ZIONS BANK: KEY POINTS |
In the midst of this very challenging economic environment, Zions First National Bank (“Zions Bank”) had net earnings of $106.7 million for the year ended December 31, 2008.
This level of earnings resulted even after Zions Bank reserved more than $163 million for potential future loan losses and approximately $90.4 million in valuation losses on securities.
• Zions Bancorporation, the holding company for Zions Bank, reported a loss of $498.1 million ($4.36 per diluted share) for the fourth quarter of 2008
o The fourth quarter loss was driven largely by non-cash goodwill impairment ($2.97 per diluted share) and valuation losses on securities ($1.07 per diluted share)
o For the year 2008, Zions Bancorporation’s core banking operations made $2.20 per diluted share, excluding non-cash charges from goodwill impairment and valuation losses on securities.
o Goodwill impairment is a non-cash expense with no impact on regulatory or tangible capital ratios
o The goodwill impairments occurred in Zions’ affiliates in Arizona, Colorado, and Nevada, and reflect the fact that market values of nearly all banks are significantly lower in these highly stressed markets.
• Zions Bank always has and continues to exceed the “well-capitalized” standard of bank regulators. In fact, Zions’ capital (regulatory and tangible) is at or near historic high levels.
o Zions Bank has a total capital to risk-weighted assets ratio of 11.33%, significantly above the 10.00% required by bank regulators to be deemed “well capitalized.”
o At December 31, 2008, Zions Bancorporation had a total capital to risk-weighted assets ratio of about 14.71%; also well above the 10.00% required by bank regulators to be deemed “well capitalized.”
• The liquidity of both Zions Bancorporation and Zions Bank has been significantly strengthened over the past quarter.
o Zions Bancorporation and Zions Bank have paid off all net short-term borrowings, leaving Zions with borrowing capacity with the Federal Reserve Bank and various Federal Home Loan Banks equal to more than one-third of total deposits.
o Zions Bancorporation issued medium-term notes, providing the company with a 2-year cash reserve.
• Our loan quality measures continue to compare favorably with industry performance.
o Among the nation’s two dozen largest domestically headquartered commercial banking organizations, Zions Bank ranks in the top quartile in terms of credit quality as measured by net loan losses – with a loss rate less than half that of the nation’s five largest banks.
o Neither Zions Bank nor any of its affiliates originated or purchased subprime residential mortgage loans.
o Zions Bancorporation has a highly diversified loan portfolio:
- Residential land development loans in California, Nevada, and Arizona (the most troubled loan types in the most troubled geographies) constitute just 6% of total loans.
- Zions Bancorporation has one of the strongest consumer loan portfolios in the nation. Total delinquencies in our HECL portfolio – a loan type that has become a significant problem for many banks – are at 0.40% as of December 31, 2008.
- While the residential housing market in CA, NV, and AZ is challenging, 60% of the assets of Zions Bancorporation are in states where the economy remains remarkably strong: Texas, Colorado, Utah, Idaho, Washington and Oregon.
• Zions Bank continues to build reserves against potential future loan losses, placing the bank in a very solid position to weather the current economic challenge.
o During 2008, Zions Bank put aside $163.1 million as a provision for potential loan losses. During that same period, the bank experienced $75.4 million in actual loan losses. This means that Zions Bank reserved 2.16 times more for losses than was actually experienced in 2008.
o As of December 31, 2008, Zions Bank was carrying $213.6 million in loan loss reserves on its balance sheet.
• During 2008, Zions Bank’s total loans increased by 13.4 percent, or more than $1.7 billion.
• Zions Bancorporation reduced its quarterly dividend to $0.04 per common share.
o While the company has ample cash and capital to continue paying a much higher dividend, paying a significant dividend to shareholders at a time of great stress in the economy and a time of reduced earnings is simply not prudent.
• 2008 was the most difficult economic environment in over half a century.
o 171 banks on the FDIC’s “troubled banks” list; 28 bank failures in 2008
o 271 credit unions on the NCUA’s “problem” list; 18 credit union failures in 2008
(Updated January 26, 2009)
*Artwork from jawboneradio under Creative Commons license at Flickr.com.
Looks like responsible banking to me.- customer
We just inherited my fathers 15,000 shares. Every year he received over $20,000.00 in dividends. This year to date only $538.00. Very disappointing since the Bank of Commerce still issued their $7200.00 dividend in January for 133 shares which was the same for the last 5 years. When do you expect the situation with Zions to change?