Zions Bancorp (ZION) posted its first quarterly profit in two
and a half years, an unexpected swing, as the Utah-based regional
bank set aside significantly less money for potential loan
losses.
Shares were up 4.1% at $23.90 after hours. Through the close,
the stock had fallen 10% in the last year.
Chairman and Chief Executive Harris H. Simmons said the
company's "substantial moderation of loan losses and continued
improvement in credit quality" allowed for the large reduction in
loan-loss provision. The provision was only $60 million, compared
with $265.6 million a year earlier and $173.2 million in the fourth
quarter.
As for credit quality, net charge-offs--loans the bank doesn't
expect to collect--fell to 1.54% of annualized average loans from
2.29% last year and 2.71% last quarter. Nonperforming assets--or
loans in danger of going bad--fell to 4.54% from 7.04% and 4.91%,
respectively.
In recent quarters, many regional banks have been reporting
better bottom lines thanks to easing charge-offs and loan-loss
provision as the economy recovers. However, Zions had remained
unprofitable longer than the company had anticipated.
Zions reported a profit of $52.8 million, compared with a
year-earlier loss of $60.2 million. On a per-share basis after
preferred dividends, the bank swung to an 8-cent profit from a
57-cent loss. Analysts surveyed by Thomson Reuters predicted an
18-cent loss.
Net interest income fell 6.9% to $363.9 million but noninterest
income climbed 25% to $134.1 million.
Loan demand fell again, though the pace of decline was slighter.
In the most recent period, net loans and leases fell 0.5%
sequentially, compared with a 2.1% decline in the fourth quarter.
Average total deposits declined 1.4% sequentially.
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.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com