Zions Bancorporation Reports Earnings Of $0.56 Per Diluted Common Share For Second Quarter 2014

News provided by

Jul 21, 2014, 04:10 ET

SALT LAKE CITY, July 21, 2014 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported second quarter net earnings applicable to common shareholders of $104.5 million, or $0.56 per diluted common share, compared to $76.2 million, or $0.41 per diluted share for the first quarter of 2014, and $55.4 million, or $0.30 per diluted share for the second quarter of 2013.

Second Quarter 2014 Highlights

Credit quality remained strong as net loan and lease charge-offs were $6 million, or 0.06% annualized of average loans and leases, compared to $8 million, or 0.08% annualized in the prior quarter. Nonperforming lending-related assets declined 14% quarter over quarter. Both of these and significant improvement in other credit quality metrics were the primary drivers of the reserve release through a net negative provision of $48 million for both funded and unfunded loans.
Net loans and leases held for investment increased $432 million this quarter compared to the prior quarter, to $39.6 billion at June 30, 2014. Average loans and leases increased $419 million this quarter.
Net interest income of $416 million this quarter was essentially unchanged from the prior quarter; the net interest margin decreased slightly to 3.29% from 3.31%.

Loans

Net loans and leases held for investment increased $432 million, or 1.1%, to $39.6 billion at June 30, 2014 from $39.2 billion at March 31, 2014. Increases of approximately $577 million were geographically widespread in commercial and industrial loans, with smaller increases in commercial owner occupied, commercial construction, and 1-4 family residential loans. These increases were partially offset by decreases of approximately $145 million in term commercial real estate and FDIC-supported and other purchase credit-impaired ("PCI") loans.

Average loans and leases increased $419 million, or 1.1%, to $39.5 billion during the second quarter of 2014, compared to $39.1 billion during the first quarter of 2014. Unfunded lending commitments were $17.5 billion at June 30, 2014 and remained relatively stable compared to March 31, 2014.

Deposits

Total deposits decreased $861 million to $45.7 billion at June 30, 2014, compared to $46.5 billion at March 31, 2014. Average total deposits for the second quarter of 2014 decreased $320 million, or 1%, to $45.5 billion, compared to $45.8 billion for the first quarter of 2014. The ratio of average loans to average deposits was 87.0% for the second quarter of 2014, compared to 85.5% for the first quarter of 2014.

Shareholders' Equity

Tangible book value per common share improved by approximately 2% compared to the prior quarter, increasing to $25.13 from $24.53. Compared to the year-ago period, tangible book value per common share improved by approximately 14%.

The estimated Tier 1 common equity ratio was 10.42% at June 30, 2014, compared to 10.56% at March 31, 2014. The decrease was driven by the previously announced termination of the Total Return Swap on collateralized debt obligations ("CDOs"), which increased risk-weighted assets.

Investment Securities

During the second quarter of 2014, the Company did not record any other-than-temporary impairment ("OTTI") on its investment securities, and no CDO securities were sold during the quarter. Gains on paydowns of CDO securities were $5 million during the second quarter, essentially the same amount as the first quarter.

Net Interest Income

Net interest income of $416 million for the second quarter of 2014 was essentially unchanged from the first quarter of 2014. The net interest margin decreased slightly to 3.29% in the second quarter of 2014, compared to 3.31% in the first quarter of 2014; improvements from a higher loan to earning assets mix were offset by 6 bps of reduction due to lower gross income from FDIC-supported/PCI loans.

Noninterest Income

Noninterest income for the second quarter of 2014 was $125 million, compared to $138 million for the first quarter of 2014. The decrease was due to net gains on sales of CDO securities during the first quarter of 2014. Excluding these gains, noninterest income would have increased by $13 million compared to the first quarter. Improvement in fair value and nonhedge derivative income (loss) resulted from the expense reduction associated with the termination of the Total Return Swap. An increase in other service charges, commissions and fees was due primarily to increased interchange fees from commercial credit cards.

Noninterest Expense

Noninterest expense for the second quarter of 2014 was $406 million compared to $398 million for the first quarter of 2014. Changes this quarter were due primarily to (1) an increase in salaries and employee benefits, due primarily to variable compensation accruals; (2) an increase in the provision for unfunded lending commitments; and (3) an increase in professional and legal services. Approximately $5 million of the variable compensation increase resulted from the immediate recognition in expense of equity-based grants that vest over three or four years to employees currently eligible for retirement. These increases were offset by reduced other noninterest expense that resulted primarily from the decreased amortization of the FDIC indemnification asset ($9 million in the second quarter of 2014 compared to $16 million in the first quarter).

Asset Quality

Credit quality further improved as nonperforming lending-related assets declined 14% to $379 million at June 30, 2014 from $441 million at March 31, 2014. Classified loans were $1.2 billion at June 30, 2014, compared to $1.3 billion at March 31, 2014. The ratio of nonperforming lending-related assets to loans and leases and other real estate owned decreased to 0.95% at June 30, 2014, compared to 1.12% at March 31, 2014.

Net loan and lease charge-offs were $6 million in the second quarter of 2014, compared to $8 million in the first quarter of 2014. The decrease was due to recoveries of $17 million during the second quarter, compared to $13 million during the first quarter. Gross loan and lease charge-offs were $23 million during the second quarter of 2014, compared to $21 million in the first quarter of 2014.

The provision for credit losses consists of the provision for loan losses (negative $54 million in the second quarter) plus the provision for unfunded lending commitments ($6 million in the second quarter). The negative provision for loan losses in the second quarter compares to a negative provision of $1 million for the first quarter. The decrease is primarily due to continued improvement in portfolio-specific credit quality metrics and sustained improvement in broader economic and credit quality indicators. The allowance for credit losses was $771 million, or 1.95%, of loans and leases at June 30, 2014, compared to $826 million, or 2.11%, of loans and leases at March 31, 2014.

Conference Call

Zions will host a conference call to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 21, 2014). 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 64591317, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at www.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 public finance advisory services, and received 12 "Excellence" awards by Greenwich Associates for the 2013 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 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 could cause actual results to differ materially from those expressed in the forward-looking statements are 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)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
PER COMMON SHARE
Dividends	$	0.04	$	0.04	$	0.04	$	0.04	$	0.04
Book value per common share ¹	30.77		30.19		29.57		28.87		27.82
Tangible book value per common share ¹	25.13		24.53		23.88		23.16		22.09

SELECTED RATIOS
Return on average assets	0.87%		0.74%		(0.30)%		0.80%		0.61%
Return on average common equity	7.30%		5.52%		(4.51)%		16.03%		4.35%
Tangible return on average tangible common equity	9.07%		6.96%		(5.45)%		20.34%		5.73%
Net interest margin	3.29%		3.31%		3.33%		3.22%		3.44%

Capital Ratios
Tangible common equity ratio ¹	8.60%		8.24%		8.02%		7.90%		7.57%
Tangible equity ratio ¹	10.46%		10.06%		9.85%		9.75%		10.78%
Average equity to average assets	12.26%		11.90%		11.20%		12.39%		12.11%

Risk-Based Capital Ratios ^1,2
Tier 1 common equity	10.42%		10.56%		10.18%		10.47%		10.03%
Tier 1 leverage	11.00%		10.71%		10.48%		10.63%		11.75%
Tier 1 risk-based capital	12.96%		13.19%		12.77%		13.10%		14.30%
Total risk-based capital	14.85%		15.11%		14.67%		14.82%		15.94%

Taxable-equivalent net interest income	$	420,202	$	420,305	$	435,714	$	419,236	$	434,579

Weighted average common and common-equivalent shares outstanding	185,286,329		185,122,844		184,208,544		184,742,414		184,061,623
Common shares outstanding ¹	185,112,965		184,895,182		184,677,696		184,600,005		184,436,656

¹At period end.

² Ratios for June 30, 2014 are estimates.

CONSOLIDATED BALANCE SHEETS

*(In thousands, except shares)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
ASSETS
Cash and due from banks	$	1,384,131	$	1,341,319	$	1,175,083	$	1,365,082	$	1,183,097
Money market investments:
Interest-bearing deposits	6,386,353		8,157,837		8,175,048		8,180,639		8,180,010
Federal funds sold and security resell agreements	478,535		379,947		282,248		209,070		221,799
Investment securities:
Held-to-maturity, at adjusted cost (approximate fair value $643,926, $635,379, $609,547, $727,908, and $734,292)	615,104		606,279		588,981		777,849		783,371
Available-for-sale, at fair value	3,462,809		3,423,205		3,701,886		3,333,889		3,193,395
Trading account, at fair value	56,572		56,172		34,559		38,278		26,385
	4,134,485		4,085,656		4,325,426		4,150,016		4,003,151

Loans held for sale	164,374		126,344		171,328		114,810		164,619

Loans and leases, net of unearned income and fees	39,630,363		39,198,136		39,043,365		38,272,730		38,187,945
Less allowance for loan losses	675,907		736,953		746,291		797,523		813,912
Loans, net of allowance	38,954,456		38,461,183		38,297,074		37,475,207		37,374,033

Other noninterest-bearing investments	854,978		848,775		855,642		851,349		852,939
Premises and equipment, net	803,214		785,519		726,372		720,365		717,299
Goodwill	1,014,129		1,014,129		1,014,129		1,014,129		1,014,129
Core deposit and other intangibles	30,826		33,562		36,444		39,667		43,239
Other real estate owned	27,725		39,248		46,105		66,381		80,789
Other assets	878,069		807,325		926,228		1,001,597		1,069,436
	$	55,111,275	$	56,080,844	$	56,031,127	$	55,188,312	$	54,904,540

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	19,609,990	$	19,257,889	$	18,758,753	$	18,566,137	$	17,803,950
Interest-bearing:
Savings and money market	23,308,114		23,097,351		23,029,928		22,806,132		22,887,404
Time	2,500,303		2,528,735		2,593,038		2,689,688		2,810,431
Foreign	252,207		1,648,111		1,980,161		1,607,409		1,514,270
	45,670,614		46,532,086		46,361,880		45,669,366		45,016,055

Federal funds and other short-term borrowings	258,401		279,837		340,348		273,774		256,615
Long-term debt	1,933,136		2,158,701		2,273,575		2,304,301		2,173,176
Reserve for unfunded lending commitments	95,472		88,693		89,705		84,147		104,082
Other liabilities	453,562		435,311		501,056		523,915		494,280
Total liabilities	48,411,185		49,494,628		49,566,564		48,855,503		48,044,208

Shareholders' equity:
Preferred stock, without par value, authorized 4,400,000 shares	1,004,006		1,003,970		1,003,970		1,003,970		1,728,659
Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 185,112,965, 184,895,182, 184,677,696, 184,600,005, and 184,436,656 shares	4,192,136		4,185,513		4,179,024		4,172,887		4,167,828
Retained earnings	1,640,785		1,542,195		1,473,670		1,540,455		1,338,401
Accumulated other comprehensive income (loss)	(136,837)		(145,462)		(192,101)		(384,503)		(374,556)
Total shareholders' equity	6,700,090		6,586,216		6,464,563		6,332,809		6,860,332
	$	55,111,275	$	56,080,844	$	56,031,127	$	55,188,312	$	54,904,540

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
*(In thousands, except per share amounts)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Interest income:
Interest and fees on loans	$	433,801	$	434,344	$	458,493	$	442,366	$	460,308
Interest on money market investments	4,888		5,130		5,985		6,175		5,764
Interest on securities	24,502		28,094		25,539		24,866		27,161
Total interest income	463,191		467,568		490,017		473,407		493,233

Interest expense:
Interest on deposits	12,096		12,779		13,622		14,506		15,143
Interest on short- and long-term borrowings	34,812		38,324		44,360		43,380		47,433
Total interest expense	46,908		51,103		57,982		57,886		62,576

Net interest income	416,283		416,465		432,035		415,521		430,657
Provision for loan losses	(54,416)		(610)		(30,538)		(5,573)		(21,990)
Net interest income after provision for loan losses	470,699		417,075		462,573		421,094		452,647

Noninterest income:
Service charges and fees on deposit accounts	42,873		42,594		43,729		44,701		44,329
Other service charges, commissions and fees	47,513		43,519		46,877		45,977		45,888
Wealth management income	7,980		7,077		8,067		7,120		7,732
Capital markets and foreign exchange	5,842		5,000		6,516		7,309		6,740
Dividends and other investment income	7,995		7,864		9,898		12,101		11,339
Loan sales and servicing income	6,335		6,474		5,155		8,464		10,723
Fair value and nonhedge derivative loss	(1,934)		(8,539)		(5,347)		(4,403)		(2,957)
Equity securities gains, net	2,513		912		314		3,165		2,209
Fixed income securities gains (losses), net	5,026		30,914		(6,624)		1,580		(1,153)
Impairment losses on investment securities:
Impairment losses on investment securities	—		(27)		(141,733)		(10,470)		(4,910)
Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income)	—		—		—		1,403		693
Net impairment losses on investment securities	—		(27)		(141,733)		(9,067)		(4,217)
Other	707		2,531		1,998		5,243		4,515
Total noninterest income (loss)	124,850		138,319		(31,150)		122,190		125,148

Noninterest expense:
Salaries and employee benefits	238,764		233,406		226,616		229,185		227,328
Occupancy, net	28,939		28,305		28,733		28,230		27,951
Furniture, equipment and software	27,986		27,944		27,450		26,560		26,545
Other real estate expense	(266)		1,607		(1,024)		(831)		1,590
Credit-related expense	7,139		6,906		6,509		7,265		9,397
Provision for unfunded lending commitments	6,779		(1,012)		5,558		(19,935)		3,627
Professional and legal services	12,171		10,995		23,886		16,462		17,149
Advertising	6,803		6,398		5,571		6,091		5,807
FDIC premiums	8,017		7,922		8,789		9,395		10,124
Amortization of core deposit and other intangibles	2,736		2,882		3,224		3,570		3,762
Debt extinguishment cost	—		—		79,910		—		40,282
Other	66,959		72,710		79,528		64,671		78,116
Total noninterest expense	406,027		398,063		494,750		370,663		451,678

Income (loss) before income taxes	189,522		157,331		(63,327)		172,621		126,117
Income taxes (benefit)	69,972		56,121		(21,855)		61,107		43,091
Net income (loss)	119,550		101,210		(41,472)		111,514		83,026
Preferred stock dividends	(15,060)		(25,020)		(17,965)		(27,507)		(27,641)
Preferred stock redemption	—		—		—		125,700		—
Net earnings (loss) applicable to common shareholders	$	104,490	$	76,190	$	(59,437)	$	209,707	$	55,385

Weighted average common shares outstanding during the period:
Basic shares	184,668		184,440		184,209		184,112		183,647
Diluted shares	185,286		185,123		184,209		184,742		184,062

Net earnings (loss) per common share:
Basic	$	0.56	$	0.41	$	(0.32)	$	1.13	$	0.30
Diluted	0.56		0.41		(0.32)		1.12		0.30

CDO Investments – Selected Information Stratified into Performing Tranches Without Credit Impairment and Nonperforming Tranches

		June 30, 2014
									Net unrealized (losses) gains recognized in AOCI ¹		Weighted average discount rate ²	% of carrying value to par
(Amounts in millions)	No. of tranches		Par amount		Amortized cost		Carrying value		Net unrealized (losses) gains recognized in AOCI ¹		Weighted average discount rate ²	% of carrying value to par
Performing CDOs
Predominantly bank CDOs	23		$	639	$	580	$	478	$	(102)	5.1%	75%
Insurance CDOs	2		42		40		41		1		1.3%	98%
Total performing CDOs	25		681		620		519		(101)		4.9%	76%

Nonperforming CDOs ³
CDOs credit impaired prior to last 12 months	21		460		296		209		(87)		4.5%	45%
CDOs credit impaired during last 12 months	5		67		54		38		(16)		5.5%	57%
Total nonperforming CDOs	26		527		350		247		(103)		4.6%	47

Total CDOs	51		$	1,208	$	970	$	766	$	(204)	4.8%	63%

¹ Amounts presented are pretax.

² Margin over related LIBOR index.

³ Defined as either deferring current interest ("PIKing") or OTTI.

CDO Investments – Changes in Selected Information

	Changes from March 31, 2014 to June 30, 2014
								Decrease (increase) in net unrealized losses recognized in AOCI		Weighted average discount rate	% of carrying value to par
*(Amounts in millions)*	No. of tranches	Par amount		Amortized cost		Carrying value				Weighted average discount rate	% of carrying value to par
Performing CDOs
Predominantly bank CDOs	—	$	(16)	$	(11)	$	(8)	$	3	(0.2)%	1%
Insurance CDOs	—	(8)		(8)		(5)		3		(0.9)%	6%
Total performing CDOs	—	(24)		(19)		(13)		6		(0.2)%	1%

Nonperforming CDOs
CDOs credit impaired prior to last 12 months	3	77		5		9		4		(1.0)%	(7)%
CDOs credit impaired during last 12 months	(3)	(78)		(5)		(4)		1		—%	28%
Total nonperforming CDOs	—	(1)		—		5		5		(0.9)%	1%

Total CDOs	—	$	(25)	$	(19)	$	(8)	$	11	(0.5)%	—%

Loan Balances Held for Investment by Portfolio Type (Unaudited)

*(In millions)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Commercial:
Commercial and industrial	$	12,805	$	12,512	$	12,481	$	11,904	$	11,899
Leasing	415		389		388		375		388
Owner occupied	7,387		7,348		7,437		7,379		7,394
Municipal	522		482		449		449		454
Total commercial	21,129		20,731		20,755		20,107		20,135

Commercial real estate:
Construction and land development	2,340		2,264		2,183		2,240		2,191
Term	7,969		8,080		8,006		7,929		7,971
Total commercial real estate	10,309		10,344		10,189		10,169		10,162

Consumer:
Home equity credit line	2,204		2,165		2,133		2,124		2,124
1-4 family residential	4,827		4,796		4,737		4,637		4,486
Construction and other consumer real estate	338		330		325		321		322
Bankcard and other revolving plans	376		361		356		332		315
Other	196		186		198		208		212
Total consumer	7,941		7,838		7,749		7,622		7,459

FDIC-supported/PCI loans ¹	251		285		350		375		432
Total loans	$	39,630	$	39,198	$	39,043	$	38,273	$	38,188

¹ FDIC-supported loans represent loans acquired from the FDIC subject to loss sharing agreements.

FDIC-Supported/PCI Loans – Effect of Higher Accretion and Impact on FDIC Indemnification Asset (Unaudited)

	Three Months Ended
*(In thousands)*		June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Balance sheet:

Change in assets from reestimation of cash flows – increase (decrease):
FDIC-supported/PCI loans		$	11,701	$	18,453	$	28,502	$	15,018	$	28,424
FDIC indemnification asset		(9,314)		(15,972)		(19,934)		(12,965)		(21,845)

Balance at end of period:
FDIC-supported/PCI loans (included in loans and leases)		250,568		285,313		350,271		374,861		431,935
FDIC indemnification asset (included in other assets)		5,777		13,184		26,411		41,771		51,297

	Three Months Ended
*(In thousands)*		June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Statement of income:

Interest income:
Interest and fees on loans		$	11,701	$	18,453	$	28,502	$	15,018	$	28,424

Noninterest expense:
Other noninterest expense		9,314		15,972		19,934		12,965		21,845
Net increase in pretax income		$	2,387	$	2,481	$	8,568	$	2,053	$	6,579

Nonperforming Lending-Related Assets (Unaudited)

*(Amounts in thousands)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013

Nonaccrual loans	$	349,415	$	397,549	$	402,219	$	466,795	$	515,708
Other real estate owned	26,498		37,841		42,817		58,295		70,031
Nonperforming lending-related assets, excluding FDIC-supported/PCI assets	375,913		435,390		445,036		525,090		585,739

FDIC-supported/PCI nonaccrual loans	2,032		4,117		4,394		4,744		5,256
FDIC-supported/PCI other real estate owned	1,227		1,407		3,288		8,086		10,758
FDIC-supported/PCI nonperforming lending-related assets	3,259		5,524		7,682		12,830		16,014
Total nonperforming lending-related assets	$	379,172	$	440,914	$	452,718	$	537,920	$	601,753

Ratio of nonperforming lending-related assets to loans ¹ and leases and other real estate owned	0.95%		1.12%		1.15%		1.40%		1.57%

Accruing loans past due 90 days or more, excluding FDIC-supported/PCI loans	$	13,728	$	6,661	$	9,957	$	9,398	$	10,685
Accruing FDIC-supported/PCI loans past due 90 days or more	33,041		31,529		30,391		22,450		33,410
Ratio of accruing loans past due 90 days or more to loans ¹ and leases	0.12%		0.10%		0.10%		0.08%		0.11%

Nonaccrual loans and accruing loans past due 90 days or more	$	398,216	$	439,856	$	446,961	$	503,387	$	565,059
Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans ¹ and leases	1.00%		1.12%		1.14%		1.31%		1.47%

Accruing loans past due 30 - 89 days, excluding FDIC-supported/PCI loans	$	100,851	$	110,566	$	104,760	$	85,128	$	103,075
Accruing FDIC-supported/PCI loans past due 30 - 89 days	7,232		3,839		11,752		10,983		6,522

Restructured loans included in nonaccrual loans	103,157		130,534		136,135		166,573		162,496
Restructured loans on accrual	320,206		318,886		345,299		384,793		385,428

Classified loans, excluding FDIC-supported/PCI loans	1,225,993		1,295,976		1,240,148		1,432,806		1,639,206

¹ Includes loans held for sale.

Allowance for Credit Losses (Unaudited)

	Three Months Ended
*(Amounts in thousands)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Allowance for Loan Losses
Balance at beginning of period	$	736,953	$	746,291	$	797,523	$	813,912	$	841,781
Add:
Provision for losses	(54,416)		(610)		(30,538)		(5,573)		(21,990)
Adjustment for FDIC-supported/PCI loans	(444)		(817)		(1,481)		(2,118)		(209)
Deduct:
Gross loan and lease charge-offs	(23,400)		(20,795)		(37,405)		(22,826)		(35,099)
Recoveries	17,214		12,884		18,192		14,128		29,429
Net loan and lease charge-offs	(6,186)		(7,911)		(19,213)		(8,698)		(5,670)
Balance at end of period	$	675,907	$	736,953	$	746,291	$	797,523	$	813,912

Ratio of allowance for loan losses to loans and leases, at period end	1.71%		1.88%		1.91%		2.08%		2.13%

Ratio of allowance for loan losses to nonperforming loans, at period end	192.32%		183.47%		183.54%		169.13%		156.23%

Annualized ratio of net loan and lease charge-offs to average loans	0.06%		0.08%		0.20%		0.09%		0.06%

Reserve for Unfunded Lending Commitments
Balance at beginning of period	$	88,693	$	89,705	$	84,147	$	104,082	$	100,455
Provision charged (credited) to earnings	6,779		(1,012)		5,558		(19,935)		3,627
Balance at end of period	$	95,472	$	88,693	$	89,705	$	84,147	$	104,082

Total Allowance for Credit Losses
Allowance for loan losses	$	675,907	$	736,953	$	746,291	$	797,523	$	813,912
Reserve for unfunded lending commitments	95,472		88,693		89,705		84,147		104,082
Total allowance for credit losses	$	771,379	$	825,646	$	835,996	$	881,670	$	917,994

Ratio of total allowance for credit losses to loans and leases outstanding, at period end	1.95%		2.11%		2.14%		2.30%		2.40%

Nonaccrual Loans by Portfolio Type (Excluding FDIC-Supported/PCI Loans) (Unaudited)

*(In millions)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013

Loans held for sale	$	29	$	—	$	—	$	—	$	—

Commercial:
Commercial and industrial	$	83	$	109	$	98	$	100	$	94
Leasing	1		1		1		1		1
Owner occupied	101		127		136		158		186
Municipal	9		10		10		10		9
Total commercial	194		247		245		269		290

Commercial real estate:
Construction and land development	23		29		29		65		70
Term	44		59		60		61		71
Total commercial real estate	67		88		89		126		141

Consumer:
Home equity credit line	11		10		9		8		11
1-4 family residential	45		48		53		58		66
Construction and other consumer real estate	2		3		4		4		5
Bankcard and other revolving plans	1		1		1		1		2
Other	—		1		1		1		1
Total consumer	59		63		68		72		85
Subtotal nonaccrual loans	320		398		402		467		516
Total nonaccrual loans	$	349	$	398	$	402	$	467	$	516

Net Charge-Offs by Portfolio Type (Unaudited)

	Three Months Ended
*(In millions)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013
Commercial:
Commercial and industrial	$	7	$	1	$	15	$	2	$	2
Leasing	—		(1)		—		—		—
Owner occupied	(2)		2		1		2		3
Municipal	—		—		—		—		—
Total commercial	5		2		16		4		5

Commercial real estate:
Construction and land development	(3)		(2)		(3)		(1)		(3)
Term	3		7		5		3		(2)
Total commercial real estate	—		5		2		2		(5)

Consumer:
Home equity credit line	1		—		—		1		2
1-4 family residential	(1)		1		—		1		3
Construction and other consumer real estate	—		(1)		—		—		1
Bankcard and other revolving plans	—		2		1		1		—
Other	1		(1)		—		—		—
Total consumer loans	1		1		1		3		6
Total net charge-offs	$	6	$	8	$	19	$	9	$	6

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES (Unaudited)

	Three Months Ended
	June 30, 2014			March 31, 2014			December 31, 2013
*(In thousands)*	Average balance		Average rate	Average balance		Average rate	Average balance		Average rate
ASSETS
Money market investments	$	7,500,554	0.26%	$	8,137,123	0.26%	$	9,154,232	0.26%
Securities:
Held-to-maturity	600,392		5.37%	587,473		5.65%	770,168		4.75%
Available-for-sale	3,355,710		2.12%	3,470,983		2.48%	3,230,152		2.17%
Trading account	66,929		3.39%	58,543		3.34%	43,063		3.39%
Total securities	4,023,031		2.63%	4,116,999		2.95%	4,043,383		2.68%

Loans held for sale	113,569		3.61%	157,170		3.61%	119,671		3.73%

Loans ¹:
Loans and leases	39,271,351		4.28%	38,805,192		4.30%	38,259,795		4.41%
FDIC-supported/PCI loans	272,762		23.01%	319,695		29.35%	363,982		36.88%
Total loans	39,544,113		4.41%	39,124,887		4.51%	38,623,777		4.72%
Total interest-earning assets	51,181,267		3.66%	51,536,179		3.71%	51,941,063		3.77%
Cash and due from banks	922,421			1,040,906			1,026,814
Allowance for loan losses	(734,517)			(745,671)			(790,361)
Goodwill	1,014,129			1,014,129			1,014,129
Core deposit and other intangibles	32,234			35,072			38,137
Other assets	2,620,739			2,552,965			2,470,837
Total assets	$	55,036,273		$	55,433,580		$	55,700,619

LIABILITIES
Interest-bearing deposits:
Savings and money market	$	23,479,755	0.15%	$	22,908,201	0.16%	$	22,972,978	0.16%
Time	2,507,489		0.47%	2,560,283		0.49%	2,642,104		0.50%
Foreign	258,234		0.17%	1,751,910		0.20%	1,796,912		0.20%
Total interest-bearing deposits	26,245,478		0.18%	27,220,394		0.19%	27,411,994		0.20%
Borrowed funds:
Federal funds and other short-term borrowings	261,011		0.10%	249,043		0.11%	271,501		0.11%
Long-term debt	2,038,810		6.84%	2,237,457		6.93%	2,352,748		7.47%
Total borrowed funds	2,299,821		6.07%	2,486,500		6.25%	2,624,249		6.71%
Total interest-bearing liabilities	28,545,299		0.66%	29,706,894		0.70%	30,036,243		0.77%
Noninterest-bearing deposits	19,212,574			18,557,992			18,842,097
Other liabilities	529,716			569,361			584,887
Total liabilities	48,287,589			48,834,247			49,463,227
Shareholders' equity:
Preferred equity	1,003,988			1,003,970			1,003,970
Common equity	5,744,696			5,595,363			5,233,422
Total shareholders' equity	6,748,684			6,599,333			6,237,392
Total liabilities and shareholders' equity	$	55,036,273		$	55,433,580		$	55,700,619

Spread on average interest-bearing funds			3.00%			3.01%			3.00%

Net yield on interest-earning assets			3.29%			3.31%			3.33%

¹ Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

GAAP to Non-GAAP Reconciliation (Unaudited)

Tangible Return on Average Tangible Common Equity
	Three Months Ended
*(Amounts in thousands)*	June 30, 2014		March 31, 2014		December 31, 2013		September 30, 2013		June 30, 2013

Net earnings (loss) applicable to common shareholders (GAAP)	$	104,490	$	76,190	$	(59,437)	$	209,707	$	55,385

Adjustments, net of tax:
Amortization of core deposit and other intangibles	1,735		1,827		2,046		2,268		2,391
Net earnings (loss) applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a)	$	106,225	$	78,017	$	(57,391)	$	211,975	$	57,776

Average common equity (GAAP)	$	5,744,696	$	5,595,363	$	5,233,422	$	5,190,073	$	5,102,082
Average goodwill	(1,014,129)		(1,014,129)		(1,014,129)		(1,014,129)		(1,014,129)
Average core deposit and other intangibles	(32,234)		(35,072)		(38,137)		(41,751)		(45,262)
Average tangible common equity (non-GAAP) (b)	$	4,698,333	$	4,546,162	$	4,181,156	$	4,134,193	$	4,042,691

Number of days in quarter (c)	91		90		92		92		91
Number of days in year (d)	365		365		365		365		365

Tangible return on average tangible common equity (non-GAAP) (a/b/c*d)	9.07%		6.96%		(5.45)%		20.34%		5.73%

This press release presents the non-GAAP financial measure previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measure 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 measure 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. This non-GAAP financial measure is 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 this non-GAAP financial measure 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 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