Zions Earnings Miss on Charges

SALT LAKE CITY ( TheStreet) -- ZIONS Bancorporation ( ZION) on Monday reported fourth-quarter net loss to common shareholders of $110.3 million, or 62 cents a share, which exceeded the estimate of a 37-cent loss per share, among analysts polled by Thomson Reuters.

The results compared to net losses to common shareholders of $80.5 million, or 47 cents a share, in the third quarter and $176.5 million, or $1.26 a share, during the fourth quarter of 2009.

The company said that "excluding the noncash effects of the discount amortization on convertible subordinated debt and additional accretion on acquired loans," the net loss to common shareholders during the fourth quarter would have been $44.1 million, or 25 cents a share, and the loss for the third quarter would have been $51.2 million, or 30 cents a share.

CEO Harris Simmons said the company was "particularly encouraged by the strong effort made during the fourth quarter to resolve more than a billion dollars of classified loans, the vast majority of which experienced favorable resolutions," and said the inflows of classified loans had "declined more than 70% from the peak quarterly rate."

Zions reported that nonperforming lending-related assets had declined 20% during the fourth quarter to $1.8 billion, or 3.58% of total assets, improving from 4.49% the previous quarter and 5.42% a year earlier.

The fourth-quarter provision for loan losses was $173.2 million, declining from $184.7 million in the third quarter and $390.7 million in the fourth quarter of 2009. With net charge-offs - loan losses less recoveries - totaling $251 million during the fourth quarter and other adjustments, Zions "released" $89.6 million in loan loss reserves, which directly reduced the company's net loss.

This followed the industry trend for the largest U.S. banks, including Citigroup ( C), which reported a net release of allowance for loan losses and unfunded lending commitments of $2.3 billion; Wells Fargo ( WFC), which released $850 million from reserves; JPMorgan Chase ( JPM), which saw a $1.9 billion decline in loan loss reserves; and Bank of America ( BAC), which reported a $1.7 billion decline in reserves during the fourth quarter.

For Zions, the fourth-quarter ratio of net charge-offs to average loans was an annualized 2.71% and reserves covered 3.92% of total loans as of December 31, making it appear that more reserve releases would be on tap for subsequent quarters.

Zions reported an adjusted net interest margin - essentially the average yield on loans and investments less the average cost of funds - of 4.07% for the fourth quarter, increasing from 4.03% the previous quarter and 3.81% a year earlier.

The company owes the government $1.4 billion in bailout funds received through the Troubled Assets Relief Program, or TARP. Zions raised $118.1 million in common equity during the fourth quarter and estimated that its Tier 1 common equity ratio was 9.08% as of December 31, increasing from 8.66% the previous quarter.

As of Friday's close, seven of the 30 analysts covering Zions Bancorporation rated the shares a buy, 19 recommended holding the shares and four analysts recommended investors sell the shares.

The shares closed at $23.75 Friday before the earnings announcement, and were down 2% for the session.

-- 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.

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