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SALT LAKE CITY, July 20 /PRNewswire-FirstCall/ -- Zions Bancorporation ("Zions" or "the Company") today reported second quarter net income of $145.3 million, or $1.35 per diluted share. Net income and earnings per share increased 22.3% and 3.8%, respectively, over the $118.8 million, or $1.30 per diluted share for the second quarter of 2005. The return on average common equity was 13.20% for the second quarter of 2006, up from 12.92% for the first quarter of 2006. The second quarter of 2006 includes after-tax merger related expense of $5.6 million ($0.05 per diluted share) related to the acquisition of Amegy Bancorporation, Inc. ("Amegy") and the related systems conversion. All comparisons to the 2005 periods reflect the effects of the Amegy acquisition.
"We are pleased to again report record quarterly earnings, driven by very strong loan growth, a relatively stable net interest margin, and continued excellent credit quality," said Harris H. Simmons, chairman and chief executive officer. "On balance sheet loans and leases grew $1.5 billion during the quarter, a record amount of growth, as economic activity remained strong throughout most of the West and Southwest," continued Simmons. "During the quarter, we also completed the conversion of Amegy Bank systems, and anticipate that this conversion will result in improved efficiencies going forward."
Year-to-date net income for 2006 increased 23.5% to $282.9 million or $2.62 per diluted share compared to $229.0 million, or $2.50 per diluted share for the same period of 2005. The return on average common equity for the first six months of 2006 was 13.06% compared to 16.20% for the first six months of 2005.
Strong Loan Growth
On-balance-sheet net loans and leases were $32.7 billion at June 30, 2006, an increase of approximately $1.5 billion (19.8% annualized) from $31.1 billion at March 31, 2006, and an increase of 37.2% from $23.8 billion at June 30, 2005. Loan growth during the second quarter was in the commercial and commercial real estate categories and was widely diversified geographically.
Deposit Growth
Total deposits at June 30, 2006 increased $382 million to $33.3 billion, an annualized increase of 4.6% from $32.9 billion at March 31, 2006, and increased 36.3% over the balances reported one year ago. Core deposits decreased $327 million during the quarter to $29.9 billion compared to $30.2 billion at March 31, 2006. However, noninterest-bearing demand deposits increased $211 million or 8.5% annualized during the quarter. Decreases in other deposit categories were offset by growth in large time deposits.
Net Interest Income
Taxable-equivalent net interest income for the quarter was $442.3 million compared to $428.8 million for the first quarter of 2006 and $336.1 million for the second quarter of 2005. For the second quarter of 2006, the net interest margin was 4.64% compared to 4.69% for the first quarter of 2006 and 4.60% for the second quarter of 2005. The decreased net interest margin for the quarter resulted mainly from the robust loan growth being funded primarily by time deposits and Federal Home Loan Bank advances and other short-term borrowings.
Noninterest Income
For the second quarter of 2006, noninterest income increased 7.2% to $137.8 million compared with $128.5 million for the first quarter of 2006, and 30.0% compared with $105.9 million for the second quarter of 2005. Service charges and fees on deposit accounts for the second quarter of 2006 increased $1.4 million or 13.7% annualized over the first quarter of 2006 and $10.0 million or 31.9% over the second quarter of 2005. Other service charges, commissions and fees were higher compared to the first quarter of 2006, reflecting increased investment, fiscal agent, and debit card interchange fees.
Noninterest Expense
Noninterest expense for the second quarter of 2006 was $333.3 million compared to $324.5 million for the first quarter of 2006 and $242.0 million for the second quarter of 2005. The largest component of noninterest expense, salaries and employee benefits, was essentially unchanged from the first quarter of 2006 and includes $4.1 million of stock option compensation expense compared to $3.9 million of stock option compensation expense in the first quarter of 2006.
Merger related expense was $8.9 million for the second quarter of 2006 compared to $6.8 million for the first quarter of 2006 and consists of systems conversion and employee-related costs for the Amegy acquisition. During the second quarter, the Company identified certain merger related expenses that were not properly classified during the first quarter. These expenses amounted to $1.1 million and were reclassified for the first quarter from other expense categories.
The efficiency ratio for the second quarter of 2006 was 57.5% compared to 58.2% for the first quarter of 2006 and 54.8% for the second quarter of 2005.
Asset Quality
Nonperforming assets declined to $73.5 million at June 30, 2006 from $96.6 million at March 31, 2006. As a result, the ratio of nonperforming assets to net loans and leases and other real estate owned improved to 0.22% at June 30, 2006 from 0.31% at both March 31, 2006 and June 30, 2005.
For the second quarter of 2006, net loan and lease charge-offs were $9.8 million or 0.12% annualized of average loans. This compares with $11.7 million or 0.15% annualized for the first quarter of 2006 and $3.9 million or 0.07% annualized for the second quarter of 2005. The provision for loan losses was $17.0 million for the second quarter of 2006 compared to $14.5 million for the first quarter of 2006 and $11.4 million for the second quarter of 2005. The increased provision for the quarter was mainly the result of the Company's strong loan growth. The combined provisions for loan losses and unfunded lending commitments were $16.8 million for the second quarter of 2006, $14.2 million for the first quarter of 2006, and $12.5 million for the second quarter of 2005.
At June 30, 2006, the allowance for loan losses as a percentage of net loans and leases was 1.07%, compared to 1.10% at March 31, 2006 and 1.18% at June 30, 2005. At June 30, 2006, the allowance was 606.6% of nonperforming loans. The combined allowances for credit losses (allowance for loan losses plus the allowance for unfunded lending commitments) of $366.1 million were 1.12% of net loans and leases at the end of the second quarter of 2006.
Capital Management
The Company's tangible common equity ratio was 5.54% at June 30, 2006 compared to 5.51% at March 31, 2006 and 6.98% at June 30, 2005. Retained earnings increased by $107.0 million during the second quarter, partially offset by a decrease in accumulated other comprehensive income of $25.2 million, while total assets increased by $1.8 billion.
Weighted average common and common-equivalent shares outstanding for the second quarter of 2006 were 107,883,374 compared to 107,724,724 for the first quarter of 2006 and 91,610,296 for the second quarter of 2005. Common shares outstanding at June 30, 2006 were 106,611,731 compared to 106,070,045 at March 31, 2006 and 90,062,646 at June 30, 2005. The increase year over year results primarily from the issuance of 14,351,115 common shares for the Amegy acquisition and for the quarter from the exercise of stock options.
Conference Call
Zions will host a conference call to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 20, 2006). Media representatives, analysts and the public are invited to listen to this discussion by calling 1-866-362-4666 and entering the passcode 97090116, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation Web site at www.zionsbancorporation.com. A replay of the call will be available from approximately 7:30 p.m. ET on Thursday, July 20 through midnight ET on Thursday, July 27, by dialing 1-888-286-8010 and entering the passcode 93617284. 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 high growth markets. Zions operates its banking businesses under local management teams and community identities through over 450 offices and approximately 600 ATMs in ten 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. 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 news release that are based on other than historical data 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. These forward-looking statements are not guarantees of future performance, 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 news 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 nationally or locally in areas in which the Company conducts its operations; changes in interest rates; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; 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; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.
In addition, the following factors relating to the Company's acquisition of Amegy, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the combination of the businesses of Zions Bancorporation and Amegy Bancorporation, Inc. may take longer, be more difficult, time consuming or costly to accomplish than expected; (2) the expected growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected; and (3) operating costs, customer losses and business disruption resulting from the merger, including adverse effects on relationships with employees, may be greater than expected.
Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2005 Annual Report on Form 10-K of Zions Bancorporation filed with the Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov).
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.
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