013

(In thousands)

Average
balance


Average

rate


Average
balance


Average

rate


Average
balance


Average

rate

ASSETS












Money market investments

$

9,454,131


0.26%


$

8,652,403


0.27%


$

8,111,798


0.27%

Securities:












Held-to-maturity

778,268


4.73%


740,839


5.07%


756,739


5.11%

Available-for-sale

3,071,039


2.22%


3,090,910


2.50%


3,035,592


2.41%

Trading account

25,959


3.21%


36,296


3.17%


22,620


3.41%

    Total securities

3,875,266


2.73%


3,868,045


3.00%


3,814,951


2.95%













Loans held for sale

131,652


3.70%


141,313


3.47%


204,597


3.50%













Loans 1:












Loans and leases

37,818,273


4.43%


37,518,549


4.55%


37,099,182


4.67%

FDIC-supported loans

405,316


20.52%


452,849


31.22%


498,654


21.43%

    Total loans

38,223,589


4.60%


37,971,398


4.87%


37,597,836


4.90%

Total interest-earning assets

51,684,638


3.66%


50,633,159


3.94%


49,729,182


3.99%

Cash and due from banks

976,159




1,000,221




1,063,314



Allowance for loan losses

(810,290)




(837,651)




(884,363)



Goodwill

1,014,129




1,014,129




1,014,129



Core deposit and other intangibles

41,751




45,262




49,069



Other assets

2,608,252




2,808,640




2,889,354



    Total assets

$

55,514,639




$

54,663,760




$

53,860,685















LIABILITIES












Interest-bearing deposits:












Savings and money market

$

22,982,998


0.17%


$

22,871,040


0.18%


$

22,735,258


0.19%

Time

2,749,985


0.56%


2,842,322


0.59%


2,935,316


0.62%

Foreign

1,675,256


0.20%


1,642,381


0.20%


1,528,665


0.20%

    Total interest-bearing deposits

27,408,239


0.21%


27,355,743


0.22%


27,199,239


0.23%

Borrowed funds:












Securities sold, not yet purchased

2,853


—%


4,076


—%


494


—%

Federal funds purchased and security repurchase agreements

257,891


0.11%


283,690


0.11%


289,918


0.10%

Other short-term borrowings


—%



—%


3,837


2.01%

Long-term debt

2,198,752


7.81%


2,214,215


8.58%


2,331,314


8.85%

    Total borrowed funds

2,459,496


7.00%


2,501,981


7.60%


2,625,563


7.88%

Total interest-bearing liabilities

29,867,735


0.77%


29,857,724


0.84%


29,824,802


0.91%

Noninterest-bearing deposits

18,179,584




17,629,219




17,211,214



Other liabilities

591,735




559,219




608,206



    Total liabilities

48,639,054




48,046,162




47,644,222



Shareholders' equity:












Preferred equity

1,685,512




1,518,823




1,229,708



Common equity

5,190,073




5,102,082




4,990,317



    Controlling interest shareholders' equity

6,875,585




6,620,905




6,220,025



Noncontrolling interests




(3,307)




(3,562)



    Total shareholders' equity

6,875,585




6,617,598




6,216,463



    Total liabilities and shareholders' equity

$

55,514,639




$

54,663,760




$

53,860,685















Spread on average interest-bearing funds



2.89%




3.10%




3.08%













Net yield on interest-earning assets



3.22%




3.44%




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)

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012











Net earnings applicable to common shareholders (GAAP)

$

209,707


$

55,385


$

88,324


$

35,605


$

62,322











Adjustments, net of tax:










Impairment loss on goodwill




583


Amortization of core deposit and other intangibles

2,268


2,391


2,425


2,677


2,692

Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a)

$

211,975


$

57,776


$

90,749


$

38,865


$

65,014











Average common equity (GAAP)

$

5,190,073


$

5,102,082


$

4,990,317


$

4,862,972


$

4,758,858

Average goodwill

(1,014,129)


(1,014,129)


(1,014,129)


(1,014,986)


(1,015,129)

Average core deposit and other intangibles

(41,751)


(45,262)


(49,069)


(53,083)


(57,345)

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

$

4,134,193


$

4,042,691


$

3,927,119


$

3,794,903


$

3,686,384











Number of days in quarter (c)

92


91


90


92


92

Number of days in year (d)

365


365


365


366


366











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

20.34%


5.73%


9.37%


4.07%


7.02%

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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