Zions Bancorp said Thursday its second-quarter profit dropped 55 percent, below analysts' expectations, as it set aside more than $114 million to cover bad loans.
For the three months ended June 30, the company reported net income applicable to common shareholders of $69.7 million, or 65 cents per share, compared with $155.6 million, or $1.43 per share, in the year-ago period.
Analysts polled by Thomson Financial, on average, anticipated earnings of 74 cents per share.
Zions set aside $114.2 million during the quarter to cover bad loans, compared with a loan loss provision of just $17.8 million in the prior-year quarter.
Net loan and lease charge-offs totaled $67.8 million, or 0.67 percent of annualized average loans, up from $8.7 million, or 0.1 percent of annualized average loans, in the second quarter of last year. Charge-offs are loans written off as not being repaid.
Nonperforming assets totaled $697.4 million at June 30, compared with $95.4 million the same time last year, driven by deterioration in residential real estate portfolios in the Southwest, and by some weakening in Utah residential construction, and commercial and industrial portfolios.
Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from lending money to customers, rose 3 percent to $484.7 million, from $469.3 million in the second quarter of 2007.
Non-interest income, or income derived from fees and other charges, fell 49 percent to $72.4 million from $141.3 million in the 2007 quarter. The amount includes pretax impairment losses on securities of $38.8 million.
"In what continues to be a turbulent and difficult environment in which a number of financial institutions have posted losses, we are pleased that our banks continue to be profitable and well-capitalized," said Harris H. Simmons, chairman and chief executive, in a statement. "Our core business is strong, our balance sheet remains healthy, and our net credit costs remain very reasonable compared to the industry even as we continue to strengthen our reserves."
Zions operates more than 500 branches in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington.
Shares jumped $3.97, or 16.9 percent, to close at $27.51. In aftermarket electronic trading, shares dropped $1.38, or 5 percent, to $26.13.
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