Zions Bancorporation Reports Earnings Of $0.30 Per Diluted Common Share For Second Quarter 2013

PR Newswire

SALT LAKE CITY, July 22, 2013 /PRNewswire/ -- Zions Bancorporation (ZION) ("Zions" or "the Company") today reported second quarter net earnings applicable to common shareholders of $55.4 million or $0.30 per diluted common share, compared to $88.3 million or $0.48 per diluted share for the first quarter of 2013, and $55.2 million or $0.30 per diluted share for the second quarter of 2012. Net earnings this quarter included after-tax debt extinguishment cost of $24.9 million, or $0.14 per share, which resulted from the redemption of trust preferred securities and a successful tender offer for approximately $258 million of expensive senior debt.

Second Quarter 2013 Highlights

  • Loans and leases held for investment, excluding FDIC-supported loans, increased $471 million compared to the prior quarter to $37.8 billion at June 30, 2013. Average loans and leases, excluding FDIC-supported loans, increased $419 million. 
  • Excluding an unusually strong performance from FDIC-supported loans, net interest income was relatively stable compared to the prior quarter, supported by the loan growth previously noted.
  • The Company completed several capital and financing actions during the quarter consistent with its objective of reducing its cost of capital and financing.
  • Credit quality showed continued improvement, with classified loans and nonperforming lending-related assets declining 6% and 12%, respectively, compared to the prior quarter. This continued improvement resulted in a second quarter negative provision for loan losses of $22.0 million.

"We are pleased with the continued growth in loans this quarter, and with the progress that we made toward replacing expensive capital and financing issued during the recent crisis with significantly lower cost instruments," said Harris H. Simmons, chairman and chief executive officer. "We look forward to continued progress on both fronts in the third quarter."

Loans

Loans and leases held for investment, excluding FDIC-supported loans, increased $471 million on a net basis to $37.8 billion at June 30, 2013, compared to $37.3 billion at March 31, 2013. The increases were predominantly in commercial and industrial, construction, and 1-4 family residential loans, and were widespread geographically. Decreases of $181 million, primarily in commercial owner occupied and term commercial real estate, partially offset increases in other loan categories. Average loans and leases, excluding FDIC-supported loans, increased $419 million to $37.5 billion during the second quarter of 2013, compared to $37.1 billion during the first quarter of 2013. Unfunded lending commitments at June 30, 2013 increased by approximately $606 million from the amount at March 31, 2013.

Deposits

Average total deposits for the second quarter of 2013 increased $0.6 billion, or 1%, to $45.0 billion, compared to $44.4 billion for the first quarter of 2013. This increase was driven mainly by average noninterest-bearing demand deposits, which increased $0.4 billion to $17.6 billion in the second quarter from $17.2 billion in the first quarter. The ratio of average loans to average deposits was 84% at June 30, 2013, compared to 85% at March 31, 2013.

Debt and Shareholders' Equity

Consistent with its stated objectives of reducing the cost of its noncommon equity capital and debt financing, the Company completed the following actions during the quarter:

1. On May 3, 2013, Zions Capital Trust B redeemed all of its 8.0% outstanding trust preferred securities (previously included in long-term debt), or 11.4 million shares, at 100% of their $25 per share liquidation amount for a total of $285 million.

2. Following its tender offer announced on May 31, 2013, the Company repurchased on June 18, 2013 approximately $258 million of its $500 million outstanding 7.75% senior notes that were due September 23, 2014.

In connection with these transactions, the Company recorded $40.3 million pretax of debt extinguishment cost, which consisted of the early tender premium and write-offs of unamortized debt discount and issuance costs.

3. On May 3, 2013, the Company issued $126.2 million of its Series H Fixed-Rate Non-Cumulative Perpetual Preferred Stock. Dividends are payable quarterly at an annual rate of 5.75%.

4. On May 17, 2013, the Company issued $300.9 million of its Series I Fixed/Floating Rate Non-Cumulative Perpetual Preferred Stock. Dividends are payable semiannually at 5.8% to June 15, 2023, at which time the interest rate resets to three-month LIBOR plus 3.8%.

Net of commissions and fees, the proceeds from these preferred stock issuances added approximately $419.2 million to shareholders' equity and Tier 1 capital. The Company expects to use the proceeds of these and earlier issuances to call like amounts of its 9.5% Series C preferred stock in the third quarter of 2013.

5. On June 13, 2013, the Company issued $300 million of 4.5% senior notes due June 13, 2023. Net proceeds were approximately $297.2 million.

The estimated common equity Tier 1 capital ratio was 10.05% at June 30, 2013, compared to 10.07% at March 31, 2013.

Net Interest Income

Net interest income increased to $431 million for the second quarter of 2013, compared to $418 million for the first quarter of 2013. The net interest margin was unchanged at 3.44% in the second quarter of 2013 compared to the first quarter of 2013. Net interest income was favorably impacted this quarter by approximately $9.4 million (8 bps of the net interest margin) due to better than expected performance of FDIC-supported loans. Continued loan growth mitigated the negative effects on net interest income of loan rates resetting at lower levels. Net interest income also benefited from reduced interest expense due to the retirement of expensive long-term debt.

Noninterest Income

Noninterest income for the second quarter of 2013 was $125.1 million, compared to $121.2 million for the first quarter of 2013. The net increase was primarily due to reduced other-than-temporary impairment ("OTTI") on collateralized debt obligation ("CDO") securities compared to the previous quarter.

CDO Investment Securities

During the second quarter of 2013, the Company recognized credit-related OTTI on CDOs of $4.2 million, compared to $10.1 million during the first quarter of 2013. Fixed income securities losses of $1.2 million for the second quarter consisted of $3.1 million of gains from $11.4 million of cash principal payments on CDOs previously written down and $4.3 million of losses on sales of $14.9 million in par amount from six CDO securities. This compares to first quarter gains of $3.3 million from $19.7 million of cash principal payments on CDOs previously written down and no sales.

The following table provides fair value and other information on the CDOs, stratified into performing tranches without credit impairment and nonperforming tranches at June 30, 2013:


June 30, 2013












Net

unrealized

losses

recognized

in AOCI 1


Weighted

average

discount

rate 2


% of carrying value

to par



(Amounts in millions)

No. of

tranches


Par

amount


Amortized

cost


Carrying

value




June 30,
2013


March 31,
2013


Change

Performing CDOs


















Predominantly bank CDOs

25


$

753


$

677


$

537


$

(140)


5.7%


71%


72%


(1)%

Insurance-only CDOs

22


446


442


335


(107)


7.9%


75%


74%


1%

Other CDOs

6


51


40


37


(3)


9.7%


73%


73%


—%

Total performing CDOs

53


1,250


1,159


909


(250)


6.7%


73%


73%


—%



















Nonperforming CDOs 3


















CDOs credit impaired prior to last 12 months

14


272


197


108


(89)


10.1%


40%


32%


8%

CDOs credit impaired during last 12 months

44


849


501


245


(256)


9.5%


29%


24%


5%

Total nonperforming CDOs

58


1,121


698


353


(345)


9.7%


31%


27%


4%



















Total CDOs

111


$

2,371


$

1,857


$

1,262


$

(595)


8.1%


53%


51%


2%



1

Amounts presented are pretax.

2

Margin over related LIBOR index.

3

Defined as either deferring current interest ("PIKing") or OTTI; the majority are predominantly bank CDOs.

The net unrealized pretax losses in accumulated other comprehensive income ("AOCI") improved by $56 million to $595 million in the second quarter of 2013 from $651 million in the first quarter of 2013 due to fair value increases. These increases occurred primarily in junior tranches and were driven by rising short-term forward interest rates and improvement in credit spreads.

Noninterest Expense

Noninterest expense for the second quarter of 2013 was $451.7 million compared to $397.3 million for the first quarter of 2013. The increase this quarter was due primarily to the debt extinguishment cost of $40 million. Other changes included the provision associated with increased unfunded lending commitments and increased professional and legal services, offset by reduced salary and employee benefit expense primarily resulting from reduced FICA payments. Approximately $3 million of professional services expenses were consulting expenses related to the Company's upgrade of its stress testing and capital planning capabilities and processes to meet Comprehensive Capital Analysis and Review ("CCAR") standards; we expect similar levels of expense related to these efforts in the third and fourth quarters.

Asset Quality

Net loan and lease charge-offs decreased $12.2 million, or 68%, in the second quarter of 2013 compared to the first quarter of 2013, due to significant recoveries of loans previously charged off. Net charge-offs declined primarily in commercial and industrial, owner occupied, and term commercial real estate loans. Gross loan and lease charge-offs were essentially unchanged at $35.1 million in the second quarter of 2013, compared to $35.5 million in the first quarter of 2013; gross charge-offs declined 52% from the second quarter of 2012.

Nonperforming lending-related assets declined 12% to $602 million at June 30, 2013 from $684 million at March 31, 2013. Nonaccrual loans declined 12% to $521 million at June 30, 2013 from $594 million at March 31, 2013. The ratio of nonperforming lending-related assets to loans and leases and other real estate owned decreased to 1.57% at June 30, 2013, compared to 1.80% at March 31, 2013.

Classified loans, excluding FDIC-supported loans, decreased approximately 6% to $1.64 billion at June 30, 2013, compared to $1.74 billion at March 31, 2013. Approximately 84% of classified loans were current as to principal and interest for the second quarter of 2013, compared to 80% for the first quarter of 2013, and 73% for the second quarter of 2012.

Other credit quality metrics also improved to a degree generally consistent with those metrics detailed above.

The negative provision for loan losses was $22.0 million for the second quarter of 2013, compared to a negative provision of $29.0 million for the first quarter of 2013. The negative provision continues to be driven by the improvement in credit quality. The allowance for credit losses was $0.92 billion, or 2.40% of loans and leases at June 30, 2013, compared to $0.94 billion, or 2.50% of loans and leases at March 31, 2013.

Other Matters

During the second quarter of 2013, the Company's Board of Directors approved a significant investment by the Company to replace its core loan and deposit systems with an integrated system offered by TATA Consultancy Services; additionally, the Company plans to upgrade its accounting systems. These initiatives will be completed in phases; as such phases are completed, management expects a significant improvement in operational efficiency, risk management, an improved customer experience as well as reduced operational and financial risk stemming from older legacy systems. The Company is executing in phases to allow for thorough testing of the new systems before retiring the current systems, with care being exercised to minimize or eliminate any adverse customer impact.

These initiatives are in the early stages of development and by their very nature, projections of duration, cost, expected savings, and related items are subject to change and significant variability. Management currently estimates that these initiatives will take between five and seven years to implement. The total cost of these initiatives is currently estimated to be approximately $200 million, with approximately one third of that amount estimated to be capitalized.

Conference Call

Zions will host a conference call to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 22, 2013). Media representatives, analysts and the public are invited to listen to this discussion by calling 253-237-1247 (domestic and international) and entering the passcode 99931233, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation website at www.zionsbancorporation.com. The webcast of the conference call will also be archived and available for 30 days.

About Zions Bancorporation

Zions Bancorporation is one of the nation's premier financial services companies, consisting of a collection of great banks in select Western markets. Zions operates its banking businesses under local management teams and community identities through approximately 475 offices in 10 Western and Southwestern states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington. The Company is a national leader in Small Business Administration lending and public finance advisory services, and received 13 "Excellence" awards by Greenwich Associates for the 2012 survey. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to subsidiary banks can be accessed at www.zionsbancorporation.com.

Forward-Looking Information

Statements in this press release that are based on other than historical data or that express the Company's expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that might cause such differences include, but are not limited to: the Company's ability to successfully execute its business plans and achieve its objectives; changes in general economic and financial market conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including changes in securities markets and valuations in structured securities and other assets; changes in governmental policies and programs resulting from general economic and financial market conditions; changes in interest and funding rates; continuing consolidation in the financial services industry; new private and governmental legal actions or changes in existing private and governmental legal actions; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company's operations or business (including The Dodd-Frank Wall Street Reform and Consumer Protection Act); and changes in accounting policies, procedures or determinations as may be required by the Financial Accounting Standards Board or other regulatory agencies.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Zions Bancorporation's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov).

Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

 

FINANCIAL HIGHLIGHTS

(Unaudited)

















Three Months Ended

(In thousands, except share, per share, and ratio data)

June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

2012


June 30,

 2012

PER COMMON SHARE










Dividends

$

0.04


$

0.01


$

0.01


$

0.01


$

0.01

Book value per common share 1

27.82


27.43


26.73


26.05


25.48

Tangible common equity per common share 1

22.09


21.67


20.95


20.24


19.65











SELECTED RATIOS










Return on average assets

0.61%


0.83%


0.43%


0.82%


0.70%

Return on average common equity

4.35%


7.18%


2.91%


5.21%


4.71%

Tangible return on average tangible common equity

5.73%


9.37%


4.07%


7.02%


6.41%

Net interest margin

3.44%


3.44%


3.47%


3.58%


3.56%











Capital Ratios










Tangible common equity ratio 1

7.57%


7.53%


7.09%


7.17%


6.91%

Tangible equity ratio 1

10.78%


9.97%


9.15


9.32%


10.35%

Average equity to average assets

12.11%


11.54%


11.03%


12.22%


12.37%












Risk-Based Capital Ratios 1,2










Common equity Tier 1 capital

10.05%


10.07%


9.80%


9.86%


9.78%

Tier 1 leverage

11.76%


11.55%


10.96%


11.05%


12.31%

Tier 1 risk-based capital

14.32%


14.08%


13.38%


13.49%


15.03%

Total risk-based capital

15.96%


15.75%


15.05%


15.25%


16.89%











Taxable-equivalent net interest income

$

434,579


$

422,252


$

434,252


$

442,595


$

430,967











Weighted average common and common-

equivalent shares outstanding

184,061,623


183,655,129


183,456,109


183,382,650


183,136,631

Common shares outstanding 1

184,436,656


184,246,471


184,199,198


184,156,402


184,117,522



1

At period end.

2

Ratios for June 30, 2013 are estimates.

 

CONSOLIDATED BALANCE SHEETS
















(In thousands, except share amounts)

June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012


(Unaudited)


(Unaudited)




(Unaudited)


(Unaudited)

ASSETS










Cash and due from banks

$

1,183,097


$

928,817


$

1,841,907


$

1,060,918


$

1,124,673

Money market investments:










Interest-bearing deposits

8,180,010


5,785,268


5,978,978


5,519,463


7,887,175

Federal funds sold and security resell agreements

221,799


2,340,177


2,775,354


1,960,294


83,529

Investment securities:










Held-to-maturity, at adjusted cost
(approximate fair value 
$734,292, $684,668,
$674,741, $655,768, and $715,710)

783,371


736,158


756,909


740,738


773,016

Available-for-sale, at fair value

3,193,395


3,287,844


3,091,310


3,127,192


3,167,590

Trading account, at fair value

26,385


28,301


28,290


13,963


20,539


4,003,151


4,052,303


3,876,509


3,881,893


3,961,145











Loans held for sale

164,619


161,559


251,651


220,240


139,245











Loans, net of unearned income and fees:










Loans and leases

37,756,010


37,284,694


37,137,006


36,674,288


36,319,596

FDIC-supported loans

431,935


477,725


528,241


588,566


642,246


38,187,945


37,762,419


37,665,247


37,262,854


36,961,842

Less allowance for loan losses

813,912


841,781


896,087


927,068


973,443

Loans, net of allowance

37,374,033


36,920,638


36,769,160


36,335,786


35,988,399











Other noninterest-bearing investments

852,939


855,388


855,462


874,903


867,882

Premises and equipment, net

717,299


706,746


708,882


709,188


714,913

Goodwill

1,014,129


1,014,129


1,014,129


1,015,129


1,015,129

Core deposit and other intangibles

43,239


47,000


50,818


55,034


59,277

Other real estate owned

80,789


89,904


98,151


118,190


144,816

Other assets

1,069,436


1,208,635


1,290,917


1,335,963


1,420,829


$

54,904,540


$

54,110,564


$

55,511,918


$

53,087,001


$

53,407,012











LIABILITIES AND SHAREHOLDERS' EQUITY










Deposits:










Noninterest-bearing demand

$

17,803,950


$

17,311,150


$

18,469,458


$

17,295,911


$

16,498,248

Interest-bearing:










Savings and money market

22,887,404


22,760,397


22,896,624


21,970,062


21,945,230

Time

2,810,431


2,889,903


2,962,931


3,107,815


3,211,942

Foreign

1,514,270


1,528,745


1,804,060


1,398,749


1,504,827


45,016,055


44,490,195


46,133,073


43,772,537


43,160,247











Securities sold, not yet purchased

15,799


1,662


26,735


21,708


104,882

Federal funds purchased and security
repurchase agreements

240,816


325,107


320,478


451,214


759,591

Other short-term borrowings



5,409


6,608


7,621

Long-term debt

2,173,176


2,352,569


2,337,113


2,326,659


2,274,571

Reserve for unfunded lending commitments

104,082


100,455


106,809


105,850


103,586

Other liabilities

494,280


489,923


533,660


484,170


507,151

Total liabilities

48,044,208


47,759,911


49,463,277


47,168,746


46,917,649











Shareholders' equity:










Preferred stock, without par value, authorized 4,400,000 shares

1,728,659


1,301,289


1,128,302


1,123,377


1,800,473

Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 184,436,656, 184,246,471, 184,199,198, 184,156,402, and 184,117,522 shares

4,167,828


4,170,888


4,166,109


4,162,001


4,157,525

Retained earnings

1,338,401


1,290,131


1,203,815


1,170,477


1,110,120

Accumulated other comprehensive income (loss)

(374,556)


(406,903)


(446,157)


(534,738)


(576,147)

Controlling interest shareholders' equity

6,860,332


6,355,405


6,052,069


5,921,117


6,491,971

Noncontrolling interests


(4,752)


(3,428)


(2,862)


(2,608)

Total shareholders' equity

6,860,332


6,350,653


6,048,641


5,918,255


6,489,363


$

54,904,540


$

54,110,564


$

55,511,918


$

53,087,001


$

53,407,012

 

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

















Three Months Ended

(In thousands, except per share amounts)

June 30,
2013


March 31,
2013


December 31,

 2012


September 30,

 2012


June 30,
2012

Interest income:










Interest and fees on loans

$

460,308


$

453,433


$

462,002


$

473,162


$

472,926

Interest on money market investments

5,764


5,439


6,004


5,349


5,099

Interest on securities:










Held-to-maturity

7,846


7,974


8,130


8,337


9,325

Available-for-sale

19,028


17,712


21,971


22,042


25,090

Trading account

287


190


150


110


148

Total interest income

493,233


484,748


498,257


509,000


512,588











Interest expense:










Interest on deposits

15,143


15,642


16,861


19,049


20,823

Interest on short-term borrowings

78


92


178


193


256

Interest on long-term debt

47,355


50,899


51,261


51,597


65,165

Total interest expense

62,576


66,633


68,300


70,839


86,244











Net interest income

430,657


418,115


429,957


438,161


426,344

Provision for loan losses

(21,990)


(29,035)


(10,401)


(1,889)


10,853

Net interest income after provision for loan losses

452,647


447,150


440,358


440,050


415,491











Noninterest income:










Service charges and fees on deposit accounts

44,329


43,580


44,492


44,951


43,426

Other service charges, commissions and fees

45,888


42,731


46,497


44,679


44,197

Trust and wealth management income

7,732


6,994


7,450


6,521


8,057

Capital markets and foreign exchange

6,740


7,486


7,708


6,026


7,342

Dividends and other investment income

11,339


12,724


13,117


11,686


21,542

Loan sales and servicing income

10,723


10,951


10,595


10,695


10,287

Fair value and nonhedge derivative loss

(2,957)


(5,445)


(4,778)


(5,820)


(6,784)

Equity securities gains (losses), net

2,209


2,832


(682)


2,683


107

Fixed income securities gains (losses), net

(1,153)


3,299


10,259


3,046


5,519

Impairment losses on investment securities:










Impairment losses on investment securities

(4,910)


(31,493)


(120,082)


(3,876)


(24,026)

Noncredit-related losses on securities not expected to be
sold
(recognized in other comprehensive income)

693


21,376


36,274


1,140


16,718

Net impairment losses on investment securities

(4,217)


(10,117)


(83,808)


(2,736)


(7,308)

Other

4,515


6,184


3,309


3,495


2,280

Total noninterest income

125,148


121,219


54,159


125,226


128,665











Noninterest expense:










Salaries and employee benefits

227,328


229,789


220,039


220,223


220,765

Occupancy, net

27,951


27,389


28,226


28,601


28,169

Equipment, software and furniture

26,545


26,074


27,774


27,122


27,302

Other real estate expense

1,590


1,977


5,266


207


6,440

Credit related expense

9,397


10,482


11,302


13,316


12,415

Provision for unfunded lending commitments

3,627


(6,354)


959


2,264


4,868

Professional and legal services

17,149


10,471


15,717


12,749


12,947

Advertising

5,807


5,893


5,969


7,326


6,618

FDIC premiums

10,124


9,711


10,760


11,278


10,444

Amortization of core deposit and other intangibles

3,762


3,819


4,216


4,241


4,262

Debt extinguishment cost

40,282





Other

78,116


78,097


76,786


67,648


67,426

Total noninterest expense

451,678


397,348


407,014


394,975


401,656













Income before income taxes

126,117


171,021


87,503


170,301


142,500

Income taxes

43,091


60,634


29,817


60,704


51,036

Net income

83,026


110,387


57,686


109,597


91,464

Net loss applicable to noncontrolling interests


(336)


(566)


(254)


(273)

Net income applicable to controlling interest

83,026


110,723


58,252


109,851


91,737

Preferred stock dividends

(27,641)


(22,399)


(22,647)


(47,529)


(36,522)

Net earnings applicable to common shareholders

$

55,385


$

88,324


$

35,605


$

62,322


$

55,215











Weighted average common shares outstanding during the period:











Basic shares

183,647


183.396


183,300


183,237


182,985

Diluted shares

184,062


183,655


183,456


183,383


183,137











Net earnings per common share:










Basic

$

0.30


$

0.48


$

0.19


$

0.34


$

0.30

Diluted

0.30


0.48


0.19


0.34


0.30

 

Loan Balances by Portfolio Type

(Unaudited)

















(In millions)


June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012

Commercial:











Commercial and industrial


$

11,899


$

11,504


$

11,257


$

10,840


$

10,471

Leasing


388


390


423


405


406

Owner occupied


7,394


7,501


7,589


7,669


7,811

Municipal


454


484


494


469


477

Total commercial


20,135


19,879


19,763


19,383


19,165












Commercial real estate:











Construction and land development


2,191


2,039


1,939


1,956


2,099

Term


7,971


8,012


8,063


8,140


8,012

Total commercial real estate


10,162


10,051


10,002


10,096


10,111












Consumer:











Home equity credit line


2,124


2,125


2,178


2,175


2,181

1-4 family residential


4,486


4,408


4,350


4,181


4,019

Construction and other consumer real estate


322


320


321


320


328

Bankcard and other revolving plans


315


293


307


295


284

Other


212


208


216


224


232

Total consumer


7,459


7,354


7,372


7,195


7,044












FDIC-supported loans 1


432


478


528


589


642

Total loans


$

38,188


$

37,762


$

37,665


$

37,263


$

36,962



1

FDIC-supported loans represent loans acquired from the FDIC subject to loss sharing agreements.

 

FDIC-Supported Loans – Effect of Higher Accretion

and Impact on FDIC Indemnification Asset

(Unaudited)


















Three Months Ended

(In thousands)


June 30,

2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012

Balance sheet:






















Change in assets from reestimation of cash flows –

increase (decrease):











FDIC-supported loans


$

28,424


$

18,977


$

12,970


$

17,594


$

14,761

FDIC indemnification asset (included in other assets)


(21,845)


(20,288)


(10,610)


(14,401)


(11,233)












Balance at end of period:











FDIC-supported loans


431,935


477,725


528,241


588,566


642,246

FDIC indemnification asset (included in other assets)


51,297


71,100


90,074


100,004


117,167













Three Months Ended

(In thousands)


June 30,

2013


March 31,

2013


December 31,

 2012


September 30,

 2012


June 30,

 2012

Statement of income:






















Interest income:











Interest and fees on loans


$

28,424


$

18,977


$

12,970


$

17,594


$

14,761












Noninterest expense:











Other noninterest expense


21,845


20,288


10,610


14,401


11,233

Net increase (decrease) in pretax income


$

6,579


$

(1,311)


$

2,360


$

3,193


$

3,528

 

Nonperforming Lending-Related Assets

(Unaudited)
















(Amounts in thousands)

June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012











Nonaccrual loans

$

515,708


$

589,221


$

630,810


$

699,952


$

771,510

Other real estate owned

70,031


80,701


90,269


106,356


125,142

Nonperforming lending-related assets,
excluding
FDIC-supported assets

585,739


669,922


721,079


806,308


896,652











FDIC-supported nonaccrual loans

5,256


4,927


17,343


19,454


21,980

FDIC-supported other real estate owned

10,758


9,203


7,882


11,834


19,674

FDIC-supported nonperforming assets

16,014


14,130


25,225


31,288


41,654

Total nonperforming lending-related assets

$

601,753


$

684,052


$

746,304


$

837,596


$

938,306











Ratio of nonperforming lending-related assets to loans1 and leases and other real estate owned

1.57%


1.80%


1.96%


2.23%


2.52%











Accruing loans past due 90 days or more, excluding FDIC-supported loans

$

10,685


$

12,708


$

9,730


$

14,508


$

29,460

Accruing FDIC-supported loans past due 90 days or more

33,410


47,208


52,033


60,913


70,453

Ratio of accruing loans past due 90 days or more to loans 1 and leases

0.11%


0.16%


0.16%


0.20%


0.27%












Nonaccrual loans and accruing loans past due 90 days or more

$

565,059


$

654,064


$

709,916


$

794,827


$

893,403

Ratio of nonaccrual loans and accruing loans past due 90 days or more to loans1 and leases

1.47%


1.72%


1.87%


2.12%


2.41%











Accruing loans past due 30 - 89 days,
excluding
FDIC-supported loans

$

103,075


$

155,896


$

185,422


$

143,539


$

142,501

Accruing FDIC-supported loans past due 30 - 89 days

6,522


11,571


11,924


15,462


15,519











Restructured loans included in nonaccrual loans

162,496


193,975


215,476


207,088


227,568

Restructured loans on accrual

385,428


416,181


407,026


421,055


393,360











Classified loans, excluding FDIC-supported loans

1,639,206


1,737,178


1,767,460


1,810,099


1,880,932



1

Includes loans held for sale.

 

Allowance for Credit Losses

(Unaudited)

















Three Months Ended

(Amounts in thousands)

June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012

Allowance for Loan Losses










Balance at beginning of period

$

841,781


$

896,087


$

927,068


$

973,443


$

1,011,786

Add:










Provision for losses

(21,990)


(29,035)


(10,401)


(1,889)


10,853

Adjustment for FDIC-supported loans

(209)


(7,429)


(1,721)


(5,908)


(5,856)

Deduct:










Gross loan and lease charge-offs

(35,099)


(35,467)


(54,709)


(58,781)


(73,685)

Recoveries

29,429


17,625


35,850


20,203


30,345

Net loan and lease charge-offs

(5,670)


(17,842)


(18,859)


(38,578)


(43,340)

Balance at end of period

$

813,912


$

841,781


$

896,087


$

927,068


$

973,443











Ratio of allowance for loan losses to loans and leases, at period end

2.13%


2.23%


2.38%


2.49%


2.63%











Ratio of allowance for loan losses to nonperforming loans, at period end

156.23%


141.68%


138.25%


128.87%


122.68%











Annualized ratio of net loan and lease charge-offs to average loans

0.06%


0.19%


0.20%


0.41%


0.47%











Reserve for Unfunded Lending Commitments










Balance at beginning of period

$

100,455


$

106,809


$

105,850


$

103,586


$

98,718

Provision charged (credited) to earnings

3,627


(6,354)


959


2,264


4,868

Balance at end of period

$

104,082


$

100,455


$

106,809


$

105,850


$

103,586











Total Allowance for Credit Losses










Allowance for loan losses

$

813,912


$

841,781


$

896,087


$

927,068


$

973,443

Reserve for unfunded lending
commitments

104,082


100,455


106,809


105,850


103,586

Total allowance for credit losses

$

917,994


$

942,236


$

1,002,896


$

1,032,918


$

1,077,029











Ratio of total allowance for credit losses
to loans and
leases outstanding, at period end

2.40%


2.50%


2.66%


2.77%


2.91%

 

Nonaccrual Loans by Portfolio Type

(Excluding FDIC-Supported Loans)

(Unaudited)

















(In millions)

June 30,

2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012












Commercial:











Commercial and industrial


$

94


$

100


$

91


$

103


$

133

Leasing


1


1


1


1


1

Owner occupied


186


195


206


223


240

Municipal


9


9


9


6


Total commercial


290


305


307


333


374












Commercial real estate:











Construction and land development


70


93


108


125


115

Term


71


102


125


155


182

Total commercial real estate


141


195


233


280


297












Consumer:











Home equity credit line


11


12


14


12


14

1-4 family residential


66


71


70


66


76

Construction and other consumer real estate


5


4


5


6


8

Bankcard and other revolving plans


2


1


1


1


1

Other


1


1


1


2


2

Total consumer


85


89


91


87


101

Total nonaccrual loans


$

516


$

589


$

631


$

700


$

772

 

 

Net Charge-Offs by Portfolio Type

(Unaudited)



(In millions)

June 30,

 2013


March 31,

 2013


December 31,

 2012


September 30,

 2012


June 30,

 2012

Commercial:











Commercial and industrial


$

2


$

5


$

(1)


$

3


$

9

Leasing




2



Owner occupied


3


5


7


10


10

Municipal






Total commercial


5


10


8


13


19












Commercial real estate:











Construction and land development


(3)


(3)


(7)



(2)

Term


(2)


5


7


16


13

Total commercial real estate


(5)


2



16


11












Consumer:











Home equity credit line


2


2


6


2


6

1-4 family residential


3


3


4


4


5

Construction and other consumer real estate


1


(1)



1


Bankcard and other revolving plans



2


1


2


1

Other






1

Total consumer loans


6


6


11


9


13

Total net charge-offs


$

6


$

18


$

19


$

38


$

43

 

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)

















Three Months Ended


June 30, 2013


March 31, 2013


December 31, 2012

(In thousands)

Average

balance


Average

rate


Average

balance


Average

rate


Average

balance


Average

rate

ASSETS












Money market investments

$

8,652,403


0.27%


$

8,111,798


0.27%


$

8,652,394


0.28%

Securities:












Held-to-maturity

740,839


5.07%


756,739


5.11%


740,297


5.29%

Available-for-sale

3,090,910


2.50%


3,035,592


2.41%


2,958,311


3.01%

Trading account

36,296


3.17%


22,620


3.41%


21,793


2.74%

Total securities

3,868,045


3.00%


3,814,951


2.95%


3,720,401


3.46%













Loans held for sale

141,313


3.47%


204,597


3.50%


231,710


3.22%













Loans 1:












Loans and leases

37,518,549


4.55%


37,099,182


4.67%


36,685,969


4.78%

FDIC-supported loans

452,849


31.22%


498,654


21.43%


559,643


15.12%

Total loans

37,971,398


4.87%


37,597,836


4.90%


37,245,612


4.94%

Total interest-earning assets

50,633,159


3.94%


49,729,182


3.99%


49,850,117


4.01%

Cash and due from banks

1,000,221




1,063,314




1,259,311



Allowance for loan losses

(837,651)




(884,363)




(925,943)



Goodwill

1,014,129




1,014,129




1,014,986



Core deposit and other intangibles

45,262




49,069




53,083



Other assets

2,808,640




2,889,354




3,014,503



Total assets

$

54,663,760




$

53,860,685




$

54,266,057















LIABILITIES












Interest-bearing deposits:












Savings and money market

$

22,871,040


0.18%


$

22,735,258


0.19%


$

22,356,014


0.20%

Time

2,842,322


0.59%


2,935,316


0.62%


3,038,934


0.64%

Foreign

1,642,381


0.20%


1,528,665


0.20%


1,597,513


0.23%

Total interest-bearing deposits

27,355,743


0.22%


27,199,239


0.23%


26,992,461


0.25%

Borrowed funds:












Securities sold, not yet purchased

4,076


—%


494


—%


3,320


Federal funds purchased and security
repurchase
agreements

283,690


0.11%


289,918


0.10%


429,653


0.14%

Other short-term borrowings


—%


3,837


2.01%


6,293


1.71%

Long-term debt

2,214,215


8.58%


2,331,314


8.85%


2,318,478


8.80%

Total borrowed funds

2,501,981


7.60%


2,625,563


7.88%


2,757,744


7.42%

Total interest-bearing liabilities

29,857,724


0.84%


29,824,802


0.91%


29,750,205


0.91%

Noninterest-bearing deposits

17,629,219




17,211,214




17,918,890



Other liabilities

559,219




608,206




610,316



Total liabilities

48,046,162




47,644,222




48,279,411



Shareholders' equity:












Preferred equity

1,518,823




1,229,708




1,126,566



Common equity

5,102,082




4,990,317




4,862,972



Controlling interest shareholders' equity

6,620,905




6,220,025




5,989,538



Noncontrolling interests

(3,307)




(3,562)




(2,892)



Total shareholders' equity

6,617,598




6,216,463




5,986,646



Total liabilities and shareholders' equity

$

54,663,760




$

53,860,685




$

54,266,057















Spread on average interest-bearing funds



3.10%




3.08%




3.10%













Net yield on interest-earning assets



3.44%




3.44%




3.47%



1

Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

 

GAAP to Non-GAAP Reconciliation

(Unaudited)









Tangible Return on Average Tangible Common Equity














Three Months Ended

(Amounts in thousands)

June 30,

2013


March 31,

2013


December 31,

2012


September 30,

2012


June 30,

2012











Net earnings applicable to common shareholders (GAAP)

$

55,385


$

88,324


$

35,605


$

62,322


$

55,215











Adjustments, net of tax:










Impairment loss on goodwill



583



Amortization of core deposit and
other intangibles

2,391


2,425


2,677


2,692


2,704

Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a)

$

57,776


$

90,749


$

38,865


$

65,014


$

57,919











Average common equity (GAAP)

$

5,102,082


$

4,990,317


$

4,862,972


$

4,758,858


$

4,713,318

Average goodwill

(1,014,129)


(1,014,129)


(1,014,986)


(1,015,129)


(1,015,129)

Average core deposit and other
intangibles

(45,262)


(49,069)


(53,083)


(57,345)


(61,511)

Average tangible common equity
(non-GAAP) (b)

$

4,042,691


$

3,927,119


$

3,794,903


$

3,686,384


$

3,636,678











Number of days in quarter (c)

91


90


92


92


91

Number of days in year (d)

365


365


366


366


366











Tangible return on average tangible
common equity
 (non-GAAP) (a/b/c*d)

5.73%


9.37%


4.07%


7.02%


6.41%

 

This press release presents the non-GAAP financial measure previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measure are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results.

The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measure provides a meaningful base for period-to-period and company-to-company comparisons, which will assist investors and analysts in analyzing the operating results of the Company and in predicting future performance. This non-GAAP financial measure is used by management and the Board of Directors to assess the performance of the Company's business for evaluating bank reporting segment performance, for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting this non-GAAP financial measure will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management and the Board of Directors.

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

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