Zions Bancorporation Reports Earnings Of $0.34 Per Diluted Common Share For Third Quarter 2012
Zions Bancorporation Reports Earnings Of $0.34 Per Diluted Common Share For
Third Quarter 2012
PR Newswire
SALT LAKE CITY, Oct. 22, 2012
SALT LAKE CITY, Oct. 22, 2012 /PRNewswire/ -- Zions Bancorporation (NASDAQ:
ZION) ("Zions" or "the Company") today reported third quarter net earnings
applicable to common shareholders of $62.3 million or $0.34 per diluted common
share, compared to $55.2 million or $0.30 per diluted share for the second
quarter of 2012.
Adjusted for the noncash effects in the third quarter of (1) the discount
amortization on conversion of subordinated debt and additional accretion, net
of expense, on acquired FDIC-supported loans ($6.3 million, $0.03 per share),
and (2) the remaining discount amortization for the $700 million redemption of
Troubled Asset Relief Program ("TARP") preferred stock ($16.6 million, $0.09
per share), net earnings were $85.2 million or $0.46 per diluted share for the
third quarter of 2012, compared to $72.9 million or $0.40 per diluted share
for the second quarter of 2012.
Third Quarter 2012 Highlights
o Loans and leases, excluding FDIC-supported loans, increased $351 million,
or an annualized 3.9%, to $36.6 billion at September 30, 2012.
o Net interest income increased to $444 million from $432 million in the
second quarter; core net interest income declined slightly to $439 million
from $444 million in the second quarter.
o Both net loan and lease charge-offs and nonperforming lending-related
assets declined 11%, as credit quality continues to improve.
o Tangible common equity per common share improved to $20.24 from $19.65 in
the second quarter.
o The Company successfully completed the redemption of its TARP preferred
stock.
"We are pleased with the accomplishments in the third quarter, including
stronger loan growth and the final redemption of TARP funds," said Harris H.
Simmons, chairman and chief executive officer. "Regarding loan growth, we
currently expect stronger loan balances in the fourth quarter and in 2013,"
continued Mr. Simmons. "We are also pleased with the continued strong
improvement in credit quality, including a strong improvement in nonperforming
assets and net charge-offs compared to the prior quarter."
Loans
Loans and leases, excluding FDIC-supported loans, increased $351 million on a
net basis to $36.6 billion at September 30, 2012, compared to $36.2 billion at
June 30, 2012. The increases were predominantly in commercial and industrial,
1-4 family residential, and term commercial real estate loans and were
widespread geographically. Decreases of $285 million in commercial owner
occupied and construction and land development loans partially offset
increases in other loan categories. Average loans and leases, excluding
FDIC-supported loans, were $36.5 billion during the third quarter of 2012,
compared to $36.1 billion during the second quarter of 2012.
Deposits
Average total deposits for the third quarter of 2012 increased $535 million,
or 1.2% (5.0% annualized), to $43.5 billion, compared to $42.9 billion for the
second quarter of 2012. The increase resulted from a higher level of average
noninterest-bearing demand deposits, primarily in nonpersonal accounts, for
the third quarter of 2012, which were $16.8 billion compared to $16.2 billion
for the second quarter of 2012. The ratio of loans to deposits was 84.9% at
September 30, 2012, compared to 85.4% at June 30, 2012.
Debt and Shareholders' Equity
As previously reported, on September 26, 2012, the Company redeemed the
remaining $700 million of TARP preferred stock pursuant to its Capital Plan
submitted to the Federal Reserve in January 2012. The increase in the
preferred stock dividend this quarter primarily resulted from the remaining
discount amortization related to warrants issued in conjunction with the TARP
preferred stock.
As previously announced, effective September 17, 2012, approximately $5.4
million of convertible subordinated debt was converted into the Company's
Series C preferred stock. Accelerated discount amortization on the converted
debt increased interest expense by a pretax noncash amount of approximately
$2.0 million ($1.6 million after-tax) in the third quarter of 2012, compared
to $16.2 million ($13.2 million after-tax) in the second quarter of 2012.
Accumulated other comprehensive income (loss) improved by approximately $41
million, primarily due to fair value increases in CDO investment securities.
The tangible common equity ratio was 7.17% at September 30, 2012, compared to
6.91% at June 30, 2012. The estimated common equity tier 1 capital ratio was
9.84% at September 30, 2012, compared to 9.78% at June 30, 2012.
Net Interest Income
Net interest income increased 2.8% to $444 million for the third quarter of
2012, compared to $432 million for the second quarter of 2012. Core net
interest income, adjusted for the discount amortization on convertible
subordinated debt and accretion on acquired loans, was approximately $439
million for the third quarter of 2012, compared to $444 million for the second
quarter of 2012.
The net interest margin increased to 3.63% in the third quarter of 2012,
compared to 3.62% in the second quarter of 2012. The core net interest margin
decreased 12 basis points to 3.60% in the third quarter, compared to 3.72% in
the second quarter. The decreases in the core net interest income and margin
were due primarily to reduced yields on loans and investment securities
attributable to rate resets; on these assets, the initial rate was fixed for a
period of time (typically five years) and the current benchmark index rate is
significantly lower than it was at the time the assets were originated.
Similarly, maturing loans are being replaced at tighter credit spreads.
Noninterest Income
Noninterest income for the third quarter of 2012 was $119.2 million, compared
to $123.0 million for the second quarter of 2012. The decrease was primarily
due to lower dividends and other investment income in the third quarter
compared to higher levels recognized in the second quarter. Other less
volatile sources of noninterest income, such as various service charges on
deposits and loans, were relatively stable compared to the second quarter.
CDO Investment Securities
During the third quarter of 2012, the Company recognized credit-related
other-than-temporary impairment ("OTTI") on collateralized debt obligations
("CDOs") of $2.7 million or $0.01 per diluted share, compared to $7.3 million
or $0.02 per diluted share during the second quarter of 2012. OTTI this
quarter was due primarily to the impact of prepayments on the value of junior
CDO tranches. Gains resulting from cash principal payments on CDOs previously
written down, amounting to $3.0 million, exceeded OTTI during the third
quarter of 2012.
The following table stratifies the CDOs into performing tranches without
credit impairment and nonperforming tranches at September 30, 2012:
September 30, 2012
Net % of carrying value to
unrealized Weighted par
(Amounts in No. of Par Amortized Carrying losses average September June
millions) recognized discount 30, 30, Change
tranches amount cost value in AOCI ^1 rate ^2 2012 2012
Performing
CDOs
Predominantly 30 $ 887 $ 792 $ 637 $ (155) 5.34 % 72 % 63 % 9 %
bank CDOs
Insurance-only 21 450 444 322 (122) 8.51 % 72 % 73 % (1) %
CDOs
Other CDOs 7 79 68 62 (6) 7.29 % 78 % 76 % 2 %
Total
performing 58 1,416 1,304 1,021 (283) 6.46 % 72 % 67 % 5 %
CDOs
Nonperforming
CDOs ^3
CDOs deferring
interest, but 3 72 72 19 (53) 13.69 % 26 % 29 % (3) %
never credit
impaired
CDOs credit
impaired prior 32 593 437 128 (309) 13.44 % 22 % 23 % (1) %
to last 12
months
CDOs credit
impaired 23 444 275 63 (212) 14.84 % 14 % 16 % (2) %
during last 12
months
Total
nonperforming 58 1,109 784 210 (574) 14.02 % 19 % 21 % (2) %
CDOs
Total CDOs 116 $ 2,525 $ 2,088 $ 1,231 $ (857) 9.78 % 49 % 47 % 2 %
^1 Accumulated other comprehensive income, amounts presented are pretax.
^2 Margin over related LIBOR index.
^3 Defined as either deferring current interest ("PIKing") or OTTI; the
majority are predominantly bank CDOs.
Fair value increases occurred in senior tranches and were driven by collateral
credit quality improvements, prepayments and declining credit spreads.
Noninterest Expense
Noninterest expense for the third quarter of 2012 was $395.0 million compared
to $401.7 million for the second quarter of 2012. The decrease was due
primarily to a reduction in other real estate expense resulting from increased
net gains on property sales, and to a decline in the provision for unfunded
lending commitments.
Asset Quality
Net loan and lease charge-offs decreased 11% to $38 million for the third
quarter of 2012, compared to $43 million million for the second quarter of
2012; gross charge-offs declined 20% compared to the second quarter and have
declined 54% compared to the year-ago period. Net charge-offs declined
primarily in commercial and industrial and home equity credit line loans.
Nonperforming lending-related assets declined 11% to $838 million at
September 30, 2012 from $938 million at June 30, 2012. Nonaccrual loans
declined 9% to $719 million at September 30, 2012 from $793 million at
June 30, 2012. The ratio of nonperforming lending-related assets to loans and
leases and other real estate owned decreased to 2.23% at September 30, 2012,
compared to 2.53% at June 30, 2012.
Classified loans, excluding FDIC-supported loans, decreased approximately 4%
to $1.8 billion at September 30, 2012, compared to $1.9 billion at June 30,
2012. Approximately 76% of classified loans were current as to principal and
interest for the third quarter of 2012, compared to 73% for the second quarter
of 2012.
The provision (credit) for loan losses was $(1.9) million for the third
quarter of 2012, compared to $10.9 million for the second quarter of 2012. The
allowance for credit losses was $1.0 billion, or 2.77% of loans and leases at
September 30, 2012, compared to $1.1 billion, or 2.92% of loans and leases at
June 30, 2012. The reduction in both the allowance and the provision is
attributable to improvement in the quantity and severity of problem loans.
Conference Call
Zions will host a conference call to discuss these third quarter results at
5:30 p.m. ET this afternoon (October 22, 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 32821169,
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 22, 2012,
until midnight ET on Monday, October 29, 2012, by dialing 404-537-3406
(domestic and international) and entering the same passcode. 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, 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 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 (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 September 30, June 30, March 31, December 31, September 30,
share, and ratio 2012 2012 2012 2011 2011
data)
PER COMMON SHARE
Dividends $ 0.01 $ 0.01 $ 0.01 $ 0.01 $ 0.01
Book value per 26.05 25.48 25.25 25.02 24.78
common share ^1
Tangible common
equity per common 20.24 19.65 19.39 19.14 18.87
share ^1
SELECTED RATIOS
Return on average 0.82 % 0.70 % 0.69 % 0.67 % 0.84 %
assets
Return on average 5.21 % 4.71 % 2.21 % 3.84 % 5.58 %
common equity
Net interest 3.63 % 3.62 % 3.73 % 3.86 % 3.99 %
margin
Capital Ratios
Tangible common 7.17 % 6.91 % 6.89 % 6.77 % 6.90 %
equity ratio ^1
Tangible equity 9.32 % 10.35 % 10.24 % 11.33 % 11.56 %
ratio ^1
Average equity to 12.22 % 12.37 % 13.31 % 13.27 % 13.51 %
average assets
Risk-Based Capital
Ratios ^1,2
Common equity tier 9.84 % 9.78 % 9.71 % 9.57 % 9.53 %
1 capital
Tier 1 leverage 11.04 % 12.31 % 12.17 % 13.40 % 13.48 %
Tier 1 risk-based 13.46 % 15.03 % 14.83 % 16.13 % 16.10 %
capital
Total risk-based 15.21 % 16.89 % 16.76 % 18.06 % 18.12 %
capital
Taxable-equivalent
net interest $ 448,632 $ 436,610 $ 447,161 $ 466,699 $ 475,580
income
Weighted average
common and 183,382,650 183,136,631 182,963,828 182,823,190 182,857,702
common-equivalent
shares outstanding
Common shares 184,156,402 184,117,522 184,228,178 184,135,388 184,294,782
outstanding ^1
^1 At period end.
^2 Ratios for September 30, 2012 are estimates.
CONSOLIDATED BALANCE SHEETS
(In thousands, September 30, June 30, March 31, December 31, September
except share 2012 2012 2012 2011 30,
amounts) 2011
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
ASSETS
Cash and due from $ 1,060,918 $ 1,124,673 $ 1,082,186 $ 1,224,350 $ 1,102,768
banks
Money market
investments:
Interest-bearing 5,519,463 7,887,175 7,629,399 7,020,895 5,118,066
deposits
Federal funds sold
and security resell 1,960,294 83,529 52,634 102,159 165,106
agreements
Investment
securities:
Held-to-maturity,
at adjusted cost
(approximate fair
value $655,768, 740,738 773,016 797,149 807,804 791,569
$715,710, $728,479,
$729,974, and
$715,608)
Available-for-sale, 3,127,192 3,167,590 3,223,086 3,230,795 3,970,602
at fair value
Trading account, at 13,963 20,539 19,033 40,273 49,782
fair value
3,881,893 3,961,145 4,039,268 4,078,872 4,811,953
Loans held for sale 220,240 139,245 184,579 201,590 159,300
Loans, net of
unearned income and
fees:
Loans and leases 36,582,253 36,231,104 35,903,475 36,393,782 35,924,054
FDIC-supported 588,566 642,246 687,126 750,870 800,454
loans
37,170,819 36,873,350 36,590,601 37,144,652 36,724,508
Less allowance for 925,341 971,716 1,010,059 1,049,958 1,148,903
loan losses
Loans, net of 36,245,478 35,901,634 35,580,542 36,094,694 35,575,605
allowance
Other
noninterest-bearing 874,903 867,882 875,037 865,231 860,045
investments
Premises and 709,188 714,913 715,815 719,276 726,503
equipment, net
Goodwill 1,015,129 1,015,129 1,015,129 1,015,129 1,015,129
Core deposit and 55,034 59,277 63,538 67,830 72,571
other intangibles
Other real estate 118,190 144,816 158,592 153,178 203,173
owned
Other assets 1,426,271 1,507,594 1,499,588 1,605,905 1,721,101
$ 53,087,001 $ 53,407,012 $ 52,896,307 $ 53,149,109 $ 51,531,320
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Deposits:
Noninterest-bearing $ 17,295,911 $ 16,498,248 $ 16,185,140 $ 16,110,857 $ 14,911,729
demand
Interest-bearing:
Savings and NOW 7,685,192 7,505,841 7,406,910 7,159,101 6,711,002
Money market 14,284,870 14,439,389 14,813,495 14,616,740 14,576,527
Time 3,107,815 3,211,942 3,326,717 3,413,550 3,536,755
Foreign 1,398,749 1,504,827 1,366,826 1,575,361 1,627,135
43,772,537 43,160,247 43,099,088 42,875,609 41,363,148
Securities sold, 21,708 104,882 47,404 44,486 30,070
not yet purchased
Federal funds
purchased and 451,214 759,591 486,808 608,098 630,901
security repurchase
agreements
Other short-term 6,608 7,621 19,839 70,273 125,290
borrowings
Long-term debt 2,326,659 2,274,571 2,283,121 1,954,462 1,898,439
Reserve for
unfunded lending 105,850 103,586 98,718 102,422 98,062
commitments
Other liabilities 484,170 507,151 474,551 510,531 466,493
Total liabilities 47,168,746 46,917,649 46,509,529 46,165,881 44,612,403
Shareholders'
equity:
Preferred stock,
without par value, 1,123,377 1,800,473 1,737,633 2,377,560 2,354,523
authorized
4,400,000 shares
Common stock,
without par value;
authorized
350,000,000 shares;
issued and
outstanding 4,162,001 4,157,525 4,162,522 4,163,242 4,160,697
184,156,402,
184,117,522,
184,228,178,
184,135,388, and
184,294,782 shares
Retained earnings 1,170,477 1,110,120 1,060,525 1,036,590 994,380
Accumulated other
comprehensive (534,738) (576,147) (571,567) (592,084) (588,834)
income (loss)
Controlling
interest 5,921,117 6,491,971 6,389,113 6,985,308 6,920,766
shareholders'
equity
Noncontrolling (2,862) (2,608) (2,335) (2,080) (1,849)
interests
Total shareholders' 5,918,255 6,489,363 6,386,778 6,983,228 6,918,917
equity
$ 53,087,001 $ 53,407,012 $ 52,896,307 $ 53,149,109 $ 51,531,320
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
(In thousands, September 30, June 30, March 31, December 31, September 30,
except per share 2012 2012 2012 2011 2011
amounts)
Interest income:
Interest and fees $ 479,199 $ 478,569 $ 486,615 $ 504,243 $ 520,133
on loans
Interest on money 5,349 5,099 4,628 4,308 3,482
market investments
Interest on
securities:
Held-to-maturity 8,337 9,325 8,959 9,106 8,937
Available-for-sale 22,042 25,090 23,158 21,268 21,382
Trading account 110 148 338 548 462
Total interest 515,037 518,231 523,698 539,473 554,396
income
Interest expense:
Interest on 19,049 20,823 23,413 26,645 31,093
deposits
Interest on
short-term 193 256 779 1,221 1,501
borrowings
Interest on 51,597 65,165 57,207 49,699 51,207
long-term debt
Total interest 70,839 86,244 81,399 77,565 83,801
expense
Net interest 444,198 431,987 442,299 461,908 470,595
income
Provision for loan (1,889) 10,853 15,664 (1,476) 14,553
losses
Net interest
income after 446,087 421,134 426,635 463,384 456,042
provision for loan
losses
Noninterest
income:
Service charges
and fees on 44,951 43,426 43,532 42,873 44,154
deposit accounts
Other service
charges, 38,642 38,554 34,226 38,539 45,308
commissions and
fees
Trust and wealth 6,521 8,057 6,374 6,481 6,269
management income
Capital markets
and foreign 6,026 7,342 5,734 8,106 7,729
exchange
Dividends and
other investment 11,686 21,542 9,480 7,805 9,356
income
Loan sales and 10,695 10,287 8,352 6,058 6,165
servicing income
Fair value and
nonhedge (5,820) (6,784) (4,400) (4,677) (5,718)
derivative loss
Equity securities 2,683 107 9,145 1,961 5,289
gains, net
Fixed income
securities gains, 3,046 5,519 720 1,288 13,035
net
Impairment losses
on investment
securities:
Impairment losses
on investment (3,876) (24,026) (18,273) (12,351) (55,530)
securities
Noncredit-related
losses on
securities not
expected to be 1,140 16,718 8,064 265 42,196
sold (recognized
in other
comprehensive
income)
Net impairment
losses on (2,736) (7,308) (10,209) (12,086) (13,334)
investment
securities
Other 3,495 2,280 4,045 1,956 2,789
Total noninterest 119,189 123,022 106,999 98,304 121,042
income
Noninterest
expense:
Salaries and 220,223 220,765 224,634 220,290 216,855
employee benefits
Occupancy, net 28,601 28,169 27,951 27,899 29,040
Furniture and 27,122 27,302 26,792 27,036 26,852
equipment
Other real estate 207 6,440 7,810 14,936 20,564
expense
Credit related 13,316 12,415 13,485 14,213 15,379
expense
Provision for
unfunded lending 2,264 4,868 (3,704) 4,360 (2,202)
commitments
Legal and
professional 12,749 12,947 11,096 14,974 8,897
services
Advertising 7,326 6,618 5,807 7,780 6,511
FDIC premiums 11,278 10,444 10,919 12,012 12,573
Amortization of
core deposit and 4,241 4,262 4,291 4,741 4,773
other intangibles
Other 67,648 67,426 63,291 76,799 69,776
Total noninterest 394,975 401,656 392,372 425,040 409,018
expense
Income before 170,301 142,500 141,262 136,648 168,066
income taxes
Income taxes 60,704 51,036 51,859 47,877 59,348
Net income 109,597 91,464 89,403 88,771 108,718
Net loss
applicable to (254) (273) (273) (248) (375)
noncontrolling
interests
Net income
applicable to 109,851 91,737 89,676 89,019 109,093
controlling
interest
Preferred stock (47,529) (36,522) (64,187) (44,599) (43,928)
dividends
Net earnings
applicable to $ 62,322 $ 55,215 $ 25,489 $ 44,420 $ 65,165
common
shareholders
Weighted average common shares
outstanding during the period:
Basic shares 183,237 182,985 182,798 182,703 182,676
Diluted shares 183,383 183,137 182,964 182,823 182,858
Net earnings per
common share:
Basic $ 0.34 $ 0.30 $ 0.14 $ 0.24 $ 0.35
Diluted 0.34 0.30 0.14 0.24 0.35
Loans Balances by Portfolio Type
(Unaudited)
September June 30, March 31, December September
(In millions) 30, 2012 2012 31, 30,
2012 2011 2011
Commercial:
Commercial and industrial $ 10,748 $ 10,383 $ 10,157 $ 10,335 $ 9,733
Leasing 405 406 394 380 366
Owner occupied 7,669 7,811 7,887 8,159 8,326
Municipal 469 477 441 441 440
Total commercial 19,291 19,077 18,879 19,315 18,865
Commercial real estate:
Construction and land 1,956 2,099 2,100 2,265 2,467
development
Term 8,140 8,011 8,070 7,883 7,723
Total commercial real 10,096 10,110 10,170 10,148 10,190
estate
Consumer:
Home equity credit line 2,175 2,181 2,167 2,187 2,161
1-4 family residential 4,181 4,019 3,875 3,921 3,891
Construction and other 320 328 316 306 303
consumer real estate
Bankcard and other 295 284 274 291 278
revolving plans
Other 224 232 223 226 236
Total consumer 7,195 7,044 6,855 6,931 6,869
FDIC-supported loans ^1 589 642 687 751 801
Total loans $ 37,171 $ 36,873 $ 36,591 $ 37,145 $ 36,725
^1 FDIC-supported loans represent loans acquired from the FDIC subject to loss
sharing agreements.
FDIC-Supported Loans – Effect of Higher Accretion
and Impact on FDIC Indemnification Asset
(Unaudited)
September
(In thousands) 30, June 30,
2012 2012 March 31, December 31, September 30,
2012 2011 2011
Balance sheet:
Change in assets
from reestimation
of cash flows –
increase
(decrease):
FDIC-supported $ 17,594 $ 14,761 $ 13,171 $ 17,003 $ 20,642
loans
FDIC
indemnification (14,401) (11,233) (10,002) (13,126) (15,431)
asset (included
in other assets)
Balance at end of
period:
FDIC-supported 588,566 642,246 687,126 750,870 800,454
loans
FDIC
indemnification 100,004 117,167 123,862 137,719 151,164
asset (included
in other assets)
Three Months Ended
September
(In thousands) 30, June 30, December 31, September 30,
2012 2012 March 31, 2011 2011
2012
Statement of
income:
Interest income:
Interest and fees $ 17,594 $ 14,761 $ 13,171 $ 17,003 $ 20,642
on loans
Noninterest
expense:
Other noninterest 14,401 11,233 10,002 13,126 15,431
expense
Net increase in $ 3,193 $ 3,528 $ 3,169 $ 3,877 $ 5,211
pretax income
Nonperforming Lending-Related Assets
(Unaudited)
(Amounts in September June 30, March 31, December September
thousands) 30, 2012 2012 31, 30,
2012 2011 2011
Nonaccrual $ 699,941 $ 771,510 $ 849,543 $ 885,608 $ 1,038,803
loans
Other real 106,356 125,142 129,676 128,874 170,023
estate owned
Nonperforming
lending-related
assets, 806,297 896,652 979,219 1,014,482 1,208,826
excluding
FDIC-supported
assets
FDIC-supported
nonaccrual 19,465 21,980 22,623 24,267 29,082
loans
FDIC-supported
other real 11,834 19,674 28,916 24,304 33,150
estate owned
FDIC-supported
nonperforming 31,299 41,654 51,539 48,571 62,232
assets
Total
nonperforming $ 837,596 $ 938,306 $ 1,030,758 $ 1,063,053 $ 1,271,058
lending-related
assets
Ratio of
nonperforming
lending-related
assets to loans 2.23% 2.53% 2.79% 2.83% 3.43%
1 and leases
and other real
estate owned
Accruing loans
past due 90
days or more, $ 14,508 $ 29,460 $ 38,172 $ 19,145 $ 15,863
excluding
FDIC-supported
loans
Accruing
FDIC-supported 60,913 70,453 76,945 74,611 85,714
loans past due
90 days or more
Ratio of
accruing loans
past due 90 0.20% 0.27% 0.31% 0.25% 0.28%
days or more to
loans 1 and
leases
Nonaccrual
loans and
accruing loans $ 794,827 $ 893,403 $ 987,283 $ 1,003,631 $ 1,169,462
past due 90
days or more
Ratio of
nonaccrual
loans and
accruing loans 2.13% 2.41% 2.68% 2.69% 3.17%
past due 90
days or more to
loans 1 and
leases
Accruing loans
past due 30 -
89 days, $ 143,539 $ 142,501 $ 171,224 $ 183,976 $ 174,250
excluding
FDIC-supported
loans
Accruing
FDIC-supported 15,462 15,519 13,899 24,691 13,816
loans past due
30 - 89 days
Restructured
loans included 207,089 227,568 276,669 295,825 308,159
in nonaccrual
loans
Restructured
loans on 421,055 393,360 401,554 448,109 430,253
accrual
Classified
loans,
excluding 1,810,099 1,880,932 2,076,220 2,056,472 2,361,574
FDIC-supported
loans
^1 Includes loans held for sale.
Allowance for Credit Losses
(Unaudited)
Three Months Ended
(Amounts in September June 30, March 31, December September
thousands) 30, 2012 2012 31, 30,
2012 2011 2011
Allowance for
Loan Losses
Balance at
beginning of $ 971,716 $ 1,010,059 $ 1,049,958 $ 1,148,903 $ 1,237,733
period
Add:
Provision for (1,889) 10,853 15,664 (1,476) 14,553
losses
Adjustment for
FDIC-supported (5,908) (5,856) (1,057) (2,655) (1,520)
loans
Deduct:
Gross loan and
lease (58,781) (73,685) (80,014) (120,599) (129,146)
charge-offs
Recoveries 20,203 30,345 25,508 25,785 27,283
Net loan and
lease (38,578) (43,340) (54,506) (94,814) (101,863)
charge-offs
Balance at end $ 925,341 $ 971,716 $ 1,010,059 $ 1,049,958 $ 1,148,903
of period
Ratio of
allowance for
loan losses to 2.49% 2.64% 2.76% 2.83% 3.13%
loans and
leases, at
period end
Ratio of
allowance for
loan losses to 128.63% 122.46% 115.81% 115.40% 107.59%
nonperforming
loans, at
period end
Annualized
ratio of net
loan and lease 0.42% 0.47% 0.59% 1.03% 1.11%
charge-offs to
average loans
Reserve for
Unfunded
Lending
Commitments
Balance at
beginning of $ 103,586 $ 98,718 $ 102,422 $ 98,062 $ 100,264
period
Provision
charged 2,264 4,868 (3,704) 4,360 (2,202)
(credited) to
earnings
Balance at end $ 105,850 $ 103,586 $ 98,718 $ 102,422 $ 98,062
of period
Total
Allowance for
Credit Losses
Allowance for $ 925,341 $ 971,716 $ 1,010,059 $ 1,049,958 $ 1,148,903
loan losses
Reserve for
unfunded 105,850 103,586 98,718 102,422 98,062
lending
commitments
Total
allowance for $ 1,031,191 $ 1,075,302 $ 1,108,777 $ 1,152,380 $ 1,246,965
credit losses
Ratio of total
allowance for
credit losses
to loans and 2.77% 2.92% 3.03% 3.10% 3.40%
leases
outstanding,
at period end
Nonaccrual Loans by Portfolio Type
(Excluding FDIC-Supported Loans)
(Unaudited)
September June 30, March 31, December 31, September 30,
(In millions) 30, 2012 2012 2011 2011
2012
Loans held for $ — $ — $ — $ 18 $ 18
sale
Commercial:
Commercial and 103 133 149 127 176
industrial
Leasing 1 1 1 2 1
Owner occupied 223 240 245 239 268
Municipal 6 — — — —
Total commercial 333 374 395 368 445
Commercial real
estate:
Construction and 125 115 148 220 245
land development
Term 155 182 191 156 189
Total commercial 280 297 339 376 434
real estate
Consumer:
Home equity 12 14 17 18 15
credit line
1-4 family 66 76 87 91 108
residential
Construction and
other consumer 6 8 8 12 16
real estate
Bankcard and
other revolving 1 1 1 — —
plans
Other 2 2 3 3 3
Total consumer 87 101 116 124 142
Total nonaccrual $ 700 $ 772 $ 850 $ 886 $ 1,039
loans
Net Charge-Offs by Portfolio Type
(Unaudited)
September June 30, March 31, December 31, September 30,
(In millions) 30, 2012 2012 2011 2011
2012
Commercial:
Commercial and $ 3 $ 9 $ 17 $ 9 $ 27
industrial
Leasing — — — — —
Owner occupied 10 10 8 33 27
Municipal — — — — —
Total commercial 13 19 25 42 54
Commercial real
estate:
Construction and — (2) (2) 13 17
land development
Term 16 13 18 24 15
Total commercial 16 11 16 37 32
real estate
Consumer:
Home equity 2 6 4 6 4
credit line
1-4 family 4 5 7 7 5
residential
Construction and
other consumer 1 — 1 1 4
real estate
Bankcard and
other revolving 2 1 2 2 3
plans
Other — 1 — — —
Total consumer 9 13 14 16 16
loans
Total net $ 38 $ 43 $ 55 $ 95 $ 102
charge-offs
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)
Three Months Ended
September 30, 2012 June 30, 2012 March 31, 2012
Average Average Average Average Average Average
(In thousands) balance balance balance
rate rate rate
ASSETS
Money market $ 7,990,243 0.27 % $ 7,786,191 0.26 % $ 7,282,245 0.26 %
investments
Securities:
Held-to-maturity 758,761 5.32 % 797,843 5.72 % 799,741 5.53 %
Available-for-sale 3,052,559 2.93 % 3,084,771 3.34 % 3,093,827 3.08 %
Trading account 13,691 3.20 % 18,877 3.15 % 41,189 3.30 %
Total securities 3,825,011 3.41 % 3,901,491 3.82 % 3,934,757 3.58 %
Loans held for sale 183,224 3.52 % 157,308 3.99 % 174,902 3.45 %
Loans ^1:
Loans and leases 36,494,927 4.94 % 36,067,463 5.07 % 36,078,917 5.17 %
FDIC-supported 613,710 17.27 % 661,597 14.84 % 712,877 13.29 %
loans
Total loans 37,108,637 5.14 % 36,729,060 5.25 % 36,791,794 5.33 %
Total
interest-earning 49,107,115 4.21 % 48,574,050 4.33 % 48,183,698 4.41 %
assets
Cash and due from 1,000,159 1,025,681 1,122,979
banks
Allowance for loan (962,950) (1,004,879) (1,046,709)
losses
Goodwill 1,015,129 1,015,129 1,015,129
Core deposit and 57,345 61,511 65,837
other intangibles
Other assets 3,150,014 3,218,519 3,239,161
Total assets $ 53,366,812 $ 52,890,011 $ 52,580,095
LIABILITIES
Interest-bearing
deposits:
Savings and NOW $ 7,567,020 0.16 % $ 7,435,000 0.17 % $ 7,200,170 0.20 %
Money market 14,458,871 0.26 % 14,522,941 0.28 % 14,701,771 0.32 %
Time 3,162,165 0.69 % 3,264,853 0.75 % 3,369,323 0.79 %
Foreign 1,472,437 0.29 % 1,490,695 0.35 % 1,408,409 0.40 %
Total
interest-bearing 26,660,493 0.28 % 26,713,489 0.31 % 26,679,673 0.35 %
deposits
Borrowed funds:
Securities sold, 2,062 — % 6,128 1.90 % 22,758 3.38 %
not yet purchased
Federal funds
purchased and 453,209 0.14 % 474,026 0.14 % 528,662 0.12 %
security repurchase
agreements
Other short-term 8,273 1.73 % 13,290 2.00 % 48,394 3.61 %
borrowings
Long-term debt 2,297,409 8.93 % 2,329,608 11.25 % 1,991,776 11.55 %
Total borrowed 2,760,953 7.46 % 2,823,052 9.32 % 2,591,590 9.00 %
funds
Total
interest-bearing 29,421,446 0.96 % 29,536,541 1.17 % 29,271,263 1.12 %
liabilities
Noninterest-bearing 16,817,085 16,228,973 15,691,499
deposits
Other liabilities 606,973 582,743 619,231
Total liabilities 46,845,504 46,348,257 45,581,993
Shareholders'
equity:
Preferred equity 1,765,162 1,830,845 2,355,549
Common equity 4,758,858 4,713,318 4,644,722
Controlling
interest 6,524,020 6,544,163 7,000,271
shareholders'
equity
Noncontrolling (2,712) (2,409) (2,169)
interests
Total shareholders' 6,521,308 6,541,754 6,998,102
equity
Total liabilities
and shareholders' $ 53,366,812 $ 52,890,011 $ 52,580,095
equity
Spread on average
interest-bearing 3.25 % 3.16 % 3.29 %
funds
Net yield on
interest-earning 3.63 % 3.62 % 3.73 %
assets
^1 Net of unearned income and fees, net of related costs. Loans include
nonaccrual and restructured loans.
GAAP to Non-GAAP Reconciliation
(Unaudited)
Three Months Ended
(Amounts in thousands) September 30, 2012 June 30, 2012
Amount Diluted Amount Diluted
EPS EPS
Net Earnings Excluding the
Effects of the Discount
1. Amortization on Convertible
Subordinated Debt and
Additional Accretion on
Acquired Loans
Net earnings applicable to $ 62,322 $ 0.34 $ 55,215 $ 0.30
common shareholders (GAAP)
Addback for the after-tax
impact of:
Discount amortization on 6,495 0.03 6,584 0.04
convertible subordinated debt
Accelerated discount
amortization on convertible 1,615 0.01 13,175 0.07
subordinated debt
Additional accretion of
interest income on acquired (1,850) (0.01) (2,035) (0.01)
loans, net of expense
Subtotal 6,260 0.03 17,724 0.10
Net earnings excluding the
effects of the discount
amortization on convertible $ 68,582 $ 0.37 $ 72,939 $ 0.40
subordinated debt and
additional accretion on
acquired loans (non-GAAP)
Three Months Ended
September 30, 2012 June 30, 2012
Core Net Interest Income
2. (NII)/Net Interest Margin NII NIM NII NIM
(NIM)
Net interest income/net
interest margin as reported $ 444,198 3.63 % ^1 $ 431,987 3.62 % ^1
(GAAP)
Addback for the pretax impact
of:
Discount amortization on 10,518 0.09 % 10,663 0.09 %
convertible subordinated debt
Accelerated discount
amortization on convertible 1,987 0.02 % 16,202 0.13 %
subordinated debt
Additional accretion of
interest income on acquired (17,594) (0.14) % (14,761) (0.12) %
loans
Core net interest income/net $ 439,109 3.60 % $ 444,091 3.72 %
interest margin (non-GAAP)
^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 to evaluate a company, they have
limitations as an analytical tool and should not be considered in isolation or
as a substitute for analysis of results reported under GAAP.
SOURCE Zions Bancorporation
Website: http://www.zionsbancorporation.com
Contact: James Abbott, +1-801-524-4787
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