Zions Bancorp. in Salt Lake City is planning to raise $525 million in fresh capital to satisfy regulators' concerns about its ability to withstand a severe economic downturn.

The Federal Reserve Board rejected Zions' capital plan earlier this year as part of the Comprehensive Capital Analysis Review, or CCAR. The Fed concluded that Zions' Tier 1 common capital ratio would fall below the 5% regulatory minimum under severely stressed economic conditions. An additional stress test mandated by the Dodd-Frank Act reached a similar conclusion.

Zions had initially planned to raise $400 million through the sale of common stock, but said Monday that it was increasing the size of the offering to $525 million. It also said that the original, $400 million plan had received no objection from the Fed. The company gave no reason for the increase.

Its capital plan also calls for the continued payment of preferred and common stock dividends at its current rates. That plan received a no objection from the Federal Reserve Board.

Management at Zions had previously said its resubmitted plan would benefit from the sale of collateralized-debt obligations valued at nearly $1 billion.

Though the capital raise was larger than anticipated, analysts said it is a positive development for the company and its investors. The news "will remove the overhang on the shares and investors can focus on the core fundamentals, including excess liquidity deployment and debt cost reduction, which could enhance earnings into 2015," Brian Klock, an analyst at Keefe, Bruyette & Woods, wrote in a research note.

Kevin Barker, an analyst at Compass Point Research & Trading, said that the additional $125 million would not materially dilute Zions' shares. He added that the equity raise should be "well subscribed given the bank's significant leverage to higher interest rates and cheap valuation relative to" tangible book value, he added.

Zions priced the public offering at $29.80 per share and said it would use the net proceeds for general corporate purposes. The stock sale is expected to end Thursday.

Zions' shares were down 1.4% in early trading Monday, to $29.64.

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