In a presentation including in a Securities and Exchange Commission filing on Tuesday, the company said it expected "further improvement in profitability" from its capital actions, and that its net interest margin "remains strong relative to peers." Zions also said it would see "Significant earnings and capital upside" from its asset-sensitive position, "If short-term interest rates rise and/or yield curve steepens further."

Zions reported second-quarter earnings applicable to common shareholders of $55.4 million, or 30 cents a share, declining from $88.3 million, or 48 cents a share, in the first quarter, but rising slightly from $55.2 million, or 30 cents a share, during the second quarter of 2012.

Excluding $24.9 million, or 14 cents a share in costs from the redemption of trust-preferred redemption and retirement of debt, the year-over-year earnings increase mainly reflected the bank's improved credit quality. During the second quarter, Zions transferred $22.0 million from loan loss reserves, compared to a provision for reserves of $10.9 million a year earlier.

Even after that transfer, reserves were very strong, covering 2.13% of total loans. A very low annualized net charge-off ratio of 0.06% during the second quarter, and net charge-offs at annualized levels below 0.50% of total loans over the past year, indicate significant further reserve releases ahead.

Zions reported second-quarter net interest income of $430.7 million, increasing from $418.1 million in the first quarter, and $426.3 million in the second quarter of 2012, reflecting growth of average non-covered portfolio loans of 1% sequentially and 2% year-over-year.

The company still has a way to go to join the ranks of regional banks with strong earnings results, in part because of the costs associated with the continued balance sheet restructuring. The second-quarter return on average assets was 0.61%, and the return on average tangible common equity was 5.73%.

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-- 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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