Zions Bancorporation Reports Fourth Quarter And Annual 2015 Financial Results

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Jan 25, 2016, 04:10 ET

SALT LAKE CITY, Jan. 25, 2016 /PRNewswire/ -- Zions Bancorporation (NASDAQ: ZION) ("Zions" or "the Company") today reported net earnings applicable to common shareholders for the fourth quarter of 2015 of $88.2 million, or $0.43 per diluted common share, compared to net earnings applicable to common shareholders of $84.2 million, or $0.41 per diluted common share, for the third quarter of 2015 and $66.8 million, or $0.33 per diluted common share, for the fourth quarter of 2014.

Annual net earnings applicable to common shareholders for 2015 was $246.6 million, or $1.20 per diluted common share, compared to $326.6 million, or $1.68 per diluted common share, for 2014. During the second quarter of 2015, the Company sold the remaining portfolio of its collateralized debt obligation ("CDO") securities and recognized a one-time pretax loss of approximately $137 million, or $0.42 after-tax per diluted common share. Excluding the loss, net earnings applicable to common shareholders for 2015 was $331.5 million, or $1.62 per diluted common share.

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

Fourth Quarter 2015 Highlights

The net interest margin increased to 3.23% from 3.11% in the prior quarter, while net interest income increased to $449 million in the fourth quarter of 2015 from $425 million in the third quarter of 2015. Adjusted for recoveries of interest income, the net interest margin was 3.18% in the fourth quarter of 2015. The increase in net interest margin was primarily driven by a change in the mix of interest-earning assets and the maturity of high cost long-term debt. The mix of interest-earning assets changed as cash held in money market investments was transitioned to term investment securities.
The Company achieved positive operating leverage in the fourth quarter and met its goals to keep adjusted noninterest expense below $1.6 billion for the year and the efficiency ratio less than 70% during the second half of 2015. Total adjusted noninterest expense was $403 million during the fourth quarter of 2015 and $1,581 million for 2015. The Company's efficiency ratio for the fourth quarter of 2015 was 69.8% compared to 69.3% in the third quarter of 2015, resulting in an efficiency ratio of 69.6% for the second half of 2015. The Company is committed to maintaining adjusted noninterest expense below $1.6 billion and achieving an efficiency ratio of less than 66% in 2016. Details of the adjusted noninterest expense and efficiency ratio calculation can be found later in this press release.
Credit quality remained in line with expectations, with deterioration in energy-related loans and continued strength in other loans. When compared to the prior quarter, classified loans increased 3%, nonperforming assets declined 4%, and the allowance for credit losses increased slightly due to energy-related loans. The Company recorded a provision for loan losses of $22.7 million, primarily related to the energy portfolio, during the fourth quarter of 2015 compared to $18.3 million during the third quarter of 2015. Excluding energy-related loans, the Company experienced a net recovery of $11 million in the fourth quarter of 2015, compared to a net charge-off of $14 million in the third quarter of 2015.
Net charge-offs for energy-related loans were $24 million during the fourth quarter of 2015 compared to $17 million during the third quarter of 2015. The Company increased the allowance for credit losses on its energy portfolio to greater than 5% of oil and gas-related loans due to the duration and amount of the decline in energy prices.
Excluding the strategic reduction in energy-related loans, net loans and leases increased $728 million, or 2.0% (8.0% on an annualized basis based on fourth quarter growth) during the quarter, compared to $176 million during the prior quarter calculated on the same basis.
The Company successfully completed the merger of its seven subsidiary banks to a single national bank charter on December 31, 2015.

Harris H. Simmons, Chairman and CEO of Zions Bancorporation, stated, "We were encouraged with the relatively strong improvement in net interest income, and when combined with the expected benefit from the December interest rate increase, we expect to see continued expansion in the net interest margin in 2016. Despite some headwinds in loan growth, particularly due to energy-related loan reductions, we experienced improvement in loan growth in the fourth quarter relative to the prior quarter." Mr. Simmons continued, "Credit quality trends, when taken as a whole, remain strong and Zions' credit performance ratios are among the strongest in the industry. As expected, credit quality for the energy portfolio deteriorated, although we are pleased with the relatively limited energy net charge-offs during the quarter, and the relatively strong pay-downs and payoffs of energy-related loans in the quarter. We boosted the reserve level in the fourth quarter due to the recent additional weakness in energy commodity prices, but we expect that our loan losses from this portfolio should be manageable." Mr. Simmons concluded, "Finally, we are encouraged with the successful achievement of our financial goals for the second half of 2015 announced in early June, and expect to continue to make progress toward achieving our 2016 and 2017 targets. In addition to achieving our expense goals, during 2015 we substantially strengthened our balance sheet through the liquidation of our remaining CDO portfolio, completed the consolidation of our bank charters as part of an effort to simplify our structure, and made strong progress on technology initiatives that will provide us with a modern, streamlined and fully integrated core operating platform."

Supplemental Presentation and Conference Call
Zions has posted a supplemental presentation to its website, which will be used to discuss these fourth quarter results at 5:30 p.m. ET this afternoon (January 25, 2016). Media representatives, analysts, investors, and the public are invited to join this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 19851960, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at zionsbancorporation.com. The webcast of the conference call will also be archived and available for 30 days.

About Zions Bancorporation
Zions Bancorporation is one of the nation's premier financial services companies with total assets of approximately $60 billion. Zions operates under local management teams and unique brands 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 is a consistent top recipient of numerous Greenwich Excellence awards in banking. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to local banking brands can be accessed at zionsbancorporation.com.

Forward-Looking Information
Statements in this press release that are based on other than historical data or that express the Company's expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company's expectations regarding future events. Forward-looking statements provide current expectations or forecasts or intentions regarding future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include the actual amount and duration of declines in the price of oil and gas, our ability to meet our efficiency and noninterest expense goals, as well as other factors discussed in the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov).

Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

FINANCIAL HIGHLIGHTS
(Unaudited)

	Three Months Ended
*(In thousands, except share, per share, and ratio data)*	December 31, 2015		September 30, 2015		June 30, 2015		March 31, 2015		December 31, 2014
BALANCE SHEET
Loans and leases, net of allowance	$	40,043,494	$	39,516,683	$	39,414,609	$	39,560,101	$	39,458,995
Total assets	59,669,525		58,410,927		58,365,459		57,555,931		57,208,874
Deposits	50,374,091		48,920,147		48,937,124		48,123,360		47,848,075
Total shareholders' equity	7,507,519		7,638,095		7,530,175		7,454,298		7,369,530

STATEMENT OF INCOME
Net interest income	$	448,833	$	425,377	$	423,704	$	417,346	$	430,430
Taxable-equivalent net interest income	453,780		429,782		428,015		421,581		434,789
Provision for loan losses	22,701		18,262		566		(1,494)		11,587
Total noninterest income	124,064		130,813		421		121,822		129,396
Total noninterest expense	402,776		396,149		404,100		397,461		422,666
Net earnings (loss) applicable to common shareholders	88,197		84,238		(1,100)		75,279		66,761

PER COMMON SHARE
Net earnings (loss) per diluted common share	$	0.43	$	0.41	$	(0.01)	$	0.37	$	0.33
Dividends	0.06		0.06		0.06		0.04		0.04
Book value per common share¹	32.67		32.47		32.03		31.74		31.35
Tangible book value per common share¹	27.63		27.42		26.95		26.64		26.23

SELECTED RATIOS
Return on average assets	0.68%		0.69%		0.10%		0.66%		0.57%
Return on average common equity	5.17%		5.02%		(0.07)%		4.77%		4.06%
Tangible return on average tangible common equity	6.20%		6.05%		0.03%		5.80%		4.95%
Net interest margin	3.23%		3.11%		3.18%		3.22%		3.25%
Efficiency ratio	69.8%		69.3%		71.4%		72.1%		74.1%
Effective tax rate	30.5%		28.8%		28.3%		35.7%		34.8%
Ratio of nonperforming assets to loans and leases and other real estate owned	0.87%		0.92%		0.96%		0.99%		0.81%
Annualized ratio of net loan and lease charge-offs to average loans	0.13%		0.31%		0.11%		(0.17)%		0.17%
Ratio of total allowance for credit losses to loans and leases outstanding¹	1.68%		1.69%		1.72%		1.75%		1.71%

Capital Ratios ¹
Tangible common equity ratio	9.63%		9.76%		9.58%		9.58%		9.48%
Basel III: ²
Common equity tier 1 capital	12.20%		12.16%		12.00%		11.76%
Tier 1 leverage	11.26%		11.63%		11.65%		11.75%
Tier 1 risk-based capital	14.06%		14.41%		14.26%		13.93%
Total risk-based capital	16.10%		16.46%		16.32%		15.97%
Basel I:
Tier 1 common equity									11.92%
Tier 1 leverage									11.82%
Tier 1 risk-based capital									14.47%
Total risk-based capital									16.27%

Weighted average common and common-equivalent shares outstanding	204,276,930		204,154,880		202,887,762		202,944,209		203,277,500
Common shares outstanding¹	204,417,093		204,278,594		203,740,914		203,192,991		203,014,903

¹At period end.

²Basel III capital ratios became effective January 1, 2015 and are based on a 2015 phase-in.