Zions Has $40.7 Million Loss on Commercial Defaults

Zions Bancorporation, the Utah lender that has acquired four failed banking companies, posted a third straight loss as defaults on commercial properties surged.

The second-quarter loss of $40.7 million, or 35 cents a share, compares with profit of $72.2 million, or 65 cents a share, a year earlier, the Salt Lake City-based company said today in a statement.

With 35 percent of its loan portfolio in commercial real estate and construction, Zions suffered as commercial property defaults doubled nationwide in the first half of 2009. Zions operates in 10 Western states. The company’s provision for loan losses climbed to $762.7 million from $297.6 million in the first quarter.

California Bank & Trust, a San Diego-based unit of Zions, bought the operations of Vineyard Bank last week, the fourth failed bank Zions has bought in the past year. Zions will gain $1.5 billion in deposits from the deal, and the Federal Deposit Insurance Corp. agreed to share losses on $1.4 billion of loans. Zions said the transaction will add 4 cents to 6 cents a share to annual earnings.

Zions rose 66 cents, or 5.7 percent, to $12.22 at 4 p.m. New York time on the Nasdaq Stock Market today. The shares have tumbled 50 percent this year, more than three times the decline in the KBW Bank Index.
Nationwide, there were 5,315 buildings in default, foreclosure or bankruptcy at the end of June, more than twice the number at the close of 2008, according to a July 8 report from New York-based Real Capital Analytics. At least $108 billion of U.S. commercial properties are in distress, the report said.

The quarter included $53.7 million in writedowns, with Zions citing collateralized debt obligations and auction-rate securities.

Nonperforming lending assets that are not FDIC-supported, measured against net loans and leases and other real estate, rose to 4.7 percent from 4 percent in March and 1.7 percent a year ago. Zions said its tangible common equity ratio, a measure of how much capital a firm has to withstand losses, rose to 5.7 percent from 5.3 percent in the first quarter after raising money. link....