Zions Bancorp's first-quarter loss narrowed much more sharply than analysts' expected, as the Utah-based regional bank's charge-offs and loan-loss provision eased from the fourth quarter.

Shares were up 2.2% at $26 after hours. The stock has risen more than two-thirds from its level a year earlier, when it was on the mend from a 17-year low.

The company's sixth consecutive loss comes as the bank sees increasing signs that the worst of loan losses is behind it. Loan-loss provisions fell 11% to $265.6 million from a year earlier and 32% from the previous quarter.

Regional banks' fates in the economic downturn have often traced the real-estate market in areas they serve. Zions operates in 10 Western and Southwestern states, which include markets that were among the hardest hit in the housing downturn.

Loan demand has remained weak. In the most recent period, net loans and leases were $39 billion, down 6.6% from a year earlier and 2.9% sequentially. Average total deposits were $1.1 billion, falling 0.7% and 2.5%, respectively.

Zions reported a loss of $86.5 million, or 57 cents a share, from $852.3 million, or $7.47 a share, a year earlier. The company had nearly one-third more shares outstanding. Analysts surveyed by Thomson Reuters predicted a 95-cent loss.

Net charge-offs, loans the bank doesn't expect to collect, rose to 2.37% of annualized average loans from 1.47% last year, but were down sequentially from 2.98%. But nonperforming assets, or loans in danger of going bad, rose to 6.42% from 3.96% and 6%, respectively.

Zions received $1.4 billion from the federal government under the Troubled Asset Relief Program. Last month, the company's share price rose on news Barclays PLC was looking to acquire a U.S. retail bank.

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