SALT LAKE CITY (TheStreet) -- Zions Bancorporation (ZION) - Get Report reported a narrower than expected loss for the June quarter amid signs of improvement in its loan portfolio.

The bank said its net loss available to common shares was $135 million, or 84 cents a share, for the second quarter, narrower than Wall Street's expectation for a loss of 95 cents a share.

The results available to common shareholders excluded $25 million in dividends paid on preferred shares, which included $1.4 billion owed to the Treasury for bailout money received in November 2008 through the Troubled Assets Relief Program, or TARP.

In comparison, the net loss applicable to common shareholders was $86.5 million, or 57 cents for the first quarter, and $23.8 million, or 21 cents a share, in the same period a year earlier.

The sequential earnings decline increases in expenses on repossessed real estate, and also the reversal of a $20 million provision for unfunded lending commitments during the first quarter. The year-over-year decline is mainly the result of a $494 million gain on the modification of subordinated debt that was booked in the second quarter of 2009.

There were several positive signs for improvement in Zions's loan portfolio, including reductions in total nonperforming assets -- including non-accrual loans and loans past-due 90 days (less government-guaranteed balances) and repossessed real estate -- which comprised 4.74% of total assets, down from 4.88% the previous quarter but up from 3.98% a year earlier. These nonperforming asset figures exclude assets with FDIC loss-sharing guarantees.

Loans in early stages of delinquency or past due 30-89 days -- again excluding loans with FDIC backing -- totaled $318 million, down sharply from $462 million the previous quarter and $496 million in the second quarter of 2009.

Net charge-offs -- loan losses less recoveries -- increased to $255 million during the second quarter from $227 million the previous quarter and $348 million a year earlier, and Zions was sufficiently confident about improving credit metrics that its provision for loan losses was $229 million. This "release" of $26 million in loan losses was the company's first since the credit crisis began in 2008.

A number of large banks reporting quarterly results last week reported substantial reserve releases, including


(C) - Get Report

, which set aside $3.6 billion for loan loss reserves while net loan charge-offs totaled $6.5 billion, thus "releasing" $2.6 billion in reserves and boosting operating earnings by that amount.

Bank of America

(BAC) - Get Report

released $1.45 billion in loan loss reserves during the second quarter, and

JPMorgan Chase

(JPM) - Get Report

released $2.8 billion in loan loss reserves.

Zions CEO Harris Simmons said the lender was "encouraged with the decline in nonperforming lending-related assets, as well as an improvement in other problem credits; notably, more than 80% of the improvement in nonaccrual loans occurred in construction and term commercial real estate."

He also touted the company's capital ratios, as being at "record high levels" after the company raised $615 million in Tier 1 regulatory capital during the second quarter, through common and preferred stock offerings.

Zions's Tier 1 leverage ratio was 11.91% as of June 30, and its total risk-based capital ratio was 12.64%, well above the 5% and 10% required for most banks to be considered

well capitalized


Back in May, Harris said the company might consider repaying TARP during the first half of 2011, according to

SNL Financial


Shares of Zions closed Monday at $21.42, down 1.2% for the session. Year-to-date, the stock is up almost 70%, although it's well off itss 52-week high of $30.29 set on April 26.


Written by Philip van Doorn in Jupiter, Fla.

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 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.