Increases in short-term interest rates, stronger residential mortgage lending and several recoveries during the second quarter helped to drive up profits for Zions Bancorp. in Salt Lake City.
Net income for the $65.5 billion-asset Zions totaled $168 million in the second quarter, up 47% from last year's second quarter. Earnings per share increased to 73 cents, beating by 11 cents consensus analysts’ estimates compiled by FactSet Research Systems.
"We are encouraged with the solid results of the second quarter. Loan growth exceeded expectations and was diversified across commercial and consumer categories and also by geography,” Chairman and CEO Harris H. Simmons said in a press release after the markets closed Tuesday.
Net interest income increased 14%, or $63 million, to $528 million. The net interest margin expanded 13 basis points year over year to 3.52%. Zions said the gains in interest income were driven by several factors, including growth in commercial and consumer loans, increases in short-term interest rates and increases in its investment securities portfolio. Zions also recorded $16 million in interest income related to the recoveries of four loans.
Net loans and leases increased 2.8% to $43.7 billion in the second quarter. Consumer loans increased 11% year over year to $10.3 billion and was driven mainly by one- to four-family residential real estate loans, which increased 12% to $6.4 billion. Meanwhile, commercial real estate loans declined slightly to $11.2 billion, and commercial and industrial balances increased slightly to $22.2 billion.
Noninterest income increased 4.8% to $132 million, mainly driven by increased sales of interest rate swaps and other lending-related fees.
Noninterest expenses increased 6% to $405 million from the same period last year. Zions said this was driven by an increase in provision for unfunded lending commitments, as well as an increase in FDIC premiums due to a larger deposit base and a change in deposit insurance assessments.