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

Oct 21, 2013, 16:10 ET from Zions Bancorporation


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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