Zions Bancorporation : Reports Earnings of $0.24 Per Diluted Common Share for Fourth Quarter 2011

SALT LAKE CITY, Jan. 23, 2012/PRNewswire/ -- Zions Bancorporation (Nasdaq: ZION) ("Zions" or "the Company") today reported fourth quarter net earnings applicable to common shareholders of $44.4 millionor $0.24per diluted common share, compared to $65.2 millionor $0.35per diluted share for the third quarter of 2011. Excluding the noncash effects of the discount amortization on convertible subordinated debt and additional accretion (net of expense) on acquired loans, net earnings were $53.5 millionor $0.30per diluted share for the fourth quarter of 2011, compared to $74.8 millionor $0.40per diluted share for the third quarter of 2011.

Fourth Quarter 2011 Highlights

• Nonaccrual loans decreased 15% to $0.9 billion, compared to a decrease of 16% to $1.1 billionin the third quarter.  
• Other real estate owned decreased 25% to $153 million, compared to a decrease of 15% to $203 millionin the third quarter.
• Net charge-offs decreased 7% to $95 million, compared to a decrease of 10% to $102 millionin the third quarter.
• Average loans and leases, excluding FDIC-supported loans, increased 0.4% or $158 millionto $36.1 billion, compared to a $4 millionincrease in the third quarter.
• The estimated Tier 1 common to risk-weighted assets ratio was 9.55% compared to 9.53% in the third quarter.
• Net interest income decreased 1.8% to $462 millionfrom $471 millionin the third quarter. The net interest margin decreased 13 basis points to 3.86% from 3.99% in the third quarter. The increase in average cash-related balances accounted for 8 basis points of the decrease.
• Average total deposits increased $804 million, compared to an increase of $512 millionin the third quarter. Average cash-related balances increased $1.1 billion, compared to an increase of $726 millionin the third quarter.  

"We are again pleased with the significant improvement in credit quality this quarter, which we expect to continue and to result in lower net charge-offs in 2012," said Harris H. Simmons, chairman and chief executive officer. Mr. Simmons continued, "We also are pleased with the somewhat stronger loan growth this quarter and with signs of strengthening loan pipelines, particularly for business loans. Revenue growth was a challenge for us, as it was for the whole industry, in 2011." Mr. Simmons concluded, "However, we see signs of stabilizing loan pricing, which with continued loan growth and improving credit quality should lead to improved results in 2012."

Asset Quality

Nonperforming lending-related assets declined approximately 16% to $1.1 billionat December 31, 2011from $1.3 billionat September 30, 2011. Nonaccrual loans declined approximately 15% to $0.9 billionat December 31, 2011from $1.1 billionat September 30, 2011. Additions to nonaccrual loans declined to $209 millionduring the fourth quarter of 2011, compared to $233 millionduring the third quarter of 2011. Nonaccrual loans that are current as to principal and interest were approximately 41% of the balance at December 31, 2011, compared to 39% at September 30, 2011. Other real estate owned declined approximately 25% to $153 millionat December 31, 2011, compared to $203 millionat September 30, 2011.

The ratio of nonperforming lending-related assets to net loans and leases and other real estate owned decreased to 2.83% at December 31, 2011, compared to 3.43% at September 30, 2011.

Classified loans decreased approximately 13% to $2.1 billionat December 31, 2011, compared to 12% to $2.4 billionat September 30, 2011. Additions to classified loans decreased to $330 millionduring the fourth quarter of 2011, compared to $357 millionduring the third quarter of 2011. Approximately 72% of classified loans were current as to principal and interest for the fourth quarter of 2011, unchanged from the third quarter of 2011.  

Net loan and lease charge-offs were $95 millionfor the fourth quarter of 2011, compared to $102 millionfor the third quarter of 2011. Net charge-offs declined primarily in commercial and industrial loans.  

The Company had a negative provision for loan losses, $(1.5) million, for the fourth quarter of 2011, compared to a provision of $14.6 millionfor the third quarter of 2011. The decline mainly resulted from improvement in the credit quality indicators previously discussed. The allowance for credit losses was $1.2 billion, or 3.10% of net loans and leases at December 31, 2011, compared to $1.3 billion, or 3.40% of net loans and leases at September 30, 2011. The allowance for credit losses was 127% of nonaccrual loans at December 31, 2011, compared to 117% at September 30, 2011, and equaled approximately 3.0 years' coverage of annualized net charge-offs at December 31, 2011.

Loans

Average loans and leases, excluding FDIC supported loans, increased $158 millionor 0.4% to $36.1 billionduring the fourth quarter of 2011, compared to an increase of $4 millionduring the third quarter of 2011. Net increases in commercial and industrial loans, primarily at Amegy Bank and Zions Bank, along with net increases in term commercial real estate primarily at California Bank & Trust, were offset by decreases in construction and land development, commercial owner occupied, and FDIC-supported loans. FDIC-supported loans in the aggregate continue to perform better than originally forecasted.

Deposits

Average total deposits for the fourth quarter of 2011 increased $804 millionor 1.9% to $42.2 billioncompared to $41.4 billionfor the third quarter of 2011. The increase resulted primarily from a higher level of average noninterest-bearing demand deposits for the fourth quarter of 2011 which were $15.5 billion, compared to $14.8 billionfor the third quarter of 2011. The large majority of the increase occurred in commercial accounts at Amegy Bank. The ratio of loans to deposits was 86.9% at December 31, 2011, compared to 89.1% at September 30, 2011.

Net Interest Income

Net interest income decreased 1.8% to $462 millionfor the fourth quarter of 2011, compared to $471 millionfor the third quarter of 2011; the decrease was primarily due to rate resets on older vintage longer-term loans. The net interest margin decreased 13 basis points to 3.86% in the fourth quarter of 2011, compared to 3.99% in the third quarter of 2011; approximately 8 basis points of the decline was attributable to an increase in average cash-related balances to $6.6 billionfor the fourth quarter, compared to $5.5 billionfor the third quarter.

The calculations of core net interest income and the core net interest margin adjust for discount amortization on convertible subordinated debt and accretion on acquired loans. For the fourth quarter of 2011, these adjustments substantially offset each other as core net interest income at $461 millionwas substantially the same as net interest income, and the core net interest margin was the same as the net interest margin.

Investment Securities

During the fourth quarter of 2011, the Company recognized credit-related OTTI on CDOs of $12.1 millionor $0.04per diluted share, compared to $13.3 millionor $0.04per diluted share during the third quarter of 2011. The OTTI this quarter included $4.3 millionfrom a homebuilder bankruptcy within the CDO pool and $4.6 millionthat resulted primarily from assumption increases in the medium-term PDs of the best performing banks. In its CDO portfolio, the Company had exposure to 24 of the 92 bank failures that occurred in 2011. At the time of default, the Company's weighted average PD for the 24 failed banks was 96%.

The following table shows the changes in carrying value for CDOs at December 31, 2011compared to September 30, 2011:

		December 31, 2011												% of carrying				Change
(Amounts in millions)		Par				Amortized cost				Carrying value				value to par				12/31/11
		Amount		%		Amount		%		Amount		%		12/31/11		9/30/11		vs 9/30/11
Predominantly bank CDOs
by original ratings:
AAA		$    944		36%		$    827		38%		$    577		47%		61%		60%		1 %
A		948		36%		727		34%		194		16%		20%		20%		0 %
BBB		67		3%		24		1%		3		0%		4%		3%		1 %
Total bank CDOs		1,959		75%		1,578		73%		774		63%		40%		39%		1 %
Insurance only CDOs		461		18%		455		21%		363		30%		79%		79%		0 %
Other CDOs		189		7%		123		6%		83		7%		44%		45%		(1)%
Total CDOs		$ 2,609		100%		$ 2,156		100%		$ 1,220		100%		47%		47%		0 %

Noninterest Income

Noninterest income for the fourth quarter of 2011 was $98.3 million, compared to $121.0 millionin the third quarter of 2011. The decrease included an $8 millionreduction, partially offset by other items, in other service charges, commissions and fees due to the impact of the Durbin amendment. Other decreases in noninterest income during the quarter primarily resulted from the recognition in the third quarter of both the $13 millionfixed income securities gains and the $5.5 millionequity securities gain from the sale of BServ, Inc. (dba BankServ) stock.

Noninterest Expense

Noninterest expense for the fourth quarter of 2011 was $425.0 millioncompared to $409.0 millionfor the third quarter of 2011. The increase in salaries and employee benefits primarily resulted from one-time accrual adjustments of approximately $6 millionfor retirement-related benefits. Excluding employee benefits, salaries and bonuses in the fourth quarter of 2011 were lower than the third quarter of 2011 and the fourth quarter of 2010. Other significant increases included the provision for unfunded lending commitments, legal and professional services, and other related accruals. Notable decreases included other real estate and credit related expenses.

Shareholders' Equity

Effective November 16, 2011, approximately $15.0 millionof convertible subordinated debt was converted into depositary shares each representing a 1/40th interest in a share of the Company's preferred stock. This conversion added 14,957 shares of Series C to the Company's preferred stock. Accelerated discount amortization on the converted debt increased interest expense by a pretax noncash amount of approximately $5.8 million($4.7 millionafter-tax) in the fourth quarter of 2011, compared to $7.5 million($6.1 millionafter-tax) in the third quarter of 2011.  

The estimated Tier 1 common to risk-weighted assets ratio was 9.55% at December 31, 2011, compared to 9.53% at September 30, 2011.

Conference Call

Zions will host a conference call to discuss these fourth quarter results at 5:30 p.m. ETthis afternoon (January 23, 2012). Media representatives, analysts and the public are invited to listen to this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 36356880, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at . A replay of the call will be available from approximately 7:30 p.m. ETon Monday, January 23, 2012, until midnight ETon Monday, January 30, 2012, by dialing 404-537-3406 (domestic and international) and entering the passcode 36356880. The webcast of the conference call will also be archived and available for 30 days.

About Zions Bancorporation

Zions Bancorporation is one of the nation's premier financial services companies, consisting of a collection of great banks in select Western markets. Zions operates its banking businesses under local management teams and community identities through approximately 500 offices in 10 Western and Southwestern states:  Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utahand 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 .

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 private and governmental legal actions or changes in existing private and governmental legal actions; 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 ().

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 share, per share, and ratio data)		December 31,		September 30,		June 30,		March 31,		December 31,
		2011		2011		2011		2011		2010
PER COMMON SHARE
Dividends		$             0.01		$             0.01		$             0.01		$             0.01		$             0.01
Book value per common share		25.02		24.78		24.88		24.93		25.12
Tangible common equity per common share		19.14		18.87		18.95		18.96		19.09
SELECTED RATIOS
Return on average assets		0.67 %		0.84 %		0.57 %		0.42 %		(0.56)%
Return on average common equity		3.84 %		5.58 %		2.53 %		1.29 %		(9.51)%
Net interest margin		3.86 %		3.99 %		3.62 %		3.76 %		3.49 %
Capital Ratios
Tangible common equity ratio		6.77 %		6.90%		6.95%		7.01%		6.99%
Tangible equity ratio		11.33 %		11.56%		11.58%		11.36%		11.10%
Average equity to average assets		13.27 %		13.51%		13.42%		13.25%		12.80%
Risk-Based Capital Ratios(1):
Tier 1 common to risk-weighted assets		9.55%		9.53%		9.36%		9.32%		8.95%
Tier 1 leverage		13.39%		13.48%		13.44%		13.14%		12.56%
Tier 1 risk-based capital		16.10%		16.10%		15.87%		15.46%		14.78%
Total risk-based capital		18.04%		18.12%		18.01%		17.77%		17.15%
Taxable-equivalent net interest income		$       466,699		$       475,580		$       421,226		$       429,231		$       412,001
Weighted average common and common-
equivalent shares outstanding		182,823,190		182,857,702		182,728,185		181,997,687		178,097,851
Common shares outstanding		184,135,388		184,294,782		184,311,290		183,854,486		182,784,086
(1)Ratios for December 31, 2011 are estimates.

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
		December 31,		September 30,		June 30,		March 31,		December 31,
(In thousands, except share amounts)		2011		2011		2011		2011		2010
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
ASSETS
Cash and due from banks		$   1,224,350		$    1,102,768		$   1,035,028		$      949,140		$      924,126
Money market investments:
Interest-bearing deposits		7,020,895		5,118,066		4,924,992		4,689,323		4,576,008
Federal funds sold and security resell agreements		102,159		165,106		123,132		67,197		130,305
Investment securities:
Held-to-maturity, at adjusted cost (approximate fair value
$729,974, $715,608, $762,998, $758,169, and $788,354)		807,804		791,569		829,702		820,636		840,642
Available-for-sale, at fair value		3,230,795		3,970,602		4,084,963		4,130,342		4,205,742
Trading account, at fair value		40,273		49,782		51,152		56,549		48,667
		4,078,872		4,811,953		4,965,817		5,007,527		5,095,051
Loans held for sale		201,590		159,300		158,943		195,055		206,286
Loans:
Loans and leases excluding FDIC-supported loans		36,526,661		36,050,339		36,092,361		35,753,638		35,896,395
FDIC-supported loans		751,091		800,530		853,937		912,881		971,377
		37,277,752		36,850,869		36,946,298		36,666,519		36,867,772
Less:
Unearned income and fees, net of related costs		133,100		126,361		122,721		120,725		120,341
Allowance for loan losses		1,049,958		1,148,903		1,237,733		1,349,800		1,440,341
Loans and leases, net of allowance		36,094,694		35,575,605		35,585,844		35,195,994		35,307,090
Other noninterest-bearing investments		865,231		860,045		858,678		858,958		858,367
Premises and equipment, net		719,276		726,503		722,600		721,487		720,985
Goodwill		1,015,129		1,015,129		1,015,161		1,015,161		1,015,161
Core deposit and other intangibles		67,830		72,571		77,346		82,199		87,898
Other real estate owned		153,178		203,173		238,990		268,876		299,577
Other assets		1,605,905		1,721,101		1,654,883		1,756,791		1,814,032
		$ 53,149,109		$  51,531,320		$ 51,361,414		$ 50,807,708		$ 51,034,886
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand		$ 16,110,857		$  14,911,729		$ 14,475,383		$ 13,790,615		$ 13,653,929
Interest-bearing:
Savings and NOW		7,159,101		6,711,002		6,555,306		6,494,013		6,362,138
Money market		14,616,740

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
		Three Months Ended
(In thousands, except per share amounts)		December 31,		September 30,		June 30,		March 31,		December 31,
		2011		2011		2011		2011		2010
Interest income:
Interest and fees on loans		$      504,243		$       520,133		$ 523,741		$ 518,157		$      539,452
Interest on money market investments		4,308		3,482		3,199		2,843		3,419
Interest on securities:
Held-to-maturity		9,106		8,937		9,009		8,664		8,149
Available-for-sale		21,268		21,382		22,179		22,276		22,472
Trading account		548		462		538		452		546
Total interest income		539,473		554,396		558,666		552,392		574,038

ZIONS BANCORPORATION AND SUBSIDIARIES

Loan Balances By Portfolio Type

(Unaudited)

(In millions)

December 31,

September 30,

June 30,

March 31,

December 31,

2011

2011

2011

2011

2010

Commercial:

Commercial and industrial

ZIONS BANCORPORATION AND SUBSIDIARIES
Nonperforming Lending-Related Assets
(Unaudited)
(Amounts in thousands)		December 31,		September 30,		June 30,		March 31,		December 31,
		2011		2011		2011		2011		2010
Nonaccrual loans		$      885,608		$    1,038,803		$ 1,243,304		$ 1,379,521		$   1,492,869
Other real estate owned		128,874		170,023		195,005		225,005		259,614
Nonperforming lending-related assets, excluding
FDIC-supported assets		1,014,482		1,208,826		1,438,309		1,604,526		1,752,483
FDIC-supported nonaccrual loans		24,267		29,082		30,414		32,935		35,837
FDIC-supported other real estate owned		24,304		33,150		43,985		43,871

ZIONS BANCORPORATION AND SUBSIDIARIES
Allowance for Credit Losses
(Unaudited)
		Three Months Ended
(Amounts in thousands)		December 31,		September 30,		June 30,		March 31,		December 31,
		2011		2011		2011		2011		2010
Allowance for Loan Losses
Balance at beginning of period		$   1,148,903		$    1,237,733		$ 1,349,800		$ 1,440,341		$   1,529,955
Add:
Provision for losses		(1,476)		14,553		1,330		60,000		173,242
Adjustment for FDIC-supported loans		(2,655)		(1,520)		(162)		(4,514)		(6,046)
Deduct:
Gross loan and lease charge-offs		(120,599)

ZIONS BANCORPORATION AND SUBSIDIARIES
Nonaccrual Loans By Portfolio Type
(Excluding FDIC-Supported Loans)
(Unaudited)
(In millions)		December 31,				September 30,				June 30,				March 31,				December 31,
		2011				2011				2011				2011				2010
Loans held for sale			$       18				$       18				$      17				$      21				$         -
Commercial:
Commercial and industrial			127				176				186				213				224
Leasing			2				1				1				1				1
Owner occupied			239				268				314				317				342
Municipal			-				-				6				2				2
Total commercial			368				445				507				533				569
Commercial real estate:

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)

ZIONS BANCORPORATION AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliation
(Unaudited)
			Three Months Ended
			December 31, 2011				September 30, 2011
(Amounts in thousands)					Diluted				Diluted
			Amount		EPS		Amount		EPS
1.	Net Earnings Excluding the Effects of the Discount Amortization on
	Convertible Subordinated Debt and Additional Accretion on Acquired Loans
	Net earnings applicable to common shareholders (GAAP)		$   44,420		$  0.24		$   65,165		$  0.35
	Addback for the after-tax impact of:
	Discount amortization on convertible subordinated debt		6,679		0.04		6,574		0.04
	Accelerated discount amortization on convertible subordinated debt		4,687		0.03		6,095		0.03
	Additional accretion of interest income on acquired loans, net of expense		(2,242)		(0.01)		(3,019)		(0.02)
	Net earnings excluding the effects of the discount amortization on convertible
	subordinated debt and additional accretion on acquired loans (non-GAAP)		$   53,544		$  0.30		$   74,815		$  0.40
			Three Months Ended
			December 31, 2011				September 30, 2011
2.	Core Net Interest Income (NII)/Net Interest Margin (NIM)		NII		NIM		NII		NIM
	Net interest income/net interest margin as reported (GAAP)		$ 461,908		3.86 %	(1)	$ 470,595		3.99 %	(1)
	Addback for the pretax impact of:
	Discount amortization on convertible subordinated debt		10,817		0.09 %		10,645		0.09 %
	Accelerated discount amortization on convertible subordinated debt		5,759		0.05 %		7,498		0.06 %
	Additional accretion of interest income on acquired loans		(17,003)		(0.14)%		(20,642)		(0.17)%
	Core net interest income/net interest margin (non-GAAP)		$ 461,481		3.86 %		$ 468,096		3.97 %
	(1) Calculation of net interest margin is based on taxable equivalent net interest income.

This Press Release presents the following non-GAAP financial measures: 1. Net earnings excluding the effects of the discount amortization on convertible subordinated debt and additional accretion on acquired loans, and  2. Core net interest income/net interest margin. These non-GAAP financial measures exclude the effects of the following adjustments:  (i) periodic discount amortization on convertible subordinated debt; (ii) accelerated discount amortization on convertible subordinated debt which has been converted; and (iii) additional accretion of interest income on acquired loans based on increased projected cash flows (net of related expense in 1.).

The identified adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results.

The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period and company-to-company comparisons, which will assist investors and analysts in analyzing the operating results of the Company and in predicting future performance. These non-GAAP financial measures are used by management and the Board of Directors to assess the performance of the Company's business for evaluating bank reporting segment performance, for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting these non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management and the Board of Directors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these 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 reported under GAAP.

SOURCE Zions Bancorporation