SALT LAKE CITY (
on Monday reported a third-quarter net loss to common shareholders of $80.5 million, or 47 cents a share, beating the consensus of a 50-cent loss per share among analysts polled by Thomson Reuters.
The net loss to common shareholders took into account $33.1 million in dividends paid during the quarter to preferred shareholders, including the
U.S. Treasury Department
, which provided Zions $1.4 billion in November 2008 through the Troubled Assets Relief Program, or TARP.
The third-quarter loss narrowed from a second-quarter net loss to common shareholders of $135.2 million, or 84 cents a share, and a loss of $181.9 million, or $1.43 a share, a year earlier.
The main factor in the improved operating results was a $184.7 million provision for loan losses, which declined from $228.7 million in the second quarter and $565.9 million in the third quarter of 2009.
Net charge-offs - loan losses less recoveries -- for the third quarter were $235.7 million, declining from $255.2 million in the second quarter and $381.3 million in the third quarter of 2009. With charge-offs exceeding the provision for loan losses, Zions "released" $26.5 million in loan loss reserves during the third quarter.
Loan loss reserves covered 4.07% of loans as of September 30, well "ahead of the pace" of loan losses, since the annualized ratio of net charge-offs to average loans for the third quarter was 2.50%.
Nonperforming assets - including nonaccrual loans and repossessed real estate - made up 6.01% of total assets as of Sep. 30, declining from 6.60% the previous quarter and 6.62% a year earlier. Excluding nonaccrual loans with loss-sharing guarantees from the
Federal Deposit Insurance Corp.
, the nonperforming assets ratio was 4.14%, compared to 4.46% in June and 4.07% a year earlier.
CEO Harris Simmons said the company was "encouraged by the trends exhibited in our third quarter results," as "asset quality metrics improved across all major fronts," adding that Zions expected "continued improvement into the fourth quarter and beyond."
Zions also reported $2.4 billion in loan originations during the third quarter, increasing from $1.8 billion during the second quarter. The net interest margin - essentially the average yield on loans and investments less the average rate paid on deposits and borrowings - was 3.84%, compared to 3.58% the previous quarter and 3.91% in the third quarter of 2009.
Howe Barnes Hoefer & Arnett analyst Chris Stulpin initiated his firm's coverage of Zions on October 7 with a buy rating and a 12-month price target of $29.00, which would be a 36% gain from Monday's closing price of $21.35. In a conversation with
following the company's earnings release, Stulpin said it "it looks like things are pointed in a positive direction as far as credit quality is concerned."
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.