Zions Bancorp. (ZION) in Salt Lake City reported a quarterly loss after recording charges tied to its portfolio of collateralized-debt obligations.
The $55.7 billion-asset company reported Monday after the market closed that it lost $59.4 million in the fourth quarter, compared to a $35.6 million profit a year earlier.
The fourth quarter included impairment charges on its CDO securities as a result of the Volcker Rule and management's decision to reduce risk within that portfolio. Zions decided to sell a portion of its CDO portfolio, which resulted in impairment charges. The company said the sales followed an analysis of CDO positions under the Volcker Rule, among other factors. The fair value of the CDO portfolio increased by $137 million during the quarter, even as sales and pay downs lowered the portfolio's par balance.
The loss also included debt-extinguishment costs from Zions' tender offer for some of its high-cost subordinated debt. The total pretax impairment charges and debt extinguishment costs were $222 million.
Net interest income rose less than 1% from a year earlier, to $432 million. Total loans increased more than 3% from the end of 2012, to $39 billion. Commercial loans, led by the commercial-and-industrial portfolio, increased roughly 5% from a year earlier, to $20.8 billion, and consumer loans rose 5%, to $7.7 billion.
"We are pleased with the improvement in loan growth, further strengthening of credit quality, and stabilization of the net interest margin," Harris Simmons, Zions' chairman and chief executive, said in a press release. "Additionally, the steps we are taking to reduce risk in our securities portfolio, combined with continued strengthening of our capital ratios, positions us well to serve our customers and grow as the economy continues to improve."
Asset quality also improved. Nonperforming lending-related assets fell about 39% from a year earlier, to $452.7 million, and classified loans, excluding Federal Deposit Insurance Corp.-supported loans, fell roughly 30%, to $1.2 billion. Zions recorded a $30.5 million recovery for credit losses.