Zions Bancorp (ZION), for the second straight quarter, unexpectedly swung to a profit on more credit quality and loan-loss provision improvement, while the Utah-based regional bank's loan demand finally began to increase.
Like many regional banks, Zions's bottom lines have improved as credit quality revives and it sets aside fewer funds for potential loan losses. Its transition to the black came later than the company had anticipated, but it has twice in a row posted profits when analysts were expecting losses.
In the latest period, loan-loss provision -- money set aside to cover potential losses -- was $1.3 million, compared with $228.7 million a year earlier and $60 million in the first quarter.
As for credit quality, net charge-offs -- loans the bank doesn't expect to collect -- fell to 1.23% of annualized average loans from 2.64% last year and 1.54% last quarter. Nonperforming assets -- loans in danger of going bad -- fell to 4.06% from 6.6% and 4.54%, respectively.
Loan demand, which had been on a streak of sequential declines, increased in the latest period compared with the first part of the year. In the most recent period, net loans and leases rose 0.8% sequentially. Average total deposits climbed 0.7% from the prior quarter.
Overall, Zions reported a profit of $72.9 million, or 16 cents a share, compared with a year-earlier loss of $113 million, or 84 cents a share. The number of shares outstanding increased 13%. Analysts surveyed by Thomson Reuters predicted an 2-cent loss.
The most recent results included discount amortization on convertible subordinated debt and additional accretion on acquired loans, without which earnings would have been 45 cents a share.
Total interest income declined 4.3% to $558.7 million.
During the downturn, regional banks' performance often was closely linked to local real-estate markets. With operations in Western and Southwestern states, Zions was exposed to some of the hardest-hit housing markets. It turned to the government's Troubled Asset Relief Program to get through the worst of the downturn and has yet to repay the $1.4 billion it received from the federal government.
Zions shares were up 0.5% at $22.90 after hours. Through the close, the stock had fallen 5.9% in the last year.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; firstname.lastname@example.org