Zions Bancorp (ZION), for the second straight quarter,
unexpectedly swung to a profit on more credit quality and loan-loss
provision improvement, while the Utah-based regional bank's loan
demand finally began to increase.
Like many regional banks, Zions's bottom lines have improved as
credit quality revives and it sets aside fewer funds for potential
loan losses. Its transition to the black came later than the
company had anticipated, but it has twice in a row posted profits
when analysts were expecting losses.
In the latest period, loan-loss provision -- money set aside to
cover potential losses -- was $1.3 million, compared with $228.7
million a year earlier and $60 million in the first quarter.
As for credit quality, net charge-offs -- loans the bank doesn't
expect to collect -- fell to 1.23% of annualized average loans from
2.64% last year and 1.54% last quarter. Nonperforming assets --
loans in danger of going bad -- fell to 4.06% from 6.6% and 4.54%,
respectively.
Loan demand, which had been on a streak of sequential declines,
increased in the latest period compared with the first part of the
year. In the most recent period, net loans and leases rose 0.8%
sequentially. Average total deposits climbed 0.7% from the prior
quarter.
Overall, Zions reported a profit of $72.9 million, or 16 cents a
share, compared with a year-earlier loss of $113 million, or 84
cents a share. The number of shares outstanding increased 13%.
Analysts surveyed by Thomson Reuters predicted an 2-cent loss.
The most recent results included discount amortization on
convertible subordinated debt and additional accretion on acquired
loans, without which earnings would have been 45 cents a share.
Total interest income declined 4.3% to $558.7 million.
During the downturn, regional banks' performance often was
closely linked to local real-estate markets. With operations in
Western and Southwestern states, Zions was exposed to some of the
hardest-hit housing markets. It turned to the government's Troubled
Asset Relief Program to get through the worst of the downturn and
has yet to repay the $1.4 billion it received from the federal
government.
Zions shares were up 0.5% at $22.90 after hours. Through the
close, the stock had fallen 5.9% in the last year.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com