Zions Bancorporation Reports 2010 Second Quarter Results
SALT LAKE CITY, July 19 /PRNewswire-FirstCall/ -- Zions Bancorporation (Nasdaq: ZION) ("Zions" or "the Company") today reported a second quarter net loss applicable to common shareholders of $135.2 million or $0.84 per diluted share, compared to a net loss of $86.5 million or $0.57 per diluted share for the first quarter of 2010.
Second Quarter 2010 Highlights
- Nonperforming lending-related assets were $2.55 billion compared to $2.79 billion in the first quarter. Delinquent loans declined to $482.1 million from $600.6 million in the first quarter.
- The provision for loan losses fell for the fourth consecutive quarter to $228.7 million compared to $265.6 million in the first quarter, while reserve coverage measures remained stable.
- Average noninterest-bearing demand deposits increased to $13.3 billion from $12.5 billion in the first quarter.
- While the net interest margin declined to 3.58% from 4.03% in the first quarter, primarily due to the effects of a subordinated debt conversion, the core net interest margin, which excludes subordinated debt conversions, remained strong at 4.14% compared to 4.26% in the first quarter.
- The tangible common equity ratio increased to 6.86% compared to 6.30% in the first quarter, despite a larger balance sheet. Approximately 11.6% of tangible assets are in cash or cash equivalents, up from 8.8% in the first quarter.
- Credit-related impairment losses on CDO securities fell to $18.1 million compared to $31.3 million in the first quarter.
- In spite of originating and renewing approximately $1.8 billion of new credit during the second quarter, an approximate 30% increase compared to the first quarter, loan balances declined 2.5% from the first quarter due to continued weakness in loan demand.
"We are encouraged with the decline in nonperforming lending-related assets, as well as an improvement in other problem credits; notably, more than 80% of the improvement in nonaccrual loans occurred in construction and term commercial real estate," said Harris H. Simmons, chairman and chief executive officer. Mr. Simmons continued, "Additionally, the capital raises completed during the quarter brought total capital ratios to record high levels."
Asset Quality
Nonperforming lending-related assets declined 8.5% to $2,547.4 million at June 30, 2010 from $2,785.4 million at March 31, 2010. Nonaccrual loans declined 10.0% to $2,134.1 million at June 30, 2010 from $2,371.2 million at March 31, 2010. Delinquent loans (accruing loans past due 30-89 days and 90 days or more) declined 19.7% to $482.1 million at June 30, 2010 from $600.6 million at March 31, 2010. The ratio of nonperforming lending-related assets to net loans and leases and other real estate owned was 6.59% at June 30, 2010 compared to 7.03% at March 31, 2010. The preceding amounts and comparisons include FDIC-supported assets.
The provision for loan losses was $228.7 million for the second quarter of 2010 compared to $265.6 million for the first quarter of 2010.
The allowance for loan losses as a percentage of net loans and leases increased to 4.11% at June 30, 2010 compared to 4.05% at March 31, 2010. The allowance for credit losses was $1,660.5 million, or 4.37% of net loans and leases at June 30, 2010, compared to 4.30% at March 31, 2010.
Net loan and lease charge-offs for the second quarter of 2010 were $255.2 million or 2.64% annualized of average loans, compared to $227.1 million or 2.29% annualized of average loans for the first quarter of 2010.
Capital Transactions
During the second quarter of 2010, the Company increased its Tier 1 capital by taking the following capital actions:
Issuance | |||
(In millions) | amount | ||
1. Common stock equity distribution issuances | $ 287.5 | ||
2. Series E perpetual preferred stock | 142.5 | ||
3. Common stock warrants | 185.0 | ||
Total capital raised | $ 615.0 | ||
- Common stock equity distribution issuances: The Company completed the sale of 12,295,917 shares of common stock for $287.5 million (average price of $23.38) that commenced May 24, 2010.
- Series E perpetual preferred stock (NYSE: ZBPRE): The Company sold a total of 5,700,000 depositary shares (each share representing a 1/40th ownership interest in a share of Series E Fixed-Rate Resettable Non-Cumulative Perpetual Preferred Stock) at an offering price of $25 per depositary share with an initial dividend rate of 11%.
- Common stock warrants (Nasdaq Global Select Market: ZIONW): The Company sold 22,281,640 warrants at an offering price of $8.3028 per warrant.
On May 17, 2010, $116.6 million of convertible subordinated debt was converted into 116,624 shares of the Company's Series C preferred stock. Accelerated discount amortization on the converted debt increased interest expense by a pretax amount of approximately $60.5 million.
On June 25, 2010, $8.6 million of Series A preferred stock was exchanged for 224,903 shares of the Company's common stock at the fair value on that date of $23.82 per share. This preferred stock redemption increased retained earnings by approximately $3.1 million.
The tangible common equity ratio was 6.86% at June 30, 2010 compared to 6.30% at March 31, 2010. The change from March 31, 2010 was primarily due to the previously discussed capital transactions, partially offset by operating results and preferred stock dividends during the second quarter. The estimated Tier 1 common to risk-weighted assets ratio was 7.91% at June 30, 2010 compared to 7.14% at March 31, 2010. The more significant improvement in risk-based capital ratios compared to the tangible common equity ratio is due to a significantly higher mix of cash on the balance sheet, which was 11.6% of tangible assets at June 30, 2010 compared to 8.8% at March 31, 2010.
Loans
Net loans and leases of $38.0 billion at June 30, 2010 decreased approximately $1.0 billion or 2.5% from $39.0 billion at March 31, 2010. Excluding construction and land development loans, the decrease was approximately $0.4 billion or 1.2% from March 31, 2010.
Deposits
Average noninterest-bearing demand deposits for the second quarter of 2010 increased $0.8 billion or 6.2% to $13.3 billion compared to $12.5 billion for the first quarter of 2010. Average total deposits for the second quarter of 2010 increased $0.4 billion or 0.9% to $42.2 billion compared to $41.8 billion for the first quarter of 2010. Gross loans were 90.8% of total deposits at June 30, 2010, compared to 93.0% at March 31, 2010.
Net Interest Income
The net interest margin decreased to 3.58% for the second quarter of 2010 compared to 4.03% for the first quarter of 2010. The net interest margin was reduced by 12 bp for the discount amortization on the convertible subordinated debt, and by an additional 52 bp for the accelerated discount amortization due to the previously discussed conversion of $116.6 million of convertible subordinated debt. The net interest margin was increased by 8 bp due to the recognition in interest income of the accretion on acquired loans based on increased projected cash flows. The core net interest margin, adjusted for the above items in both the first and second quarters, was 4.14% in the second quarter compared to 4.26% in the first quarter (see the subsequent GAAP to Non-GAAP reconciliation in this press release). The net decline in the core net interest margin from the first quarter was primarily due to higher cash balances.
Investment Securities
During the second quarter of 2010, the Company recognized credit-related net impairment losses on collateralized debt obligations ("CDOs") of $18.1 million or $0.07 per diluted share, compared to $31.3 million or $0.13 per diluted share during the first quarter of 2010.
CDOs for which the underlying collateral is predominantly bank trust preferred securities comprised $2.2 billion of the $2.7 billion par amount of the bank and insurance CDO portfolio at June 30, 2010. The following table shows the decrease in carrying value at June 30, 2010 of original single A and BBB rated CDOs compared to March 31, 2010. Approximately 90% of the $18.1 million of credit-related net impairment losses during the second quarter came from original single A and BBB rated CDOs.
(In millions) | ||||||||||||||||||||
June 30, 2010 | % of carrying | Change | ||||||||||||||||||
Original | Par | Amortized cost | Carrying value | value to par | 6/30/10 | |||||||||||||||
Ratings | Amount | % | Amount | % | Amount | % | 6/30/10 | 3/31/10 | vs 3/31/10 | |||||||||||
AAA | $ 1,131 | 52% | $ 939 | 54% | $ 816 | 73% | 72% | 72% | 0% | |||||||||||
A | 949 | 44% | 772 | 44% | 297 | 26% | 31% | 35% | -4% | |||||||||||
BBB | 90 | 4% | 34 | 2% | 13 | 1% | 14% | 17% | -3% | |||||||||||
$ 2,170 | 100% | $ 1,745 | 100% | $ 1,126 | 100% | 52% | 54% | -2% | ||||||||||||
Noninterest Income and Noninterest Expense
Noninterest income for the second quarter of 2010 was $109.4 million compared to $107.6 million for the first quarter of 2010. Noninterest expense for the second quarter of 2010 was $430.4 million compared to $389.1 million for the first quarter of 2010. The increase in noninterest expense during the second quarter of 2010 primarily resulted from (1) a $9.8 million increase in other real estate expense; (2) a $9.0 million increase in other noninterest expense from a reduction to the FDIC indemnification asset resulting from improvements in projected cash flows on acquired loans, and from other adjustments; and (3) the change in the provision for unfunded lending commitments to $0.5 million in the second quarter compared to a negative provision of $20.1 million in the first quarter. Excluding the effects of the reduction to the indemnification asset and the provision for unfunded lending commitments, noninterest expense increased by $11.6 million during the second quarter of 2010, most of which is explained by the increase in other real estate expense.
Conference Call
Zions will host a conference call to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 19, 2010). Media representatives, analysts and the public are invited to listen to this discussion by calling 1-877-368-2147 (international: 253-237-1247) and entering the passcode 84044344, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation Web site at www.zionsbancorporation.com. A replay of the call will be available from approximately 7:30 p.m. ET on Monday, July 19, 2010, until midnight ET on Monday, July 26, 2010, by dialing 1-800-642-1687 (international: 706-645-9291) and entering the passcode 84044344. 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 high growth markets. Zions operates its banking businesses under local management teams and community identities through approximately 500 offices in ten 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. 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 litigation or changes in existing litigation; 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.
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
(In thousands, except per share and ratio data) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||
PER COMMON SHARE | ||||||||||
Dividends | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.04 | |||||
Book value per common share | 26.63 | 26.89 | 27.85 | 30.38 | 33.89 | |||||
Tangible common equity per common share | 20.19 | 19.89 | 20.35 | 22.01 | 24.78 | |||||
SELECTED RATIOS | ||||||||||
Return on average assets | (0.87)% | (0.47)% | (1.37)% | (1.15)% | (0.38)% | |||||
Return on average common equity | (12.41)% | (8.30)% | (16.80)% | (16.74)% | (2.37)% | |||||
Efficiency ratio | 81.45 % | 68.44 % | 83.47 % | 58.05 % | 37.72 % | |||||
Net interest margin | 3.58 % | 4.03 % | 3.81 % | 3.91 % | 4.10 % | |||||
Capital Ratios | ||||||||||
Tangible common equity ratio | 6.86% | 6.30% | 6.12% | 5.76% | 6.00% | |||||
Tangible equity ratio | 10.40% | 9.36% | 9.16% | 8.73% | 8.94% | |||||
Average equity to average assets | 11.59% | 11.16% | 10.76% | 10.94% | 10.41% | |||||
Risk-Based Capital Ratios (1): | ||||||||||
Tier 1 common to risk-weighted assets | 7.91% | 7.14% | 6.73% | 6.59% | 6.41% | |||||
Tier 1 leverage | 11.91% | 10.77% | 10.38% | 10.40% | 10.22% | |||||
Tier 1 risk-based capital | 12.64% | 11.19% | 10.53% | 10.34% | 10.00% | |||||
Total risk-based capital | 15.22% | 13.93% | 13.28% | 13.08% | 12.72% | |||||
Taxable-equivalent net interest income | $ 418,951 | $ 460,979 | $ 462,608 | $ 478,135 | $ 499,432 | |||||
Weighted average common and common- | ||||||||||
equivalent shares outstanding | 161,810,017 | 151,073,384 | 139,858,788 | 127,581,404 | 115,908,127 | |||||
Common shares outstanding | 173,331,281 | 160,300,162 | 150,425,070 | 136,398,089 | 125,095,328 | |||||
(1) Ratios for June 30, 2010 are estimates. | ||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | ||||||
(In thousands, except share amounts) | 2010 | 2010 | 2009 | 2009 | 2009 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
ASSETS | ||||||||||
Cash and due from banks | $ 1,068,755 | $ 1,045,391 | $ 1,370,189 | $ 992,940 | $ 1,229,205 | |||||
Money market investments: | ||||||||||
Interest-bearing deposits | 4,861,871 | 3,410,211 | 652,964 | 2,234,337 | 1,005,060 | |||||
Federal funds sold | 44,720 | 44,436 | 20,985 | 44,056 | 390,619 | |||||
Security resell agreements | 58,954 | 73,112 | 57,556 | 52,539 | 57,476 | |||||
Investment securities: | ||||||||||
Held-to-maturity, at adjusted cost (approximate fair value | ||||||||||
$766,824, $820,689, $833,455, $835,814, and $891,186) | 817,060 | 867,335 | 869,595 | 877,105 | 937,942 | |||||
Available-for-sale, at fair value | 3,416,448 | 3,437,098 | 3,655,619 | 3,547,092 | 3,903,895 | |||||
Trading account, at fair value | 85,707 | 50,698 | 23,543 | 76,709 | 78,608 | |||||
4,319,215 | 4,355,131 | 4,548,757 | 4,500,906 | 4,920,445 | ||||||
Loans held for sale | 189,376 | 171,892 | 208,567 | 206,387 | 251,526 | |||||
Loans: | ||||||||||
Loans and leases excluding FDIC-supported loans | 36,956,067 | 37,820,588 | 38,882,083 | 39,782,240 | 40,654,802 | |||||
FDIC-supported loans | 1,208,362 | 1,320,737 | 1,444,594 | 1,607,493 | 783,238 | |||||
38,164,429 | 39,141,325 | 40,326,677 | 41,389,733 | 41,438,040 | ||||||
Less: | ||||||||||
Unearned income and fees, net of related costs | 125,945 | 131,723 | 137,697 | 134,629 | 130,042 | |||||
Allowance for loan losses | 1,563,753 | 1,581,577 | 1,531,332 | 1,432,715 | 1,248,055 | |||||
Loans and leases, net of allowance | 36,474,731 | 37,428,025 | 38,657,648 | 39,822,389 | 40,059,943 | |||||
Other noninterest-bearing investments | 858,602 | 909,601 | 1,099,961 | 1,061,464 | 1,046,131 | |||||
Premises and equipment, net | 705,372 | 707,387 | 710,534 | 698,225 | 703,613 | |||||
Goodwill | 1,015,161 | 1,015,161 | 1,015,161 | 1,017,385 | 1,017,385 | |||||
Core deposit and other intangibles | 100,425 | 106,839 | 113,416 | 123,551 | 121,675 | |||||
Other real estate owned | 413,336 | 414,237 | 389,782 | 413,901 | 304,778 | |||||
Other assets | 2,036,777 | 2,031,558 | 2,277,487 | 2,130,070 | 1,660,098 | |||||
$ 52,147,295 | $ 51,712,981 | $ 51,123,007 | $ 53,298,150 | $ 52,767,954 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
Deposits: | ||||||||||
Noninterest-bearing demand | $ 14,071,456 | $ 12,799,002 | $ 12,324,247 | $ 11,453,247 | $ 11,142,017 | |||||
Interest-bearing: | ||||||||||
Savings and NOW | 6,030,986 | 5,978,536 | 5,843,573 | 5,392,096 | 4,949,711 | |||||
Money market | 15,562,664 | 16,667,011 | 16,378,874 | 17,413,735 | 17,276,743 | |||||
Time under $100,000 | 2,155,366 | 2,306,101 | 2,497,395 | 2,784,593 | 2,845,893 | |||||
Time $100,000 and over | 2,509,479 | 2,697,261 | 3,117,472 | 3,949,684 | 4,455,225 | |||||
Foreign | 1,683,925 | 1,647,898 | 1,679,028 | 2,014,626 | 1,974,583 | |||||
42,013,876 | 42,095,809 | 41,840,589 | 43,007,981 | 42,644,172 | ||||||
Securities sold, not yet purchased | 81,511 | 47,890 | 43,404 | 39,360 | 51,109 | |||||
Federal funds purchased | 391,213 | 477,959 | 208,669 | 1,008,181 | 1,169,809 | |||||
Security repurchase agreements | 500,812 | 475,832 | 577,346 | 509,014 | 565,975 | |||||
Other liabilities | 585,782 | 563,683 | 588,527 | 651,139 | 597,543 | |||||
Commercial paper | 1,149 | 3,123 | 1,084 | 2,449 | 1,019 | |||||
Federal Home Loan Bank advances and other borrowings: | ||||||||||
One year or less | 217,440 | 175,312 | 120,189 | 42,962 | 47,152 | |||||
Over one year | 15,558 | 15,640 | 15,722 | 18,803 | 18,882 | |||||
Long-term debt | 1,918,852 | 2,000,821 | 2,017,220 | 2,324,020 | 1,917,598 | |||||
Total liabilities | 45,726,193 | 45,856,069 | 45,412,750 | 47,603,909 | 47,013,259 | |||||
Shareholders’ equity: | ||||||||||
Preferred stock, without par value, authorized 4,400,000 shares | 1,806,877 | 1,532,323 | 1,502,784 | 1,529,462 | 1,491,730 | |||||
Common stock, without par value; authorized 350,000,000 | ||||||||||
shares; issued and outstanding 173,331,281, 160,300,162, | ||||||||||
150,425,070, 136,398,089, and 125,095,328 shares | 3,964,140 | 3,517,621 | 3,318,417 | 3,125,344 | 2,935,724 | |||||
Retained earnings | 1,099,621 | 1,236,497 | 1,324,516 | 1,502,232 | 1,685,522 | |||||
Accumulated other comprehensive income (loss) | (433,020) | (428,177) | (436,899) | (469,112) | (368,164) | |||||
Deferred compensation | (15,776) | (16,058) | (16,160) | (15,218) | (14,138) | |||||
Controlling interest shareholders’ equity | 6,421,842 | 5,842,206 | 5,692,658 | 5,672,708 | 5,730,674 | |||||
Noncontrolling interests | (740) | 14,706 | 17,599 | 21,533 | 24,021 | |||||
Total shareholders’ equity | 6,421,102 | 5,856,912 | 5,710,257 | 5,694,241 | 5,754,695 | |||||
$ 52,147,295 | $ 51,712,981 | $ 51,123,007 | $ 53,298,150 | $ 52,767,954 | ||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
(In thousands, except per share amounts) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||
Interest income: | ||||||||||
Interest and fees on loans | $ 541,778 | $ 540,446 | $ 569,613 | $ 586,246 | $ 583,590 | |||||
Interest on loans held for sale | 1,937 | 2,363 | 2,735 | 2,434 | 3,082 | |||||
Lease financing | 4,251 | 5,129 | 5,289 | 5,125 | 4,735 | |||||
Interest on money market investments | 2,601 | 1,439 | 1,800 | 1,195 | 1,543 | |||||
Interest on securities: | ||||||||||
Held-to-maturity – taxable | 6,113 | 2,456 | (2,075) | 4,864 | 9,367 | |||||
Held-to-maturity – nontaxable | 4,883 | 5,135 | 5,396 | 5,806 | 5,796 | |||||
Available-for-sale – taxable | 19,818 | 20,971 | 21,063 | 23,460 | 26,982 | |||||
Available-for-sale – nontaxable | 1,700 | 1,721 | 1,813 | 1,830 | 1,778 | |||||
Trading account | 657 | 475 | 492 | 842 | 823 | |||||
Total interest income | 583,738 | 580,135 | 606,126 | 631,802 | 637,696 | |||||
Interest expense: | ||||||||||
Interest on savings and money market deposits | 34,124 | 36,389 | 43,921 | 54,554 | 64,949 | |||||
Interest on time and foreign deposits | 18,629 | 19,687 | 28,671 | 42,780 | 52,577 | |||||
Interest on short-term borrowings | 3,486 | 3,067 | 2,714 | 2,325 | 3,661 | |||||
Interest on long-term borrowings | 114,153 | 65,692 | 73,931 | 59,963 | 22,821 | |||||
Total interest expense | 170,392 | 124,835 | 149,237 | 159,622 | 144,008 | |||||
Net interest income | 413,346 | 455,300 | 456,889 | 472,180 | 493,688 | |||||
Provision for loan losses | 228,663 | 265,565 | 390,719 | 565,930 | 762,654 | |||||
Net interest income after provision for loan losses | 184,683 | 189,735 | 66,170 | (93,750) | (268,966) | |||||
Noninterest income: | ||||||||||
Service charges and fees on deposit accounts | 51,909 | 51,608 | 53,475 | 54,466 | 51,833 | |||||
Other service charges, commissions and fees | 43,395 | 39,042 | 38,794 | 39,227 | 40,291 | |||||
Trust and wealth management income | 7,021 | 7,609 | 5,825 | 8,209 | 8,750 | |||||
Capital markets and foreign exchange | 10,733 | 8,539 | 8,692 | 12,106 | 16,311 | |||||
Dividends and other investment income | 8,879 | 7,700 | 12,942 | 2,597 | 2,684 | |||||
Loan sales and servicing income | 5,617 | 6,432 | 7,011 | 2,359 | 7,040 | |||||
Fair value and nonhedge derivative income (loss) | (1,552) | 2,188 | 31,367 | 58,092 | 20,316 | |||||
Equity securities losses, net | (1,500) | (3,165) | (2,164) | (1,805) | (619) | |||||
Fixed income securities gains (losses), net | 530 | 1,256 | (7,385) | 1,900 | 1,444 | |||||
Impairment losses on investment securities: | ||||||||||
Impairment losses on investment securities | (19,557) | (48,570) | (134,357) | (198,378) | (71,515) | |||||
Noncredit-related losses on securities not expected to | ||||||||||
be sold (recognized in other comprehensive income) | 1,497 | 17,307 | 35,051 | 141,863 | 29,546 | |||||
Net impairment losses on investment securities | (18,060) | (31,263) | (99,306) | (56,515) | (41,969) | |||||
Valuation losses on securities purchased | - | - | - | - | (11,701) | |||||
Gain on subordinated debt modification | - | - | 15,220 | - | 493,725 | |||||
Gain on subordinated debt exchange | - | 14,471 | - | - | - | |||||
Acquisition related gains | - | - | 56 | 146,153 | 22,977 | |||||
Other | 2,441 | 3,193 | 1,360 | 3,951 | 1,654 | |||||
Total noninterest income | 109,413 | 107,610 | 65,887 | 270,740 | 612,736 | |||||
Noninterest expense: | ||||||||||
Salaries and employee benefits | 205,776 | 204,333 | 206,823 | 205,433 | 202,420 | |||||
Occupancy, net | 27,822 | 28,488 | 28,667 | 28,556 | 26,651 | |||||
Furniture and equipment | 25,703 | 24,996 | 24,689 | 25,320 | 24,870 | |||||
Other real estate expense | 42,444 | 32,648 | 38,290 | 30,419 | 23,748 | |||||
Legal and professional services | 8,887 | 9,976 | 10,081 | 9,076 | 9,497 | |||||
Postage and supplies | 7,598 | 7,646 | 7,879 | 7,680 | 8,036 | |||||
Advertising | 5,772 | 6,374 | 5,738 | 4,418 | 5,678 | |||||
FDIC premiums | 26,438 | 24,210 | 24,197 | 19,820 | 42,329 | |||||
Amortization of core deposit and other intangibles | 6,414 | 6,577 | 10,135 | 7,575 | 7,078 | |||||
Provision for unfunded lending commitments | 483 | (20,133) | 19,220 | 36,537 | 7,927 | |||||
Other | 73,018 | 64,011 | 65,410 | 59,873 | 61,235 | |||||
Total noninterest expense | 430,355 | 389,126 | 441,129 | 434,707 | 419,469 | |||||
Impairment loss on goodwill | - | - | 2,224 | - | - | |||||
Income (loss) before income taxes | (136,259) | (91,781) | (311,296) | (257,717) | (75,699) | |||||
Income taxes (benefit) | (22,898) | (28,644) | (125,809) | (100,046) | (23,761) | |||||
Net income (loss) | (113,361) | (63,137) | (185,487) | (157,671) | (51,938) | |||||
Net income (loss) applicable to noncontrolling interests | (368) | (2,927) | (1,423) | (2,394) | (1,209) | |||||
Net income (loss) applicable to controlling interest | (112,993) | (60,210) | (184,064) | (155,277) | (50,729) | |||||
Preferred stock dividends | (25,342) | (26,311) | (24,633) | (26,603) | (25,447) | |||||
Preferred stock redemption | 3,107 | - | 32,215 | - | 52,418 | |||||
Net earnings (loss) applicable to common shareholders | $ (135,228) | $ (86,521) | $ (176,482) | $ (181,880) | $ (23,758) | |||||
Weighted average common shares outstanding during the period: | ||||||||||
Basic shares | 161,810 | 151,073 | 139,859 | 127,581 | 115,908 | |||||
Diluted shares | 161,810 | 151,073 | 139,859 | 127,581 | 115,908 | |||||
Net earnings (loss) per common share: | ||||||||||
Basic | $ (0.84) | $ (0.57) | $ (1.26) | $ (1.43) | $ (0.21) | |||||
Diluted | (0.84) | (0.57) | (1.26) | (1.43) | (0.21) | |||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
Loan Balances By Portfolio Type | ||||||||||
(Unaudited) | ||||||||||
(In millions) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||
Commercial lending: | ||||||||||
Commercial and industrial | $ 9,419 | $ 9,578 | $ 9,922 | $ 10,124 | $ 10,588 | |||||
Leasing | 442 | 442 | 466 | 449 | 423 | |||||
Owner occupied | 8,334 | 8,457 | 8,752 | 8,745 | 8,782 | |||||
Total commercial lending | 18,195 | 18,477 | 19,140 | 19,318 | 19,793 | |||||
Commercial real estate: | ||||||||||
Construction and land development | 4,484 | 5,060 | 5,552 | 6,087 | 6,848 | |||||
Term | 7,567 | 7,524 | 7,255 | 7,279 | 6,795 | |||||
Total commercial real estate | 12,051 | 12,584 | 12,807 | 13,366 | 13,643 | |||||
Consumer: | ||||||||||
Home equity credit line | 2,139 | 2,121 | 2,135 | 2,114 | 2,086 | |||||
1-4 family residential | 3,549 | 3,584 | 3,642 | 3,698 | 3,781 | |||||
Construction and other consumer real estate | 379 | 403 | 459 | 537 | 599 | |||||
Bankcard and other revolving plans | 285 | 314 | 341 | 333 | 344 | |||||
Other | 271 | 279 | 293 | 343 | 342 | |||||
Total consumer | 6,623 | 6,701 | 6,870 | 7,025 | 7,152 | |||||
Foreign loans | 87 | 58 | 65 | 74 | 67 | |||||
FDIC-supported loans (1) | 1,208 | 1,321 | 1,445 | 1,607 | 783 | |||||
Total loans | $ 38,164 | $ 39,141 | $ 40,327 | $ 41,390 | $ 41,438 | |||||
(1) FDIC-supported loans represent loans acquired from the FDIC subject to loss sharing agreements. | ||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
Nonperforming Lending-Related Assets | ||||||||||
(Unaudited) | ||||||||||
(In thousands) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||
Nonaccrual loans | $ 1,962,313 | $ 2,087,203 | $ 2,023,503 | $ 1,811,827 | $ 1,628,700 | |||||
Other real estate owned | 364,954 | 366,798 | 335,652 | 359,187 | 293,857 | |||||
Nonperforming lending-related assets, excluding | ||||||||||
FDIC-supported assets | 2,327,267 | 2,454,001 | 2,359,155 | 2,171,014 | 1,922,557 | |||||
FDIC-supported nonaccrual loans | 171,764 | 283,999 | 355,911 | 544,558 | 125,854 | |||||
FDIC-supported other real estate owned | 48,382 | 47,439 | 54,130 | 54,714 | 10,921 | |||||
FDIC-supported nonperforming assets (1) | 220,146 | 331,438 | 410,041 | 599,272 | 136,775 | |||||
Total nonperforming assets | $ 2,547,413 | $ 2,785,439 | $ 2,769,196 | $ 2,770,286 | $ 2,059,332 | |||||
Ratio of nonperforming lending-related assets to net loans | ||||||||||
and leases (1) and other real estate owned | 6.59% | 7.03% | 6.79% | 6.62% | 4.92% | |||||
Accruing loans past due 90 days or more, excluding | ||||||||||
FDIC-supported loans | $ 131,773 | $ 60,009 | $ 107,040 | $ 186,519 | $ 178,300 | |||||
FDIC-supported loans past due 90 days or more | 5,483 | 22,275 | 56,260 | 35,553 | 18,231 | |||||
Ratio of accruing loans past due 90 days or more to | ||||||||||
net loans and leases (1) | 0.36% | 0.21% | 0.40% | 0.54% | 0.47% | |||||
Nonaccrual loans and accruing loans past due 90 days or more | $ 2,271,333 | $ 2,453,486 | $ 2,542,714 | $ 2,578,457 | $ 1,951,085 | |||||
Ratio of nonaccrual loans and accruing loans past due | ||||||||||
90 days or more to net loans and leases (1) | 5.94% | 6.26% | 6.29% | 6.22% | 4.69% | |||||
Accruing loans past due 30-89 days, excluding | ||||||||||
FDIC-supported loans | $ 317,666 | $ 462,409 | $ 428,290 | $ 571,399 | $ 495,527 | |||||
FDIC-supported loans past due 30-89 days | 27,180 | 55,919 | 27,485 | 74,142 | 26,144 | |||||
Restructured loans included in nonaccrual loans | $ 338,378 | $ 340,165 | $ 298,820 | $ 106,922 | $ 100,590 | |||||
Restructured loans on accrual | 270,251 | 211,486 | 204,233 | 115,635 | 39,280 | |||||
(1) Includes loans held for sale. | ||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||
Allowance for Credit Losses | ||||||||||
(Unaudited) | ||||||||||
Three Months Ended | ||||||||||
(In thousands) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||
Allowance for Loan Losses | ||||||||||
Balance at beginning of period | $ 1,581,577 | $ 1,531,332 | $ 1,432,715 | $ 1,248,055 | $ 832,878 | |||||
Add: | ||||||||||
Provision for losses | 228,663 | 265,565 | 390,719 | 565,930 | 762,654 | |||||
Increase in allowance covered by FDIC indemnification | 8,748 | 11,770 | - | - | - | |||||
Deduct: | ||||||||||
Gross loan and lease charge-offs | (279,025) | (248,312) | (355,601) | (389,134) | (353,226) | |||||
Net charge-offs recoverable from FDIC | 629 | 1,859 | 2,303 | - | - | |||||
Recoveries | 23,161 | 19,363 | 61,196 | 7,864 | 5,749 | |||||
Net loan and lease charge-offs | (255,235) | (227,090) | (292,102) | (381,270) | (347,477) | |||||
Balance at end of period | $ 1,563,753 | $ 1,581,577 | $ 1,531,332 | $ 1,432,715 | $ 1,248,055 | |||||
Ratio of allowance for loan losses to net loans and | ||||||||||
leases, at period end | 4.11% | 4.05% | 3.81% | 3.47% | 3.02% | |||||
Ratio of allowance for loan losses to nonperforming | ||||||||||
loans, at period end | 73.28% | 66.70% | 64.36% | 60.80% | 71.13% | |||||
Annualized ratio of net loan and lease charge-offs to | ||||||||||
average loans | 2.64% | 2.29% | 2.87% | 3.65% | 3.33% | |||||
Reserve for Unfunded Lending Commitments | ||||||||||
Balance at beginning of period | $ 96,312 | $ 116,445 | $ 97,225 | $ 60,688 | $ 52,761 | |||||
Provision charged (credited) to earnings | 483 | (20,133) | 19,220 | 36,537 | 7,927 | |||||
Balance at end of period | $ 96,795 | $ 96,312 | $ 116,445 | $ 97,225 | $ 60,688 | |||||
Total Allowance for Credit Losses | ||||||||||
Allowance for loan losses | $ 1,563,753 | $ 1,581,577 | $ 1,531,332 | $ 1,432,715 | $ 1,248,055 | |||||
Reserve for unfunded lending commitments | 96,795 | 96,312 | 116,445 | 97,225 | 60,688 | |||||
Total allowance for credit losses | $ 1,660,548 | $ 1,677,889 | $ 1,647,777 | $ 1,529,940 | $ 1,308,743 | |||||
Ratio of total allowance for credit losses | ||||||||||
to net loans and leases outstanding, at period end | 4.37% | 4.30% | 4.10% | 3.71% | 3.17% | |||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||||||||||||||||||
Nonaccrual Loans By Portfolio Type | ||||||||||||||||||||
(Excluding FDIC-Supported Loans) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||||||
Loans held for sale | $ - | $ - | $ - | $ - | $ 18 | |||||||||||||||
Commercial lending: | ||||||||||||||||||||
Commercial and industrial | 318 | 320 | 319 | 231 | 200 | |||||||||||||||
Leasing | 8 | 8 | 11 | 10 | 10 | |||||||||||||||
Owner occupied | 438 | 460 | 474 | 357 | 282 | |||||||||||||||
Total commercial lending | 764 | 788 | 804 | 598 | 492 | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction and land development | 744 | 803 | 825 | 839 | 826 | |||||||||||||||
Term | 281 | 324 | 228 | 221 | 126 | |||||||||||||||
Total commercial real estate | 1,025 | 1,127 | 1,053 | 1,060 | 952 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity credit line | 13 | 14 | 11 | 8 | 6 | |||||||||||||||
1-4 family residential | 136 | 127 | 113 | 101 | 113 | |||||||||||||||
Construction and other consumer real estate | 20 | 28 | 38 | 42 | 45 | |||||||||||||||
Bankcard and other revolving plans | 1 | - | 1 | 1 | 1 | |||||||||||||||
Other | 3 | 3 | 3 | 2 | 2 | |||||||||||||||
Total consumer | 173 | 172 | 166 | 154 | 167 | |||||||||||||||
Total nonaccrual loans | $ 1,962 | $ 2,087 | $ 2,023 | $ 1,812 | $ 1,629 | |||||||||||||||
Net Charge-Offs By Portfolio Type | ||||||||||||||||||||
(In millions) | June 30, | March 31, | Dec. 31, | Sept. 30, | June 30, | |||||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | ||||||||||||||||
Commercial lending: | ||||||||||||||||||||
Commercial and industrial | $ 52 | $ 49 | $ 36 | $ 70 | $ 117 | |||||||||||||||
Leasing | - | 2 | 2 | 3 | 1 | |||||||||||||||
Owner occupied | 35 | 36 | 27 | 19 | 9 | |||||||||||||||
Total commercial lending | 87 | 87 | 65 | 92 | 127 | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction and land development | 99 | 86 | 139 | 219 | 156 | |||||||||||||||
Term | 39 | 23 | 56 | 29 | 11 | |||||||||||||||
Total commercial real estate | 138 | 109 | 195 | 248 | 167 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity credit line | 7 | 7 | 4 | 6 | 3 | |||||||||||||||
1-4 family residential | 14 | 15 | 14 | 17 | 24 | |||||||||||||||
Construction and other consumer real estate | 6 | 5 | 10 | 10 | 17 | |||||||||||||||
Bankcard and other revolving plans | 2 | 3 | 2 | 2 | 6 | |||||||||||||||
Other | 2 | 3 | 4 | 6 | 4 | |||||||||||||||
Total consumer loans | 31 | 33 | 34 | 41 | 54 | |||||||||||||||
Charge-offs recoverable from FDIC | (1) | (2) | (2) | - | - | |||||||||||||||
Total net charge-offs | $ 255 | $ 227 | $ 292 | $ 381 | $ 348 | |||||||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | |||||||||||||
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | |||||||||||||
June 30, 2010 | March 31, 2010 | Dec. 31, 2009 | |||||||||||
(In thousands) | Average | Average | Average | Average | Average | Average | |||||||
balance | rate | balance | rate | balance | rate | ||||||||
ASSETS | |||||||||||||
Money market investments | $ 3,853,275 | 0.27% | $ 2,227,181 | 0.26% | $ 2,761,132 | 0.26% | |||||||
Securities: | |||||||||||||
Held-to-maturity | 852,906 | 6.41% | 864,021 | 4.86% | 875,730 | 2.82% | |||||||
Available-for-sale | 3,364,126 | 2.67% | 3,378,930 | 2.83% | 3,507,766 | 2.70% | |||||||
Trading account | 72,322 | 3.64% | 51,330 | 3.75% | 67,900 | 2.87% | |||||||
Total securities | 4,289,354 | 3.43% | 4,294,281 | 3.25% | 4,451,396 | 2.72% | |||||||
Loans held for sale | 166,612 | 4.66% | 179,433 | 5.34% | 208,219 | 5.21% | |||||||
Loans: | |||||||||||||
Net loans and leases excluding FDIC-supported loans (1) | 37,381,140 | 5.60% | 38,310,187 | 5.59% | 39,222,262 | 5.59% | |||||||
FDIC-supported loans | 1,265,319 | 8.41% | 1,393,775 | 5.59% | 1,518,368 | 6.24% | |||||||
Total loans and leases | 38,646,459 | 5.69% | 39,703,962 | 5.59% | 40,740,630 | 5.62% | |||||||
Total interest-earning assets | 46,955,700 | 5.03% | 46,404,857 | 5.12% | 48,161,377 | 5.04% | |||||||
Cash and due from banks | 1,444,343 | 1,280,013 | 1,191,881 | ||||||||||
Allowance for loan losses | (1,594,814) | (1,565,136) | (1,497,873) | ||||||||||
Goodwill | 1,015,161 | 1,015,161 | 1,017,361 | ||||||||||
Core deposit and other intangibles | 104,083 | 110,754 | 120,512 | ||||||||||
Other assets | 3,945,496 | 4,306,119 | 4,266,457 | ||||||||||
Total assets | $ 51,869,969 | $ 51,551,768 | $ 53,259,715 | ||||||||||
LIABILITIES | |||||||||||||
Interest-bearing deposits: | |||||||||||||
Savings and NOW | $ 6,026,526 | 0.35% | $ 5,842,531 | 0.36% | $ 5,505,938 | 0.38% | |||||||
Money market | 16,292,870 | 0.71% | 16,515,285 | 0.77% | 17,247,187 | 0.89% | |||||||
Time under $100,000 | 2,247,255 | 1.36% | 2,365,645 | 1.44% | 2,637,651 | 1.78% | |||||||
Time $100,000 and over | 2,590,056 | 1.30% | 2,911,319 | 1.23% | 3,575,690 | 1.53% | |||||||
Foreign | 1,754,944 | 0.60% | 1,663,380 | 0.61% | 1,818,423 | 0.65% | |||||||
Total interest-bearing deposits | 28,911,651 | 0.73% | 29,298,160 | 0.78% | 30,784,889 | 0.94% | |||||||
Borrowed funds: | |||||||||||||
Securities sold, not yet purchased | 41,473 | 4.94% | 50,243 | 4.29% | 39,045 | 5.11% | |||||||
Federal funds purchased and security | |||||||||||||
repurchase agreements | 871,441 | 0.14% | 1,137,716 | 0.20% | 1,611,774 | 0.26% | |||||||
Commercial paper | 5,618 | 1.36% | 11,185 | 2.14% | 2,125 | 0.93% | |||||||
FHLB advances and other borrowings: | |||||||||||||
One year or less | 199,755 | 5.31% | 141,018 | 5.52% | 89,891 | 5.01% | |||||||
Over one year | 15,611 | 4.98% | 15,693 | 5.07% | 17,963 | 4.84% | |||||||
Long-term debt | 1,963,082 | 23.28% | 2,028,912 | 13.09% | 2,230,949 | 13.11% | |||||||
Total borrowed funds | 3,096,980 | 15.24% | 3,384,767 | 8.24% | 3,991,747 | 7.62% | |||||||
Total interest-bearing liabilities | 32,008,631 | 2.14% | 32,682,927 | 1.55% | 34,776,636 | 1.70% | |||||||
Noninterest-bearing deposits | 13,318,836 | 12,544,442 | 12,151,870 | ||||||||||
Other liabilities | 530,457 | 570,028 | 601,724 | ||||||||||
Total liabilities | 45,857,924 | 45,797,397 | 47,530,230 | ||||||||||
Shareholders’ equity: | |||||||||||||
Preferred equity | 1,624,856 | 1,509,197 | 1,543,363 | ||||||||||
Common equity | 4,371,255 | 4,229,021 | 4,166,944 | ||||||||||
Controlling interest shareholders’ equity | 5,996,111 | 5,738,218 | 5,710,307 | ||||||||||
Noncontrolling interests | 15,934 | 16,153 | 19,178 | ||||||||||
Total shareholders’ equity | 6,012,045 | 5,754,371 | 5,729,485 | ||||||||||
Total liabilities and shareholders’ equity | $ 51,869,969 | $ 51,551,768 | $ 53,259,715 | ||||||||||
Spread on average interest-bearing funds | 2.89% | 3.57% | 3.34% | ||||||||||
Taxable-equivalent net interest income and | |||||||||||||
net yield on interest-earning assets | 3.58% | 4.03% | 3.81% | ||||||||||
(1) Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans. | |||||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES | ||||
GAAP to Non-GAAP Reconciliation | ||||
(Unaudited) | ||||
Three Months Ended | ||||
June 30, | March 31, | |||
2010 | 2010 | |||
Net interest margin as reported | 3.58% | 4.03% | ||
Addback for the impact on net interest margin of: | ||||
Discount amortization on convertible subordinated debt | 0.12% | 0.13% | ||
Accelerated discount amortization on convertible subordinated debt | 0.52% | 0.10% | ||
Accretion of interest income on acquired loans | -0.08% | - | ||
Core net interest margin | 4.14% | 4.26% | ||
This Press Release presents a “core net interest margin” which excludes the effects of the (1) discount amortization on convertible subordinated debt; (2) accelerated discount amortization on convertible subordinated debt; and (3) accretion of interest income on acquired loans based on increased projected cash flows (hereinafter collectively referred to as the “net interest margin adjustments”). The net interest margin adjustments are included in financial results presented in accordance with generally accepted accounting principles (“GAAP”). Management considers the net interest margin adjustments to be relevant to ongoing operating results.
The Company believes the exclusion of these net interest margin adjustments to present a core net interest margin provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the operating results of the Company and predicting future performance. As a non-GAAP financial measure, the core net interest margin is used by management and the Board of Directors to assess the performance of the Company’s business for the following purposes:
- Evaluation of bank reporting segment performance
- Presentations of Company performance to investors
The Company believes that presenting the core net interest margin will permit investors 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 in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.
SOURCE Zions Bancorporation
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