Zions Bancorp. (ZION) posted lower fourth-quarter earnings after taking a big charge on its holdings of collateralized debt obligations.
Separately, the Salt Lake City company said it plans to raise up to $200 million with the help of its own online broker-dealer subsidiary. It plans to use the money for general corporate purposes, it said.
The $54.3 billion-asset company reported Monday after the market closed that it earned $35.6 million in the quarter, down nearly 20% from a year earlier. Earnings per share were 19 cents, falling short of expectations of analysts polled by Bloomberg by 16 cents.
Zions recorded an impairment charge on CDO securities of $83.8 million, compared with $2.7 million in the third quarter. It did so after raising its assumed probabilities of default for bank holding company issuers of trust preferred securities that are still deferring, and from raising its near-term prepayment assumptions tied to some trust-preferreds.
Zions said it saw greater regulatory and restructuring risk than previously predicted on those issuers that have deferred and not resumed payments on trust preferreds.
The charge was partially offset by $10.2 million of CDO securities gains.
Regarding the offering, Zions plans to sell up to $200 million of depository shares in an online auction through Zions Direct. The auction will begin the morning of Jan. 30 and close at the next afternoon.
The bank will offer 8 million depository shares for $25 per share. Each depository share will represent a fraction of a share of perpetual preferred stock issued in 2011. Deutsche Bank, Goldman Sachs and Zions Direct will underwrite the offering.
Fourth-quarter results also included roughly $9 million of credit card interchange fees that were reclassified from interest and fees on loans to other service charges, commissions and fees. Additionally, $3 million of income on factored receivables was reclassified from other service charges to interest and fees on loans. These reclassifications contributed to net interest income declining by about 6%, to $430 million, and the net interest margin falling 34 basis points, to 3.47%, year over year.
Zions recorded a $10.4 million credit toward its provisions for loan losses, compared with a credit of $1.4 million a year earlier. Net loan and lease chargeoffs fell by 80%, to $18.9 million, year over year.