Zions Bancorporation Reports 2010 Third Quarter Results

Loan Balances Stabilizing While Credit Measures Continue to Improve

Oct 18, 2010, 16:10 ET from Zions Bancorporation

SALT LAKE CITY, Oct. 18 /PRNewswire-FirstCall/ -- Zions Bancorporation (Nasdaq: ZION) ("Zions" or "the Company") today reported a third quarter net loss applicable to common shareholders of $80.5 million or $0.47 per diluted share, compared to a net loss of $135.2 million or $0.84 per diluted share for the second quarter of 2010.

Third Quarter 2010 Highlights

  • Loan balances declined at a slower pace of 1.2% compared to 2.5% in the second quarter. Excluding construction and land development loans and FDIC-supported loans, loan balances declined 0.2% compared to 0.9% in the second quarter.

  • Loan originations and renewals were $2.4 billion, up 33% from $1.8 billion in the second quarter.

  • Net interest income, adjusted for the effects of additional accretion on FDIC-supported loans and interest amortization from subordinated debt conversions, was relatively stable compared to the second quarter.

  • Nonperforming lending-related assets continued to decline, down 10% to $2.29 billion from $2.55 billion in the second quarter. Additions to nonperforming lending-related assets declined to $426 million from $591 million in the second quarter.

  • Excluding FDIC-supported other real estate owned, OREO declined 17% to $304.5 million from $365.0 million at June 30, 2010.

  • The tangible common equity ratio increased to 7.03% from 6.86% in the second quarter. The estimated Tier 1 common to risk-weighted assets ratio improved to 8.77% from 7.91% in the second quarter.

"Overall, we are encouraged by the trends exhibited in our third quarter results. Excluding construction and FDIC-supported loans, our loan balances held relatively steady and the core net interest margin performed in line with our expectations. Furthermore, asset quality metrics improved across all major fronts and we generally expect continued improvement into the fourth quarter and beyond," said Harris H. Simmons, chairman and chief executive officer. Mr. Simmons continued, "Additionally, we ended the quarter with record high capital levels."

Loans

Net loans and leases of $37.5 billion at September 30, 2010 decreased approximately $0.5 billion or 1.2% from $38.0 billion at June 30, 2010, compared to a 2.5% decrease from the balances at March 31, 2010. Commercial and consumer loan balances were stable compared to the second quarter. Runoff occurred in construction and land development loans and FDIC-supported loans, which the Company is actively managing downward. Certain FDIC-supported loans have experienced better performance than previous estimates. The expectation of higher-than-expected cash flows from this portfolio results in a higher rate of accretion in loan balances and the recognition of additional interest income. Lower losses on paid-off loans have also contributed to the overall higher expected cash flows. The effect on the financial statements of this higher accretion and the corresponding impact to the FDIC indemnification asset is summarized as follows:

(In thousands)

September 30,


June 30,


2010


2010

Balance sheet – increase (decrease) in assets:












FDIC-supported loans


$ 18,713



$    9,109







FDIC indemnification asset (included in other assets)


(14,970)



(8,976)








Three Months Ended


September 30,


June 30,


2010


2010

Statement of income:












Interest income:






Interest and fees on loans


$ 18,713



$    9,109







Noninterest expense:






Other noninterest expense


14,970



8,976

Net increase in pretax income


$   3,743



$       133



The balance of the FDIC indemnification asset, reflecting the above reduction and other changes in the third quarter, was $233.6 million at September 30, 2010 compared to $243.8 million at June 30, 2010.

Asset Quality

Net loan and lease charge-offs declined to $235.7 million for the third quarter of 2010 from $255.2 million for the second quarter of 2010. Gross charge-offs of $263.7 million included $7.7 million from FDIC-supported loans. Net charge-offs recoverable from the FDIC were $5.7 million. The provision for loan losses declined to $184.7 million for the third quarter of 2010 compared to $228.7 million for the second quarter of 2010. Despite the lower provision and the decline in net charge-offs, the allowance for loan losses as a percentage of net loans and leases was relatively stable, at 4.07% at September 30, 2010 compared to 4.11% at June 30, 2010. The allowance for credit losses was $1,627.9 million, or 4.34% of net loans and leases at September 30, 2010, compared to $1,660.5 million, or 4.37% at June 30, 2010.

Excluding FDIC-supported other real estate owned, OREO declined 17% to $304.5 million at September 30, 2010 compared to $365.0 million at June 30, 2010. OREO expense increased $1.9 million to $44.3 million during the third quarter from $42.4 million in the second quarter. Additionally, $19.2 million of valuation charges and the losses on the sale of OREO were included in net charge-offs, up from $13.4 million in the previous quarter.

Nonperforming lending-related assets declined 10% to $2,293.1 million at September 30, 2010 from $2,547.4 million at June 30, 2010. Nonaccrual loans declined 9% to $1,936.2 million at September 30, 2010 from $2,134.1 million at June 30, 2010. Delinquent loans (accruing loans past due 30-89 days and 90 days or more) declined 18% to $396.9 million at September 30, 2010 from $482.1 million at June 30, 2010. The ratio of nonperforming lending-related assets to net loans and leases and other real estate owned was 6.01% at September 30, 2010 compared to 6.60% at June 30, 2010. The preceding amounts and comparisons include the FDIC-supported assets.

Capital Transactions

During the third quarter of 2010, the Company increased its Tier 1 capital as a result of the following capital actions:  

  1. Common stock equity distribution issuances:  From August 18, 2010 to September 14, 2010, the Company sold 3,936,300 shares of common stock for $75.5 million (average price of $19.18).
  2. Common stock warrants:  On September 28, 2010, the Company sold 7,000,000 warrants for $36.8 million ($5.25 per warrant) through an online modified Dutch auction. Each warrant can be exercised for a share of common stock at an initial price of $36.63 through May 22, 2020. These warrants are part of the same series of warrants initially sold on May 25, 2010.

Net of commissions and fees, these capital actions added $109.9 million to tangible common equity.

In addition, on September 15, 2010, $54.3 million of convertible subordinated debt was converted into shares of the Company's preferred stock (54,219 shares of Series C and 40 shares of Series A). Accelerated discount amortization on the converted debt increased interest expense by a pretax amount of approximately $27.5 million.

The tangible common equity ratio was 7.03% at September 30, 2010 compared to 6.86% at June 30, 2010. The increase from June 30, 2010 was primarily due to the previously discussed capital transactions, partially offset by operating results and preferred stock dividends during the third quarter. Preferred stock dividends increased during the third quarter primarily because of the new issuance in the second quarter of Series E preferred stock. The estimated Tier 1 common to risk-weighted assets ratio was 8.77% at September 30, 2010 compared to 7.91% at June 30, 2010. The more significant improvement in risk-based capital ratios compared to the tangible common equity ratio is due to the total return swap.

Total Return Swap

As previously announced on July 29, 2010, the Company entered into a total return swap and related interest rate swaps ("TRS") relating to a portfolio of $1.16 billion notional amount of its bank and insurance trust preferred collateralized debt obligations ("CDOs"). This transaction increased the Company's Tier 1 common to risk-weighted assets ratio by 68 bp. The transaction did not qualify for hedge accounting and did not change the accounting for the underlying securities. During the third quarter, the Company incurred a negative initial valuation of $22.8 million, included in fair value and nonhedge derivative income (loss), and structuring costs of $11.6 million, included in other noninterest expense. The negative initial valuation is essentially the amount of the first-year TRS fee.

Deposits

Average total deposits for the third quarter of 2010 decreased $0.5 billion or 1.3% to $41.7 billion compared to $42.2 billion for the second quarter of 2010, as the Company actively worked to reduce excess funding. Average deposit balances fell in the time, foreign and money market categories. Average noninterest-bearing demand deposits for the third quarter of 2010 increased $0.5 billion or 3.5% to $13.8 billion compared to $13.3 billion for the second quarter of 2010, although the end of period balance declined significantly due to active management. The decline in excess funding improved profitability, as such deposits were not necessary to fund loan demand.

Net Interest Income

The net interest margin increased to 3.84% in the third quarter of 2010 compared to 3.58% in the second quarter of 2010. The net interest margin decreased by 12 bp for the discount amortization on the convertible subordinated debt, and by an additional 23 bp (compared to 52 bp in the second quarter) for the accelerated discount amortization when debt holders exercised their options to convert to preferred stock. The net interest margin increased by 16 bp due to the recognition in interest income of the additional accretion on acquired loans. The core net interest margin, adjusted for the amortization and accretion previously discussed, was 4.03% in the third quarter compared to 4.14% in the second quarter, largely due to the increase in average money market investments rising to 11.0% of total interest-earning assets in the third quarter compared to 8.2% in the second quarter.

Investment Securities

During the third quarter of 2010, the Company recognized credit-related net impairment losses on trust preferred CDOs of $23.7 million or $0.08 per diluted share, compared to $18.1 million or $0.07 per diluted share during the second quarter of 2010. The increased impairment is primarily due to assumption changes in prepayment speeds on trust preferred securities, given the adoption of the Dodd-Frank Act, which, among other things, will disqualify trust preferred securities from Tier 1 capital for certain banks. The Company's estimated default probabilities declined significantly for banks that are deferring payment on their trust preferred securities.

CDOs for which the underlying collateral is predominantly bank trust preferred securities comprised $2.2 billion of the $2.6 billion par amount of the bank and insurance CDO portfolio at September 30, 2010. The following table shows the decrease in carrying value at September 30, 2010 of original AAA and BBB rated CDOs compared to June 30, 2010.

(In millions)








































September 30, 2010


% of carrying


Change

Original


Par


Amortized cost


Carrying value


value to par


9/30/10

ratings


Amount


%


Amount


%


Amount


%


9/30/10


6/30/10


vs 6/30/10




















AAA


$ 1,126


52%


$    937


54%


$    781


72%


69%


72%


-3%

A


949


44%


751


44%


298


27%


31%


31%


0%

BBB


90


4%


34


2%


12


1%


13%


14%


-1%



$ 2,165


100%


$ 1,722


100%


$ 1,091


100%


50%


52%


-2%



Sale of NetDeposit

On September 3, 2010, the Company sold substantially all of the assets of its wholly-owned subsidiary, NetDeposit, to BServ, Inc. (dba BankServ), a privately-owned company headquartered in San Francisco, California. Both companies specialize in remote deposit capture and electronic payment technologies. The Company recognized a pretax gain on the sale of approximately $13.9 million, which was included in other noninterest income.

Noninterest Income

Noninterest income for the third quarter of 2010 was relatively unchanged at $110.2 million compared to $109.4 million for the second quarter of 2010. Increases from the $13.9 million gain on sale of NetDeposit assets and from fixed income securities gains of $6.1 million on the repurchase at par by the underwriter of certain auction rate securities, were offset by the negative $22.8 million valuation of the TRS and the $5.6 million increase in CDO impairment.

Noninterest Expense

Noninterest expense for the third quarter of 2010 was $456.0 million compared to $430.4 million for the second quarter of 2010. The increase included $11.6 million of structuring costs for the TRS and the $15.0 million reduction (compared to $9.0 million in the second quarter) of the FDIC indemnification asset.

Conference Call

Zions will host a conference call to discuss these third quarter results at 5:30 p.m. ET this afternoon (October 18, 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 14043091, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at www.zionsbancorporation.com. A replay of the call will be available from approximately 7:30 p.m. ET on Monday, October 18, 2010, until midnight ET on Monday, October 25, 2010, by dialing 1-800-642-1687 (international: 706-645-9291) and entering the passcode 14043091. 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)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

PER COMMON SHARE










Dividends

$             0.01


$            0.01


$            0.01


$            0.01


$             0.01

Book value per common share

26.07


26.63


26.89


27.85


30.38

Tangible common equity per common share

19.81


20.19


19.89


20.35


22.01











SELECTED RATIOS










Return on average assets

(0.36)%


(0.87)%


(0.47)%


(1.37)%


(1.15)%

Return on average common equity

(6.94)%


(12.41)%


(8.30)%


(16.80)%


(16.74)%

Net interest margin

3.84%


3.58%


4.03%


3.81%


3.91%











Capital Ratios










Tangible common equity ratio

7.03%


6.86%


6.30%


6.12%


5.76%

Tangible equity ratio

10.78%


10.40%


9.36%


9.16%


8.73%

Average equity to average assets

12.40%


11.59%


11.16%


10.76%


10.94%











Risk-Based Capital Ratios (1):










Tier 1 common to risk-weighted assets

8.77%


7.91%


7.14%


6.73%


6.59%

Tier 1 leverage

11.99%


11.80%


10.77%


10.38%


10.40%

Tier 1 risk-based capital

14.15%


12.63%


11.19%


10.53%


10.34%

Total risk-based capital

16.73%


15.25%


13.93%


13.28%


13.08%











Taxable-equivalent net interest income

$       457,172


$      418,953


$      460,981


$      462,608


$       478,135











Weighted average common and common-










equivalent shares outstanding

172,864,619


161,810,017


151,073,384


139,858,788


127,581,404











Common shares outstanding

177,202,340


173,331,281


160,300,162


150,425,070


136,398,089











(1) Ratios for September 30, 2010 are estimates.



ZIONS BANCORPORATION AND SUBSIDIARIES










CONSOLIDATED BALANCE SHEETS











Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,

(In thousands, except share amounts)

2010


2010


2010


2009


2009


(Unaudited)


(Unaudited)


(Unaudited)




(Unaudited)

ASSETS










Cash and due from banks

$    1,060,646


$   1,068,755


$   1,045,391


$   1,370,189


$       992,940

Money market investments:










Interest-bearing deposits

4,468,778


4,861,871


3,410,211


652,964


2,234,337

Federal funds sold

67,026


44,720


44,436


20,985


44,056

Security resell agreements

49,432


58,954


73,112


57,556


52,539

Investment securities:










Held-to-maturity, at adjusted cost (approximate fair value










$783,362, $802,370, $856,256, $833,455, and $835,814)

841,573


852,606


902,902


869,595


877,105

Available-for-sale, at fair value

3,295,864


3,416,448


3,437,098


3,655,619


3,547,092

Trading account, at fair value

42,811


85,707


50,698


23,543


76,709


4,180,248


4,354,761


4,390,698


4,548,757


4,500,906











Loans held for sale  

217,409


189,376


171,892


208,567


206,387











Loans:










Loans and leases excluding FDIC-supported assets

36,579,470


36,920,355


37,784,853


38,882,083


39,782,240

FDIC-supported loans

1,089,926


1,208,362


1,320,737


1,444,594


1,607,493


37,669,396


38,128,717


39,105,590


40,326,677


41,389,733

Less:










Unearned income and fees, net of related costs

120,037


125,779


131,555


137,697


134,629

Allowance for loan losses

1,529,955


1,563,753


1,581,577


1,531,332


1,432,715

Loans and leases, net of allowance

36,019,404


36,439,185


37,392,458


38,657,648


39,822,389











Other noninterest-bearing investments

858,402


866,970


909,601


1,099,961


1,061,464

Premises and equipment, net

719,592


705,372


707,387


710,534


698,225

Goodwill

1,015,161


1,015,161


1,015,161


1,015,161


1,017,385

Core deposit and other intangibles

94,128


100,425


106,839


113,416


123,551

Other real estate owned

356,923


413,336


414,237


389,782


413,901

Other assets

1,940,627


2,028,409


2,031,558


2,277,487


2,130,070


$  51,047,776


$ 52,147,295


$ 51,712,981


$ 51,123,007


$  53,298,150











LIABILITIES AND SHAREHOLDERS’ EQUITY










Deposits:










Noninterest-bearing demand

$  13,264,415


$ 14,071,456


$ 12,799,002


$ 12,324,247


$  11,453,247

Interest-bearing:










Savings and NOW

6,394,964


6,030,986


5,978,536


5,843,573


5,392,096

Money market

15,398,157


15,562,664


16,667,011


16,378,874


17,413,735

Time under $100,000

2,037,318


2,155,366


2,306,101


2,497,395


2,784,593

Time $100,000 and over

2,417,779


2,509,479


2,697,261


3,117,472


3,949,684

Foreign

1,447,507


1,683,925


1,647,898


1,679,028


2,014,626


40,960,140


42,013,876


42,095,809


41,840,589


43,007,981











Securities sold, not yet purchased

41,943


81,511


47,890


43,404


39,360

Federal funds purchased

367,402


391,213


477,959


208,669


1,008,181

Security repurchase agreements

371,149


500,812


475,832


577,346


509,014

Federal Home Loan Bank advances and other borrowings:










One year or less

236,507


218,589


178,435


121,273


45,411

Over one year

20,239


15,558


15,640


15,722


18,803

Long-term debt

1,919,156


1,918,852


2,000,821


2,017,220


2,324,020

Reserve for unfunded lending commitments

97,899


96,795


96,312


116,445


97,225

Other liabilities

538,750


488,987


467,371


472,082


553,914

Total liabilities

44,553,185


45,726,193


45,856,069


45,412,750


47,603,909











Shareholders’ equity:










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










shares

1,875,463


1,806,877


1,532,323


1,502,784


1,529,462

Common stock, without par value; authorized 350,000,000










shares; issued and outstanding 177,202,340, 173,331,281,










160,300,162, 150,425,070, and 136,398,089 shares

4,070,963


3,964,140


3,517,621


3,318,417


3,125,344

Retained earnings

1,017,428


1,099,621


1,236,497


1,324,516


1,502,232

Accumulated other comprehensive income (loss)

(452,553)


(433,020)


(428,177)


(436,899)


(469,112)

Deferred compensation

(15,869)


(15,776)


(16,058)


(16,160)


(15,218)

Controlling interest shareholders’ equity

6,495,432


6,421,842


5,842,206


5,692,658


5,672,708

Noncontrolling interests

(841)


(740)


14,706


17,599


21,533

Total shareholders’ equity

6,494,591


6,421,102


5,856,912


5,710,257


5,694,241


$  51,047,776


$ 52,147,295


$ 51,712,981


$ 51,123,007


$  53,298,150



ZIONS BANCORPORATION AND SUBSIDIARIES










CONSOLIDATED STATEMENTS OF INCOME










(Unaudited)





















Three Months Ended

(In thousands, except per share amounts)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

Interest income:










Interest and fees on loans

$ 543,478


$  541,474


$ 540,144


$  569,613


$  586,246

Interest on loans held for sale

2,223


1,937


2,363


2,735


2,434

Lease financing

4,788


4,251


5,129


5,289


5,125

Interest on money market investments

3,487


2,601


1,439


1,800


1,195

Interest on securities:










Held-to-maturity – taxable

1,000


6,113


2,456


(2,075)


4,864

Held-to-maturity – nontaxable

5,063


5,187


5,437


5,396


5,806

Available-for-sale – taxable

19,782


19,818


20,971


21,063


23,460

Available-for-sale – nontaxable

1,571


1,700


1,721


1,813


1,830

Trading account

542


657


475


492


842

Total interest income

581,934


583,738


580,135


606,126


631,802











Interest expense:










Interest on savings and money market deposits

29,900


34,124


36,389


43,921


54,554

Interest on time and foreign deposits

16,468


18,629


19,687


28,671


42,780

Interest on short-term borrowings

3,566


3,486


3,067


2,714


2,325

Interest on long-term borrowings

80,125


114,153


65,692


73,931


59,963

Total interest expense

130,059


170,392


124,835


149,237


159,622











Net interest income

451,875


413,346


455,300


456,889


472,180

Provision for loan losses

184,668


228,663


265,565


390,719


565,930

Net interest income after provision for loan losses

267,207


184,683


189,735


66,170


(93,750)











Noninterest income:










Service charges and fees on deposit accounts

49,733


51,909


51,608


53,475


54,466

Other service charges, commissions and fees

41,780


43,395


39,042


38,794


39,227

Trust and wealth management income

6,310


7,021


7,609


5,825


8,209

Capital markets and foreign exchange

13,154


10,733


8,539


8,692


12,106

Dividends and other investment income

8,874


8,879


7,700


12,942


2,597

Loan sales and servicing income

8,390


5,617


6,432


7,011


2,359

Fair value and nonhedge derivative income (loss)

(21,854)


(1,552)


2,188


31,367


58,092

Equity securities losses, net

(1,082)


(1,500)


(3,165)


(2,164)


(1,805)

Fixed income securities gains (losses), net

8,428


530


1,256


(7,385)


1,900

Impairment losses on investment securities:










Impairment losses on investment securities

(73,082)


(19,557)


(48,570)


(134,357)


(198,378)

Noncredit-related losses on securities not expected to










be sold (recognized in other comprehensive income)

49,370


1,497


17,307


35,051


141,863

Net impairment losses on investment securities

(23,712)


(18,060)


(31,263)


(99,306)


(56,515)

Gain on subordinated debt modification

-


-


-


15,220


-

Gain on subordinated debt exchange

-


-


14,471


-


-

Acquisition related gains

-


-


-


56


146,153

Other

20,179


2,441


3,193


1,360


3,951

Total noninterest income

110,200


109,413


107,610


65,887


270,740











Noninterest expense:










Salaries and employee benefits

207,947


205,776


204,333


206,823


205,433

Occupancy, net

29,292


27,822


28,488


28,667


28,556

Furniture and equipment

25,591


25,703


24,996


24,689


25,320

Other real estate expense

44,256


42,444


32,648


38,290


30,419

Credit related expense

17,438


17,658


16,825


16,347


11,793

Provision for unfunded lending commitments

1,104


483


(20,133)


19,220


36,537

Legal and professional services

9,305


8,887


9,976


10,081


9,076

Advertising

5,575


5,772


6,374


5,738


4,418

FDIC premiums

25,706


26,438


24,210


24,197


19,820

Amortization of core deposit and other intangibles

6,296


6,414


6,577


10,135


7,575

Other

83,534


62,958


54,832


56,942


55,760

Total noninterest expense

456,044


430,355


389,126


441,129


434,707











Impairment loss on goodwill

-


-


-


2,224


-











Income (loss) before income taxes

(78,637)


(136,259)


(91,781)


(311,296)


(257,717)

Income taxes (benefit)

(31,180)


(22,898)


(28,644)


(125,809)


(100,046)

Net income (loss)

(47,457)


(113,361)


(63,137)


(185,487)


(157,671)

Net income (loss) applicable to noncontrolling interests

(132)


(368)


(2,927)


(1,423)


(2,394)

Net income (loss) applicable to controlling interest

(47,325)


(112,993)


(60,210)


(184,064)


(155,277)

Preferred stock dividends

(33,144)


(25,342)


(26,311)


(24,633)


(26,603)

Preferred stock redemption

-


3,107


-


32,215


-

Net earnings (loss) applicable to common shareholders

$ (80,469)


$ (135,228)


$ (86,521)


$ (176,482)


$ (181,880)











Weighted average common shares outstanding during the period:










Basic shares

172,865


161,810


151,073


139,859


127,581

Diluted shares

172,865


161,810


151,073


139,859


127,581











Net earnings (loss) per common share:










Basic

$     (0.47)


$       (0.84)


$     (0.57)


$       (1.26)


$       (1.43)

Diluted

(0.47)


(0.84)


(0.57)


(1.26)


(1.43)



ZIONS BANCORPORATION AND SUBSIDIARIES










Loan Balances By Portfolio Type










(Unaudited)




















(In millions)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

Commercial lending:










Commercial and industrial

$           9,402


$   9,384


$   9,543


$          9,922


$         10,124

Leasing

402


442


442


466


449

Owner occupied

8,345


8,334


8,457


8,752


8,745

Total commercial lending

18,149


18,160


18,442


19,140


19,318











Commercial real estate:










Construction and land development

4,206


4,484


5,060


5,552


6,087

Term

7,550


7,567


7,524


7,255


7,279

Total commercial real estate

11,756


12,051


12,584


12,807


13,366











Consumer:










Home equity credit line

2,157


2,139


2,121


2,135


2,114

1-4 family residential

3,509


3,549


3,584


3,642


3,698

Construction and other consumer real estate

366


379


403


459


537

Bankcard and other revolving plans

287


285


314


341


333

Other

271


271


279


293


343

Total consumer

6,590


6,623


6,701


6,870


7,025











Foreign loans

84


87


58


65


74











FDIC-supported loans (1)

1,090


1,208


1,321


1,445


1,607

Total loans

$         37,669


$ 38,129


$ 39,106


$        40,327


$         41,390





















(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)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009











Nonaccrual loans

$    1,809,570


$ 1,962,313


$ 2,087,203


$   2,023,503


$    1,811,827

Other real estate owned

304,498


364,954


366,798


335,652


359,187

Nonperforming lending-related assets, excluding










   FDIC-supported assets

2,114,068


2,327,267


2,454,001


2,359,155


2,171,014











FDIC-supported nonaccrual loans

126,634


171,764


283,999


355,911


544,558

FDIC-supported other real estate owned

52,425


48,382


47,439


54,130


54,714

FDIC-supported nonperforming assets

179,059


220,146


331,438


410,041


599,272

Total nonperforming assets

$    2,293,127


$ 2,547,413


$ 2,785,439


$   2,769,196


$    2,770,286











Ratio of nonperforming lending-related assets to net loans










and leases (1) and other real estate owned

6.01%


6.60%


7.04%


6.79%


6.62%











Accruing loans past due 90 days or more, excluding










FDIC-supported loans

$         74,829


$    131,773


$      60,009


$      107,040


$       186,519

FDIC-supported loans past due 90 days or more

9,689


5,483


22,275


56,260


35,553

Ratio of accruing loans past due 90 days or more to










net loans and leases (1)

0.22%


0.36%


0.21%


0.40%


0.54%











Nonaccrual loans and accruing loans past due 90 days or more

$    2,020,722


$ 2,271,333


$ 2,453,486


$   2,542,714


$    2,578,457

Ratio of nonaccrual loans and accruing loans past due










90 days or more to net loans and leases (1)

5.35%


5.95%


6.27%


6.29%


6.22%











Accruing loans past due 30-89 days, excluding










FDIC-supported loans

$       303,472


$    317,666


$    462,409


$      428,290


$       571,399

FDIC-supported loans past due 30-89 days

8,919


27,180


55,919


27,485


74,142











Restructured loans included in nonaccrual loans

$       354,434


$    339,113


$    340,165


$      298,820


$       106,922

Restructured loans on accrual

334,416


288,388


211,486


204,233


115,635





















(1) Includes loans held for sale.



ZIONS BANCORPORATION AND SUBSIDIARIES










Allowance for Credit Losses










(Unaudited)





















Three Months Ended

(In thousands)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

Allowance for Loan Losses










Balance at beginning of period

$   1,563,753


$   1,581,577


$   1,531,332


$   1,432,715


$   1,248,055

Add:










Provision for losses

184,668


228,663


265,565


390,719


565,930

Increase in allowance covered by FDIC indemnification

17,190


8,748


11,770


-


-

Deduct:










Gross loan and lease charge-offs

(263,673)


(279,025)


(248,312)


(355,601)


(389,134)

Net charge-offs recoverable from FDIC

5,674


629


1,859


2,303


-

Recoveries

22,343


23,161


19,363


61,196


7,864

Net loan and lease charge-offs

(235,656)


(255,235)


(227,090)


(292,102)


(381,270)

Balance at end of period

$   1,529,955


$   1,563,753


$   1,581,577


$   1,531,332


$   1,432,715











Ratio of allowance for loan losses to net loans and










leases, at period end

4.07%


4.11%


4.06%


3.81%


3.47%











Ratio of allowance for loan losses to nonperforming










loans, at period end

79.02%


73.28%


66.70%


64.36%


60.80%











Annualized ratio of net loan and lease charge-offs to










average loans

2.50%


2.64%


2.29%


2.87%


3.65%











Reserve for Unfunded Lending Commitments










Balance at beginning of period

$       96,795


$        96,312


$      116,445


$        97,225


$        60,688

Provision charged (credited) to earnings

1,104


483


(20,133)


19,220


36,537

Balance at end of period

$       97,899


$        96,795


$        96,312


$      116,445


$        97,225











Total Allowance for Credit Losses










Allowance for loan losses

$   1,529,955


$   1,563,753


$   1,581,577


$   1,531,332


$   1,432,715

Reserve for unfunded lending commitments

97,899


96,795


96,312


116,445


97,225

Total allowance for credit losses

$   1,627,854


$   1,660,548


$   1,677,889


$   1,647,777


$   1,529,940











Ratio of total allowance for credit losses










to net loans and leases outstanding, at period end

4.34%


4.37%


4.31%


4.10%


3.71%



ZIONS BANCORPORATION AND SUBSIDIARIES 

Nonaccrual Loans By Portfolio Type

(Excluding FDIC-Supported Loans)

(Unaudited)





















(In millions)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

Commercial lending:




















Commercial and industrial


$       284




$    318




$    320




$    319




$    231


Leasing


2




8




8




11




10


Owner occupied


414




438




460




474




357


Total commercial lending


700




764




788




804




598






















Commercial real estate:




















Construction and land development


660




744




803




825




839


Term


263




281




324




228




221


Total commercial real estate


923




1,025




1,127




1,053




1,060






















Consumer:




















Home equity credit line


16




13




14




11




8


1-4 family residential


145




136




127




113




101


Construction and other consumer real estate


22




20




28




38




42


Bankcard and other revolving plans


1




1




-




1




1


Other


3




3




3




3




2


Total consumer


187




173




172




166




154


Total nonaccrual loans


$    1,810




$ 1,962




$ 2,087




$ 2,023




$ 1,812










































Net Charge-Offs By Portfolio Type








































(In millions)

Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


2010


2010


2010


2009


2009

Commercial lending:




















Commercial and industrial


72




$      52




$      49




$      36




$      70


Leasing


3




-




2




2




3


Owner occupied


32




35




36




27




19


Total commercial lending


107




87




87




65




92






















Commercial real estate:




















Construction and land development


71




99




86




139




219


Term


31




39




23




56




29


Total commercial real estate


102




138




109




195




248






















Consumer:




















Home equity credit line


6




7




7




4




6


1-4 family residential


15




14




15




14




17


Construction and other consumer real estate


7




6




5




10




10


Bankcard and other revolving plans


2




2




3




2




2


Other


3




2




3




4




6


Total consumer loans


33




31




33




34




41






















Charge-offs recoverable from FDIC


(6)




(1)




(2)




(2)




-


Total net charge-offs


$       236




$    255




$    227




$    292




$    381




ZIONS BANCORPORATION AND SUBSIDIARIES












CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES











(Unaudited)













Three Months Ended


Three Months Ended


Three Months Ended


September 30, 2010


June 30, 2010


March 31, 2010

(In thousands)

Average


Average


Average


Average


Average


Average


balance


rate


balance


rate


balance


rate

ASSETS












Money market investments

$   5,192,847


0.27%


$   3,853,275


0.27%


$   2,227,181


0.26%

Securities:












Held-to-maturity

843,268


4.14%


888,466


6.36%


899,587


4.88%

Available-for-sale

3,282,056


2.68%


3,364,126


2.67%


3,378,930


2.83%

Trading account

59,216


3.63%


72,322


3.64%


51,330


3.75%

Total securities

4,184,540


2.99%


4,324,914


3.45%


4,329,847


3.27%













Loans held for sale

188,794


4.67%


166,612


4.66%


179,433


5.34%













Loans:












Net loans and leases excluding FDIC-supported loans (1)

36,525,416


5.60%


37,345,580


5.60%


38,274,621


5.59%

FDIC-supported loans

1,149,976


11.93%


1,265,319


8.41%


1,393,775


5.59%

Total loans and leases

37,675,392


5.79%


38,610,899


5.69%


39,668,396


5.59%

Total interest-earning assets

47,241,573


4.93%


46,955,700


5.03%


46,404,857


5.12%

Cash and due from banks

1,063,000




1,444,343




1,280,013



Allowance for loan losses

(1,556,558)




(1,594,814)




(1,565,136)



Goodwill

1,015,161




1,015,161




1,015,161



Core deposit and other intangibles

97,741




104,083




110,754



Other assets

3,917,955




3,945,496




4,306,119



Total assets

$ 51,778,872




$ 51,869,969




$ 51,551,768















LIABILITIES












Interest-bearing deposits:












Savings and NOW

$   6,186,704


0.32%


$   6,026,526


0.35%


$   5,842,531


0.36%

Money market

15,584,312


0.63%


16,292,870


0.71%


16,515,285


0.77%

Time under $100,000

2,103,818


1.25%


2,247,255


1.36%


2,365,645


1.44%

Time $100,000 and over

2,462,904


1.21%


2,590,056


1.30%


2,911,319


1.23%

Foreign

1,563,090


0.60%


1,754,944


0.60%


1,663,380


0.61%

Total interest-bearing deposits

27,900,828


0.66%


28,911,651


0.73%


29,298,160


0.78%

Borrowed funds:












Securities sold, not yet purchased

38,789


4.33%


41,473


4.94%


50,243


4.29%

Federal funds purchased and security












repurchase agreements

873,954


0.14%


871,441


0.14%


1,137,716


0.20%

FHLB advances and other borrowings:












One year or less

210,235


5.34%


205,373


5.20%


152,203


5.28%

Over one year

18,415


4.74%


15,611


4.98%


15,693


5.07%

Long-term debt

1,927,360


16.45%


1,963,082


23.28%


2,028,912


13.09%

Total borrowed funds

3,068,753


10.82%


3,096,980


15.24%


3,384,767


8.24%

Total interest-bearing liabilities

30,969,581


1.67%


32,008,631


2.14%


32,682,927


1.55%

Noninterest-bearing deposits

13,786,784




13,318,836




12,544,442



Other liabilities

601,439




530,457




570,028



Total liabilities

45,357,804




45,857,924




45,797,397



Shareholders’ equity:












Preferred equity

1,819,889




1,624,856




1,509,197



Common equity

4,601,920




4,371,255




4,229,021



Controlling interest shareholders’ equity

6,421,809




5,996,111




5,738,218



Noncontrolling interests

(741)




15,934




16,153



Total shareholders’ equity

6,421,068




6,012,045




5,754,371



Total liabilities and shareholders’ equity

$ 51,778,872




$ 51,869,969




$ 51,551,768















Spread on average interest-bearing funds



3.26%




2.89%




3.57%

Taxable-equivalent net interest income and












net yield on interest-earning assets



3.84%




3.58%




4.03%













(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


September 30,


June 30,


2010


2010







Net interest margin as reported (GAAP)


3.84%



3.58%

Addback for the impact on net interest margin of:






Discount amortization on convertible subordinated debt


0.12%



0.12%

Accelerated discount amortization on convertible subordinated debt


0.23%



0.52%

Additional accretion of interest income on acquired loans


-0.16%



-0.08%

Core net interest margin


4.03%



4.14%



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) additional 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 an analytical tool, 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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