Zions Bancorporation Reports Third Quarter 2015 Financial Results

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Oct 19, 2015, 04:11 ET

SALT LAKE CITY, Oct. 19, 2015 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported third quarter net earnings applicable to common shareholders of $84.2 million, or $0.41 per diluted common share, compared to a net loss applicable to common shareholders of $(1.1) million, or $(0.01) per diluted common share, for the second quarter of 2015. The Company's second quarter results included a $137 million loss, or $0.42 per diluted share, from the sale of remaining collateralized debt obligation ("CDO") securities. Excluding this loss, net earnings applicable to common shareholders was $83.4 million, or $0.41 per diluted common share, for the second quarter of 2015.

The following is an abbreviated version of the 2015 third quarter earnings release. For the full version, including financial tables, please visit zionsbancorporation.com.

Third Quarter 2015 Highlights

Total noninterest expense was $396 million during the third quarter and $1,198 million year-to-date, compared to $404 million and $802 million reported last quarter. As previously committed, the Company is on track to achieve 50% of its target gross $120 million expense reduction by the end of 2015 and to hold adjusted noninterest expense below $1.6 billion in 2015.
The efficiency ratio improved to 69.5% during the third quarter, compared to 71.4% during the second quarter, reflecting the Company's commitment to have this ratio be at or less than 70% for the second half of 2015.
Overall credit quality remained in line with expectations, with moderate deterioration in energy loans and continued strength in other loans. When compared to the prior quarter's level, classified loans increased 2%, nonperforming assets declined 4%, net charge-offs excluding energy loans were stable, and the allowance for credit losses remained relatively unchanged.
Energy loan net charge-offs were $17 million during the third quarter; there were no energy loan net charge-offs during the second quarter. The Company increased the allowance for credit losses on its energy portfolio in part due to the substantial decline in energy prices during the third quarter. This contributed to an increased provision for loan losses of $18.3 million during the third quarter, compared to $0.6 million during the second quarter. The overall performance of the energy loan portfolio has been substantially consistent with the Company's initial communications in late 2014, which concluded that some deterioration was expected from declining energy prices; however, disciplined underwriting and strong reserves will keep the impact relatively modest to net charge-offs and overall profitability.
Net interest income increased slightly from the prior quarter while the net interest margin declined to 3.11% from 3.18%, primarily driven by an increased concentration of cash and securities and a decline in the yield of the loan portfolio attributable primarily to the waning benefit from loans purchased from the FDIC in 2009.
Loans held for investment increased $89 million during the third quarter. Excluding the effect of attrition in energy-related loans and the National Real Estate portfolio, loans increased $285 million during the third quarter, compared to a $259 million increase during the second quarter calculated on the same basis.

"We're continuing to make solid progress in achieving our goals with respect to improved operating efficiency while building a very strong balance sheet and investing in systems and processes that will allow us to provide exceptional service to our customers," said Harris H. Simmons, chairman and chief executive officer. "We've received regulatory approval to consolidate our seven subsidiary banks under a single national bank charter, which we expect to complete on December 31 of this year. We will continue to emphasize our locally-oriented leadership structure and the power of our strong local brands in each market we serve. We are simultaneously streamlining our risk and credit organizations and enhancing local credit decision-making authority. The consolidation of our bank charters will facilitate a simpler and more responsive operating environment and the realization of efficiencies more quickly and in greater measure than is possible under the status quo."

Mr. Simmons concluded, "While loan growth has been sluggish in the current environment, we are encouraged by the Company's credit quality metrics, with only modest deterioration in the level of classified loans and net charge-offs that are in line to better than peer average levels. The Company's funding profile, loss reserves and capital levels also remain very strong relative to peers."

Supplemental Presentation and Conference Call
Zions has posted a supplemental presentation to its website, which will be used to discuss these third quarter results at 5:30 p.m. ET this afternoon (October 19, 2015). Media representatives, analysts, investors, and the public are invited to join this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 56565783, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at 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 in 11 Western and Southwestern states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. The Company is a national leader in Small Business Administration lending and received 24 "Excellence" awards by Greenwich Associates for the 2014 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 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. Statements based on historical data are not intended and should not be understood to indicate the Company's expectations regarding future events. 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 include the actual amount and duration of declines in the price of oil and gas as well as other factors 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, 2015		June 30, 2015		March 31, 2015		December 31, 2014		September 30, 2014
BALANCE SHEET
Loans and leases, net of allowance	$	39,516,683	$	39,414,609	$	39,560,101	$	39,458,995	$	39,129,295
Total assets	58,410,927		58,365,459		57,555,931		57,208,874		55,458,870
Deposits	48,920,147		48,937,124		48,123,360		47,848,075		46,266,562
Total shareholders' equity	7,638,095		7,530,175		7,454,298		7,369,530		7,322,159

STATEMENT OF INCOME
Net interest income	$	425,377	$	423,704	$	417,346	$	430,430	$	416,819
Taxable-equivalent net interest income	429,782		428,015		421,581		434,789		420,850
Provision for loan losses	18,262		566		(1,494)		11,587		(54,643)
Total noninterest income	130,813		421		121,822		129,396		116,071
Total noninterest expense	396,149		404,100		397,461		422,666		438,536

Net earnings (loss) applicable to common shareholders	84,238		(1,100)		75,279		66,761		79,127

PER COMMON SHARE
Net earnings (loss) per diluted common share	$	0.41	$	(0.01)	$	0.37	$	0.33	$	0.40
Dividends	0.06		0.06		0.04		0.04		0.04
Book value per common share ¹	32.47		32.03		31.74		31.35		31.14

Tangible book value per common share ¹	27.42		26.95		26.64		26.23		26.00

SELECTED RATIOS
Return on average assets	0.69%		0.10%		0.66%		0.57%		0.69%
Return on average common equity	5.02%		(0.07)%		4.77%		4.06%		5.10%

Tangible return on average tangible common equity	6.05%		0.03%		5.80%		4.95%		6.19%
Net interest margin	3.11%		3.18%		3.22%		3.25%		3.20%
Efficiency ratio	69.5%		71.4%		72.3%		74.1%		73.0%
Effective tax rate	28.8%		28.3%		35.7%		34.8%		35.6%

Ratio of nonperforming assets to loans and leases and other real estate owned	0.92%		0.96%		0.99%		0.81%		0.84%

Annualized ratio of net loan and lease charge-offs to average loans	0.31%		0.11%		(0.17)%		0.17%		0.11%

Ratio of total allowance for credit losses to loans and leases outstanding ¹	1.69%		1.72%		1.75%		1.71%		1.74%

Capital Ratios ¹
Tangible common equity ratio	9.76%		9.58%		9.58%		9.48%		9.70%
Basel III: ²
Common equity tier 1 capital	12.17%		12.00%		11.76%
Tier 1 leverage	11.63%		11.65%		11.75%
Tier 1 risk-based capital	14.43%		14.26%		13.93%
Total risk-based capital	16.48%		16.32%		15.97%
Basel I:
Tier 1 common equity							11.92%		11.86%
Tier 1 leverage							11.82%		11.87%
Tier 1 risk-based capital							14.47%		14.43%
Total risk-based capital							16.27%		16.28%

Weighted average common and common-equivalent shares outstanding	204,154,880		202,887,762		202,944,209		203,277,500		197,271,076
Common shares outstanding ¹	204,278,594		203,740,914		203,192,991		203,014,903		202,898,491