UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the fiscal year ended December 31, 20142015
OR
ý¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the transition period from ___________ to ___________
COMMISSION FILE NUMBER 001-12307
ZIONS BANCORPORATION
(Exact name of Registrant as specified in its charter)
UTAH 87-0227400
(State or other jurisdiction of
incorporation or organization)
 
(Internal Revenue Service Employer
Identification Number)
One South Main, 15th Floor
Salt Lake City, Utah
 84133
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (801) 844-7637
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, without par valueThe NASDAQ Stock Market LLC
Warrants to Purchase Common Stock (expiring May 22, 2020)The NASDAQ Stock Market LLC
Warrants to Purchase Common Stock (expiring November 14, 2018)The NASDAQ Stock Market LLC
Depositary Shares each representing a 1/40th ownership interest in a share of Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock
New York Stock Exchange
Depositary Shares each representing a 1/40th ownership interest in a share of Series F 7.9% Non-Cumulative Perpetual Preferred Stock
New York Stock Exchange
Depositary Shares each representing a 1/40th ownership interest in a share of Series G Fixed/Floating RateFloating-Rate Non-Cumulative Perpetual Preferred StockNew York Stock Exchange
Depositary Shares each representing a 1/40th ownership interest in a share of Series H Fixed-Rate5.75% Non-Cumulative Perpetual Preferred StockNew York Stock Exchange
Convertible 6% Subordinated Notes due September 15, 2015New York Stock Exchange
6.95% Fixed-to-Floating Rate Subordinated Notes due September 15, 2028New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ý      Accelerated filer ¨     Non-accelerated filer ¨      Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Aggregate Market Value of Common Stock Held by Non-affiliates at June 30, 20142015 $5,309,399,7796,337,925,184
Number of Common Shares Outstanding at February 18, 201516, 2016 203,193,271204,506,825 shares
Documents Incorporated by Reference: Portions of the Company’s Proxy Statement – Incorporated into Part III

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FORM 10-K TABLE OF CONTENTS

 Page
PART I
 
Item 1.
Business
5
Item 1A.
Risk Factors
13
Item 1B.
Unresolved Staff Comments
2021
Item 2.
Properties
2021
Item 3.
Legal Proceedings
2021
Item 4.
Mine Safety Disclosures
2021
  
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
2022
Item 6.
Selected Financial Data
2324
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2425
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
9284
Item 8.
Financial Statements and Supplementary Data
9384
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
178163
Item 9A.
Controls and Procedures
178163
Item 9B.
Other Information
178163
  
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance
178163
Item 11.
Executive Compensation
178163
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
178163
Item 13.
Certain Relationships and Related Transactions, and Director Independence
179164
Item 14.
Principal Accounting Fees and Services
179164
  
PART IV
 
Item 15.
Exhibits, Financial Statement Schedules
179164
Signatures
184169


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Table of Contents

PART I

FORWARD-LOOKING INFORMATION
Statements in this Annual Report on Form 10-K that are based on other than historical data are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events and include, among others:
statements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation (“the Parent”) and its subsidiaries (collectively “the Company,” “Zions,” “we,” “our,” “us”); and
statements preceded by, followed by, or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” or similar expressions.
These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, including, but not limited to, those presented in Management’s Discussion and Analysis. Factors that might cause such differences include, but are not limited to:
the Company’s ability to successfully execute its business plans, manage its risks, and achieve its objectives;objectives, including its restructuring and efficiency initiatives and its tender offers for certain of its preferred stock;
changes in local, national and international political and economic conditions, including without limitation the political and economic effects of the recent economic crisis, delay of recovery from that crisis, economic and fiscal imbalances in the United States and other countries, potential or actual downgrades in ratings of sovereign debt issued by the United States and other countries, and other major developments, including wars, military actions, and terrorist attacks;
changes in financial and commodity market prices and conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including without limitation rates of business formation and growth, commercial and residential real estate development, real estate prices, and energy-relatedoil and gas-related commodity prices;
changes in markets for equity, fixed-income,fixed income, commercial paper and other securities, including availability, market liquidity levels, and pricing, including the actual amount and duration of declines in the price of oil and gas;
any impairment of our goodwill or other intangibles, or any adjustment of valuation allowances on our deferred tax assets due to adverse changes in the economic environment, declining operations of the reporting unit, or other factors;
changes in markets for debt, equity, and securities, including availability, market liquidity levels, and pricing;
changes in interest rates, the quality and composition of the loan and securities portfolios, demand for loan products, deposit flows and competition;
acquisitions and integration of acquired businesses;
increases in the levels of losses, customer bankruptcies, bank failures, claims, and assessments;
changes in fiscal, monetary, regulatory, trade and tax policies and laws, and regulatory assessments and fees, including policies of the U.S. Department of Treasury, the OCC, the Board of Governors of the Federal Reserve Board System, and the FDIC, the SEC, and the CFPB;
the impact of executive compensation rules under the Dodd-Frank Act and banking regulations which may impact the ability of the Company and other American financial institutions to retain and recruit executives and other personnel necessary for their businesses and competitiveness;

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the impact of the Dodd-Frank Act and of new international standards known as Basel III, and rules and regulations thereunder, on our required regulatory capital and liquidity levels, governmental assessments on us (including, but not limited to, the Federal Reserve reviews of our annual capital plan), the scope of business activities in which we may engage, the manner in which we engage in such activities, the fees we may charge for certain products and services, and other matters affected by the Dodd-Frank Act and these international standards;
continuing consolidation in the financial services industry;
new legal claims against the Company, including litigation, arbitration and proceedings brought by governmental or self-regulatory agencies, or changes in existing legal matters;

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success in gaining regulatory approvals, when required;
changes in consumer spending and savings habits;
increased competitive challenges and expanding product and pricing pressures among financial institutions;
inflation and deflation;
technological changes and the Company’s implementation of new technologies;
the Company’s ability to develop and maintain secure and reliable information technology systems;
legislation or regulatory changes which adversely affect the Company’s operations or business;
the Company’s ability to comply with applicable laws and regulations;
changes in accounting policies or procedures as may be required by the Financial Accounting Standards BoardFASB or regulatory agencies; and
costs of deposit insurance and changes with respect to FDIC insurance coverage levels.

Except to the extent required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

AVAILABILITY OF INFORMATION
We also make available free of charge on our website, www.zionsbancorporation.com, annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission.
GLOSSARY OF ACRONYMS AND ABBREVIATIONS
ABSASCAsset-Backed SecurityAccounting Standards CodificationCFPBCMCConsumer Financial Protection BureauCapital Management Committee
ASUAccounting Standards UpdateCSVCash Surrender Value
AOCIAccumulated Other Comprehensive IncomeCDOCollateralized Debt Obligation
ARMAdjustable Rate MortgageCLTVCombined Loan-to-Value Ratio
ACLAllowance for Credit LossesCLTVCRECombined Loan-to-Value Ratio
AFSAvailable-for-SaleCMCCapital Management Committee
ALCOAsset/Liability CommitteeCOSO
Committee of Sponsoring Organizations
of the Treadway Commission
Commercial Real Estate
ALLLAllowance for Loan and Lease LossesCOSOCommittee of Sponsoring Organizations of the Treadway Commission
AmegyAmegy Bank, a division of ZB, N.A.CET1Common Equity Tier 1 (Basel III)
ALCOAsset/Liability CommitteeCRACommunity Reinvestment Act
AmegyAmegy CorporationCRECommercial Real Estate
AOCIAccumulated Other Comprehensive IncomeCSVCash Surrender Value
ARMAdjustable Rate MortgageDBDeutsche Bank AG
ASCAccounting Standards CodificationDBRSDominion Bond Rating Service
ASUAccounting Standards UpdateDDADemand Deposit Account
ATMAutomated Teller MachineCCARComprehensive Capital Analysis and Review
AFSAvailable-for-SaleCFPBConsumer Financial Protection Bureau
BHC ActBank Holding Company ActCACCredit Administration Committee
BOLIBank-Owned Life InsuranceCSACredit Support Annex
bpsbasis pointsDTADeferred Tax Asset
BCFBeneficial Conversion FeatureDFASTDodd-Frank Annual Stress Test
BCBSCB&TBasel Committee on Banking SupervisionCalifornia Bank & Trust, a division of ZB, N.A.Dodd-Frank ActDodd-Frank Wall Street Reform and Consumer Protection Act
BCFBeneficial Conversion FeatureDTADeferred Tax Asset
BHC ActBank Holding Company ActEITFEmerging Issues Task Force
bpsbasis pointsERMCEnterprise Risk Management Committee
BSABank Secrecy ActEVEEconomic Value of Equity
CB&TCalifornia Bank & TrustFAMC
Federal Agricultural Mortgage Corporation,
or “Farmer Mac”
CCARComprehensive Capital Analysis and ReviewFASBFinancial Accounting Standards Board
CDOCollateralized Debt ObligationFDICFederal Deposit Insurance Corporation
CDRConstant Default RateFDICIAFederal Deposit Insurance Corporation Improvement Act
CET1Common Equity Tier 1 (Basel III)FHLBFederal Home Loan Bank

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FHLMCDBRS
Dominion Bond Rating Service
NSBNevada State Bank, a division of ZB, N.A.
EVEEconomic Value of EquityNYMEXNew York Mercantile Exchange
EITFEmerging Issues Task ForceOCCOffice of the Comptroller of the Currency
ERMEnterprise Risk ManagementOCIOther Comprehensive Income
ERMCEnterprise Risk Management CommitteeOREOOther Real Estate Owned
FAMCFederal Home LoanAgricultural Mortgage Corporation,
or “Freddie“Farmer Mac”
OTTIOther-Than-Temporary Impairment
FINRAFDICFinancial Industry Regulatory AuthorityFederal Deposit Insurance CorporationParentOTCZions BancorporationOver-the-Counter
FNMAFDICIA
Federal NationalDeposit Insurance Corporation Improvement Act
PEIPrivate Equity Investment
FHLBFederal Home Loan BankPDProbability of Default
FHLMCFederal Home Loan Mortgage Association,
Corporation, or “Fannie Mae”
“Freddie Mac”		PCAOBPublic Company Accounting Oversight Board
FRBFNMAFederal Reserve BoardNational Mortgage Association, or “Fannie Mae”PCIPurchased Credit-Impaired
FRBFederal Reserve BoardREITReal Estate Investment Trust
FASBFinancial Accounting Standards BoardRULCReserve for Unfunded Lending Commitments
FINRAFinancial Industry Regulatory AuthorityRSURestricted Stock Unit
FTEFull-time EquivalentPDROCProbability of DefaultRisk Oversight Committee
GAAPGenerally Accepted Accounting PrinciplesPEISECPrivate Equity InvestmentSecurities and Exchange Commission
GDPGNMAGross Domestic ProductGovernment National Mortgage Association, or “Ginnie Mae”PIKSVCPayment in KindSecuritization Valuation Committee
GLB ActGramm-Leach-Bliley ActREITSNCReal Estate Investment Trust
HECLHome EquityShared National Credit LineRSURestricted Stock Unit
HQLAHigh Quality Liquid AssetsRULCReserve for Unfunded Lending Commitments
HTMHeld-to-MaturitySBASmall Business Administration
IFRHQLAInterim Final RuleHigh Quality Liquid AssetsSBICSmall Business Investment Company
IFRSHECLInternational Financial Reporting StandardsSECSecurities and Exchange Commission
LCRLiquidity Coverage RatioHome Equity Credit LineSIFISystemically Important Financial Institution
LGDIFRLoss Given DefaultSOCSecuritization Oversight Committee
LIBORLondon Interbank Offered RateSSUSalary Stock Unit
LIHTCLow-Income Housing Tax CreditTARPTroubled Asset Relief Program
LockhartLockhart Funding LLCInterim Final RuleTCBOThe Commerce Bank of Oregon
MD&AIFRSManagement’s Discussion and AnalysisInternational Financial Reporting StandardsTCBWThe Commerce Bank of Washington, a division of ZB, N.A.
ISDAInternational Swap and Derivative AssociationT1CTier 1 Common (Basel I)
LCRLiquidity Coverage RatioTRSTotal Return Swap
LIBORLondon Interbank Offered RateTARPTroubled Asset Relief Program
LGDLoss Given DefaultTDRTroubled Debt Restructuring
LIHTCLow-Income Housing Tax CreditVIEVariable Interest Entity
MD&AManagement’s Discussion and AnalysisVectraVectra Bank Colorado, a division of ZB, N.A.
NASDAQNational Association of Securities Dealers Automated QuotationsTDRVRTroubled Debt RestructuringVolcker Rule
NBAZNational Bank of Arizona, a division of ZB, N.A.ZB, N.A.ZB, National Association
NAVNet Asset ValueTRACEParentTrade Reporting and Compliance Engine
NBAZNational Bank of ArizonaTRSTotal Return SwapZions Bancorporation
NIMNet Interest MarginVectraVectra Bank Colorado
NRSRONationally Recognized Statistical Rating OrganizationVIEVariable Interest Entity
NSBNevada State BankVRVolcker Rule
OCCOffice of the Comptroller of the CurrencyT1CTier 1 Common (Basel I)
OCIOther Comprehensive IncomeZions BankZions First National Bank, a division of ZB, N.A.
OREONSFROther Real Estate OwnedZMFUZions MunicipalNet Stable Funding
OTCOver-the-Counter RatioZMSCZions Management Services Company

ITEM 1. BUSINESS
ITEM 1.BUSINESS
DESCRIPTION OF BUSINESS
Zions Bancorporation (“the Parent”) is a financial holding company organized under the laws of the State of Utah in 1955, and registered under the BHC Act, as amended. The Parent owns and operates a commercial bank with a total of 450 domestic branches at year-end 2015. The Parent and its subsidiaries (collectively “the Company”) own and operate eight commercial banks with a total of 460 domestic branches at year-end 2014. The Company providesprovide a full range of banking and related services, through its banking and other subsidiaries, primarily in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. The Company conducts its banking operations through seven separately managed and branded segments, which we sometimes refer to as “affiliates” or by reference to their respective brands. Full-time equivalent (“FTE”) employees totaled 10,46210,200 at December 31, 20142015. For further

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information about the Company’s industry segments, see “Business Segment Results” on page 4639 in MD&A and Note 21 of the Notes to Consolidated Financial Statements. For information about the Company’s foreign operations, see “Foreign Exposure and Operations” on page 6047 in MD&A. The “Executive Summary” on page 2425 in MD&A provides further information about the Company.

PRODUCTS AND SERVICES
The Company focuses on providing community banking services by continuously strengthening its core business lines of 1)(1) small and medium-sized business and corporate banking; 2)(2) commercial and residential development, construction and term lending; 3)(3) retail banking; 4)(4) treasury cash management and related products and services; 5)

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(5) residential mortgage servicing and lending; 6)(6) trust and wealth management; 7)(7) limited capital markets activities, including municipal finance advisory and underwriting; and 8)(8) investment activities. It operates eight different banks in eleven Western and Southwestern states withprimarily through seven locally managed segments that each bank operatingdo business under a different name and each havingname. Each of these affiliated banking operations has its own board of directors, chief executive officer and management team.
The banks provideCompany provides a wide variety of commercial and retail banking and mortgage lending products and services. TheyIt also provideprovides a wide range of personal banking services to individuals, including home mortgages, bankcard, other installment loans, home equity lines of credit, checking accounts, savings accounts, certificates of deposit of various types and maturities, trust services, safe deposit facilities, direct deposit, and Internet and mobile banking. In addition, certain subsidiary banks providethe Company provides services to key market segments through theirits Women’s Financial, Private Client Services, and Executive Banking Groups. We also offer wealth management services, through various subsidiaries, including Contango Capital Advisors and Zions Trust Company, andas well as online and traditional brokerage services through Zions Direct and Amegy Investments.
On June 1, 2015, the Company announced certain efficiency and restructuring initiatives that included, among other things, the merger of seven subsidiary banks into a single national charter, ZB, N.A., which was completed on December 31, 2015. The Company continues to operate using regional brand names according to geographic location.
In addition to these core businesses, the Company has built specialized lines of business in capital markets and public finance, and is a leader in SBA lending. Through its subsidiary banks, theThe Company is one of the nation’s largest providers of SBA 7(a) and SBA 504 financing to small businesses. The CompanyIt owns an equity interest in Farmer Mac and is its top originator of secondary market agricultural real estate mortgage loans. The Company provides finance advisory and corporate trust services for municipalities. The Company uses its trust powers to providealso provides trust services to individuals in its wealth management business and to provide bond transfer, stock transfer, and escrow services in its corporate trust business, both within and outside of its footprint.

COMPETITION
The Company operates in a highly competitive environment. The Company’s most direct competition for loans and deposits comes from other commercial banks, credit unions, and thrifts, including institutions that do not have a physical presence in our market footprint but solicit via the Internet and other means. In addition, the Company competes with finance companies, mutual funds, insurance companies, brokerage firms, securities dealers, investment banking companies, financial technology and other non-traditional lending and banking companies, and a variety of other types of companies. Many of theseThese companies may have fewer regulatory constraints and some have lower cost structures or tax burdens.
The primary factors in competing for business include convenience of office locations and other delivery methods, range of products offered, the quality of service delivered, and pricing. The Company must compete effectively along all of these dimensions to remain successful.

SUPERVISION AND REGULATION
The banking and financial services business in which we engage is highly regulated. Such regulation is intended, among other things, to improve the stability of banking and financial companies and to protect the interests of customers, including both loan customers and depositors, and taxpayers. These regulations are not, however, generally intended to protect the interests of our shareholders or creditors, and in fact may have the consequence of

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reducing returns to our shareholders. This regulatory framework has been materially revised and expanded since the 2008-2009 financial crisis and recession. In particular, the Dodd-Frank Act and regulations promulgated pursuant to it have given financial regulators expanded powers over nearly every aspect of the Company’s business. These include, among other things, new, higher regulatory capital requirements; regulation of dividends and other forms of capital distributions to shareholders through annual stress testing and capital planning processes; heightened liquidity and liquidity stress testing requirements, which include specific definitions of the types of investment securities that qualify as “high quality liquid assets” and which effectively limit the portion of the Company’s balance sheet that can be used to meet the credit needs of its customers; specific limitations on mortgage lending products and practices; specific limits on certain consumer payment fees; and subjecting compensation practices to specific regulatory oversight and restrictions. Individually and collectively, these additional regulations have imposed and will continue to impose higher costs on the Company, and have reduced and may continue to reduce returns earned by shareholders. TheSome aspects of the Dodd-Frank Act provides for further regulations,continue to be subject to rulemaking, many of the specificsrules that have been adopted will take effect over several additional years, and many of which are still not knownthe rules that have been adopted may be subject to interpretation or clarification, and accordingly, the impact of such regulatory changes cannot be presently determined. The Company is committed

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to both satisfying heightened regulatory expectations and providing attractive shareholder returns. However, given the still changingstill-changing regulatory environment, the results of these efforts cannot yet be known.
Described below are the material elements of some selected laws and regulations applicable to the Company. The descriptions are not intended to be complete and are qualified in their entirety by reference to the full text of the statutes and regulations described. Changes in applicable laws or regulations, and in their application by regulatory agencies, cannot be predicted, but they may have a material effect on the business and results of the Company.
The Parent is a bank holding company and a financial holding company as provided by the BHC Act, as modified by the GLB Act and the Dodd-Frank Act. These and other federal statutes provide the regulatory framework for bank holding companies and financial holding companies, which have as their umbrella regulator the FRB. The supervision of the separatelyZB, N.A. and other regulated subsidiaries of a bank holding company is conducted by each subsidiary’s primary functional regulator and the laws and regulations administered by those regulators. The GLB Act allows our subsidiary banksbank to engage in certain financial activities through financial subsidiaries. To qualify for and maintain status as a financial holding company, or to do business through a financial subsidiary, the Parent and its subsidiary banksbank must satisfy certain ongoing criteria. The Company currently engages in only limited activities for which financial holding company status is required.
The Parent’s subsidiary banks and Zions Trust areZB, N.A. is subject to the provisions of the National Bank Act or other statutes governing national banks, or, for those that are state-chartered banks, the banking laws of their various states, as well as the rules and regulations of the OCC, (for those that are national banks),the CFPB, and the FDIC. They areIt is also subject to periodic examination and supervision by the OCC or their respective state banking departments, and the FDIC. ManySome of our nonbank subsidiaries are also subject to regulation by the FRB and other federal and state agencies. These bank regulatory agencies may exert considerable influence over our activities through their supervisory and examination role.roles. Our brokerage and investment advisory subsidiaries are regulated by the SEC, FINRA and/or state securities regulators.
The Dodd-Frank Act
The recent financial crisis led to numerous new laws in the United States and internationally for financial institutions. The Dodd-Frank Act, which was enacted in July 2010, is one of the most far reaching legislative actions affecting the financial services industry in decades and significantly restructuresrestructured the financial regulatory regime in the United States.
The Dodd-Frank Act and regulations adopted under the Dodd-Frank Act broadly affect the financial services industry by creating new resolution authorities, requiring ongoing stress testing of our capital and liquidity, mandating higher capital and liquidity requirements, requiring divestiture of certain equity investments, increasing regulation of executive and incentive-based compensation, requiring banks to pay increased fees to regulatory agencies, and requiring numerous other provisions aimed at strengthening the sound operation of the financial services sector. Among other things affecting capital standards, the Dodd-Frank Act provides that:

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the requirements applicable to large bank holding companies (those with consolidated assets of greater than $50 billion) be more stringent than those applicable to other financial companies;
standards applicable to bank holding companies be no less stringent than those applied to insured depository institutions; and
bank regulatory agencies implement countercyclical elements in their capital requirements.
Regulations promulgated under the Dodd-Frank Act will require us to maintain greater levels of capital and liquid assets than was generally the case before the crisis and will limit the forms of capital that we will be able to rely upon for regulatory purposes. For example, provisions of the Dodd-Frank Act require us to transition trust preferred securities from Tier 1 capital to Tier 2 capital over a two-year period that begins January 1, 2015. In 2015, 75% of trust preferred securities transition to Tier 2 Capital from Tier 1 and the remaining 25% in 2016. In addition, in its supervisory role with respect to our stress testing and capital planning, our ability to deliver returns to our shareholders through dividends and stock repurchases is subject to prior non-objection by the FRB. The stress

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testing and capital plan process also could substantially reduce our flexibility to respond to market developments and opportunities in such areas as capital raising and acquisitions.
The Dodd-Frank Act’s provisions and related regulations also affect the fees we must pay to regulatory agencies and the pricing of certain products and services, including the following:
The assessment base for federal deposit insurance was changed to consolidated assets less tangible capital instead of the amount of insured deposits.
The federal prohibition on the payment of interest on business transaction accounts was repealed.
The FRB was authorized to issue regulations governing debit card interchange fees.
The Dodd-Frank Act also created the CFPB, which is responsible for promulgating regulations designed to protect consumers’ financial interests and examining large financial institutions for compliance with, and enforcing, those regulations. The Dodd-Frank Act adds prohibitions on unfair, deceptive or abusive acts and practices to the scope of consumer protection regulations overseen and enforced by the CFPB. The CFPB also enacted new regulations that became fully effective January 10, 2014, which require significant changes to residential mortgage origination; these changes include the definition of a “qualified mortgage” and the requirement regarding how a borrower’s “ability to repay” must be determined. The Dodd-Frank Act subjected national banks to the possibility of further regulation by restricting the preemption of state laws by federal laws, which had enabled national banks and their subsidiaries to comply with federal regulatory requirements without complying with various state laws. In addition, the Dodd-Frank Act gives greater power to state attorneys general to pursue legal actions against banking organizations for violations of federal law.
The Dodd-Frank Act contains numerous provisions that limit or place significant burdens and costs on activities traditionally conducted by banking organizations, such as originating and securitizing mortgage loans and other financial assets, arranging and participating in swap and derivative transactions, proprietary trading and investing in private equity and other funds. For the affected activities, these provisions may result in increased compliance and other costs, increased legal risk, and decreased scope of product offerings and earning assets.
The Company is subject to the provisions of the Volcker Rule (“VR”), issued pursuant to the Dodd-Frank Act. As of December 31, 2014, the Company had divested all securities that were not in compliance with the Volcker Rule,VR, and had sold all but $41$18 million (amortized cost) of non-compliant investments. Such investments include $25also provide for $7 million of potential capital calls, which the Company expects to fund, as allowed by the Volcker Rule,VR, if and as the capital calls are made until the investments are sold. These investments are in private equity funds, and are referred to in this document as private equity investments (“PEIs”). The Company continues to pursue the disposition of all non-compliant PEIs. The FRB has granted a blanket extension of the Volcker RuleVR compliance date to July 21, 2016. An additional one-year extension by the FRB is expected to further extend the Volcker conformance period for existing investments to July 21, 2017.
The Company and other companies subject to the Dodd-Frank Act are subject to a number of requirements regarding the time, manner and form of compensation given to its key executives and other personnel receiving incentive compensation, which are being imposed through the supervisory process as well as published guidance

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and proposed rules. These requirements generally implement the compensation restrictions imposed by the Dodd-Frank Act and include documentation and governance, deferral, risk balancing, and claw-back requirements.
As discussed further throughout this section, manySome aspects of the Dodd-Frank Act arecontinue to be subject to further rulemaking, andmany of the rules that have been adopted will take effect over several additional years, making it difficultand many of the rules that have been adopted may be subject to anticipateinterpretation or clarification, and accordingly, the overall financial impact on the Company or the industry.

of such regulatory changes cannot be presently determined.
Capital Standards – Basel Framework
The Basel III capital regulations issued byrules, which effectively replaced the FRBBasel I rules, became effective for the Company on January 1, 2015 (subject to phase-in periods for certain of their components and other U. S. regulators pursuant to the 1988 capital accord (“Basel I”) of the BCBS were still in effect as of December 31, 2014. However, inprovisions). In 2013, the FRB, FDIC, and OCC issuedpublished final rules (the “Basel III Capital Rules”capital rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implementimplemented the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The

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Basel III Capital Rulescapital rules substantially revise and restate Basel 1 rules regardingrevised the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company. TheCompany, compared to the Basel III Capital Rules became effective for the Company on January 1, 2015 (subject to phase-in periods for certain of their components).I U.S. risk-based capital rules.
The Basel III Capital Rulescapital rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Basel III Capital Rulescapital rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replacereplaced the existing risk-weighting approach which was derived from Basel I capital accords of the Basel Committee, with a more risk-sensitive approach based, in part, on the standardized approach in the Basel Committee’s 2004 Basel II capital accords. The Basel III Capital Rulescapital rules also implementimplemented the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies’ rules.
The Basel III Capital Rules,capital rules, among other things, (i) introduceintroduced a new capital measure called “Common Equity Tier 1” (“CET1”), (ii) specifyspecified that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting specified requirements, (iii) applyapplied most deductions/adjustments to regulatory capital measures to CET1 and not to the other components of capital, thus potentially requiring higher levels of CET1 in order to meet minimum ratios, and (iv) expandexpanded the scope of the deductions/adjustments from capital as compared to existingprior regulations.
Under the Basel III Capital Rules,capital rules, the minimum capital ratios as of January 1, 2015 will bewere as follows:
4.5% CET1 to risk-weighted assets;
6.0% Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets;
8.0% Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets; and
4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”).
When fully phased inphased-in on January 1, 2019, the Basel III Capital Rulescapital rules will also require the Company and its subsidiary banksbank to maintain a 2.5% “capital conservation buffer,”buffer” designed to absorb losses during periods of economic stress, composed entirely of CET1, on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The implementation of the capital conservation buffer will begin on January 1, 2016 at the 0.625% level and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019.
The Basel III Capital Rulescapital rules also prescribe a standardized approach for calculating risk-weighted assets that expand the risk-weighting categories from the current four Basel I-derived categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. Government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a

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variety of asset categories. In addition, the Basel III Capital Rulescapital rules provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.
The Basel III Capital Rulescapital rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets (“DTA”) dependent upon future taxable income, and significant investments in common equity issued by nonconsolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. The Company’s preliminary analysis indicates that application of this part of the rule shoulddid not result in any deductions from CET1. Also, primarily asAs a result of the large amount of CDO sales completed in 2014 and 2015, the Company no longer expectsdoes not expect the application of the Basel III corresponding deduction rules to have a materialan effect on its Basel III regulatory capital ratios, either as phased inphased-in or on a fully phased inphased-in basis.

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Under currentprior Basel I capital standards, the effects of AOCI items included in capital arewere excluded for purposes of determining regulatory capital and capital ratios. Under the Basel III Capital Rules,As a “non-advanced approaches banking organizations,organization,” including the Company and its subsidiary banks, may makewe made a one-time permanent election as of January 1, 2015 to continue to exclude these items. The Company has made the decision to “opt out,” which will be reported to the FRB on the Company’s first quarter 2015 FRY-9 report.
The Basel III Capital Rules require that trust preferred securities be phased out from Tier 1 capital by the end of 2015. However, for a banking organization suchitems, as the Company, that has greater than $15 billion in total consolidated assets, but is not an “advanced approaches banking organization,”allowed under the Basel III Capital Rules permit permanent inclusion of trust preferred securities issued prior to May 19, 2010 in Tier 2 capital regardless of whether they would otherwise meet the qualifications for Tier 2 capital. As of December 31, 2014, the Company had outstanding $163 million of trust preferred securities that qualified for this permanent inclusion in Tier 2 capital.rules.
Basel III also requires additional regulatory capital disclosures to be made that are commonly referred to as “Pillar 3” disclosures. These disclosures require the Company to make prescribed regulatory disclosures on a quarterly basis regarding its capital structure adequacy and risk-weighted assets. The disclosure requirements will be applicable beginning with the Company’s financial results for the first quarter of 2015. TheCompany began publishing these Pillar 3 disclosures will be made publiclyin 2015, and such disclosures are available on the Company’s website.
The Company believes that, as of December 31, 2014, the Company and its subsidiary banks would meetmet all capital adequacy requirements under the Basel III Capital Rulescapital rules based upon a 2015 phase-in as of December 31, 2015, and believes it would meet all capital adequacy requirements on a fully phased-in basis if such requirements were currently effective.

Capital Plan and Stress Testing Prudential Standards, and Early Remediation
As a bank holding company with assets greater than $50 billion, theThe Company is required by the Dodd-Frank Act to participate in annual stress tests known as the Dodd-Frank Annual Stress Test (“DFAST”) and Federal Reserve’s Comprehensive Capital Analysis and Review (“CCAR”). The Company timely submitted its 2015 capital plan and stress test results to the FRB on January 5, 2015. In its capital plan, the Company was required to forecast, under a variety of economic scenarios for nine quarters ending the fourth quarter of 2016, its estimated regulatory capital ratios, including its Tier 1 common (“T1C”) ratio associated with the Basel I capital rules, its CET1 ratio under Basel I rules, its estimated regulatory capital ratios, including its Common Equity Tier 1 ratio, underthe Basel III capital rules, and its GAAP tangible common equity ratio. On March 11, 2015, we announced that the Federal Reserve notified us that it did not object to the capital actions outlined in our 2015 capital plan. The plan included (1) the increase of the quarterly common dividend to $0.06 per share beginning in the second quarter of 2015; (2) the continued payment of preferred dividends at the current rates; and (3) up to $300 million in total reduction of preferred equity.
The Company’s stress test results were significantly different from those modeled by the FRB, as the FRB estimated that the Company’s minimum Tier 1 Common ratio in the severely adverse scenario was 5.1%, just above the 5.0% minimum. Since the release of the FRB’s modeled results, the Company has undertaken several actions designed in part to improve the Company’s risk profile under the CCAR stress tests. These actions include selling parts of the investment portfolio, extending the duration of the investment portfolio, and limiting growth in certain loan categories which are perceived as risky in the CCAR stress test.
During the second quarter of 2015, we completed our mid-cycle capital stress test as required under DFAST. The results demonstrated that we maintained sufficient capital to withstand a severe economic downturn. Detailed disclosure of the mid-cycle stress test results can be found on the Company’s website. Under the implementing regulations for CCAR, a bank holding company may generally only raise and redeem capital, pay dividends, and repurchase stock and take similar capital-related actions only under a capital plan as to which the FRB has not objected.

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On February 17, 2014, the Federal Reserve published final rules to implement Section 165, Enhanced Supervision and Prudential Standards for Nonbank Financial Companies Supervised by the Board of Governors and Certain Bank Holding Companies, of the Dodd-Frank Act. The Company believes that it is in compliance with these rules.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”), requires each federal banking agency to take prompt corrective action to resolve the problems of insured depository institutions, including but not limited to those that fall below one or more prescribed minimum capital ratios. Pursuant to FDICIA, the FDIC promulgated regulations defining the following five categories in which an insured depository institution will be placed, based on the level of its capital ratios: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the prompt corrective action provisions of FDICIA as modified by the Basel III capital rules, an insured depository institution generally will be classified as well-capitalized if it has a CET1 ratio of at least 6.5%, a Tier 1 capital ratio of at least 6%8%, a total capital ratio of at least 10% and a Tier 1 leverage ratio of at least 5%, and an insured depository institution generally will be classified as undercapitalized if its CET1 ratio is under 3%, its total risk-based capital ratio is less than 8% or, its Tier 1 risk-based capital ratio is less than 6%, or its Tier 1 leverage ratio is less than 4%. An institution that, based upon its capital levels, is classified as “well-capitalized,” “adequately capitalized,” or “undercapitalized,” may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition or an unsafe or unsound practice warrants such treatment. Under the

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fully phased-in Basel III Capital Rules, (i) a new CET1 ratio requirement will be introduced at every level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status; (ii) the minimum Tier 1 capital ratio requirement for each category will be increased, with the minimum Tier 1 capital ratio for well-capitalized status being 8%; and (iii) the current provision that provides that a bank with a composite supervisory rating of 1 may have a 3% leverage ratio and still be well-capitalized will be eliminated. At each successive lower capital category, an insured depository institution is subject to more restrictions and prohibitions, including restrictions on growth, restrictions on interest rates paid on deposits, restrictions or prohibitions on payment of dividends and restrictions on the acceptance of brokered deposits. Furthermore, if a bank is classified in one of the undercapitalized categories, it is required to submit a capital restoration plan to the federal bank regulator, and the holding company must guarantee the performance of that plan.
Other Regulations
The Company is subject to a wide range of other requirements and restrictions contained in both the laws of the United States and the states in which its banks and other subsidiaries operate. These regulations include but are not limited to the following:
Requirements that the Parent serve as a source of strength for its subsidiary banks.bank. The FRB has a policy that a bank holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banksbank and, under appropriate circumstances, to commit resources to support eachthe subsidiary bank. The Dodd-Frank Act codifies this policy as a statutory requirement.
Limitations on dividends payable by subsidiaries. A significant portion of the Parent’s cash, which is used to pay dividends on our common and preferred stock and to pay principal and interest on our debt obligations, is derived from dividends paid to the Parent by its subsidiary banks.bank. These dividends are subject to various legal and regulatory restrictions. See Note 18 of the Notes to Consolidated Financial Statements.
Limitations on dividends payable to shareholders. The Parent’s ability to pay dividends on both its common and preferred stock may be subject to regulatory restrictions, including the requirement that they be included in a stress test and capital plan to which the FRB has not objected. See discussion under “Liquidity Management Actions” on page 81.
Cross-guarantee requirements. All of the Parent’s subsidiary banks are insured by the FDIC. Each commonly controlled FDIC-insured bank can be held liable for any losses incurred, or reasonably expected to be incurred, by the FDIC due to another commonly controlled FDIC-insured bank being placed into receivership, and for any assistance provided by the FDIC to another commonly controlled FDIC-insured bank that is subject to certain conditions indicating that receivership is likely to occur in the absence of regulatory assistance.69.
Safety and soundness requirements. Federal and state laws require that our banks be operated in a safe and sound manner. We are subject to additional safety and soundness standards prescribed in the Federal Deposit Insurance Corporate Improvement Act of 1991,FDICIA, including standards related to internal controls, information systems, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth and compensation, as well as other operational and management standards deemed appropriate by the federal banking agencies. The safety and soundness requirements give bank regulatory agencies significant latitude in their supervisory authority over us.
Requirements for approval of acquisitions and activities and restrictions on other activities. Prior approval of the FRB is required under the BHC Act for a financial holding company to acquire or hold more than a 5% voting interest in any bank, to acquire substantially all the assets of a bank or to merge with another financial or bank

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holding company. The BHC Act also requires approval for certain nonbanking acquisitions, restricts the activities of bank holding companies that are not financial holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto, and restricts the nonbanking activities of a financial holding company to those that are permitted for financial holding companies or that have been determined by the FRB to be financial in nature, incidental to financial activities, or complementary to a financial activity. Laws and regulations governing national and state-chartered banks contain similar provisions concerning acquisitions and activities.
Limitations on the amount of loans to a borrower and its affiliates.

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Limitations on transactions with affiliates. The Dodd-Frank Act significantly expanded the coverage and scope of the limitations on affiliate transactions within a banking organization.
Restrictions on the nature and amount of any investments and ability to underwrite certain securities.
Requirements for opening of branches and the acquisition of other financial entities.
Fair lending and truth in lending requirements to provide equal access to credit and to protect consumers in credit transactions.
Broker-dealer and investment advisory regulations. Certain of our subsidiaries are broker-dealers that engage in securities underwriting and other broker-dealer activities. These companies are registered with the SEC and are members of FINRA. Certain other subsidiaries are registered investment advisers under the Investment Advisers Act of 1940, as amended, and as such are supervised by the SEC. They are also subject to various U.S. federal and state laws and regulations. These laws and regulations generally grant supervisory agencies broad administrative powers, including the power to limit or restrict the carrying on of business for failure to comply with such laws.
Provisions of the GLB Act and other federal and state laws dealing with privacy for nonpublic personal information of individual customers.
CRACommunity Reinvestment Art (“CRA”) requirements. The CRA requires banks to help serve the credit needs in their communities, including providing credit to low and moderate income individuals. If the Company or its subsidiaries failour bank subsidiary fails to adequately serve theirits communities, penalties may be imposed including denials of applications to add branches, relocate, add subsidiaries and affiliates, and merge with or purchase other financial institutions.
Anti-money laundering regulations. The BSA,Bank Secrecy Act, Title III of the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”), and other federal laws require financial institutions to assist U.S. Government agencies in detecting and preventing money laundering and other illegal acts by maintaining policies, procedures and controls designed to detect and report money laundering, terrorist financing, and other suspicious activity.
The Parent is subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, both as administered by the SEC. As a company listed on the NASDAQ Global Select Market, the Parent is subject to NASDAQ listing standards for quoted companies.
The Company is subject to the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, and other federal and state laws and regulations which address, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. NASDAQ has also adopted corporate governance rules, which are intended to allow shareholders and investors to more easily and efficiently monitor the performance of companies and their directors.
The Board of Directors of the Parent has implemented a comprehensive system of corporate governance and risk practices. This system includes policies and guidelines such as Corporate Governance Guidelines, a Code of Business Conduct and Ethics for Employees, a Directors Code of Conduct, a Related Party Transaction Policy, Stock Ownership and Retention Guidelines, a Compensation Clawback Policy, an insider trading policy including provisions prohibiting hedging and placing some restrictions on the pledging of company stock by insiders, and charters for the Audit, Risk Oversight, Compensation, and Nominating and Corporate Governance Committees. More information on the Company’s corporate governance practices is available on the Company’s website at www.zionsbancorporation.com. (The Company’s website is not part of this Annual Report on Form 10-K).

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The Company has adopted policies, procedures and controls to address compliance with the requirements of the banking, securities and other laws and regulations described above or otherwise applicable to the Company. The Company intends to make appropriate revisions to reflect any changes required.
Regulators, Congress, state legislatures, and international consultative bodies continue to enact rules, laws, and policies to regulate the financial services industry and public companies and to protect consumers and investors. The nature of these laws and regulations and the effect of such policies on future business and earnings of the Company cannot be predicted.

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GOVERNMENT MONETARY POLICIES
The earnings and business of the Company are affected not only by general economic conditions, but also by policies adopted by various governmental authorities. The Company is particularly affected by the monetary policies of the FRB, which affect both short-term and long-term interest rates and the national supply of bank credit.
In view of the changing conditions in the economy and the effect of the FRB’s monetary policies, it is difficult to predict future changes in loan demand, deposit levels and interest rates, or their effect on the business and earnings of the Company. FRB monetary policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.

ITEM 1A.
ITEM 1A.RISK FACTORS
The Company’s growth strategy is driven by key factors while adhering to defined risk parameters. The key elements of Zions’ strategy reflect its prudent risk-taking philosophy. The Company generates revenue by taking prudent and appropriately priced risks. These factors are outlined in the Company’s Risk Appetite Framework.
The Company’s Board of Directors has established a Risk Oversight Committee of the Board, approved an Enterprise Risk Management policy,Framework, and appointed an Enterprise Risk Management Committee (“ERMC”) consisting of senior management to oversee and implement the policy.Framework. The Company’s most significant risk exposure has traditionally come from the acceptance of credit risk inherent in prudent extension of credit to relationship customers. In addition to credit and interest rate risk, these committees also monitor the following risk areas: strategic risk, market risk,and interest rate risks, liquidity risk, strategic/business risk, operational/technology risks, model risk, capital/financial reporting risks, legal/compliance risks (including regulatory risk), and reputational risk compensation-relatedas outlined in the Company’s risk operationaltaxonomy. Additional governance and oversight includes Board-approved policies and management committees with direct focus on these specific risk information technology risk, and reputation risk.

categories.
The following list describes several risk factors which are significant to the Company, including but not limited to:
Credit Risk
Credit quality has adversely affected us in the past and may adversely affect us in the future.
Credit risk is one of our most significant risks. If the strength of the U.S. economy in general and the strength of the local economies in which we and our subsidiary banks conduct operations declined, this could result in, among other things, deterioration in credit quality and/or reduced demand for credit, including a resultant adverse effect on the income from our loan portfolio, an increase in charge-offs and an increase in the allowance for loan and lease losses.losses (“ALLL”).
We have concentrations of risk in our loan portfolio, including loans secured by real estate and energy-relatedoil and gas-related lending, which may have unique risk characteristics that may adversely affect our results. Given the current volatility in oil prices and the potential for oil prices to remain low for an extended period of time, Zions Bancorporation’s credit exposure in oil and gas could be adversely impacted. We have heightened our oversight of this credit exposure and have taken proactive steps to effectively manage this book of business.
Concentration or counterparty risk could adversely affect the Company. Concentration risk across our loan and investment portfolios could pose significant additional credit risk to the Company due to exposures which perform in a similar fashion. Counterparty risk could also pose additional credit risk.

Most
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We engage in both commercial termconstruction and land acquisition and development and constructionlending, as well as commercial term lending, primarily in our Western states footprint, and thefootprint. The Company, as a whole, has relatively larger concentrations of such lending than many other peer institutions. In addition, we have a concentration in energy-relatedoil and gas-related lending, primarily in our Amegy Bank subsidiary.Texas at Amegy. Both commercial real estate (“CRE”) and energyoil and gas lending are subject to specific risks, including volatility and potential significant and prolonged declines in collateral values and activity levels. In addition, our real estate lending is concentrated in the Western states, and values there may behave differently than in other parts of the United States. We may have other unidentified concentrated or correlated risks in our loan portfolio.
Our business is highly correlated to local economic conditions in a specific geographic region of the United States.
As a regional bank holding company, the Company provides a full range of banking and related services through its local management teams and unique brands in Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. Approximately 80% of the Company’s total net interest income for the year ended December 31, 2015, and 77% of total assets as of December 31, 2015 relate to our banking operations in Utah, Texas, and California. This is compared to 82% of the Company’s total net interest income for the year ended December 31, 2014, and 78% of total assets as of December 31, 2014. As a result of this geographic concentration, our financial results depend largely upon economic conditions in these market areas. Accordingly, adverse economic conditions affecting these three states in particular could significantly affect our consolidated operations and financial results. For example, our credit risk could be elevated to the extent that our lending practices in these three states focus on borrowers or groups of borrowers with similar economic characteristics, which are similarly affected by the same adverse economic events. At both December 31, 2015 and December 31, 2014, loan balances associated with our banking operations in Utah, Texas, and California comprised 81% of the Company’s commercial lending portfolio, 75% of the CRE lending portfolio, and 69% of the consumer lending portfolio. Loans originated by our banking operations in Utah, Texas, and California are primarily to borrowers in those respective states, with the exception of the National Real Estate group, which co-originates or purchases primarily owner occupied first CRE loans from financial institutions throughout the country.
We have been and could continue to be negatively affected by adverse economic conditions.
Adverse economic conditions negatively affect the Company’s assets, including its loans and securities portfolios, capital levels, results of operations, and financial condition. The most recent financial crisis resulted in significant regulatory changes that continue to affect the Company. Although economic conditions have improved since the most recent financial crisis, it is possible that economic conditions may weaken or that sluggish economic conditions may continue for a substantial period of time. Economic and fiscal conditions in the United States and other countries may directly or indirectly adversely impact economic and market conditions faced by the Company and its customers. Any sustained weakness or further weakening in economic conditions would adversely affect the Company. The Company has exposure to oil and gas-related companies that are currently experiencing a prolonged period of low energy prices. For more information regarding the Company’s exposure to oil and gas-related companies see “Oil and Gas-Related Exposure” in “Risk Elements” on pages 52-55 of MD&A in this Form 10-K.
Market and Interest Rate Risks
Failure to effectively manage our interest rate risk and prolonged periods of low interest rates could adversely affect us.
Net interest income is the largest component of the Company’s revenue. The management of interestInterest rate risk foris managed by the Company and its subsidiary banks is centralized and overseen by an Asset Liability Management Committee, which is appointed by the Company’s Board of Directors. Failure to effectively manage our interest rate risk could adversely affect us.the Company. Factors beyond the Company’s control can significantly influence the interest rate environment and increase the Company’s risk. These factors include competitive pricing pressures for our loans and deposits, adverse shifts in the mix of deposits and other funding sources, and volatile market interest rates resulting from general economic conditions and the policies of governmental and regulatory agencies, in particular the FRB.

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The Company remains in an “asset sensitive”“asset-sensitive” interest rate risk position, which means that net interest income would be expected to increase if interest rates increase, and to decline if interest rates decrease. Most recently, the FRB hasmaintained the target range for federal funds rate at 0.25% to 0.50%, and indicated that it expects to be “patient” with respect towill determine the timing and amountsize of anyfuture rate increases.adjustments by assessing realized and expected economic conditions relative to the objectives of maximum employment and 2% inflation.
Financial market participants have recently contemplated the possibility of negative interest rates. With the exception of brief money market disruptions in which some U.S. Treasury bills traded at negative rates, the U.S. has not previously experienced a negative rate environment, although other developed economies have had prolonged periods of negative rates. Therefore, there are many unknown factors which could impact the Company in a negative rate environment. The ability to effectively charge customers interest on deposits will be determined largely by competition for deposits, but the Company’s deposit systems may require modification to allow for negative deposit rates. Asset allocation strategies would be reconsidered were the FRB to charge for excess reserves.
Our estimates of our interest rate risk position forrelated to noninterest-bearing demand deposits are dependent on assumptions for which there is little historical experience, and the actual behavior of those deposits in a changing interest rate environment may differ materially from our estimates, which could materially affect our results of operations.
We have experienced a low interest rate environment for the past several years. Our views with respect to, among other things, the degree to which we are “asset-sensitive,” including our interest rate risk position for noninterest-bearing demand deposits, are dependent on modeled projections that rely on assumptions regarding changes in balances of such deposits in a changing interest rate environment. Because there is no modern precedent for the prolonged, extremely low interest rate environment that has prevailed for the last several years, there is little historical experience upon which to base such assumptions. If interest rates begincontinue to increase, our assumptions regarding changes in balances of noninterest-bearing demand deposits and regarding the speed and degree to which other deposits are repriced may prove to be incorrect, and business decisions made in reliance on our modeled projections and underlying assumptions could prove to be unsuccessful. Because noninterest-bearing demand deposits are a significant portion of our deposit base, errors inrealized results which are different from our modeled projections and the underlying assumptions could materially affect our results of operations.
Liquidity Risk
We have been andand/or the holders of our securities could continue to be negativelyadversely affected by adverse economic conditions.unfavorable rating actions from rating agencies.
Our ability to access the capital markets is important to our overall funding profile. This access is affected by the ratings assigned by rating agencies to us, certain of our affiliates, and particular classes of securities that we and our banking subsidiary issue. The United States and manyrates that we pay on our securities are also influenced by, among other countries recently facedthings, the credit ratings that we, our affiliates, and/or our securities receive from recognized rating agencies. Ratings downgrades to us, our affiliates, or our securities could increase our costs or otherwise have a severe economic crisis, including a major recession from which the recovery has been slow. These adverse economic conditions have negatively affected the Company’s assets, including its loans and securities portfolios, capital levels,negative effect on our results of operations or financial condition or the market prices of our securities.
As a regulated entity, we are subject to capital and liquidity requirements that may limit our operations and potential growth.
We are a bank holding company and a financial condition. In responseholding company. As such, we and our subsidiary bank are subject to the economic crisis, the United Statescomprehensive, consolidated supervision and other governments established a variety of programs and policies designed to mitigate the effectsregulation of the crisis. While these programs and policies may have had a stabilizing effect inFRB, the United States following the severe financial crisis that occurred in the second half of 2008, troubling economic conditions continue to exist in the United States and globally. Most of these programs have expired, however, the FRB and central banks in other countries continue to pursue monetary policies that have resulted in an unusual period of very low interest rates. However, the full impact of these policies on, among other things, general economic activity and asset values that serve as collateral for loans extended by the Company, for example, real estate values, how long these policies may persist,OCC and the impacts of withdrawing those policies, is unclear and may not be known for some time. It is possible that economic conditions may again become more severe or that weak economic conditions may continue for a substantial period of time. Economic and fiscal conditions in the United States and other countries may directly or indirectly adversely impact economic and market conditions faced by the Company and its customers. Any increase in the severity or duration of adverse economic conditions,FDIC, including a recession or continued weak economic recovery, would adversely affect the Company.
Economic and other circumstances may require us to raise capital at times or in amounts that are unfavorable to the Company.
The Company and its subsidiary banks must maintain certain risk-based and leverage capital ratios as required by theirratio requirements, and Basel III liquidity requirements. Capital needs may rise above normal levels when we experience deteriorating earnings and credit quality, and our banking regulators which can change depending uponmay increase our capital requirements based on general economic conditions and our particular condition, risk profile and growth plans. In addition, we may be required to increase our capital levels even in the absence of actual adverse economic conditions or forecasts as a result of stress testing and capital planning based on hypothetical future adverse economic scenarios, and the particular conditions, risk profiles and growth plans of those entities.scenarios. Compliance with the capital requirements, including leverage ratios, may limit operations that require the Company’sintensive use of capital and could adversely affect our ability to expand and has required, and may require, the Company to raise additional capital, or additional capital investment from the Parent or its subsidiaries. These uncertainties and risks, including those created by legislative and regulatory uncertainties, may increase the Company’s cost of capital and other financing costs.
Our business is highly correlated to local economic conditions in a specific geographic region of the United States.
As a regional bank holding company, the Company provides a full range of banking and related services through its banking and other subsidiaries in Arizona, California, Colorado, Idaho, Nevada, New Mexico,maintain

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Oregon, Texas, Utah, Washington, and Wyoming. Approximately 82%present business levels. For a summary of the Company’s total net interest income for the year ended December 31, 2014capital rules to which we are subject, see “Capital Standards – Basel Framework” in “Supervision and 77%Regulation” on page 9 of total assets as of December 31, 2014 relateMD&A in this Form 10-K.
Liquidity regulations, including regulations establishing a minimum Liquidity Coverage Ratio (“LCR”) and requiring monthly liquidity stress testing applicable to the Company may impact profitability.
The Company is subject to liquidity regulations, including a requirement that it conduct monthly liquidity stress tests, that require it maintain a modified LCR of at least 100% effective January 1, 2016. The Company’s calculation of the modified LCR indicates that the Company is in compliance with the requirement. Such stress testing is subject to ongoing model and assumptions changes which could affect results.
In order to meet the requirements of these new regulations, the Company expects to continue to hold a higher portion of its assets in High Quality Liquid Assets (“HQLA”) and a lower portion of its assets in loans than was generally the case prior to such regulation. HQLA generally have lower yields than loans of the type made by the Company.
The Company may not be able to utilize the significant deferred tax asset recorded on its balance sheet.
The Company’s balance sheet includes a significant DTA. The largest components of this asset result from additions to our ALLL for purposes of generally accepted accounting principles in excess of loan losses actually taken for tax purposes. Our ability to continue to record this DTA is dependent on the Company’s ability to realize its value through net operating loss carrybacks or future projected earnings. Loss of part or all of this asset would adversely impact tangible capital. In addition, inclusion of this asset in determining regulatory capital is subject to certain limitations. Currently no DTA are disallowed for regulatory purposes either on a consolidated basis or at the Company’s subsidiary banks in Utah, Texasbank.
Strategic/Business Risk
Problems encountered by other financial institutions could adversely affect financial markets generally and California.have indirect adverse effects on us.
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, clearing or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we interact on a daily basis, and therefore could adversely affect us. Information security and vendor management processes are in place to actively identify, manage and monitor actual and potential impacts.
The regulation of this geographic concentration, our financial results depend largely upon economic conditions in these market areas. Accordingly, adverse economic conditions affecting these three states in particular could significantlyincentive compensation under the Dodd-Frank Act may adversely affect our consolidatedability to retain our highest performing employees.
The bank regulatory agencies have published guidance and proposed regulations which limit the manner and amount of compensation that banking organizations provide to employees. These regulations and guidance may adversely affect our ability to attract and retain key personnel. If we were to suffer such adverse effects with respect to our employees, our business, financial condition and results of operations and financial results. For example, our credit risk could be elevatedadversely affected, perhaps materially.
We have made and are continuing to make significant changes to the extentCompany that our lending practices in these three states focus on borrowers or groupsinclude, among other things, the combination of borrowers with similar economic characteristics, which are similarly affected by the same adverse economic events. Ascertain of December 31, 2014, loan balances at our subsidiary companies into a single entity, other organizational restructurings, efficiency initiatives, and replacement or upgrades of certain core technological systems to improve our control environment, operating efficiency, and results of operations. The ultimate success and completion of these changes, and their effect on the Company, may vary significantly from initial planning, which could materially adversely affect the Company.
During 2013, our Board of Directors approved a significant investment by us to replace our loan and deposit systems and to upgrade our accounting systems. The new integrated system for most of our loans and deposits is expected to employ technology that is a significant improvement over our current systems. These initiatives will be completed in phases to allow for appropriate testing and implementation so as to minimize time delays and cost

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overruns. In December 2015, the Company consolidated its seven subsidiary banks, a subsidiary trust company, and our service company into a single bank. The Company also decided to make other organizational changes such as the realignment of management responsibilities and the rationalization of support functions, including accounting and risk, and back office operations. Additionally, in Utah, TexasJune 2015, management announced certain efficiency initiatives to improve operating results and California comprised 82% of the Company’s commercial lending portfolio, 75% of the commercial real estate lending portfolio,return on equity.
These changes continue to be implemented and 69% of the consumer lending portfolio. Loans originated by these bankssome are primarily to borrowers in their respective states,early stages. By their very nature, projections of duration, cost, expected savings, expected efficiencies, and related items are subject to change and significant variability.
We may encounter significant adverse developments in the completion and implementation of these changes. These may include significant time delays, cost overruns, loss of key people, technological problems, processing failures, and other adverse developments. Our ability to attract key employees with appropriate talent to implement these changes may also be challenged. Further, our ability to maintain an adequate control environment may be impacted. Any or all of these issues could result in disruptions to our systems, processes, controls, procedures, and employees, which may adversely impact our customers and our ability to conduct business.
We have plans, policies and procedures designed to prevent or limit the exceptionnegative effect of these potential adverse developments. However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be adequately remediated. The ultimate effect of any adverse development could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could materially affect the National Real Estate group owner-occupied loan portfolio held by our Utah subsidiary bank.Company, including its control environment, operating efficiency, and results of operations.
Operational/Technology Risks
Catastrophic events including, but not limited to, hurricanes, tornadoes, earthquakes, fires, floods, and prolonged drought, may adversely affect the general economy, financial and capital markets, specific industries, and the Company.
The Company has significant operations and a significant customer base in Utah, Texas, California and other regions where natural and other disasters may occur. These regions are known for being vulnerable to natural disasters and other risks, such as hurricanes, tornadoes, earthquakes, fires, floods, and prolonged drought. These types of natural catastrophic events at times have disrupted the local economy, the Company’s business and customers, and have posed physical risks to the Company’s property. In addition, catastrophic events occurring in other regions of the world may have an impact on the Company’s customers and in turn on the Company. AAlthough we have business continuity and disaster recovery programs in place, a significant catastrophic event could materially adversely affect the Company’s operating results.
Problems encountered by other financial institutions could adversely affect financial markets generally and have indirect adverse effects on us.
The commercial soundness of many financial institutions may be closely interrelated as a result of credit, trading, clearing or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges, with which we interact on a daily basis, and therefore could adversely affect us.
We and/or the holders of our securities could be adversely affected by unfavorable rating actions from rating agencies.failure in our internal controls.
OurA failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that customers, regulators and investors may have of the Company. We continue to devote a significant amount of effort, time and resources to improving our controls and ensuring compliance with complex accounting standards and regulations. These efforts also include the management of controls to mitigate operational risks for programs and processes across the Company.
We could be adversely affected by financial technology advancements and other non-traditional lending and banking sources.
The ability to access the capital marketssuccessfully remain competitive is importantdependent upon our ability to maintain a critical technological capability and identify and develop new, value-added products for existing and future customers. Failure to do so could impede our overall funding profile. This access is affected by the ratings assigned by rating agenciestime to us, certain ofmarket, reduce customer product accessibility and weaken our affiliates, and particular classes of securities that we and our affiliates issue. The rates that we pay on our securities also are also influenced by, among other things, the credit ratings that we, our affiliates, and/or our securities receive from recognized rating agencies. Ratings downgrades to us, our affiliates, or our securities could increase our costs or otherwise have a negative effect on our results of operations or financial condition or the market prices of our securities.
The Dodd-Frank Act imposes significant limitations on our business activities and subjects us to increased regulation and additional costs.
The Dodd-Frank Act has material implications for the Company and the entire financial services industry. The Dodd-Frank Act places significant additional regulatory oversight and requirements on financial institutions, particularly those with more than $50 billion of assets, including the Company. In addition, among other things, the Dodd-Frank Act:
affects the levels of capital and liquidity with which the Company must operate and how it plans capital and liquidity levels (including a phased-in elimination of the Company’s existing trust preferred securities as Tier 1 capital);competitive position.

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subjects the CompanyOur information systems may experience an interruption or security breach.
We rely heavily on communications and information systems to new and/or higher fees paid to various regulatory entities, including but not limited to deposit insurance fees to the FDIC;
impacts the Company’s ability to invest in certain types of entities or engage in certain activities;
impacts a number of the Company’s business strategies;
requires us to incur the cost of developing substantial heightened risk management policies and infrastructure;
regulates the pricing of certain ofconduct our products and services and restricts the revenue that the Company generates from certain businesses;
subjects the Company to new capital planning actions, including stress testing or similar actions and timing expectations for capital-raising;
subjects the Company to supervision by the CFPB, with very broad rule-making and enforcement authorities;
grants authority to state agencies to enforce state and federal laws against national banks;
subjects the Company to new and different litigation and regulatory enforcement risks; and
limits the manner in which compensation is paid to executive officers and employees generally.
The Company and the entire financial services industry have incurred and will continue to incur substantial personnel, systems, consulting,business. We, our customers, and other costs in order to complyfinancial institutions with new regulations promulgated under the Dodd-Frank Act, particularly with respect to stress testing and risk management. Because the responsible agencies are still in the process of proposing and finalizing many of the regulations required under the Dodd-Frank Act, the full impact of this legislation on the Company and the financial services industries, business strategies, and financial performance cannot be known at this time, and may not be known for some time. Individually and collectively, regulations adopted under the Dodd-Frank Act may materially adversely affect the Company’s and the financial services industry’s business, financial condition (including the Company’s ability to compete effectively with less regulated financial services providers), and results of operations.
As a regulated entity,which we interact, are subject to capitalongoing, continuous attempts to penetrate key systems by individual hackers, organized criminals, and liquidity requirements that mayin some cases, state-sponsored organizations. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems, misappropriation of funds, and theft of proprietary Company or customer data. While we have significant internal resources, policies and procedures designed to prevent or limit our operations and potential growth.
We are a bank holding company and a financial holding company. As such, we and our subsidiary banks are subject to the comprehensive, consolidated supervision and regulationeffect of the FRB, the OCC (in the casepossible failure, interruption or security breach of our national subsidiary banks) and the FDIC, including risk-based and leverage capital ratio requirements, and Basel III liquidity requirements. Capital needs may rise above normal levels when we experience deteriorating earnings and credit quality, and our banking regulators may increase our capital requirements based on general economic conditions and our particular condition, risk profile and growth plans. In addition, we mayinformation systems, there can be required to increase our capital levels even in the absenceno assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of actual adverse economic conditionsany failure, interruption or forecasts as a result of stress testing and capital planning based on hypothetical future adverse economic scenarios. Compliance with the capital requirements, including leverage ratios, may limit operations that require the intensive use of capital and could adversely affect our ability to expand or maintain present business levels. For a summary of recently announced capital rules, see “Capital Standards – Basel Framework” in “Supervision and Regulation” on page 8 of MD&A in this Form 10-K.
Stress testing and capital management under the Dodd-Frank Act may limit our ability to increase dividends, repurchase sharessecurity breach of our stock, and access the capital markets.
Under the CCAR, we are required to submit to the Federal Reserve each yearinformation systems could damage our capital plan for the applicable planning horizon, along with the resultsreputation, result in a loss of required stress tests. Each annual capital plan will, among other things, specify our planned actions with respect to dividends, redemptions, repurchases, capital raising, and similar matters and will becustomer business, subject to the objection or non-objection by the Federal Reserve. Moreover, the CCAR process requires us to analyze the pro forma impact on our financial condition of various hypothetical future adverse economic scenarios selected by usadditional regulatory scrutiny, or the Federal Reserve. We must maintain or raise capital sufficient to meet our risk management and regulatory expectations under such hypothetical scenarios. Similarly, Dodd-Frank Act Stress Tests (“DFAST”) are stress tests run by the Federal Reserve using its

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proprietary models to analyze the Company’s stressed capital position. In order to receive a “non-objection” from the Federal Reserve to its capital plan, it must pass both the Federal Reserve’s quantitatively modeled stress capital and a qualitative examination of its CCAR submission and capital plan. As required by the Dodd-Frank Act we also submit stress tests to the OCC (for Amegy and Zions) and FDIC (for CB&T) for our subsidiary banks with assets in excess of $10 billion. The severity of the hypothetical scenarios devised by the FRB and other bank regulators and employed in these stress tests is undefined by law or regulation, and is thus subject solely to the discretion of the regulators. The stress testing and capital planning processes may, among other things, requireexpose us to increase our capital levels, limit our dividends or other capital distributions to shareholders, modify our business strategies, or decrease our exposure to various asset classes.civil litigation and possible financial liability.
Under stress testing and capital management standards implemented by bank regulatory agencies under the Dodd-Frank Act, we may declare dividends, repurchase common stock, redeem preferred stock and debt, access capital markets for certain types of capital, make acquisitions, and enter into similar transactions only if included in a capital plan to which the FRB has not objected. Any similar transactions not contemplated in our annual capital plan, other than those with a de minimus impact on actual or projected capital, may require a new stress test and capital plan, which is subject to FRB non-objection. These requirements may significantly limit our ability to respond to and take advantage of market developments.Model Risk
We increasingly use models in the management of the Company, and in particular in the required stress testing and capital plan. There is risk that these models are incorrect or inaccurate in various ways, which can cause us to make non-optimal decisions, and this risk causes the Company to hold additional capital as a buffer against that risk.
We attempt to carefully develop, document, back test, and validate the models used in the management of the Company, including, for example, models used in the management of interest rate and liquidity risk, and those used in projecting stress losses in various segments of our credit and securities portfolios, and projecting net revenue under stress. Models are inherently imperfect for a number of reasons, however, and cannot perfectly predict outcomes. Management decisions based in part on such models, therefore, can be suboptimal. In addition, in determining the Company’s capital needs under stress testing, we attempt to specifically quantify the amounts by which model results could be incorrect, and we hold material additional amounts of capital as a buffer against this “model risk.”
New liquidity regulations, including regulations establishing a minimum Liquidity Coverage Ratio (“LCR”)Capital/Financial Reporting Risks
Stress testing and requiring monthly liquidity stress testing applicable to the Company may impact profitability.
The Company is subject to new liquidity regulations, including a requirement that it conduct monthly liquidity stress tests starting in January 2015, and that subject it to a new requirement that it maintain a modified LCR of at least 100% effective January 1, 2016. Current liquidity stress tests indicate that the Company is in compliance with the modified LCR requirement. Such stress testing is subject to ongoing model and assumptions changes which could affect results.
In order to meet the requirements of these new regulations, the Company expects to hold a higher portion of its assets in High Quality Liquid Assets (“HQLA”) and a lower portion of its assets in loans than was generally the case prior to such regulation. HQLA generally have lower yields than loans of the type made by the Company.
The regulation of incentive compensationcapital management under the Dodd-Frank Act may adversely affectlimit our ability to retainincrease dividends, repurchase shares of our highest performing employees.stock, and access the capital markets.
Under the CCAR, we are required to submit to the FRB each year our capital plan for the applicable planning horizon, along with the results of required stress tests. Each annual capital plan will, among other things, specify our planned capital actions with respect to dividends, preferred stock redemptions, common stock buybacks or issuances, and similar matters and will be subject to the objection or non-objection by the FRB. Moreover, the CCAR process requires us to analyze the pro forma impact on our financial condition of various hypothetical future adverse economic scenarios selected by us and the FRB. We must maintain or raise capital sufficient to meet our risk management and regulatory expectations under such hypothetical scenarios. In connection with the annual CCAR process, we also participate in the Dodd-Frank Act Stress Tests (“DFAST”) on a semi-annual basis. Under DFAST, a standardized strategy for capital actions (dividend payments held constant and other current capital obligations met) is implemented by all participating banks. As required by the Dodd-Frank Act we also submit stress tests to the OCC for our subsidiary bank because it has assets in excess of $10 billion. Under both CCAR and DFAST, the Federal Reserve uses its proprietary models to analyze the Company’s stressed capital position. The severity of the hypothetical scenarios devised by the FRB and OCC and employed in these stress tests is undefined by law or regulation, and is thus subject solely to the discretion of the regulators. The stress testing and capital planning processes may, among other things, require us to increase our capital levels, limit our dividends or other capital distributions to shareholders, modify our business strategies, or decrease our exposure to various asset classes.
Under stress testing and capital management standards implemented by bank regulatory agencies have published guidanceunder the Dodd-Frank Act, we may declare dividends, repurchase common stock, redeem preferred stock and proposed regulations which limit the mannerdebt, access capital markets for certain types of capital, make acquisitions, and amount of compensation that banking organizations provide to employees. These regulations and guidance may adversely affect our ability to attract and retain key personnel. If we were to suffer such adverse effects with respect to our employees, our business, financial condition and results of operations could be adversely affected, perhaps materially.enter into similar transactions only if included in a

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Increasescapital plan to which the FRB has not objected. Any similar transactions not contemplated in FDIC insurance premiumsour annual capital plan, other than those with an inconsequential impact on actual or projected capital, may adversely affect our earnings.
Our deposits are insured by the FDIC up to legal limitsrequire a new stress test and accordingly, we arecapital plan, which is subject to FDIC insurance assessments.During 2008FRB non-objection. These requirements may significantly limit our ability to respond to and 2009, higher levelstake advantage of market developments.
Economic and other circumstances may require us to raise capital at times or in amounts that are unfavorable to the Company.
The Company and its subsidiary bank failures dramatically increased resolution costsmust maintain certain risk-based and leverage capital ratios, as required by its banking regulators, which can change depending upon general economic conditions, hypothetical future adverse economic scenarios, and the particular conditions, risk profiles and growth plans of the FDICCompany and depleted the deposit insurance fund. In addition, the FDIC instituted two temporary programs to further insure customer deposits at FDIC insured banks. These programs, which have since expired, placed additional stress on the deposit insurance fund. In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, the FDIC has increased assessment rates of insured institutions. Further, under the Dodd-Frank Act, the assessment base was expanded to include non-deposit liabilities. We generally have only limited ability to control the amount of premiums that we are required to pay the FDIC for insurance. Changes in our required insurance premium paymentsits subsidiary bank. Compliance with capital requirements may adversely impact our earnings.
Other legislative and regulatory actions taken now or in the future may have a significant adverse effect on our operations.
In addition to the Dodd-Frank Act described previously, bank regulatory agencies and international regulatory consultative bodies have proposed or are considering new regulations and requirements, some of which may be imposed without formal promulgation.
There can be no assurance that any or all of these regulatory changes or actions will ultimately be adopted. However, if adopted, some of these proposals could adversely affect the Company by, among other things: impacting after-tax returns earned by financial services firms in general; limitinglimit the Company’s ability to grow; increasing taxesexpand and has required, and may require, the Company or fees on some ofits subsidiaries to raise additional capital, or may require additional capital investment from the Parent. These uncertainties and risks, including those created by legislative and regulatory uncertainties, may increase the Company’s funding or activities; limiting the rangecost of productscapital and services that the Company could offer; and requiring the Company to raise capital at inopportune times.
The ultimate impact of these proposals cannot be predicted as it is unclear which, if any, may be adopted.other financing costs.
We could be adversely affected by accounting, financial reporting, and regulatory and compliance risk.
The Company is exposed to accounting, financial reporting, and regulatory/compliance risk. The Company provides to its customers, invests in, and uses for its own capital, funding, and risk management needs, a number of complex financial products and services. Estimates, judgments, and interpretations of complex and changing accounting and regulatory policies are required in order to provide and account for these products and services. Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and conditions. The level of regulatory/compliance oversight has been heightened in recent periods as a result of rapid changes in regulations that affect financial institutions. The administration of some of these regulations and related changes has required the Company to comply before their formal adoption. Identification,Therefore, identification, interpretation and implementation of complex and changing accounting standards as well as compliance with regulatory requirements therefore pose an ongoing risk.
Our results of operations depend upon the performance of our subsidiaries.
We are a holding company that conducts substantially all of our operations through our banking subsidiary and other subsidiaries. The Parent receives substantially all of its revenues from dividends from its subsidiaries and primarily from its subsidiary bank. These dividends are a principal source of funds to pay dividends on our common and preferred stock and interest and principal on our debt. We and certain of our subsidiaries experienced periods of unprofitability or reduced profitability during the most recent recession of 2007-2009. The ability of the Company and its subsidiary bank to pay dividends is restricted by regulatory requirements, including profitability and the need to maintain required levels of capital. Lack of profitability or reduced profitability exposes us to the risk that regulators could restrict the ability of our subsidiary bank to pay dividends. It also increases the risk that the Company may have to establish a “valuation allowance” against its net DTA or have that asset disallowed for regulatory capital purposes.
The ability of our subsidiary bank to pay dividends or make other payments to us is also limited by its obligations to maintain sufficient capital and by other general regulatory restrictions on its dividends. If it does not satisfy these regulatory requirements, we may be unable to pay dividends or interest on our indebtedness. The OCC, the primary regulator of our subsidiary bank, has issued policy statements generally requiring insured banks to pay dividends only out of current earnings. In addition, if, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice, which could include the payment of dividends, such authority may take actions requiring that such bank refrain from the practice. Payment of dividends could also be subject to regulatory limitations if a subsidiary bank were to become “under-capitalized” for purposes of the applicable federal regulatory “prompt corrective action” regulations.
The value of our goodwill may decline in the future.
As of December 31, 2015, the Company had $1 billion of goodwill that was allocated to Amegy, CB&T and Zions Bank. If the fair value of a reporting unit is determined to be less than its carrying value, the Company may have to

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take a charge related to the impairment of its goodwill. Such a charge would occur if the fair value of the Company’s net assets improves at a faster rate than the market value of our reporting units, or if the Company was to experience increases in the book value of a reporting unit in excess of the increase in the fair value of equity of a reporting unit. A significant decline in the Company’s expected future cash flows, a significant adverse change in the business climate, slower economic growth or a significant and sustained decline in the price of the Company’s common stock, any or all of which could be materially impacted by many of the risk factors discussed herein, may necessitate the Company taking charges in the future related to the impairment of its goodwill. Future regulatory actions could also have a material impact on assessments of the appropriateness of the goodwill carrying value. If the Company was to conclude that a future write-down of its goodwill is necessary, it would record the appropriate charge, which could have a material adverse effect on the Company’s results of operations.
Legal/Compliance Risks
The Dodd-Frank Act imposes significant limitations on our business activities and subjects us to increased regulation and additional costs.
The Dodd-Frank Act has material implications for the Company and the entire financial services industry. The Dodd-Frank Act places significant additional regulatory oversight and requirements on financial institutions, particularly those with more than $50 billion of assets, including the Company. In addition, among other things, the Dodd-Frank Act:
affects the levels of capital and liquidity with which the Company must operate and how it plans capital and liquidity levels;
subjects the Company to new and/or higher fees paid to various regulatory entities, including but not limited to deposit insurance fees to the FDIC;
impacts the Company’s ability to invest in certain types of entities or engage in certain activities;
impacts a number of the Company’s business strategies;
requires us to incur the cost of developing substantial heightened risk management policies and infrastructure;
regulates the pricing of certain of our products and services and restricts the revenue that the Company generates from certain businesses;
subjects the Company to capital planning actions, including stress testing or similar actions and timing expectations for capital raising;
subjects the Company to supervision by the CFPB, with very broad rule-making and enforcement authorities;
grants authority to state agencies to enforce state and federal laws against national banks;
subjects the Company to new and different litigation and regulatory enforcement risks; and
limits the manner and amount in which compensation is paid to executive officers and employees generally.
The Company and the entire financial services industry have incurred and will continue to incur substantial personnel, systems, consulting, and other costs in order to comply with new regulations promulgated under the Dodd-Frank Act, particularly with respect to stress testing and risk management. Some aspects of the Dodd-Frank Act continue to be subject to rulemaking, many of the rules that have been adopted will take effect over several additional years, and many of the rules that have been adopted may be subject to interpretation and clarification, and accordingly, the impact of such regulatory changes cannot be presently determined. Individually and collectively, regulations adopted under the Dodd-Frank Act may materially adversely affect the Company’s and the financial services industry’s business, financial condition (including the Company’s ability to compete effectively with less regulated financial services providers), and results of operations.

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Other legislative and regulatory actions taken now or in the future may have a significant adverse effect on our operations and earnings.
In addition to the Dodd-Frank Act described previously, bank regulatory agencies and international regulatory consultative bodies have proposed or are considering new regulations and requirements, some of which may be imposed without formal promulgation. Our deposits are insured by the FDIC up to legal limits and, accordingly, we are subject to FDIC insurance assessments.
There can be no assurance that any or all of these regulatory changes or actions will ultimately be adopted. However, if adopted, some of these proposals could adversely affect the Company by, among other things: impacting after-tax returns earned by financial services firms in general; limiting the Company’s ability to grow; increasing taxes or fees on some of the Company’s funding or activities; limiting the range of products and services that the Company could offer; and requiring the Company to raise capital at inopportune times.
The ultimate impact of these proposals cannot be predicted as it is unclear which, if any, may be adopted.
We could be adversely affected by legal and governmental proceedings.
We are subject to risks associated with legal claims, fines, litigation, and regulatory and other government proceedings. The Company’s exposure to these proceedings has increased and may further increase as a result of stresses on customers, counterparties and others arising from the past or current economic environments, new regulations promulgated under recently adopted statutes, the creation of new examination and enforcement bodies, and increasingly aggressive enforcement and legal actions against banking organizations.
The quality and liquidity of our asset-backed investment securities portfolio has adversely affected us and may continue to adversely affect us.Reputational Risk
The Company’s asset-backed investment securities portfoliocompany is presented with various reputational risk issues that could stem from operational, compliance and legal risks.
A Reputational Risk Council was established to monitor, manage and develop strategies to effectively manage reputational risk which includes, CDOs collateralized primarily by trust preferred securities issued by bank holding companies. Many factors, some of which are beyond the Company’s control, significantly influence the fair value and impairment status of these securities. These factors include, but areis not limited to, defaults, deferralsaddressing communication logistics, legal and restructurings by debt issuers, the views of banking regulators, changes in our accounting treatment with respect to these securities, rating agency downgrades of securities, limited market pricing of securities, or market pricing that varies from the Company’s current model valuations, and changes in prepayment rates and future interest rates. The occurrence of one or more of these factors could result in additional OTTI charges with respect to our CDO portfolio, which could be material.

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The Company may not be able to utilize the significant deferred tax asset recorded on its balance sheet.
The Company’s balance sheet includes a significant deferred tax asset. The largest components of this asset result from additions to our allowance for loan and lease losses for purposes of generally accepted accounting principles in excess of loan losses actually taken for tax purposes and other-than-temporary impairment losses on our securities portfolio that have not yet been realized for tax purposes by selling the securities. Our ability to continue to record this deferred tax asset is dependent on the Company’s ability to realize its value through net operating loss carrybacks or future projected earnings. Loss of part or all of this asset would adversely impact tangible capital. In addition, inclusion of this asset in determining regulatory capital is subject to certain limitations. Currently no deferred tax assets are disallowed for regulatory purposes either on a consolidated basis or at any of the Company’s subsidiary banks.
We could be adversely affected by failure in our internal controls.
A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that customers, regulators and investors may have of the Company. We continue to devote a significant amount of effort, time and resources to improving our controls and ensuring compliance with complex accounting standards and regulations.
Our information systems may experience an interruption or security breach.
We rely heavily on communications and information systems to conduct our business. We, our customers, and other financial institutions with which we interact, are subject to ongoing, continuous attempts to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems, misappropriation of funds, and theft of proprietary Company or customer data. While we have policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of our information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability.
We are making a significant investment to replace our core loan and deposit systems and to upgrade our accounting systems. The actual duration, cost, expected savings, and other factors to implement these initiatives may vary significantly from our estimates, which could materially affect the Company, including its results of operations.
During 2013, our Board of Directors approved a significant investment by us to replace our loan and deposit systems and to upgrade our accounting systems. The new integrated system for most of our loans and deposits is expected to employ technology that is a significant improvement over our current systems. These initiatives will be completed in phases to allow for appropriate testing and implementation so as to minimize time delays and cost overruns. However, these initiatives are in the early stages and by their very nature, projections of duration, cost, expected savings, and related items are subject to change and significant variability.
We may encounter significant adverse developments in the completion and implementation of these initiatives. These may include significant time delays, cost overruns, and other adverse developments that could result in disruptions to our systems and adversely impact our customers.
We have plans, policies and procedures designed to prevent or limit the negative effect of these adverse developments. However, there can be no assurance that any such adverse developments will not occur or, if they do occur, that they will be adequately remediated. The occurrence of any adverse development could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to civil litigation and possible financial liability, any of which could materially affect the Company, including its results of operations in any given reporting period.

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Our results of operations depend upon the performance of our subsidiaries.
We are a holding company that conducts substantially all of our operations through our banking and other subsidiaries. The Parent receives substantially all of its revenues from dividends from its subsidiaries. These dividends are a principal source of funds to pay dividends on our common and preferred stock and interest and principal on our debt. We and certain of our subsidiaries experienced periods of unprofitability or reduced profitability during the recent severe recession. The ability of the Company and its subsidiary banks to pay dividends is restricted by regulatory requirements, including profitability and the need to maintain required levels of capital. Lack of profitability or reduced profitability exposes us to the risk that regulators could restrict the ability of our subsidiary banks to pay dividends. It also increases the risk that the Company may have to establish a “valuation allowance” against its net deferred tax asset or have that asset disallowed for regulatory capital purposes.
The ability of our subsidiary banks to pay dividends or make other payments to us is also limited by their obligations to maintain sufficient capital and by other general regulatory restrictions on their dividends. If they do not satisfy these regulatory requirements, we may be unable to pay interest on our indebtedness. The OCC, the primary regulator for certain of our subsidiary banks, has issued policy statements generally requiring insured banks only to pay dividends out of current earnings. In addition, if, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice, which could include the payment of dividends, such authority may take actions requiring that such bank refrain from the practice. Payment of dividends could also be subject to regulatory limitations if a subsidiary bank were to become “under-capitalized” for purposes of the applicable federal regulatory “prompt corrective action” regulations.issues.

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.UNRESOLVED STAFF COMMENTS
There are no unresolved written comments that were received from the SEC’s staff 180 days or more before the end of the Company’s fiscal year relating to its periodic or current reports filed under the Securities Exchange Act of 1934.

ITEM 2. PROPERTIES
ITEM 2.PROPERTIES
At December 31, 2014,2015, the Company operated 460450 domestic branches, of which 286280 are owned and 174170 are leased. The Company also leases its headquarters offices in Salt Lake City, Utah. Other operations facilities are either owned or leased. The annual rentals under long-term leases for leased premises are determined under various formulas and factors, including operating costs, maintenance and taxes. For additional information regarding leases and rental payments, see Note 17 of the Notes to Consolidated Financial Statements.

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.LEGAL PROCEEDINGS
The information contained in Note 17 of the Notes to Consolidated Financial Statements is incorporated by reference herein.

ITEM 4. MINE SAFETY DISCLOSURES
ITEM 4.MINE SAFETY DISCLOSURES
None.


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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
The Company’s common stock is traded on the NASDAQ Global Select Market under the symbol “ZION.” The last reported sale price of the common stock on NASDAQ on February 18, 201516, 2016 was $26.04$21.68 per share.


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The following schedule sets forth, for the periods indicated, the high and low sale prices of the Company’s common stock, as quoted on NASDAQ:
 2014 2013 2015 2014
 High Low High Low High Low High Low
                
1st Quarter $33.33
 $27.82
 $25.86
 $21.56
 $28.72
 $23.72
 $33.33
 $27.82
2nd Quarter 31.87
 27.65
 29.41
 23.10
 33.03
 26.20
 31.87
 27.65
3rd Quarter 30.89
 27.44
 31.40
 26.79
 32.42
 26.42
 30.89
 27.44
4th Quarter 29.93
 25.02
 30.13
 26.89
 31.18
 26.22
 29.93
 25.02
During 2015, the Company purchased $176 million of its Series I preferred stock pursuant to a cash tender offer. During 2014, the Company issued $525 million of common stock, which consisted of approximately 17.6 million shares at a price of $29.80 per share. Net of commissions and fees, this issuance added approximately $516 million to common stock.

See Note 13 of the Notes to Consolidated Financial Statements for further information regarding equity transactions during 20142014 and 2015.

As of February 18, 201516, 2016, there were 5,3234,813 holders of record of the Company’s common stock.

EQUITY CAPITAL AND DIVIDENDS
We have 4,400,000 authorized shares of preferred stock without par value and with a liquidation preference of $1,000 per share. As of December 31, 20142015, 66,034,66,139, 143,750, 171,827, 126,221, 300,893,125,224, and 195,152 of preferred shares series A, F, G, H, I, and J respectively, have been issued and are outstanding. In addition, holders of $151 million of the Company’s subordinated debt have the right to convert that debt into either Series A or C preferred stock. In general, preferred shareholders may receive asset distributions before common shareholders; however, preferred shareholders have only limited voting rights generally with respect to certain provisions of the preferred stock, the issuance of senior preferred stock, and the election of directors. Preferred stock dividends reduce earnings available to common shareholders and are paid quarterly or semiannually in arrears. The preferred stock redemption amount is computed at the per share liquidation preference plus any declared but unpaid dividends. All of the outstanding series of preferred stock are registered with the SEC. In addition, Series A, F, G, and H preferred stock are listed and traded on the New York Stock Exchange. See Note 13 of the Notes to Consolidated Financial Statements for further information regarding the Company’s preferred stock.

The frequency and amount of common stock dividends paid during the last two years are as follows:
 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
                
2015 $0.04
 $0.06
 $0.06
 $0.06
2014 $0.04
 $0.04
 $0.04
 $0.04
 0.04
 0.04
 0.04
 0.04
2013 0.01
 0.04
 0.04
 0.04
The Company’s Board of Directors approved a dividend of $0.04$0.06 per common share payable on February 26, 201525, 2016 to shareholders of record on February 19, 2015.18, 2016. The Company expects to continue its policy of paying regular cash dividends on a quarterly basis, although there is no assurance as to future dividends because they depend on future earnings, capital requirements, financial condition, and regulatory approvals.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The information contained in Item 12 of this Form 10-K is incorporated by reference herein.

SHARE REPURCHASES
The following schedule summarizes the Company’s share repurchases for the fourth quarter of 20142015:

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Period 
Total number
of shares
repurchased 1
 
Average
price paid
per share
 
Total number of shares
purchased as part of
publicly announced
plans or programs
 
Approximate dollar
value of shares that
may yet be purchased
under the plan
 
Total number
of shares
repurchased 1
 
Average
price paid
per share
 
Total number of shares
purchased as part of
publicly announced
plans or programs
 
Approximate dollar
value of shares that
may yet be purchased
under the plan
                  
October 985
 $28.80
 —
 $—
  942
 $27.84
 —
 $—
 
November 316
 29.06
 —
 —
  7,176
 29.97
 —
 —
 
December 1,057
 27.51
 —
 —
  100
 30.22
 —
 —
 
Fourth quarter 2,358
 28.26
 —
    8,218
 29.73
 —
   
1Represents common shares acquired from employees in connection with the Company’s stock compensation plan. Shares were acquired from employees to pay for their payroll taxes upon the vesting of restricted stock and restricted stock units under the “withholding shares” provision of an employee share-based compensation plan.
1
Represents common shares acquired from employees in connection with the Company’s stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the vesting of restricted stock and restricted stock units, and the exercise of stock options, under the “withholding shares” provision of an employee share-based compensation plan.
PERFORMANCE GRAPH
The following stock performance graph compares the five-year cumulative total return of Zions Bancorporation’s common stock with the Standard & Poor’s 500 Index and the KBW Bank Index, both of which include Zions Bancorporation. The KBW Bank Index is a market capitalization-weighted bank stock index developed and published by Keefe, Bruyette & Woods, Inc., a nationally recognized brokerage and investment banking firm specializing in bank stocks. The index is composed of 24 geographically diverse stocks representing national money center banks and leading regional financial institutions. The stock performance graph is based upon an initial investment of $100 on December 31, 20092010 and assumes reinvestment of dividends.

PERFORMANCE GRAPH FOR ZIONS BANCORPORATION
INDEXED COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
 
 2009 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2015
                        
Zions Bancorporation 100.0
 189.2
 127.4
 167.8
 235.9
 225.8
 100.0
 67.3
 88.7
 124.7
 119.4
 115.2
KBW Bank Index 100.0
 123.3
 94.9
 125.8
 172.9
 188.9
 100.0
 76.8
 102.2
 140.8
 154.0
 154.7
S&P 500 100.0
 114.8
 117.2
 135.8
 179.4
 203.6
 100.0
 102.1
 118.4
 156.8
 178.2
 180.7

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
(Dollar amounts in millions, except per share amounts) 2014/2013 Change 2014 2013 2012 2011 2010 2015/2014 Change 2015 2014 2013 2012 2011
For the Year                        
Net interest income -1 % $1,680.0
 $1,696.3
 $1,731.9
 $1,756.2
 $1,714.3
 +2 % $1,715.3
 $1,680.0
 $1,696.3
 $1,731.9
 $1,756.2
Noninterest income +51 % 508.6
 337.4
 419.9
 498.2
 453.6
 -26 % 377.1
 508.6
 337.4
 419.9
 498.2
Total revenue +8 % 2,188.6
 2,033.7
 2,151.8
 2,254.4
 2,167.9
 -4 % 2,092.4
 2,188.6
 2,033.7
 2,151.8
 2,254.4
Provision for loan losses -13 % (98.1) (87.1) 14.2
 74.5
 852.7
 +141 % 40.0
 (98.1) (87.1) 14.2
 74.5
Noninterest expense -3 % 1,665.3
 1,714.4
 1,595.0
 1,658.6
 1,718.3
 -4 % 1,600.5
 1,665.3
 1,714.4
 1,595
 1,658.6
Impairment loss on goodwill — % —
 —
 1.0
 —
 —
 — % —
 —
 —
 1.0
 —
Income (loss) before income taxes +53 % 621.4
 406.4
 541.6
 521.3
 (403.1)
Income taxes (benefit) +56 % 222.9
 142.9
 193.4
 198.6
 (106.8)
Net income (loss) +51 % 398.5
 263.5
 348.2
 322.7
 (296.3)
Net income (loss) applicable to noncontrolling interests -100 % —
 (0.3) (1.3) (1.1) (3.6)
Net income (loss) applicable to controlling interest +51 % 398.5
 263.8
 349.5
 323.8
 (292.7)
Net earnings (loss) applicable to common shareholders +11 % 326.6
 294.0
 178.6
 153.4
 (412.5)
Income before income taxes -27 % 451.9
 621.4
 406.4
 541.6
 521.3
Income taxes -36 % 142.4
 222.9
 142.9
 193.4
 198.6
Net income -22 % 309.5
 398.5
 263.5
 348.2
 322.7
Net loss applicable to noncontrolling interests — % —
 —
 (0.3) (1.3) (1.1)
Net income applicable to controlling interest -22 % 309.5
 398.5
 263.8
 349.5
 323.8
Net earnings applicable to common shareholders -24 % 246.6
 326.6
 294.0
 178.6
 153.4
                        
Per Common Share                        
Net earnings (loss) – diluted +6 % 1.68
 1.58
 0.97
 0.83
 (2.48)
Net earnings (loss) – basic +6 % 1.68
 1.58
 0.97
 0.83
 (2.48)
Net earnings – diluted -29 % 1.20
 1.68
 1.58
 0.97
 0.83
Net earnings – basic -29 % 1.20
 1.68
 1.58
 0.97
 0.83
Dividends declared +23 % 0.16
 0.13
 0.04
 0.04
 0.04
 +38 % 0.22
 0.16
 0.13
 0.04
 0.04
Book value 1
 +6 % 31.35
 29.57
 26.73
 25.02
 25.12
 +4 % 32.67
 31.35
 29.57
 26.73
 25.02
Market price – end   28.51
 29.96
 21.40
 16.28
 24.23
   27.30
 28.51
 29.96
 21.40
 16.28
Market price – high   33.33
 31.40
 22.81
 25.60
 30.29
   33.03
 33.33
 31.40
 22.81
 25.60
Market price – low   25.02
 21.56
 16.40
 13.18
 12.88
   23.72
 25.02
 21.56
 16.40
 13.18
                        
At Year-End                        
Assets +2 % 57,209
 56,031
 55,512
 53,149
 51,035
 +4 % 59,670
 57,209
 56,031
 55,512
 53,149
Net loans and leases +3 % 40,064
 39,043
 37,665
 37,258
 36,830
 +1 % 40,650
 40,064
 39,043
 37,670
 37,257
Deposits +3 % 47,847
 46,362
 46,133
 42,876
 40,935
 +5 % 50,374
 47,848
 46,363
 46,134
 42,878
Long-term debt -52 % 1,092
 2,274
 2,337
 1,954
 1,943
 -25 % 817
 1,092
 2,274
 2,337
 1,954
Shareholders’ equity: 

           

          
Preferred equity — % 1,004
 1,004
 1,128
 2,377
 2,057
 -17 % 829
 1,004
 1,004
 1,128
 2,377
Common equity +17 % 6,366
 5,461
 4,924
 4,608
 4,591
 +5 % 6,679
 6,366
 5,461
 4,924
 4,608
Noncontrolling interests — % —
 —
 (3) (2) (1) — % —
 —
 —
 (3) (2)
                        
Performance Ratios                        
Return on average assets   0.71% 0.48% 0.66% 0.63% (0.57)%   0.53% 0.71% 0.48% 0.66% 0.63%
Return on average common equity   5.42% 5.73% 3.76% 3.32% (9.26)%   3.75% 5.42% 5.73% 3.76% 3.32%
Tangible return on average tangible common equity   6.70% 7.44% 5.18% 4.72% (11.88)%Tangible return on average tangible common equity  4.55% 6.70% 7.44% 5.18% 4.72%
Net interest margin   3.26% 3.36% 3.57% 3.77% 3.70 %   3.19% 3.26% 3.36% 3.57% 3.77%
                        
Capital Ratios 1
                        
Equity to assets   12.88% 11.54% 10.90% 13.14% 13.02 %   12.58% 12.88% 11.54% 10.90% 13.14%
Tier 1 common   11.92% 10.18% 9.80% 9.57% 8.95 %
Tier 1 leverage   11.82% 10.48% 10.96% 13.40% 12.56 %
Tier 1 risk-based capital   14.47% 12.77% 13.38% 16.13% 14.78 %
Total risk-based capital   16.27% 14.67% 15.05% 18.06% 17.15 %
Common equity tier 1 (Basel III), tier 1 common (Basel I) 2
Common equity tier 1 (Basel III), tier 1 common (Basel I) 2
 12.22% 11.92% 10.18% 9.80% 9.57%
Tier 1 leverage 2
   11.26% 11.82% 10.48% 10.96% 13.40%
Tier 1 risk-based capital 2
   14.08% 14.47% 12.77% 13.38% 16.13%
Total risk-based capital 2
   16.12% 16.27% 14.67% 15.05% 18.06%
Tangible common equity   9.48% 8.02% 7.09% 6.77% 6.99 %   9.63% 9.48% 8.02% 7.09% 6.77%
Tangible equity   11.27% 9.85% 9.15% 11.33% 11.10 %   11.05% 11.27% 9.85% 9.15% 11.33%
                        
Selected Information                        
Average common and common-equivalent shares
(in thousands)
   192,789
 184,297
 183,236
 182,605
 166,054
   203,698
 192,789
 184,297
 183,236
 182,605
Common dividend payout ratio   9.56% 8.20% 4.14% 4.80% na
   18.30% 9.56% 8.20% 4.14% 4.80%
Full-time equivalent employees   10,462
 10,452
 10,368
 10,606
 10,524
   10,200
 10,462
 10,452
 10,368
 10,606
Commercial banking offices   460
 469
 480
 486
 495
   450
 460
 469
 480
 486
1 
At year-end.

2
For 2015, ratios are based on Basel III. For years prior to 2015, ratios are based on Basel I.

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT’S DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY
Company Overview
Zions Bancorporation (“the Parent”) and its subsidiaries (collectively “the Company,” “Zions,” “we,” “our,” “us”) together comprise a $57$60 billion financial holding company headquartered in Salt Lake City, Utah. The Company is considered a “systemically important financial institution” under the Dodd-Frank Act.
•
As of December 31, 2014, the Company was the 16th
As of December 31, 2015, the Company was the 23rd largest domestic bank holding company in terms of deposits and is included in the S&P 500 and NASDAQ Financial 100 indices.
At December 31, 2014,2015, the Company operatedhad banking businessesoperations through 460450 domestic branches in eleven westernWestern and southwesternSouthwestern states.
The Additionally, the Company ranked 4th in small business lending of large institutionscurrently has, and is further developing, numerous online product offerings to support customer banking preferences in the Small Business Administration’s “Small Business Lending in the United States 2013” report released in December, 2014.digital era of banking.
The Company has been awarded numerous “Excellence” awards by Greenwich Associates, having received 1231 awards for the 20132015 survey; only 12four U.S. banks werehave been awarded more than 10 excellence awards. awards since the inception of the survey.
The 2014Company has been awarded numerous “Best Brand Awards” for Small Business and Middle Market Banking in 2015 and 2014. The Company has also been awarded numerous national and several regional “Excellence” awards were not available atfor Small Business and Middle Market Banking in 2014.
The long term strategy of the timeCompany is driven by four key factors:
◦We focus our banking business in geographies representing growth markets in the Western United States.
◦We strive to maintain a local community bank-like approach for customer-facing elements of our business by giving a significant degree of autonomy in product offerings and pricing to our regional management teams. Management believes this provides a meaningful competitive advantage over larger national banks whose loan and deposit products are often homogeneous.
◦Relative to smaller community banks, we believe the Company generally achieves greater economies of scale and stronger risk management. We believe that scale gives us superior access to capital markets, more robust treasury management and other product capabilities than smaller community banks.
◦We centralize or oversee centrally many non-customer facing operations, such as risk and capital management, and technology and back office operations.
During 2015, we took significant actions to positively improve the Company’s risk profile, including selling the remaining CDO portfolio, purchasing HQLA securities, reducing long term debt and preferred stock, and reducing our oil and gas-related credit exposure.
In December 2015, the Company consolidated its various banking charters into a single charter in order to simplify the corporate structure and remove associated costs; however, we will continue to emphasize our locally-oriented leadership structure and the power of publication for this document.our strong local brands in each market we serve.
The Company announced in 2015 various initiatives designed to substantially improve profitability and announced in 2013 various initiatives to substantially upgrade its technology platform.
The Company’s various measures of capital, credit quality, and liquidity generally rank within the top quartile of regional bank peers.
Revenues and profits are primarily derived from commercial customers.
Thecustomers and the Company also emphasizes mortgage banking, wealth management and brokerage services.

Long-Term Strategy
We strive to maintain a local community and regional bank approach for customer-facing elements of our business. We believe that our target customers appreciate the local focus and fast decision-making provided by our local management teams. By retaining a significant degree of autonomy in product offerings and pricing, we believe our banks have a meaningful competitive advantage over larger national banks whose loan and deposit products are often homogeneous. However, we centralize or oversee centrally many non-customer facing operations, such as risk and capital management, and technology and back office operations. Currently, the Company is undertaking an extensive overhaul of its back office and accounting systems and is further evaluating ways to streamline its operations and improve its overall efficiency. By centralizing many of these functions, we believe we can generally achieve greater economies of scale and stronger risk management, and that scale gives our portfolio of community banks superior access to capital markets, more robust treasury management and other product capabilities than smaller, independent community banks.
Our strategy is driven by four key factors:
focus on geographies representing growth markets;
maintain a sustainable competitive advantage over large national and global banks by keeping many decisions that affect customers local;
maintain a sustainable competitive advantage over community banks by delivering superior products, realizing productivity and efficiencies derived from economies of scale, and providing a lower cost of capital; and
centralize and standardize policies and oversight of key risks, technology and operations.
The Company continues to evaluate and alter its strategies as it attempts to mitigate adverse impacts on shareholder returns; however, given the still-changing regulatory environment, the results of these efforts cannot yet be known.


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Focus on Geographies Representing Growth Markets
The Company seeks to grow both organically and through acquisitions in growth markets, primarily in the Western part of the United States. The states in our Western geographic footprint have, on average, experienced higher rates of population and economic growth than the rest of the country. Our footprint is well diversified by industry and enjoys strong business formation rates, real estate development, and general economic expansion.
GDP growth in our footprint has exceeded nominal U.S. GDP by an average of 1.2% per year (compounded) over the last 10 years; i.e., from 2003-2013, nominal U.S. GDP grew by 3.9%, while nominal GDP in Zions’ footprint (weighted by December 31, 2014 assets) grew by 5.1%.
Job creation within the Zions’ footprint has greatly exceeded the national rate during the past 10 years. U.S. nonfarm payroll jobs increased by 6.2% during the last 10 years; however, job creation in Zions’ footprint increased by 15.2%.

While some states in our footprint experienced a significant slowing in economic activity during the recent recession, others experienced above-average growth and stronger resistance to the economic downturn.

More than 77% of the Company’s assets are held in the banks headquartered in Utah, Texas and California. Zions Bank has approximately $19 billion in assets, which represent 33% of the Company’s assets. Zions Bank is the second largest full-service commercial bank in the state of Utah and the fourth largest in Idaho as measured by domestic deposits, and operates in all submarkets in Utah and most submarkets in Idaho. The Utah economy is primarily based on the energy, agriculture, real estate, computer technology, education, health care, and financial services sectors. During 2014, Utah employment grew at a rate of 3.9% compared to the national employment growth rate of 1.8%. This growth improved Utah’s overall unemployment rate to 3.5% in 2014 from 4.1% in 2013. In addition, the Utah state government has been recognized for its policies promoting a business-friendly climate, providing a predictable and stable tax policy, and controlling government spending levels. See “Business Segment Results” on page 46 for further discussion on the 2014 performance of Zions Bank.

Amegy, located in Texas, has $14 billion in assets, which represent approximately 24% of the Company’s assets. Texas has a well diversified economy that is the second largest in the United States. Significant drivers of its growth are the energy, health care, manufacturing, transportation, and technology sectors. In addition, the Texas economic environment benefits from business-friendly growth policies and affordable housing markets. These attributes and industry sectors have propelled the Texas economy to outperform the nation, which has resulted in the unemployment rate declining to 4.6% compared to the national rate of 5.6%. Amegy’s three primary markets, Houston, Dallas and San Antonio, experienced strong job growth in 2014. However, due to the decline in energy commodity prices in late 2014, economic conditions are generally expected to slow compared to 2014. Included within this document is an extensive discussion on the Company’s energy-related exposure as found on page 65. See “Business Segment Results” on page 46 for further discussion on the 2014 performance of Amegy.

CB&T has approximately $11 billion in assets, which represent 20% of the Company’s assets. Trends in unemployment, home foreclosures, and bank credit problems continue to improve throughout California, resulting in corresponding reductions in problem credits and nonperforming assets at CB&T. During 2014, California employment grew 2.1%, which marked the state’s third straight year growing at least 2%. This growth improved California’s overall unemployment rate to 7.0% in 2014 from 8.3% in 2013. California’s recovery, however, has been uneven with coastal areas experiencing much greater gains in employment and housing prices than the interior parts of the state. CB&T’s primary markets – the coastal and major metropolitan areas in California including the San Francisco Bay area, Los Angeles County, Orange County, and San Diego – continued to experience economic improvements in 2014 compared to 2013. Unemployment rates are much lower in CB&T’s primary markets compared to the state as a whole. See “Business Segment Results” on page 46 for further discussion of the 2013 performance of CB&T.


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Keep Decisions That Affect Customers Local
We believe that over the long term, ensuring that local management teams retain the authority over many of the decisions affecting their customers is a strategy that ultimately generates optimal growth and profitability in our banking businesses. We operate eight different community and regional banks, each under a different name and each with its own charter, chief executive officer, and management team. We believe this approach allows us to attract and retain exceptional management, and provides service of the highest quality to our targeted customers. This structure helps ensure that many of the decisions related to customers are made at a local level:
branding and marketing strategies;
product offerings and pricing;
credit decisions (within the limits of established corporate policy); and
relationship management strategies and the integration of various business lines.

The results of this service are evident in the outcome of the Greenwich Associates annual survey, wherein the Company consistently receives numerous “Excellent” ratings from small and middle-market businesses.
Maintain a Sustainable Competitive Advantage Over Community Banks
To create a sustainable competitive advantage over other smaller community banks, we focus on achieving better product breadth and quality, productivity, economies of scale, availability of liquidity, and a lower cost of capital. Compared to community banks, our objectives include the following:
Use the combined scale of all of our banking operations to create a broad product offering;
Utilize our larger capital base and breadth of product offerings to lend to business customers of a wide range of sizes, from small businesses to large companies;
For certain products for which economies of scale are believed to be critical, we “manufacture” the product centrally or are able to obtain services from third-party vendors at lower costs due to volume-driven pricing power; and
Take advantage of our combined size and diversification that affords us superior access to the capital markets for debt and equity financing; over the long term, this advantage has historically, and should in the future, result in a lower cost of capital than our subsidiary banks could achieve on their own.
Centralize and Standardize Policies and Oversight of Key Risks
We seek to standardize policies and practices related to the management of key risks in order to assure a consistent risk profile in an otherwise decentralized management model. Among these key risks and functions are credit, interest rate, liquidity, and market risks.
The Company conducts regular stress testing of the loan portfolio using multiple economic scenarios. Such tests help to identify pockets of risk and enable management to reduce risk.
The Company oversees credit risk using a single credit policy and specialists in business, commercial real estate, and consumer lending; additionally the Company’s manages concentration risk.
The Company regularly measures interest rate and liquidity risk and uses capital markets instruments to adjust risks to stay within Board-approved levels.
The Company centrally monitors and oversees operational risk. Centralized internal audit, credit examination, and compliance functions test compliance with established policies.
MANAGEMENT’S OVERVIEW OF 20142015 PERFORMANCE
The Company reported net earnings applicable to common shareholders for 20142015 of $246.6 million or $1.20 per diluted common share compared to $326.6 million or $1.68 diluted earnings per share compared to $294.0 million or $1.58 per diluted common share for 2013.
2014. The decline in net income in 2015 was primarily due to the sale of the Company’s remaining CDO portfolio, $574 million at amortized cost, as the Company sold these non-core assets with asymmetric risk characteristics. While we are encouraged with the 20142015 results, net income and returns on capital are still lower than peers and the Company’s aspirations.objectives. The 2015 results were due to risk reduction actions, major operational initiatives, and operating results.
Major Initiative Announced in 2015
In June 2015, we announced a corporate restructuring, in conjunction with a series of significant changes, designed to substantially improve customer experience (e.g., faster turnaround times), simplify our corporate structure and operations, and drive positive operating leverage. Key elements of the announcement included:
Consolidation of bank charters from seven to one while maintaining local leadership, local product pricing, and local brands. The consolidation of the bank charters occurred on December 31, 2015.
Creation of a Chief Banking Officer position, with responsibility for retail banking, wealth management, and residential mortgage lending.
Consolidation of risk functions and other non-customer facing operations, while emphasizing local credit decision making.
Investment in building technology to meet the demands of a rapidly changing information technology environment.
Financial Performance Targets
Following are the targeted financial performance outcomes of these organizational changes, and associated operational and technological initiatives with some brief comments regarding current performance against these measures:
Achieve an adjusted efficiency ratio in the low 60s by fiscal year 2017, driven by expense and revenue initiatives detailed below; the announced target assumes a slight increase in interest rates. Our efficiency ratio for the second half of 2015 was 69.6%, which met our goal to keep the efficiency ratio less than 70% during the second half of 2015. We are committed to achieving an efficiency ratio of less than 66% in 2016. See “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of the adjusted efficiency ratio.
Increase returns on tangible common equity over the long term to double digit levels. For the fourth quarter of 2015, the tangible return on average tangible common equity was 6.20%, compared to 6.05% for the third quarter 2015, and 4.95% for the fourth quarter of 2014 (see “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of the tangible return on average tangible common equity).
Maintain adjusted noninterest expense below $1.6 billion in 2015 and 2016, although increasing somewhat in 2017; this target excludes those same expense items excluded in arriving at the efficiency ratio (see “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of the efficiency ratio). For 2015 adjusted noninterest expense was $1.58 billion and we are committed to keeping noninterest expense below $1.6 billion in 2016.
Achieve annual gross pretax cost savings of $120 million from operational expense initiatives by fiscal year 2017, which include overhauling technology, consolidating legal charters, and improving operating efficiency across the Company. At year-end 2015 we had achieved more than 50% of the $120 million of cost savings.
Our initiatives are designed to make the Company a more efficient organization that drives positive operating leverage, simplifies the corporate structure and operations, and improves customer experience. The increase in operating leverage is expected to come through increased revenue from growth in loans, deployment of cash to mortgage-backed securities, increased use of interest rate swaps, improvement in core fee income, and disciplined expense management.

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If successfully implemented, these initiatives should ultimately produce better revenue and expense trajectories, improve profitability, and drive stronger investor returns.
Risk Management Actions in 2015
During 2015, the Company underwent a significant balance sheet restructuring which contributed to overall changes in its risk profile. The restructuring included the following actions:
We reduced risk by selling the remaining non-core securities CDO portfolio, which is expected to improve the Company’s results under stressful economic conditions.
We improved our earning asset mix with the purchase of HQLA securities of $4.8 billion while maintaining asset sensitivity. This boosted current earnings significantly as compared to the alternative of holding the deposits in cash. This action also should improve the Company’s revenue stability under stressful economic conditions.
We reduced long term debt by $275 million, or 25%, which reduced interest expense, and tendered $176 million of preferred stock which improved net earnings to common shareholders.
We actively managed oil and gas-related credit exposure, resulting in a reduction of approximately $1 billion, or 17%, during 2015.
Areas Experiencing Strength in 20142015
Net interest income, which is more than three-quarters of our revenue, improved by $35.3 million as compared to common shareholders improved in 2014. Two major items had a significant adverse impact on profitability during the year: 1) while debt extinguishment cost related to high-cost debt was lower than it was in 2013, the Company still had $44.4 million of debt extinguishment cost in 2014, and 2) elevated salaries and employee benefits due largely to the Company’s initiative to streamline its back office and accounting. Two major items had a significant favorable impact on profitability in 2014: 1) the negative provision for loan losses and unfunded lending commitments of $106.7 million (which is not expected to continue in 2015), and 2) the reduction of interest expense on long-term debt from the debt redemptions and maturities.
Tier 1 common (“T1C”) capital plus reserves for credit losses improved and ranks well above the peer median (see Chart 1). In July of 2014 the Company issued $525 million of common equity in response to the CCAR results; as a result of this action, as well as increased retained earnings, the T1C capital ratio further improved to 11.92% at December 31, 2014.
Additionally, we made significant progress towards reducing the cost of debt. In 2014, weWe reduced long-term debt by $1.2 billion$275 million through tender offers, early calls and redemptions at maturity. As a result of these actions, we estimate thatmaturity which reduced interest expense on long-term debt in 2015 will decline by approximately $53 million.
Asset quality improved significantly; nonperforming lending-related assets declined 28% in 2014 (see Chart 2),$54.5 million and net charge-offs declinedwill continue to $42 million in 2014 compared to $52 million in 2013. As a result, credit costs, including the provision for loan losses and unfunded lending commitments, other real estate expense and credit-related expense, declined approximately 16%.
Despite a difficult interest rate environment and modest loan growth,benefit net interest income only declined 1.0% in 20142016. Additionally, we increased the investment securities portfolio substantially in 2015, purchasing several billion dollars of government agency securities which resulted in a $24.3 million increase in interest income. This action should improve both the Company’s revenue stability under future stressful economic scenarios and current earnings significantly as compared to 2013 (see Chart 3), and grew slightlythe alternative of holding money market investments.
Noninterest income from customer-related fees in the fourth quarter of 2014. The decline2015 increased approximately 4% from the prior year period. This increase was due to reduced income from FDIC-supported loans as that portfolio, purchased in 2009, winds down.increased commercial credit card fees and fees generated on sales of swaps to clients.
During 2014 we undertook considerable actionsAdjusted noninterest expense was held to reduce risk by selling a significant portionour articulated goal of less than $1.6 billion (see “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of the Company’s constructionefficiency ratio and land development loans, as well as significantlywhich expenses are excluded in arriving at adjusted noninterest expense). During the year, we cut consulting expenses by approximately $13 million, or 34%, and took additional steps necessary to meet our aforementioned expense target.
We successfully completed a tender offer for preferred stock, reducing preferred equity by $176 million. Our 2015 capital plan, which runs through the sizesecond quarter of 2016, allows for an additional use of up to $120 million of cash for preferred stock redemptions, subject to the CDO portfolio.generation of retained earnings in approximately that amount subsequent to September 30, 2015.
Tangible book value per common share improved by 9.8% in 2014,5.5% to $27.63 at December 31, 2015, compared to 2013,$26.23 at December 31, 2014, due to increased retained earnings and a reduction in OCIAOCI due to CDO sales (see “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of tangible book value per common share).
Areas Experiencing Challenges in 2015
Loan growth – Loans increased on a net basis by $586 million, or 1.5%, compared to December 31, 2014, including increases of $387 million in CRE term loans and improvement$181 million in 1-4 family residential loans. We continued to manage the market valueconcentration of the remaining CDO securities.
Chart 1.TIER 1 COMMON CAPITAL + RESERVES AS A PERCENTAGE OF RISK-WEIGHTED ASSETS*

construction and land development loans, which declined by $144 million during 2015. We also continued to experience runoff and attrition in our National Real Estate group

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Chart 2.NONPERFORMING LENDING-RELATED ASSETS AS A PERCENTAGE OF NET LOANS
AND OTHER REAL ESTATE OWNED

Chart 3.NET INTEREST INCOME
(amounts in millions)
Areas Experiencing Weakness in 2014
Although net income applicable to common shareholders improved in 2014, the additional common equity issued in response to the Federal Reserve 2014 stress test results for the Company and additional retained earnings meant that returns on common equity declined. For example, the tangible return on tangible common equity declined to 6.7% in 2014 from 7.4% in 2013.
Although loans increased somewhat compared to 2013, the growth was very modest. Loans increased on a net basis by $1.0 billion, or 2.6%, compared to December 31, 2013, including increases of $704 million in commercial and industrial and $459 million in 1-4 family residential. As noted, the Company particularly constrained the growth in construction and land development loans in 2014 for risk management purposes. We also continued to experience weakness resulting from attrition in our National Real Estate Group owner-occupiedowner occupied loan portfolio, which is not expected to continue. This business iscontinue at the same pace in 2016, in addition to a wholesale businessstrategic reduction in our oil and depends upon loan referrals from other community banking institutions; due to generally soft loan demand nationally, many banks are retaining, rather than selling, their loan production.

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gas-related credit exposure.
Table of Contents

Net Interest Margin (“NIM”) – Our net interest marginNIM declined to 3.19% in 2015 from 3.26% in 2014, from 3.36% in 2013, which was primarily due primarily to a reduction in FDIC-supported loan income as that portfolio continues to wind down, competitive pricing pressure, and improvement in the underlying quality of our borrowers’ financial condition (see discussion on asset quality on page 72).condition. Nevertheless, our NIM continued to remain reasonably strong relative to other peer banks,banks.
Energy credit quality – The overall credit quality of our loan portfolio remained strong, but, as expected, the credit quality of our oil and actually improved slightly ingas-related portfolio deteriorated. At December 31, 2015, approximately $66.2 million, or 2.5%, of the fourth quarter of 2014oil and gas-related loan balances were nonaccruing, compared to the third quarter.
Redemption expenses of high-cost debt weighed significantly on profitability. The high cost of debt is a byproductapproximately $16.6 million, or 0.5% at December 31, 2014. As part of our risk management efforts, we reduced our total oil and gas-related credit exposure to stabilize the Company’s capital base and funding$4.8 billion, a reduction of approximately $1 billion, or 17%, during the recent recession. While significant debt refinancing activities were completed in 2014, some additional relatively expensive debt that matures in 2015 remains.
Noninterest expense levels are elevated and are expected to remain higher than normal as we continue to implement several technology initiatives that are designed to streamline the efficiency of the Company. Upon completion of these initiatives, we expect expenses relative to revenues to improve meaningfully.

2015.
Areas of Focus for 20152016
In 2015,2016, we are focused on improving Company profitability and returns on equity with initiatives across the enterprise. Major areas of emphasis include:
Business activities:
Stabilize and improve net interest margin by:
◦Continuing to incrementally deploy the Company’s excess cash into higher yielding,NIM by continuing to incrementally deploy the Company’s excess cash into higher-yielding, short-to-medium duration HQLA, which was begun in the latter half of 2014.
Act on our commitment to achieve an efficiency ratio of less than 66% and hold adjusted noninterest expense below $1.6 billion in 2016 through expense management discipline.
Focus on revenue growth opportunities by continuing to:
◦emphasize loan growth, particularly through continued strong business lending and additional growth in residential mortgage lending; and
◦Complete the retirement of expensive long-term debt that arose from actions taken during the economic crisis.further increase fee income.
Continue to emphasize loan growth, particularly through continued strong business lending and additional growth in residential mortgage lending; and
Continue efforts to increase fee income.
ContinuedAdditional improvements in the capital structure:
In addition toReduce the retirement of debt mentioned previously, over time seek to alter the mix of capital in our capital structure; that mix currently includes relatively higher levelspercentage of preferred stock than peer institutions.equity and possibly further reduce debt;
Increase the return on- and of-capital to shareholders.
Credit:
Maintain strong levels of asset quality. We expect energyoil and gas loans to experience some further deterioration, although losses are currently expected to be modest;manageable; however, we expect continued modest improvementcredit quality metrics in other segments of the loan portfolio.portfolio to remain relatively stable.
Operations:
Continue to invest in previously announced major upgrades to the Company’s systems, while maintaining noninterest expenses at or near current levels.
Pursue further opportunities forAccelerate positive operating efficiencies.leverage from:
Continue responsible risk management improvements.

◦further investment and implementation in previously announced major upgrades to the Company’s systems; and
◦streamlining and simplifying operations as a result of the efficiency initiatives and charter consolidation.

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Schedule 1 presents the key drivers of the Company’s performance during 20142015 and 2013.

2014.
Schedule 1
KEY DRIVERS OF PERFORMANCE
20142015 COMPARED TO 20132014
Driver 2014 2013 
Change
better/(worse)
 2015 2014 
Change
better/(worse)
            
 (Amounts in billions)   (Amounts in billions)  
Average net loans and leases $39.5
 $38.1
 4 % $40.2
 $39.5
 2 %
Average money market investments 8.2
 8.8
 (7)% 8.3
 8.2
 1 %
Average total securities 5.8
 4.1
 41 %
Average noninterest-bearing deposits 19.6
 18.0
 9 % 21.4
 19.6
 9 %
Average total deposits 46.3
 45.3
 2 % 48.6
 46.3
 5 %
            
 (Amounts in millions)   (Amounts in millions)  
Net interest income $1,680.0
 $1,696.3
 (1)% $1,715.3
 $1,680.0
 2 %
Provision for loan losses (98.1) (87.1) 13 % 40.0
 (98.1) (141)%
Net impairment losses on investment securities —
 (165.1) 100 %
Other noninterest income 508.6
 502.5
 1 %
Noninterest income 377.1
 508.6
 (26)%
Noninterest expense 1,665.3
 1,714.4
 3 % 1,600.5
 1,665.3
 4 %
            
Nonaccrual loans 1
 307
 406
 24 %
Nonaccrual loans 350
 307
 (14)%
            
Net interest margin 3.26% 3.36% (10)bps
 3.19% 3.26% (7)bps
Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 2
 0.81% 1.15% 34 bps
Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 1
 0.87% 0.81% (6)bps
Ratio of total allowance for credit losses to net loans and leases outstanding 1.71% 2.14% 43 bps
 1.68% 1.71% 3 bps
Tier 1 common capital ratio 11.92% 10.18% 174 bps
1 Includes FDIC-supported loans.
2Includes loans held for sale.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Note 1 of the Notes to Consolidated Financial Statements contains a summary of the Company’s significant accounting policies. Discussed below are certain significant accounting policies that we consider critical to the Company’s financial statements. These critical accounting policies were selected because the amounts affected by them are significant to the financial statements. Any changes to these amounts, including changes in estimates, may also be significant to the financial statements. We believe that an understanding of these policies, along with the related estimates we are required to make in recording the financial transactions of the Company, is important to have a complete picture of the Company’s financial condition. In addition, in arriving at these estimates, we are required to make complex and subjective judgments, many of which include a high degree of uncertainty. The following discussion of these critical accounting policies includes the significant estimates related to these policies. We have discussed each of these accounting policies and the related estimates with the Audit Committee of the Board of Directors.

We have included, where applicable in this document, sensitivity schedules and other examples to demonstrate the impact of the changes in estimates made for various financial transactions. The sensitivities in these schedules and examples are hypothetical and should be viewed with caution. Changes in estimates are based on variations in assumptions and are not subject to simple extrapolation, as the relationship of the change in the assumption to the change in the amount of the estimate may not be linear. In addition, the effect of a variation in one assumption is in reality likely to cause changes in other assumptions, which could potentially magnify or counteract the sensitivities.


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Fair Value Estimates
The Company measures or monitors many of its assets and liabilities on a fair value basis. Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. To increase consistency and comparability in fair value measurements, current accounting guidance has established a three-level hierarchy to prioritize the valuation inputs among (1) observable inputs that reflect quoted prices in active markets, (2) inputs other than quoted prices with observable market data, and (3) unobservable data such as the Company’s own data or single dealer nonbinding pricing quotes.

When observable market prices are not available, fair value is estimated using modeling techniques such as discounted cash flow analysis. These modeling techniques utilize assumptions that market participants would use in pricing the asset or the liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, the related life of the asset and applicable growth rate, the risk of nonperformance, and other related assumptions.

The selection and weighting of the various fair value techniques may result in a fair value higher or lower than carrying value. Considerable judgment may be involved in determining the amount that is most representative of fair value.

For assets and liabilities recorded at fair value, the Company’s policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those items where there is an active market. In certain cases, when market observable inputs for model-based valuation techniques may not be readily available, the Company is required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. The models used to determine fair value adjustments are regularly evaluated by management for relevance under current facts and circumstances.

Changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. When market data is not available, the Company would use valuation techniques requiring more management judgment to estimate the appropriate fair value.

Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary measure of accounting. Fair value is used on a nonrecurring basis to measure certain assets or liabilities (including HTM securities, loans held for sale, and OREO) for impairment or for disclosure purposes in accordance with current accounting guidance.

Impairment analysis also relates to long-lived assets, goodwill, and core deposit and other intangible assets. An impairment loss is recognized if the carrying amount of the asset is not likely to be recoverable and exceeds its fair value. In determining the fair value, management uses models and applies the techniques and assumptions previously discussed.

Investment securities are valued using several methodologies, which depend on the nature of the security, availability of current market information, and other factors. CDOs are valued using an internal model and the assumptions are analyzed for sensitivity. “Investment Securities Portfolio” on page 52provides more information regarding this analysis.

Investment securities are reviewed formally on a quarterly basis for the presence of OTTI. The evaluation process takes into account current market conditions, the fair value of the security relative to its amortized cost, and many other factors. The decision to deem these securities OTTI is based on a specific analysis of the structure of each security and an evaluation of the underlying collateral. OTTI is considered to have occurred if its fair value is below amortized cost and (1) we intend to sell the security, or (2) it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis, or (3) the present value of expected cash flows is not sufficient

31

to recover the entire amortized cost basis. The “more likely than not” criteria is a lower threshold than the “probable” criteria.

Notes 1, 5, 7, 9 and 20 of the Notes to Consolidated Financial Statements and “Investment Securities Portfolio” on page 52 contain further information regarding the use of fair value estimates.

Allowance for Credit Losses
The allowance for credit losses includes the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses provides for probable losses that have been identified with specific customer relationships and for probable losses believed to be inherent in the loan portfolio, but which have not been specifically identified. The determination of the appropriate level of the allowance is based on periodic evaluations of the portfolios. This process includes both quantitative and qualitative analyses, as well as a qualitative review of the results. The qualitative review requires a significant amount of judgment, and is described in more detail in Note 6 of the Notes to Consolidated Financial Statements.

The reserve for unfunded lending commitments provides for potential losses associated with off-balance sheet lending commitments and standby letters of credit. The reserve is estimated using the same procedures and methodologies as for the allowance for loan losses, plus assumptions regarding the probability and amount of unfunded commitments being drawn.

There are numerous components that enter into the evaluation of the allowance for loan losses. Although we believe that our processes for determining an appropriate level for the allowance adequately address the various components that could potentially result in credit losses, the processes and their elements include features that may be susceptible to significant change. Any unfavorable differences between the actual outcome of credit-related events and our estimates and projections could require an additional provision for credit losses.As an example, if the PD risk grade, for all pass-graded commercial and CRE loans, was immediately downgraded one grade on a 1-14 grade scale, the quantitatively determined amount of the allowance for loan losses at December 31, 2014 would increase by approximately $77 million. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in risk grades may have on the allowance estimation process.

Although the qualitative process is subjective, it represents the Company’s best estimate of qualitative factors impacting the determination of the allowance for loan losses. Such factors include, but are not limited to, national and regional economic trends and indicators. We believe that given the procedures we follow in determining the allowance for loan losses for the loan portfolio, the various components used in the current estimation processes are appropriate.

Note 6 of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 63contain further information and more specific descriptions of the processes and methodologies used to estimate the allowance for credit losses.

Accounting for Goodwill
Goodwill is initially recorded at fair value and is subsequently evaluated at least annually for impairment in accordance with current accounting guidance. We perform this annual test as of October 1 of each year, or more often if events or circumstances indicate that carrying value may not be recoverable. The goodwill impairment test for a given reporting unit (generally one of our subsidiary banks) compares its fair value with its carrying value. If the carrying amount exceeds fair value, an additional analysis must be performed to determine the amount, if any, by which goodwill is impaired.

To determine the fair value, we generally use a combination of up to three separate methods: comparable publicly traded financial service companies (primarily banks and bank holding companies) in the Western and Southwestern states (“Market Value”); where applicable, comparable acquisitions of financial services companies in the Western

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and Southwestern states (“Transaction Value”); and the discounted present value of management’s estimates of future cash flows. Critical assumptions that are used as part of these calculations include:
selection of comparable publicly traded companies based on location, size, and business focus and composition;
selection of market comparable acquisition transactions based on location, size, business focus and composition, and date of the transaction;
the discount rate, which is based on Zions’ estimate of its cost of capital, applied to future cash flows;
the projections of future earnings and cash flows of the reporting unit;
the relative weight given to the valuations derived by the three methods described; and
the control premium associated with reporting units.
We apply a control premium in the Market Value approach to determine the reporting units’ equity values. Control premiums represent the ability of a controlling shareholder to change how the Company is managed and can cause the fair value of a reporting unit as a whole to exceed its market capitalization. Based on a review of historical bank acquisition transactions within the Company’s geographic footprint, and a comparison of the target banks’ market values 30 days prior to the announced transaction to the deal value, we have determined that a control premium of 25% was appropriate at the most recent test date.

Since estimates are an integral part of the impairment computations, changes in these estimates could have a significant impact on any calculated impairment amount. Estimates include economic conditions, which impact the assumptions related to interest and growth rates, loss rates and imputed cost of equity capital. The fair value estimates for each reporting unit incorporate current economic and market conditions, including Federal Reserve monetary policy expectations and the impact of legislative and regulatory changes. Additional factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors and attrition, loan losses, changes in growth trends, cost structures and technology, changes in equity market values and merger and acquisition valuations, and changes in industry conditions.

Weakening in the economic environment, a decline in the performance of the reporting units, or other factors could cause the fair value of one or more of the reporting units to fall below carrying value, resulting in a goodwill impairment charge. Additionally, new legislative or regulatory changes not anticipated in management’s expectations may cause the fair value of one or more of the reporting units to fall below the carrying value, resulting in a goodwill impairment charge. Any impairment charge would not affect the Company’s regulatory capital ratios, tangible common equity ratio, or liquidity position.

During the fourth quarter of 2014, we performed our annual goodwill impairment evaluation of the entire organization, effective October 1, 2014. Upon completion of the evaluation process, we concluded that none of our subsidiary banks was impaired. Furthermore, the evaluation process determined that the fair values of Amegy, CB&T, and Zions Bank exceeded their carrying values by 27%, 40% and 33%, respectively. Additionally, we performed a hypothetical sensitivity analysis on the discount rate assumption to evaluate the impact of an adverse change to this assumption. If the discount rate applied to future earnings were increased by 100 bps, the fair values of Amegy, CB&T, and Zions Bank would exceed their carrying values by 17%, 30% and 13%, respectively. Additionally, because of the significant decline in energy prices since October 1, 2014, we ran additional sensitivity analyses to estimate the impact that the decline would have on Amegy’s value. Even in the most severe of the additional sensitivity analyses related to the decline in energy prices, the goodwill of Amegy was not considered impaired. Note 9 of the Notes to Consolidated Financial Statements contains additional information related to goodwill.

Income Taxes
The Company is subject to the income tax laws of the United States, its states and other jurisdictions where the Company conducts business. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management must make judgments and

33

estimates about the application of these laws and related regulations. In the process of preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law.

The Company had net Deferred Tax Assets (“DTAs”) of $224 million at December 31, 2014, compared to $304 million at December 31, 2013. The most significant portions of the deductible temporary differences relate to (1) the allowance for loan losses, (2) fair value adjustments or impairment write-downs related to securities and (3) deferred compensation arrangements. No valuation allowance has been recorded as of December 31, 2014 related to DTAs except for a full valuation reserve related to certain acquired net operating losses from an immaterial nonbank subsidiary. In assessing the need for a valuation allowance, both the positive and negative evidence about the realization of DTAs were evaluated. The ultimate realization of DTAs is based on the Company’s ability to (1) carry back net operating losses to prior tax periods, (2) utilize the reversal of taxable temporary differences to offset deductible temporary differences, (3) implement tax planning strategies that are prudent and feasible, and (4) generate future taxable income.

After considering the weight of the positive evidence compared to the negative evidence, management has concluded it is more likely than not that the Company will realize the existing DTAs and that an additional valuation allowance is not needed.

On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current best estimate of net income and the applicable taxes expected for the full year. Deferred tax assets and liabilities are also reassessed on a regular basis. Reserves for contingent tax liabilities are reviewed quarterly for adequacy based upon developments in tax law and the status of examinations or audits. The Company has tax reserves at December 31, 2014 of approximately $2 million, net of federal and/or state benefits, for uncertain tax positions primarily for various state tax contingencies in several jurisdictions.

Note 14 of the Notes to Consolidated Financial Statements contains additional information regarding income taxes.

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
Note 2 of the Notes to Consolidated Financial Statements discusses recently issued accounting pronouncements that the Company will be required to adopt. Also discussed is the Company’s expectation of the impact these new accounting pronouncements will have, to the extent they are material, on the Company’s financial condition, results of operations, or liquidity.

RESULTS OF OPERATIONS
The Company reported net earnings applicable to common shareholders of $326.6 million, or $1.68 per diluted common share for 2014, compared to $294.0 million, or $1.58 per diluted common share for 2013. The following changes had a favorable impact on net earnings applicable to common shareholders:
$165.1 million decrease in net impairment losses on investment securities;
$75.8 million decrease in debt extinguishment cost;
$62.8 million decrease in interest on long-term debt;
$23.6 million decrease in preferred stock dividends;
$19.3 million decrease in other noninterest expense; and
$13.3 million increase in fixed income securities gains.
The impact of these items was partially offset by the following:
$125.7 million decrease in preferred stock redemption benefit;
$85.0 million decrease in interest and fees on loans;
$80.0 million increase in income tax expense; and
$43.5 million increase in salaries and employee benefits.

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The Company reported net earnings applicable to common shareholders of $294.0 million, or $1.58 per diluted common share for 2013, compared to $178.6 million, or $0.97 per diluted common share for 2012. The following changes had a favorable impact on net earnings applicable to common shareholders:
$125.7 million benefit from preferred stock redemption;
$101.4 million decrease in the provision for loan losses;
$75.4 million reduction in preferred stock dividends;
$21.5 million decrease in the provision for unfunded lending commitments; and
$18.0 million decline in other real estate expense.
The impact of these items was partially offset by the following:
$120.2 million increase in debt extinguishment cost;
$61.1 million increase in net impairment losses on investment securities;
$35.6 million decrease in net interest income;
$27.3 million increase in salaries and employee benefits; and
$25.3 million increase in other noninterest expense.
Net Interest Income, Margin and Interest Rate Spreads
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities. Taxable-equivalent net interest income is the largest portion of the Company’sour revenue. For 2014,2015, taxable-equivalent net interest income was $1,696.1$1,733.2 million, compared to $1,711.8$1,696.2 million and $1,750.2$1,711.9 million, in 20132014 and 2012,2013, respectively. The tax rate used for calculating all taxable-equivalent adjustments was 35% for all years presented.
Net interest margin in 2015 vs. 2014
The NIM was 3.19% and 3.26% for 2015 and 2014, respectively. The decrease resulted primarily from lower yields on loans and reduced interest income from FDIC-supported loans. The impact of these items was partially offset by lower yields and balances on our long-term debt and a change in the mix of interest-earning assets as cash held in money market investments was transitioned to term investment securities.
Even though our average loan portfolio was $649 million higher during 2015, compared to 2014, the average interest rate earned on the loan portfolio was 18 bps lower than it was in 2014. The resulting decline in interest income was primarily caused by reduced interest income on loans purchased from the FDIC in 2009, as those acquired portfolios were successfully managed down, and new loans being originated at lower yields than those that prepaid or matured.
The average balance of available-for-sale (“AFS”) securities for 2015 increased by $1.7 billion or 49.2%, compared to 2014, and the average yield in 2015 was 24 bps lower than in 2014. The decline in the average yield and the changes in the average balance are a result of changes in the composition of the AFS portfolio and the yields of the securities sold and purchased. Beginning in the second half of 2014 we started purchasing U.S. agency pass-through

29

securities in order to increase our holdings of HQLA and to alter the mix of our interest-earning assets. These increases were partially offset by CDO sales and paydowns.
Average noninterest-bearing demand deposits provided us with low cost funding and comprised 43.9% of average total deposits for 2015, compared to 42.4% for 2014. Average interest-bearing deposit balances increased by 2.3% in 2015 compared to 2014; additionally, the rate paid declined by 1 bps to 18 bps.
The average balance of long-term debt was $790 million lower for 2015 compared to 2014. The reduced balance was the result of tender offers, early calls and maturities. The average interest rate on long-term debt for 2015 decreased by 8 bps compared to 2014. This is due to the maturity of higher cost long-term debt in the latter part of 2015. On September 15, 2015 and November 16, 2015 respectively, there was $112 million of 6.0% and $124 million of 5.5% subordinated and convertible debt notes that matured. The total effective cost of this debt was approximately 15% during 2015. The higher effective cost for the debt that matured was due to the amortization of debt discount. We continue to look for opportunities to manage down the cost of funds. Refer to the “Liquidity Risk Management” section beginning on page 68 for more information.
During 2015, most of our cash in excess of that needed to fund earning assets was held in money market investments, primarily deposits with the Federal Reserve Bank. Average money market investments were 15.2% of total interest-earning assets, compared to 15.8% in the prior year.
Net interest margin in 2014 vs. 2013
The net interest marginNIM was 3.26% and 3.36% for 2014 and 2013, respectively. The decrease resulted primarily from lower yields on loans and AFS investment securities. The impact of these items was partially offset by lower yields and balances on the Company’sour long-term debt.
Even though the Company’sour average loan portfolio was $1.4 billion higher during 2014, compared to 2013, the average interest rate earned on those assets was 4.39%, which is 38 bps lower than the comparable prior year rate. This decline in interest income was primarily caused by (1) reduced interest income on loans acquired with FDIC assistance in 2009, as those acquired portfolios were successfully managed down, (2) adjustable rate loans originated in the past resetting to lower rates due to the current repricing index being lower than the rate when the loans were originated, and (3) loans originated at lower rates than the weighted average rate of the existing portfolio. The primary reasons for the narrowing of credit and interest rate spreads arewas a combination of competitive pricing pressures and improved customer credit, which arewere the result of a more stable economic environment than a few years ago;compared to prior years; a portion of the narrowing of the spreads may be attributed to the improved fundamental condition of the Company’sour borrowers, such as stronger earnings and improved leverage ratios.
The average HTMheld-to-maturity (“HTM”) securities portfolio was $609 million during 2014, compared to $762 million during the same prior year period. During the fourth quarter of 2013, the Companywe reclassified a substantial portion of itsour CDO securities from HTM to AFS as a result of the impact of the Volcker Rule.VR. The average yield earned during 2014 on HTM securities was 36 bps higher than the yield in 2013, primarily due to the reclassification of CDO securities into the AFS portfolio during the fourth quarter of 2013 that have a lower-yieldlower yield than the remaining securities in the HTM portfolio.
The average balance of AFS securities for 2014 increased by $365 million, or 11.7%, compared to 2013, and the average yield in 2014 was 15 bps lower than in 2013. The increase in AFS securities was due primarily to purchases of approximately $1.0$1 billion par amount of agency pass-through securities. The yield was also impacted by the sale of $913 million amortized cost of the Company’sour CDO securities during 2014.
Average noninterest-bearing demand deposits provided the Companyus with low cost funding and comprised 42.4%

35

of average total deposits for 2014, compared to 39.7% for 2013. Average interest-bearing deposit balances were down 2.5% in 2014 compared to 2013; however, the rate paid declined by 3 bps to 19 bps, thus continuing the difficulty to reduce deposit costs further as these costs approach zero.

From December 31, 2013, the Company has
30

During 2014, we reduced long-term debt by $1.2 billion as a result of tender offers, early calls, and redemptions at maturity, including $835 million during the third quarter of 2014. These actions led to a decrease of $463 million, or 20.3%, of the Company’sour average long-term debt outstanding in 2014 compared to 2013. The average interest rate paid on long-term debt for 2014 decreased by 138 bps compared to 2013. Refer to the “Liquidity Risk Management” section beginning on page 8168 for more information.
During 2014, most of the Company’sour cash in excess of that needed to fund earning assets was invested in money market assets, primarily deposits with the Federal Reserve Bank. Average money market investments were 15.8% of total interest-earning assets, compared to 17.3%17.4% in the prior year.

See “Interest Rate and Market Risk Management” on page 7663 for further discussion of how we manage the portfolios of interest-earning assets, interest-bearing liabilities, and the associated risk.
Net interest margin in 2013 vs. 2012
The net interest margin was 3.36% and 3.57% for 2013 and 2012, respectively. The decrease resulted primarily from:
lower yields on loans, excluding FDIC-supported loans, and AFS investment securities; and
increased balance of low-yielding money market investments.
The impact of these items was partially offset by the following favorable developments:
lower yields on long-term debt and deposit funding; and
higher yields on FDIC-supported loans.
Even though the Company’s average loan portfolio, excluding FDIC-supported loans, was $1.3 billion higher in 2013 than in 2012, the average interestInterest rate earned on those assets was 42 bps lower. This decline in interest income was driven by a reduction in FDIC-supported loan income as that portfolio continues to wind down, competitive pricing pressure, and improvement in the underlying quality of our borrowers’ financial condition (see discussion on asset quality on page 72).
The yield earned on AFS securities during 2013 was 77 bps lower than in the prior year. The yield decline primarily related to lower yields on asset-backed securities. The fair values of these securities increased during 2013, but the coupon rates stayed the same, resulting in lower yields. Also, the interest rates for most of the securities in the AFS securities portfolio are based on variable rate indexes such as the 3-month LIBOR rate, which decreased between these years.
During 2013, most of the Company’s excess liquidity was invested in money market assets, primarily deposits with the Federal Reserve Bank. Average money market investments increased to 17.3% of total interest-earning assets in 2013 compared to 16.2% in the prior year. The average rate earned on these investments remained essentially unchanged for these years.
Noninterest-bearing demand deposits provided the Company with low cost funding and comprised 39.7% of average total deposits in 2013 compared to 38.4% in 2012. Additionally, the average rate paid on interest-bearing deposits during 2013 decreased by 8 bps compared to 2012.
During 2013, the Company refinanced a portion of its long-term debt by redeeming and repurchasing higher cost debt, while issuing new lower cost debt. This resulted in a $39 million increase in the average balance of long-term debt. The average interest rate paid on long-term debt decreased by 191 bps due to these transactions, as well as a reduction in the accelerated amortization of discount related to conversions of subordinated debt to preferred stock. Refer to the “Liquidity Management Actions” section on page 83 for more information.

36

Chart 4 illustrates recent trends in the net interest margin and the average federal funds rate.

Chart 4.NET INTEREST MARGIN
See “Interest Rate and Market Risk Management” on page 76 for further discussion of how we manage the portfolios of interest-earning assets, interest-bearing liabilities, and the associated risk.spreads
The spread on average interest-bearing funds was 2.99%, for both 2015 and 2014, and 3.02%, and 3.16% for 2014, 2013, and 2012, respectively.2013. The spread on average interest-bearing funds for 2015 and 2014 was affected by the same factors that had an impact on the net interest margin.NIM.
We expect the mix of interest-earning assets to continue to change over the next several quarters due to further decreases in the FDIC-supported/PCI loan portfolio, and slight-to-moderate loan growth in the commercial and industrial and residential mortgageconsumer portfolios, accompanied by somewhat less growth in commercial real estate loans.CRE loans, and partially offset by continued attrition in the oil and gas portfolio. In addition, as discussed below, we are incrementally investing in short-to-medium duration U.S. agency pass-through securities that qualify as HQLA; over time we expect these investments to reduce the proportion of earning assets in cash and money market instruments,investments, and increase the proportion of AFS securities. Average yields on the loan portfolio are likely tomay continue to experience modest downward pressure due to competitive pricing lower benchmark indices (such as LIBOR), and growth in lower-yielding residential mortgages; however, we expect this pressure to be somewhat less likely than incompared to the prior two years. We believe that some of the downward pressure on the net interest marginNIM will be mitigated by lower interest expense on reduced levels of long-term debt that resulted from the Company’s tender offers, early calls, and maturities during 2014. Additional reductions to long-term debt will occur due to maturities inthat occurred towards the end of 2015. We also believe we can offset some of the pressure on the net interest marginNIM through loan growth.growth, redeployment of cash held in money market investments to term investment securities, and employment of interest rate swaps designated as cash flow hedges.
The Company expectsWe expect to remain “asset-sensitive” (which refers to net interest income increasing as a result of a rising interest rate environment) with regard to interest rate risk. In response to new liquidity and liquidity stress-testing regulations, which elevate, relative to historic levels, the proportion of high quality liquid assets that the CompanyHQLA we will be required to hold, on its balance sheet, we decided in the second half of 2014 to begin deploying cash into short-to-medium duration U.S. agency pass-through securities. In 2014, the Company increased itsDuring 2015, we purchased HQLA securities of $4.8 billion at amortized cost, increasing HQLA securities by approximately $1.0$4.0 billion par amountafter paydowns and ispayoffs during the year, and we are continuing these purchases in 2015.purchases. Over time these purchases are expected to somewhat reduce our asset sensitivity compared to previous periods. Our estimates of the Company’s actual interest rate risk position are highly dependent upon a number of assumptions regarding the repricing behavior of various deposit and loan types in response to changes in both short-term and long-term interest rates, balance sheet composition, and other modeling assumptions, as well as the actions of competitors and customers in response to those changes. In addition, our modeled projections for noninterest-bearing demand deposits, which are a substantial portion of our deposit balances, are particularly reliant on assumptions for which there is little historical experience due to the prolonged period of very low interest rates. Further detail on interest rate risk is discussed in “Interest Rate Risk” on page 77.63.

37

The following schedule summarizes the average balances, the amount of interest earned or incurred, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities that generate taxable-equivalent net interest income.

31

Schedule 2
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS’ EQUITY
AVERAGE BALANCE SHEETS, YIELDS AND RATES
 2014 2013 2015 2014
(Amounts in millions) 
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
ASSETS                        
Money market investments $8,211
 $21.4
 0.26% $8,848
 $23.4
 0.26% $8,252
 $23.2
 0.28% $8,215
 $21.4
 0.26%
Securities:                        
Held-to-maturity 609
 32.1
 5.27
 762
 37.4
 4.91
 581
 29.5
 5.08
 609
 32.1
 5.27
Available-for-sale 3,472
 75.3
 2.17
 3,107
 72.2
 2.32
 5,181
 100.0
 1.93
 3,472
 75.3
 2.17
Trading account 61
 2.0
 3.22
 32
 1.0
 3.29
 64
 2.2
 3.46
 61
 2.0
 3.22
Total securities 4,142
 109.4
 2.64
 3,901
 110.6
 2.84
 5,826
 131.7
 2.26
 4,142
 109.4
 2.64
Loans held for sale 128
 4.6
 3.63
 149
 5.4
 3.58
 125
 4.5
 3.61
 128
 4.6
 3.63
Loans and leases 2
 39,523
 1,733.7
 4.39
 38,107
 1,817.5
 4.77
            
Commercial 21,419
 903.2
 4.22
 21,125
 922.6
 4.37
Commercial Real Estate 10,178
 453.5
 4.46
 10,337
 483.7
 4.68
Consumer 8,574
 335.3
 3.91
 8,060
 327.5
 4.06
Total Loans and leases 40,171
 1,692.0
 4.21
 39,522
 1,733.8
 4.39
Total interest-earning assets 52,004
 1,869.1
 3.59
 51,005
 1,956.9
 3.84
 54,374
 1,851.4
 3.40
 52,007
 1,869.2
 3.59
Cash and due from banks 897
     1,016
     642
     894
    
Allowance for loan losses (690)     (830)     (607)     (690)    
Goodwill 1,014
     1,014
     1,014
     1,014
    
Core deposit and other intangibles 31
     44
     21
     31
    
Other assets 2,634
     2,693
     2,606
     2,634
    
Total assets $55,890
     $54,942
     $58,050
     $55,890
    
LIABILITIES                        
Interest-bearing deposits:                        
Saving and money market $23,532
 37.0
 0.16
 $22,891
 39.7
 0.17
 $24,619
 38.8
 0.16
 $23,532
 37.0
 0.16
Time 2,490
 11.5
 0.46
 2,792
 15.9
 0.57
 2,274
 9.8
 0.43
 2,490
 11.5
 0.46
Foreign 642
 1.2
 0.18
 1,662
 3.3
 0.20
 379
 0.7
 0.18
 642
 1.2
 0.18
Total interest-bearing deposits 26,664
 49.7
 0.19
 27,345
 58.9
 0.22
 27,272
 49.3
 0.18
 26,664
 49.7
 0.19
Borrowed funds:                        
Federal funds purchased and other short-term borrowings 223
 0.3
 0.11
 278
 0.3
 0.11
 235
 0.4
 0.14
 223
 0.3
 0.11
Long-term debt 1,811
 123.0
 6.79
 2,274
 185.9
 8.17
 1,021
 68.5
 6.71
 1,811
 123.0
 6.79
Total borrowed funds 2,034
 123.3
 6.06
 2,552
 186.2
 7.29
 1,256
 68.9
 5.48
 2,034
 123.3
 6.06
Total interest-bearing liabilities 28,698
 173.0
 0.60
 29,897
 245.1
 0.82
 28,528
 118.2
 0.41
 28,698
 173.0
 0.60
Noninterest-bearing deposits 19,609
     17,971
     21,366
     19,610
    
Other liabilities 555
     586
     592
     554
    
Total liabilities 48,862
     48,454
     50,486
     48,862
    
Shareholders’ equity:                        
Preferred equity 1,004
     1,360
     983
     1,004
    
Common equity 6,024
     5,130
     6,581
     6,024
    
Controlling interest shareholders’ equity 7,028
     6,490
     7,564
     7,028
    
Noncontrolling interests —
     (2)     —
     —
    
Total shareholders’ equity 7,028
     6,488
     7,564
     7,028
    
Total liabilities and shareholders’ equity $55,890
     $54,942
     $58,050
     $55,890
    
Spread on average interest-bearing funds     2.99%     3.02%     2.99%     2.99%
Taxable-equivalent net interest income and net yield on interest-earning assets   $1,696.1
 3.26%   $1,711.8
 3.36%   $1,733.2
 3.19%   $1,696.2
 3.26%
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.


3832











2012 2011 2010
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
                 
$7,930
 $21.1
 0.27% $5,356
 $13.8
 0.26% $4,085
 $11.0
 0.27%
                 
774
 42.3
 5.47
 818
 44.7
 5.47
 866
 44.3
 5.12
3,047
 94.2
 3.09
 3,895
 89.6
 2.30
 3,416
 91.5
 2.68
24
 0.7
 3.13
 58
 2.0
 3.45
 61
 2.2
 3.64
3,845
 137.2
 3.57
 4,771
 136.3
 2.86
 4,343
 138.0
 3.18
187
 6.6
 3.51
 146
 5.7
 3.94
 187
 8.9
 4.78
37,037
 1,892.0
 5.11
 36,897
 2,053.0
 5.56
 38,326
 2,170.5
 5.66
48,999
 2,056.9
 4.20
 47,170
 2,208.8
 4.68
 46,941
 2,328.4
 4.96
1,102
     1,056
     1,214
    
(986)     (1,272)     (1,556)    
1,015
     1,015
     1,015
    
60
     78
     101
    
3,089
     3,363
     3,912
    
$53,279
     $51,410
     $51,627
    
                 
                 
$22,061
 52.3
 0.24
 $21,476
 84.8
 0.39
 $22,039
 126.5
 0.57
3,208
 23.1
 0.72
 3,750
 35.6
 0.95
 4,747
 59.8
 1.26
1,493
 4.7
 0.31
 1,515
 8.1
 0.53
 1,626
 9.8
 0.60
26,762
 80.1
 0.30
 26,741
 128.5
 0.48
 28,412
 196.1
 0.69
                 
499
 1.4
 0.28
 832
 6.7
 0.80
 1,149
 12.5
 1.09
2,234
 225.2
 10.08
 1,913
 297.2
 15.54
 1,980
 383.8
 19.38
2,733
 226.6
 8.29
 2,745
 303.9
 11.07
 3,129
 396.3
 12.67
29,495
 306.7
 1.04
 29,486
 432.4
 1.47
 31,541
 592.4
 1.88
16,668
 
   14,531
     13,318
    
605
     523
     576
    
46,768
     44,540
     45,435
    

                
1,768
     2,257
     1,732
    
4,745
     4,614
     4,452
    
6,513
     6,871
     6,184
    
(2)     (1)     8
    
6,511
     6,870
     6,192
    
$53,279
     $51,410
     $51,627
    

   3.16%     3.21%     3.08%
  $1,750.2
 3.57%   $1,776.4
 3.77%   $1,736.0
 3.70%
2013 2012 2011
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
 
Average
balance
 
Amount of
interest 1
 
Average
rate
                 
$8,850
 $23.4
 0.26% $7,931
 $21.1
 0.27% $5,357
 $13.8
 0.26%
                 
762
 37.4
 4.91
 774
 42.3
 5.47
 818
 44.7
 5.47
3,107
 72.2
 2.32
 3,047
 94.2
 3.09
 3,895
 89.6
 2.30
32
 1.1
 3.29
 24
 0.7
 3.13
 58
 2.0
 3.45
3,901
 110.7
 2.84
 3,845
 137.2
 3.57
 4,771
 136.3
 2.86
147
 5.3
 3.64
 186
 6.6
 3.53
 146
 5.7
 3.94
                 
20,186
 940.8
 4.66
 19,394
 991.6
 5.11
 19,006
 1,074.4
 5.65
10,386
 556.4
 5.36
 10,533
 575.6
 5.47
 11,088
 644.5
 5.81
7,537
 320.4
 4.25
 7,110
 325.0
 4.57
 6,802
 334.1
 4.91
38,109
 1,817.6
 4.77
 37,037
 1,892.2
 5.11
 36,896
 2,053.0
 5.56
51,007
 1,957.0
 3.84
 48,999
 2,057.1
 4.20
 47,170
 2,208.8
 4.68
1,014
     1,101
     1,055
    
(830)     (986)     (1,272)    
1,014
     1,015
     1,015
    
44
     60
     78
    
2,693
     3,090
     3,364
    
$54,942
     $53,279
     $51,410
    
                 
                 
$22,891
 39.8
 0.17
 $22,061
 52.3
 0.24
 $21,476
 84.8
 0.39
2,792
 15.8
 0.57
 3,208
 23.1
 0.72
 3,750
 35.6
 0.95
1,662
 3.3
 0.20
 1,493
 4.7
 0.31
 1,515
 8.1
 0.53
27,345
 58.9
 0.22
 26,762
 80.1
 0.30
 26,741
 128.5
 0.48
                 
278
 0.3
 0.11
 499
 1.4
 0.28
 832
 6.7
 0.80
2,274
 185.9
 8.17
 2,234
 225.2
 10.08
 1,913
 297.2
 15.54
2,552
 186.2
 7.29
 2,733
 226.6
 8.29
 2,745
 303.9
 11.07
29,897
 245.1
 0.82
 29,495
 306.7
 1.04
 29,486
 432.4
 1.47
17,974
 
   16,669
     14,533
    
583
     604
     521
    
48,454
     46,768
     44,540
    

                
1,360
     1,768
     2,257
    
5,130
     4,745
     4,614
    
6,490
     6,513
     6,871
    
(2)     (2)     (1)    
6,488
     6,511
     6,870
    
$54,942
     $53,279
     $51,410
    

   3.02%     3.16%     3.21%
  $1,711.9
 3.36%   $1,750.4
 3.57%   $1,776.4
 3.77%


3933

Schedule 3 analyzes the year-to-year changes in net interest income on a fully taxable-equivalent basis for the years indicated. For purposes of calculating the yields in these schedules, the average loan balances also include the principal amounts of nonaccrual and restructured loans. However, interest received on nonaccrual loans is included in income only to the extent that cash payments have been received and not applied to principal reductions. In addition, interest on restructured loans is generally accrued at reduced rates.

Schedule 3
ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND RATE
  2014 over 2013  2013 over 2012  2015 over 2014  2014 over 2013
 Changes due to Total changes Changes due to Total changes Changes due to Total changes Changes due to Total changes
(In millions) Volume 
Rate1
 Volume 
Rate1
  Volume 
Rate1
 Volume 
Rate1
 
INTEREST-EARNING ASSETS                        
Money market investments $(1.6) $(0.4) $(2.0) $2.7
 $(0.4) $2.3
 $0.1
 $1.7
 $1.8
 $(1.6) $(0.4) $(2.0)
Securities:                        
Held-to-maturity (7.5) 2.2
 (5.3) (0.6) (4.3) (4.9) (1.4) (1.2) (2.6) (7.5) 2.2
 (5.3)
Available-for-sale 7.8
 (4.7) 3.1
 1.5
 (23.5) (22.0) 33.0
 (8.3) 24.7
 7.9
 (4.8) 3.1
Trading account 1.0
 —
 1.0
 0.3
 —
 0.3
 —
 0.2
 0.2
 0.9
 —
 0.9
Total securities 1.3
 (2.5) (1.2) 1.2
 (27.8) (26.6) 31.6
 (9.3) 22.3
 1.3
 (2.6) (1.3)
Loans held for sale (0.8) —
 (0.8) (1.3) 0.1
 (1.2) (0.1) —
 (0.1) (0.7) —
 (0.7)
Loans and leases2
 60.8
 (144.6) (83.8) 50.8
 (125.3) (74.5)            
Commercial 11.7
 (31.1) (19.4) 40.5
 (58.7) (18.2)
Commercial Real Estate (7.5) (22.7) (30.2) (2.4) (70.3) (72.7)
Consumer 20.1
 (12.3) 7.8
 21.5
 (14.4) 7.1
Total loans and leases 24.3
 (66.1) (41.8) 59.6
 (143.4) (83.8)
Total interest-earning assets 59.7
 (147.5) (87.8) 53.4
 (153.4) (100.0) 55.9
 (73.7) (17.8) 58.6
 (146.4) (87.8)
 

           

          
INTEREST-BEARING LIABILITIES                        
Interest-bearing deposits:                        
Saving and money market 0.4
 (3.1) (2.7) 2.3
 (14.9) (12.6) 1.2
 0.6
 1.8
 0.3
 (3.1) (2.8)
Time (1.4) (3.0) (4.4) (2.4) (4.8) (7.2) (0.9) (0.8) (1.7) (1.3) (3.0) (4.3)
Foreign (1.8) (0.3) (2.1) 0.3
 (1.7) (1.4) (0.5) —
 (0.5) (1.8) (0.3) (2.1)
Total interest-bearing deposits (2.8) (6.4) (9.2) 0.2
 (21.4) (21.2) (0.2) (0.2) (0.4) (2.8) (6.4) (9.2)
Borrowed funds:                        
Federal funds purchased and other short-term borrowings —
 —
 —
 (0.2) (0.9) (1.1) —
 0.1
 0.1
 —
 —
 —
Long-term debt (31.4) (31.5) (62.9) 3.3
 (42.6) (39.3) (53.0) (1.5) (54.5) (31.4) (31.5) (62.9)
Total borrowed funds (31.4) (31.5) (62.9) 3.1
 (43.5) (40.4) (53.0) (1.4) (54.4) (31.4) (31.5) (62.9)
Total interest-bearing liabilities (34.2) (37.9) (72.1) 3.3
 (64.9) (61.6) (53.2) (1.6) (54.8) (34.2) (37.9) (72.1)
Change in taxable-equivalent net interest income $93.9
 $(109.6) $(15.7) $50.1
 $(88.5) $(38.4) $109.1
 $(72.1) $37.0
 $92.8
 $(108.5) $(15.7)
1 Taxable-equivalent rates used where applicable.
2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

In the analysis of interest changes due to volume and rate, changes due to the volume/rate variance are allocated to volume with the following exceptions: when volume and rate both increase, the variance is allocated proportionately to both volume and rate; when the rate increases and volume decreases, the variance is allocated to rate.

Provisions for Credit Losses
The provision for loan losses is the amount of expense that, in our judgment, is required to maintain the allowance for loan losses at an adequate level based uponon the inherent risks in the loan portfolio. The provision for unfunded lending commitments is used to maintain the reserve for unfunded lending commitments (“RULC”) at an adequate level based uponon the inherent risks associated with such commitments. In determining adequate levels of the allowance and reserve, we perform periodic evaluations of the Company’sour various loan portfolios, the levels of actual charge-offs,charge-

34

offs, credit trends, and external factors. See Note 6 of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 6350 for more information on how we determine the appropriate level for the ALLL and the RULC.

40


During the past few years, the Company haswe have experienced a significantan improvement in credit quality metrics; however, recently we have experienced deterioration in credit quality metrics including lower levelsassociated with oil and gas-related loans at Amegy. Overall credit quality metrics for 2015 compared to 2014 deteriorated moderately. Gross loan and lease charge-offs increased to $138.9 million in 2015, compared to $106.2 million in 2014. Additionally, we had gross recoveries of criticized and classified loans and lower realized loss rates$100.3 million in most loan segments. For example,2015, compared to $64.0 million in 2014.

Nonperforming assets increased to $357 million at December 31, 2014, classified2015 from $326 million at December 31, 2014. The ratio of nonperforming assets to loans were $1.1 billion comparedand leases and other real estate owned (“OREO”) increased to $1.3 billion and $1.90.87% at December 31, 2015 from 0.81% at December 31, 2014. Classified loans increased to $1.4 billion at December 31, 20132015 from $1.1 billion at December 31, 2014. Approximately 87% of classified loans at December 31, 2015 were current as to principal and 2012, respectively. Netinterest payments, compared to 83% at December 31, 2014. Classified loans are loans with well-defined credit weaknesses that are risk graded Substandard or Doubtful.

The allowance for loan losses increased by approximately $1.4 million since December 31, 2014, due to deterioration within the oil and lease charge-offs declined to $42gas portfolio, which offset improvements in credit quality metrics outside of the oil and gas portfolio. This resulted in a provision of $40.0 million in 2015, compared to a provision of $(98.1) million for 2014. The negative provision in 2014 from $52was due to the continued improvement in portfolio-specific credit quality metrics and sustained improvement in broader economic and credit quality indicators up to that point. We continue to exercise caution with regard to the appropriate level of the allowance for loan losses, given the state of the economy and the sensitivity of the oil and gas loan portfolio to energy prices. Refer to the “Oil and Gas-Related Exposure” section on page 52 for more information.

During 2015, we recorded a $(6.2) million and $155provision for unfunded lending commitments compared to $(8.6) million in 20132014. The negative provision recognized in 2015 is primarily due to the funding of one large impaired letter of credit, partially offset by deterioration in the oil and 2012, respectively.gas-related portfolio. The negative provision recognized in 2014 ratio of net loan and lease charge-offswas primarily due to average loans was 0.11%.See “Nonperforming Assets” on page 72 and “Allowance and Reserve for Credit Losses” on page 75 for further details.

These sustained significant improvementsimprovement in portfolio-specific credit quality metrics, sustained improvement in broader economic and credit quality indicators, and changes in the portfolio mix resulting from the reductions in outstanding balances of construction and land development loans, combined with relatively modest growth in loans and commitments, have resulted in negative provisions for loan and lease losses and a reduction in the ALLL. The provision for loan losses for 2014 was $(98.1) million compared to $(87.1) million and $14.2 million for 2013 and 2012, respectively.

However, as the Company’s credit quality metrics have improved to relatively strong levels, the scope for further improvement is believed to be limited. In the fourth quarter of 2014, the Company decided to increase the portion of the reserve related to qualitative and environmental factors due to recent sharp declines in energy prices causing anticipated credit losses to increase across the Company’s energy portfolio. The Company continues to exercise caution with regard to the appropriate level of the allowance for loan losses, given the slow economic recovery and the decline in oil and gas prices. As a result, we currently do not expect further significant reductions in the ALLL in 2015, and we currently expect net positive provisions for the year.

During 2014, the Company recorded an $(8.6) million provision for unfunded lending commitments compared to $(17.1) million in 2013 and $4.4 million in 2012. The negative provision in 2014 was primarily driven by the same factors that caused the negative provision for loan losses described previously. The overall decrease in the provision from 2012 to 2013 resulted primarily from refinements in the process of estimating the rate at which such commitments are likely to convert into funded balances, and from continued improvements in credit quality. The decrease was partially offset by an increase in unfunded lending commitments.mix. From quarter to quarter, the expense related to the reserveprovision for unfunded lending commitments may be subject to sizable fluctuations due to changes in the timing and volume of loan commitments, originations, and funding, as well asand changes in credit quality.

A significant contributor to net earnings in both 2013 and 2014 was the negative provision for loan and lease losses. This is primarily attributable to continued reduction in both the quantity of problem loans and the loss severity of such problem loans. Although we currently expect further improvements in credit quality, we do not expect this to be a significant source of earnings. Deterioration in economic conditions within our footprint would likely result in net additions to the allowance, such as the recent decline in oil and gas prices at Amegy in the fourth quarter of 2014, resulting in a significant change in profitability.

Noninterest Income
Noninterest income represents revenues the Company earnswe earn for products and services that have no associated interest rate or yield. For 2014,2015, noninterest income was $508.6$377.1 million compared to $508.6 million in 2014 and $337.4 million in 2013 and $419.9 million in 2012.2013.

4135

Schedule 4 presents a comparison of the major components of noninterest income for the past three years.

Schedule 4
NONINTEREST INCOME
(Amounts in millions) 2014 Percent change 2013 Percent change 2012 2015 Percent change 2014 Percent change 2013
                    
Service charges and fees on deposit accounts $174.0
 (1.3)% $176.3
 (0.1)% $176.4
 $168.4
 0.1% $168.3
 (1.6)% $171.0
Other service charges, commissions and fees 191.5
 5.5
 181.5
 4.1
 174.4
 206.8
 6.6
 194.0
 5.4
 184.0
Trust and wealth management income 30.6
 2.3
 29.9
 5.3
 28.4
Wealth management income 31.2
 2.0
 30.6
 2.3
 29.9
Capital markets and foreign exchange 22.4
 (20.3) 28.1
 4.9
 26.8
 25.7
 13.7
 22.6
 (19.6) 28.1
Dividends and other investment income 43.7
 (5.2) 46.1
 (17.4) 55.8
 30.1
 (31.0) 43.6
 (5.4) 46.1
Loan sales and servicing income 26.0
 (26.3) 35.3
 (11.8) 40.0
 30.7
 5.5
 29.1
 (23.6) 38.1
Fair value and nonhedge derivative loss (11.4) 37.4
 (18.2) 16.5
 (21.8) (0.1) 99.1
 (11.4) 37.4
 (18.2)
Equity securities gains, net 13.5
 58.8
 8.5
 (24.8) 11.3
 11.9
 (11.9) 13.5
 58.8
 8.5
Fixed income securities gains (losses), net 10.4
 458.6
 (2.9) (114.8) 19.6
 (138.7) (1,433.7) 10.4
 458.6
 (2.9)
Impairment losses on investment securities:          
Impairment losses on investment securities —
 100.0
 (188.6) (13.4) (166.3) —
 —
 —
 100.0
 (188.6)
Noncredit-related losses on securities not expected to          
be sold (recognized in other comprehensive income) —
 (100.0) 23.5
 (62.2) 62.2
Less amounts recognized in other comprehensive income —
 —
 —
 (100.0) 23.5
Net impairment losses on investment securities —
 100.0
 (165.1) (58.6) (104.1) —
 —
 —
 100.0
 (165.1)
Other 7.9
 (55.9) 17.9
 36.6
 13.1
 11.1
 40.5
 7.9
 (55.9) 17.9
Total $508.6
 50.7
 $337.4
 (19.6) $419.9
 $377.1
 (25.9) $508.6
 50.7
 $337.4

Other service charges, commissions and fees, which are comprised of ATM fees, insurance commissions, bankcard merchant fees, debit and credit card interchange fees, cash management fees, lending commitment fees, syndication and servicing fees, and other miscellaneous fees, increased by $10$12.8 million compared to 2014. The increase was primarily a result of higher interchange fees and fees generated on sales of swaps to clients, partially offset by a decline in loan fees. In 2014, other service charges commissions and fees increased by $10.0 million compared to 2013. Most of the increase can be attributed to higher interchange fees, which increased by approximately $13 million in 2014, primarily due to increased numbers of commercial card customers and increased usage of those cards. This was offset by a decrease of approximately $3 million in exchange and other fees.

In 2013, other service charges, commissionsLoan sales and fees increased by $7.1 millionservicing income remained relatively flat, increasing only 5.5%, in 2015 compared to 2012. Most of the increase can be attributed to higher bankcard merchant2014. Income from loan sales and interchange fees. In 2013, other service charges, commissionsservicing remained low in 2015 and fees included approximately $34.4 million of debit card interchange fees,2014 compared to approximately $32.5 millionprior periods as the Company is continuing to retain more of its loan production than in 2012.

previous years. Loan sales and servicing income decreased by $9.3$9.0 million in 2014 compared to 2013. The decrease iswas mainly caused by decreased income from residential mortgage loan sales in 2014, compared to 2013. In 2014, the Company and the industry experienced a reduction in the volume of new residential loan originations primarily for refinanced mortgages. In response, the Companywe decided to retain more newly-originated loans on itsour balance sheet rather than sell them, in order to fund them using some of itsour excess balance sheet liquidity to improve net interest income. In 2013, the Company also had lower loan sales than in 2012 as the Company originated fewer residential mortgages and retained more mortgage loans in its portfolio than in 2012.

Capital markets and foreign exchange income includes trading income, public finance fees, foreign exchange income, and other capital market related fees. In 2015, capital markets and foreign exchange income increased by $3.1 million due to an increase of approximately $3.4 million in bond origination fees. In 2014, capital markets and foreign exchange income decreased by $5.7$5.5 million due primarily to a $1.8 million decrease in trading income and a $1.7 million decrease in bond origination fees from clients due to lower levels of financing activity. Capital markets

Dividends and foreign exchangeother investment income remained fairly stabledeclined by $13.5 million in 2013 when2015 compared to 2012.


42

Fair valuewrite-downs on certain PEIs. In 2014 dividends and nonhedge derivative loss consists of the following:

Schedule 5
FAIR VALUE AND NONHEDGE DERIVATIVE LOSS
(Amounts in millions) 2014 Percent change 2013 Percent change 2012
           
Nonhedge derivative income (loss) $(0.4) 20.0 % $(0.5) 66.7 % $(1.5)
Total return swap (7.9) 63.8
 (21.8) (0.5) (21.7)
Derivative fair value credit adjustments (3.1) (175.6) 4.1
 192.9
 1.4
Total $(11.4) 37.4
 $(18.2) 16.5
 $(21.8)
other investment income declined by $2.5 million compared to 2013.

Fair value and nonhedge derivative loss improved by $11.3 million in 2015 compared to 2014 primarily as a result of not having any fees associated with the total return swap (“TRS”) that was terminated effective April 28, 2014 and an improvement in the derivative fair value credit adjustments. In 2014, fair value and nonhedge derivative loss

36

improved by $6.8 million in 2014compared to 2013 primarily as a result of the termination of the total return swap effective April 28, 2014,TRS, partially offset by losses on derivative fair value credit adjustments. Fair value and nonhedge derivative loss was $3.6 million lower in 2013 than in 2012. The decreased losses are primarily attributable to changes in fair value on interest rate swaps.

During 2014, the Company2015 we recorded $13.5$11.9 million of equity securities gains, compared to $13.5 million in 2014 and $8.5 million in 2013 and $11.3 million2013. The decrease in 2012.2015 was primarily a result of decreased income from our non-SBIC investments, partially offset by an increase in gains related to our SBIC investments. The increase in 2014 was driven by unrealized gains related to appreciation of the Company’sour SBIC equity investments, includinginvestments.

In 2015 we recorded a particular investment that hadfixed income securities loss of $138.7 million compared to a significant write-upgain of $10.4 million in 2014. During the fourth quarter. Mostsecond quarter of 2015, we sold the gains recognized in 2013 were generated by SBIC investments, private equity funds, and the sale of other investments, including sales of some investments that did not comply with the Volcker Rule. We expect that the resulting decline in the overall sizeremaining portfolio of our equity investments portfolio may limit future earnings from this source.

CDO securities, or $574 million at amortized cost, and realized net losses of approximately $137 million. The fixed income securities gain of $10.4 million in 2014 was primarily from paydowns and payoffs of the CDO securities; the net loss recorded in 2013 was primarily due to CDO sales.securities.

The Company recognized only $27 thousand of net impairment losses on investment securities compared to $165.1 million in 2013 and $104.1 million in 2012. See “Investment Securities Portfolio” on page 52 for additional information. These impairment losses occurred in our portfolio of trust preferred CDO securities. Approximately $1.0 billion of these securities were sold or paid down in 2014, leaving a portfolio of $592 million of amortized cost as of December 31, 2014.

In 2013, otherOther noninterest income increased by $4.8$3.2 million in 2015 compared to 2014 primarily as a result from 2012. The increase wasthe gain on sale of a branch in California. Other noninterest income decreased by $10.0 million in 2014, primarily due to gains in 2013 related to certain loans, which had been purchased from failed banks covered by FDIC loss-sharing agreements, as well as gains from branch deposit and asset sales. Other noninterest income decreased by $10.0 million in 2014, primarily as a result of a decline in the same items that led to the increase in 2013.

Noninterest Expense
Noninterest expense decreased by 2.9%3.9% to $1,600.5 million in 2015, compared to $1,665.3 million in 2014. In 2014 compared to 2013. During both 2013 and 2014, the Companywe redeemed considerable amounts of itsour long-term debt and incurred debt extinguishment costs however these coststhat were not as large in 2014 as they were in 2013.significantly higher than those incurred during 2015. Other noninterest expense also decreased by approximately $19.3$39.5 million in 20142015 primarily as a result of reductions in write-downs of the FDIC indemnification asset. Fees related to professional and legal services declined by $15.6 million in 2015 due to a decline in consulting fees. These decreases in expense were partially offset by a 4.8%$16.3 million, or 1.7%, increase in salaries and employee benefits in 2014.

43

Table2015 as a result of Contentsan increase in employee base salaries.

Schedule 65 presents a comparison of the major components of noninterest expense for the past three years.

Schedule 65
NONINTEREST EXPENSE
(Amounts in millions) 2014 Percent change 2013 Percent change 2012 2015 Percent change 2014 Percent change 2013
                    
Salaries and employee benefits $956.4
 4.8% $912.9
 3.1% $885.7
 $972.7
 1.7% $956.4
 4.8% $912.9
Occupancy, net 115.7
 3.0
 112.3
 (0.5) 112.9
 119.5
 3.3
 115.7
 3.0
 112.3
Furniture, equipment and software 115.3
 8.2
 106.6
 (2.2) 109.0
 123.2
 6.9
 115.3
 8.2
 106.6
Other real estate expense (1.2) (170.6) 1.7
 (91.4) 19.7
 (0.6) 50.0
 (1.2) (170.6) 1.7
Credit-related expense 28.0
 (16.7) 33.6
 (33.5) 50.5
 28.5
 1.4
 28.1
 (16.9) 33.8
Provision for unfunded lending commitments (8.6) 49.7
 (17.1) (488.6) 4.4
 (6.2) 27.9
 (8.6) 49.7
 (17.1)
Professional and legal services 66.0
 (2.9) 68.0
 29.5
 52.5
 50.4
 (23.6) 66.0
 (2.9) 68.0
Advertising 25.1
 7.3
 23.4
 (8.9) 25.7
 25.3
 0.8
 25.1
 7.3
 23.4
FDIC premiums 32.2
 (15.3) 38.0
 (12.4) 43.4
 34.4
 6.8
 32.2
 (15.3) 38.0
Amortization of core deposit and other intangibles 10.9
 (24.3) 14.4
 (15.3) 17.0
 9.3
 (14.7) 10.9
 (24.3) 14.4
Debt extinguishment cost 44.4
 (63.1) 120.2
 —
 —
 2.5
 (94.4) 44.4
 (63.1) 120.2
Other 281.1
 (6.4) 300.4
 9.2
 275.2
 241.5
 (14.1) 281.0
 (6.4) 300.2
Total $1,665.3
 (2.9) $1,714.4
 7.4
 $1,596.0
 $1,600.5
 (3.9) $1,665.3
 (2.9) $1,714.4

Salaries and employee benefits increased by 4.8%$16.3 million, or 1.7%, in 20142015 compared to 2013, driven by a higher amount of salaries and bonuses.2014. The increase in base salaries resulted, in part, from increased headcount related to the Company’sour major systems projects and build-out of itsour enterprise risk management and stress testing functions, partially offset by reductions elsewhere. Staff involved in those projects tend to be in more highly compensated roles than positions in which reductions occurred. At June 30, 2014, the Company’s headcount had increased to 10,536 full-time equivalent (“FTE”) employees from 10,452 at December 31, 2013. During the third quarter of 2014, the Company incurred severance costs of approximately $5 million and reduced FTE employees to 10,462 as of December 31, 2014.

Salaries and employee benefits increased by 3.1% during 2013. Most of the increase can be attributed to higher base salaries and bonuses, which were partially offset by decreased share-based compensation and lower retirement expense.

Salaries and employee benefits are shown in greater detail in Schedule 7.

Schedule 7
SALARIES AND EMPLOYEE BENEFITS
(Dollar amounts in millions) 2014 Percent change  2013 Percent change  2012
             
Salaries and bonuses $814.2
 5.3%  $773.4
 3.7%  $745.7
Employee benefits:            
Employee health and insurance 53.9
 10.2
  48.9
 0.6
  48.6
Retirement 35.0
 (10.3)  39.0
 (4.4)  40.8
Payroll taxes and other 53.3
 3.3
  51.6
 2.0
  50.6
Total benefits 142.2
 1.9
  139.5
 (0.4)  140.0
Total salaries and employee benefits $956.4
 4.8
  $912.9
 3.1
  $885.7
             
Full-time equivalent (“FTE”) employees at December 31 10,462
 0.1
  10,452
 0.8
  10,368

Our

4437

headcount decreased from 10,462 FTE employees to 10,200 as of December 31, 2015. During 2015, we incurred severance costs of approximately $11 million compared to approximately $9 million in 2014. Salaries and employee benefits increased by 4.8% in 2014 compared to 2013 for similar reasons to those in 2015.

Schedule 6
SALARIES AND EMPLOYEE BENEFITS
(Dollar amounts in millions) 2015 Percent change  2014 Percent change  2013
             
Salaries and bonuses $828.5
 1.8%  $814.2
 5.3%  $773.4
Employee benefits:            
Employee health and insurance 58.1
 7.8
  53.9
 10.2
  48.9
Retirement 33.4
 (4.6)  35.0
 (10.3)  39.0
Payroll taxes and other 52.7
 (1.1)  53.3
 3.3
  51.6
Total benefits 144.2
 1.4
  142.2
 1.9
  139.5
Total salaries and employee benefits $972.7
 1.7
  $956.4
 4.8
  $912.9
             
Full-time equivalent employees at December 31 10,200
 (2.5)  10,462
 0.1
  10,452

Furniture, equipment and software expense increased by $7.9 million in 2015, compared to 2014. The increase was primarily due to an increase in amortization of purchased software and an increase in our maintenance agreements as a result of our continued investment in the business. Furniture, equipment and software expense increased by $8.7 million in 2014, compared to 2013. The increase was due to an increase in the Company’sour maintenance agreements, added licenses, and contract renewals for a variety of vendors.

Other real estate expense wentProfessional and legal services decreased in 2015 by $15.6 million, or 23.6%, from an expense of $1.7 million in 2013 to an income amount of $1.3 million in 2014. The improvement in this expense isdecrease was due to the Company having less holding costs associated with these propertiesa decline in consulting fees primarily related to our CCAR submission. In 2014, fees related to professional and recognizing gains from sales. Other real estate expense decreased 91.4%legal services declined by $2.0 million, or 2.9%, due a decline in 2013, compared to 2012. The decrease is primarily due to lower write-downs of OREO values during work-out and lower holding expenses,legal fees, partially offset by decreased gains from property sales. OREO balances declined by 59.0% during the last 12 months.an increase in consulting fees.

Credit-related expense includes costs incurred during the foreclosure process priorFDIC premiums increased by $2.2 million, or 6.8%, in 2015 compared to the Company obtaining title to collateral and recording an asset in OREO, as well as other out-of-pocket costs related to the management of problem loans and other assets. During 2014, credit-related expense decreased by $5.6 million primarily due to lower legal expenses, appraisal expenses and property taxes. Additionally, the levels of problem credits have decreased from 2013. The decrease in credit-related expense in 2013 is primarily attributable to lower foreclosure costs and legal expenses.

2014. FDIC premiums decreased in 2014 by $5.8 million, or 15.3%, from 2013. In 2013, FDIC premiums decreased by 12.4%. Most of the decrease in 2014 was due to reduced assessment rates resulting from improved credit quality of the Company’sour loan portfolio and improved capital adequacy.

The Company does not expectFDIC has proposed a change in deposit insurance assessments that implements a Dodd-Frank Act provision requiring banks with over $10 billion in assets to be responsible for recapitalizing the FDIC premiumsinsurance fund to significantly change1.35% of insured deposits by the end of 2018, after it reaches a 1.15% reserve ratio. If the rule is finalized, it may go into effect in 2015.the first half of 2016, and is expected to increase our FDIC assessment by approximately $5-$10 million per year.

In both 20132015 and 2014, the Companywe reduced long-term debt through tender offers, early calls, and maturities. The tender offers in 2014 resulted in debt extinguishment cost of $44.4 million, which is a decrease of $75.8compared to $2.5 million from 2013.in 2015. In 2013, the Companywe incurred $120.2 million of debt extinguishment cost due the extinguishment of several long-term debt instruments. No such costs were incurred in 2012. For more information, see Note 12 of the Notes to the Consolidated Financial Statements.

Other noninterest expense decreased by $19.3$39.5 million in 2015, compared to 2014, and by $19.2 million in 2014, compared to 2013. The decline is primarily the result of decreased write-downs of the FDIC indemnification asset. In 2013, the Company experiencedasset and an increase in write-downsincreased amount of the FDIC indemnification asset compared to the prior year.insurance recoveries. The balance of FDIC-supported loans declined significantly in 2014, primarily due2014.

In 2015, we held adjusted noninterest expense below $1.6 billion and plan to paydowns and payoffs.do the same in 2016, with a slight increase to noninterest expense in 2017. The Company does not expect significant write-downsexpense items that we exclude from the targeted noninterest expense of

38

$1.6 billion are the same as those excluded in arriving at the efficiency ratio (see “GAAP to Non-GAAP Reconciliations” on page 76 for more information regarding the calculation of the FDIC indemnification asset in 2015.efficiency ratio).

Income Taxes
The Company’s incomeIncome tax expense was $142.4 million in 2015, $222.9 million in 2014, and $142.9 million in 2013, and $193.4 million in 2012. The Company’s2013. Our effective income tax rates, including the effects of noncontrolling interests, were 31.5% in 2015, 35.9% in 2014, and 35.1% in 2013, and 35.6% in 2012.2013. The tax expense rates for all tax years were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance. In 2012, these rate reductions were mostly offset by the nondeductibility of a portion of the accelerated discount amortization from the conversion of subordinated debt to preferred stock. Further, theThe rate reductions in 2014 were offset by the reduction in the amount of tax credits generated and the inclusion of approximately $3 million of tax-related interest expense in income tax expense on the financial statements. The interest paid related to various notices and to the closure of various federal and state audits. Further, the tax rate in 2015 decreased significantly as a result of the Company’s investments in alternative energy and technology initiatives.
As discussed in previous filings, the Company has received federal income tax credits under the U.S. Government’s Community Development Financial Institutions Fund that are recognized over a seven-year period from the year of investment. The effect of these tax credits provided an income tax benefit of $0.6 million in 2013 and $1.2 million in 2012.
The CompanyWe had a net deferred tax assetDTA balance of approximately $203 million at December 31, 2015, compared to $224 million at December 31, 2014, compared to $304 million at December 31, 2013.2014. The decrease in the net deferred tax assetDTA resulted primarily from items

45

related to loan charge-offs in excess of loan loss provisions and fair value adjustments on security sales, and OREO.sales. The net decrease in deferred tax assetsDTA was partially offset by a decrease in the deferred tax liabilities related to premises and equipment and the debt exchange from 2009.
The Company
We did not record any additional valuation allowance for GAAP purposes as of December 31, 2014.2015. See Note 14 of the Notes to Consolidated Financial Statements and “Critical Accounting Policies and Significant Estimates” on page 3080 for additional information.

Preferred Stock Dividends and Redemption
In 2015, we incurred preferred stock dividends of $62.9 million, a decrease of $9.0 million from 2014. In 2014, the Companywe incurred preferred stock dividends of $71.9 million, a decrease of $23.6 million from 2013. Additionally,In November, 2015, we redeemed $176 million of Series I preferred stock pursuant to a cash tender offer announced in October 2015. Assuming no further tender offers, the benefit frompreferred dividends for 2016 are expected to be $11.7 million in the first and third quarters and $15.1 million in the second and fourth quarters, respectively. However, the Company’s 2015 capital plan, which runs through the second quarter of 2016, allows for an additional use of up to $120 million of cash for preferred stock redemptions decreased by $125.7 millionsubject to retained earnings levels. See further details in 2014 compared to 2013. The decrease in the dividends and redemption benefit is due to the redemption of preferred stock in 2013. During the third quarter of 2013, the Company redeemed all of its outstanding $800 million par amount (799,467 shares) of 9.5% Series C preferred stock at 100%Note 13 of the $25 per depositary share redemption amount. The redemption reduced preferred stock by the $926 million carrying value (at the time of redemption) of the Series C preferred stock. The difference from the par amount, or $125.7 million, relatedNotes to the intrinsic value of the beneficial conversion feature associated with the convertible subordinated debt. The redemption of the Series C preferred stock had a positive $0.68 per share impact on the Company’s earnings per share in the third quarter of 2013. The Company did not have any preferred stock redemptions in 2014.Consolidated Financial Statements.

BUSINESS SEGMENT RESULTS
The Company managesFollowing the close of business on December 31, 2015, we completed the merger of our subsidiary banks with and into Zions First National Bank. Subsequently, Zions First National Bank changed its legal name to ZB, National Association. We continue to manage our banking operations under our existing brand names and prepares management reports with a primary focus on its subsidiary banksbusiness segments, including Zions Bank, Amegy Bank, California Bank & Trust, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and the geographies in which they operate.The Commerce Bank of Washington. As discussed in the “Executive Summary” on page 24,25, most of the lending and other decisions affecting customers are made at the local level. Each subsidiary bank holds its own banking charter. Those with national bank charters (Zions Bank, Amegy, NBAZ, Vectra, and TCBW) are subject to regulatory oversight by the OCC. Those with state charters (CB&T, NSB, and TCBO) are regulated by the FDIC and applicable state authorities. Effective March 31, 2015, The Commerce Bank of Oregon, originally a stand-alone affiliate of Zions Bancorporation, will operate as a division of The Commerce Bank of Washington. The operating segment identified as “Other” includes the Parent, Zions Management Services Company, certain nonbank financial service subsidiaries, TCBO, and eliminations of transactions between segments.
The accounting policies of the individual segments are the same as those of the Company. The Company allocatesWe allocate the cost of centrally provided services to the business segments based upon estimated or actual usage of those services. Due to the charter consolidation, we are moving to an internal funds transfer pricing allocation system to report results of operations for business segments. Note 21 of the Notes to Consolidated Financial Statements contains selected information from the respective balance sheets and statements of income for all segments.

39

During 2014, the Company’s subsidiary banks2015, our banking operations experienced improved financial performance. Common areas of financial performance experienced at various levels of the segments include:
increased loan balances, primarily at Amegy;CB&T, NBAZ, and Vectra;
improvements in credit quality, improvements across all metricswhich, with the exception of oil and gas-related exposures, resulted in reductions of the ALLL, with the exception of energy-related exposures;ALLL; and
increased growth in customer deposit balances.balances, primarily at CB&T, NSB and Vectra.

46

Schedule 87
SELECTED SEGMENT INFORMATION
(Amounts in millions) Zions Bank Amegy CB&T Zions Bank Amegy CB&T
201420132012 201420132012 201420132012 201520142013 201520142013 201520142013
KEY FINANCIAL INFORMATION            
Total assets $19,079
$18,590
$17,930
 $13,929
$13,705
$13,119
 $11,340
$10,923
$11,069
 $19,744
$19,079
$18,590
 $14,062
$13,888
$13,620
 $12,187
$11,340
$10,923
Total deposits 16,633
16,257
15,575
 11,447
11,198
10,706
 9,707
9,327
9,483
 16,900
16,633
16,257
 11,634
11,491
11,199
 10,520
9,707
9,328
Net income (loss) applicable to controlling interests 220.4
224.6
189.3
 93.9
130.5
166.7
 101.3
140.1
127.1
Net income applicable to controlling interests 149.4
220.4
224.6
 44.8
93.2
127.4
 106.2
101.3
140.1
Net interest margin 3.40%3.55%4.04% 3.09%3.23%3.44% 4.05%4.73 %4.71% 3.31%3.40%3.55% 3.16%3.12%3.27% 3.62%4.05%4.73 %
RISK-BASED CAPITAL RATIOS      
Tier 1 leverage 10.52%10.02%10.58% 11.79%12.09%12.03% 10.78%10.75 %10.37%
Tier 1 risk-based capital 14.07%13.32%12.96% 12.83%13.61%13.91% 13.00%12.40 %12.92%
Total risk-based capital 15.27%14.52%14.17% 14.09%14.86%15.17% 14.18%13.65 %14.18%
CREDIT QUALITY            
Provision for loan losses $(58.5)$(40.5)$88.3
 $32.2
$4.2
$(63.9) $(20.1)$(16.7)$(7.9) $(28.3)$(58.5)$(40.5) $91.3
$32.2
$4.2
 $(4.4)$(20.1)$(16.7)
Net loan and lease charge-offs 13.0
19.7
74.4
 22.8
23.8
4.6
 5.5
(4.1)19.8
 10.3
13.0
19.7
 22.2
22.8
23.8
 10.1
5.5
(4.1)
Ratio of net charge-offs to average loans and leases 0.11%0.16%0.60% 0.24%0.27%0.06% 0.06%(0.05)%0.24% 0.08%0.11%0.16% 0.22%0.24%0.27% 0.12%0.06%(0.05)%
Allowance for loan losses $219
$290
$350
 $154
$144
$164
 $96
$123
$146
 $180
$219
$290
 $223
$154
$144
 $81
$96
$123
Ratio of allowance for loan losses to net loans and leases, at year-end 1.78%2.37%2.80% 1.53%1.57%1.94% 1.13%1.43 %1.77% 1.46%1.78%2.37% 2.20%1.53%1.57% 0.92%1.13%1.43 %
Nonperforming lending-related assets $82.6
$143.7
$259.0
 $78.8
$79.9
$138.8
 $88.7
$109.9
$150.7
 $108.9
$82.6
$143.7
 $115.7
$78.8
$79.9
 $42.3
$88.7
$109.9
Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 0.67%1.16%2.05% 0.78%0.86%1.63% 1.04%1.28 %1.82% 0.88%0.67%1.16% 1.14%0.78%0.86% 0.48%1.04%1.28 %
Accruing loans past due 90 days or more $2.2
$2.0
$2.6
 $1.7
$0.3
$3.4
 $24.7
$36.9
$54.2
 $4.3
$2.2
$2.0
 $2.5
$1.7
$0.3
 $24.1
$24.7
$36.9
Ratio of accruing loan past due 90 days or more to net loans and leases 0.02%0.02%0.02% 0.02%—%0.04% 0.29%0.43 %0.66% 0.03%0.02%0.02% 0.02%0.02%—% 0.27%0.29%0.43 %


4740

(Amounts in millions)NBAZ NSB Vectra TCBWNBAZ NSB Vectra TCBW
201420132012 201420132012 201420132012 201420132012201520142013 201520142013 201520142013 201520142013
KEY FINANCIAL INFORMATIONKEY FINANCIAL INFORMATION       KEY FINANCIAL INFORMATION       
Total assets$4,771
$4,579
$4,575
 $4,096
$3,980
$4,061
 $2,999
$2,571
$2,511
 $892
$943
$961
$5,024
$4,771
$4,579
 $4,441
$4,096
$3,980
 $3,310
$2,999
$2,571
 $1,198
$970
$1,010
Total deposits4,133
3,931
3,874
 3,690
3,590
3,604
 2,591
2,178
2,164
 752
793
791
4,369
4,133
3,931
 4,035
3,690
3,590
 2,889
2,591
2,178
 986
816
845
Net income (loss) applicable to controlling interests46.5
43.9
30.9
 22.3
18.8
21.8
 21.4
21.4
18.9
 1.2
7.7
7.9
Net income applicable to controlling interests42.0
46.5
43.9
 31.5
22.3
18.8
 15.7
21.4
21.4
 14.2
1.0
7.9
Net interest margin3.67%3.76%4.00% 2.95%2.99%3.19% 3.99%4.26%4.82% 3.39 %3.24%3.25%3.43%3.67%3.76% 2.78 %2.95%2.99% 3.40%3.99%4.26% 3.09 %3.42 %3.31%
RISK-BASED CAPITAL RATIOS       
Tier 1 leverage11.84%11.54%12.12% 9.02%8.86%10.30% 11.77%12.02%11.52% 10.31 %10.23%9.39%
Tier 1 risk-based capital13.98%13.33%14.53% 15.51%15.10%18.94% 13.76%13.02%12.32% 11.79 %12.90%12.30%
Total risk-based capital15.24%14.59%15.79% 16.78%16.38%20.22% 15.01%14.28%13.58% 13.04 %14.15%13.56%
       
CREDIT QUALITY              
Provision for loan losses$(21.5)$(15.0)$(0.6) $(20.9)$(12.0)$(9.6) $(8.4)$(4.9)$7.0
 $(0.6)$(1.8)$0.4
$7.9
$(21.5)$(15.0) $(28.3)$(20.9)$(12.0) $4.7
$(8.4)$(4.9) $(2.9)$(0.9)$(2.3)
Net loan and lease charge-offs0.4
6.2
14.0
 0.2
3.1
29.8
 0.9
2.5
9.1
 (0.7)0.7
2.7
10.1
0.4
6.2
 (17.3)0.2
3.1
 3.7
0.9
2.5
 (0.4)(0.6)0.2
Ratio of net charge-offs to average loans and leases0.01%0.17%0.41% 0.01%0.14%1.38% 0.04%0.12%0.45% (0.11)%0.12%0.48%0.26%0.01%0.17% (0.74)%0.01%0.14% 0.16%0.04%0.12% (0.05)%(0.08)%0.03%
Allowance for loan losses$40
$62
$83
 $54
$75
$90
 $32
$42
$49
 $9
$9
$12
$38
$40
$62
 $43
$54
$75
 $33
$32
$42
 $8
$10
$10
Ratio of allowance for loan losses to net loans and leases, at year-end1.07%1.67%2.31% 2.22%3.25%4.30% 1.39%1.83%2.30% 1.40 %1.46%2.06%0.97%1.07%1.67% 1.87 %2.22%3.25% 1.34%1.39%1.83% 1.08 %1.42 %1.51%
Nonperforming lending-related assets$28.8
$49.1
$70.9
 $21.2
$29.5
$73.1
 $19.1
$34.4
$42.3
 $6.4
$5.4
$10.7
$46.8
$28.8
$49.1
 $19.2
$21.2
$29.5
 $22.8
$19.1
$34.4
 $1.3
$6.4
$6.2
Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned0.77%1.31%1.94% 0.88%1.28%3.47% 0.82%1.50%1.93% 0.97 %0.85%1.88%1.20%0.77%1.31% 0.84 %0.88%1.28% 0.92%0.82%1.50% 0.18 %0.90 %0.90%
Accruing loans past due 90 days or more$0.1
$0.1
$0.6
 $0.5
$0.7
$0.9
 $—
$0.3
$—
 $—
$—
$—
$0.1
$0.1
$0.1
 $—
$0.5
$0.7
 $1.0
$—
$0.3
 $—
$—
$—
Ratio of accruing loans past due 90 days or more to net loans and leases—%—%0.02% 0.02%0.03%0.04% —%0.01%—% — %—%—%—%—%—% — %0.02%0.03% 0.04%—%0.01% — %— %—%
The above amounts do not include intercompany eliminations.

Zions First National Bank
Zions Bank is headquartered in Salt Lake City, Utah, and is primarily responsible for conducting the Company’s operations in Utah, Idaho, and Idaho. Zions Bank isWyoming. If it were a separately chartered bank, it would be the 24ndth largest full-service commercial bank in Utah and the 4th largest in Idaho, as measured by domestic deposits in these states. Zions Bank conducts the largest portion of the Company’sour Capital Markets operations, which include Zions Direct, Inc., fixed income securities trading, correspondent banking, public finance, and trust and investment advisory services.
Within Zions Bank, the National Real Estate Groupgroup is a wholesale business that generally sources loans from other community banks across the country. Such loans are generally low loan-to-value owner-occupiedowner occupied loans, but also include non-owner occupied CRE term commercial real estate loans.
Zions Bank net income decreased by $4.2$71.0 million, or 1.9%32.2%, during 2014.2015 primarily as a result of losses on CDO sales and an increase in the provision for loan losses. The loan portfolio decreasedincreased by $8$83 million during 2014,2015, which consisted of a $371increases of $269 million decline in commercial real estateloans and $20 million in consumer loans, partially offset by a $129decrease of $206 million increase in consumer loans and a $234 million increase in commercialCRE loans. The decline in commercial real estateCRE loans was mainly the result of a reduction in the National Real Estate construction and term loan portfolios. Nonperforming lending-related assets decreased 42.5% fromincreased 31.8% due primarily to increases in nonaccrual loans in the prior year due to extensive efforts to work out problem loanscommercial and to sell OREO properties. Additionally, the higher credit quality of loans originated since the beginning of the financial crisis also contributed to the improved credit quality of theindustrial and commercial owner occupied portfolio. Total deposits at

48

December 31, 20142015 were 2.3%1.6% higher than at December 31, 2013.2014. The net interest marginNIM in 20142015 decreased to 3.31% from 3.40% from 3.55% in 2013.2014.

Amegy CorporationBank
Amegy Bank is headquartered in Houston, Texas and operates Amegy Bank, Amegy Mortgage Company, Amegy Investments, and Amegy Insurance Agency. Amegy Bank isTexas. If it were a separately chartered bank, it would be the 79th largest full-service commercial bank in Texas as measured by domestic deposits in the state.

41

Amegy’s net income decreased by $36.6$48.4 million, or 28.0%51.9%, in 2014.2015. The decline in net income is mainly due to a $28.0$59.1 million increase in the provision for loan losses, primarily for its energy-relatedoil and gas-related loans. See Schedule 2216 and discussion of the Company’s energy-related exposureour “Oil and Gas-Related Exposure” on page 6553 for more information. OverDespite the past two years,decline in the oil and gas-related portfolio, Amegy has been able to achieve significantmarginal loan portfolio growth; $859growth, resulting in a $38 million in 2014increase from the prior year. During 2015, commercial loans decreased by $572 million, and $767 million in 2013. During 2014, commercialCRE loans and consumer loans increased by $259 million, consumer loans by $360$307 million, and commercial real estate loans increased by $240 million. The$303 million, respectively. As a result of the oil and gas-related exposure, the credit quality of Amegy’s loan portfolio improveddeclined during 2014,2015, and the ratio of allowance for loan losses to net loans and leases decreasedincreased to 1.53%2.20% at December 31, 20142015 from 1.57%1.53% a year earlier. During 2014,2015, nonperforming lending-related assets decreasedincreased by 1.4%46.8%. Deposits increased by 2.2%1.2% from 20132014 to 2014.2015. The net interest marginNIM for Amegy in 2015 increased to 3.16% from 3.12% in 2014, decreasedprimarily due to 3.09% from 3.23% in 2013.recoveries of previously charged-off commercial loans.

California Bank & Trust
California Bank & Trust is headquartered in San Diego, California. If it were a separately chartered bank, it would be the 16th largest full-service commercial bank in California as measured by domestic deposits. Its core business is built on relationship banking by providing commercial, real estate and consumer lending, depository services, international banking, cash management, and community development services.

CB&T’s net income decreasedincreased by $38.8$4.9 million, or 27.7%4.8%, in 20142015 due primarily to losses on sales of CDOsan increase in 2014, a one-time gain on sale of branches in 2013noninterest income and net interest margin compression, offset partially by a decrease in noninterest expenses.expense. CB&T’s loan portfolio decreasedincreased by $44$302 million in 20142015 from the prior year. During 2014, consumer2015, CRE loans grew by $32$170 million, commercial loans increased by $232 million, while commercial real estateconsumer loans declined by $74$100 million. The credit quality of CB&T’s loan portfolio continues to improve, and the ratio of allowance for loan losses to net loans and leases declined to 1.13%0.92% at December 31, 20142015 from 1.43%1.13% a year earlier. Deposits at December 31, 20142015 were $380 million,$10.5 billion, or 4.07%8.4%, higher than at December 31, 2013.2014. CB&T’s net interest marginNIM for 20142015 decreased to 3.62% from 4.05% from 4.73% in 2013.2014.

National Bank of Arizona
National Bank of Arizona is headquartered in Phoenix, Arizona. If it were a separately chartered bank, it would be the 45th largest full-service commercial bank in Arizona as measured by domestic deposits in the state.

NBAZ had net income of $46.5$42.0 million in 2014,2015, a $2.6$4.5 million or 5.9% increase9.7% decrease from 2013.2014. During 2014,2015, the loan portfolio increased by $26$159 million, including a $56$199 million increase in commercial loans, partially offset by a $30decreases of $25 million decline in commercial real estateCRE loans and $15 million in consumer loans. The credit quality of NBAZ’s loan portfolio continues to improve, and the ratio of allowance for loan losses to net loans and leases declined to 1.07%0.97% at December 31, 20142015 from 1.67%1.07% a year earlier. Deposits at December 31, 20142015 were 5.14%5.7% higher than a year earlier. The net interest marginNIM for 20142015 was 3.67%3.43% compared to 3.76%3.67% in 2013.2014.

Nevada State Bank
Nevada State Bank is headquartered in Las Vegas, Nevada. If it were a separately chartered bank, it would be the 5th largest full-service commercial bank in Nevada as measured by domestic deposits in the state. NSB focuses on serving small and mid-sized businesses as well as retail consumers, with an emphasis inon relationship banking.
In 2014,2015, NSB had net income of $22.3$31.5 million, compared to $18.8$22.3 million in 2013.2014. NSB’s loans grewdeclined by $125$136 million during 2014,2015, including a $136$141 million increase in consumercommercial loans and $15 million in CRE loans, partially offset by a $14an increase of $20 million decline in

49

commercial real estate consumer loans. The credit quality of NSB’s loan portfolio improved significantly, and the ratio of allowance for loan losses to net loans and leases was 2.22%1.87% and 3.25%2.22% at December 31, 2015 and 2014, and 2013, respectively. NetDuring 2015, NSB experienced net loan recoveries of $17.3 million, primarily related to the term loan portfolio, compared to net loan and lease charge-offs in 2014 declined toof $0.2 million from $3.1 million in 2013, and nonperforming2014. Nonperforming lending-related assets declined 28.1%.9.4% from the prior year. Deposits at December 31, 2014 were 2.79%9.3% higher than a year earlier. The net interest marginNIM for NSB in 20142015 decreased slightly to 2.78% from 2.95% from 2.99% in 2013.2014.


42

Vectra Bank Colorado
Vectra Bank Colorado N.A. is headquartered in Denver, Colorado. If it were a separately a chartered bank, it would be the 7th largest full-service commercial bank in Colorado as measured by domestic deposits in the state.

In 2014,2015, Vectra’s net income remained unchangeddeclined to $15.7 million from $21.4 million in 2013.2014 primarily as a result of an increase in the provision related to Vectra’s oil and gas-related credit exposure. During 2014,2015, total loans increased by $42$148 million, including a $61$78 million increase in consumer loans, a $40$56 million increase in commercial loans, offset by a $59and $14 million decrease in commercial real estateCRE loans. The credit quality of Vectra’s loan portfolio continued to improve, and the ratio of allowance for loan losses to net loans and leases decreased to 1.39%1.34% at December 31, 20142015 from 1.83%1.39% a year earlier. Deposits at December 31, 20142015 were 18.97%11.5% higher than a year earlier. The net interest marginNIM for Vectra in 20142015 decreased to 3.40% from 3.99% from 4.26% in 2013.2014.

The Commerce Bank of Washington
The Commerce Bank of Washington is headquartered in Seattle, Washington. It operates in Washington and operates out ofthrough a single office locatedunder the Commerce Bank of Washington name and in the Seattle central business district.Portland, Oregon, under The Commerce Bank of Oregon name. Its business strategy focuses on serving the financial needs of commercial businesses, including professional services firms. TCBW has been successful in serving the greater Seattle/Puget Sound regionand Portland regions without requiring extensive investments in a traditional branch network. It has been innovative in effectively utilizing couriers, bank by mail, remote deposit image capture, and other technologies.

TCBW net income for 20142015 was $1.2$14.2 million compared to $7.7$1.0 million in 2013.2014. The loan portfolio increaseddecreased by $32$9 million, including a $27$8 million increasedecrease in commercial real estate loans and a $5$2 million decrease in CRE loans, with $1 million increase in consumer loans.
Nonperforming lending-related assets increased $1.0decreased $5 million, and the ratio of allowance for loan losses slightly decreased from 1.46%1.42% to 1.40%1.08% in 2014.2015. Deposits at December 31, 20142015 were 5.17% lower20.8% higher than a year earlier. The net interest marginNIM for TCBW increaseddecreased from 3.24%3.42% in 20132014 to 3.39%3.09% in 2014.2015.

TCBW’s 2014 results were adversely affected by an $11 million increase in litigation reservessettlement of a legal matter relating to claims brought against TCBW in connection with a customer Frederick Berg, and a number of associated investment funds using the “Meridian” brand name. These claims were settled in February 2015,name as discussed in further detail in Note 17 of the Notes to Consolidated Financial Statements.Statements in the 2014 Form 10-K.

Other Segment
Operating components in the “Other” segment, as shown in Notes 21 and 23 of the Notes to Consolidated Financial Statements, relate primarily to the Parent ZMSC and eliminations of transactions between segments. The major components at the Parent include net interest income, which includes interest expense on other borrowed funds, and net impairment losses on investment securities.

securities, and losses from the sale of the remaining CDO portfolio.
Significant changes in 20142015 compared to 20132014 include (1) a $68$45.3 million increase in net interest income, $47.4 million decrease in noninterest expense primarily due to repurchases, tender offers and redemptions of long-term debt, and (2) a $154$88.6 million decrease in net impairment losses on investment securities, as discussed in “Investment Securities Portfolio” on page 52. Additionally, sales of $808 million carrying value of CDO securities were done in the Other segment. Significant changes in 2013 compared to 2012 include (1) a $125 million increase in noninterest expense, and (2) a $53.7 million increase in net impairment losses on investment securities.income.


50

BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets are those assets that have interest rates or yields associated with them. One of our goals is to maintain a high level of interest-earning assets relative to total assets while keeping nonearning assets at a minimum. Interest-earning assets consist of money market investments, securities, loans, and leases.

Schedule 2,, which we referred to in our discussion of net interest income, includes the average balances of the Company’sour interest earning assets, the amount of revenue generated by them, and their respective yields. Another goal is to

43

maintain a higher-yielding mix of interest-earning assets, such as loans, relative to lower-yielding assets, such as money market investments or securities, while maintaining adequate levels of highly liquid assets. The current periodAs a result of slowslower economic growth accompanied by the moderate loan demand experienced in recent quarters has made it difficultprevious periods, the Company’s initiative to achieve these goals.In 2014, the Company beganmaintain a higher-yielding mix of interest-earning assets caused us to incrementally deploy someexcess funds into security purchases and redemptions of its excess cash into short-to-medium duration pass-through agency securities that qualify as HQLA under new LCR and liquidity stress testing regulations. As a result of this, the Company increased its HQLA securities by approximately $1.0 billion par amount and is continuing these purchases in 2015, which will generate a higher return than that of money market investments.

long term-term debt.
Average interest-earning assets were $52.0$54.4 billion in 20142015 compared to $51.0$52.0 billion in the previous year. Average interest-earning assets as a percentage of total average assets were 93.7% in 2015 and 93.1% in 2014 and 92.8% in 2013.

2014.
Average loans were $40.2 billion in 2015 and $39.5 billion in 2014 and $38.1 billion in 2013.2014. Average loans as a percentage of total average assets were 69.2% in 2015 compared to 70.7% in 2014, comparedprimarily driven by a change in the mix of interest-earning assets, due to 69.4%purchases of term investment securities that outpaced loan growth in 2013.

2015.
Average money market investments, consisting of interest-bearing deposits and federal funds sold and security resell agreements, decreasedincreased by 7.2%0.5% to $8.3 billion in 2015 compared to $8.2 billion in 2014 compared to $8.8 billion in 2013.2014. Average securities increased by 6.2%40.7% from 2013.2014. Average total deposits increased by 2.1%5.1% while average total loans increased by 3.7%1.6% in 20142015 when compared to 2013. The decrease in average money market investments in 2014 was due in part to excess cash being deployed to fund the loan growth that was stronger than deposit growth, in addition to security purchases and redemptions of long-term debt.2014.

Chart 5.OUTSTANDING LOANS AND DEPOSITS
(at December 31)

51

Investment Securities Portfolio
We invest in securities to generateactively manage liquidity and interest rate risk, in addition to generating revenues for the Company; portions of the portfolio are also available as a source of liquidity.Company. Refer to the “Liquidity Risk Management” section on page 81 of the MD&A68 for additional information on management of liquidity and funding management and compliance with Basel III and LCR requirements. Schedule 9The following schedule presents a profile of the Company’sour investment securities portfolio. The amortized cost amounts represent the Company’s original cost of the investments, adjusted for related accumulated amortization or accretion of any yield adjustments, and for impairment losses, including credit-related impairment. The estimated fair value measurement levels and methodology are discussed in detail in Note 20 of the Notes to Consolidated Financial Statements.

44

Schedule 98
INVESTMENT SECURITIES PORTFOLIO
 December 31, 2014 December 31, 2013 December 31, 2012December 31, 2015 December 31, 2014
(In millions)
 
Amortized
cost
 
Carrying
value
 
Estimated
fair
value
 
Amortized
cost
 
Carrying
value
 
Estimated
fair
value
 
Amortized
cost
 
Carrying
value
 
Estimated
fair
value
Par Value 
Amortized
cost
 
Carrying
value
 
Estimated
fair
value
 Par Value 
Amortized
cost
 
Carrying
value
 
Estimated
fair
value
Held-to-maturity                                 
Municipal securitiesMunicipal securities$608
 $608
 $620
 $551
 $551
 $558
 $525
 $525
 $537
$546
 $546
 $546
 $552
 $608
 $608
 $608
 $620
Asset-backed securities:Asset-backed securities:                                
Trust preferred securities – banks and insuranceTrust preferred securities – banks and insurance79
 39
 57
 80
 38
 51
 255
 213
 126
—
 —
 —
 —
 89
 79
 39
 57
Other—
 —
 —
 —
 —
 —
 22
 19
 12
 687
 647
 677
 631
 589
 609
 802
 757
 675
546
 546
 546
 552
 697
 687
 647
 677
Available-for-sale                                 
U.S. Treasury securities      1
 2
 2
 104
 105
 105
U.S. Government agencies and corporations:U.S. Government agencies and corporations:                                
Agency securitiesAgency securities607
 601
 601
 518
 519
 519
 109
 113
 113
1,233
 1,232
 1,233
 1,233
 606
 607
 601
 601
Agency guaranteed mortgage-backed securitiesAgency guaranteed mortgage-backed securities935
 945
 945
 309
 317
 317
 407
 425
 425
3,810
 3,965
 3,936
 3,936
 899
 935
 945
 945
Small Business Administration loan-backed securitiesSmall Business Administration loan-backed securities1,544
 1,552
 1,552
 1,203
 1,221
 1,221
 1,124
 1,153
 1,153
1,741
 1,933
 1,931
 1,931
 1,400
 1,544
 1,552
 1,552
Municipal securitiesMunicipal securities189
 189
 189
 65
 66
 66
 75
 76
 76
387
 417
 419
 419
 187
 189
 189
 189
Other25
 25
 23
 23
        
Asset-backed securities:Asset-backed securities:                                
Trust preferred securities – banks and insuranceTrust preferred securities – banks and insurance538
 415
 415
 1,508
 1,239
 1,239
 1,596
 949
 949
—
 —
 —
 —
 659
 538
 415
 415
Trust preferred securities – real estate investment trusts—
 —
 —
 23
 23
 23
 41
 16
 16
Auction rate securities 5
 5
 5
 7
 7
 7
 7
 7
 7
OtherOther1
 1
 1
 28
 28
 28
 26
 19
 19
—
 —
 —
 —
 7
 6
 6
 6
 3,819
 3,708
 3,708
 3,662
 3,422
 3,422
 3,489
 2,863
 2,863
7,196
 7,572
 7,542
 7,542
 3,758
 3,819
 3,708
 3,708
Mutual funds and otherMutual funds and other137
 136
 136
 287
 280
 280
 228
 228
 228
101
 101
 101
 101
 137
 137
 136
 136
 3,956
 3,844
 3,844
 3,949
 3,702
 3,702
 3,717
 3,091
 3,091
7,297
 7,673
 7,643
 7,643
 3,895
 3,956
 3,844
 3,844
TotalTotal$4,643
 $4,491
 $4,521
 $4,580
 $4,291
 $4,311
 $4,519
 $3,848
 $3,766
$7,843
 $8,219
 $8,189
 $8,195
 $4,592
 $4,643
 $4,491
 $4,521

The amortized cost of investment securities onat December 31, 2015 increased by 77.0% from the balances at December 31, 2014, increased by 1.4% from the balances on December 31, 2013 primarily due to increases inpurchases of agency guaranteed mortgage-backed securities, Small Business Administration loan-backed securities, and municipal securities, partially offset by decreased investments in trust preferred and other asset-backed securities, and mutual funds. In 2013, the amortized cost of investment securities also increased by 1.4%, primarily due tosecurities. There were additional increases in agency securities Small Business Administrationand SBA loan-backed securities, and mutual funds,securities. These increases were partially offset by decreased investments inthe sale of the remaining bank and insurance trust preferred and other asset-backedCDO portfolio during the second quarter of 2015.
The investment securities U.S. Treasuryportfolio includes $376 million of net premium almost exclusively from SBA loan-backed securities and agency guaranteed mortgage-backed securities.

52

Recent purchases of these securities have occurred at a premium to the respective par amount. The amortization of these premiums each quarter is dependent upon borrower prepayment behavior. Premium amortization for 2015 was approximately $51 million, compared to approximately $23 million in 2014, and is included in portfolio yields. The increased premium amortization is due to both an increased amount of agency guaranteed mortgage-backed securities and SBA loan-backed securities and changes in prepayment rates of the underlying loans.
TableDuring the first quarter of Contents


The2015, we reclassified all of the remaining held-to-maturity CDO securities, sold during 2014 consistedor approximately $79 million at amortized cost, to AFS securities. See Note 5 of the following:Notes to Consolidated Financial Statements for further discussion regarding this reclassification.

Schedule 10
CDO SECURITIES SOLD IN 2014
(Amounts in millions) Par value Amortized cost Carrying value  Sales proceeds Gain (loss) realized
Performing CDOs           
Predominantly bank CDOs $160
 $128
 $119
  $123
 $(5)
Insurance CDOs 398
 381
 316
  341
 (40)
Other CDOs 43
 26
 26
  28
 2
Total performing CDOs 601
 535
 461
  492
 (43)
            
Nonperforming CDOs 1
           
Credit impairment prior to last 12 months 507
 275
 257
  297
 22
Credit impairment during last 12 months 258
 103
 90
  119
 16
Total nonperforming CDOs 765
 378
 347
  416
 38
Total $1,366
 $913
 $808
  $908
 $(5)
As of December 31, 2015, under the GAAP fair value accounting hierarchy, 0.8% of the $7.6 billion fair value of the AFS securities portfolio was valued at Level 1,Defined 99.2% was valued at Level 2, and there were no Level 3 AFS securities as either deferring current interest (“PIKing”) or OTTI.

During 2014,a result of the Company realized $5 millionsale of losses on sales ofthe remaining CDO securities. The losses represent the difference between the amortized cost and the sales proceeds at the time of sale. Depending upon the sales price, previously unrealized holding gains/losses recognized in OCI may be reclassified to earnings or act to reduce remaining unrealized gains/losses in the portfolio. Sales and payoffs eliminated the Company’s holdings of CDOs comprised of solely insurance companies during 2014. At December 31, 2014, the CDO portfolio consisted of CDOs backed primarily by bank collateral.

As of December 31, 2014, 2.7% of the $3.8 billion fair value of available-for-sale (“AFS”)AFS securities portfolio was valued at Level 1, 86.8% was valued at Level 2, and 10.5% was valued at Level 3 under the GAAP fair value accounting valuation hierarchy. At December 31, 2013, 7.0% of the $3.7 billion fair value of AFS securities portfolio was valued at Level 1, 57.7% was valued at Level 2, and 35.3% was valued at Level 3.

The amortized cost of AFS investment securities valued at Level 3 was $522 million at December 31, 2014 and the fair value of these securities was $402 million. The securities valued at Level 3 were comprised of primarily bank trust preferred CDOs and municipal securities. For these Level 3 securities, the net pretax unrealized loss recognized in OCI at December 31, 2014 was $120 million. As of December 31, 2014, we believe we will receive on settlement or maturity at least the amortized costamounts of the Level 3 AFS securities. This expectation applies to both those securities for which OTTI has been recognized and those for which no OTTI has been recognized.

Estimated fair value determined under ASC 820 precludes the use of “blockage factors” or liquidity adjustments due to the quantity of securities held by the Company. All of the Company’s CDO securities are valued under Level 3. The Company’s ability to sell in a short period of time a substantial portion of its CDO securities at the indicated estimated fair values is highly dependent upon then current market conditions. The market for such securities, which showed substantial improvement during 2014, remains difficult to predict. The Company may execute additional CDO sales in future quarters which may result in net losses. Please refer to Notes 5 andSee Note 20 of the Notes to Consolidated Financial Statements for more information.

further discussion of fair value accounting.

5345

Schedule 11 presents the Company’s CDOs according to performing tranches without credit impairment and nonperforming tranches. These CDOs are the large majority of our asset-backed securities and consist of both HTM and AFS securities.

Schedule 11
CDOs BY PERFORMANCE STATUS

  December 31, 2014 % of carrying value to par  
          
Net unrealized losses recognized in AOCI 1
 
Weighted average discount rate 2
   
             
(Dollar amounts in millions) 
No. of
tranches
 
Par
amount
 
Amortized
cost
 
Carrying
value
  December 31,  
      2014 2013 Change
Performing CDOs                  
Predominantly bank CDOs 17
 $443
 $420
 $325
 $(95) 3.6% 73% 73% — %
Insurance-only CDOs —
 —
 —
 —
 —
 —
 —
 80
 (80)
Other CDOs —
 —
 —
 —
 —
 —
 —
 60
 (60)
Total performing CDOs 17
 443
 420
 325
 (95) 3.6
 73
 75
 (2)
                   
Nonperforming CDOs 3
                  
CDOs credit impaired prior to last 12 months 12
 279
 172
 107
 (65) 4.9
 38
 46
 (8)
CDOs credit impaired during last 12 months 1
 1
 —
 —
 —
 3.4
 —
 33
 (33)
Total nonperforming CDOs 13
 280
 172
 107
 (65) 4.9
 38
 41
 (3)
                   
Total CDOs 30
 $723
 $592
 $432
 $(160) 4.0
 60
 59
 1

  December 31, 2013 % of carrying value to par  
          
Net unrealized losses recognized in AOCI 1
 
Weighted average discount rate 2
   
             
(Dollar amounts in millions) 
No. of
tranches
 
Par
amount
 
Amortized
cost
 
Carrying
value
  December 31,  
      2013 2012 Change
Performing CDOs                  
Predominantly bank CDOs 23
 $687
 $617
 $499
 $(118) 5.6% 73% 66% 7 %
Insurance-only CDOs 22
 433
 413
 346
 (67) 4.9
 80
 72
 8
Other CDOs 3
 43
 26
 26
 —
 10.6
 60
 70
 (10)
Total performing CDOs 48
 1,163
 1,056
 871
 (185) 5.5
 75
 68
 7
                   
Nonperforming CDOs 3
                  
CDOs credit impaired prior to last 12 months 32
 614
 369
 285
 (84) 7.0
 46
 30
 16
CDOs credit impaired during last 12 months 23
 448
 187
 147
 (40) 6.5
 33
 25
 8
Total nonperforming CDOs 55
 1,062
 556
 432
 (124) 6.8
 41
 26
 15
                   
Total CDOs 103
 $2,225
 $1,612
 $1,303
 $(309) 6.1
 59
 49
 10
1 Accumulated other comprehensive income, amounts presented are pretax.
2 Margin over related LIBOR index.
3 Defined as either deferring current interest (“PIKing”) or OTTI; the majority are predominantly bank CDOs.


54

We have included selected credit rating information for certain of the investment securities in Schedules 12 and 13 because this information is one indication of the degree of credit risk to which we are exposed, and significant declines in ratings for our investment portfolio could indicate an increased level of risk for the Company.
As shown in Schedule 12, CDO securities representing 92.2% of that portfolio’s fair value at December 31, 2014 were upgraded by one or more NRSROs during 2014. The Company attributes these upgrades to improvements in over-collateralization ratios and de-leveraging combined with certain less severe rating agency assumptions and methodologies.

Schedule 12
BANK TRUST PREFERRED CDOs
   December 31, 2014
(Dollar amounts in millions) No. of securities 
Par
amount
 Amortized cost 
Fair
value
Year-to-date rating changes 1
            
Upgrade  24
  $587
  $542
  $416
No change  6
  136
  50
  35
Downgrade  —
  —
  —
  —
   30
  $723
  $592
  $451
1 By any NRSRO.

Bank Collateral Deferral Experience
The Company’s loss and recovery experience on defaults as of December 31, 2014 (and our Level 3 modeling assumption) is essentially a 100% loss on defaulted bank collateral in CDOs, although we have, to date, received several, generally small, recoveries on a few defaults. Securities sales during 2014 resulted in the Company reducing its exposure to some unresolved deferring banks. At December 31, 2014, the Company had exposure to 43 deferring issuers of which 32 were in their initial five-year deferral period. We continue to expect that future losses on these deferrals may result from actions other than bank failures – primarily holding company bankruptcies and debt restructurings.

A significant number of previous deferrals have resumed interest payments; 157 issuing banks have either come current and resumed interest payments on their trust preferred securities or have announced they intend to do so at the next payment date. Banks may come current on their trust preferred securities for one or more quarters and then re-defer. Such re-deferral has occurred in 11 of the 43 banks that are currently deferring. Further information on the Company’s valuation process is detailed in Note 20 of the Notes to Consolidated Financial Statements.

Schedule 13 provides additional information on the below-investment-grade rated bank trust preferred CDOs’ portions of the AFS and HTM portfolios. The schedules reflect data and assumptions that are included in the calculations of fair value and OTTI. The schedules utilize the lowest rating assigned by any rating agency to identify those securities below investment grade. The schedules segment the securities by whether or not they have been determined to have credit-related OTTI, and by original ratings level to provide granularity on the seniority level of the securities and the distribution of unrealized losses.

55


Schedule 13
BANK TRUST PREFERRED CDO VALUES CURRENTLY RATED BELOW-INVESTMENT-GRADE –SORTED BY WHETHER CREDIT RELATED OTTI HAS BEEN TAKEN AND BY ORIGINAL RATINGS
At December 31, 2014
     Total Credit OTTI loss 
Valuation losses 1
(Dollar amounts in millions)
Number
of securities
 
% of
portfolio
 
Par
value
 
Amortized
cost
 
Estimated
fair value
 
Unrealized
gain (loss)
 
Current
year
 
Life-to-
date
 
Life-to-
date
                  
Original ratings of securities, no credit OTTI recognized:              
Original AAA12 53.5% $328
 $309
 $239
 $(70) $—
 $—
 $(31)
Original A1 1.1
 7
 7
 6
 (1) —
 —
 —
Total Non-OTTI  54.6
 335
 316
 245
 (71) —
 —
 (31)
Original ratings of securities, credit OTTI recognized:              
Original AAA1 8.1
 50
 43
 29
 (14) —
 (5) (2)
Original A11 33.2
 204
 128
 97
 (31) —
 (75) —
Original BBB1 4.1
 25
 —
 —
 —
 —
 (25) —
Total OTTI  45.4
 279
 171
 126
 (45) —
 (105) (2)
Total below-investment-grade bank and insurance CDOs 100.0% $614
 $487
 $371
 $(116) $—
 $(105) $(33)
1 Valuation losses relate to securities purchased from Lockhart Funding LLC prior to its consolidation in June 2009.

Significant Assumption Changes for 2014
The Company reduced discount rates and prepayment assumptions on CDO securities during 2014. Neither assumption change was material to either fair value estimates or credit impairment considerations during 2014. The Company incorporated these observations into the process used to estimate fair value. Trade information included sales of CDO securities by the Company and by third parties.

After observing slower prepayment rates in the latter half of 2014, we reduced our prepayment rate assumption. Effective at year-end 2014, we assumed all CDO collateral would prepay at a 2% annual prepayment rate through maturity. This differed from our third quarter prepayment rate assumption which assumed that small banks would prepay at a 3% annual prepayment rate through maturity and that larger investment grade-rated issuing banks facing the phased-in disallowance of certain trust preferred securities as Tier 1 capital would fully prepay by year-end 2015. In the fourth quarter of 2014, we observed no prepayments of big bank collateral remaining within our pools. Decreased prepayment rates are generally adverse to the fair value of the most senior tranches and favorable to the fair value of the more junior tranches.
Valuation Sensitivity of Level 3 Bank CDOs
Schedule 14 sets forth the sensitivity of the current internally modeled CDOs’ fair values to changes in the most significant assumptions utilized in the model.

56

Schedule 14
SENSITIVITY OF INTERNAL MODEL
(Amounts in millions)           
  Held-to-maturity Available-for-sale
          
Fair value at December 31, 2014  $57    $393   
   Incremental Cumulative Incremental Cumulative
Currently Modeled Assumptions           
Expected collateral credit losses 1
           
Loss percentage from currently defaulted or deferring collateral 2
    15.9%    26.1%
Projected loss percentage from currently performing collateral          
1-year  0.3%  16.2% 0.2%  26.3%
years 2-5  1.9%  18.2% 1.8%  28.2%
years 6-maturity  12.0%  30.1% 10.4%  38.6%
Discount rate 3
           
Weighted average spread over LIBOR  497
bps   385
bps  
Sensitivity of Modeled Assumptions           
Increase (decrease) in fair value due to increase in projected loss percentage from currently performing collateral 4
25% $(0.5)    $(1.2)   
 50% (1.4)    (2.2)   
 100% (4.0)    (4.1)   
Increase (decrease) in fair value due to increase in projected loss percentage from currently performing collateral 4 and the immediate default of all deferring collateral with no recovery
25% $(0.9)    $(3.0)   
 50% (2.2)    (4.1)   
 100% (4.7)    (6.1)   
Increase (decrease) in fair value due to
increase in discount rate
+100 bps $(6.2)    $(38.2)   
 +200 bps (11.6)    (71.2)   
Increase (decrease) in fair value due to increase in forward LIBOR curve+100 bps $—
    $—
   
Increase (decrease) in fair value due to:           
increase in prepayment assumption 5
+1% $(0.1)    $13.6
   
increase in prepayment assumption 6
+2% 0.2
    25.7
   
1 The Company uses an incurred credit loss model which specifies cumulative losses at the 1-year, 5-year, and 30-year points from the date of valuation. These current and projected losses are reflected in the CDO’s fair value.
2
Weighted average percentage of collateral that is defaulted due to bank failures, or deferring payment as allowed under the terms of the security, including a 0% recovery rate on defaulted collateral and a credit-specific probability of default on deferring collateral which ranges from 2.18% to 100%.
3The discount rate is a spread over the forward LIBOR curve at the date of valuation.
4 Percentage increase is applied to incremental projected loss percentages from currently performing collateral. For example, the 50% and 100% stress scenarios for AFS securities would result in cumulative 30-year losses of 44.8% = 38.6%+50% (0.2%+1.8%+10.4%) and 51.0% = 38.6%+100% (0.2%+1.8%+10.4%), respectively.
5 Prepayment rate increased to 3% per year through maturity.
6
Prepayment rate increased to 4% per year through maturity.
During 2014, the market level discount rates applicable to bank CDOs declined substantially and fair values rose. The discount rate, or credit spread, in the above 2014 sensitivity analysis of valuation assumptions is approximately 166 bps lower than that used in 2013. Trade data supported the extent of fair value increases through the year. In addition, the AFS portfolio’s fair value exhibited much less sensitivity to loss assumptions on performing collateral than was the case in 2013. This is due to the Company’s sales of the junior priority AFS securities during 2014.
Schedule 159 presents the maturities of the different types of investments that the Companywe owned and the corresponding average yield as of December 31, 20142015 based on amortized cost. Expected maturities, rather than contractual maturities, are shown for trust preferred CDOs, SBA securities, agency guaranteed mortgage-backed securities and certain agency and municipal securities. See “Liquidity Risk Management” on page 8168 and Notes 1, 5 and 7 of the Notes to Consolidated Financial Statements for additional information about the Company’sour investment securities and their management.

57

Schedule 159
MATURITIES AND AVERAGE YIELDS ON SECURITIES
At December 31, 20142015
Total securities Within one year  After one but within five years After five but within ten years After ten yearsTotal securities Within one year  After one but within five years After five but within ten years After ten years
(Amounts in millions)Amount Yield* Amount Yield* Amount Yield* Amount Yield* Amount Yield*Amount Yield* Amount Yield* Amount Yield* Amount Yield* Amount Yield*
Held-to-maturity                                      
Municipal securities$608
 5.1% $97
 5.1% $196
 3.8% $153
 5.6% $162
 6.2%$546
 5.0% $64
 3.4% $199
 4.4% $153
 5.8% $130
 5.7%
Asset-backed securities:                   
Trust preferred securities – banks and insurance79
 2.4
 —
 —
 1
 2.6
 1
 2.6
 77
 2.4
687
 4.8
 97
 5.1
 197
 3.8
 154
 5.6
 239
 5.0
546
 5.0
 64
 3.4
 199
 4.4
 153
 5.8
 130
 5.7
                                      
Available-for-sale                                      
U.S. Treasury securities—
   —
   —
   —
   —
  
U.S. Government agencies and corporations:                                      
Agency securities607
 1.8
 75
 1.8
 239
 1.8
 157
 1.9
 136
 1.8
1,232
 2.2
 106
 2.3
 346
 2.3
 595
 2.0
 185
 2.6
Agency guaranteed mortgage-backed securities935
 2.5
 134
 2.5
 369
 2.5
 312
 2.3
 120
 2.8
3,965
 2.2
 534
 2.1
 1,507
 2.1
 1,359
 2.1
 565
 2.3
Small Business Administration loan-backed securities1,544
 2.0
 309
 2.0
 742
 2.0
 342
 2.0
 151
 2.0
1,933
 2.1
 387
 2.1
 922
 2.1
 442
 2.1
 182
 2.2
Municipal securities189
 2.8
 15
 0.9
 94
 2.7
 59
 3.4
 21
 3.3
417
 2.9
 13
 2.1
 157
 2.5
 211
 3.1
 36
 3.3
Asset-backed securities:                   
Trust preferred securities – banks and insurance538
 2.1
 12
 2.0
 36
 1.8
 45
 1.8
 445
 2.1
Trust preferred securities – real estate investment trusts—
   —
   —
   —
   —
  
Auction rate securities5
 1.0
 —
   —
   —
   5
 1.0
Other1
 2.6
 —
   —
   1
 2.6
 —
  25
 5.6
 —
   —
   —
   25
 5.6
3,819
 2.2
 545
 2.1
 1,480
 2.2
 916
 2.2
 878
 2.2
7,572
 2.2
 1,040
 2.1
 2,932
 2.2
 2,607
 2.1
 993
 2.5
Mutual funds and other137
 1.0
 137
 1.0
 —
   —
   —
  101
 0.3
 101
 0.3
 —
   —
   —
  
3,956
 2.1
 682
 1.9
 1,480
 2.2
 916
 2.2
 878
 2.2
7,673
 2.2
 1,141
 2.0
 2,932
 2.2
 2,607
 2.1
 993
 2.5
Total$4,643
 2.5
 $779
 2.3
 $1,677
 2.3
 $1,070
 2.7
 $1,117
 2.8
$8,219
 2.4
 $1,205
 2.1
 $3,131
 2.3
 $2,760
 2.3
 $1,123
 2.8
*Taxable-equivalent rates used where applicable.

Other-Than-Temporary Impairment – Investments in Debt Securities
We review investments in debt securities each quarter for the presence of OTTI. For securities for which an internal income-based cash flow model or third party valuation service produces a loss-adjusted expected cash flow for the security, the presence of OTTI is identified and the amount of the credit component of OTTI is calculated by discounting this loss-adjusted cash flow at the security-specific effective interest rate and comparing that value to the Company’s amortized cost of the security.
We review the relevant facts and circumstances each quarter to assess our intentions regarding any potential sales of securities, as well as the likelihood that we would be required to sell prior to recovery of amortized cost for AFS securities and prior to maturity for HTM securities. At December 31, 2014, for each AFS security whose fair value was below amortized cost, we have determined that we did not intend to sell the security, and that it was not more likely than not we would be required to sell the security before recovery of its amortized cost basis.For each HTM security whose fair value was below amortized cost, we have determined that it was not more likely than not we would be required to sell the security before maturity.
During 2014, the Company recognized an immaterial amount of OTTI on CDOs, compared to $165.1 million in 2013. For some CDO tranches that we do not intend to sell, which have previously recorded OTTI, the expected future cash flows have remained stable or have slightly improved subsequent to the quarter that OTTI was identified and recorded. For other CDO tranches, an adverse change in the expected future cash flows has resulted in the

58

recording of additional OTTI. In both situations, while a difference may remain between fair value and amortized cost, the difference is not due to credit and the expected future cash flows substantiate the return of the full amortized cost of the CDO tranches. We utilize a present value technique to both identify the OTTI existing in the CDO tranches and to estimate fair value. The primary drivers of unrealized losses in these CDOs are further discussed in Note 5 of the Notes to Consolidated Financial Statements.
In 2013, as a result of the Volcker Rule, IFR, and the Company’s decision to reduce its risk profile, the Company changed its intent with respect to the holding period of certain AFS securities, including some securities that were formerly HTM. The result was a pretax securities impairment charge of $137 million on these securities. Approximately one third of the charge relates to securities that the Company determined to sell during the first quarter of 2014, and which the Volcker Rule and the IFR at the time the decision was made, precluded the Company from holding beyond July 21, 2015, by which time the Company did not expect to have recovered its amortized cost. That deadline has since been extended to July 21, 2016 and the Federal Reserve has announced its intention to grant an additional one-year extension to July 21, 2017. The remaining two thirds of the charge relates to securities that the Company determined to sell during the first quarter of 2014 despite each being allowable under the Volcker Rule and the IFR.
Additionally, credit-related impairment of $5 million was identified in the fourth quarter of 2013 in securities that we did not intend to sell. We evaluate the difference between the fair value and the amortized cost of each security and identify if any of the difference is due to credit. The credit component of the difference is recognized by writing down the amortized cost of each security found to have OTTI.

Exposure to State and Local Governments
The Company providesWe provide multiple products and services to state and local governments (referred together as “municipalities”), including deposit services, loans, and investment banking services, and the Company investswe invest in securities issued by the municipalities.

Schedule 1610 summarizes the Company’s exposure to state and local municipalities.

Schedule 1610
MUNICIPALITIES
 
December 31,December 31,
(In millions)2014 20132015 2014
      
Loans and leases$521
 $449
$676
 $521
Held-to-maturity – municipal securities608
 551
546
 608
Available-for-sale – municipal securities189
 66
419
 189
Available-for-sale – auction rate securities5
 7
—
 5
Trading account – municipal securities53
 27
33
 53
Unused commitments to extend credit58
 17
Unfunded lending commitments119
 58
Total direct exposure to municipalities$1,434
 $1,117
$1,793
 $1,434


46

At December 31, 2014, $1.12015, $1 million of loans to one municipality were on nonaccrual. A significant amount of the municipal loan and lease portfolio is secured by real estate and equipment, and approximately 90%87% of the outstanding credits were originated by Zions Bank, CB&T, Amegy, and Vectra. See Note 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans.

AllGrowth in municipal exposures came primarily from increases in the municipal AFS securities are reviewed quarterly for OTTI; see Note 5portfolio consistent with the Company’s initiative to increase securities. AFS securities generally consist of the Notes to Consolidated Financial Statements forrated securities with investment grade ratings from one or more information.major credit rating agencies. HTM securities consist of unrated bonds issued by small local government entities and are purchased through private placements, often in situations in which one of the Company’s subsidiaries has acted as a financial advisor to the municipality.entities. Prior to purchase, the issuers of municipal securities are evaluated by the Company for their creditworthiness, and some of the securities are guaranteed by third parties. Of the AFS municipal securities, 99% of the total portfolio on a fair value basis are rated by major credit rating agencies and

59

were rated investment grade as of December 31, 2014. The Company also underwrites municipal bonds and sells most of them to third party investors.
Foreign Exposure and Operations
The Company has de minimisOur credit exposure to foreign sovereign risks and does not believe its total foreign credit exposure is material. The Company canceled its Total Return Swap (“TRS”) with Deutsche Bank AG (“DB”) effective April 28, 2014 due to the removal, mostly through sale, of over half of the CDOs originally covered by the TRS. See “Noninterest Income” on page 41 and Note 7 of the Notes to Consolidated Financial Statements for additional information. Following the cancellation, the TRS derivative liability was extinguished and the Company’s regulatory risk weighted assets increased by approximately $0.9 billion. The Company doesnot significant. We also do not have significant foreign exposure for itsto derivative counterparties.

Foreign loans to non-sovereign entities consist primarily of commercial and industrial loans and totaled $144 million and $43 million at December 31, 2014 and 2013, respectively.

The Company’s We have foreign operations are comprisedas a result of Amegy operating aour branch in Grand Cayman, Grand Cayman Islands B.W.I. In April 2014, Zions Bank closed its branch in the Grand Cayman Islands. Amegy’s foreign branch only accepts deposits from qualified domestic customers. While deposits in this branch are not subject to FRB reserve requirements, there are no federal or state income tax benefits to the Company or any customers as a result of these operations.

Foreign deposits at December 31, 2015 and 2014 were $294 million and 2013 were $0.3 billion and $2.0 billion,$328 million, respectively. The decrease is due to the closing of the Zions Bank branch. Foreign deposits are related to domestic customers of our subsidiary banks.

Loans Held for Sale
Loans held for sale, consisting primarily of consumer mortgage and small business loans to be sold in the secondary market, were $150 million at December 31, 2015, compared to $133 million at December 31, 2014, compared to $171 million at December 31, 2013.2014. Consumer loans are primarily fixed ratefixed-rate mortgages that are originated and sold to third parties.

Loan Portfolio
As of December 31, 2014,2015, net loans and leases accounted for 70.0%68.1% of total assets compared to 69.7%70.0% at the end of 2013.2014. Schedule 1711 presents the Company’sour loans outstanding by type of loan as of the five most recent year-ends. The schedule also includes a maturity profile for the loans that were outstanding as of December 31, 2014.2015. However, while this schedule reflects the contractual maturity and repricing characteristics of these loans, in a small number of cases, the Company haswe have hedged the repricing characteristics of itsour variable-rate loans as more fully described in “Interest Rate Risk” on page 77.63.

6047

Schedule 1711
LOAN PORTFOLIO BY TYPE AND MATURITY
December 31, 2014 December 31,December 31, 2015 December 31,
(In millions)One year or less One year through five years Over five years Total 2013 2012 2011 2010One year or less One year through five years Over five years Total 2014 2013 2012 2011
Commercial:                              
Commercial and industrial$7,355
 $4,599
 $1,209
 $13,163
 $12,459
 $11,215
 $10,422
 $9,152
$7,560
 $4,267
 $1,384
 $13,211
 $13,163
 $12,459
 $11,215
 $10,422
Leasing35
 296
 78
 409
 388
 422
 380
 365
29
 323
 90
 442
 409
 388
 422
 380
Owner occupied448
 1,353
 5,550
 7,351
 7,568
 7,781
 8,394
 8,500
467
 1,231
 5,452
 7,150
 7,351
 7,568
 7,781
 8,394
Municipal27
 101
 393
 521
 449
 494
 441
 438
85
 127
 464
 676
 521
 449
 494
 441
Total commercial7,865
 6,349
 7,230
 21,444
 20,864
 19,912
 19,637
 18,455
8,141
 5,948
 7,390
 21,479
 21,444
 20,864
 19,912
 19,637
Commercial real estate:                              
Construction and land development806
 1,108
 72
 1,986
 2,193
 1,969
 2,315
 3,679
711
 1,055
 76
 1,842
 1,986
 2,193
 1,969
 2,315
Term1,434
 3,115
 3,578
 8,127
 8,203
 8,362
 8,310
 8,084
1,292
 3,619
 3,603
 8,514
 8,127
 8,203
 8,362
 8,310
Total commercial real estate2,240
 4,223
 3,650
 10,113
 10,396
 10,331
 10,625
 11,763
2,003
 4,674
 3,679
 10,356
 10,113
 10,396
 10,331
 10,625
Consumer:                              
Home equity credit line50
 52
 2,219
 2,321
 2,147
 2,197
 2,210
 2,172
60
 41
 2,316
 2,417
 2,321
 2,147
 2,197
 2,210
1-4 family residential12
 151
 5,038
 5,201
 4,742
 4,358
 3,933
 3,518
12
 117
 5,253
 5,382
 5,201
 4,742
 4,363
 3,932
Construction and other consumer real estate205
 10
 156
 371
 325
 322
 306
 346
225
 33
 127
 385
 371
 325
 322
 306
Bankcard and other revolving plans266
 17
 118
 401
 361
 312
 298
 307
286
 17
 141
 444
 401
 361
 312
 298
Other25
 165
 23
 213
 208
 233
 249
 269
15
 148
 24
 187
 213
 208
 233
 249
Total consumer558
 395
 7,554
 8,507
 7,783
 7,422
 6,996
 6,612
598
 356
 7,861
 8,815
 8,507
 7,783
 7,427
 6,995
Total net loans$10,663
 $10,967
 $18,434
 $40,064
 $39,043
 $37,665
 $37,258
 $36,830
$10,742
 $10,978
 $18,930
 $40,650
 $40,064
 $39,043
 $37,670
 $37,257
                              
Loans maturing:                              
With fixed interest rates$1,540
 $3,851
 $3,233
 $8,624
        $1,228
 $3,706
 $3,490
 $8,424
        
With variable interest rates9,123
 7,116
 15,201
 31,440
        9,514
 7,272
 15,440
 32,226
        
Total$10,663
 $10,967
 $18,434
 $40,064
        $10,742
 $10,978
 $18,930
 $40,650
        

As of December 31, 2014,2015, net loans and leases were $40.1$40.7 billion, reflecting a 2.6%1.5% increase from the prior year. The increase is primarily attributable to new loan originations, as well as a decrease in paydowns and charge-offs of existing loans.
Most of the loan portfolio growth during 20142015 occurred in commercial and industrial,municipal, CRE term, 1-4 family residential, and home equity credit line loans.loans (“HECL”). The impact of these increases was partially offset by declines in commercial owner occupied, and commercial real estateCRE construction loans. The loan portfolio increased primarily at Amegy, NSB,CB&T, NBAZ, and Vectra, while balances declined at CB&T and Zions Bank.NSB.
Of the significant increases and decreases within the portfolio, commercial and industrialmunicipal loans increased more than $700approximately $155 million, CRE term loans increased $388 million, and 1-4 family residential loans increased $181 million, due in part to an increase in loan production, and 1-4 family residentialproduction. The increase in loans increased more than $450 million, primarily due tooccurred across the purchase of $249 million par amount of high quality jumbo ARM loans from another bank.Company’s geographic footprint.
Commercial owner occupied loans declined more than $200approximately $202 million due to the runoff and attrition of the National Real Estate portfolio at Zions Bank, which is not expected to continue at the same pace in 2015.2016. The National Real Estate business is a wholesale business that depends upon loan referrals from other community banking institutions. Due to generally soft loan demand nationally, many community banking institutions are retaining, rather than selling, their loan production.

61

We expect slight-to-moderate overall loan and lease growth to increase at a moderate paceduring 2016 primarily in 2015.consumer and commercial and industrial loans, partially offset by continued attrition from the National Real Estate and oil and gas-related loan portfolios. We also expect to continue to limit construction and land development loan commitment growth for the

48

foreseeable future as part of management’s actions to improve the risk profile of the Company’s loansCompany and to reduce portfolio concentration risk.
Loans serviced for the benefit of others remained unchanged atincreased to $3.0 billion during 2015 from $2.7 billion during 2014 and 2013.in 2014.

Since 2009, CB&T and NSB have had loss sharingloss-sharing agreements with the FDIC that provided indemnification for credit losses of acquired loans and foreclosed assets up to specified thresholds. The last of the agreements for commercial loans, which comprised the major portion of the acquired portfolio, expired as of September 30, 2014. The agreements for 1-4 family residential loans will expire in 2019. In previous periods, the FDIC-supported loan balances were presented separately in schedules within MD&A and in other disclosures, and included PCIpurchase credit-impaired (“PCI”) loans, as discussed in Note 6 of the Notes to Consolidated Financial Statements. Due to declining balances, for all yearsperiods presented herein, the FDIC-supported/PCI loans have been reclassified to their respective loan segments and classes.

Other Noninterest-Bearing Investments
As part of our initiative to consolidate our charters into a single charter, we will have shares in a single FHLB (Des Moines) and we expect to redeem outstanding shares of the other respective FHLBs, most likely in the second quarter of 2016. Our investment balance in Federal Reserve stock is expected to remain relatively stable. Schedule 1812 sets forth the Company’sour other noninterest-bearing investments.
Schedule 1812
OTHER NONINTEREST-BEARING INVESTMENTS
December 31,December 31,
(In millions)2014 20132015 2014
      
Bank-owned life insurance$476
 $466
$486
 $476
Federal Home Loan Bank stock104
 105
68
 104
Federal Reserve stock121
 121
123
 121
FARMAC stock25
 26
SBIC investments86
 61
113
 86
Non-SBIC investment funds and other74
 98
Trust preferred securities5
 5
Non-SBIC investment funds24
 44
Others9
 9
$866
 $856
$848
 $866
Premises and Equipment
Premises and equipment increased $76 million, or 9.1%, from the prior year primarily due to an increase of $47 million in buildings and $56 million in software, partially offset by an increase in depreciation of $30 million. The capitalized costs associated with buildings were primarily from the development of a new corporate facility for Amegy in Texas. The increase in software was mainly due to the capitalization of eligible costs related to the development of new lending, deposit and reporting systems.
Deposits
Deposits, both interest-bearing and noninterest-bearing, are a primary source of funding for the Company. Average total deposits increased by 2.1%5.1% during 2014,2015, with average interest-bearing deposits decreasing by 2.5%2.3% and average noninterest-bearing deposits increasing 9.1%9.0%. The average interest rate paid for interest-bearing deposits was 3 bps lower1 bp higher in 20142015 than in 2013.2014.
Core depositsDeposits at December 31, 2014, which exclude2015, excluding time deposits larger than $100,000 and over and brokered deposits, increased by 3.4%5.8%, or $1.5$2.7 billion, from December 31, 2013.2014. The increase was mainly due to increases in noninterest-bearing and interest-bearing demand deposits, savings accounts, and a marginalan increase in money market accounts partially offset by foreign deposits and time deposits. The increases in noninterest-bearing demand deposits, resulted primarily from increased balancesinterest-bearing domestic savings and money market, and foreign deposits, offset by a decrease in accountstime deposits under $100,000.

49

Demand and savings and money market deposits comprised 94.3%95.2% of total deposits at December 31, 2014,2015, compared with 90.1%94.3% at December 31, 2013.2014.
During 2015 and 2014, and 2013, the Companywe maintained a relatively low level of brokered deposits with the primary purpose of keeping that funding source available in case of a future need. At December 31, 2014,2015, total deposits included $108$119 million of brokered deposits compared to $29$108 million at December 31, 2013.2014.
See Notes 11 and 12 of the Notes to Consolidated Financial Statements and “Liquidity Risk Management” on page 8168 for additional information on funding and borrowed funds.


62

RISK ELEMENTS
Since risk is inherent in substantially all of the Company’sour operations, management of risk is an integral part of itsour operations and is also a key determinant of itsour overall performance. We applyThe Board of Directors has appointed a Risk Oversight Committee (“ROC”) that consists of appointed Board members who oversee the Company’s risk management processes. The ROC meets on a regular basis to monitor and review Enterprise Risk Management (“ERM”) activities. As required by its charter, the ROC performs oversight for various ERM activities and approves ERM policies and activities as detailed in the ROC charter.
Management applies various strategies to reduce the risks to which the Company’s operations are exposed, including credit, interest rate and market, liquidity, and operational risks. These risks are overseen by the various management committees of which the ERMC is the focal point for the monitoring and review of enterprise risk.
Credit Risk Management
Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risk arises primarily from the Company’sour lending activities, as well as from off-balance sheet credit instruments.

The Board of Directors, through the ROC, is responsible for approving the overall policies relating to the management of the credit risk of the Company. In addition, the ROC oversees and monitors adherence to key policies and the credit risk appetite which is defined in the Risk Appetite Framework. Additionally, the Board has established the Credit Administration Committee (“CAC”), chaired by the Chief Credit Officer and consisting of members of management, to which it has delegated the responsibility for managing credit risk for the company.

Centralized oversight of credit risk is provided through credit policies, credit administration, and credit examination functions at the Parent. We have structured the organization to separate the lending function from the credit administration function, which has added strength to thestrengthens control over, and the independent evaluation of, credit activities. Formal loan policies and procedures provide the Company with a framework for consistent underwriting and a basis for sound credit decisions at the local banking affiliate level. In addition, the Company haswe have a well-defined set of standards for evaluating itsour loan portfolio, and management utilizeswe utilize a comprehensive loan grading system to determine the risk potential in the portfolio. Furthermore, an independent internal credit examination department periodically conducts examinations of the Company’s lending departments. These examinations are designed to review credit quality, adequacy of documentation, appropriate loan grading administration, and compliance with lending policies, andpolicies. Credit examination reports thereon are submitted to management and to the Risk Oversight Committee of the Board of Directors.ROC on a regular basis. New, expanded, or modified products and services, as well as new lines of business, are approved by the corporate New Product Review Committee.

Both the credit policy and the credit examination functions are managed centrally. Each subsidiary bank can be more conservative in its operations under the corporate credit policy; however, formal corporate approval must be obtained if a bank wishes to invoke a more liberal policy. Historically, there have been only a limited number of such approvals. This entire process has been designed to place an emphasisEmphasis is placed on strong underwriting standards and early detection of potential problem credits so thatin order to develop and implement action plans can be developed and implemented on a timely basis to mitigate any potential losses.

The Company’sOur credit risk management strategy includes diversification of itsour loan portfolio. The Company attemptsWe attempt to avoid the risk of an undue concentration of credits in a particular collateral type or with an individual customer or counterparty. Generally, the Companyour loan portfolio is well diversified in its loan portfolio;diversified; however, due to the nature of the Company’sour geographical footprint, there are

50

certain significant concentrations primarily in CREcommercial real estate (“CRE”) and energy-relatedoil and gas-related lending. The Company hasWe have adopted and adheresadhere to concentration limits on various types of CRE lending, particularly construction and land development lending, leveraged lending, municipal lending, and energy-relatedoil and gas-related lending. All of these limits are continually monitored and revised as necessary. These concentration limits, particularly with regard to the various types of CRE and real estate development, are materially lower than they wereThe recent growth in 2007 and 2008, just prior to the emergence of the recent economic downturn. During 2014, the Company determined to further reduce construction and land development loan commitments. This was done largely as a result ofcommitments is within the modeled losses by the Company and management’s beliefs about the likely severity of losses modeled by the Federal Reserve in its stress testing, under the severely adverse economic scenarios, as required under the Dodd-Frank Act. The majority of the Company’sestablished concentration limits. Our business activity is primarily with customers located within the geographical footprint of its subsidiary banks.our banking affiliates.

The credit quality of the Company’sour loan portfolio improvedslightly deteriorated during 2014.2015. Nonperforming lending-related assets at December 31, 2014 decreased2015 increased by approximately 28%9.6% from December 31, 2013.2014. Gross charge-offs for 2014 declined2015 increased to $139 million from $106 million from $131 million in 2013. Net2014. However, net charge-offs decreased to $42$39 million from $52$42 million for the same periods.


63

As displayed in Schedule 19,13, commercial and industrial loans were the largest category and constituted 32.9%32.5% of the Company’sour loan portfolio at December 31, 2014.2015. Construction and land development loans slightly decreased to 5.0%4.5% of total loans at December 31, 2014,2015, compared to 5.6%5.0% at December 31, 2013; however, they have declined significantly from a pre-recession level of 20.1% of total loans at the end of 2007.2014.

Schedule 1913
LOAN PORTFOLIO DIVERSIFICATION
December 31, 2014 December 31, 2013December 31, 2015 December 31, 2014
(Amounts in millions)Amount 
% of
total loans
 Amount 
% of
total loans
Amount 
% of
total loans
 Amount 
% of
total loans
Commercial:              
Commercial and industrial$13,163
 32.9% $12,459
 31.9%$13,211
 32.5% $13,163
 32.9%
Leasing409
 1.0
 388
 1.0
442
 1.1
 409
 1.0
Owner occupied7,351
 18.3
 7,568
 19.4
7,150
 17.6
 7,351
 18.3
Municipal521
 1.3
 449
 1.2
676
 1.7
 521
 1.3
Total commercial21,444
 53.5
 20,864
 53.5
21,479
 52.9
 21,444
 53.5
Commercial real estate:  
      
    
Construction and land development1,986
 5.0
 2,193
 5.6
1,842
 4.5
 1,986
 5.0
Term8,127
 20.3
 8,203
 21.0
8,514
 21.0
 8,127
 20.3
Total commercial real estate10,113
 25.3
 10,396
 26.6
10,356
 25.5
 10,113
 25.3
Consumer:              
Home equity credit line2,321
 5.8
 2,147
 5.5
2,417
 5.9
 2,321
 5.8
1-4 family residential5,201
 13.0
 4,742
 12.1
5,382
 13.2
 5,201
 13.0
Construction and other consumer real estate371
 0.9
 325
 0.8
385
 0.9
 371
 0.9
Bankcard and other revolving plans401
 1.0
 361
 0.9
444
 1.1
 401
 1.0
Other213
 0.5
 208
 0.6
187
 0.5
 213
 0.5
Total consumer8,507
 21.2
 7,783
 19.9
8,815
 21.6
 8,507
 21.2
       
Total net loans$40,064
 100.0% $39,043
 100.0%$40,650
 100.0% $40,064
 100.0%
Government Agency Guaranteed Loans
The Company participatesWe participate in various guaranteed lending programs sponsored by U.S. government agencies, such as the Small Business Administration,SBA, Federal Housing Authority, Veterans’ Administration, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. As of December 31, 2014,2015, the principal balance of these loans was $563$569 million, and the guaranteed portion was approximately $430$432 million. Most of these loans were guaranteed by the Small Business Administration.SBA.

51

Schedule 2014 presents the composition of government agency guaranteed loans.

Schedule 2014
GOVERNMENT GUARANTEES
(Amounts in millions)
December 31,
2014
 
Percent
guaranteed
 
December 31,
2013
 
Percent
guaranteed
December 31,
2015
 
Percent
guaranteed
 
December 31,
2014
 
Percent
guaranteed
                  
Commercial $539
 76% $563
 76%  $536
 76% $539
 76% 
Commercial real estate 19
 76
 18
 76
  17
 77
 19
 77
 
Consumer 5
 100
 4
 100
  16
 90
 17
 86
 
Total loans $563
 76
 $585
 76
  $569
 76
 $575
 76
 
Commercial Lending
Schedule 2115 provides selected information regarding lending concentrations to certain industries in our commercial lending portfolio.


64

Schedule 2115
COMMERCIAL LENDING BY INDUSTRY GROUP
December 31, 2014 December 31, 2013December 31, 2015 December 31, 2014
(Amounts in millions)Amount Percent Amount PercentAmount Percent Amount Percent
              
Real estate, rental and leasing$2,418
 11.4% $2,937
 14.1%$2,355
 11.0% $2,418
 11.4%
Manufacturing2,305
 10.7
 2,181
 10.5
2,338
 10.9
 2,305
 10.7
Retail trade2,025
 9.4
 1,924
 9.0
Mining, quarrying and oil and gas extraction2,277
 10.6
 2,205
 10.6
1,820
 8.5
 2,277
 10.6
Retail trade1,924
 9.0
 1,737
 8.3
Wholesale trade1,638
 7.6
 1,464
 7.0
1,644
 7.6
 1,638
 7.6
Healthcare and social assistance1,347
 6.3
 1,211
 5.8
1,361
 6.3
 1,347
 6.3
Finance and insurance1,325
 6.2
 1,168
 5.5
Transportation and warehousing1,294
 6.0
 1,074
 5.2
1,219
 5.7
 1,294
 6.0
Finance and insurance1,168
 5.5
 1,168
 5.6
Construction1,027
 4.8
 926
 4.4
1,087
 5.1
 1,027
 4.8
Accommodation and food services911
 4.2
 799
 3.8
964
 4.5
 911
 4.2
Other services (except Public Administration)862
 4.0
 830
 3.9
Professional, scientific and technical services884
 4.1
 928
 4.4
860
 4.0
 884
 4.1
Other 1
4,251
 19.8
 4,234
 20.3
Utilities 1
775
 3.6
 576
 2.7
Other 2
2,844
 13.2
 2,845
 13.2
Total$21,444
 100.0% $20,864
 100.0%$21,479
 100.0% $21,444
 100.0%
1
Includes primarily utilities, power, and renewable energy.
2
No other industry group exceeds 3%.
1 No other industry group exceeds 4%.
Energy-RelatedOil and Gas-Related Exposure
Various industries represented in the previous schedule, including mining, quarrying and oil/gas extraction; manufacturing; and transportation and warehousing; contain certain loans we categorized by the Company as energy-related.oil and gas-related. At December 31, 2015 and 2014, the Companywe had approximately $6.3$4.8 billion and $5.8 billion of total credit energy-related exposure and $3.2 billion of primarily oil and gas energy-related loan balances.gas-related credit exposure, respectively. The distribution of energy-relatedoil and gas-related loans by customer market segment is shown in Schedule 22.16.


52

Schedule 2216
ENERGY-RELATEDOIL AND GAS-RELATED EXPOSURE 1 
   % of total oil and gas- related   % of total oil and gas- related
(Amounts in millions) December 31, 2014December 31, 2015 December 31, 2014 
  
Loans and leases             
Oil and gas-related $3,172
Alternative energy 225
Total loans and leases 3,397
Unused commitments to extend credit 2,858
Total credit exposure $6,255
  
Private equity investments $22
  
Distribution of oil and gas-related balances  
Upstream – exploration and production 32% $817
 31% $1,052
 34%
Midstream – marketing and transportation 19
 621
 23
 579
 19
Downstream – refining 2
 127
 5
 110
 4
Other non-services 2
 44
 2
 55
 2
Oilfield services 33
 784
 30
 971
 31
Energy service manufacturing 12
 229
 9
 306
 10
Total loans and leases 100%
Total loan and lease balances 2,622
 100% 3,073
 100%
Unfunded lending commitments 2,151
   2,700
  
Total oil and gas credit exposure $4,773
   $5,773
  
        
Private equity investments $13
   $21
  
Credit quality measures   
Criticized loan ratio30.3% 7.5%
Classified loan ratio19.7% 4.3%
Nonperforming loan ratio2.5% 0.5%
Net charge-off ratio, annualized 2
3.6% —%
1 
ManyBecause many borrowers operate in multiple businesses. Therefore,businesses, judgment has been applied in characterizing a borrower as energy-related,oil and togas-related, including a particular segment of energy-relatedoil and gas-related activity, e.g., upstream or downstream.

2
Calculated as the ratio of annualized net charge-offs from the fourth quarters of 2015 and 2014, respectively, to loan balances at period end 2015 and 2014, respectively.
65

TableDuring 2015, our overall balance of Contentsoil and gas-related loans decreased approximately $451 million, or 14.7%, to $2.6 billion, primarily as a result of payoffs and pay-downs; exploration and production loan balances decreased 22.3%, and energy services loan balances declined 20.7%. Unfunded oil and gas-related lending commitments declined by $549 million, or 20.3%. The decline in oil and gas-related credit exposure during 2015 was consistent with expectations, and further attrition over the next several quarters is likely.

As of December 31, 2014, $17 million (or 0.5%)expected, the credit quality of the $3.2 billion outstanding oil and gas energy-relatedloan portfolio deteriorated during 2015, and will likely continue throughout 2016 due to low energy prices. At December 31, 2015, approximately $66.2 million, or 2.5%, of the oil and gas-related loan balances were nonperforming. The Company’s historical energy lending performance has been strong despite significant volatility in both oil and natural gas prices, largely duenonaccruing, compared to the efforts of our highly experienced team of bankers dedicated exclusively to the energy finance sector, conservative underwriting standards, and solid risk management controls and practices. Losses following the 2008-2009 periodapproximately $16.6 million, or 0.5% at December 31, 2014. Approximately 71% of oil and gas price declinesgas-related nonaccruing loans were current as to principal and volatilityinterest payments at December 31, 2015, up from approximately 62% at December 31, 2014.
Classified oil and gas-related credits increased to $517.5 million at December 31, 2015, from $133.6 million at December 31, 2014. Oil and gas-related loan net charge-offs were modest. Energy-related classified loans increased significantly$42.5 million for 2015, compared to $8.8 million for 2014. The majority of loan downgrades during this last economic downturn, nonperforming loans increased much more modestly, and annual losses were relatively minor (approximately 1%2015 reflected deterioration in the peak yearfinancial condition of 2010).oilfield services companies and, to a lesser degree, a small number of downgrades in the upstream portfolio. Further downgrades are likely; however, we currently believe we have established an appropriate reserve for the portfolio. The Company’s cumulative energy-related net charge-offs overpattern of a significant increase in graded or classified oil and gas loans as well as the last five years have been lower than the cumulative net loss rate of general commercialincrease in nonaccrual oil and industrial lending during that same time period.

gas loans is generally consistent with prior cycles.
Upstream
Upstream exploration and production loans comprised approximately 32%31% and 34% of the Company’s energy-related exposure as ofoil and gas-related loans at December 31, 2014. Most2015 and December 31, 2014, respectively. Many upstream borrowers have relatively balanced production between oil and gas.

53

The Company usesTable of Contents

We use disciplined underwriting practices to mitigate the risk associated with its upstream lending activities. Upstream loans are made to reserve-based borrowers where more thanapproximately 90% of those loans are collateralized by the value of the borrower’s oil and gas reserves. The Company’sOur oil and gas price deck, the pricing applied to a borrower'sborrower’s reserves for underwriting purposes, has generally been below the NYMEX strip, i.e., the average of the daily settlement prices of the next 12 months’ futures contracts. Through the use of independent Company and third-partythird party engineers and conservative underwriting, the Company applieswe apply multiple discounts. These discounts often range from 10-40% of the value of the collateral in determining the borrowing base (commitment), and help protect credit quality against significant commodity price declines. Further, reserve-based commitments are subject to a borrowing base re-determinationredetermination based on then-current energy prices, typically every six months. Generally, the Company has,we have, at itsour option, the right to conduct additional re-determinationsredeterminations during the year. Borrowing bases for clients are usually set at 60-70% of available collateral after an adjustment for the discounts described above.

Upstream borrowers generally do not draw the maximum available funding on their lines, which provides the borrower additional liquidity and flexibility. The line utilization rate on reserve-based loan commitmentsfor upstream borrowers was approximately 57% and 58% at December 31, 2014.2015 and December 31, 2014, respectively. This unused commitment gives us the ability in some cases to reduce the borrowing base commitment through the re-determinationredetermination process without creating a borrowing base deficiency (where outstanding debt exceeds the new borrowing base). Nevertheless, our loan agreements generally require the borrowers to maintain a certain amount of equity. Therefore, if the loan to collateral value exceeds an acceptable limit, we work with the borrowers to reinstate an acceptable collateral-value threshold.

As a result of the fall 2015 redetermination of exploration and production oil and gas-related loan borrowing bases, the borrowing base for total exploration and production commitments, including new commitments, declined approximately 21% since the fall 2014 redetermination.
An additional metric that the Company considerswe consider in itsour underwriting is a borrower’s oil and gas price hedging practices. A significantconsiderable portion of the Company’sour reserve-based borrowers are hedged. OfAs of December 31, 2015, of the Company’supstream borrower’s risk-based estimated oil production and gas production projected in 20152016, approximately 61% and 2016, more than 50%43%, respectively, is hedged based on weighted average commitments and the latest data provided by the borrowers.

Midstream
Midstream marketing and transportation loans comprised approximately 23% and 19% of the Company’s energy-relatedoil and gas-related exposure as ofat December 31, 2014.2015 and December 31, 2014, respectively. Loans in this segment are made to companies that gather, transport, treat and blend oil and natural gas.gas, or that provide services to similar companies. The assets owned by these borrowers, which make this activity possible, are field-level gathering systems (small diameter pipe), pipelines (medium/large diameter pipe), tanks, trucks, rail cars, various water-based vessels, and natural gas treatment plants. Our midstream loans are secured by these assets, unless the borrower is rated investment-grade. The majorityA significant portion of our midstream borrowers’ revenues are derived from fee-based contracts, giving them limited exposure to commodity price risk. Since lower oil and gas prices slow the drilling and development of new oil and natural gas, but do not normally result in significant numbers of producing wells being shut in, volumes of oil and gas flowing through midstream systems usually remain relatively stable

66

throughout oil and natural gas price cycles. During the 2008-2009 period of oil and gas price volatility, classified loans in the Midstream segment peaked at a lower level than the Upstream and Energy Services segments.

Energy Services
Energy serviceservices loans, which include oilfield services and energy service manufacturing, in Schedule 22, comprised approximately 45%39% and 41% of the Company’s energy-relatedoil and gas-related exposure as ofat December 31, 2014.2015 and December 31, 2014, respectively. Energy serviceservices loans include borrowers that have a concentration of revenues toin the energy industry. However, many of these borrowers provide a broad range of products and services to the energy industry and are not subject to the same volatility as new drilling activities. Many of these borrowers are diversified geographically and service both oil and gas relatedgas-related drilling and production.

For energy serviceservices loans, underwriting criteria requiresrequire lower leverage to compensate for the cyclical nature of the industry. During the Company’s underwriting process, we use sensitivity analysis to consider revenue and cash flow impacts resulting from oil and gas price cycles. Generally, we underwrite energy serviceservices loans to withstand a 20-50% decline in cash flows, with higher discounts for those borrowers subject to greater cyclicality.

54

Risk Management of the Energy-RelatedOil and Gas-Related Portfolio
The Company appliesWe apply concentration limits and disciplined underwriting to itsthe entire energy-relatedoil and gas-related loan portfolio in order to limit itsour risk exposure. Concentration limits on energy-relatedoil and gas-related lending, coupled with adherence to the Company’sour underwriting standards, served to constrain loan growth during the past several quarters. As an indicator of the diversity in the size of our energy-related portfolio’s size,oil and gas-related portfolio, the average amount of our commitments is approximately $8$7 million, with approximately 60%64% of the commitments less than $30 million. Additionally, there are instances where we have commitments to a common sponsor which, when combined, would result in higher commitment levels than $30 million. The portfolio contains only senior loans – no junior or second lien positions; additionally, the Company generally avoidswe cautiously approach making first lienfirst-lien loans to borrowers that employ significantexcessive leverage through the use of junior lien loans or large unsecured senior trancheslayers of debt. More thanApproximately 90% of the total energy-relatedoil and gas-related portfolio is secured by reserves, equipment, real estate, and other collateral, or a combination of collateral types. Lending arrangements that are not secured are generally to investment grade borrowers.

For efficiency purposes, and to further reduce concentration risk, the Company participatesWe participate as a lender in loans and commitments designated as Shared National Credits (“SNCs”), which are generally consist of larger and more diversified borrowers that have better access to capital markets. SNCs are loans or loan commitments of at least $20 million that are shared by three or more federally supervised institutions. The percentage of SNCs is 80% inapproximately 72% of the upstream portfolio, 77% in72% of the midstream portfolio, and 50% in47% of the energy services portfolio. Our bankers have direct access and contact with the management of these SNC borrowers, and as such, are active participants. In many cases, the Company provideswe provide ancillary banking services to these borrowers, further evidencing this direct relationship.

As a secondary source of support, many of our energy-relatedoil and gas-related borrowers have access to capital markets and private equity sources. Approximately 45% of our exposure is to public companies and/or to those who have private equity sponsors. Private sponsors tend to be large funds, often with assets under management of more than $1 billion, managed by individuals with a great deal of energy expertise and experience and who have successfully managed energy investments through previous energy price cycles. The investors in the funds are believed to be primarily institutional investors, such as large pensions, foundations, trusts, and high net worth family offices.

During the fourth quarter of 2014, observed credit qualityWe expect further downgrades in the energy-relatedoil and gas portfolio, based on most recent borrower financial statements, remained strong and was relatively unchangedprimarily from the third quarter. During the fourth quarter of 2014, the Company conducted certain sensitivity analyses, and based on those analyses, subjected certain energy-related credits to further scrutiny resulting in a small number of creditoilfield services companies; although, we currently believe we have appropriately reserved for these downgrades. The fact thatdeterioration of oil and gas-related credits is transpiring consistently with our outlook and expectations from late 2014; although, future energy price volatility may result in further credit deterioration. When establishing the level of the allowance for credit losses(“ACL”), we consider multiple factors, including reduced drilling activity and additional capital raises. During 2015, we increased the ACL on the oil and gas portfolio by approximately $74 million, primarily due to the decline in energy prices, has basically taken place within one quarter makes it difficult yetwhich contributed to see measurable changes to the financial condition of many energy-related borrowers, which is a primary driver of individualan increased provision for loan risk grades; such risk grades, in turn, are a primary driver of the quantitative portion of the allowance for credit losses. Nevertheless, the Company recognizes that some of its energy-related credits likely have incurred losses, assuming

67

current levels of oil and gas prices persist. Therefore, it made changes to certain qualitative adjustment factors that had the effect of increasing the allowance for credit losses by approximately $25 million.

Finally, in addition to re-evaluating certain credits and bolstering the allowance for credit losses in the fourth quarter of 2014, the Company has initiated the process of interim borrowing base re-determinations on a few selected borrowers. This is expected to result in some reduction of the size of the lines of credit available to those borrowers, and may result in some credit downgrades, as borrowers provide updated financial statements and the borrowing bases of exploration and production credits are updated. However, the Company believes it is prudent to take early action for the few selected borrowers and secure additional collateral, reduce commitments, etc., rather than wait for the normal borrowing base re-determination period in the spring of 2015.



6855

Commercial Real Estate Loans
Selected information indicative of credit quality regarding our CRE loan portfolio is presented in Schedule 23.17.
Schedule 2317
COMMERCIAL REAL ESTATE PORTFOLIO BY LOAN TYPE AND COLLATERAL LOCATION
At December 31, 20142015
(Amounts in millions)(Amounts in millions) Collateral Location    (Amounts in millions) Collateral Location    
Loan type 
As of
date
 Arizona 
Northern
California
 
Southern
California
 Nevada Colorado Texas 
Utah/
Idaho
 Wash-ington 
Other 1
 Total 
% of 
total
CRE
 
As of
date
 Arizona California Colorado Nevada Texas 
Utah/
Idaho
 Wash-ington 
Other 1
 Total 
% of 
total
CRE
Commercial term
Balance outstanding 12/31/2014 $1,111
 $626
 $2,172
 $557
 $400
 $1,244
 $1,105
 $255
 $657
 $8,127
 80.4% 12/31/2015 $1,094
 $2,933
 $408
 $550
 $1,409
 $1,243
 $268
 $609
 $8,514
 82.2%
% of loan type 13.7% 7.7% 26.7% 6.9% 4.9% 15.3% 13.6% 3.1% 8.1% 100.0%   12.8% 34.4% 4.8% 6.5% 16.5% 14.6% 3.2% 7.2% 100.0%  
Delinquency rates 2:
                      
Delinquency rates: 2
Delinquency rates: 2
                    
30-89 days 12/31/2014 —
 —
 0.1% 0.4% —
 —
 0.6% 0.3% 0.2% 0.2%   12/31/2015 0.1% 0.1% 0.3% 0.1% 0.1% —% 0.2% 0.2% 0.1%  
 12/31/2013 0.3% —
 0.2% 0.7% —
 0.2% 0.1% —
 0.4% 0.2%   12/31/2014 —% 0.1% —% 0.4% —% 0.6% 0.3% 0.2% 0.2%  
≥ 90 days 12/31/2014 0.1% —
 0.6% 0.6% —
 0.1% 0.3% 0.3% 1.0% 0.4%   12/31/2015 —% 0.5% 1.6% 0.1% 0.1% 0.2% 1.0% 0.9% 0.4%  
 12/31/2013 —
 0.5% 0.4% —
 —
 0.3% 0.1% —
 0.5% 0.2%   12/31/2014 0.1% 0.6% —% 0.6% 0.1% 0.3% 0.3% 1.0% 0.4%  
Accruing loans past due 90 days or more 12/31/2014 $—
 $—
 $12
 $4
 $—
 $—
 $3
 $1
 $—
 $20
   12/31/2015 $—
 $15
 $—
 $—
 $—
 $3
 $3
 $1
 $22
  
 12/31/2013 —
 1
 19
 —
 —
 —
 —
 —
 —
 20
   12/31/2014 —
 12
 —
 4
 —
 3
 1
 —
 20
  
Nonaccrual loans 12/31/2014 2
 1
 7
 1
 1
 2
 1
 —
 10
 25
   12/31/2015 17
 4
 8
 3
 1
 1
 —
 6
 40
  
 12/31/2013 7
 4
 13
 8
 1
 7
 6
 1
 14
 61
   12/31/2014 2
 8
 1
 1
 2
 1
 —
 10
 25
  
Residential construction and land development
Balance outstanding 12/31/2014 $52
 $27
 $270
 $7
 $45
 $218
 $97
 $17
 $13
 $746
 7.4% 12/31/2015 $15
 $316
 $68
 $1
 $232
 $59
 $16
 $2
 $709
 6.9%
% of loan type 7.0% 3.6% 36.2% 0.9% 6.0% 29.2% 13.0% 2.4% 1.7% 100.0%   2.1% 44.6% 9.6% 0.1% 32.7% 8.3% 2.3% 0.3% 100.0%  
Delinquency rates 2:
                      
Delinquency rates: 2
Delinquency rates: 2
                    
30-89 days 12/31/2014 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
   12/31/2015 —% —% —% —% 0.3% —% —% —% 0.1%  
 12/31/2013 1.0% —
 —
 —
 0.4% —
 —
 —
 —
 0.1%   12/31/2014 —% —% —% —% —% —% —% —% —%  
≥ 90 days 12/31/2014 —
 —
 —
 —
 —
 2.6% —
 —
 —
 0.8%   12/31/2015 —% —% —% —% 0.5% —% —% —% 0.2%  
 12/31/2013 —
 —
 0.1% —
 —
 3.0% 0.2% —
 —
 0.9%   12/31/2014 —% —% —% —% 2.6% —% —% —% 0.8%  
Accruing loans past due 90 days or more 12/31/2014 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
   12/31/2015 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
  
 12/31/2013 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
   12/31/2014 —
 —
 —
 —
 —
 —
 —
 —
 —
  
Nonaccrual loans 12/31/2014 —
 —
 —
 —
 —
 7
 —
 —
 —
 7
   12/31/2015 —
 —
 —
 —
 3
 —
 —
 —
 3
  
 12/31/2013 1
 —
 —
 —
 —
 9
 —
 —
 —
 10
   12/31/2014 —
 —
 —
 —
 7
 —
 —
 —
 7
  
Commercial construction and land development
Balance outstanding 12/31/2014 $77
 $42
 $245
 $69
 $95
 $402
 $232
 $19
 $59
 $1,240
 12.2% 12/31/2015 $83
 $212
 $78
 $33
 $482
 $173
 $28
 $44
 $1,133
 10.9%
% of loan type 6.2% 3.4% 19.8% 5.6% 7.6% 32.4% 18.7% 1.5% 4.8% 100.0%   7.3% 18.7% 6.9% 2.9% 42.5% 15.3% 2.5% 3.9% 100.0%  
Delinquency rates 2:
                      
Delinquency rates: 2
Delinquency rates: 2
                    
30-89 days 12/31/2014 —
 —
 0.5% —
 0.1% 0.2% 0.1% —
 —
 0.2%   12/31/2015 —% —% —% —% —% 0.1% —% —% —%  
 12/31/2013 0.7% 0.8% 0.5% 4.9% —
 0.3% —
 —
 —
 0.6%   12/31/2014 —% 0.5% 0.1% —% 0.2% 0.1% —% —% 0.2%  
≥ 90 days 12/31/2014 —
 —
 0.9% —
 —
 0.9% —
 —
 —
 0.5%   12/31/2015 —% —% —% —% 0.7% 0.4% —% —% 0.4%  
 12/31/2013 —
 —
 —
 —
 —
 1.5% —
 —
 —
 0.4%   12/31/2014 —% 0.8% —% —% 0.9% —% —% —% 0.5%  
Accruing loans past due 90 days or more 12/31/2014 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
   12/31/2015 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
 $—
  
 12/31/2013 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
   12/31/2014 —
 —
 —
 —
 —
 —
 —
 —
 —
  
Nonaccrual loans 12/31/2014 —
 —
 2
 —
 —
 4
 11
 —
 —
 17
   12/31/2015 —
 —
 —
 —
 4
 —
 —
 —
 4
  
 12/31/2013 —
 1
 —
 —
 —
 5
 13
 —
 —
 19
   12/31/2014 —
 2
 —
 —
 4
 12
 —
 —
 18
  
Total construction and land development 12/31/2014 $129
 $69
 $515
 $76
 $140
 $620
 $329
 $36
 $72
 $1,986
   12/31/2015 $98
 $528
 $146
 $34
 $714
 $232
 $44
 $46
 $1,842
  
Total commercial real estate 12/31/2014 $1,240
 $695
 $2,687
 $633
 $540
 $1,864
 $1,434
 $291
 $729
 $10,113
 100.0% 12/31/2015 $1,192
 $3,461
 $554
 $584
 $2,123
 $1,475
 $312
 $655
 $10,356
 100.0%
1No other geography exceeds $83 million for all three loan types.
2Delinquency rates include nonaccrual loans.
1
No other geography exceeds $101 million for all three loan types.
2
Delinquency rates include nonaccrual loans.

6956


Approximately 23%24% of the CRE term loans consist of mini-perm loans as of December 31, 2014.2015. For such loans, construction has been completed and the project has stabilized to a level that supports the granting of a mini-perm loan in accordance with our underwriting standards. Mini-perm loans generally have initial maturities of three to seven years. The remaining 77%76% of CRE loans are term loans with initial maturities generally of 5 to 20 years. The stabilization criteria for a project to qualify for a term loan differ by product type and include criteria related to the cash flow generated by the project, loan-to-value ratio, and occupancy rates.

Approximately $208$142 million, or 17%12%, of the commercial construction and land development portfolio at December 31, 20142015 consists of acquisition and development loans. Most of these acquisition and development loans are secured by specific retail, apartment, office, or other projects. Underwriting on commercial properties is primarily based on the economic viability of the project with heavy consideration given to the creditworthiness and experience of the sponsor. We generally require that the owner’s equity be injected prior to bank advances. Remargining requirements (required equity infusions upon a decline in value of the collateral) are often included in the loan agreement along with guarantees of the sponsor. Recognizing that debt is paid via cash flow, the projected cash flows of the project are critical in the underwriting because these determine the ultimate value of the property and its ability to service debt. Therefore, in most projects (with the exception of multifamily projects) we look for substantial pre-leasing in our underwriting and we generally require a minimum projected stabilized debt service coverage ratio of 1.20 or higher, depending on the project asset class.

Within the residential construction and development sector, many of the requirements previously mentioned, such as creditworthiness and experience of the developer, up-front injection of the developer’s equity, principal curtailment requirements, and the viability of the project are also important in underwriting a residential development loan. Significant consideration is given to the likely market acceptance of the product, location, strength of the developer, and the ability of the developer to stay within budget. Progress inspections by qualified independent inspectors are routinely performed before disbursements are made.

Real estate appraisals are ordered and validated independent of the loan officer and the borrower, generally by each bank’sour internal appraisal review function, which is staffed by licensed appraisers. In some cases, reports from automated valuation services are used. Appraisals are ordered from outside appraisers at the inception, renewal or, for CRE loans, upon the occurrence of any event causing a downgrade to an adverse grade (i.e., “criticized” or “classified”). We increase the frequency of obtaining updated appraisals for adversely graded credits when declining market conditions exist.

Advance rates (i.e., loan commitments) will vary based on the viability of the project and the creditworthiness of the sponsor, but our guidelines generally limit advances to 50% for raw land, 65% for land development, 65% for finished commercial lots, 75% for finished residential lots, 80% for pre-sold homes, 75% for models and homes not under contract, and 75% for commercial properties. Exceptions may be granted on a case-by-case basis.

Loan agreements require regular financial information on the project and the sponsor in addition to lease schedules, rent rolls and, on construction projects, independent progress inspection reports. The receipt of this financial information is monitored and calculations are made to determine adherence to the covenants set forth in the loan agreement. Additionally, loan-by-loan reviews of pass gradepass-grade loans for all commercial and residential construction and land development loans are performed semiannually at Amegy, CB&T, NBAZ, NSB, Vectra and Zions Bank, while TCBO andall affiliates except TCBW, performwhich performs such reviews annually.

Interest reserves are generally established as a loan disbursement budget item for real estate construction or development loans. We generally require borrowers to inject their equity into the project prior to loan disbursements, which ensures the availability of equity to complete the project. We monitor the construction, sales and/or leasing progress to determine whether or not the project remains viable. If, at any time during the life of the credit, the project is determined not to be viable (including the adequacy of the remaining interest reserves), the bank takes appropriate action to protect its collateral position via negotiation and/or legal action as deemed

70

necessary. At December 31, 2014 and 2013, Zions’ affiliates had 656 and 609 loans with an outstanding balance of $801 million and $715 million where available interest reserves amounted to $108 million and $104 million, respectively. In instances where projects are in default and have been determined not to be viable, the interest reserves and other disbursements have been frozen, as appropriate.

We have not been involved to any meaningful extent with insurance arrangements, credit derivatives, or any other default agreements as a mitigation strategy for CRE loans. However, we do make use of personal or other guarantees as risk mitigation strategies.

CRE loans are sometimes modified to increase the likelihood of collecting the maximum possible amount of the Company’sour investment in the loan. In general, the existence of a guarantee that improves the likelihood of repayment is taken into consideration when analyzing a loan for impairment. If the support of the guarantor is quantifiable and documented, it is included in the potential cash flows and liquidity available for debt repayment and our impairment methodology takes into consideration this repayment source.


57

Additionally, when we modify or extend a loan, we give consideration to whether the borrower is in financial difficulty, and whether we have granted a concession. In determining if an interest rate concession has been granted, we consider whether the interest rate on the modified loan is equivalent to current market rates for new debt with similar risk characteristics. If the rate in the modification is less than current market rates, it may indicate that a concession was granted and impairment exists. However, if additional collateral is obtained or if a strong guarantor exists who is believed to be able and willing to support the loan on an extended basis, we also consider the nature and amount of the additional collateral and guarantees in the ultimate determination of whether a concession has been granted.

In general, we obtain and consider updated financial information for the guarantor as part of our determination to extend a loan. The quality and frequency of financial reporting collected and analyzed varies depending on the contractual requirements for reporting, the size of the transaction, and the strength of the guarantor.

Complete underwriting of the guarantor includes, but is not limited to, an analysis of the guarantor’s current financial statements, leverage, liquidity, global cash flow, global debt service coverage, contingent liabilities, etc. The assessment also includes a qualitative analysis of the guarantor’s willingness to perform in the event of a problem and demonstrated history of performing in similar situations. Additional analysis may include personal financial statements, tax returns, liquidity (brokerage) confirmations, and other reports, as appropriate.

A qualitative assessment is performed on a case-by-case basis to evaluate the guarantor’s experience, performance track record, reputation, performance of other related projects with which we are familiar, and willingness to work with us. We also utilize market information sources, rating, and scoring services in our assessment. This qualitative analysis coupled with a documented quantitative ability to support the loan may result in a higher-quality internal loan grade, which may reduce the level of allowance the Company estimates.we estimate. Previous documentation of the guarantor’s financial ability to support the loan is discounted if there is any indication of a lack of willingness by the guarantor to support the loan.

In the event of default, we evaluate the pursuit of any and all appropriate potential sources of repayment, which may come from multiple sources, including the guarantee. A number of factors are considered when deciding whether or not to pursue a guarantor, including, but not limited to, the value and liquidity of other sources of repayment (collateral), the financial strength and liquidity of the guarantor, possible statutory limitations (e.g., single action rule on real estate) and the overall cost of pursuing a guarantee compared to the ultimate amount we may be able to recover. In other instances, the guarantor may voluntarily support a loan without any formal pursuit of remedies.


Due to the oil and gas price volatility, there could be a potential adverse impact on our CRE loan portfolio within Texas. Our largest credit exposures are to the office, multi-family and hospitality sectors in the city of Houston.

71

Consumer Loans
The Company hasWe have mainly been an originator of first and second mortgages, generally considered to be of prime quality. Historically, the Company’sour practice has been to sell “conforming” fixed-rate loans to third parties, including Fannie Mae and Freddie Mac, for which it makeswe make representations and warranties that the loans meet certain underwriting and collateral documentation standards. It has also been the Company’sour practice historically to hold variable ratevariable-rate loans in itsour portfolio. We actively monitor loan “put-backs” (required repurchases of loans previously sold to Fannie Mae or Freddie Mac due to inadequate documentation or other reasons). Loan put-backs have been minimal over a multiple-year period. We estimate that the Company doeswe do not have any material risk as a result of either itsour foreclosure practices or loan put-backs and haswe have not established any reserves related to these items.
The Company is
We are engaged in home equity credit line (“HECL”)HECL lending. At December 31, 2015 and 2014, the Company’sour HECL portfolio totaled $2.4 billion and $2.3 billion. Approximately $1.2 billion, respectively. Schedule 18 shows the composition of theour HECL portfolio is secured by first deedslien status.


58

Schedule 18
HECL PORTFOLIO BY LIEN STATUS
 December 31,
(In millions)2015 2014
    
Secured by first deeds of trust$1,267
 $1,201
Secured by second (or junior) liens1,149
 1,120
Total$2,416
 $2,321

As of December 31, 2014,2015, loans representing approximately 4%2% of the outstanding balance in the HECL portfolio were estimated to have combined loan-to-value ratios (“CLTV”) above 100%. An estimated CLTV ratio is the ratio of our loan plus any prior lien amounts divided by the estimated current collateral value. At origination, underwriting standards for the HECL portfolio generally include a maximum 80% CLTV with high credit scores at origination.
More than
Approximately 95% of the Company’sour HECL portfolio is still in the draw period, and approximately 35%31% is scheduled to begin amortizing within the next five years; however, most of the loans are expected to be renewed for a second 10-year period after a satisfactory review of the borrower’s credit history and ability to repay the loan. The Companyyears. We regularly analyzesanalyze the risk of borrower default in the event of a loan becoming fully amortizing and the risk of higher interest rates. The analysis indicates that the risk of loss from this factor is minimal in the current economic environment. The annualized credit losses for the HECL portfolio were (2) bps and 5 bps, for 2015 and 23 bps for 2014, and 2013, respectively. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of this portfolio.

Nonperforming Assets
Nonperforming lending-related assets as a percentage of loans and leases and OREO decreased significantlyincreased slightly to 0.87% at December 31, 2015, compared with 0.81% at December 31, 2014, compared with 1.15% at December 31, 2013.2014.

Total nonaccrual loans at December 31, 2014 decreased2015 increased by $99$43 million from the prior year, primarily due to a $50 million decreasedeterioration in the oil and gas portfolio. Excluding oil and gas-related loans, nonperforming assets have increased in the CRE term loan class, but have declined in the commercial owner occupied loans, and a $36 million decrease in commercial real estate term loans.construction and land development loan classes. The largest total decreases in nonaccrual loans occurred at Zions Bank and CB&T.

The balance of nonaccrual loans can decrease due to paydowns, charge-offs, and the return of loans to accrual status under certain conditions. If a nonaccrual loan is refinanced or restructured, the new note is immediately placed on nonaccrual. If a restructured loan performs under the new terms for at least a period of six months, the loan can be considered for return to accrual status. See “Restructured Loans” on page 7360 for more information. Company policy does not allow for the conversion of nonaccrual construction and land development loans to commercial real estateCRE term loans. See Note 6 of the Notes to Consolidated Financial Statements for more information.


7259

Schedule 2419 sets forth the Company’sour nonperforming lending-related assets.

Schedule 2419
NONPERFORMING LENDING-RELATED ASSETS
(Amounts in millions) December 31, December 31,
 2014 2013 2012 2011 2010 2015 2014 2013 2012 2011
Nonaccrual loans:                    
Loans held for sale $—
 $—
 $—
 $18
 $—
 $—
 $—
 $—
 $—
 $18
Commercial:   

     

   

     

Commercial and industrial 106
 101
 94
 130
 229
 164
 106
 101
 94
 130
Leasing —
 1
 1
 2
 1
 4
 —
 1
 1
 2
Owner occupied 87
 137
 207
 242
 349
 74
 87
 137
 207
 242
Municipal 1
 10
 9
 —
 2
 1
 1
 10
 9
 —
Commercial real estate:                    
Construction and land development 24
 29
 108
 221
 494
 7
 24
 29
 108
 221
Term 25
 60
 137
 173
 288
 40
 25
 60
 137
 173
Consumer:                    
Real estate 64
 66
 89
 122
 163
 59
 64
 66
 89
 122
Other —
 2
 3
 3
 3
 1
 —
 2
 3
 3
Nonaccrual loans 307
 406
 648
 911
 1,529
 350
 307
 406
 648
 911
Other real estate owned:                    
Commercial:                    
Commercial properties 11
 16
 51
 63
 121
 5
 11
 16
 51
 63
Developed land —
 6
 10
 4
 7
 —
 —
 6
 10
 4
Land 2
 6
 8
 19
 37
 1
 2
 6
 8
 19
Residential:                    
1-4 family 4
 8
 8
 35
 64
 1
 4
 8
 8
��35
Developed land 2
 9
 15
 22
 52
 —
 2
 9
 15
 22
Land —
 1
 6
 10
 18
 —
 —
 1
 6
 10
Other real estate owned 19
 46
 98
 153
 299
 7
 19
 46
 98
 153
Total nonperforming lending-related assets $326
 $452
 $746
 $1,064
 $1,828
 $357
 $326
 $452
 $746
 $1,064
Ratio of nonperforming lending-related assets to net loans and leases1 and other real estate owned
 0.81% 1.15% 1.96% 2.83% 4.90% 0.87% 0.81% 1.15% 1.96% 2.83%
Accruing loans past due 90 days or more:                    
Commercial $8
 $8
 $24
 $30
 $44
 $7
 $8
 $8
 $24
 $30
Commercial real estate 20
 29
 32
 55
 89
 22
 20
 29
 32
 55
Consumer 1
 3
 6
 9
 9
 3
 1
 3
 6
 9
Total $29
 $40
 $62
 $94
 $142
 $32
 $29
 $40
 $62
 $94
Ratio of accruing loans past due 90 days or more to net loans and leases1
 0.07% 0.10% 0.16% 0.25% 0.38% 0.08% 0.07% 0.10% 0.16% 0.25%
1 Includes loans held for sale.
1
Includes loans held for sale.
Restructured Loans
TDRsTroubled debt restructuring (“TDR”) are loans that have been modified to accommodate a borrower that is experiencing financial difficulties, and for which the Company haswe have granted a concession that itwe would not otherwise consider. TDRs declined 29%approximately 13.4% during 2014.2015, primarily due to payments and payoffs. Commercial loans may be modified to provide the borrower more time to complete the project, to achieve a higher lease-up percentage, to sell the property, or for other reasons. Consumer loan TDRs represent loan modifications in which a concession has been granted to the borrower who is unable to refinance the loan with another lender, or who is experiencing economic hardship. Such consumer loan TDRs may include first-lien residential mortgage loans and home equity loans.

7360


For certain TDRs, we split the loan into two new notes – an “A” note and a “B” note. The A note is structured to comply with our current lending standards at current market rates, and is tailored to suit the customer’s ability to make timely principal and interest payments. The B note includes the granting of the concession to the borrower and varies by situation. We may defer principal and interest payments until the A note has been paid in full. At the time of restructuring, the A note is identified and classified as a TDR. The B note is charged off, but the obligation is not forgiven to the borrower, and any payments collected on the B notes are accounted for as recoveries. The outstanding carrying value of loans restructured using the A/B note strategy was approximately $112 million and $126 million at December 31, 2014 and 2013, respectively.home equity loans.

If the restructured loan performs for at least six months according to the modified terms, and an analysis of the customer’s financial condition indicates that the Company iswe are reasonably assured of repayment of the modified principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the restructuring is taken into account to determine whether or not a loan should be returned to accrual status.

Schedule 2520
ACCRUING AND NONACCRUING TROUBLED DEBT RESTRUCTURED LOANS
December 31,December 31,
(In millions)2014 20132015 2014
      
Restructured loans – accruing$245
 $345
$194
 $245
Restructured loans – nonaccruing98
 136
103
 98
Total$343
 $481
$297
 $343

In the periods following the calendar year in which a loan was restructured, a loan may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the modification or restructure). Company policy requires that the removal of TDR status be approved at the same management level that approved the upgrading of a loan’s classification. See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding TDRs.

Schedule 2621
TROUBLED DEBT RESTRUCTURED LOANS ROLLFORWARD
 
(In millions)2014 20132015 2014
      
Balance at beginning of year$481
 $623
$343
 $481
New identified TDRs and principal increases81
 213
140
 81
Payments and payoffs(149) (271)(156) (149)
Charge-offs(16) (18)(12) (16)
No longer reported as TDRs(36) (28)(13) (36)
Sales and other(18) (38)(5) (18)
Balance at end of year$343
 $481
$297
 $343

Other Nonperforming Assets
In addition to lending-related nonperforming assets, the Company had $4 million in carrying value ($5.6 million at amortized cost) of investments in debt securities (primarily bank and insurance company CDOs) that were on nonaccrual status at December 31, 2014, compared to $224 million in carrying value ($239 million at amortized cost) at December 31, 2013. During 2014, we sold a significant portion of nonperforming securities in an effort to reduce risk and maximize the use of capital because these securities were estimated to consume a significant amount of capital under the Dodd-Frank Act Stress Test.


74

Allowance and Reserve for Credit Losses
In analyzing the adequacy of the allowance for loan losses, we utilize a comprehensive loan grading system to determine the risk potential in the portfolio and also consider the results of independent internal credit reviews. To determine the adequacy of the allowance, the Company’sour loan and lease portfolio is broken into segments based on loan type.

61

Schedule 2722 shows the changes in the allowance for loan losses and a summary of loan loss experience.

Schedule 2722
SUMMARY OF LOAN LOSS EXPERIENCE
(Amounts in millions) 2014 2013 2012 2011 2010 2015 2014 2013 2012 2011
Loans and leases outstanding on December 31, (net of unearned income) $40,064
 $39,043
 $37,665
 $37,258
 $36,830
 $40,650
 $40,064
 $39,043
 $37,670
 $37,257
Average loans and leases outstanding, (net of unearned income) $39,523
 $38,107
 $37,037
 $36,897
 $38,326
 $40,171
 $39,522
 $38,109
 $37,037
 $36,896
                    
Allowance for loan losses:                    
Balance at beginning of year $746
 $896
 $1,052
 $1,442
 $1,532
 $605
 $746
 $896
 $1,052
 $1,442
Provision charged against earnings (98) (87) 14
 75
 853
 40
 (98) (87) 14
 75
Adjustment for FDIC-supported/PCI loans (1) (11) (15) (9) 40
 —
 (1) (11) (15) (9)
Charge-offs:                    
Commercial (77) (76) (121) (241) (417) (111) (77) (76) (121) (241)
Commercial real estate (15) (26) (85) (229) (517) (14) (15) (26) (85) (229)
Consumer (14) (29) (61) (90) (140) (14) (14) (29) (61) (90)
Total (106) (131) (267) (560) (1,074) (139) (106) (131) (267) (560)
Recoveries:                    
Commercial 41
 41
 56
 55
 35
 55
 41
 41
 56
 55
Commercial real estate 12
 25
 42
 35
 44
 35
 12
 25
 42
 35
Consumer 11
 13
 14
 14
 12
 10
 11
 13
 14
 14
Total 64
 79
 112
 104
 91
 100
 64
 79
 112
 104
Net loan and lease charge-offs (42) (52) (155) (456) (983) (39) (42) (52) (155) (456)
Balance at end of year $605

$746

$896

$1,052

$1,442
 $606

$605

$746

$896

$1,052
                    
Ratio of net charge-offs to average loans and leases 0.11% 0.14% 0.42% 1.24% 2.56% 0.10% 0.11% 0.14% 0.42% 1.24%
Ratio of allowance for loan losses to net loans and leases, on December 31, 1.51% 1.91% 2.38% 2.82% 3.92% 1.49% 1.51% 1.91% 2.38% 2.82%
Ratio of allowance for loan losses to nonperforming loans, on December 31, 197.18% 183.54% 138.25% 115.43% 94.32% 173.23% 197.18% 183.54% 138.25% 115.43%
Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more, on December 31, 180.03% 166.97% 126.22% 104.67% 86.31% 158.70% 180.03% 166.97% 126.22% 104.67%


75

Schedule 2823 provides a breakdown of the allowance for loan losses and the allocation among the portfolio segments.

Schedule 2823
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
At December 31,
2014 2013 2012 2011 20102015 2014 2013 2012 2011
% of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance
(Amounts in millions)% of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance
% of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance % of total loans Allocation of allowance  
Loan segment                     
Commercial53.5% $413
 53.5% $469
 52.9% $521
 52.7% $578
 50.0% $786
 52.9% $454
 53.5% $413
 53.5% $469
 52.9% $521
 52.7% $578
 
Commercial real estate25.3
 145
 26.6
 216
 27.4
 277
 28.5
 347
 32.0
 497
 25.5
 114
 25.3
 145
 26.6
 216
 27.4
 277
 28.5
 347
 
Consumer21.2
 47
 19.9
 61
 19.7
 98
 18.8
 127
 18.0
 159
 21.6
 38
 21.2
 47
 19.9
 61
 19.7
 98
 18.8
 127
 
Total100.0% $605
  100.0% $746
  100.0% 
$896
 100.0% $1,052
 100.0% $1,442
 100.0% $606
  100.0% $605
  100.0% 
$746
 100.0% $896
 100.0% $1,052
 

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The total ALLL declinedremained relatively unchanged during 2014 by $141 million2015, due to deterioration within the positiveoil and gas portfolio, which was offset by improvements in credit trends experienced in our major loan portfolio segmentsquality metrics outside of the oil and due to reductions in outstanding balances of construction and land development loans.gas portfolio. However, during the fourth quarter of 2014, the Company2015, we increased the portion of the ALLL related to qualitative and environmental factors to account for the increased risk of loss on loans that are likely to be affected by the sharp decline in oil prices and more moderate decline in natural gas prices that occurred during the quarter.year.
The total ALLL at December 31, 20132014 decreased by $150$141 million compared to December 31, 2012.2013. The decreases in the ALLL reflected improvements in credit quality trends, and somewhat improving economic conditions in some of our markets. The Companymarkets, and reductions in construction and land development loans. During 2014, we decreased the portion of the ALLL related to qualitative and environmental factors to reflect the positive credit quality trends and stabilizing economic conditions.
The reserve for unfunded lending commitmentsRULC represents a reserve for potential losses associated with off-balance sheet commitments and standby letters of credit. The reserve is separately shown in the Company’sour balance sheet and any related increases or decreases in the reserve are shown separately in the statement of income. The reserve decreased by $8.6$6.2 million comparedduring 2015, primarily due to December 31, 2013, primarily driven by improvements inthe funding of one large impaired letter of credit, quality metrics and reductions in commitments of construction and land development loans, but partially offset by an increasethe proportionally large amount of unfunded commitments in other unfunded loan commitments.the oil and gas portfolio compared to the rest of the portfolio.
See Note 6 of the Notes to Consolidated Financial Statements for additional information related to the allowance for credit lossesACL and credit trends experienced in each portfolio segment.

Interest Rate and Market Risk Management
Interest rate and market risk are managed centrally. Interest rate risk is the potential for reduced net interest income and other rate sensitive income resulting from adverse changes in the level of interest rates. Market risk is the potential for loss arising from adverse changes in the fair value of fixed income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. As a financial institution that engages in transactions involving an array of financial products, the Company iswe are exposed to both interest rate risk and market risk.

The Company’s Board of Directors is responsible for approving the overall policies relating to the management of the financial risk of the Company, including interest rate and market risk management. The Boards of Directors of the Company’s subsidiary banks are also required to review and approve these policies. In addition, the Board establishes and periodically revises policy limits and reviews limit exceptions reported by management. The Board has established the Asset/Liability Committee (“ALCO”) consisting of members of management, to which it has delegated the responsibility of managing interest rate and market risk for the Company. Among its other responsibilities, ALCO’s primary responsibilityALCO is primarily responsible for managing interest rate and market risk includes the following:

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recommending policies to the Enterprise Risk Management Committee (“ERMC”) and administering the Board-approved policies that govern and limit the Company’s exposure to all interest rate and market risks, including policies that are designed to limit the Company’s adverse exposure to changes in interest rates;
approving procedures that support the Board-approved policies;
approving all material interest rate risk management strategies;
approving all financial derivative positions taken at both the Parent and subsidiaries for the purpose of hedging the Company’s interest rate and market risks;
overseeing the management of the balance sheet, net interest income, and liquidity;
calculating the estimated economic value of each class of assets, liabilities, and net equity, given defined interest rate scenarios;
managing the Company’s estimated earnings at risk and estimated economic value of equity (“EVE”) due to interest rate fluctuations; and
reporting timely all policy limit violations to the Chief Risk Officer, who reports them to the Board of Directors.risk.
Interest Rate Risk
Interest rate risk is one of the most significant risks to which the Company iswe are regularly exposed. In general, our goal in managing interest rate risk is to have net interest income increase in a rising interest rate environment. We refer to this goal as being “asset-sensitive.” This approach is based on our belief that in a rising interest rate environment, the market cost of equity, or implied rate at which future earnings are discounted, would also tend to rise. The asset sensitivity of the Company’s balance sheet changed minimally during 2014.

Due to the low level of rates, and the natural lower bound of zero for market indices, there is limited sensitivity to falling rates at the current time, and the Company haswe have tended to operate near its interest rate risk triggers“triggers” and appetites notedto be appropriately positioned in Schedule 29 following.light of prevailing market conditions in order to maximize shareholder value. However, if interest rates remain at their current historically low levels, given the Company’sour asset sensitivity, itwe would expect its net interest marginthe NIM to be under continuing modest pressure assuming a stable balance sheet.sheet that is static in size. Additionally, market participants have recently contemplated the possibility of negative rates in the U.S. markets which would likely have a more negative impact on the NIM. In order to mitigate this pressure in 2014, the Company began incrementallywe have been deploying cash and money market instruments into short-to-medium duration HQLA-qualifying,agency pass-through agency residential mortgage backed securities. During 2014, itAdditionally, we have increased its HQLA securities by approximately $1.0 billion, and it expects to continue purchasing HQLA securities at a pace of $1.5 to $2.0 billion in 2015, and possibly beyond. We expect these purchases to mitigate, but not eliminate, the Company’s asset sensitivity over time.
We attempt to minimize the impact of changing interest rates on net interest income primarily through the use of interest rate floors on variable rate loans, interest rate swaps interest rate futures, and by avoiding large exposuresdesignated as cash flow hedges to long-term fixed rate interest-earningsynthetically convert floating-rate assets that could experience a substantially slower returnto fixed-rate. Over time these actions are expected to somewhat reduce our asset sensitivity compared to previous periods, while improving current earnings.

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Interest Rate Risk Measurement
We monitor interest rate risk through the use of two complementary measurement methods: net interest income simulation and Economic Value of Equity at Risk (“EVE”), and net interest income simulation. In the EVE method, we measure the expected changes in the fair values of equity in response to changes in interest rates.. In the net interest income simulation method, we analyze the expected change in net interest income in response to changes in interest rates. In the EVE method, we measure the expected changes in the fair value of equity in response to changes in interest rates.

Net interest income simulation is an estimate of the total net interest income that would be recognized under different rate environments. Net interest income is measured under several parallel and nonparallel interest rate environments and deposit repricing assumptions, taking into account an estimate of the possible exercise of embedded options within the portfolio (e.g., a borrower’s ability to refinance a loan under a lower rate environment). Our policy contains a trigger for a 10% decline in rate sensitive income as well as a risk capacity of a 13% decline if rates were to immediately rise or fall in parallel by 200 bps. This trigger and risk capacity apply to both the fast and the slow deposit assumptions.

EVE is calculated as the fair value of all assets and derivative instruments minus the fair value of liabilities. We measure changes in the dollar amount of EVE for parallel shifts in interest rates. Due to embedded optionality and asymmetric rate risk, changes in EVE can be useful in quantifying risks not apparent for small rate changes. Examples of such risks may include out-of-the-money interest rate caps (or limits) on loans, which have little effect forunder small rate movements but may become important if largerlarge rate shockschanges were to occur, or substantial prepayment deceleration for low rate mortgages in a higher rate environment.

The Company’s policy is to limit declines in EVE to 4% per 100 bps movement in interest rates in either direction. Schedule 29following schedule presents the formal EVE limits adopted by the

77

Company’s Board of Directors. Changes or exceptionswe have adopted. Exceptions to the EVE limits are subject to notification and approval by the Risk Oversight CommitteeROC. In the normal course of business, we evaluated our limits and made changes to reflect its current balance sheet management objectives. These changes are reflected in the Company’s Board of Directors.following schedule.
Schedule 2924
ECONOMIC VALUE OF EQUITY DECLINE LIMITS
Parallel change in interest rates Trigger decline in EVE Risk capacity decline in EVE Trigger decline in EVE Risk capacity decline in EVE
        
+/- 100 bps 3% 4%
+/- 200 bps 6% 8% 8% 10%
+/- 300 bps 9% 12%
+/- 400 bps 21% 25%
Net interest income simulation is an
New Interest Rate Risk Model and Comparisons
In the first quarter of 2015, we adopted a new model to estimate of the totalimpact to net interest income that would be recognized under different rate environments. Netand to EVE from changes in interest incomerates. We made the change because the new model is measured under several parallel and nonparallelbelieved to better reflect customer behavior, particularly with regard to dynamic prepayment speeds (i.e., incrementally slower prepayment speeds on mortgages with incrementally higher interest rate environmentschanges) and deposit repricing assumptions, taking into account an estimatecharacteristics (i.e., faster deposit product migration to interest-bearing accounts for larger deposit balances). We ran both models in parallel for several months and members of ALCO scrutinized the results. Additionally, rigorous statistical validation of the possible exercisenew model was conducted prior to its adoption.

Regardless of options within the portfolio (e.g. a borrower’s ability to refinance a loan under a lower rate environment). Formodel used, estimating the impact on net interest income simulation, Company policy requires that net interest income from a static balance sheet be limited to a decline of no more than 10% during one year if rates were to immediately rise or fall in parallel by 200 bps.
Each of these measurement methodsand EVE requires that we assess a number of variables and make various assumptions in managing the Company’sour exposure to changes in interest rates. The assessments address deposit withdrawals and deposit product migration (e.g., customers moving money from checking accounts to certificates of deposit), competitive pricing (e.g., existing loans and deposits are assumed to roll into new loans and deposits at similar spreads relative to benchmark interest rates), loan and security prepayments, early deposit withdrawals, and the effects of other similar embedded options and noncontrollable events.options. As a result of uncertainty about the maturity and repricing characteristics of both deposits and loans, the Company estimateswe estimate ranges of EVE andpossible net interest income simulationand EVE results under a variety of assumptions and scenarios. The Company’s interest rate risk position changes as the interest rate environment changes and is actively managed to maintain an asset-sensitive position. However, positions at the end of any period may not be reflective of the Company’s position in any subsequent period.
The estimated EVE and net interest income simulationmodeled results are highly sensitive to the assumptions

64

used for deposits that do not have specific maturities, such as checking, and savings and money market accounts, and also to prepayment assumptions used for loans with prepayment options. Given the uncertainty of these estimates, we view both the EVE and the net interest income simulation results as falling within a wide range of possibilities. Management usesWe use historical regression analysis as a guide to setting such assumptions; however, due to the current low interest rate environment, which has little historical precedent, estimated deposit durations may not reflect actual future results. Even modest variationAdditionally, competition for funding in the marketplace has and may again result in changes of deposit pricing on interest-bearing accounts that is greater or less than changes in benchmark interest rates such as LIBOR or the federal funds rate.

Under most rising interest rate environments, we would expect some customers to move balances in demand deposits to interest-bearing accounts such as money market, savings, or CDs. The models are particularly sensitive to the assumption about the rate of such migration. In order to capture the sensitivity of our models to this risk, we estimate a range of possible outcomes for interest sensitivity under “fast” and “slow” movements of client funds out of noninterest-bearing deposits and into interest-bearing sources of funds.

In addition, we assume certain correlation rates, often referred to as a “deposit beta,” of interest-bearing deposits, wherein the rates paid to customers change at a different pace when compared to changes in benchmark interest rates. Generally, certificates of deposit are assumed to have a high correlation rate, while interest-on-checking accounts are assumed to have a lower correlation rate. Actual results may differ materially due to factors including competitive pricing, money supply, credit worthiness of the Company, and so forth; however, we use our historical experience as well as industry data to inform our assumptions. The aforementioned migration and correlation assumptions may have significant impact on the calculation of income simulation and economic value of equity shown below. These assumptions are as follows:result in deposit durations presented in Schedule 25.

Schedule 3025
REPRICING SCENARIODEPOSIT ASSUMPTIONS BY DEPOSIT PRODUCT

  As of December 31, 2014
  Fast Slow
Product Effective duration (base) Effective duration (+200 bps) Effective duration (base) Effective duration (+200 bps)
         
Demand deposits 1.7% 1.7% 2.8% 2.9%
Money market 0.8% 0.7% 1.2% 1.1%
Savings and interest on checking 3.0% 2.8% 3.8% 3.6%
Note: Effective duration measures the percent change in EVE for a 100 bps parallel shift in rates as compared to the Macaulay Duration, which measures weighted average life of cash flows in years and is not reported. The Company’s Demand Deposit Model assumes significant run-off of noninterest-bearing deposits in the event of rising interest rates.
  December 31, 2015
  Fast Slow
Product Effective duration (unchanged) Effective duration (+200 bps) Effective duration (unchanged) Effective duration (+200 bps)
         
Demand deposits 1.9% 1.2% 2.2% 2.0%
Money market 1.4% 1.1% 1.8% 1.5%
Savings and interest-on-checking 2.5% 1.7% 3.0% 2.5%


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As of the dates indicated and incorporating the assumptions previously described, the following schedule shows the Company’sour estimated percentage change in net interest rate sensitive income, based on a static balance sheet size, in the first year after the interest rate change if interest rates were to sustain immediate parallel changes ranging from -100 bps to +300 bps. The Company estimates interest rate risk with two sets of deposit repricing scenarios.
The first scenario assumes that administered-rate deposits (money market, interest-earning checking, and savings) reprice at a faster speed in response to changes in interest rates. In the current low rate environment, significant declines in interest rates from current levels are deemed less likely and, therefore, the magnitude of downward rate shocks is limited. At December 31, 2014 and 2013, interest rates were at such a low level that repricing scenarios assuming -100 bps rate shocks produced negative results.
The second scenario assumes that those deposits reprice at a slower speed. For larger rate shocks, e.g., +300 bps, models reflecting consumer behavior in regards to both loan prepayments and deposit run-off are inherently prone to increased model uncertainty.

Schedule 3126
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME
 December 31, 2015
 As of December 31, 2014 
Parallel shift in rates (in basis points)1
Repricing scenario -100 bps +100 bps +200 bps +300 bps -100 0 +100 +200 +300
                  
Fast (3.0)% 6.8% 13.9% 20.6% (4.2)% —% 5.0% 8.6% 11.1%
Slow (3.2)% 8.1% 16.5% 24.6% (5.0)% —% 8.0% 15.5% 22.2%
1
Assumes rates cannot go below zero in the negative rate shift.

For comparative purposes, we applied the new model to the December 31, 2014 balances; these results are presented in the following schedule.

The decrease from December 31, 2014 in interest rate sensitivity for upward shocks in rates was driven by

65

purchases of securities, addition of swap contracts in which we receive a fixed rate, and the previously mentioned changes in modeled demand deposit behavior. For the down 100bp shock, interest rate sensitivity increased due to the fact that negative shocked rates are not allowed. As the Fed Funds target rate was 0.25% as of December 31, 2014 and 0.50% as of December 31, 2015 the -100bp shock as of the latter date represented a larger shock for short-term rates.
 December 31, 2014
 As of December 31, 2013 
Parallel shift in rates (in basis points)1
Repricing scenario -100 bps +100 bps +200 bps +300 bps -100 0 +100 +200 +300
                  
Fast (3.1)% 6.8% 14.2% 21.3% (2.6)% —% 7.8% 14.1% 18.7%
Slow (3.2)% 8.1% 16.9% 25.4% (3.0)% —% 10.7% 20.7% 29.6%
1
Assumes rates cannot go below zero in the negative rate shift.

Schedule 32 includesAs of the dates indicated and incorporating the assumptions previously described, the following schedule shows our estimated percentage change in EVE under parallel interest rate changes in the EVEranging from -100 bps to +300 bps parallel rate moves for both “fast” and “slow” scenarios.bps.

Schedule 3227
CHANGES IN ECONOMIC VALUE OF EQUITY
 December 31, 2015
 As of December 31, 2014 
Parallel shift in rates (in basis points)1
Repricing scenario -100 bps +100 bps +200 bps +300 bps -100 bps 0 bps +100 bps +200 bps +300 bps
                  
Fast 1.4 % 1.2% 2.4% 2.6% (1.8)% —% 0.4% (1.3)% (4.5)%
Slow (2.1)% 6.3% 12.3% 16.9% (1.1)% —% 3.9% 6.1 % 7.2 %
1
Assumes rates cannot go below zero in the negative rate shift.


For comparative purposes, we applied the new model to the December 31, 2014 balances; these results are presented in the following schedule.The drivers of changes in the EVE are the same as cited above for Net Interest Income.
 December 31, 2014
 As of December 31, 2013 
Parallel shift in rates (in basis points)1
Repricing scenario -100 bps +100 bps +200 bps +300 bps -100 bps 0 bps +100 bps +200 bps +300 bps
                  
Fast 0.6 % 1.1% 2.6% 3.3% (0.8)% —% 2.4% 3.1% 2.2%
Slow (3.5)% 6.2% 13.0% 18.4% (2.4)% —% 5.1% 9.0% 11.4%
During 2014, changes in both measures of interest rate sensitivity were, among other things, driven by:
a 9.4% year-over-year increase in noninterest-bearing demand deposits;
the redemption of long-term debt from cash reserves;
issuance of $525 million of new common equity; and
increase of approximately $1.0 billion of primarily short-to-medium duration agency pass-through securities which qualify as HQLA.

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1
Assumes rates cannot go below zero in the negative rate shift.

Table of Contents


In 2015, we expect to introduce a new modeling approach to monitor interest rate risk. Based on parallel testing during 2014, we expect the new model will show reduced asset sensitivity compared to Schedule 32, particularly in the “slow” scenario.

Our focus on business banking also plays a significant role in determining the nature of the Company’s asset-liability management posture. At December 31, 2015 and 2014, approximately 80% and 2013, approximately 77.5% and 77.7%78%, respectively, of the Company’s commercial lending and CRE portfolios were variable ratevariable-rate and primarily tied to either the prime rate orLIBOR. In addition, certain of our consumer loans also have variable interest rates. See Schedule 1711 for further information on fixed and variable interest rates of the loan portfolio.

Largely due to competitive pressures, the favorable impact on loan yield from the use of interest rate floors has diminished. As of December 31, 2015 and 2014, approximately 33% and 2013, approximately 36.5% and 39.4%37%, respectively, of all of the Company’s variable ratevariable-rate loan balances contain floors. Of the loans with floors, approximately 58.5%44% and 64.5%55% of the balances at these same respective dates were priced at the floor rates, which were above the “index plus spread” rate by an average of 0.42%0.33% and 0.53%, respectively.


66

At December 31, 2014,2015, the Company held $275$1,388 million (notional amount) of interest rate swap agreements of which $50 million each mature in 2018 and 2019.agreements. See Notes 7 and 20of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.

Market Risk – Fixed Income
The Company engagesWe engage in the underwriting and trading of municipal securities. This trading activity exposes the Companyus to a risk of loss arising from adverse changes in the prices of these fixed income securities.

At December 31, 2014, the Company2015, we had a relatively small amount, $71$48 million, of trading assets and $24$30 million of securities sold, not yet purchased, compared with $35$71 million and $74$24 million, respectively, at December 31, 2013.2014.

The Company isWe are exposed to market risk through changes in fair value. The Company isWe are also exposed to market risk for interest rate swaps used to hedge interest rate risk. Changes in the fair value of AFS securities and in interest rate swaps that qualify as cash flow hedges are included in AOCI for each financial reporting period. During 2014,2015, the after-tax change in AOCI attributable to AFS and HTM securities was an increase of $77improved by $74 million compared to a $235 million increase in 2013. The primary reasons for the $77 million increase in 2014 are the sales of CDOs and the observed improvement in market values of trust preferred CDOs; such market improvements may not be sustainable. If any of the AFS or HTM securities become other-than-temporarily impaired, the credit impairment is charged to operations. See “Investment Securities Portfolio” on page 52 for additional information on OTTI.same prior year period.

Market Risk – Equity Investments
Through itsour equity investment activities, the Company ownswe own equity securities that are publicly traded. In addition, the Company ownswe own equity securities in companies and governmental entities, e.g., Federal Reserve Bank and Federal Home Loan Banks,FHLBs, that are not publicly traded. The accounting for equity investments may use the cost, fair value, equity, or full consolidation methods of accounting, depending upon the Company’son our ownership position and degree of involvement in influencing the investees’ affairs. Regardless of the accounting method, the value of the Company’sour investment is subject to fluctuation. SinceBecause the fair value of these securities may fall below the Company’sour investment costs, the Company iswe are exposed to the possibility of loss. Equity investments in private and public companies are approved, monitored and evaluated by the Company’s Equity Investment Committee.Committee consisting of members of management.
The Company holdsWe hold both direct and indirect investments in predominately pre-public companies through various predominantly SBIC venture capital funds. The Company’sOur equity exposure to these investments was approximately $86 million and $61$113 million at December 31, 20142015 and 2013, respectively.

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Table$86 million at December 31, 2014. On occasion, some of Contentsthe companies within our SBIC investments may issue an initial public offering. In this case, the fund is generally subject to a lockout period before liquidating the investment which can introduce additional market risk. As of December 31, 2015 we had direct SBIC investments of approximately $25 million of publicly traded stocks.

Additionally, Amegy has an alternative investments portfolio. These investments are primarily directed towards equity buyout and mezzanine funds with a key strategy of deriving ancillary commercial banking business from the portfolio companies. Early stage venture capital funds wereare generally not a part of the strategy sincebecause the underlying companies wereare typically not creditworthy. The carrying value of Amegy’s equity investments was $38 million and $54$21 million at December 31, 20142015 and 2013, respectively.$38 million at December 31, 2014.

These private equity investmentsPEIs are subject to the provisions of the Dodd-Frank Act. The Volcker RuleVR of the Dodd-Frank Act, as published onin December 10, 2013 and amended in January 2014, prohibits banks and bank holding companies from holding private equity investmentsPEIs beyond July 21, 2016, as currently extended, except for SBIC funds. The Federal ReserveFRB has announced its intention to act in 2015 to grant an additional one-year extension to July 21, 2017. As of December 31, 2014,2015, such prohibited private equity investments, except for SBIC funds,PEIs amounted to $41$18 million, with an additional $25$7 million of unfunded commitments (see NoteNotes 5 and 17 of the Notes to Consolidated Financial Statements for more information). The CompanyWe currently doesdo not believe that this divestiture requirement will ultimately have a material effectimpact on the Company’sour financial statements.

The Company’sOur earnings from these investments, and the potential volatility of these earnings, are expected to decline over the next several years and will ultimately cease.


67

Liquidity Risk Management
Overview
Liquidity risk is the possibility that the Company’sour cash flows may not be adequate to fund itsour ongoing operations and meet itsour commitments in a timely and cost-effective manner. Since liquidity risk is closely linked to both credit risk and market risk, many of the previously discussed risk control mechanisms also apply to the monitoring and management of liquidity risk. We manage the Company’sour liquidity to provide adequate funds to meet itsour anticipated financial and contractual obligations, including withdrawals by depositors, debt and capital service requirements, and lease obligations, as well as to fund customers’ needs for credit.

Overseeing liquidity management is the responsibility of ALCO, which implements a Board-adopted corporate Liquidity and Funding Policy. This policy addresses monitoring and maintaining adequate liquidity, diversifying funding positions, monitoring liquidity at consolidated as well as subsidiary bank levels, and anticipating future funding needs. The policy also includes liquidity ratio guidelines, for example,such as the “time-to-required funding” and fixed charges coverage ratios,LCR, that are used to monitor the liquidity positions of the Parent and subsidiary banks,ZB, N.A., as well as various stress test and liquid asset measurements for the Parent and subsidiary banks’ZB, N.A. liquidity.

The management of liquidity and funding is performed centrally for the Parent and jointly by the Parent and bank management for its subsidiary banks. Zions Bank’s Capital Markets/Investment Divisionbank. The Treasury Department performs this management centrally, under the direction of the Company’s Chief Investment Officer,Corporate Treasurer, with oversight by ALCO. The Chief Investment OfficerTreasurer is responsible for recommending changes to existing funding plans, as well as to the Company’s Liquidity Policy. These recommendations must be submitted for approval to ALCO, and changes to the Policy also must be approved by the Company’s Enterprise Risk Management CommitteeERMC and the Board of Directors. The Company has adopted policy limits that govern liquidity risk, includingrisk. The policy requires the Company to maintain a target forbuffer of highly liquid assets sufficient to cover cash outflows as the result of a severe liquidity crisis. The Company targets a buffer of highly liquid assets at the Parent’s time-to-required funding of to cover 18-24 months of cash outflows under a scenario with limited cash inflows, and maintains a minimum policy limit of not less than 12 months. The Company’s banking subsidiary ZB, N.A. exceeds the regulatory requirements of the Modified LCR that mandates a buffer of HQLA to cover 70% of 30-day cash outflows under the assumptions mandated in the Final Liquidity Rule. Additionally, the Company performs monthly liquidity stress testing using a set of internally generated scenarios representing severe liquidity constraints over a 12-month horizon. ZB, N.A. maintains a buffer of highly liquid assets consisting of cash, U.S. Agency, and U.S. Government Sponsored Entity securities to cover 30-day cash outflows under liquidity stress tests and maintains a contingency funding plan to identify funding sources that would be utilized over the extended 12-month horizon. Throughout 20142015 and as of December 31, 2014,2015, the Company complied with this policy.
The subsidiary banks have authority to price deposits, borrow from their FHLB and the Federal Reserve, and sell/purchase federal funds to/from Zions Bank and/or correspondent banks. The banks may also make liquidity and funding recommendations to the Chief Investment Officer.
Liquidity Regulation
In September 2014, U.S. banking regulators issued a final rule that implements a quantitative liquidity requirement in the U.S. generally consistent with the Liquidity Coverage Ratio (“LCR”)LCR minimum liquidity measure established under the Basel III liquidity framework. Under this rule, the Company iswe are subject to a modified LCR standard, which

81

requires a financial institution to hold an adequate amount of unencumbered High Quality Liquid Assets (“HQLA”) that can be converted into cash easily and immediately in private markets to meet its liquidity needs for a short-term liquidity stress scenario. Although thisThis rule is notbecame applicable to the Company and other banks of its size untilus on January 2016, the Company has1, 2016. We have calculated that, it isif the rule were applicable to us as of December 31, 2015, we would be in compliance with the requirement to maintain a modified LCR of at least 100%.

The Company is required to and is conducting monthlyZions’ internal liquidity stress teststesting program as contained in its policy complies with the requirements of January 2015. These tests incorporate scenarios designed by the Company subject to review by the Federal Reserve.Enhanced Prudential Standards for liquidity management (Reg. YY).

The Basel III liquidity framework includes a second minimum liquidity measure, the Net Stable Funding Ratio (“NSFR”), which requires a financial institution to maintain a stable funding profile in relation to the characteristics of its on- and off-balance sheet activities. On October 31, 2014, the Basel Committee on Banking Supervision issued its final standards for this ratio, entitled Basel III: The Net Stable Funding Ratio. Based upon this Basel III publication, we believe the Companywe would meet the minimum NSFR if such requirement were currently effective. However,

68

the Federal ReserveFRB has not yet proposed regulations to implement these Basel Committee standards. The Company is monitoringWe continue to monitor these developments.
Contractual Obligations
Schedule 3328 summarizes the Company’sour contractual obligations at December 31, 2014:2015.
Schedule 3328
CONTRACTUAL OBLIGATIONS
(In millions)One year or less Over one year through three years Over three years through five years Over five years 
Indeterminable maturity 1
 TotalOne year or less Over one year through three years Over three years through five years Over five years 
Indeterminable maturity 1
 Total
                      
Deposits$1,933
 $392
 $216
 $1
 $45,305
 $47,847
$1,668
 $377
 $197
 $1
 $48,131
 $50,374
Commitments to extend credit4,591
 5,695
 3,246
 3,127
   16,659
4,916
 5,045
 3,674
 3,535
 —
 17,170
Standby letters of credit:                      
Financial564
 95
 6
 81
   746
512
 43
 5
 102
 —
 662
Performance150
 31
 2
     183
172
 34
 11
 —
 —
 217
Commercial letters of credit30
   2
     32
18
 —
 —
 —
 —
 18
Commitments to make venture and other noninterest-bearing investments 2
25
         25
22
 —
 —
 —
 —
 22
Federal funds and other short-term borrowings244
         244
347
 —
 —
 —
 —
 347
Long-term debt 3
217
 250
 39
 585
   1,091
Long-term debt88
 173
 —
 556
 —
 817
Operating leases, net of subleases47
 88
 67
 125
   327
45
 83
 60
 102
 —
 290
Unrecognized tax benefits  3
       3
5
 —
 —
 —
 —
 5
$7,801
 $6,554
 $3,578
 $3,919
 $45,305
 $67,157
$7,793
 $5,755
 $3,947
 $4,296
 $48,131
 $69,922
1 
Indeterminable maturity deposits include noninterest-bearing demand, savings and money market, and non-time foreign.
2 
Commitments to make venture and other noninterest-bearing investments do not have defined maturity dates. They have therefore been considered due on demand, maturing in one year or less.
3
The maturities on long-term borrowings do not include the associated hedges.

In addition to the commitments specifically noted in Schedule 33, the Company enters28, we enter into a number of contractual commitments in the ordinary course of business. These include software licensing and maintenance, telecommunications services, facilities maintenance and equipment servicing, supplies purchasing, and other goods and services used in the operation of itsour business. Generally, these contracts are renewable or cancelable at least annually, although in some cases to secure favorable pricing concessions, the Company haswe have committed to contracts that may extend to several years.


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The CompanyWe also entersenter into derivative contracts under which it iswe are required either to receive or pay cash, depending on changes in interest rates. These contracts are carried at fair value on the balance sheet with the fair value representing the net present value of the expected future cash receipts and payments based on market rates of interest as of the balance sheet date.interest. The fair value of the contracts changes daily as interest rates change. See Note 7 of the Notes to Consolidated Financial Statements for further information on derivative contracts.

Liquidity Management Actions
Consolidated cash, interest-bearing deposits held as investments, and security resell agreements at the Parent and its subsidiaries decreased slightly to $7.4 billion at December 31, 2015 from $9.2 billion at December 31, 2014 from $9.3 billion at December 31, 2013. The $0.1$1.8 billion decrease during 20142015 resulted primarily from (1) repayments of debt,an increase in investment securities, (2) netNet loan originations, (3) repayment of long-term debt, (4) tender offer and purchases,purchase of preferred stock, and (3)(5) dividends on common and preferred and common stock.stock These decreases in cash were partially offset by (1) an increase in deposits (2) the issuance of common stock, and (3) net cash provided by operating activities.


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Our AFS investment securities increased by $3.8 billion during 2015. This increase was primarily due to the purchase of short-to-medium duration agency guaranteed mortgage-backed securities, partially offset by the sale of the remaining portfolio of CDO securities. We have been adding to our investment portfolio as a result of the need for a permanent buffer of highly liquid assets to satisfy the new LCR rules and more broadly, to maintain a sufficient buffer of highly liquid assets to meet projected liquidity needs under our monthly liquidity stress tests. We expect to continue to deploy cash and short-term investments into highly liquid assets in the next several quarters.

During 2015 we completed a tender offer to purchase $176 million of our Series I preferred stock.

We made cash payments totaling $288 million during 2015 for our long-term debt which matured or were redeemed and did not incur any new long-term debt during the same time period. See Note 12 for additional detail about debt redemptions and maturities during 2015.

Parent Company Liquidity – The Parent’s cash requirements consist primarily of debt service, investments in and advances to subsidiaries, operating expenses, income taxes, and dividends to preferred and common shareholders. The Parent’s cash needs are usually met through dividends from its subsidiaries, interest and investment income, subsidiaries’ proportionate share of current income taxes, and long-term debt and equity issuances.

Cash and interest-bearing deposits held as investments at the Parent increaseddecreased to $0.8 billion at December 31, 2015 from $1.0 billion at December 31, 2014 from $0.9 billion at December 31, 2013. The $0.1$0.2 billion increasedecrease during 20142015 was primarily a result of (1) the issuancerepayment of commonlong-term debt, (2) tender offer and purchase of preferred stock, (2) sales and paydowns of CDO securities, and (3) dividends received from subsidiaries.on common and preferred stock. These increasesdecreases were partially offset by (1) repayments of approximately $1.1 billion of senior notesdividends received from its subsidiary banks on common and $106 million of subordinated notes,preferred stock, (2) interest payments on debt,net cash provided by operating activities, and (3) the payment of preferred and common dividends. The issuance of $525 million of common stock during 2014 consisted of approximately 17.6 million shares at a price of $29.80 per share. Net of commissions and fees, this issuance added approximately $516 million to common stock.decrease in investment securities. See Notes 12 and 13 of the Notes to Consolidated Financial Statements for additional information about the Company’sour long-term debt and equity transactions.

During 2015, the Company expects to redeem high-cost, long-term debt, including debt from maturities and from early optional redemption provisions. The Parent’s long-term debt maturities in 2015 include:

Schedule 34
LONG-TERM DEBT MATURITIES IN 2015
(Amounts in millions) 
Coupon
rate
 December 31, 2014  
Description  Carrying balance Par amount Maturity
         
Subordinated note 6.00% $32.9
 $32.4
 September 15, 2015
Convertible subordinated note 6.00% 70.4
 79.3
 September 15, 2015
Subordinated note 5.50% 53.0
 52.1
 November 16, 2015
Convertible subordinated note 5.50% 62.4
 71.6
 November 16, 2015
    $218.7
 $235.4
  

In addition, at December 31, 2014, the Company had optional early redemptions totaling $27 million of long-term senior notes during 2015. On February 17, 2015, $8.0 million of this amount was redeemed.

During 20142015, the Parent received common dividends and return of common equity totaling $190$192 million and preferred dividends totaling $46$42 million from its subsidiary banks. During 2013,2014, the Parent received from its subsidiary banks $377$190 million for common dividends and return of common equity $45and $46 million for preferred dividends. At December 31, 2015, ZB, N.A., had approximately $604 million available for the payment of dividends and $175 million fromunder current capital regulations. Following the redemptionclose of preferred stock issued tobusiness on December 31, 2015, we completed the Parent.merger of our subsidiary banks, resulting in one bank with a legal name of ZB, National Association. (see Note 1 for a more detailed discussion). The dividends that our subsidiary banksZB, N.A. can pay to the Parent are restricted by current and historical earning levels, retained earnings, and risk-based and other regulatory capital requirements and limitations. During 20142015, all of the Company’sour subsidiary

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banks recorded a profit, except for TCBO, which operated at approximately break-even.profit. We expect that this profitability will be sustained under the new single charter bank previously discussed, thus permitting continued payments of dividends by the subsidiaries to the Parent during 2015.2016 although dividend capacity to the Parent will change.

General financial market and economic conditions impact the Company’sour access to, and cost of, external financing. Access to funding markets for the Parent and subsidiary banks is also directly affected by the credit ratings received from various rating agencies. The ratings not only influence the costs associated with the borrowings, but can also influence the sources of the borrowings. The debt ratings and outlooks issued by the various rating agencies for the Company did not change during 20142015, except that Fitch’s outlook forMoody’s upgraded the Company was revisedCompany’s subordinated debt to stableBa1 from positive. Standard & Poor’s, Fitch,Ba2 and both Moody’s and Dominion Bond Rating Service (“DBRS”), revised its outlook to positive from stable. Standard & Poor’s, Fitch, DBRS, and Kroll all rate the Company’s senior debt at an investment gradeinvestment-grade level, while Moody’s rates the Company’s senior debt as Ba1 (one notch below investment grade)investment-grade). In addition, all of the previously mentioned rating agencies, except Kroll, rate the Company’s subordinated debt as noninvestment grade.noninvestment-grade.

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Schedule 29 presents the ZB, N.A.’s ratings as of December 31, 2015:
Schedule 3529
CREDIT RATINGS
Rating agencyOutlook Long-term issuer/senior debt ratingShort-term debt rating
S&PStableBBBA-2
Moody’sPositiveBaa1P-2
FitchStableBBB-F3
Schedule 30 presents the Parent’s ratings as of December 31, 2014:

2015:
Schedule 3530
CREDIT RATINGS
Rating agency Outlook  Long-term issuer/senior debt rating Subordinated debt rating
       
S&P Stable BBB- BB+
Moody’s StablePositive Ba1 Ba2Ba1
Fitch Stable BBB- BB+
DBRS StablePositive BBB (low) BB (high)
Kroll Stable BBB BBB-
The Parent’s cash payments for interest, reflected in operating expenses, decreased to $51 million in 2015 from $96 million in 2014 from $126 million in 2013 as a result of a net repayment of long-term debt of $0.3 billion and $1.2 billion during 2015 and $0.2 billion during 2014, and 2013, respectively. Cash payments for interest isare expected to continue to decrease during 20152016 as a result of the debt repayments during 2014 and the expected debt repayments during 2015.
Additionally, the Parent paid approximately $96$108 million and $120$96 million of total dividends on preferred stock and common stock during 2014 and 2013, respectively.for the same periods. Preferred stock dividends were lowerwill decrease during 2014 compared to 2013 primarily2016 as a result of the replacementtender offer and purchase of the 9.5% Series Capproximately $176 million of our series I preferred stock with lower-rate Series G, H, I, and J preferred stock during the first three quarters of 2013.stock.
Note 23 of the Notes to Consolidated Financial Statements contains the Parent’s statements of income and cash flows for 2015, 2014 2013 and 2012,2013, as well as its balance sheets at December 31, 20142015 and 2013.2014.
The Parent’s long-term debt maturities during 2016 consist of $89 million senior notes due on June 20, 2016. At December 31, 2014,2015, maturities of the Company’sour long-term senior and subordinated debt ranged from September 2015June 2016 to September 2028, with effective interest rates from 3.30%3.60% to 6.95%.

See Note 12 of the Notes to Consolidated Financial Statements for a complete summary of the Company’sour long-term debt.

Subsidiary Bank Liquidity – The subsidiary banks’ZB, N.A.’s primary source of funding is theirits core deposits, consisting of demand, savings and money market deposits, and time deposits under $100,000, and foreign deposits. At December 31, 2014, these core deposits, excluding brokered deposits, in aggregate, constituted 97.3% of consolidated deposits, compared with 97.1% at December 31, 2013.$250,000. On a consolidated basis, the Company’s net loan to total deposit ratio is 80.7% as of December 31, 2015, compared to 83.7% as of December 31, 2014, compared to 84.2% as of December 31, 2013.

During 2014, the Company repaid Amegy’s $75 million subordinated note, which matured on September 22, 2014.

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Deposit growth during 2014 was very strong. Total deposits increased by $1.5$2.5 billion from $46.3to $50.4 billion at December 31, 20132015, compared to $47.8$47.9 billion at December 31, 2014, mainlyprimarily due to increases of $1.8a $1.7 billion increase in noninterest-bearing demand deposits and $1.5a $1.1 billion increase in savings deposits. These increases were partly offset primarily by a decrease of $1.6 billion in foreign deposits and $0.2 billion in time deposits. The Company experienced a significant reduction in foreign deposits as a result of closing some of its Cayman Islands operations. These foreign deposits were transferred to domestic savings and money market deposit accounts.
deposits. This increase was partially offset by a $276 million decrease in time deposits. Also, during 2014,2015, the subsidiary banks redeployed approximately $1.0$1.8 billion inof interest-bearing deposits held as investments toand security resell agreements.agreements to short-to-medium duration agency guaranteed mortgage-backed securities. ZB, N.A.’s long-term senior debt ratings were the same as the Parent, except Standard & Poor’s was BBB.
The FHLB system and Federal Reserve Banks have been and are a source of back-up liquidity, and from time to time, have been a significant source of funding for each of the Company’sour subsidiary banks. Zions Bank, TCBW, and TCBO are members ofSubsequent to the FHLB of Seattle. CB&T, NSB, and NBAZ are members of the FHLB of San Francisco. Vectracharter consolidation on December 31, 2015, ZB, N.A. is a member of the FHLB of Topeka and Amegy Bank is a member of the FHLB of Dallas.Des Moines. The FHLB allows

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member banks to borrow against their eligible loans to satisfy liquidity and funding requirements. The subsidiary banks arebank is required to invest in FHLB and Federal Reserve stock to maintain their borrowing capacity. We do not believe that the subsidiary bank mergers will adversely impact bank liquidity or funding.
At December 31, 20142015, the amount available for additional FHLB and Federal Reserve borrowings was approximately $16.4$13.4 billion. The amount available for additional FHLB and Federal Reserve borrowings is not expected to decrease as a result of the subsidiary bank mergers. Loans with a carrying value of approximately $22.5$19.4 billion at December 31, 20142015, and $23.0$22.5 billion at December 31, 20132014 have been pledged at the Federal Reserve and various FHLBs as collateral for current and potential borrowings. The Company had a de minimis amount (approximatelyDuring 2015, we repaid our outstanding $22 million)million of long-term borrowings outstanding with the FHLB at December 31, 2014, which was a slight decrease from $23 million at December 31, 2013. The CompanyFHLB. We had no short-term FHLB or Federal Reserve borrowings outstanding at December 31, 2014, which was unchanged from2015 or December 31, 2013.2014. At December 31, 2014 and 2013, the subsidiary banks’2015, our total investment in FHLB stock was approximately $104 million and $105 million, respectively. The subsidiary banks’ total investment in Federal Reserve stock was approximately$68 million and $123 million, respectively, compared to $104 million and $121 million at both December 31, 2014 and 2013.2014.
The Company’sOur investment activities can provide or use cash, depending on the asset-liabilityasset liability management posture taken. During 20142015, HTM & AFS investment securities’ activities resulted in a net increase in investment securities and a net $71 million$3.8 billion decrease in cash compared with a net $246$71 million decrease in cash for 2013.2014.
Maturing balances in our subsidiary banks’ loan portfolios also provide additional flexibility in managing cash flows. Lending and purchase activity for 20142015 resulted in a net cash outflow of $1.1$0.6 billion compared to a net cash outflow of $1.5$1.1 billion for 20132014.

During 2014, the Company2015, we paid income taxes of $183$132 million, compared to $181$183 million during 2013.2014.

Operational Risk Management
Operational risk is the risk to current or anticipated earnings or capital arising from inadequate or failed internal processes or systems, human errors or misconduct, or adverse external events. In itsour ongoing efforts to identify and manage operational risk, the Company haswe have an Enterprise Risk Management department whose responsibility is to help employees, management and the Board of Directors to assess, understand, measure, monitor and managemonitor risk in accordance with the Company’sour Risk Appetite Framework. We have documented both controls and the Control Self AssessmentSelf-Assessment related to financial reporting under the 2013 framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and the Federal Deposit Insurance Corporation Improvement Act of 1991.

To manage and minimize itsour operational risk, the Company haswe have in place transactional documentation requirements; systems and procedures to monitor transactions and positions; systems and procedures to detect and mitigate attempts to commit fraud, penetrate the Company’sour systems or telecommunications, access customer data, and/or deny normal access to those systems to the Company’sour legitimate customers; regulatory compliance reviews; and periodic reviews by the Company’s Internal Audit and Credit Examination departments. Reconciliation procedures have been established to ensure that data processing systems consistently and accurately capture critical data.

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Further, we undertake significant efforts to maintain contingency and business continuity plans for operational support in the event of natural or other disasters. We also mitigate operational risk through the purchase of insurance, including errors and omissions and professional liability insurance.

The Company isWe are continually improving itsour oversight of operational risk, including enhancement of risk identification, risk and control self-assessments, and antifraud measures, which are reported on a regular basis to theenterprise management committees. The Operational Risk Committee reports to the ERMC, which reports to the ROC. Additional measures have been taken to increase oversight by Enterprise Risk Management Committee,and Operational Risk Management through the strengthening of new product reviews, enhancements to the Vendor Management and Vendor Risk Management framework, enhancements to the Business Continuity and Disaster Recovery program, and the establishment of Fraud Risk Oversight, Incident Response Oversight and Technology Project Oversight programs. Significant enhancements have also been made to governance and reporting, including the establishment of Policy and Committee Governance programs and the creation of the Board on a regular basis. Late in 2013, the Company further improved operational risk management by creatingan Enterprise Risk Profile and staffing the position of Director of Corporate Operational Risk in order to consolidate and enhance its risk oversight functions.Profile.

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The number and sophistication of attempts to disrupt or penetrate the Company’sour critical systems, sometimes referred to as hacking, cyberfraud, cyberattacks, cyberterrorism, or other similar names, also continue to grow. On a daily basis, the Company, its customers, and other financial institutions are subject to a large number of such attempts. The Company hasWe have established systems and procedures to monitor, thwart or mitigate damage from such attempts. However, in some instances we, or our customers, have been victimized by cyberfraud (related(our related losses to the Company have not been material), or some of our customers have been temporarily unable to routinely access our online systems as a result of, for example, distributed denial of service attacks. The Company continuesWe continue to review this area of itsour operations to help ensure that we manage this risk in an effective manner.

CAPITAL MANAGEMENT
Overview
The Board of Directors is responsible for approving the policies associated with capital management. The Board has established the Capital Management Committee (“CMC”) whose primary responsibility is to recommend and administer the approved capital policies that govern the capital management of the Company and its subsidiary banks.bank. Other major CMC responsibilities include:
Setting overall capital targets within the Board-approved capital policy, monitoring performance compared to the Company’s Capital Policy limits, and recommending changes to capital including dividends, common stock repurchases, subordinated debt, and changes in major strategies to maintain the Company and its subsidiary banksbank at well capitalizedwell-capitalized levels;
Maintaining an adequate capital cushion to withstand adverse stress events while continuing to meet the lending needs of its customers, and to provide reasonable assurance of continued access to wholesale funding, consistent with fiduciary responsibilities to depositors and bondholders; and
Reviewing agency ratings of the Parent and its subsidiary banksZB, N.A., and establishing target ratings.
The Company has a fundamental financial objective to consistently produce superior risk-adjusted returns on its shareholders’ capital. We believe that a strong capital position is vital to continued profitability and to promoting depositor and investor confidence. Specifically, it is the policy of the Parent and each of the subsidiary banksZB, N.A. to:
Maintain sufficient capital to support current needs;
Maintain an adequate capital cushion to withstand future adverse stress events while continuing to meet borrowing needs of its customers; and
Meet fiduciary responsibilities to depositors and bondholders while managing capital distributions to shareholders through dividends and repurchases of common stock so as to be consistent with Federal Reserve guidelines SR 09-04 and 12 U.S.C §§ 56 and 60.


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Capital Plan and Stress Tests
The CMC oversees the Company’s capital stress testing under a variety of adverse economic and market scenarios. The Company hasWe have established processes to periodically conduct stress tests to evaluate potential impacts to the Company under hypothetical economic scenarios. These stress tests facilitate our contingency planning and management of capital and liquidity within quantitative limits reflecting the Board of Directors’ risk appetite. These processes are also used to complete the Company’s DFAST, as required by the Dodd-Frank Act, and CCAR as required by the Federal Reserve.

Filing a capital plan with the Federal Reserve based on stress-testingstress testing and documented sound policies, processes, models, controls, and governance practices, and the subsequent review by the Federal Reserve, is an annual regulatory requirement. This capital plan, which is subject to objection by the Federal Reserve, governs all of the Company’s capital and significant unsecured debt financing actions for a period of five quarters. Among the actions governed by the capital plan are the repurchase of outstanding capital securities and the timing of new capital issuances, and whether the Company can pay or increase dividends. Any such action not included in a capital plan

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to which the Federal Reserve has not objected cannot be executed without submission of a revised stress test and capital plan for Federal Reserve review and non-objection; de minimis changes are allowed without a complete plan resubmission, subject to receipt of a Federal Reserve non-objection. Regulations require Company disclosure of these stress tests results. The Company submitted its 2015 capital plan to the Federal Reserve on January 5, 2015. The Federal Reserve has indicated it will announce the results of its CCAR 2015 review by mid-March.

The Company originallyWe submitted its 2014 capital plan to the Federal Reserve on January 6, 2014. The Company subsequently notified the Federal Reserve of its intention to resubmit its capital plan to reflect the impact of the Volcker Rule, and the impact of its decision to sell certain CDO securities to improve the Company’s risk profile. In February 2014, the Federal Reserve granted its approval for a resubmission. In March 2014, the Federal Reserve notified the Company that, based upon its original capital plan, the Company’s capital ratios would not have met certain minimum requirements of the Federal Reserve’s capital adequacy rules under results projected by the Federal Reserve using the hypothetical severely adverse economic stress scenario in the Dodd-Frank Act Stress Test (“DFAST”). The DFAST results were worse than those projected by the Company with regard to pretax, pre-provision net revenue and credit losses for some loan types.

Under the Federal Reserve’s capital planning rules, this failure to maintain required minimum capital ratios as projected by the Federal Reserve under its severely adverse stress scenario triggered a requirement that the Company conduct a new stress test and submit a new capital plan. The Company resubmitted its 2014our 2015 capital plan and stress test on April 30, 2014results to the Federal Reserve. The resubmittedFRB on January 5, 2015. In our capital plan, incorporatedwe were required to forecast, under a variety of economic scenarios for nine quarters ending the impact of the IFR CDO exemption, the impact of the sales of CDO securities that occurred in the firstfourth quarter of 2014,2016, our estimated regulatory capital ratios, including our Tier 1 common ratio associated with the Basel I capital rules, our CET1 ratio under the Basel III capital rules, and an increase in the amount of newour GAAP tangible common equity that the Company proposed to issue to $400 million.

ratio. On July 25, 2014,March 11, 2015, we announced that the Federal Reserve announcednotified us that it did not object to the Company’s 2014 resubmittedcapital actions outlined in our 2015 capital plan. The post-stressplan included (1) the increase of the quarterly common dividend to $0.06 per share beginning in the second quarter of 2015; (2) the continued payment of preferred dividends at the current rates; and (3) up to $300 million in total reduction of preferred equity.

The Company’s stress test results were significantly different from those modeled by the FRB, as the FRB estimated that the Company’s minimum Tier 1 Common ratio in the severely adverse scenario was 5.1%, just above the 5.0% minimum. Since the release of the FRB’s modeled results, we have undertaken several actions designed in part to improve the Company’s risk profile under the CCAR stress tests. These actions include selling parts of the investment portfolio, extending the duration of the investment portfolio, and limiting growth in certain loan categories which are perceived as risky in the CCAR stress test.

During the second quarter of 2015, we completed our mid-cycle capital stress test as required under DFAST. The results demonstrated that we maintained sufficient capital to withstand a severe economic downturn. Detailed disclosure of the mid-cycle stress test results can be found on the Company’s website.

As discussed subsequently, we increased our common ratio computed bydividend to $0.06 in the second quarter of 2015. In November 2015, we purchased and retired $180 million of our Series I preferred stock pursuant to a tender offer announced in October 2015. Our 2015 capital plan, which runs through the second quarter of 2016, allows for an additional use of up to $120 million of cash for preferred stock redemptions. The ultimate determination of future preferred stock reductions will depend on a number of factors, including market conditions and the receptivity of preferred investors to the terms of any preferred stock redemption offers, as well as the effect of other steps we may explore as we seek to manage our capital in light of the most recent round of stress tests, any of which could result in a reduction or delay of further preferred equity reductions. We expect to manage any further reduction of preferred equity such that total tier 1 capital does not decline materially.

We are currently preparing our 2016 capital plan, which is due to the Federal Reserve meton April 5, 2016. In addition, our Dodd-Frank Act mid-cycle stress test, based upon the CCAR requirements. However,Company’s June 30, 2016 financial position, is due on October 5, 2016.

Basel III
The Basel III capital rules, which effectively replaced the Basel I rules, became effective for the Company determinedon January 1, 2015 (subject to increasephase-in periods for certain of their components). In 2013, the FRB, FDIC, and OCC published final rules (the “Basel III Capital Rules”) establishing a new common equity issuancecomprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework, commonly referred to $525 million as discussed previously.Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III capital rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company, compared to the Basel I U.S. risk-based capital rules.


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Under prior Basel I capital standards, the effects of AOCI items included in capital were excluded for purposes of determining regulatory capital and capital ratios. As a “non-advanced approaches banking organization,” we made a one-time permanent election as of January 1, 2015 to continue to exclude these items, as allowed under the Basel III Capital Rules.

We met all capital adequacy requirements under the Basel III Capital Rules based upon a 2015 phase-in as of December 31, 2015, and believe that we would meet all capital adequacy requirements on a fully phased-in basis if such requirements were currently effective.

A detailed discussion of Basel III requirements, including implications for the Company, is contained on page 9 of the “Capital Standards – Basel Framework” section under Part 1, Item 1 in this Annual Report on Form 10-K.

Capital Management Actions
Total shareholders’ equity increased by 14.1%1.9% from $6.5 billion at December 31, 2013 to $7.4 billion at December 31, 2014.2014 to $7.5 billion at December 31, 2015. The increase in total shareholders’ equity is primarily due to the issuance of $525.0 million of common stock, $398.5 million of net income of $309 million and a $76.9to the sale of the Company’s remaining portfolio of CDO securities, which was the primary driver of the $73 million improvementincrease in net unrealized losses on investment securities recorded in AOCI,AOCI. This increase was partially offset by $103.1the $176 million tender offer and repurchase of a portion of our Series I preferred stock and $108 million of dividends recorded on preferred and common stock. The improvement in net unrealized losses on investment securities during 2014 was primarily the result of an increase in the fair value of investment securities, partially offset by the recognition in earnings of net fixed income securities gains on investment securities sold.


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The Company has maintained its quarterly dividend on common stock at2015 from $0.04 per share paid since the second quarter of 2013, which was an increase of $0.03 per share from the $0.01 per share2013. We paid during the first quarter of 2013 and during each quarter of 2012. The Company paid $31.3$45.2 million in dividends on common stock during 2014,2015, compared to $24.1$31.3 million during 2013.2014. During its January 2015February 2016 meeting, the Board of Directors declared a dividend of $0.04$0.06 per common share payable on February 26, 201525, 2016 to shareholders of record on February 19, 2015.18, 2016.

The CompanyWe recorded preferred stock dividends of $62.9 million for 2015 and $71.9 million for 2014. Dividends on preferred stock recorded in 2014 included accruals of $7.0 million. Preferred stock dividends will decrease during 2016 as a result of the purchase of $180 million of our series I preferred stock discussed previously, and $95.5 million for 2013. The current annualized run rate ofany subsequent preferred dividends is approximately $63 million annually or approximately $15 million to $16 million quarterly, consistent with the amounts recorded during the last three quarters of 2014.stock reduction allowed in our 2015 capital plan.

Banking organizations are required by capital regulations to maintain adequate levels of capital as measured by several regulatory capital ratios. The Company’ capital ratios as of December 31, 2015 under Basel III and December 31, 2014 2013, and 20122013 under Basel I are shown in Schedule 36. Also shown are pro forma ratios as31.


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Schedule 3631
CAPITAL AND PERFORMANCE RATIOS
  Basel III
Basel I 
December 31, 2014
pro forma
2014 2013 2012 2015 Phase-in Fully Phased-in2015 2014 2013
              
Tangible common equity ratio9.48% 8.02% 7.09%    9.63% 9.48% 8.02%
Tangible equity ratio11.27% 9.85% 9.15%    11.05% 11.27% 9.85%
Average equity to average assets12.57% 11.81% 12.22%    13.03% 12.57% 11.81%
Risk-based capital ratios:         
     
Basel III risk-based capital ratios1:
     
Common equity tier 1 capital12.22%    
Tier I leverage11.26%    
Tier 1 risk-based14.08%    
Total risk-based16.12%    
     
Basel 1 risk-based capital ratios:     
Tier 1 common11.92% 10.18% 9.80% 11.82% 11.80%  11.92% 10.18%
Tier 1 leverage11.82% 10.48% 10.96% 11.59% 11.43%  11.82% 10.48%
Tier 1 risk-based14.47% 12.77% 13.38% 14.03% 13.84%  14.47% 12.77%
Total risk-based16.27% 14.67% 15.05% 16.08% 15.98%  16.27% 14.67%
              
Return on average common equity5.42% 5.73% 3.76%    3.75% 5.42% 5.73%
Tangible return on average tangible common equity6.70% 7.44% 5.18%    4.55% 6.70% 7.44%
1
Basel III capital ratios became effective January 1, 2015 and are based upon a 2015 phase-in.

Note 18 of the Notes to Consolidated Financial Statements provides additional information on risk-based capital.

At December 31, 2014,2015, Basel III regulatory Tiertier 1 risk-based capital and total risk-based capital werewas $6.6 billion and $7.5 billion, respectively. Basel I regulatory tier 1 risk-based capital and total risk-based capital at December 31, 2014 was $6.6 billion and $7.4 billion, respectively, compared to $5.8 billion and $6.6 million at December 31, 2013.

Basel III
The Basel III Capital Rules, which effectively replaced the Basel I rules, became effective for the Company on January 1, 2015 (subject to phase-in periods for certain of their components). In 2013, the FRB, FDIC, and OCC published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III Capital Rules substantially revise the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company, compared to the current U.S. risk-based capital rules.

A detailed discussion of Basel III requirements, including implications for the Company, are contained on page 8 of the “Supervision and Regulation” section under Part 1, Item 1 in this Annual Report on Form 10-K.


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The Company believes that, as of December 31, 2014, the Company and its subsidiary banks would meet all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis if such requirements were currently effective. See Schedule 38 regarding the pro forma Basel III ratios at December 31, 2014.respectively.

GAAP to NON-GAAP RECONCILIATIONS
1. Basel I Tier 1 common capital
Traditionally,The Basel I capital rules were replaced by the Federal Reserve and other banking regulators have assessed a bank’sBasel III capital adequacy based on Tier 1 capital, the calculation of which is codified in federal banking regulations. In 2013, the FRB issued final rules establishing a new comprehensive capital framework for U.S. banking organizations, including the new CET1 capital measure. The new capital rulesthat became effective for the Company on January 1, 2015; however, some key regulatory changes2015 (subject to the calculationphase-in periods for certain of this measure are phased in over several years.their components). The Basel III capital rules include the CET1 capital ratio, which is the core capital component of the Basel III standards,rules and we believe that it increasingly is becoming a key ratio considered by regulators, investors and analysts. The calculation of the CET1 capital ratio, as defined under Basel III rules, is considered an acceptable ratio by GAAP for financial institutions and, accordingly, does not require reconciliation to GAAP.
There is a difference between thisin the calculation of the CET1 capital ratio calculated usingunder Basel I definitionsIII rules and the calculation of T1Cthe tier 1 common (“T1C”) capital and those definitions usingratio under Basel IIII rules. We present the calculation of key regulatory capital ratios, including the T1C capital ratio, using the governing definition at the end of each quarter, taking into account applicable phase-in rules.

While we were subject to Basel I capital rules prior to 2015, the Federal Reserve and other banking regulators assessed a bank’s capital adequacy based on tier 1 capital, the calculation of which was codified in federal banking regulations. However, Basel I rules did not include a definition for T1C capital is often expressed asand thus it was considered a percentage of risk-weighted assets. Under the current risk-based capital framework applicablenon-GAAP measure requiring reconciliation to the Company, a bank’s balance sheet assets and credit equivalent amounts of off-balance sheet items are assigned to one of four broad “Basel I” risk categories for banks, like our subsidiary banks, that have not adopted the Basel II “Advanced Measurement Approach.” The aggregated dollar amount in each category is then multiplied by the risk weighting assigned to that category. The resulting weighted values from each of the four categories are added together and this sum is the risk-weighted assets total that, as adjusted, comprises the denominator of certain risk-based capital ratios. Tier 1 capital is then divided by this denominator (risk-weighted assets) to determine the Tier 1 capital ratio. Adjustments are made to Tier 1 capital to arrive at T1C capital. T1C capital is also divided by the risk-weighted assets to determine the T1C capital ratio. The amounts disclosed as risk-weighted assets are calculated consistent with banking regulatory requirements.

GAAP.
Schedule 3732 provides a reconciliation for prior periods of controlling interesttotal shareholders’ equity (GAAP) to Tiertier 1 capital (regulatory)(regulatory at the subject dates) and to T1C capital (non-GAAP) using currentBasel I U.S. regulatory treatment, and not proposed Basel III calculations.

Schedule 37
TIER 1 COMMON CAPITAL (NON-GAAP)
 December 31,
(Amounts in millions)2014 2013 2012
      
Controlling interest shareholders’ equity (GAAP)$7,370
 $6,465
 $6,052
Accumulated other comprehensive loss128
 192
 446
Nonqualifying goodwill and intangibles(1,040) (1,050) (1,065)
Disallowed deferred tax assets—
 —
 —
Other regulatory adjustments(1) (6) 3
Qualifying trust preferred securities163
 163
 448
Tier 1 capital (regulatory)6,620
 5,764
 5,884
Qualifying trust preferred securities(163) (163) (448)
Preferred stock(1,004) (1,004) (1,128)
Tier 1 common capital (non-GAAP)$5,453
 $4,597
 $4,308
      
Risk-weighted assets (regulatory)$45,738
 $45,146
 $43,970
Tier 1 common capital to risk-weighted assets (non-GAAP)11.92% 10.18% 9.80%
the resulting T1C capital ratio.


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2. Basel III Risk-Based Capital Ratios, Pro FormaSchedule 32

This Annual Report on Form 10-K presents Basel III risk-based capital ratios at December 31, 2014 on a pro forma basis as if such requirements were currently effective. They are presented under the yearBASEL I TIER 1 phase-in assumptions, which will be used for 2015, and under the fully phased-in assumptions which will occur in 2019.

Schedule 38 presents risk-based capital amounts under the currently effective Basel I rules and, after adjustment, under the Basel III requirements as if such requirements were currently effective. The pro forma Basel III risk-based capital ratios are then computed.

Schedule 38
Basel III Risk-Based Capital Ratios (Pro Forma, NON-GAAP)COMMON CAPITAL (NON-GAAP)
 Basel III
 
December 31, 2014
pro forma
(Amounts in millions)
2015
Phase-in
 Fully Phased-in
    
Basel I Tier 1 capital (Regulatory)$6,620
 $6,620
Basel III adjustments(131) (226)
Projected Basel III Tier 1 capital (non-GAAP) (a)6,489
 6,394
    
Basel 1 Tier 1 common capital (non-GAAP)
(see Schedule 37)
5,453
 5,453
Basel III adjustments16
 1
Projected Basel III Tier 1 common capital (non-GAAP) (b)5,469
 5,454
    
Basel 1 Total risk-based capital (Regulatory)7,443
 7,443
Basel III adjustments(4) (58)
Projected Basel III total risk-based capital (non-GAAP) (c)7,439
 7,385
    
Basel I risk-weighted assets (Regulatory)45,738
 45,738
Basel III adjustments519
 475
Projected Basel III risk-weighted assets (non-GAAP) (d)46,257
 46,213
    
Basel I tier 1 leverage risk-weighted assets (Regulatory)55,987
 55,987
Basel III adjustments(9) (63)
Projected Basel I tier 1 leverage risk-weighted assets (non-GAAP) (e)$55,978
 $55,924
    
Non-GAAP Projected Basel III risk-based capital ratios:   
Tier 1 common (b/d)11.82% 11.80%
Tier 1 leverage (a/e)11.59% 11.43%
Tier 1 risk-based (a/d)14.03% 13.84%
Total risk-based (c/d)16.08% 15.98%
  
(Amounts in millions)2014 2013
    
Total shareholders’ equity (GAAP)$7,370
 $6,465
Accumulated other comprehensive loss128
 192
Nonqualifying goodwill and intangibles(1,040) (1,050)
Disallowed deferred tax assets—
 —
Other regulatory adjustments(1) (6)
Qualifying trust preferred securities163
 163
Tier 1 capital (regulatory)6,620
 5,764
Qualifying trust preferred securities(163) (163)
Preferred stock(1,004) (1,004)
Tier 1 common capital (non-GAAP)$5,453
 $4,597
    
Risk-weighted assets (regulatory)$45,738
 $45,146
Tier 1 common capital to risk-weighted assets (non-GAAP)11.92% 10.18%

3.2. Tangible return on average tangible common equity
This Annual Report on Form 10-K presents “tangible return on average tangible common equity” which excludes, net of tax, the amortization of core deposit and other intangibles and impairment loss on goodwill from net earnings applicable to common shareholders, and average goodwill and core deposit and other intangibles from average common equity.

Schedule 3933 provides a reconciliation of net earnings applicable to common shareholders (GAAP) to net earnings applicable to common shareholders, excluding net of tax, the effects of amortization of core deposit and other intangibles and impairment loss on goodwill (non-GAAP), and average common equity (GAAP) to average tangible common equity (non-GAAP).

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Schedule 3933
TANGIBLE RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)
Year Ended December 31, Year Ended December 31,
(Amounts in millions)2014 2013 2012 2015 2014 2013
           
Net earnings applicable to common shareholders (GAAP)$326.6
 $294.0
 $178.6
 $246.6
 $326.6
 $294.0
Adjustments, net of tax:           
Impairment loss on goodwill—
 —
 0.6
Amortization of core deposit and other intangibles6.9
 9.1
 10.8
 5.9
 6.9
 9.1
Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a)$333.5
 $303.1

$190.0
Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP)(a)$252.5
 $333.5

$303.1
           
Average common equity (GAAP)$6,024
 $5,130
 $4,745
 $6,581
 $6,024
 $5,130
Average goodwill(1,014) (1,014) (1,015) (1,014) (1,014) (1,014)
Average core deposit and other intangibles(31) (44) (59) (21) (31) (44)
Average tangible common equity (non-GAAP) (b)$4,979
 $4,072
 $3,671
Average tangible common equity (non-GAAP(b)$5,546
 $4,979
 $4,072
           
Tangible return on average tangible common equity (non-GAAP) (a/b)6.70% 7.44% 5.18%
Tangible return on average tangible common equity (non-GAAP)(a/b)4.55% 6.70% 7.44%
4. Total shareholders’

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  Three Months Ended
  December 31, September 30, December 31,
(Amounts in millions) 2015 2015 2014
       
Net earnings applicable to common shareholders (GAAP) $88.2
 $84.2
 $66.7
Adjustments, net of tax:      
Amortization of core deposit and other intangibles 1.4
 1.5
 1.7
Net earnings applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP)(a)$89.6
 $85.7
 $68.4
       
Average common equity (GAAP) $6,766
 $6,656
 $6,521
Average goodwill (1,014) (1,014) (1,014)
Average core deposit and other intangibles (18) (20) (27)
Average tangible common equity (non-GAAP(b)$5,734
 $5,622
 $5,480
       
Number of days in quarter(c)92 92 92
Number of days in year(d)365 365 365
       
Tangible return on average tangible common equity (non-GAAP)(a/b/c*d)6.20% 6.05% 4.95%

3. Tangible equity, to tangible common equity, and tangible book value per common equityshare
This Annual Report on Form 10-K presents “tangible equity”equity,” “tangible common equity,” and “tangible book value per common equity”share” which excludes goodwill and core deposit and other intangibles for boththese measures and excludes preferred stock and noncontrolling interests for tangible common equity.equity and tangible book value per common share.

Schedule 4034 provides a reconciliation of total shareholders’ equity (GAAP) to both tangible equity (non-GAAP) and tangible common equity (non-GAAP). It also shows the calculation of tangible book value per common share using the aforementioned tangible common equity.
Schedule 4034
TANGIBLE EQUITY (NON-GAAP) AND TANGIBLE COMMON EQUITY (NON-GAAP)
(Amounts in millions)December 31, December 31,
2014 2013 2012 2015 2014 2013
           
Total shareholders’ equity (GAAP)$7,370
 $6,465
 $6,049
 $7,507
 $7,370
 $6,465
Goodwill(1,014) (1,014) (1,014) (1,014) (1,014) (1,014)
Core deposit and other intangibles(26) (36) (51) (16) (26) (36)
Tangible equity (non-GAAP) (a)6,330
 5,415
 4,984
(a)6,477
 6,330
 5,415
Preferred stock(1,004) (1,004) (1,128) (829) (1,004) (1,004)
Noncontrolling interests—
 —
 3
 —
 —
 —
Tangible common equity (non-GAAP) (b)$5,326
 $4,411
 $3,859
(b)$5,648
 $5,326
 $4,411
           
Total assets (GAAP)$57,209
 $56,031
 $55,512
 $59,670
 $57,209
 $56,031
Goodwill(1,014) (1,014) (1,014) (1,014) (1,014) (1,014)
Core deposit and other intangibles(26) (36) (51) (16) (26) (36)
Tangible assets (non-GAAP) (c)$56,169
 $54,981
 $54,447
(c)$58,640
 $56,169
 $54,981
           
Tangible equity ratio (a/c)11.27% 9.85% 9.15%
Tangible common equity ratio (b/c)9.48% 8.02% 7.09%
Common shares outstanding(d)204
 203
 185
      
Tangible equity ratio(a/c)11.05% 11.27% 9.85%
Tangible common equity ratio(b/c)9.63% 9.48% 8.02%
Tangible book value per common share(b/d)$27.63 $26.23 $23.88

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4. Efficiency ratio
This Annual Report on Form 10-K presents an “efficiency ratio” whose calculation includes adjustments for certain line items and amounts in noninterest expense and noninterest income.
Schedule 35 provides a reconciliation of noninterest expense (GAAP), taxable-equivalent net interest income (GAAP) and noninterest income (GAAP) to the efficiency ratio (non-GAAP).
Schedule 35
EFFICIENCY RATIO
(Amounts in millions)  Six Months Ended December 31, 2015 2015 2014
        
Noninterest expense (GAAP)(a) $798,925
 $1,600,486
 $1,665,292
Adjustments:       
Severance costs  7,045
 11,005
 8,644
Other real estate expense, net  (576) (647) (1,251)
Provision for unfunded lending commitments  (5,123) (6,238) (8,629)
Debt extinguishment cost  135
 2,530
 44,422
Amortization of core deposit and other intangibles  4,571
 9,247
 10,923
Restructuring costs  2,407
 3,852
 —
Total adjustments  8,459
 19,749
 54,109
        
Add-back of adjustments(b) (8,459) (19,749) (54,109)
Adjusted noninterest expense (non-GAAP)(a+b)=(c) $790,466
 $1,580,737
 $1,611,183
        
Taxable-equivalent net interest income (GAAP)(d) $883,562
 $1,733,158
 $1,696,146
Noninterest income (GAAP)(e) 254,877
 377,120
 508,629
Adjustments:       
Fair value and nonhedge derivative loss  (867) (111) (11,390)
Equity securities gains, net  3,683
 11,875
 13,471
Fixed income securities gains (losses), net  (60) (138,735) 10,419
Total adjustments  2,756
 (126,971) 12,500
        
Add-back of adjustments(f) (2,756) 126,971
 (12,500)
Adjusted taxable-equivalent net interest income and noninterest income (non-GAAP)(d+e+f)=(g) $1,135,683
 $2,237,249
 $2,192,275
        
Efficiency ratio(c/g) 69.6% 70.7% 73.5%

For items 2, 3, and 4, the identified adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are included where applicable in financial results or in the balance sheet presented in accordance with GAAP. We consider these adjustments to be relevant to ongoing operating results and financial position.
We believe that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period and company-to-company comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company and in

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predicting future performance. These non-GAAP financial measures are used by management to assess the performance of the Company’s business or its financial position for evaluating bank reporting segment performance, for presentations of the Company’s performance to investors, and for other reasons as may be requested by investors and analysts. We further believe that presenting these non-GAAP financial measures will permit investors and analysts to assess theour performance of the Company on the same basis as that applied by management.
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by stakeholders to evaluate a company,

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they have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of results as reported under GAAP.

ITEM 7A. QUANTITATIVECRITICAL ACCOUNTING POLICIES AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKSIGNIFICANT ESTIMATES
Note 1 of the Notes to Consolidated Financial Statements contains a summary of the Company’s significant accounting policies. Discussed below are certain significant accounting policies that we consider critical to the Company’s financial statements. These critical accounting policies were selected because the amounts affected by them are significant to the financial statements. Any changes to these amounts, including changes in estimates, may also be significant to the financial statements. We believe that an understanding of these policies, along with the related estimates we are required to make in recording the financial transactions of the Company, is important to have a complete picture of the Company’s financial condition. In addition, in arriving at these estimates, we are required to make complex and subjective judgments, many of which include a high degree of uncertainty. The following discussion of these critical accounting policies includes the significant estimates related to these policies. We have discussed each of these accounting policies and the related estimates with the Audit Committee of the Board of Directors.

We have included, where applicable in this document, sensitivity schedules and other examples to demonstrate the impact of the changes in estimates made for various financial transactions. The sensitivities in these schedules and examples are hypothetical and should be viewed with caution. Changes in estimates are based on variations in assumptions and are not subject to simple extrapolation, as the relationship of the change in the assumption to the change in the amount of the estimate may not be linear. In addition, the effect of a variation in one assumption is in reality likely to cause changes in other assumptions, which could potentially magnify or counteract the sensitivities.

Fair Value Estimates
We measure or monitor many of our assets and liabilities on a fair value basis. Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. To increase consistency and comparability in fair value measurements, current accounting guidance has established a three-level hierarchy to prioritize the valuation inputs among (1) observable inputs that reflect quoted prices in active markets, (2) inputs other than quoted prices with observable market data, and (3) unobservable data such as the Company’s own data or single dealer nonbinding pricing quotes.

When observable market prices are not available, fair value is estimated using modeling techniques such as discounted cash flow analysis. These modeling techniques utilize assumptions that market participants would use in pricing the asset or the liability, including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset, the related life of the asset and applicable growth rate, the risk of nonperformance, and other related assumptions.

The selection and weighting of the various fair value techniques may result in a fair value higher or lower than carrying value. Considerable judgment may be involved in determining the amount that is most representative of fair value.

For assets and liabilities recorded at fair value, the Company’s policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements for those items where there is an active market. In certain cases, when market observable inputs for model-based valuation techniques may not be readily available, the Company is required to make judgments about assumptions market participants would use in estimating the fair value of the financial instrument. The models used to determine fair value adjustments are regularly evaluated by management for relevance under current facts and circumstances.

Changes in market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs

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becoming unavailable. When market data is not available, the Company would use valuation techniques requiring more management judgment to estimate the appropriate fair value.

Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary measure of accounting. Fair value is used on a nonrecurring basis to measure certain assets or liabilities (including HTM securities, loans held for sale, and OREO) for impairment or for disclosure purposes in accordance with current accounting guidance.

Impairment analysis also relates to long-lived assets, goodwill, and core deposit and other intangible assets. An impairment loss is recognized if the carrying amount of the asset is not likely to be recoverable and exceeds its fair value. In determining the fair value, management uses models and applies the techniques and assumptions previously discussed.

Investment securities are valued using several methodologies, which depend on the nature of the security, availability of current market information, and other factors. Investment securities in an unrealized loss position are formally reviewed on a quarterly basis for the presence of OTTI. OTTI is considered to have occurred if its fair value is below amortized cost and (1) we intend to sell the security, or (2) it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis, or (3) the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. The “more likely than not” criteria is a lower threshold than the “probable” criteria.

Notes 1, 5, 7, 9, and 20 of the Notes to Consolidated Financial Statements and “Investment Securities Portfolio” on page 44 contain further information regarding the use of fair value estimates.

Allowance for Credit Losses
The ACL includes the allowance for loan losses and the RULC. The allowance for loan losses provides for probable losses that have been identified with specific customer relationships and for probable losses believed to be inherent in the loan portfolio, but which have not been specifically identified. The determination of the appropriate level of the allowance is based on periodic evaluations of the portfolios. This process includes both quantitative and qualitative analyses, as well as a qualitative review of the results. The qualitative review requires a significant amount of judgment, and is described in more detail in Note 6 of the Notes to Consolidated Financial Statements.

The RULC provides for potential losses associated with off-balance sheet lending commitments and standby letters of credit. The reserve is estimated using the same procedures and methodologies as for the allowance for loan losses, plus assumptions regarding the probability and amount of unfunded commitments being drawn.

There are numerous components that enter into the evaluation of the allowance for loan losses. Although we believe that our processes for determining an appropriate level for the allowance adequately address the various components that could potentially result in credit losses, the processes and their elements include features that may be susceptible to significant change. Any unfavorable differences between the actual outcome of credit-related events and our estimates could require an additional provision for credit losses.As an example, if the PD risk grade, for all pass-graded commercial and CRE loans, was immediately downgraded one grade on our internal risk grading scale, the quantitatively determined amount of the allowance for loan losses at December 31, 2015 would increase by approximately $84 million. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in risk grades may have on the allowance estimation process.

Although the qualitative process is subjective, it represents the Company’s best estimate of qualitative factors impacting the determination of the allowance for loan losses. Such factors include, but are not limited to, national and regional economic trends and indicators. We believe that given the procedures we follow in determining the allowance for loan losses for the loan portfolio, the various components used in the current estimation processes are appropriate.

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Note 6 of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 50contain further information and more specific descriptions of the processes and methodologies used to estimate the ACL.
Accounting for Goodwill
Goodwill is initially recorded at fair value and is subsequently evaluated at least annually for impairment in accordance with current accounting guidance. We perform this annual test as of October 1 of each year, or more often if events or circumstances indicate that carrying value may not be recoverable. The goodwill impairment test for a given reporting unit (generally one of our banking segments) compares its fair value with its carrying value. If the carrying amount exceeds fair value, an additional analysis must be performed to determine the amount, if any, by which goodwill is impaired.

To determine the fair value, we generally use a combination of up to three separate methods: comparable publicly traded financial service companies (primarily banks and bank holding companies) in the Western and Southwestern states (“Market Value”); where applicable, comparable acquisitions of financial services companies in the Western and Southwestern states (“Transaction Value”); and the discounted present value of management’s estimates of future cash flows. Critical assumptions that are used as part of these calculations include:
selection of comparable publicly traded companies based on location, size, and business focus and composition;
selection of market comparable acquisition transactions based on location, size, business focus and composition, and date of the transaction;
the discount rate, which is based on Zions’ estimate of its cost of capital, applied to future cash flows;
the projections of future earnings and cash flows of the reporting unit;
the relative weight given to the valuations derived by the three methods described; and
the control premium associated with reporting units.
We apply a control premium in the Market Value approach to determine the reporting units’ equity values. Control premiums represent the ability of a controlling shareholder to change how the Company is managed and can cause the fair value of a reporting unit as a whole to exceed its market capitalization. Based on a review of historical bank acquisition transactions within the Company’s geographic footprint, and a comparison of the target banks’ market values 30 days prior to the announced transaction to the deal value, we have determined that a control premium of 25% was appropriate at the most recent test date.

Since estimates are an integral part of the impairment computations, changes in these estimates could have a significant impact on any calculated impairment amount. Estimates include economic conditions, which impact the assumptions related to interest and growth rates, loss rates and imputed cost of equity capital. The fair value estimates for each reporting unit incorporate current economic and market conditions, including Federal Reserve monetary policy expectations and the impact of legislative and regulatory changes. Additional factors that may significantly affect the estimates include, among others, competitive forces, customer behaviors and attrition, loan losses, changes in growth trends, cost structures and technology, changes in equity market values and merger and acquisition valuations, and changes in industry conditions.

Weakening in the economic environment, a decline in the performance of the reporting units, or other factors could cause the fair value of one or more of the reporting units to fall below carrying value, resulting in a goodwill impairment charge. Additionally, new legislative or regulatory changes not anticipated in management’s expectations may cause the fair value of one or more of the reporting units to fall below the carrying value, resulting in a goodwill impairment charge. Any impairment charge would not affect the Company’s regulatory capital ratios, tangible common equity ratio, or liquidity position.

During the fourth quarter of 2015, we performed our annual goodwill impairment evaluation of the entire organization, effective October 1, 2015. Upon completion of the evaluation process, we concluded that none of our

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reporting units was impaired. Furthermore, the evaluation process determined that the fair values of Amegy, CB&T, and Zions Bank exceeded their carrying values by 14%, 45%, and 32%, respectively. Additionally, we performed a hypothetical sensitivity analysis on the discount rate assumption to evaluate the impact of an adverse change to this assumption. If the discount rate applied to future earnings were increased by 100 bps, the fair values of Amegy, CB&T, and Zions Bank would exceed their carrying values by 9%, 39%, and 16%, respectively. Additionally, because of the decline in energy prices since October 1, 2015 through December 31, 2015, we ran additional sensitivity analyses to estimate the impact that the decline would have on Amegy’s value and concluded that the goodwill of Amegy was not considered impaired during 2015.

However, due to the significant decline of energy prices in 2016 we are currently evaluating if the goodwill of Amegy is considered impaired for the first quarter of 2016. Our evaluation of impairment of goodwill balance at Amegy will consider the following key assumptions: the appropriate discount rate to reflect the uncertainty of achieving future cash flow projections, growth rate of the Texas economy, net loan loss expectations for future periods, stock prices of comparable publicly traded companies, and oil/gas forward price curves. These assumptions have been impacted by the decline in energy prices in 2016 and prolonged decline in energy prices can adversely impact the carrying value of Amegy. Note 9 of the Notes to Consolidated Financial Statements contains additional information related to goodwill.

Income Taxes
We are subject to the income tax laws of the United States, its states and other jurisdictions where we conduct business. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these laws and related regulations. In the process of preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law.
We had net DTAs of $203 million at December 31, 2015, compared to $224 million at December 31, 2014. The most significant portions of the deductible temporary differences relate to (1) the allowance for loan losses, (2) fair value adjustments or impairment write-downs related to securities, (3) pension and postretirement obligations and (4) deferred compensation arrangements. No valuation allowance has been recorded as of December 31, 2015 related to DTAs except for a full valuation reserve related to certain acquired net operating losses from an immaterial nonbank subsidiary. In assessing the need for a valuation allowance, both the positive and negative evidence about the realization of DTAs were evaluated. The ultimate realization of DTAs is based on the Company’s ability to (1) carry back net operating losses to prior tax periods, (2) utilize the reversal of taxable temporary differences to offset deductible temporary differences, (3) implement tax planning strategies that are prudent and feasible, and (4) generate future taxable income.
After considering the weight of the positive evidence compared to the negative evidence, management has concluded it is more likely than not that we will realize the existing DTAs and that an additional valuation allowance is not needed.
On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current best estimate of net income and the applicable taxes expected for the full year. Deferred tax assets and liabilities are also reassessed on a regular basis. Reserves for contingent tax liabilities are reviewed quarterly for adequacy based upon developments in tax law and the status of examinations or audits. We have tax reserves at December 31, 2015 of approximately $4 million, net of federal and/or state benefits, primarily relating to uncertain tax positions for various state tax contingencies in several jurisdictions.
Note 14 of the Notes to Consolidated Financial Statements contains additional information regarding income taxes.


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RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
Note 2 of the Notes to Consolidated Financial Statements discusses recently issued accounting pronouncements that we will be required to adopt. Also discussed is our expectation of the impact these new accounting pronouncements will have, to the extent they are material, on our financial condition, results of operations, or liquidity.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information required by this Item is included in “Interest Rate and Market Risk Management” in MD&A beginning on page 7663 and is hereby incorporated by reference.


92

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT ON MANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Zions Bancorporation and subsidiaries (“the Company”) is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined by Exchange Act Rules 13a-15 and 15d-15.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Although any system of internal control can be compromised by human error or intentional circumvention of required procedures, we believe our system provides reasonable assurance that financial transactions are recorded and reported properly, providing an adequate basis for reliable financial statements.

The Company’s management has used the criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)COSO to evaluate the effectiveness of the Company’s internal control over financial reporting.

The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 20142015 and has concluded that such internal control over financial reporting is effective. There are no material weaknesses in the Company’s internal control over financial reporting that have been identified by the Company’s management.

Ernst & Young LLP, an independent registered public accounting firm, has audited the consolidated financial statements of the Company for the year ended December 31, 20142015 and has also issued an attestation report, which is included herein, on internal control over financial reporting under Auditing Standard No. 5in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”).


9384

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Audit Committee of the Board of Directors and Shareholders of Zions Bancorporation and Subsidiaries
We have audited Zions Bancorporation and subsidiaries’ internal control over financial reporting as of December 31, 2014,2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Zions Bancorporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Zions Bancorporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Zions Bancorporation and subsidiaries as of December 31, 20142015 and 20132014 and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 20142015 of Zions Bancorporation and subsidiaries and our report dated February 27, 201529, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Salt Lake City, Utah
February 27, 2015


29, 2016

9485

REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
Audit Committee of the Board of Directors and Shareholders of Zions Bancorporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of Zions Bancorporation and subsidiaries as of December 31, 20142015 and 2013,2014, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014.2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Zions Bancorporation and subsidiaries at December 31, 20142015 and 2013,2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014,2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Zions Bancorporation and subsidiaries’ internal control over financial reporting as of December 31, 2014,2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 201529, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Salt Lake City, Utah
February 27, 201529, 2016


9586

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except shares)December 31,December 31,
2014 20132015 2014
ASSETS      
Cash and due from banks$845,905
 $1,175,083
$798,319
 $841,942
Money market investments:      
Interest-bearing deposits7,174,134
 8,175,048
6,108,124
 7,178,097
Federal funds sold and security resell agreements1,386,291
 282,248
619,758
 1,386,291
Investment securities:      
Held-to-maturity, at adjusted cost (approximate fair value $677,196 and $609,547)647,252
 588,981
Held-to-maturity, at adjusted cost (approximate fair value $552,088 and $677,196)545,648
 647,252
Available-for-sale, at fair value3,844,248
 3,701,886
7,643,116
 3,844,248
Trading account, at fair value70,601
 34,559
48,168
 70,601
4,562,101
 4,325,426
8,236,932
 4,562,101
      
Loans held for sale132,504
 171,328
149,880
 132,504
      
Loans and leases, net of unearned income and fees40,064,016
 39,043,365
40,649,542
 40,063,658
Less allowance for loan losses604,663
 746,291
606,048
 604,663
Loans, net of allowance39,459,353
 38,297,074
40,043,494
 39,458,995
      
Other noninterest-bearing investments865,950
 855,642
848,144
 865,950
Premises and equipment, net829,809
 726,372
905,462
 829,809
Goodwill1,014,129
 1,014,129
1,014,129
 1,014,129
Core deposit and other intangibles25,520
 36,444
16,272
 25,520
Other real estate owned18,916
 46,105
7,092
 18,916
Other assets894,262
 926,228
921,919
 894,620
$57,208,874
 $56,031,127
$59,669,525
 $57,208,874
      
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Deposits:      
Noninterest-bearing demand$20,528,287
 $18,758,753
$22,276,664
 $20,529,124
Interest-bearing:      
Savings and money market24,583,636
 23,029,928
25,672,356
 24,583,636
Time2,406,924
 2,593,038
2,130,680
 2,406,924
Foreign328,391
 1,980,161
294,391
 328,391
47,847,238
 46,361,880
50,374,091
 47,848,075
      
Federal funds and other short-term borrowings244,223
 340,348
346,987
 244,223
Long-term debt1,092,282
 2,273,575
817,348
 1,092,282
Reserve for unfunded lending commitments81,076
 89,705
74,838
 81,076
Other liabilities574,525
 501,056
548,742
 573,688
Total liabilities49,839,344
 49,566,564
52,162,006
 49,839,344
      
Shareholders’ equity:      
Preferred stock, without par value, authorized 4,400,000 shares1,004,011
 1,003,970
828,490
 1,004,011
Common stock, without par value; authorized 350,000,000 shares; issued
and outstanding 203,014,903 and 184,677,696 shares
4,723,855
 4,179,024
Common stock, without par value; authorized 350,000,000 shares; issued
and outstanding 204,417,093 and 203,014,903 shares
4,766,731
 4,723,855
Retained earnings1,769,705
 1,473,670
1,966,910
 1,769,705
Accumulated other comprehensive income (loss)(128,041) (192,101)(54,612) (128,041)
Total shareholders’ equity7,369,530
 6,464,563
7,507,519
 7,369,530
$57,208,874
 $56,031,127
$59,669,525
 $57,208,874
See accompanying notes to consolidated financial statements.

9687

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)Year Ended December 31,Year Ended December 31,
2014 2013 20122015 2014 2013
Interest income:          
Interest and fees on loans$1,729,643
 $1,814,600
 $1,889,884
$1,686,220
 $1,729,652
 $1,814,631
Interest on money market investments21,414
 23,363
 21,080
23,165
 21,414
 23,363
Interest on securities101,936
 103,442
 127,758
124,086
 101,936
 103,442
Total interest income1,852,993
 1,941,405
 2,038,722
1,833,471
 1,853,002
 1,941,436
Interest expense:          
Interest on deposits49,736
 58,913
 80,146
49,344
 49,736
 58,913
Interest on short- and long-term borrowings123,262
 186,164
 226,636
68,867
 123,262
 186,164
Total interest expense172,998
 245,077
 306,782
118,211
 172,998
 245,077
Net interest income1,679,995
 1,696,328
 1,731,940
1,715,260
 1,680,004
 1,696,359
Provision for loan losses(98,082) (87,136) 14,227
40,035
 (98,082) (87,136)
Net interest income after provision for loan losses1,778,077
 1,783,464
 1,717,713
1,675,225
 1,778,086
 1,783,495
Noninterest income:          
Service charges and fees on deposit accounts174,024
 176,339
 176,401
168,451
 168,291
 171,036
Other service charges, commissions and fees191,516
 181,473
 174,420
206,786
 193,978
 183,961
Wealth management income30,573
 29,913
 28,402
31,224
 30,573
 29,913
Loan sales and servicing income26,049
 35,293
 39,929
30,731
 29,154
 38,113
Capital markets and foreign exchange22,416
 28,051
 26,810
25,655
 22,584
 28,051
Dividends and other investment income43,662
 46,062
 55,825
30,150
 43,662
 46,062
Fair value and nonhedge derivative loss(11,390) (18,152) (21,782)(111) (11,390) (18,152)
Equity securities gains, net13,471
 8,520
 11,253
11,875
 13,471
 8,520
Fixed income securities gains (losses), net10,419
 (2,898) 19,544
(138,735) 10,419
 (2,898)
Impairment losses on investment securities(27) (188,606) (166,257)—
 (27) (188,606)
Less amounts recognized in other comprehensive income—
 23,472
 62,196
—
 —
 23,472
Net impairment losses on investment securities(27) (165,134) (104,061)—
 (27) (165,134)
Other7,925
 17,940
 13,129
11,094
 7,914
 17,904
Total noninterest income508,638
 337,407
 419,870
377,120
 508,629
 337,376
Noninterest expense:          
Salaries and employee benefits956,428
 912,918
 885,661
972,712
 956,411
 912,902
Occupancy, net115,701
 112,303
 112,947
119,529
 115,701
 112,303
Furniture, equipment and software115,312
 106,629
 108,990
123,196
 115,312
 106,629
Other real estate expense(1,251) 1,712
 19,723
(647) (1,251) 1,712
Credit-related expense27,985
 33,653
 50,518
28,541
 28,134
 33,795
Provision for unfunded lending commitments(8,629) (17,104) 4,387
(6,238) (8,629) (17,104)
Professional and legal services66,011
 67,968
 52,509
50,421
 66,011
 67,968
Advertising25,100
 23,362
 25,720
25,314
 25,100
 23,362
FDIC premiums32,174
 38,019
 43,401
34,422
 32,174
 38,019
Amortization of core deposit and other intangibles10,923
 14,375
 17,010
9,247
 10,923
 14,375
Debt extinguishment cost44,422
 120,192
 —
2,530
 44,422
 120,192
Other281,116
 300,412
 275,151
241,459
 280,984
 300,286
Total noninterest expense1,665,292
 1,714,439
 1,596,017
1,600,486
 1,665,292
 1,714,439
Income before income taxes621,423
 406,432
 541,566
451,859
 621,423
 406,432
Income taxes222,961
 142,977
 193,416
142,388
 222,961
 142,977
Net income398,462
 263,455
 348,150
309,471
 398,462
 263,455
Net loss applicable to noncontrolling interests—
 (336) (1,366)—
 —
 (336)
Net income applicable to controlling interest398,462
 263,791
 349,516
309,471
 398,462
 263,791
Preferred stock dividends(71,894) (95,512) (170,885)(62,857) (71,894) (95,512)
Preferred stock redemption—
 125,700
 —
—
 —
 125,700
Net earnings applicable to common shareholders$326,568
 $293,979
 $178,631
$246,614
 $326,568
 $293,979
          
Weighted average common shares outstanding during the year:          
Basic shares192,207
 183,844
 183,081
203,265
 192,207
 183,844
Diluted shares192,789
 184,297
 183,236
203,698
 192,789
 184,297
Net earnings per common share:          
Basic$1.68
 $1.58
 $0.97
$1.20
 $1.68
 $1.58
Diluted1.68
 1.58
 0.97
1.20
 1.68
 1.58
See accompanying notes to consolidated financial statements.

9788

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)Year Ended December 31,Year Ended December 31,
2014 2013 20122015 2014 2013
          
Net income$398,462
 $263,455
 $348,150
$309,471
 $398,462
 $263,455
Other comprehensive income, net of tax:          
Net unrealized holding gains on investment securities82,204
 145,902
 128,992
Net unrealized holding gains (losses) on investment securities(23,409) 82,204
 145,902
Reclassification of HTM securities to AFS securities10,938
 —
 —
Noncredit-related impairment losses on investment securities not expected to be sold—
 (13,751) (38,406)—
 —
 (13,751)
Reclassification to earnings for realized net fixed income securities losses (gains)(6,447) 1,775
 (12,204)86,023
 (6,447) 1,775
Reclassification to earnings for net credit-related impairment losses on investment securities17
 99,903
 63,564
—
 17
 99,903
Accretion of securities with noncredit-related impairment losses not expected to be sold1,111
 1,258
 6,863
—
 1,111
 1,258
Net unrealized gains (losses) on other noninterest-bearing investments(390) (4,503) 338
Net unrealized losses on other noninterest-bearing investments(2,552) (390) (4,503)
Net unrealized holding gains (losses) on derivative instruments2,664
 (431) 247
7,455
 2,664
 (431)
Reclassification adjustment for increase in interest income recognized in earnings on derivative instruments(1,605) (1,580) (7,857)(5,583) (1,605) (1,580)
Pension and postretirement(13,494) 25,483
 4,390
557
 (13,494) 25,483
Other comprehensive income64,060
 254,056
 145,927
73,429
 64,060
 254,056
Comprehensive income462,522
 517,511
 494,077
382,900
 462,522
 517,511
Comprehensive loss applicable to noncontrolling interests—
 (336) (1,366)—
 —
 (336)
Comprehensive income applicable to controlling interest$462,522
 $517,847
 $495,443
$382,900
 $462,522
 $517,847
See accompanying notes to consolidated financial statements.

9889

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except shares
and per share amounts)
Preferred
stock
 Common stock Retained earnings 
Accumulated
other
comprehensive income (loss)
 Noncontrolling interests 
Total
shareholders’ equity
Preferred
stock
 Common stock Retained earnings 
Accumulated
other
comprehensive income (loss)
 Noncontrolling interests 
Total
shareholders’ equity
Shares Amount Shares Amount 
                          
Balance at December 31, 2011$2,377,560
 184,135,388
 $4,163,242
 $1,036,590
 $(592,084) $(2,080) $6,983,228
Net income (loss) applicable to controlling interest      349,516
   (1,366) 348,150
Other comprehensive loss, net of tax        145,927
   145,927
Issuance of preferred stock143,750
   (2,408)       141,342
Preferred stock redemption(1,542,500)   3,830
 (3,830)     (1,542,500)
Subordinated debt converted to preferred stock104,796
   (15,232)       89,564
Net activity under employee plans and related tax benefits  63,810
 16,677
       16,677
Dividends on preferred stock44,696
     (170,885)     (126,189)
Dividends on common stock, $0.04 per share      (7,392)     (7,392)
Change in deferred compensation      (184)     (184)
Other changes in noncontrolling interests          18
 18
Balance at December 31, 20121,128,302
 184,199,198
 4,166,109
 1,203,815
 (446,157) (3,428) 6,048,641
$1,128,302
 184,199,198
 $4,166,109
 $1,203,815
 $(446,157) $(3,428) $6,048,641
Net income (loss) applicable to controlling interest      263,791
   (336) 263,455
      263,791
   (336) 263,455
Other comprehensive income, net of tax        254,056
   254,056
        254,056
   254,056
Issuance of preferred stock800,000
   (15,682)       784,318
800,000
   (15,682)       784,318
Preferred stock redemption(925,748)   580
 125,700
     (799,468)(925,748)   580
 125,700
     (799,468)
Subordinated debt converted to preferred stock1,416
   (206)       1,210
1,416
   (206)       1,210
Net activity under employee plans and related tax benefits  478,498
 32,389
       32,389
  478,498
 32,389
       32,389
Dividends on preferred stock—
     (95,512)     (95,512)

     (95,512)     (95,512)
Dividends on common stock, $0.13 per share      (24,094)     (24,094)      (24,094)     (24,094)
Change in deferred compensation      (30)     (30)      (30)     (30)
Other changes in noncontrolling interests    (4,166)     3,764
 (402)    (4,166)     3,764
 (402)
Balance at December 31, 20131,003,970
 184,677,696
 4,179,024
 1,473,670
 (192,101) —
 6,464,563
1,003,970
 184,677,696
 4,179,024
 1,473,670
 (192,101) —
 6,464,563
Net income (loss) applicable to controlling interest      398,462
   —
 398,462
Net income      398,462
   

 398,462
Other comprehensive income, net of tax        64,060
   64,060
        64,060
   64,060
Issuance of common stock—
 17,617,450
 515,856
       515,856


 17,617,450
 515,856
       515,856
Subordinated debt converted to preferred stock41
   (7)       34
41
   (7)       34
Net activity under employee plans and related tax benefits  719,757
 28,982
       28,982
  719,757
 28,982
       28,982
Dividends on preferred stock      (71,894)     (71,894)

     (71,894)     (71,894)
Dividends on common stock, $0.16 per share      (31,216)     (31,216)      (31,216)     (31,216)
Change in deferred compensation      683
     683
      683
     683
Other changes in noncontrolling interests    —
     —
 —
Balance at December 31, 2014$1,004,011
 203,014,903
 $4,723,855
 $1,769,705
 $(128,041) $—
 $7,369,530
1,004,011
 203,014,903
 4,723,855
 1,769,705
 (128,041) —
 7,369,530
Net income      309,471
   

 309,471
Other comprehensive income, net of tax        73,429
   73,429
Preferred stock redemption(175,669)   3,069
 (3,449)     (176,049)
Subordinated debt converted to preferred stock148
   (44)       104
Net activity under employee plans and related tax benefits  1,402,190
 39,851
       39,851
Dividends on preferred stock      (62,857)     (62,857)
Dividends on common stock, $0.22 per share      (45,133)     (45,133)
Change in deferred compensation      (827)     (827)
Balance at December 31, 2015$828,490
 204,417,093
 $4,766,731
 $1,966,910
 $(54,612) $—
 $7,507,519
See accompanying notes to consolidated financial statements.

9990

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)Year Ended December 31,Year Ended December 31,
2014 2013 20122015 2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income$398,462
 $263,455
 $348,150
$309,471
 $398,462
 $263,455
Adjustments to reconcile net income to net cash provided by
operating activities:
          
Debt extinguishment cost44,422
 120,192
 —
2,530
 44,422
 120,192
Net impairment losses on investment securities, goodwill, and long-lived assets27
 165,134
 106,545
Net impairment losses on investment securities and long-lived assets250
 27
 165,134
Provision for credit losses(106,711) (104,240) 18,614
33,797
 (106,711) (104,240)
Depreciation and amortization128,648
 130,616
 185,185
151,088
 128,648
 130,616
Fixed income securities losses (gains), net138,735
 (10,419) 2,898
Deferred income tax expense (benefit)25,938
 (60,117) 9,788
(29,803) 25,938
 (60,117)
Net decrease (increase) in trading securities(36,045) (6,286) 11,983
22,453
 (36,045) (6,286)
Net decrease (increase) in loans held for sale38,610
 80,323
 (31,445)(5,978) 38,610
 75,058
Change in other liabilities42,470
 (2,051) 27,439
(5,759) 42,636
 (1,949)
Change in other assets(51,004) 255,564
 71,772
(67,260) (50,956) 255,569
Other, net(30,710) (2,325) (11,836)(14,355) (20,291) (5,223)
Net cash provided by operating activities454,107
 840,265
 736,195
535,169
 454,321
 835,107
          
CASH FLOWS FROM INVESTING ACTIVITIES          
Net decrease (increase) in money market investments(103,129) 297,036
 (1,631,278)1,836,506
 (105,066) 295,640
Proceeds from maturities and paydowns of investment securities
held-to-maturity
108,404
 130,938
 128,278
123,178
 108,404
 130,938
Purchases of investment securities held-to-maturity(164,704) (155,328) (86,790)(61,036) (164,704) (155,328)
Proceeds from sales, maturities, and paydowns of investment securities
available-for-sale
1,779,327
 1,104,010
 1,212,047
1,681,280
 1,779,327
 1,104,010
Purchases of investment securities available-for-sale(1,794,525) (1,325,704) (932,034)(5,513,366) (1,794,525) (1,325,704)
Net change in loans and leases(1,079,103) (1,452,184) (725,802)(633,644) (1,079,151) (1,446,924)
Net purchases of premises and equipment(175,799) (88,580) (68,894)
Purchases of premises and equipment(157,361) (175,799) (88,580)
Proceeds from sales of other real estate owned54,056
 110,058
 204,818
24,806
 54,056
 110,058
Net cash received from (paid for) divestitures—
 3,786
 (19,901)
Other, net34,916
 19,109
 40,014
48,919
 34,916
 22,895
Net cash used in investing activities(1,340,557) (1,356,859) (1,879,542)(2,650,718) (1,342,542) (1,352,995)
          
CASH FLOWS FROM FINANCING ACTIVITIES          
Net increase in deposits1,485,358
 228,807
 3,286,823
2,526,016
 1,485,192
 228,705
Net change in short-term funds borrowed(96,125) (12,274) (370,264)102,764
 (96,125) (12,274)
Proceeds from issuance of long-term debt—
 646,408
 757,610
—
 —
 646,408
Repayments of long-term debt(1,223,275) (832,122) (372,891)(287,752) (1,223,275) (832,122)
Debt extinguishment cost paid(35,435) (45,812) —
Debt extinguishment costs paid(2,530) (35,435) (45,812)
Cash paid for preferred stock redemptions—
 (799,468) (1,542,500)(175,669) —
 (799,468)
Proceeds from the issuance of common and preferred stock526,438
 794,143
 143,240
Proceeds from the issuances of common and preferred stock22,392
 526,438
 794,143
Dividends paid on common and preferred stock(96,130) (119,660) (133,581)(108,055) (96,130) (119,660)
Other, net(3,559) (10,252) (7,533)(5,240) (3,559) (10,252)
Net cash provided by (used in) financing activities557,272
 (150,230) 1,760,904
2,071,926
 557,106
 (150,332)
Net increase (decrease) in cash and due from banks(329,178) (666,824) 617,557
Net decrease in cash and due from banks(43,623) (331,115) (668,220)
Cash and due from banks at beginning of year1,175,083
 1,841,907
 1,224,350
841,942
 1,173,057
 1,841,277
Cash and due from banks at end of year$845,905
 $1,175,083
 $1,841,907
$798,319
 $841,942
 $1,173,057
          
Cash paid for interest$152,783
 $191,897
 $214,673
$101,623
 $152,783
 $191,897
Net cash paid for income taxes182,954
 181,318
 183,348
131,665
 182,954
 181,318
See accompanying notes to consolidated financial statements.

10091

ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20142015

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Zions Bancorporation (“the Parent”) is a financial holding company headquartered in Salt Lake City, Utah, which providesin 2015 provided a full range of banking and related services through itsseven subsidiary banks in 11 Western and Southwestern states as follows: Zions First National Bank, (“Zions Bank”), in Utah, Idaho and Wyoming; California Bank & Trust (“CB&T”); Amegy CorporationBank, N. A. (“Amegy”) and its subsidiary, Amegy Bank,, in Texas; National Bank of Arizona (“NBAZ”); Nevada State Bank (“NSB”); Vectra Bank Colorado, N.A. (“Vectra”), in Colorado and New Mexico; and The Commerce Bank of Washington (“TCBW”); which operates under that name in Washington and under the name The Commerce Bank of Oregon (“TCBO”). in Oregon. Pursuant to a Board resolution adopted November 21, 2014, TCBO will mergeThe Commerce Bank of Oregon merged into TCBW effective March 31, 2015. The Parent also owns and its subsidiary banks also own and operateoperates certain nonbank subsidiaries that engage in financial services.

Following the close of business on December 31, 2015, these banks and certain of our subsidiaries of the Parent were merged into a single bank which was renamed ZB, N.A. The Parent intends to conduct its future banking business through locally managed and branded units corresponding to these seven banks.

Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of the Parent and its majority-owned subsidiaries (“the Company,” “we,” “our,” “us”). Unconsolidated investments in which there is a greater than 20% ownership are accounted for by the equity method of accounting; those in which there is less than 20% ownership are accounted for under cost, fair value, or equity methods of accounting. All significant intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and prevailing practices within the financial services industry. References to GAAP, including standards promulgated by the Financial Accounting Standards Board (“FASB”), are made according to sections of the Accounting Standards Codification (“ASC”). Changes to the ASC are made with Accounting Standards Updates (“ASU”) that include consensus issues of the Emerging Issues Task Force (“EITF”). In certain cases, ASUs are issued jointly with International Financial Reporting Standards (“IFRS”).

In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform towith the current year presentation. These reclassifications did not affect net income or shareholders’ equity.

Variable Interest Entities
A variable interest entity (“VIE”) is consolidated when a company is the primary beneficiary of the VIE. Current accounting guidance requires continuous analysis on a qualitative rather than a quantitative basis to determine the primary beneficiary of a VIE. At the commencement of our involvement and periodically thereafter, we consider our consolidation conclusions for all entities with which we are involved. As of December 31, 2015 and 2014, and 2013, no VIEs have been consolidated in the Company’s financial statements.

Statement of Cash Flows
For purposes of presentation in the consolidated statements of cash flows, “cash and cash equivalents” are defined as those amounts included in cash and due from banks in the consolidated balance sheets.

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Security Resell Agreements
Security resell agreements represent overnight and term agreements with the majority maturing within 30 days. These agreements are generally treated as collateralized financing transactions and are carried at amounts at which the securities were acquired plus accrued interest. Either the Company, or in some instances third parties on its behalf, take possession of the underlying securities. The fair value of such securities is monitored throughout the

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contract term to ensure that asset values remain sufficient to protect against counterparty default. We are permitted by contract to sell or repledge certain securities that we accept as collateral for security resell agreements. If sold, our obligation to return the collateral is recorded as “securities sold, not yet purchased” and included as a liability in “Federal funds and other short-term borrowings.” At December 31, 20142015, we held approximately $1.2 billion$457 million of securities for which we were permitted by contract to sell or repledge. Security resell agreements averaged approximately $58569 million during 20142015, and the maximum amount outstanding at any month-end during 20142015 was approximately $1.21.6 billion.

Investment Securities
We classify our investment securities according to their purpose and holding period. Gains or losses on the sale of securities are recognized using the specific identification method and recorded in noninterest income.

Held-to-maturity (“HTM”) debt securities are statedcarried at adjustedamortized cost netwith purchase discounts or premiums accreted or amortized into interest income over the contractual life of unamortized premiums and unaccreted discounts.the security. The Company has the intent and ability to hold such securities until recovery of their amortized cost basis. However, see further discussion in Note 5 regarding the Company’s change in intent prior to December 31, 2013 for certain collateralized debt obligation (“CDO”) securities.maturity.

Available-for-sale (“AFS”) securities are stated at fair value and generally consist of debt securities held for investment and marketable equity securities not accounted for under the equity method. Unrealized gains and losses of AFS securities, after applicable taxes, are recorded as a component of other comprehensive income (“OCI”).

We review quarterly our investment securities portfolio for any declines in value that are considered to be other-than-temporary impairment (“OTTI”). The process, methodology and factors considered to evaluate securities for OTTI are discussed further in Note 5. Noncredit-related OTTI on securities we intend to sell and credit-related OTTI regardless of intent are recognized in earnings. OTTI is recognized as a realized loss through earnings when our best estimate of discounted cash flows expected to be collected is less than our amortized cost basis. Noncredit-related OTTI on securities not expected to be sold is recognized in OCI.

Trading securities are stated at fair value and consist of securities acquired for short-term appreciation or other trading purposes. Realized and unrealized gains and losses are recorded in trading income, which is included in capital markets and foreign exchange.

The fair values of investment securities, as estimated under current accounting guidance, are discussed in Note 20.

Loans and Allowance for Credit Losses
Loans are reported at the principal amount outstanding, net of unearned income. Unearned income, which includes deferred fees net of deferred direct loan origination costs, is amortized to interest income over the life of the loan using the interest method. Interest income is recognized on an accrual basis. Estimated prepayments are used in the determination of the amount of amortization.

At the time of origination, we determine whether loans will be held for investment or held for sale. We may subsequently change our intent to hold loans for investment and reclassify them as held for sale. Loans held for sale are carried at the lower of aggregate cost or fair value. A valuation allowance is recorded when cost exceeds fair value based on reviews at the time of reclassification and periodically thereafter. Gains and losses are recorded in noninterest income based on the difference between sales proceeds and carrying value.

Loans that become other than current with respect to contractual payments due may be accounted for separately depending on the status of the loan, which is determined from certain credit quality indicators and analysis under the circumstances. The loan status includes past due, nonaccrual, impaired, modified, and restructured (including

93

troubled debt restructurings “TDRs”). Our accounting policies for these loan types and our estimation of the related allowance for loan losses are discussed further in Note 6.


102

In the ordinary course of business, we transfer portions of loans under participation agreements to manage credit risk and our portfolio concentration. We evaluate the loan participations to determine if they meet the appropriate accounting guidance to qualify as sales. Certain purchased loans require separate accounting procedures that are also discussed in Note 6.
The allowance for credit losses (“ACL”) includes the allowance for loan losses and the reserve for unfunded lending commitments, and represents our estimate of losses inherent in the loan portfolio that may be recognized from loans and lending commitments that are not recoverable. Further discussion of our estimation process for the allowance for credit lossesACL is included in Note 6.

Other Noninterest-Bearing Investments
These investments include investments in private equity funds (referred to in this document as private equity investments or “PEIs”), venture capital securities, securities acquired for various debt and regulatory requirements, bank-owned life insurance, and certain other noninterest-bearing investments. See further discussiondiscussions in Notes 5, 17 and 20.
Certain private equity investmentsPEIs and venture capital securities are accounted for under the equity method and reported at estimated fair value in the absence of readily ascertainable fair values. Changes in fair value and gains and losses from sales are recognized in noninterest income. The values assigned to the securities where no market quotations exist are based upon available information and may not necessarily represent amounts that will ultimately be realized. Such estimated amounts depend on future circumstances and will not be realized until the individual securities are liquidated.
Bank-owned life insurance is accounted for at fair value based on the cash surrender values of the general account insurance policies. A third party service provides these values based on the valuations and earnings of the underlying assets.values.
Other private equity investmentsPEIs and those acquired for various debt and regulatory requirements are accounted for at cost. Periodic reviews are conducted for impairment by comparing carrying values with estimates of fair value determined according to the previous discussion.

Premises and Equipment
Premises and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation, computed primarily on the straight-line method, is charged to operations over the estimated useful lives of the properties, generally 25 to 40 years for buildings, 3 to 10 years for furniture and equipment, and 3 to 10 years for software, including capitalized costs related to the Company’s new lending and deposit systems. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter.

Goodwill and Identifiable Intangible Assets
Goodwill and intangible assets deemed to have indefinite lives are not amortized. We subject these assets to annual specified impairment tests as of the beginning of the fourth quarter and more frequently if changing conditions warrant. Core deposit assets and other intangibles with finite useful lives are generally amortized on an accelerated basis using an estimated useful life of up to 12 years.

Business Combinations
Business combinations are accounted for under the acquisition method of accounting. Upon initially obtaining control, we recognize 100% of all acquired assets and all assumed liabilities regardless of the percentage owned. The assets and liabilities are recorded at their estimated fair values, with goodwill being recorded when such fair values are less than the cost of acquisition. Certain transaction and restructuring costs are expensed as incurred.

94

Changes to estimated fair values from a business combination are recognized as an adjustment to goodwill over the measurement period, which cannot exceed one year from the acquisition date. Results of operations of the acquired business are included in our statement of income from the date of acquisition.

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Other Real Estate Owned
Other real estate owned (“OREO”) consists principally of commercial and residential real estate obtained in partial or total satisfaction of loan obligations. Amounts are recorded initially at the lower of cost or fair value (less any selling costs) based on property appraisals at the time of transfer and periodically thereafter.subsequently at the lower of cost or fair value (less any selling costs).

Derivative Instruments
We use derivative instruments, including interest rate swaps and floors and basis swaps, as part of our overall interest rate risk management strategy. These instruments enable us to manage to desired asset and liability duration and to reduce interest rate risk exposure by matching estimated repricing periods of interest-sensitive assets and liabilities. We also execute derivative instruments with commercial banking customers to facilitate their risk management strategies. These derivatives are immediately hedged by offsetting derivatives with third parties such that we minimize our net risk exposure as a result of such transactions. We record all derivatives at fair value in the balance sheet as either other assets or other liabilities. See further discussion in Note 7.

Commitments and Letters of Credit
In the ordinary course of business, we enter into commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for loan losses. The reserve for unfunded lending commitmentsRULC is presented separately in the balance sheet.

Revenue Recognition
Service charges and fees on deposit accounts are recognized in accordance with published deposit account agreements for customer accounts or contractual agreements for commercial accounts. Other service charges, commissions and fees include interchange fees, bank services, and other fees which are generally recognized when earned.

Share-Based Compensation
Share-based compensation generally includes grants of stock options, restricted stock, restricted stock units, and other awards to employees and nonemployee directors. We recognize compensation expense in the statement of income based on the fair value of the associated share-based awards. See further discussion in Note 16.

Income Taxes
Deferred tax assets and liabilities are determined based on temporary differences between financial statement asset and liability amounts and their respective tax bases, and are measured using enacted tax laws and rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are recognized subject to management’s judgment that realization is more-likely-than-not.more likely than not. Unrecognized tax benefits for uncertain tax positions relate primarily to state tax contingencies. See further discussion in Note 14.

Net Earnings Per Common Share
Net earnings per common share is based on net earnings applicable to common shareholders, which is net of preferred stock dividends. Basic net earnings per common share is based on the weighted average outstanding common shares during each year. Unvested share-based awards with rights to receive nonforfeitable dividends are considered participating securities and included in the computation of basic earnings per share. Diluted net earnings per common share is based on the weighted average outstanding common shares during each year, including common stock equivalents. Stock options, restricted stock, restricted stock units, and stock warrants are converted

95

to common stock equivalents using the treasury method. Diluted net earnings per common share excludes common stock equivalents whose effect is antidilutive. See further discussion in Note 15.


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2.RECENT ACCOUNTING PRONOUNCEMENTS
Standard Description Date of adoption Effect on the financial statements or other significant matters
       
Standards that are not yet adopted by the Company
ASU 2016-02,
Leases (Topic 842)
The standard requires that a lessee recognize assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, the standard will require both types of leases to be recognized on the balance sheet. It also requires disclosures to better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.January 1, 2019We are currently evaluating the potential impact of this new guidance on the Company’s financial statements.
ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities
The standard provides revised accounting guidance related to the accounting for and reporting of financial instruments. Some of the main provisions include:
– Equity investments that do not result in consolidation and are not accounted for under the equity method would be measured at fair value through net income, unless they qualify for the proposed practicability exception for investments that do not have readily determinable fair values.
– Changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option would be recognized in other comprehensive income.
– Elimination of the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments carried at amortized cost. However it will require the use of exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes.
January 1, 2018We do not currently expect this new guidance will have a material impact on the Company’s financial statements.
ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent), (Topic 820)
The guidance eliminates the current requirement to categorize within the fair value hierarchy investments whose fair values are measured at net asset value (“NAV”) using the practical expedient in ASC 820. Fair value disclosure of these investments will be made to facilitate reconciliation to amounts reported on the balance sheet. Other related disclosures will continue when the NAV practical expedient is used. Adoption is retrospective and early adoption is permitted.January 1, 2016We do not expect this new disclosure guidance will have a material impact on the Company’s financial statements.
ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement (Subtopic 350-40)
The standard provides guidance to determine whether an arrangement includes a software license. If it does, the customer accounts for it the same way as for other software licenses. If no software license is included, the customer accounts for it as a service contract. Adoption may be retrospective or prospective. Early adoption is permitted.January 1, 2016We do not expect this new guidance will have a material impact on the Company’s financial statements.
ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30)
The standard requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with debt discounts. Adoption is retrospective and early adoption is permitted.January 1, 2016We currently include debt issuance costs in other assets. The amount to be reclassified to the debt liability is not material to the Company’s financial statements.

96

StandardDescriptionDate of adoptionEffect on the financial statements or other significant matters
Standards not yet adopted by the Company (continued)
ASU 2015-02, Amendments to the Consolidation Analysis (Topic 810)
The new standard changes certain criteria in the variable interest model and the voting model to determine whether certain legal entities are variable interest entities (“VIEs”) and whether they should be consolidated. Additional disclosures are required for entities not currently considered VIEs, but may become VIEs under the new guidance and may be subject to consolidation. Adoption may be retrospective or modified retrospective with a cumulative effect adjustment. Early adoption is permitted.January 1, 2016We currently do not consolidate any VIEs and do not expect this new guidance will have a material impact on the Company’s financial statements.
       
ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
 The core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The banking industry does not expect significant changes because major sources of revenue are from financial instruments that have been excluded from the scope of the new standard, (including loans, derivatives, debt and equity securities, etc.). However, the new standard affects other fees charged by banks, such as asset management fees, credit card interchange fees, deposit account fees, etc. Adoption may be made on a full retrospective basis with practical expedients, or on a modified retrospective basis with a cumulative effect adjustment. No earlyEarly adoption of the guidance is permitted.permitted as of January 1, 2017. January 1, 20172018, as extended in August 2015 by ASU 2015-14 While we currently do not expect this standard will have a significantmaterial impact on the Company’s financial statements, we are still in process of conducting our evaluation.
       
Standards that were adopted by the Company
       
ASU 2014-14, Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (Subtopic 310-40)
 The standard addresses the classification of certain foreclosed mortgage loans fully or partially guaranteed under government programs. Under certain such programs, qualifying creditors can extend mortgage loans with a guarantee entitling the creditor to recover all or a portion of the unpaid principal balance from the government if the borrower defaults. A separate other receivable is established that is measured based on the amount of the loans expected to be recovered. January 1, 2015 We have adoptedOur adoption of this standard and will providehad no impact on the necessary disclosures in our first quarter 2015 reporting; however, the amounts involved and the difference in dis-closures are not expected to be significant.accompanying financial statements.
       
ASU 2014-04, Reclassification of Residential Real Estate Collateralized
Consumer Mortgage Loans upon Foreclosure (Subtopic 310-40)
 The standard clarifies that a creditor should be considered to have physical possession of a residential real estate property collateralizing a residential mortgage loan and thus would reclassify the loan to other real estate owned when certain conditions are satisfied. Additional financial statement disclosures will be required and may be applied on either a prospective or a modified retrospective basis, with early adoption permitted.required. January 1, 2015 We have adoptedOur adoption of this standard and will provide the necessary disclosures in our first quarter 2015 reporting; however, the difference in disclosures is not expectedadded a nominal amount of additional disclosure to be significant.Note 6.
       
ASU 2014-01, Accounting for Investments in Qualified Affordable Housing
Projects (Topic 323)
 The standard revised conditions an entity must meet to elect the effective yield method when accounting for qualified affordable housing project investments. The EITF final consensus changed the method of amortizing a Low-Income Housing Tax Credit (“LIHTC”) investment from the effective yield method to a proportional amortization method. Amortization would be proportional to the tax credits and tax benefits received but, under a practical expedient available in certain circumstances, amortization could be proportional to only the tax credits. Reporting entities that invest in LIHTC investments through a limited liability entity could elect the proportional amortization method if certain conditions are met. January 1, 2015 We have adoptedOur adoption of this standard; however, it isstandard did not expected to have a significant effectmaterial impact on the Company’saccompanying financial statements in our first quarter 2015 reporting.statements.


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3.SUPPLEMENTAL CASH FLOW INFORMATION
Noncash activities are summarized as follows:
(In thousands) Year Ended December 31,
 2014 2013 2012
       
Loans transferred to other real estate owned $25,189
 $60,749
 $172,018
Loans and leases transferred to (from) loans held for sale (26,272) 36,301
 —
Beneficial conversion feature transferred from common stock to preferred stock as a result of subordinated debt conversions 7
 206
 15,232
Subordinated debt converted to preferred stock 34
 1,210
 89,564
Preferred stock transferred to common stock as a result of the Series C preferred stock redemption —
 580
 —
Preferred stock/beneficial conversion feature transferred to retained earnings as result of the Series C preferred stock redemption —
 125,700
 —
Adjusted cost of HTM securities transferred to AFS securities —
 181,915
 —
Noncash activities are summarized as follows:
(In thousands) Year Ended December 31,
 2015 2014 2013
       
Loans and leases transferred to other real estate owned $11,924
 $25,189
 $60,749
Loans and leases reclassified as loans held for sale 5,048
 (26,272) 36,301
Adjusted cost of HTM securities reclassified to AFS securities 79,276
 —
 181,915
Preferred stock/beneficial conversion feature transferred to retained earnings as result of the Series C preferred stock redemption —
 —
 125,700

4.OFFSETTING ASSETS AND LIABILITIES
Gross and net information for selected financial instruments in the balance sheet is as follows:
 December 31, 2014 December 31, 2015
(In thousands)       Gross amounts not offset in the balance sheet         Gross amounts not offset in the balance sheet  
Description Gross amounts recognized Gross amounts offset in the balance sheet Net amounts presented in the balance sheet Financial instruments Cash collateral received/pledged Net amount Gross amounts recognized Gross amounts offset in the balance sheet Net amounts presented in the balance sheet Financial instruments Cash collateral received/pledged Net amount
                        
Assets:                        
Federal funds sold and security resell agreements $1,386,291
 $—
 $1,386,291
 $—
 $—
 $1,386,291
 $619,758
 $—
 $619,758
 $—
 $—
 $619,758
Derivatives (included in other assets) 66,420
 —
 66,420
 (3,755) —
 62,665
 77,638
 —
 77,638
 (5,916) —
 71,722
 $1,452,711
 $—
 $1,452,711
 $(3,755) $—
 $1,448,956
 $697,396
 $—
 $697,396
 $(5,916) $—
 $691,480
                        
Liabilities:                        
Federal funds and other short-term borrowings $244,223
 $—
 $244,223
 $—
 $—
 $244,223
 $346,987
 $—
 $346,987
 $—
 $—
 $346,987
Derivatives (included in other liabilities) 66,064
 —
 66,064
 (3,755) (31,968) 30,341
 72,568
 —
 72,568
 (5,916) (61,134) 5,518
 $310,287
 $—
 $310,287
 $(3,755)
$(31,968)
$274,564
 $419,555
 $—
 $419,555
 $(5,916)
$(61,134)
$352,505

 December 31, 2013 December 31, 2014
(In thousands)       Gross amounts not offset in the balance sheet         Gross amounts not offset in the balance sheet  
Description Gross amounts recognized Gross amounts offset in the balance sheet Net amounts presented in the balance sheet Financial instruments Cash collateral received/pledged Net amount Gross amounts recognized Gross amounts offset in the balance sheet Net amounts presented in the balance sheet Financial instruments Cash collateral received/pledged Net amount
                        
Assets:                        
Federal funds sold and other short-term borrowings $282,248
 $—
 $282,248
 $—
 $—
 $282,248
Federal funds sold and security resell agreements $1,386,291
 $—
 $1,386,291
 $—
 $—
 $1,386,291
Derivatives (included in other assets) 65,683
 —
 65,683
 (11,650) 2,210
 56,243
 66,420
 —
 66,420
 (3,845) (18) 62,557
 $347,931
 $—
 $347,931
 $(11,650) $2,210
 $338,491
 $1,452,711
 $—
 $1,452,711
 $(3,845) $(18) $1,448,848
                        
Liabilities:                        
Federal funds and other short-term borrowings $340,348
 $—
 $340,348
 $—
 $—
 $340,348
 $244,223
 $—
 $244,223
 $—
 $—
 $244,223
Derivatives (included in other liabilities) 68,397
 —
 68,397
 (11,650) (26,997) 29,750
 66,064
 —
 66,064
 (3,845) (57,547) 4,672
 $408,745
 $—
 $408,745
 $(11,650) $(26,997) $370,098
 $310,287
 $—
 $310,287
 $(3,845) $(57,547) $248,895

106


Security resellrepurchase and reverse repurchase (“resell”) agreements are offset, when applicable, in the balance sheet according to master netting agreements. Security repurchase agreements are included with “Federal funds and other short-term borrowings.” Derivative instruments may be offset under their master netting agreements; however, for

98

accounting purposes, we present these items on a gross basis in the Company’s balance sheet. See Note 7 for further information regarding derivative instruments.

5.INVESTMENTS
Investment Securities
Investment securities are summarized below. Note 20 discusses the process to estimate fair value for investment securities.
December 31, 2014
  
Recognized in OCI 1
   Not recognized in OCI  December 31, 2015
(In thousands)
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Carrying
value
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Held-to-maturity                    
Municipal securities$607,575
 $—
 $—
 $607,575
 $13,018
 $804
 $619,789
$545,648
 $11,218
 $4,778
 $552,088
Asset-backed securities:             
Trust preferred securities – banks and insurance79,276
 —
 39,699
 39,577
 18,393
 663
 57,307
Other debt securities100
 —
 —
 100
 —
 —
 100
686,951
 —
 39,699
 647,252
 31,411
 1,467
 677,196
       
Available-for-sale                    
U.S. Government agencies and corporations:                    
Agency securities607,523
 1,572
 8,343
 600,752
     600,752
1,231,740
 4,313
 2,658
 1,233,395
Agency guaranteed mortgage-backed securities935,164
 12,132
 2,105
 945,191
     945,191
3,964,593
 7,919
 36,037
 3,936,475
Small Business Administration loan-backed securities1,544,710
 16,446
 8,891
 1,552,265
     1,552,265
1,932,817
 12,602
 14,445
 1,930,974
Municipal securities189,059
 1,143
 945
 189,257
     189,257
417,374
 2,177
 856
 418,695
Asset-backed securities:             
Trust preferred securities – banks and insurance537,589
 103
 121,984
 415,708
     415,708
Auction rate securities4,688
 80
 7
 4,761
     4,761
Other564
 127
 —
 691
     691
Other debt securities25,454
 152
 2,665
 22,941
3,819,297
 31,603
 142,275
 3,708,625
    
3,708,625
7,571,978
 27,163
 56,661
 7,542,480
Mutual funds and other136,591
 76
 1,044
 135,623
     135,623
Money market mutual funds and other100,612
 61
 37
 100,636
3,955,888
 31,679
 143,319
 3,844,248
     3,844,248
7,672,590
 27,224
 56,698
 7,643,116
Total$4,642,839
 $31,679
 $183,018
 $4,491,500
     $4,521,444
$8,218,238
 $38,442
 $61,476
 $8,195,204


10799

December 31, 2013December 31, 2014
  
Recognized in OCI 1
   Not recognized in OCI    
Recognized in OCI 1
   Not recognized in OCI  
(In thousands)

Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Carrying
value
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Amortized
cost
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Carrying
value
 
Gross
unrealized
gains
 
Gross
unrealized
losses
 
Estimated
fair
value
Held-to-maturity                          
Municipal securities$551,055
 $—
 $—
 $551,055
 $11,295
 $4,616
 $557,734
$607,675
 $—
 $—
 $607,675
 $13,018
 $804
 $619,889
Asset-backed securities:                          
Trust preferred securities – banks and insurance79,419
 —
 41,593
 37,826
 15,195
 1,308
 51,713
79,276
 —
 39,699
 39,577
 18,393
 663
 57,307
Other debt securities100
 —
 —
 100
 —
 —
 100
630,574
 —
 41,593
 588,981
 26,490
 5,924
 609,547
686,951
 —
 39,699
 647,252
 31,411
 1,467
 677,196
Available-for-sale                          
U.S. Treasury securities1,442
 104
 —
 1,546
     1,546
U.S. Government agencies and corporations:            
            
Agency securities517,905
 1,920
 901
 518,924
     518,924
607,523
 1,572
 8,343
 600,752
     600,752
Agency guaranteed mortgage-backed securities308,687
 9,926
 1,237
 317,376
     317,376
935,164
 12,132
 2,105
 945,191
     945,191
Small Business Administration loan-backed securities1,202,901
 21,129
 2,771
 1,221,259
     1,221,259
1,544,710
 16,446
 8,891
 1,552,265
     1,552,265
Municipal securities65,425
 1,329
 490
 66,264
     66,264
189,059
 1,143
 945
 189,257
     189,257
Asset-backed securities:            
            
Trust preferred securities – banks and insurance1,508,224
 13,439
 282,843
 1,238,820
     1,238,820
537,589
 103
 121,984
 415,708
     415,708
Trust preferred securities – real estate investment trusts22,996
 —
 —
 22,996
     22,996
Auction rate securities6,507
 118
 26
 6,599
     6,599
Other27,540
 359
 —
 27,899
     27,899
5,252
 207
 7
 5,452
     5,452
3,661,627
 48,324
 288,268
 3,421,683
     3,421,683
3,819,297
 31,603
 142,275
 3,708,625
     3,708,625
Mutual funds and other287,603
 21
 7,421
 280,203
     280,203
136,591
 76
 1,044
 135,623
     135,623
3,949,230
 48,345
 295,689
 3,701,886
     3,701,886
3,955,888
 31,679
 143,319
 3,844,248
     3,844,248
Total$4,579,804
 $48,345
 $337,282
 $4,290,867
     $4,311,433
$4,642,839
 $31,679
 $183,018
 $4,491,500
     $4,521,444
1 
The gross unrealized losses recognized in OCI on HTM securities resulted from a previous transfer of AFS securities to HTM and from OTTI.

CDO Sales and Paydowns
During the second quarter of 2015, we sold the remaining portfolio of our collateralized debt obligation (“CDO”) securities, or $574 million at amortized cost, and realized net losses of approximately $137 million. During the first quarter of 2015, we reclassified all of the remaining held-to-maturity CDO securities, or approximately $79 million at amortized cost, to AFS securities. The reclassification resulted from increased risk weights for these securities under the new Basel III capital rules, and was made in accordance with applicable accounting guidance that allows for such reclassifications when increased risk weights of debt securities must be used for regulatory risk-based capital purposes. No gain or loss was recognized in the statement of income at the time of reclassification.

During 2014, we reduced the CDO portfolio by $1.02 billion amortized cost through sales and paydowns/payoffs which resulted in net fixed income securities gains of $10.4 million. These sales were made in part as a result of the Volcker Rule (“VR”).


100

Maturities
The amortized cost and estimated fair value of investment debt securities are shown subsequently as of December 31, 20142015 by contractual maturity, except for CDOs, Small Business Administration (“SBA”) loan-backed securities, agency guaranteed mortgage-backed securities, and certain agency and municipal securities, where expected maturity is used.timing of principal payments. Actual maturitiesprincipal payments may differ from contractual or expected maturitiesprincipal payments because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Held-to-maturity Available-for-saleHeld-to-maturity Available-for-sale
(In thousands)
Amortized
cost
 
Estimated
fair
value
 
Amortized
cost
 
Estimated
fair
value
Amortized
cost
 
Estimated
fair
value
 
Amortized
cost
 
Estimated
fair
value
              
Due in one year or less$96,703
 $98,481
 $544,585
 $544,098
$64,213
 $64,453
 $1,040,087
 $1,036,107
Due after one year through five years197,297
 200,611
 1,480,429
 1,478,463
198,818
 202,124
 2,932,469
 2,921,436
Due after five years through ten years154,178
 157,735
 915,594
 908,323
153,325
 156,676
 2,606,838
 2,597,827
Due after ten years238,773
 220,369
 878,689
 777,741
129,292
 128,835
 992,584
 987,110
$686,951
 $677,196
 $3,819,297
 $3,708,625
$545,648
 $552,088
 $7,571,978
 $7,542,480

The following is a summary of the amount of gross unrealized losses for debt securities and the estimated fair value by length of time the securities have been in an unrealized loss position:
 December 31, 2015
 Less than 12 months 12 months or more Total
(In thousands)

Gross
unrealized
losses
 
Estimated
fair
value
 
Gross
unrealized
losses
 
Estimated
fair
value
 
Gross
unrealized
losses
 
Estimated
fair
value
Held-to-maturity           
Municipal securities$4,521
 $122,197
 $257
 $13,812
 $4,778
 $136,009
Asset-backed securities:        
  
Trust preferred securities – banks and insurance—
 —
 —
 —
 —
 —
 4,521
 122,197
 257
 13,812
 4,778
 136,009
Available-for-sale           
U.S. Government agencies and corporations:           
Agency securities2,176
 559,196
 482
 131,615
 2,658
 690,811
Agency guaranteed mortgage-backed securities34,583
 3,639,824
 1,454
 65,071
 36,037
 3,704,895
Small Business Administration loan-backed securities5,348
 567,365
 9,097
 535,376
 14,445
 1,102,741
Municipal securities735
 102,901
 121
 5,733
 856
 108,634
Other—
 —
 2,665
 12,337
 2,665
 12,337
Asset-backed securities:        
 

Trust preferred securities – banks and insurance—
 —
 —
 —
 —
 —
Auction rate securities—
 —
 —
 —
 —
 —
 42,842
 4,869,286
 13,819
 750,132
 56,661
 5,619,418
Mutual funds and other37
 35,488
 —
 —
 37
 35,488
 42,879
 4,904,774
 13,819
 750,132
 56,698
 5,654,906
Total$47,400
 $5,026,971
 $14,076
 $763,944
 $61,476
 $5,790,915

108101

The following is a summary of the amount of gross unrealized losses for debt securities and the estimated fair value by length of time the securities have been in an unrealized loss position:
 December 31, 2014
 Less than 12 months 12 months or more Total
(In thousands)

Gross
unrealized
losses
 
Estimated
fair
value
 
Gross
unrealized
losses
 
Estimated
fair
value
 
Gross
unrealized
losses
 
Estimated
fair
value
Held-to-maturity           
Municipal securities$527
 $62,762
 $277
 $14,003
 $804
 $76,765
Asset-backed securities:        
  
Trust preferred securities – banks and insurance53
 122
 40,309
 57,186
 40,362
 57,308
 580
 62,884
 40,586
 71,189
 41,166
 134,073
Available-for-sale           
U.S. Government agencies and corporations:           
Agency securities4,510
 295,694
 3,833
 101,188
 8,343
 396,882
Agency guaranteed mortgage-backed securities1,914
 425,114
 191
 12,124
 2,105
 437,238
Small Business Administration loan-backed securities5,869
 495,817
 3,022
 175,523
 8,891
 671,340
Municipal securities258
 36,551
 687
 4,616
 945
 41,167
Asset-backed securities:        
 

Trust preferred securities – banks and insurance—
 —
 121,984
 405,605
 121,984
 405,605
Auction rate securities7
 1,607
 —
 —
 7
 1,607
 12,558
 1,254,783
 129,717
 699,056
 142,275
 1,953,839
Mutual funds and other1,044
 71,907
 —
 —
 1,044
 71,907
 13,602
 1,326,690
 129,717
 699,056
 143,319
 2,025,746
Total$14,182
 $1,389,574
 $170,303
 $770,245
 $184,485
 $2,159,819
  December 31, 2014
  Less than 12 months 12 months or more Total
 
(In thousands)

Gross unrealized losses 
Estimated fair
value
 Gross unrealized losses 
Estimated fair
value
 Gross unrealized losses 
Estimated fair
value
 
 
 Held-to-maturity           
 Municipal securities$527
 $62,762
 $277
 $14,003
 $804
 $76,765
 Asset-backed securities:           
 Trust preferred securities – banks and insurance53
 122
 40,309
 57,186
 40,362
 57,308
  580
 62,884
 40,586
 71,189
 41,166
 134,073
 Available-for-sale           
 U.S. Government agencies and corporations:           
 Agency securities4,510
 295,694
 3,833
 101,188
 8,343
 396,882
 Agency guaranteed mortgage-backed securities1,914
 425,114
 191
 12,124
 2,105
 437,238
 Small Business Administration loan-backed securities5,869
 495,817
 3,022
 175,523
 8,891
 671,340
 Municipal securities258
 36,551
 687
 4,616
 945
 41,167
 Asset-backed securities:           
 Trust preferred securities – banks and insurance—
 —
 121,984
 405,605
 121,984
 405,605
 Auction rate securities7
 1,607
 —
 —
 7
 1,607
  12,558
 1,254,783
 129,717
 699,056
 142,275
 1,953,839
 Mutual funds and other1,044
 71,907
 —
 —
 1,044
 71,907
  13,602
 1,326,690
 129,717
 699,056
 143,319
 2,025,746
 Total$14,182
 $1,389,574
 $170,303
 $770,245
 $184,485
 $2,159,819

  December 31, 2013
  Less than 12 months 12 months or more Total
 
(In thousands)

Gross unrealized losses 
Estimated fair
value
 Gross unrealized losses 
Estimated fair
value
 Gross unrealized losses 
Estimated fair
value
 
 
 Held-to-maturity           
 Municipal securities$4,025
 $70,400
 $591
 $9,103
 $4,616
 $79,503
 Asset-backed securities:           
 Trust preferred securities – banks and insurance—
 —
 42,901
 51,319
 42,901
 51,319
  4,025
 70,400
 43,492
 60,422
 47,517
 130,822
 Available-for-sale           
 U.S. Government agencies and corporations:           
 Agency securities828
 47,862
 73
 5,874
 901
 53,736
 Agency guaranteed mortgage-backed securities1,231
 64,533
 6
 935
 1,237
 65,468
 Small Business Administration loan-backed securities1,709
 187,680
 1,062
 39,256
 2,771
 226,936
 Municipal securities73
 8,834
 417
 3,179
 490
 12,013
 Asset-backed securities:           
 Trust preferred securities – banks and insurance2,539
 51,911
 280,304
 847,990
 282,843
 899,901
 Auction rate securities5
 1,609
 21
 892
 26
 2,501
  6,385
 362,429
 281,883
 898,126
 288,268
 1,260,555
 Mutual funds and other943
 24,057
 6,478
 103,614
 7,421
 127,671
  7,328
 386,486
 288,361
 1,001,740
 295,689
 1,388,226
 Total$11,353
 $456,886
 $331,853
 $1,062,162
 $343,206
 $1,519,048

109

At December 31, 20142015 and 20132014, respectively, 153187 and 157153 HTM and 458709 and 317458 AFS investment securities were in an unrealized loss position.

Other-Than-Temporary Impairment
Ongoing Policy
We conduct a formal review of investment securities on a quarterly basis for the presence of OTTI.other-than-temporary impairment (“OTTI”). We assess whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the balance sheet date (the vast majority of the investment portfolio are debt securities). Under these circumstances, OTTI is considered to have occurred if (1) we intendhave formed a documented intent to sell the security;identified securities or initiated such sales; (2) it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.

Noncredit-related OTTI in securities we intend to sell is recognized in earnings as is any credit-related OTTI in securities, regardless of our intent. Noncredit-related OTTI on AFS securities not expected to be sold is recognized in OCI. The amount of noncredit-related OTTI in a security is quantified as the difference in a security’s amortized cost after adjustment for credit impairment, and its lower fair value. Presentation of OTTI is made in the statement of income on a gross basis with an offset for the amount of OTTI recognized in OCI. For securities classified as HTM, the amount of noncredit-related OTTI recognized in OCI is accreted using the effective interest rate method to the credit-adjusted expected cash flow amounts of the securities over future periods.

Our OTTI evaluation process takes into consideration current market conditions; fair value in relationship to cost; extent and nature of change in fair value; severity and duration of the impairment; recent events specific to the issuer or industry; our assessment of the creditworthiness of the issuer, and the creditworthiness of the underlying exposures in an asset-backed structured security, including external credit ratings, changes, recent downgrades, and trends; the cash flow priority position of the instrument that we hold in the case of structured securities; volatility of earnings and trends; current analysts’ evaluations; all available information relevant to the collectability of debt securities; and other key measures. In addition, for AFS securities with fair values below amortized cost, we must determine if we intend to sell the securities or if it is more likely than not that we will be required to sell the securities before recovery of their amortized cost basis. For HTM securities, we must

102

determine we have the ability to hold the securities to maturity. We consider any other relevant factors before concluding our evaluation for the existence of OTTI in our securities portfolio.

Additionally, under ASC 325-40, Beneficial Interests in Securitized Financial Assets, OTTI is recognized as a realized loss through earnings when there has been an adverse change in the holder’s best estimate of cash flows expected to be collected such that the entire amortized cost basis will not be received.

Effect of Volcker Rule, CDO Sales and Paydowns
During 2014, we reduced the CDO portfolio by $1.02 billion amortized cost through sales and paydowns/payoffs which resulted in net fixed income securities gains of $10.4 million. The reduction included all securities prohibited by the Volcker Rule (“VR”). In 2014, CDO sales totaled $913 million in amortized cost. In addition to selling $430 million of amortized cost of prohibited securities, we sold $483 million of primarily bank CDOs grandfathered under the VR. The sales of grandfathered CDOs disproportionately reduced junior priority original single A-rated securities.

At December 31, 2013, certain of the Company’s CDO securities backed primarily by insurance trust preferred securities (“TruPS”), real estate investment trust (“REIT”) securities, and asset-backed securities (“ABS”) became prohibited under the Volcker Rule. This regulatory change resulted in the Company no longer being able to hold these securities to maturity. Accordingly, in 2013, we reclassified the affected securities in the HTM portfolio from HTM to AFS. The adjusted cost of the securities reclassified was approximately $182 million. Net unrealized losses recorded in OCI during the fourth quarter of 2013 as a result of this reclassification were approximately $24.4 million. All of our holdings of these reclassified securities were sold or paid off in 2014.

Within the resulting AFS portfolio, we concluded we still had the ability to hold certain prohibited insurance CDO securities to recovery of their amortized cost basis, which was $358 million at December 31, 2013. Such securities had $67 million of unrealized losses at December 31, 2013. In contrast, for $147 million at amortized cost of prohibited CDOs, primarily ABS and REITs, we concluded recovery was unlikely prior to July 21, 2015, and determined prior to

110

December 31, 2013 an intent to sell during the first quarter of 2014. In addition, at December 31, 2013, to reduce the risk profile of the portfolio, we determined an intent to sell for certain other allowed CDO securities during the first quarter of 2014.

This formation of an intent to sell resulted in a pretax securities impairment charge in 2013 of $137.1 million for CDO trust preferred securities – banks and insurance, REITs, and other asset-backed CDO securities. Approximately $43.2 million of the charge related to securities which the VR had precluded the Company from holding beyond July 21, 2016, as currently extended. The remaining $93.9 million related to securities that we intend to sell despite being grandfathered under the VR.

OTTI Conclusions
The following summarizes the conclusions from our OTTI evaluation for those security types that had significant gross unrealized losses duringat December 31, 20142015:

OTTI – Asset-Backed Securities
Trust preferred securities – banks and insurance: These CDO securities are interests in variable rate pools of trust preferred securities issued by trusts related to bank holding companies and insurance companies (“collateral issuers”). They are rated by one or more Nationally Recognized Statistical Rating Organizations (“NRSROs”), which are rating agencies registered with the Securities and Exchange Commission (“SEC”). The more junior securities were purchased generally at par, while the senior securities were purchased from Lockhart Funding LLC (“Lockhart”), a previously consolidated qualifying special-purpose entity securities conduit, at their carrying values (generally par) and then adjusted to their lower fair values at the time of their purchase. The primary drivers that have given rise to the unrealized losses on CDOs with bank and insurance collateral are listed below:–
1)Market yield requirements for bank CDO securities remain elevated. The financial crisis and economic downturn resulted in significant utilization of both the unique five-year deferral option, which each collateral issuer maintains during the life of the CDO, and the payment in kind (“PIK”) feature described subsequently. The resulting increase in the rate of return demanded by investors for trust preferred CDOs remains substantially higher than the contractual interest rates. CDO tranches backed by bank trust preferred securities continue to be characterized by uncertainty surrounding collateral behavior, specifically including, but not limited to, prepayments; the future number, size and timing of bank failures; holding company bankruptcies; and allowed deferrals and subsequent resumption of payment or default due to nonpayment of contractual interest.
2)Structural features of the collateral make these CDO tranches difficult for market participants to model. The first feature unique to bank CDOs is the interest deferral feature previously noted. Throughout the crisis starting in 2008, certain banks within our CDO pools have exercised this prerogative. The extent to which these deferrals are likely to either transition to default or, alternatively, come current prior to the five-year deadline is extremely difficult for market participants to assess.
A second structural feature that is difficult to model is the PIK feature, which provides that upon reaching certain levels of collateral default or deferral, certain junior CDO tranches will not receive current interest but will instead have the unpaid interest amount capitalized. The delay in payment caused by PIKing results in lower security fair values even if PIKing is projected to be fully cured.
3)Although we continue to see ratings upgrades of securities held in our CDO portfolio every quarter, the ratings from one NRSRO remain below-investment-grade for even some of the most senior tranches that originally were rated AAA. Ratings on a number of CDO tranches vary significantly among rating agencies. The presence of a below-investment-grade rating by even a single rating agency generally reduces the pool of buyers, which causes greater illiquidity and therefore most likely a higher implicit discount rate/lower price with regard to that CDO tranche.
As a result of our ongoing review of these securities, we recorded an immaterial amount of OTTI in 2014.

OTTI – U.S. Government Agencies and Corporations
Agency securities:Securities: These securities consist of discount notes and medium term noteswere issued by the Federal Agricultural Mortgage Corporation (“FAMC”), Federal Home Loan and the Export-Import Bank (“FHLB”), Federal Farm Credit Bank, Federal Home Loan

111

Mortgage Corporation (“FHLMC”), and Federal National Mortgage Association (“FNMA”).the U.S. These securities are fixed rateor floating-rate and were generally purchased at premiums or discounts.par. They have maturity dates from one1 to 3025 years and have contractual cash flows guaranteed by agencies of the U.S. Government. The U.S. Government has provided substantial liquidity to FNMA and FHLMC to bolster their creditworthiness. Unrealized losses relate to changes in interest rates subsequent to purchase and are not attributable to credit. At December 31, 2014,2015, we had no plansdid not have an intent to sell agencyidentified securities with unrealized losses or initiate such sales, and we believe it is more likely than not we would not be required to sell such securities before recovery of their amortized cost basis. Therefore, we did not record OTTI for these securities in 2014.during 2015.

Small Business Administration Loan-BackedAgency Guaranteed Mortgage-Backed Securities: These pass-through securities are comprised largely of fixed and floating-rate residential mortgage-backed securities issued by the Government National Mortgage Association (“GNMA”), the Federal National Mortgage Association (“FNMA”), or the Federal Home Loan Mortgage Corporation (“FHLMC”). They were generally purchased at premiums with maturitiesmaturity dates from five10 to 2515 years for fixed-rate securities and have principal cash flows guaranteed by30 years for floating-rate securities. These securities benefit from certain guarantee provisions or, in the SBA.case of GNMA, direct U.S. government guarantees. Unrealized losses relate to changes in interest rates subsequent to purchase and are not attributable to credit. At December 31, 2014,2015, we had no plansdid not have an intent to sell SBAidentified securities with unrealized losses or initiate such sales, and we believe it is more likely than not we would not be required to sell such securities before recovery of their amortized cost basis. Therefore, we did not record OTTI for these securities during 2015.

Small Business Administration (“SBA”) Loan-Backed Securities: These securities were generally purchased at premiums with maturities from 5 to 25 years and have principal cash flows guaranteed by the SBA. Unrealized losses relate to changes in 2014.interest rates subsequent to purchase and are not attributable to credit. At December 31, 2015, we did not have an intent to sell identified SBA securities with unrealized losses or initiate such sales, and we believe it is more likely than not we would not be required to sell such securities before recovery of their amortized cost basis. Therefore, we did not record OTTI for these securities during 2015.


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The following is a tabular rollforward of the total amount of credit-related OTTI, including amounts recognized in earnings:
(In thousands)2014 20132015 2014
HTM AFS Total HTM AFS TotalHTM AFS Total HTM AFS Total
                      
Balance of credit-related OTTI at beginning of year$(9,052) $(176,833) $(185,885) $(13,549) $(394,494) $(408,043)$(9,079) $(95,472) $(104,551) $(9,052) $(176,833) $(185,885)
Additions recognized in earnings during the year:                      
Credit-related OTTI not previously recognized 1
—
 —
 —
 (403) (168) (571)—
 —
 —
 —
 —
 —
Credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis 2
(27) —
 (27) —
 (27,482) (27,482)—
 —
 —
 (27) —
 (27)
Subtotal of amounts recognized in earnings(27) —
 (27) (403) (27,650) (28,053)—
 —
 —
 (27) —
 (27)
Transfers from HTM to AFS—
 —
 —
 4,900
 (4,900) —
9,079
 (9,079) —
 —
 —
 —
Reductions for securities sold or paid off
during the year
—
 81,361
 81,361
 —
 47,768
 47,768
—
 104,551
 104,551
 —
 81,361
 81,361
Reductions for securities the Company intends to sell or will be required to sell before recovery of its amortized cost basis—
 —
 —
 —
 202,443
 202,443
—
 —
 —
 —
 —
 —
Balance of credit-related OTTI at end of year$(9,079) $(95,472) $(104,551) $(9,052) $(176,833) $(185,885)$—
 $—
 $—
 $(9,079) $(95,472) $(104,551)
1 Relates to securities not previously impaired.
2 Relates to additional impairment on securities previously impaired.
1
Relates to securities not previously impaired.
2
Relates to additional impairment on securities previously impaired.

To determine the credit component of OTTI for all security types, we utilize projected cash flows. These cash flows are credit adjusted using, among other things, assumptions for default probability and loss severity. Certain other unobservable inputs such as prepayment rate assumptions are also utilized. In addition, certain internal and external models may be utilized. See Note 20 for further discussion. To determine the credit-related portion of OTTI in accordance with applicable accounting guidance, we use the security specific effective interest rate when estimating the present value of cash flows.

For those securities with credit-related OTTI recognized in the statement of income, the amounts of pretax noncredit-related OTTI recognized in OCI were as follows:
(In thousands)2014 2013 20122015 2014 2013
          
HTM$—
 $16,114
 $16,718
$—
 $—
 $16,114
AFS—
 7,358
 45,478
—
 —
 7,358
$—
 $23,472
 $62,196
$—
 $—
 $23,472

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The following summarizes gains and losses, including OTTI, that were recognized in the statement of income:
  2014 2013 2012
 (In thousands)
Gross
gains
 
Gross
losses
 
Gross
gains
 
Gross
losses
 
Gross
gains
 Gross losses
 
 Investment securities:           
 Held-to-maturity$18
 $27
 $81
 $403
 $214
 $7,423
 Available-for-sale92,525
 83,815
 13,881
 181,591
 25,120
 102,428
             
 Other noninterest-bearing investments23,706
 8,544
 10,182
 1,662
 23,218
 11,965
  116,249
 92,386
 24,144
 183,656
 48,552
 121,816
 Net gains (losses)  $23,863
   $(159,512)   $(73,264)
 Statement of income information:           
 Net impairment losses on investment securities  $(27)   $(165,134)   $(104,061)
 Equity securities gains, net  13,471
   8,520
   11,253
 Fixed income securities gains (losses), net  10,419
   (2,898)   19,544
 Net gains (losses)  $23,863
   $(159,512)   $(73,264)

The following summarizes gains and losses, including OTTI, that were recognized in the statement of income:
  2015 2014 2013
 (In thousands)
Gross
gains
 
Gross
losses
 
Gross
gains
 
Gross
losses
 
Gross
gains
 
Gross
losses
 
 Investment securities:           
 Held-to-maturity$1
 $—
 $18
 $27
 $81
 $403
 Available-for-sale8,443
 147,656
 92,525
 83,815
 13,881
 181,591
 Other noninterest-bearing investments25,045
 12,693
 23,706
 8,544
 10,182
 1,662
  33,489
 160,349
 116,249
 92,386
 24,144
 183,656
 Net gains (losses)  $(126,860)   $23,863
   $(159,512)
 Statement of income information:           
 Net impairment losses on investment securities  $—
   $(27)   $(165,134)
 Equity securities gains, net  11,875
   13,471
   8,520
 Fixed income securities gains (losses), net  (138,735)   10,419
   (2,898)
 Net gains (losses)  $(126,860)   $23,863
   $(159,512)
Interest income by security type is as follows:
(In thousands)2014 2013 20122015 2014 2013
Taxable Nontaxable Total Taxable Nontaxable Total Taxable Nontaxable TotalTaxable Nontaxable Total Taxable Nontaxable Total Taxable Nontaxable Total
Investment securities:                                  
Held-to-maturity$14,770
 $11,264
 $26,034
 $19,905
 $11,375
 $31,280
 $20,699
 $14,052
 $34,751
$12,777
 $10,892
 $23,669
 $14,770
 $11,264
 $26,034
 $19,905
 $11,375
 $31,280
Available-for-sale71,409
 2,514
 73,923
 69,106
 2,001
 71,107
 88,698
 3,563
 92,261
94,877
 3,326
 98,203
 71,365
 2,558
 73,923
 69,061
 2,046
 71,107
Trading1,979
 —
 1,979
 1,055
 —
 1,055
 746
 —
 746
2,214
 —
 2,214
 1,979
 —
 1,979
 1,055
 —
 1,055
$88,158
 $13,778
 $101,936
 $90,066
 $13,376
 $103,442
 $110,143
 $17,615
 $127,758
$109,868
 $14,218
 $124,086
 $88,114
 $13,822
 $101,936
 $90,021
 $13,421
 $103,442

SecuritiesInvestment securities with a carrying value of approximately $1.4$2.3 billion and $1.5$1.4 billion at December 31, 20142015 and 2013,2014, respectively, were pledged to secure public and trust deposits, advances, and for other purposes as required by law. Securities are also pledged as collateral for security repurchase agreements.

Private Equity Investments
Effect of Volcker Rule
AtThe VR, as published pursuant to the Dodd-Frank Act in December 2013 and amended in January 2014, significantly restricted certain activities by covered bank holding companies, including restrictions on certain types of securities, proprietary trading, and private equity investing. The Company’s PEIs consist of Small Business Investment Companies (“SBICs”) and non-SBICs. Following the sales of its CDO securities, the only prohibited investments under the VR requiring divestiture by the Company were certain of its PEIs. Of the recorded PEIs of $137 million at December 31, 2014,2015, approximately $41$18 million outremain prohibited by the VR.

As of December 31, 2015, we have sold a total of $139approximately $17 million of the Company’s private equity investments (“PEIs”) werePEIs, including $9 million during 2015 and $8 million during 2014. All of these sales related to prohibited by the VR. InPEIs. The 2015 sales resulted in insignificant amounts of realized gains or losses. The 2014 we sold approximately $8.3 million of prohibited PEIs and recognizedsales resulted in net realized gains of $5.6 million, of which $5.1 million was recorded in equity securities gains and $0.5 million was recorded in dividends and other investment income. Further, we recognized $4.7 million of net impairment in 2014 on prohibited PEIs. With the impairment charge,The remaining balance of PEIs are primarily recorded at estimated fair value at December 31, 2014, we have recorded the remaining $41 million prohibited PEI portfolio at estimated fair value.2015.

As discussed in Note 17, we have approximately $25 million of unfunded commitments related to these prohibited PEIs. We are allowed under the VR, and we expect to fund these commitments if and as the capital calls are made until wewill dispose of the PEIs. We have taken steps to sell these investments; however,remaining $18 million of prohibited PEIs before the required deadline. However, the required deadline has been extended to July 21, 2016 from July 21, 2015 and the Federal Reserve has announced its intention to act in 2015

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to grant banking entities an additional one-year extension to July 21, 2017. See furtherother discussions in Notes 17 and 20.


As discussed in Note 17, we have $22 million at December 31, 2015 of unfunded commitments for PEIs, of which approximately $7 million relate to prohibited PEIs. Until we dispose of the prohibited PEIs, we expect to fund these commitments if and as capital calls are made, as allowed under the VR.

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6.LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans and Loans Held for Sale
Loans are summarized as follows according to major portfolio segment and specific loan class:
December 31,December 31,
(In thousands)2014 20132015 2014
      
Loans held for sale$132,504
 $171,328
$149,880
 $132,504
Commercial:      
Commercial and industrial$13,162,955
 $12,458,502
$13,211,481
 $13,162,955
Leasing408,974
 387,929
441,666
 408,974
Owner occupied7,351,548
 7,567,812
7,150,028
 7,351,548
Municipal520,887
 449,418
675,839
 520,887
Total commercial21,444,364
 20,863,661
21,479,014
 21,444,364
Commercial real estate:      
Construction and land development1,986,408
 2,193,283
1,841,502
 1,986,408
Term8,126,600
 8,202,868
8,514,401
 8,126,600
Total commercial real estate10,113,008
 10,396,151
10,355,903
 10,113,008
Consumer:      
Home equity credit line2,321,150
 2,146,707
2,416,357
 2,321,150
1-4 family residential5,201,240
 4,741,965
5,382,099
 5,200,882
Construction and other consumer real estate370,542
 325,097
385,240
 370,542
Bankcard and other revolving plans401,352
 361,401
443,780
 401,352
Other212,360
 208,383
187,149
 212,360
Total consumer8,506,644
 7,783,553
8,814,625
 8,506,286
Total loans$40,064,016
 $39,043,365
$40,649,542
 $40,063,658
Loan balances are presented net of unearned income and fees, which amounted to $144.7150.3 million at December 31, 20142015 and $141.7$144.7 million at December 31, 20132014.
Owner occupied and commercial real estate (“CRE”) loans include unamortized premiums of approximately $26.2 million at December 31, 2015 and $36.5 million at December 31, 2014 and $47.2 million at December 31, 2013.
Municipal loans generally include loans to municipalities with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
Land development loans included in the construction and land development loan class were $288.0 million at December 31, 2015, and $484.9 million at December 31, 2014, and $570.3 million at December 31, 2013.
Loans with a carrying value of approximately $19.4 billion at December 31, 2015 and $22.5 billion at December 31, 2014 and $23.0 billion at December 31, 2013 have been pledged at the Federal Reserve and various FHLBsFederal Home Loan Banks (“FHLBs”) as collateral for current and potential borrowings. Note 12 presents the balance of FHLB advances made to the Company against this pledged collateral.
We sold loans totaling $1.4 billion in 2015, $1.2 billion in 2014, and $1.6 billion in 2013, and $1.7 billion in 2012, that were classified as loans held for sale. The sold loans were derecognized from the balance sheet. Loans classified as loans held for sale primarily consist of conforming residential mortgages.mortgages and the guaranteed portion of SBA loans. The principal balance of sold loans for which we retain servicing was approximately $1.2$1.3 billion at December 31, 20142015 and 2013.2014.
Amounts added to loans held for sale during these years were $1.4 billion, $1.2 billion, and $1.5 billion, and $1.7 billion, respectively. Income from loans sold, excluding servicing, was $17.8 million in 2015, $15.1 million in 2014, and $24.1 million in 2013, and $30.7 million in 2012.2013.

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During the third quarter of 2014, construction and land development loans decreased by $447 million due to conversions to term loans, and increased syndication and participation arrangements. Additionally, 1-4 family residential loans increased by $326 million, primarily due to the purchase of $249 million par amount of high quality jumbo adjustable rate mortgage (“ARM”) loans from another bank. Management took these actions to improve the risk profile of the Company’s loans and reduce portfolio concentration risk.

Since 2009, CB&T and NSB have had loss sharingloss-sharing agreements with the Federal Deposit Insurance Corporation (“FDIC”), which provided indemnification for credit losses of acquired loans and foreclosed assets up to specified thresholds. The agreements for commercial loans, which comprised the major portion of the acquired portfolio, expired as of September 30, 2014. The agreements for 1-4 family residential loans will expire in 2019. In previous periods, the FDIC-supported loan balances were presented separately in this footnote and in other disclosures, and included purchased credit-impaired (“PCI”) loans as subsequently discussed in Purchased Loans. Due to declining balances, for all years presented herein, the FDIC-supported/PCI loans have been reclassified to their respective loan segments and classes.
Allowance for Credit Losses
The allowance for credit losses (“ACL”) consists of the allowance for loan and lease losses (“ALLL”) (also referred to as the allowance for loan losses) and the reserve for unfunded lending commitments (“RULC”).RULC.

Allowance for Loan and Lease Losses
The ALLL represents our estimate of probable and estimable losses inherent in the loan and lease portfolio as of the balance sheet date. Losses are charged to the ALLL when recognized. Generally, commercial loans are charged off or charged down at the point at which they are determined to be uncollectible in whole or in part, or when 180 days past due, unless the loan is well secured and in the process of collection. Consumer loans are either charged off or charged down to net realizable value no later than the month in which they become 180 days past due. Closed-end loans that are not secured by residential real estate are either charged off or charged down to net realizable value no later than the month in which they become 120 days past due. We establish the amount of the ALLL by analyzing the portfolio at least quarterly, and we adjust the provision for loan losses so the ALLL is at an appropriate level at the balance sheet date.
We determine our ALLL as the best estimate within a range of estimated losses. The methodologies we use to estimate the ALLL depend upon the impairment status and portfolio segment of the loan. The methodology for impaired loans is discussed subsequently. For the commercial and CRE segments, we use a comprehensive loan grading system to assign probability of default (“PD”) and loss given default (“LGD”) grades to each loan. The credit quality indicators discussed subsequently are based on this grading system. In addition, loan officers utilize their experience and judgment in assigning PD and LGD grades, subject to confirmation of the PD and LGD by either credit risk or credit examination. We create groupings of these grades for each subsidiary bankbanking affiliate and loan class and calculate historic loss rates using a loss migration analysis that attributes historic realized losses to these loan grade groupings over the period of January 2008 through the most recent full quarter.

For the consumer loan segment, we use roll rate models to forecast probable inherent losses. Roll rate models measure the rate at which consumer loans migrate from one delinquency category to the next worse delinquency category, and eventually to loss. We estimate roll rates for consumer loans using recent delinquency and loss experience by segmenting our consumer loan portfolio into separate pools based on common risk characteristics and separately calculating historical delinquency and loss experience for each pool. These roll rates are then applied to current delinquency levels to estimate probable inherent losses. Roll rates incorporate housing market trends inasmuch as these trends manifest themselves in charge-offs and delinquencies. In addition, our qualitative and environmental factors discussed subsequently incorporate the most recent housing market trends.

The current status and historical changes in qualitative and environmental factors may not be reflected in our quantitative models. Thus, after applying historical loss experience, as described above, we review the quantitatively derived level of ALLL for each segment using qualitative criteria and use those criteria to determine

115107

our estimate within the range. We track various risk factors that influence our judgment regarding the level of the ALLL across the portfolio segments. These factors primarily include:
Asset quality trends
Risk management and loan administration practices
Risk identification practices
Effect of changes in the nature and volume of the portfolio
Existence and effect of any portfolio concentrations
National economic and business conditions
Regional and local economic and business conditions
Data availability and applicability
Effects of other external factors
The magnitude of the impact of these factors on our qualitative assessment of the ALLL changes from quarter to quarter according to the extent these factors are already reflected in historic loss rates and according to the extent these factors diverge from one to another. We also consider the uncertainty inherent in the estimation process when evaluating the ALLL.
Reserve for Unfunded Lending Commitments
We also estimate a reserve for potential losses associated with off-balance sheet commitments, including standby letters of credit. We determine the RULC using the same procedures and methodologies that we use for the ALLL. The loss factors used in the RULC are the same as the loss factors used in the ALLL, and the qualitative adjustments used in the RULC are the same as the qualitative adjustments used in the ALLL. We adjust the Company’s unfunded lending commitments that are not unconditionally cancelable to an outstanding amount equivalent using credit conversion factors, and we apply the loss factors to the outstanding equivalents.
Changes in the ACL are summarized as follows:
December 31, 2014December 31, 2015
(In thousands)
Commercial 
Commercial
real estate
 Consumer TotalCommercial 
Commercial
real estate
 Consumer Total
Allowance for loan losses              
Balance at beginning of year$469,213
 $216,012
 $61,066
 $746,291
$412,514
 $145,009
 $47,140
 $604,663
Additions:              
Provision for loan losses(19,691) (67,825) (10,566) (98,082)96,995
 (51,777) (5,183) 40,035
Adjustment for FDIC-supported loans(1,209) —
 (96) (1,305)
Adjustment for FDIC-supported/PCI loans(57) 57
 5
 5
Deductions:              
Gross loan and lease charge-offs(76,345) (15,322) (14,543) (106,210)(110,437) (14,194) (14,298) (138,929)
Recoveries40,546
 12,144
 11,279
 63,969
55,262
 34,897
 10,115
 100,274
Net loan and lease charge-offs(35,799) (3,178) (3,264) (42,241)
Net loan and lease (charge-offs) recoveries(55,175) 20,703
 (4,183) (38,655)
Balance at end of year$412,514
 $145,009
 $47,140
 $604,663
$454,277
 $113,992
 $37,779
 $606,048
              
Reserve for unfunded lending commitments              
Balance at beginning of year$48,345
 $37,485
 $3,875
 $89,705
$58,931
 $21,517
 $628
 $81,076
Provision charged (credited) to earnings10,586
 (15,968) (3,247) (8,629)
Provision credited to earnings(1,235) (4,991) (12) (6,238)
Balance at end of year$58,931
 $21,517
 $628
 $81,076
$57,696
 $16,526
 $616
 $74,838
              
Total allowance for credit losses              
Allowance for loan losses$412,514
 $145,009
 $47,140
 $604,663
$454,277
 $113,992
 $37,779
 $606,048
Reserve for unfunded lending commitments58,931
 21,517
 628
 81,076
57,696
 16,526
 616
 74,838
Total allowance for credit losses$471,445
 $166,526
 $47,768
 $685,739
$511,973
 $130,518
 $38,395
 $680,886

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December 31, 2013December 31, 2014
(In thousands)Commercial 
Commercial
real estate
 Consumer TotalCommercial 
Commercial
real estate
 Consumer Total
Allowance for loan losses              
Balance at beginning of year$520,914
 $277,562
 $97,611
 $896,087
$469,213
 $216,012
 $61,066
 $746,291
Additions:              
Provision for loan losses(14,109) (55,125) (17,902) (87,136)(19,691) (67,825) (10,566) (98,082)
Adjustment for FDIC-supported loans(2,574) (6,070) (2,593) (11,237)
Adjustment for FDIC-supported/PCI loans(1,209) —
 (96) (1,305)
Deductions:              
Gross loan and lease charge-offs(75,845) (25,578) (29,374) (130,797)(76,345) (15,322) (14,543) (106,210)
Recoveries40,827
 25,223
 13,324
 79,374
40,546
 12,144
 11,279
 63,969
Net loan and lease charge-offs(35,018) (355) (16,050) (51,423)(35,799) (3,178) (3,264) (42,241)
Balance at end of year$469,213
 $216,012
 $61,066
 $746,291
$412,514
 $145,009
 $47,140
 $604,663
              
Reserve for unfunded lending commitments              
Balance at beginning of year$67,374
 $37,852
 $1,583
 $106,809
$48,345
 $37,485
 $3,875
 $89,705
Provision charged (credited) to earnings(19,029) (367) 2,292
 (17,104)10,586
 (15,968) (3,247) (8,629)
Balance at end of year$48,345
 $37,485
 $3,875
 $89,705
$58,931
 $21,517
 $628
 $81,076
              
Total allowance for credit losses              
Allowance for loan losses$469,213

$216,012

$61,066

$746,291
$412,514

$145,009

$47,140

$604,663
Reserve for unfunded lending commitments48,345

37,485

3,875

89,705
58,931

21,517

628

81,076
Total allowance for credit losses$517,558
 $253,497
 $64,941
 $835,996
$471,445
 $166,526
 $47,768
 $685,739

The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:
The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows:
December 31, 2014December 31, 2015
(In thousands)Commercial 
Commercial
real estate
 Consumer TotalCommercial 
Commercial
real estate
 Consumer Total
Allowance for loan losses              
Individually evaluated for impairment$28,627
 $4,027
 $9,059
 $41,713
$36,909
 $3,154
 $9,462
 $49,525
Collectively evaluated for impairment382,552
 140,090
 37,508
 560,150
417,295
 110,417
 27,866
 555,578
Purchased loans with evidence of credit deterioration1,335
 892
 573
 2,800
73
 421
 451
 945
Total$412,514
 $145,009
 $47,140
 $604,663
$454,277
 $113,992
 $37,779
 $606,048
              
Outstanding loan balances              
Individually evaluated for impairment$259,207
 $167,435
 $95,267
 $521,909
$289,629
 $107,341
 $92,605
 $489,575
Collectively evaluated for impairment21,105,217
 9,861,862
 8,395,729
 39,362,808
21,129,125
 10,193,840
 8,712,079
 40,035,044
Purchased loans with evidence of credit deterioration79,940
 83,711
 15,648
 179,299
60,260
 54,722
 9,941
 124,923
Total$21,444,364
 $10,113,008
 $8,506,644
 $40,064,016
$21,479,014
 $10,355,903
 $8,814,625
 $40,649,542


117109

December 31, 2013December 31, 2014
(In thousands)Commercial 
Commercial
real estate
 Consumer TotalCommercial 
Commercial
real estate
 Consumer Total
Allowance for loan losses              
Individually evaluated for impairment$39,288
 $12,510
 $10,701
 $62,499
$28,627
 $4,027
 $9,059
 $41,713
Collectively evaluated for impairment426,240
 200,853
 50,173
 677,266
382,552
 140,090
 37,508
 560,150
Purchased loans with evidence of credit deterioration3,685
 2,649
 192
 6,526
1,335
 892
 573
 2,800
Total$469,213
 $216,012
 $61,066
 $746,291
$412,514
 $145,009
 $47,140
 $604,663
              
Outstanding loan balances              
Individually evaluated for impairment$316,415
 $263,313
 $101,552
 $681,280
$259,207
 $167,435
 $95,267
 $521,909
Collectively evaluated for impairment20,428,295
 9,963,912
 7,658,794
 38,051,001
21,105,217
 9,861,862
 8,395,371
 39,362,450
Purchased loans with evidence of credit deterioration118,951
 168,926
 23,207
 311,084
79,940
 83,711
 15,648
 179,299
Total$20,863,661
 $10,396,151
 $7,783,553
 $39,043,365
$21,444,364
 $10,113,008
 $8,506,286
 $40,063,658

Nonaccrual and Past Due Loans
Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain.
A nonaccrual loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms of the loan agreement; the loan, if secured, is well secured; the borrower has paid according to the contractual terms for a minimum of six months; and analysis of the borrower indicates a reasonable assurance of the ability and willingness to maintain payments. Payments received on nonaccrual loans are applied as a reduction to the principal outstanding.
Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credit such as charge-card plans and other revolving credit plans are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semiannual, etc.), single payment, and demand notes are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more.
 

118110

Nonaccrual loans are summarized as follows:
December 31,December 31,
(In thousands)2014 20132015 2014
      
Commercial:      
Commercial and industrial$105,591
 $100,641
$163,906
 $105,591
Leasing295
 757
3,829
 295
Owner occupied87,243
 137,422
73,881
 87,243
Municipal1,056
 9,986
951
 1,056
Total commercial194,185
 248,806
242,567
 194,185
Commercial real estate:      
Construction and land development23,880
 29,205
7,045
 23,880
Term25,107
 60,786
40,253
 25,107
Total commercial real estate48,987
 89,991
47,298
 48,987
Consumer:      
Home equity credit line11,430
 8,969
8,270
 11,430
1-4 family residential49,861
 53,162
50,254
 49,861
Construction and other consumer real estate1,735
 3,510
748
 1,735
Bankcard and other revolving plans196
 1,371
537
 196
Other254
 804
186
 254
Total consumer loans63,476
 67,816
59,995
 63,476
Total$306,648
 $406,613
$349,860
 $306,648

Past due loans (accruing and nonaccruing) are summarized as follows:
December 31, 2014December 31, 2015
(In thousands)Current 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current1
Current 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current1
                          
Commercial:                          
Commercial and industrial$13,092,731
 $28,295
 $41,929
 $70,224
 $13,162,955
 $4,677
 $64,385
$13,114,045
 $60,523
 $36,913
 $97,436
 $13,211,481
 $3,065
 $117,942
Leasing408,724
 225
 25
 250
 408,974
 —
 270
440,963
 183
 520
 703
 441,666
 —
 3,309
Owner occupied7,275,842
 29,182
 46,524
 75,706
 7,351,548
 3,334
 39,649
7,085,086
 37,776
 27,166
 64,942
 7,150,028
 3,626
 43,984
Municipal520,887
 —
 —
 —
 520,887
 —
 1,056
668,207
 7,586
 46
 7,632
 675,839
 46
 951
Total commercial21,298,184
 57,702
 88,478
 146,180
 21,444,364
 8,011
 105,360
21,308,301
 106,068
 64,645
 170,713
 21,479,014
 6,737
 166,186
Commercial real estate:                          
Construction and land development1,972,206
 2,711
 11,491
 14,202
 1,986,408
 92
 12,481
1,835,360
 842
 5,300
 6,142
 1,841,502
 —
 1,745
Term8,082,940
 14,415
 29,245
 43,660
 8,126,600
 19,700
 13,787
8,469,390
 10,424
 34,587
 45,011
 8,514,401
 21,697
 24,867
Total commercial real estate10,055,146
 17,126
 40,736
 57,862
 10,113,008
 19,792
 26,268
10,304,750
 11,266
 39,887
 51,153
 10,355,903
 21,697
 26,612
Consumer:                          
Home equity credit line2,309,967
 4,503
 6,680
 11,183
 2,321,150
 1
 1,779
2,407,972
 4,717
 3,668
 8,385
 2,416,357
 —
 3,053
1-4 family residential5,163,968
 12,416
 24,856
 37,272
 5,201,240
 318
 20,599
5,340,549
 14,828
 26,722
 41,550
 5,382,099
 1,036
 20,939
Construction and other consumer real estate359,723
 9,675
 1,144
 10,819
 370,542
 160
 608
374,987
 8,593
 1,660
 10,253
 385,240
 1,337
 408
Bankcard and other revolving plans397,882
 2,425
 1,045
 3,470
 401,352
 946
 80
440,358
 1,861
 1,561
 3,422
 443,780
 1,217
 146
Other211,560
 644
 156
 800
 212,360
 —
 84
186,436
 647
 66
 713
 187,149
 —
 83
Total consumer loans8,443,100
 29,663
 33,881
 63,544
 8,506,644
 1,425
 23,150
8,750,302
 30,646
 33,677
 64,323
 8,814,625
 3,590
 24,629
Total$39,796,430
 $104,491
 $163,095
 $267,586
 $40,064,016
 $29,228
 $154,778
$40,363,353
 $147,980
 $138,209
 $286,189
 $40,649,542
 $32,024
 $217,427

119111

December 31, 2013December 31, 2014
(In thousands)Current 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current1
Current 
30-89 days
past due
 
90+ days
past due
 
Total
past due
 
Total
loans
 
Accruing
loans
90+ days
past due
 
Nonaccrual
loans
that are
current1
                          
Commercial:                          
Commercial and industrial$12,360,946
 $49,462
 $48,094
 $97,556
 $12,458,502
 $3,411
 $53,279
$13,092,731
 $28,295
 $41,929
 $70,224
 $13,162,955
 $4,677
 $64,385
Leasing387,526
 173
 230
 403
 387,929
 36
 563
408,724
 225
 25
 250
 408,974
 —
 270
Owner occupied7,480,166
 40,806
 46,840
 87,646
 7,567,812
 4,555
 82,770
7,275,842
 29,182
 46,524
 75,706
 7,351,548
 3,334
 39,649
Municipal440,607
 3,308
 5,503
 8,811
 449,418
 —
 1,175
520,887
 —
 —
 —
 520,887
 —
 1,056
Total commercial20,669,245
 93,749
 100,667
 194,416
 20,863,661
 8,002
 137,787
21,298,184
 57,702
 88,478
 146,180
 21,444,364
 8,011
 105,360
Commercial real estate:                          
Construction and land development2,163,032
 8,968
 21,283
 30,251
 2,193,283
 9,469
 17,310
1,972,206
 2,711
 11,491
 14,202
 1,986,408
 92
 12,481
Term8,147,699
 21,623
 33,546
 55,169
 8,202,868
 19,978
 43,030
8,082,940
 14,415
 29,245
 43,660
 8,126,600
 19,700
 13,787
Total commercial real estate10,310,731
 30,591
 54,829
 85,420
 10,396,151
 29,447
 60,340
10,055,146
 17,126
 40,736
 57,862
 10,113,008
 19,792
 26,268
Consumer:                          
Home equity credit line2,134,908
 8,248
 3,551
 11,799
 2,146,707
 1,079
 2,868
2,309,967
 4,503
 6,680
 11,183
 2,321,150
 1
 1,779
1-4 family residential4,709,682
 8,837
 23,446
 32,283
 4,741,965
 667
 27,593
5,163,610
 12,416
 24,856
 37,272
 5,200,882
 318
 20,599
Construction and other consumer real estate322,825
 1,038
 1,234
 2,272
 325,097
 157
 2,232
359,723
 9,675
 1,144
 10,819
 370,542
 160
 608
Bankcard and other revolving plans358,170
 2,117
 1,114
 3,231
 361,401
 924
 1,109
397,882
 2,425
 1,045
 3,470
 401,352
 946
 80
Other206,386
 1,269
 728
 1,997
 208,383
 72
 126
211,560
 644
 156
 800
 212,360
 —
 84
Total consumer loans7,731,971
 21,509
 30,073
 51,582
 7,783,553
 2,899
 33,928
8,442,742
 29,663
 33,881
 63,544
 8,506,286
 1,425
 23,150
Total$38,711,947
 $145,849
 $185,569
 $331,418
 $39,043,365
 $40,348
 $232,055
$39,796,072
 $104,491
 $163,095
 $267,586
 $40,063,658
 $29,228
 $154,778
1 Represents nonaccrual loans not past due more than 30 days; however, full payment of principal and interest is still not expected.
1
Represents nonaccrual loans not past due more than 30 days; however, full payment of principal and interest is still not expected.
Credit Quality Indicators
In addition to the past due and nonaccrual criteria, we also analyze loans using loan risk grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definitions of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.
Definitions of Pass, Special Mention, Substandard, and Doubtful are summarized as follows:
Pass – A Pass asset is higher quality and does not fit any of the other categories described below. The likelihood of loss is considered remote.
Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date.
Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well definedwell-defined weaknesses and are characterized by the distinct possibility that the bank may sustain some loss if deficiencies are not corrected.
Doubtful – A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable.
We generally assign internal risk grades to commercial and CRE loans with commitments equal to or greater than $750,000 based on financial and statistical models, individual credit analysis, and loan officer judgment. For these larger loans, we assign one of multiple grades within the Pass classification or one of the following four grades: Special Mention, Substandard, Doubtful, and Loss. Loss indicates that the outstanding balance has been charged off. We confirm our internal risk grades quarterly, or as soon as we identify information that affects the credit risk of the loan.


120112

For consumer loans or certain small commercial loans with commitments equal to or less than $750,000, we generally assign internal risk grades similar to those described previously based on automated rules that depend on refreshed credit scores, payment performance, and other risk indicators. These are generally assigned either a Pass or Substandard grade and are reviewed as we identify information that might warrant a grade change.
Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows:
December 31, 2014December 31, 2015
(In thousands)Pass 
Special
mention
 
Sub-
standard
 Doubtful 
Total
loans
 
Total
allowance
Pass 
Special
mention
 
Sub-
standard
 Doubtful 
Total
loans
 
Total
allowance
                      
Commercial:                      
Commercial and industrial$12,515,846
 $209,215
 $426,002
 $11,892
 $13,162,955
  $12,007,076
 $399,847
 $804,403
 $155
 $13,211,481
  
Leasing399,032
 4,868
 5,074
 —
 408,974
  411,131
 5,166
 25,369
 —
 441,666
  
Owner occupied6,844,310
 168,423
 338,815
 —
 7,351,548
  6,720,052
 139,784
 290,192
 —
 7,150,028
  
Municipal518,513
 1,318
 1,056
 —
 520,887
  663,903
 —
 11,936
 —
 675,839
  
Total commercial20,277,701
 383,824
 770,947
 11,892
 21,444,364
 $412,514
19,802,162
 544,797
 1,131,900
 155
 21,479,014
 $454,277
Commercial real estate:                      
Construction and land development1,925,685
 8,464
 52,259
 —
 1,986,408
  1,786,610
 42,348
 12,544
 —
 1,841,502
  
Term7,802,571
 96,347
 223,324
 4,358
 8,126,600
  8,319,348
 47,245
 139,036
 8,772
 8,514,401
  
Total commercial real estate9,728,256
 104,811
 275,583
 4,358
 10,113,008
 145,009
10,105,958
 89,593
 151,580
 8,772
 10,355,903
 113,992
Consumer:                      
Home equity credit line2,304,352
 —
 16,798
 —
 2,321,150
  2,404,635
 —
 11,722
 —
 2,416,357
  
1-4 family residential5,139,018
 —
 62,222
 —
 5,201,240
  5,325,519
 —
 56,580
 —
 5,382,099
  
Construction and other consumer real estate367,932
 —
 2,610
 —
 370,542
  381,738
 —
 3,502
 —
 385,240
  
Bankcard and other revolving plans399,446
 —
 1,906
 —
 401,352
  440,282
 —
 3,498
 —
 443,780
  
Other211,811
 —
 549
 —
 212,360
  186,836
 —
 313
 —
 187,149
  
Total consumer loans8,422,559
 —
 84,085
 —
 8,506,644
 47,140
8,739,010
 —
 75,615
 —
 8,814,625
 37,779
Total$38,428,516
 $488,635
 $1,130,615
 $16,250
 $40,064,016
 $604,663
$38,647,130
 $634,390
 $1,359,095
 $8,927
 $40,649,542
 $606,048

December 31, 2013December 31, 2014
(In thousands)Pass 
Special
mention
 
Sub-
standard
 Doubtful 
Total
loans
 
Total
allowance
Pass 
Special
mention
 
Sub-
standard
 Doubtful 
Total
loans
 
Total
allowance
                      
Commercial:                      
Commercial and industrial$11,766,855
 $312,652
 $369,726
 $9,269
 $12,458,502
  $12,515,846
 $209,215
 $426,002
 $11,892
 $13,162,955
  
Leasing380,268
 2,050
 5,611
 —
 387,929
  399,032
 4,868
 5,074
 —
 408,974
  
Owner occupied6,929,186
 185,617
 453,009
 —
 7,567,812
  6,844,310
 168,423
 338,815
 —
 7,351,548
  
Municipal439,432
 —
 9,986
 —
 449,418
  518,513
 1,318
 1,056
 —
 520,887
  
Total commercial19,515,741
 500,319
 838,332
 9,269
 20,863,661
 $469,213
20,277,701
 383,824
 770,947
 11,892
 21,444,364
 $412,514
Commercial real estate:                      
Construction and land development2,108,830
 15,010
 69,443
 —
 2,193,283
  1,925,685
 8,464
 52,259
 —
 1,986,408
  
Term7,708,352
 185,045
 309,471
 —
 8,202,868
  7,802,571
 96,347
 223,324
 4,358
 8,126,600
  
Total commercial real estate9,817,182
 200,055
 378,914
 —
 10,396,151
 216,012
9,728,256
 104,811
 275,583
 4,358
 10,113,008
 145,009
Consumer:                      
Home equity credit line2,123,370
 —
 23,337
 —
 2,146,707
  2,304,352
 —
 16,798
 —
 2,321,150
  
1-4 family residential4,673,863
 —
 68,102
 —
 4,741,965
  5,138,660
 —
 62,222
 —
 5,200,882
  
Construction and other consumer real estate313,899
 —
 11,198
 —
 325,097
  367,932
 —
 2,610
 —
 370,542
  
Bankcard and other revolving plans358,680
 —
 2,721
 —
 361,401
  399,446
 —
 1,906
 —
 401,352
  
Other207,032
 —
 1,351
 —
 208,383
  211,811
 —
 549
 —
 212,360
  
Total consumer loans7,676,844
 —
 106,709
 —
 7,783,553
 61,066
8,422,201
 —
 84,085
 —
 8,506,286
 47,140
Total$37,009,767
 $700,374
 $1,323,955
 $9,269
 $39,043,365
 $746,291
$38,428,158
 $488,635
 $1,130,615
 $16,250
 $40,063,658
 $604,663

121113

Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. For our non-purchased credit-impaired loans, if a nonaccrual loan has a balance greater than $1 million, or if a loan is a TDR, including TDRs that subsequently default, or if the loan is no longer reported as a TDR, we individually evaluate the loan for impairment and estimate a specific reserve for the loan for all portfolio segments under applicable accounting guidance. Smaller nonaccrual loans are pooled for ALLL estimation purposes. PCI loans are included in impaired loans and are accounted for under separate accounting guidance. See subsequent discussion under Purchased Loans.

When a loan is impaired, we estimate a specific reserve for the loan based on the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the loan’s underlying collateral. The process of estimating future cash flows also incorporates the same determining factors discussed previously under nonaccrual loans. When we base the impairment amount on the fair value of the loan’s underlying collateral, we generally charge offcharge-off the portion of the balance that is impaired, such that these loans do not have a specific reserve in the ALLL. Payments received on impaired loans that are accruing are recognized in interest income, according to the contractual loan agreement. Payments received on impaired loans that are on nonaccrual are not recognized in interest income, but are applied as a reduction to the principal outstanding. The amount of interest income recognized on a cash basis during the time the loans were impaired within the years ended December 31, 20142015 and 20132014 was not significant.
Information on all impaired loans is summarized as follows, including the average recorded investment and interest income recognized for the years ended December 31, 20142015 and 20132014:

December 31, 2014 Year Ended
December 31, 2014		 December 31, 2015 Year Ended
December 31, 2015
(In thousands)

Unpaid
principal
balance
 Recorded investment 
Total
recorded
investment
 
Related
allowance
 
Average
recorded
investment
 Interest
income
recognized		 
Unpaid
principal
balance
 Recorded investment 
Total
recorded
investment
 
Related
allowance
 
Average
recorded
investment
 Interest
income
recognized
with no
allowance
 
with
allowance
 
with no
allowance
 
with
allowance
 
Commercial:                           
Commercial and industrial$185,520
 $43,257
 $103,565
 $146,822
 $22,852
 $185,947
 $10,803
 $272,161
 $44,190
 $163,729
 $207,919
 $30,538
 $153,756
 $7,506
Owner occupied198,231
 83,179
 86,382
 169,561
 6,087
 233,361
 18,221
 141,526
 83,024
 43,243
 126,267
 5,486
 125,777
 12,450
Municipal1,535
 1,056
 —
 1,056
 —
 9,208
 —
 1,430
 951
 —
 951
 —
 994
 —
Total commercial385,286
 127,492
 189,947
 317,439
 28,939
 428,516
 29,024
 415,117
 128,165
 206,972
 335,137
 36,024
 280,527
 19,956
Commercial real estate:                           
Construction and land development60,993
 16,500
 26,977
 43,477
 1,773
 61,068
 6,384
 22,791
 5,076
 9,558
 14,634
 618
 16,192
 6,410
Term203,788
 96,351
 63,740
 160,091
 2,345
 238,507
 31,144
 142,239
 82,864
 34,361
 117,225
 2,604
 111,074
 16,971
Total commercial real estate264,781
 112,851
 90,717
 203,568
 4,118
 299,575
 37,528
 165,030
 87,940
 43,919
 131,859
 3,222
 127,266
 23,381
Consumer:                           
Home equity credit line30,209
 14,798
 11,883
 26,681
 437
 25,909
 2,426
 27,064
 18,980
 5,319
 24,299
 243
 22,050
 1,547
1-4 family residential86,575
 37,096
 35,831
 72,927
 8,494
 81,526
 2,058
 74,009
 29,540
 41,155
 70,695
 8,736
 96,482
 2,616
Construction and other consumer real estate3,902
 1,449
 1,410
 2,859
 233
 3,167
 155
 2,741
 989
 1,014
 2,003
 173
 2,288
 123
Bankcard and other revolving plans—
 —
 —
 —
 —
 2
 22
 —
 —
 —
 —
 —
 1
 102
Other6,580
 —
 5,254
 5,254
 133
 7,585
 1,665
 3,187
 36
 2,570
 2,606
 299
 3,781
 838
Total consumer loans127,266
 53,343
 54,378
 107,721
 9,297
 118,189
 6,326
 107,001
 49,545
 50,058
 99,603
 9,451
 124,602
 5,226
Total$777,333
 $293,686
 $335,042
 $628,728
 $42,354
 $846,280
 $72,878
 $687,148
 $265,650
 $300,949
 $566,599
 $48,697
 $532,395
 $48,563

122114

December 31, 2013 Year Ended
December 31, 2013		 December 31, 2014 Year Ended
December 31, 2014
(In thousands)

Unpaid
principal
balance
 Recorded investment 
Total
recorded
investment
 
Related
allowance
 
Average
recorded
investment
 Interest
income
recognized		 
Unpaid
principal
balance
 Recorded investment 
Total
recorded
investment
 
Related
allowance
 
Average
recorded
investment
 Interest
income
recognized
with no
allowance
 
with
allowance
 
with no
allowance
 
with
allowance
 
Commercial:                           
Commercial and industrial$191,094
 $33,503
 $126,976
 $160,479
 $23,391
 $197,490
 $17,956
 $185,520
 $43,257
 $103,565
 $146,822
 $22,852
 $185,947
 $10,803
Owner occupied277,447
 92,997
 152,030
 245,027
 16,656
 346,135
 19,885
 198,231
 83,179
 86,382
 169,561
 6,087
 233,361
 18,221
Municipal10,465
 1,175
 8,811
 9,986
 1,225
 10,195
 —
 1,535
 1,056
 —
 1,056
 —
 9,208
 —
Total commercial479,006
 127,675
 287,817
 415,492
 41,272
 553,820
 37,841
 385,286
 127,492
 189,947
 317,439
 28,939
 428,516
 29,024
Commercial real estate:                           
Construction and land development112,863
 23,422
 55,974
 79,396
 3,862
 148,317
 36,363
 60,993
 16,500
 26,977
 43,477
 1,773
 61,068
 6,384
Term371,932
 66,533
 239,941
 306,474
 10,251
 477,309
 52,242
 203,788
 96,351
 63,740
 160,091
 2,345
 238,507
 31,144
Total commercial real estate484,795
 89,955
 295,915
 385,870
 14,113
 625,626
 88,605
 264,781
 112,851
 90,717
 203,568
 4,118
 299,575
 37,528
Consumer:                           
Home equity credit line30,344
 12,575
 13,443
 26,018
 242
 26,926
 1,366
 30,209
 14,798
 11,883
 26,681
 437
 25,909
 2,426
1-4 family residential99,757
 38,838
 45,657
 84,495
 10,290
 104,592
 1,999
 86,575
 37,096
 35,831
 72,927
 8,494
 81,526
 2,058
Construction and other consumer real estate4,877
 2,643
 1,090
 3,733
 176
 6,392
 152
 3,902
 1,449
 1,410
 2,859
 233
 3,167
 155
Bankcard and other revolving plans755
 726
 24
 750
 1
 43
 12
 —
 —
 —
 —
 —
 2
 22
Other10,419
 134
 8,061
 8,195
 112
 11,696
 2,112
 6,580
 —
 5,254
 5,254
 133
 7,585
 1,665
Total consumer loans146,152
 54,916
 68,275
 123,191
 10,821
 149,649
 5,641
 127,266
 53,343
 54,378
 107,721
 9,297
 118,189
 6,326
Total$1,109,953
 $272,546
 $652,007
 $924,553
 $66,206
 $1,329,095
 $132,087
 $777,333
 $293,686
 $335,042
 $628,728
 $42,354
 $846,280
 $72,878

Modified and Restructured Loans
Loans may be modified in the normal course of business for competitive reasons or to strengthen the Company’s position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. These modifications are structured on a loan-by-loan basis and, depending on the circumstances, may include extended payment terms, a modified interest rate, forgiveness of principal, or other concessions. Loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for which the Company has granted a concession that it would not otherwise consider, are considered TDRs.
We consider many factors in determining whether to agree to a loan modification involving concessions, and seek a solution that will both minimize potential loss to the Company and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.
TDRs are classified as either accrual or nonaccrual loans. A loan on nonaccrual and restructured as a TDR will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the restructuring, or significant events that coincide with the restructuring, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of restructuring or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan. A TDR loan that specifies an interest rate that at the time of the restructuring is greater than or equal to the rate the bank is willing to accept for a new loan with comparable risk may not be reported as a TDR or an impaired loan in the calendar years subsequent to the restructuring if it is in compliance with its modified terms.

123115

Selected information on TDRs at year-end that includes the recorded investment on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules:
December 31, 2014December 31, 2015
Recorded investment resulting from the following modification types:  Recorded investment resulting from the following modification types:  
(In thousands)

Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 Total
Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 Total
Accruing                          
Commercial:                          
Commercial and industrial$2,611
 $6,509
 $18
 $3,203
 $3,855
 $34,585
 $50,781
$202
 $3,236
 $13
 $100
 $23,207
 $34,473
 $61,231
Owner occupied19,981
 1,124
 960
 1,251
 10,960
 17,505
 51,781
1,999
 681
 929
 —
 9,879
 16,339
 29,827
Total commercial22,592
 7,633
 978
 4,454
 14,815
 52,090
 102,562
2,201
 3,917
 942
 100
 33,086
 50,812
 91,058
Commercial real estate:                          
Construction and land development—
 —
 —
 —
 521
 19,854
 20,375
94
 —
 —
 —
 —
 9,698
 9,792
Term7,328
 9,027
 179
 3,153
 2,546
 39,007
 61,240
4,696
 638
 166
 976
 2,249
 20,833
 29,558
Total commercial real estate7,328
 9,027
 179
 3,153
 3,067
 58,861
 81,615
4,790
 638
 166
 976
 2,249
 30,531
 39,350
Consumer:                          
Home equity credit line742
 70
 11,320
 —
 166
 1,281
 13,579
192
 2,147
 9,763
 —
 164
 3,155
 15,421
1-4 family residential2,425
 552
 6,828
 446
 753
 34,719
 45,723
2,669
 353
 6,747
 433
 3,440
 32,903
 46,545
Construction and other consumer real estate290
 422
 42
 90
 —
 1,227
 2,071
174
 384
 —
 —
 —
 1,152
 1,710
Total consumer loans3,457
 1,044
 18,190
 536
 919
 37,227
 61,373
3,035
 2,884
 16,510
 433
 3,604
 37,210
 63,676
Total accruing33,377
 17,704
 19,347
 8,143
 18,801
 148,178
 245,550
10,026
 7,439
 17,618
 1,509
 38,939
 118,553
 194,084
Nonaccruing                          
Commercial:                          
Commercial and industrial442
 576
 —
 611
 5,199
 20,410
 27,238
28
 455
 —
 1,879
 3,577
 49,617
 55,556
Owner occupied2,714
 1,219
 —
 883
 2,852
 12,040
 19,708
685
 1,669
 —
 724
 34
 16,335
 19,447
Municipal—
 1,056
 —
 —
 —
 —
 1,056
—
 951
 —
 —
 —
 —
 951
Total commercial3,156
 2,851
 —
 1,494
 8,051
 32,450
 48,002
713
 3,075
 —
 2,603
 3,611
 65,952
 75,954
Commercial real estate:                          
Construction and land development11,080
 68
 —
 93
 3,300
 6,427
 20,968
—
 333
 —
 —
 3,156
 208
 3,697
Term2,851
 —
 —
 —
 277
 4,607
 7,735
1,844
 —
 —
 —
 2,960
 5,203
 10,007
Total commercial real estate13,931
 68
 —
 93
 3,577
 11,034
 28,703
1,844
 333
 —
 —
 6,116
 5,411
 13,704
Consumer:                          
Home equity credit line—
 —
 420
 203
 —
 399
 1,022
7
 500
 1,400
 54
 —
 233
 2,194
1-4 family residential3,378
 1,029
 1,951
 191
 3,527
 9,413
 19,489
—
 275
 2,052
 136
 1,180
 7,299
 10,942
Construction and other consumer real estate—
 463
 —
 —
 —
 100
 563
—
 101
 17
 48
 —
 44
 210
Bankcard and other revolving plans—
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
Total consumer loans3,378
 1,492
 2,371
 394
 3,527
 9,912
 21,074
7
 876
 3,469
 238
 1,180
 7,576
 13,346
Total nonaccruing20,465
 4,411
 2,371
 1,981
 15,155
 53,396
 97,779
2,564
 4,284
 3,469
 2,841
 10,907
 78,939
 103,004
Total$53,842
 $22,115
 $21,718
 $10,124
 $33,956
 $201,574
 $343,329
$12,590
 $11,723
 $21,087
 $4,350
 $49,846
 $197,492
 $297,088
 
124116

December 31, 2013December 31, 2014
Recorded investment resulting from the following modification types:  Recorded investment resulting from the following modification types:  
(In thousands)

Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 Total
Interest
rate below
market
 
Maturity
or term
extension
 
Principal
forgiveness
 
Payment
deferral
 
Other1
 
Multiple
modification
types2
 Total
Accruing                          
Commercial:                          
Commercial and industrial$1,143
 $9,848
 $11,491
 $3,217
 $4,308
 $53,117
 $83,124
$2,611
 $6,509
 $18
 $3,203
 $3,855
 $34,585
 $50,781
Owner occupied22,841
 1,482
 987
 1,291
 9,659
 23,576
 59,836
19,981
 1,124
 960
 1,251
 10,960
 17,505
 51,781
Total commercial23,984
 11,330
 12,478
 4,508
 13,967
 76,693
 142,960
22,592
 7,633
 978
 4,454
 14,815
 52,090
 102,562
Commercial real estate:                          
Construction and land development1,067
 8,231
 —
 1,063
 4,119
 28,295
 42,775
—
 —
 —
 —
 521
 19,854
 20,375
Term7,542
 9,241
 190
 3,783
 14,932
 61,024
 96,712
7,328
 9,027
 179
 3,153
 2,546
 39,007
 61,240
Total commercial real estate8,609
 17,472
 190
 4,846
 19,051
 89,319
 139,487
7,328
 9,027
 179
 3,153
 3,067
 58,861
 81,615
Consumer:                          
Home equity credit line743
 —
 9,438
 —
 323
 332
 10,836
742
 70
 11,320
 —
 166
 1,281
 13,579
1-4 family residential2,628
 997
 6,814
 643
 3,083
 35,869
 50,034
2,425
 552
 6,828
 446
 753
 34,719
 45,723
Construction and other consumer real estate128
 329
 11
 —
 —
 1,514
 1,982
290
 422
 42
 90
 —
 1,227
 2,071
Total consumer loans3,499
 1,326
 16,263
 643
 3,406
 37,715
 62,852
3,457
 1,044
 18,190
 536
 919
 37,227
 61,373
Total accruing36,092
 30,128
 28,931
 9,997
 36,424
 203,727
 345,299
33,377
 17,704
 19,347
 8,143
 18,801
 148,178
 245,550
Nonaccruing                          
Commercial:                          
Commercial and industrial2,028
 6,989
 —
 473
 8,948
 10,395
 28,833
442
 576
 —
 611
 5,199
 20,410
 27,238
Owner occupied3,020
 1,489
 1,043
 1,593
 10,482
 14,927
 32,554
2,714
 1,219
 —
 883
 2,852
 12,040
 19,708
Municipal—
 1,056
 —
 —
 —
 —
 1,056
Total commercial5,048
 8,478
 1,043
 2,066
 19,430
 25,322
 61,387
3,156
 2,851
 —
 1,494
 8,051
 32,450
 48,002
Commercial real estate:                          
Construction and land development11,699
 1,555
 —
 —
 5,303
 8,617
 27,174
11,080
 68
 —
 93
 3,300
 6,427
 20,968
Term2,126
 —
 —
 1,943
 315
 14,861
 19,245
2,851
 —
 —
 —
 277
 4,607
 7,735
Total commercial real estate13,825
 1,555
 —
 1,943
 5,618
 23,478
 46,419
13,931
 68
 —
 93
 3,577
 11,034
 28,703
Consumer:                          
Home equity credit line—
 —
 1,036
 —
 221
 —
 1,257
—
 —
 420
 203
 —
 399
 1,022
1-4 family residential4,315
 1,396
 1,606
 —
 3,901
 14,109
 25,327
3,378
 1,029
 1,951
 191
 3,527
 9,413
 19,489
Construction and other consumer real estate4
 1,260
 —
 —
 —
 229
 1,493
—
 463
 —
 —
 —
 100
 563
Bankcard and other revolving plans—
 252
 —
 —
 —
 —
 252
Total consumer loans4,319
 2,908
 2,642
 —
 4,122
 14,338
 28,329
3,378
 1,492
 2,371
 394
 3,527
 9,912
 21,074
Total nonaccruing23,192
 12,941
 3,685
 4,009
 29,170
 63,138
 136,135
20,465
 4,411
 2,371
 1,981
 15,155
 53,396
 97,779
Total$59,284
 $43,069
 $32,616
 $14,006
 $65,594
 $266,865
 $481,434
$53,842
 $22,115
 $21,718
 $10,124
 $33,956
 $201,574
 $343,329
1 Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 Includes TDRs that resulted from a combination of any of the previous modification types.
1
Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2
Includes TDRs that resulted from a combination of any of the previous modification types.
Unused commitments to extend credit on TDRs amounted to approximately $7.5 million at December 31, 2015 and $6.1 million at December 31, 2014 and $5.6 million at December 31, 2013.
The total recorded investment of all TDRs in which interest rates were modified below market was $219.3$188.0 million and $245.9$219.3 million at December 31, 20142015 and 20132014, respectively. These loans are included in the previous schedule in the columns for interest rate below market and multiple modification types.

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The net financial impact on interest income due to interest rate modifications below market for accruing TDRs is summarized in the following schedule:
(In thousands) 2014 2013 2015 2014
Commercial:        
Commercial and industrial $(84) $—
 $(261) $(84)
Owner occupied (519) (390) (279) (519)
Total commercial (603) (390) (540) (603)
Commercial real estate:        
Construction and land development (197) (112) (90) (197)
Term (573) (742) (378) (573)
Total commercial real estate (770) (854) (468) (770)
Consumer:        
Home equity credit line (5) (10) (2) (5)
1-4 family residential (1,130) (1,248) (1,037) (1,130)
Construction and other consumer real estate (32) (36) (27) (32)
Total consumer loans (1,167) (1,294) (1,066) (1,167)
Total decrease to interest income 1
 $(2,540) $(2,538) $(2,074) $(2,540)
1 
Calculated based on the difference between the modified rate and the premodified rate applied to the recorded investment.
On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.
As of December 31, 20142015, the recorded investment of accruing and nonaccruing TDRs that had a payment default during the year listed below (which(and are still in default at year-end) and are within 12 months or less of being modified as TDRs is as follows:
(In thousands) December 31, 2014 December 31, 2013 December 31, 2015 December 31, 2014
Accruing Nonaccruing Total Accruing Nonaccruing Total Accruing Nonaccruing Total Accruing Nonaccruing Total
Commercial:                        
Commercial and industrial $—
 $1,008
 $1,008
 $—
 $—
 $—
 $883
 $116
 $999
 $—
 $1,008
 $1,008
Owner occupied —
 378
 378
 —
 430
 430
 —
 1,684
 1,684
 —
 378
 378
Total commercial —
 1,386
 1,386
 —
 430
 430
 883
 1,800
 2,683
 —
 1,386
 1,386
Commercial real estate:                        
Construction and land development —
 —
 —
 —
 1,676
 1,676
 —
 —
 —
 —
 —
 —
Term —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Total commercial real estate —
 —
 —
 —
 1,676
 1,676
 —
 —
 —
 —
 —
 —
Consumer:                        
Home equity credit line —
 201
 201
 —
 342
 342
 —
 —
 —
 —
 201
 201
1-4 family residential 192
 310
 502
 —
 2,592
 2,592
 —
 722
 722
 192
 310
 502
Construction and other consumer real estate —
 55
 55
 —
 —
 —
 —
 —
 —
 —
 55
 55
Total consumer loans 192
 566
 758
 —
 2,934
 2,934
 —
 722
 722
 192
 566
 758
Total $192
 $1,952
 $2,144
 $—
 $5,040
 $5,040
 $883
 $2,522
 $3,405
 $192
 $1,952
 $2,144
Note: Total loans modified as TDRs during the 12 months previous to December 31, 20142015 and 20132014 were $84.7134.0 million and $155.884.7 million, respectively.

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As of December 31, 2015, the amount of foreclosed residential real estate property held by the Company was approximately $0.5 million, and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was approximately $12.5 million.

Concentrations of Credit Risk
Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risks (whether on- or off-balance sheet) may occur when individual borrowers, groups of borrowers, or counterparties have similar economic characteristics, including industries, geographies, collateral types, sponsors, etc., and are similarly affected by changes in economic or other conditions. Credit risk also includes the loss that would be recognized subsequent to the reporting date if counterparties failed to perform as contracted. See Note 7 for a discussion of counterparty risk associated with the Company’s derivative transactions.

We perform an ongoing analysis of our loan portfolio to evaluate whether there is any significant exposure to any concentrations of credit risk. Based on this analysis, we believe that the loan portfolio is generally well diversified; however, due to the nature of the Company’s geographical footprint, there are certain significant concentrations primarily in CRE and energy-relatedoil and gas-related lending. Further, we cannot guarantee that we have fully understood or mitigated all risk concentrations or correlated risks. We have adopted and adhere to concentration limits on various types of CRE lending, particularly construction and land development lending, leveraged lending, municipal lending, and energy-relatedoil and gas-related lending. All of these limits are continually monitored and revised as we judge appropriate. These concentration limits, particularly the various types of CRE and real estate development loan limits, are materially lower than they were just prior to the emergence of the recent economic downturn.

Purchased Loans
Background and Accounting
We purchase loans in the ordinary course of business and account for them and the related interest income based on their performing status at the time of acquisition. Purchased credit-impaired (“PCI”) loans have evidence of credit deterioration at the time of acquisition and it is probable that not all contractual payments will be collected. Interest income for PCI loans is accounted for on an expected cash flow basis. Certain other loans acquired by the Company that are not credit-impaired include loans with revolving privileges and are excluded from the PCI tabular disclosures following. Interest income for these loans is accounted for on a contractual cash flow basis. Certain acquired loans with similar characteristics such as risk exposure, type, size, etc., are grouped and accounted for in loan pools.
Outstanding Balances and Accretable Yield
The outstanding balances of all required payments and the related carrying amounts for PCI loans are as follows:
December 31,December 31,
(In thousands)
2014 20132015 2014
      
Commercial$104,942
 $150,191
$72,440
 $104,942
Commercial real estate118,217
 233,720
65,167
 118,217
Consumer17,910
 28,608
11,082
 17,910
Outstanding balance$241,069
 $412,519
$148,689
 $241,069
      
Carrying amount$179,299
 $311,797
$125,029
 $179,299
Less ALLL2,800
 6,478
945
 2,800
Carrying amount, net$176,499
 $305,319
$124,084
 $176,499

At the time of acquisition of PCI loans, we determine the loan’s contractually required payments in excess of all cash flows expected to be collected as an amount that should not be accreted (nonaccretable difference). With

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respect to the cash flows expected to be collected, the portion representing the excess of the loan’s expected cash flows over our initial investment (accretable yield) is accreted into interest income on a level yield basis over the remaining expected life of the loan or pool of loans. The effects of estimated prepayments are considered in estimating the expected cash flows.

127


Certain PCI loans are not accounted for as previously described because the estimation of cash flows to be collected involves a high degree of uncertainty. Under these circumstances, the accounting guidance provides that interest income is recognized on a cash basis similar to the cost recovery methodology for nonaccrual loans. The net carrying amounts in the preceding schedule also include the amounts for these loans. There were no amounts of these loans which wereat December 31, 2015 and $5.3 million at December 31, 2014 and not significant at December 31, 2013.

Changes in the accretable yield for PCI loans were as follows: 
(In thousands)2014 20132015 2014
      
Balance at beginning of year$77,528
 $134,461
$45,055
 $77,528
Accretion(58,140) (111,951)(40,077) (58,140)
Reclassification from nonaccretable difference17,647
 36,467
22,190
 17,647
Disposals and other8,020
 18,551
12,635
 8,020
Balance at end of year$45,055
 $77,528
$39,803
 $45,055
The primary drivers of reclassification to accretable yield from nonaccretable difference and increases in disposals and other were (1) changes in estimated cash flows, (2) unexpected payments on nonaccrual loans, and (3) recoveries on zero balance loans pools. See subsequent discussion under changes in cash flow estimates.
ALLL Determination
For all acquired loans, the ALLL is only established for credit deterioration subsequent to the date of acquisition and represents our estimate of the inherent losses in excess of the book value of acquired loans. The ALLL for acquired loans is included in the overall ALLL in the balance sheet.
During 2015, 2014 2013 and 2012,2013, we adjusted the ALLL for acquired loans by recording a negative provision for loan losses of $0.3 million in 2015, and a negative provision of $(1.7) million in 2014, and $(10.1) million in 2013, and $(16.5) million in 2012.2013. The provision is net of the ALLL reversals resulting from changes in cash flow estimates, which are discussed subsequently.
Changes in the provision for loan losses and related ALLL are driven in large part by the same factors that affect the changes in reclassification from nonaccretable difference to accretable yield, as discussed under changes in cash flow estimates.
Changes in Cash Flow Estimates
Over the life of the loan or loan pool, we continue to estimate cash flows expected to be collected. We evaluate quarterly at the balance sheet date whether the estimated present values of these loans using the effective interest rates have decreased below their carrying values. If so, we record a provision for loan losses.

For increases in carrying values that resulted from better-than-expectedbetter than expected cash flows, we use such increases first to reverse any existing ALLL. During 2015, 2014, 2013, and 2012,2013, total reversals to the ALLL, including the impact of increases in estimated cash flows, were $3.7 million in 2015 and $4.6 million in 2014 and $15.1 million in 2013, and $20.4$15.1 million in 2012.2013. When there is no current ALLL, we increase the amount of accretable yield on a prospective basis over the remaining life of the loan and recognize this increase in interest income. Changes that increase cash flows have been due primarily to (1) the enhanced economic status of borrowers compared to original evaluations, (2) improvements in the Southern California market where the majority of these loans were originated, and (3) efforts by our credit officers and loan workout professionals to resolve problem loans.
The impact of increased cash flow estimates recognized in the statement of income for acquired loans with no ALLL was approximately $31.6 million in 2015, $46.7 million in 2014, and $90.9 million in 2013,, and $58.5 million in 2012, of additional interest income.

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7.DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives
Our objectives in using derivatives are to add stability to interest income or expense, to modify the duration of specific assets or liabilities as we consider advisable, to manage exposure to interest rate movements or other identified risks, and/or to directly offset derivatives sold to our customers. We apply hedge accounting to certain derivatives executed for risk management purposes as described in more detail subsequently. However, we do not apply hedge accounting to all of the derivatives involved in our risk management activities. Derivatives not designated as accounting hedges are not speculative and are used to economically manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements.

Accounting
We record all derivatives on the balance sheet at fair value. Note 20 discusses the process to estimate fair value for derivatives. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives used to manage the exposure to risk, which can include total return swaps, are considered credit derivatives. When put in place after purchase of the asset(s) to be protected, these derivatives generally may not be designated as accounting hedges. See discussion following regarding the total return swap and estimation of its fair value.

For derivatives designated as fair value hedges, changes in the fair value of the derivative are recognized in earnings together with changes in the fair value of the related hedged item. The net amount, if any, representing hedge ineffectiveness, is reflected in earnings. In previous years, we used fair value hedges to manage interest rate exposure to certain long-term debt. These hedges have been terminated and their remaining balances are beingwere completely amortized into earnings as discussed subsequently.

during 2015.
For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative are recorded in OCI and recognized in earnings when the hedged transaction affects earnings. The ineffective portion of changes in the fair value of cash flow hedges is recognized directly in earnings. We use interest rate swaps as part of our cash flow hedging strategy to hedge the variable cash flows associated with designated commercial loans. These interest rate swap agreements designated as cash flow hedges involve the receipt of fixed-rate amounts in exchange for variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

No derivatives have been designated for hedges of investments in foreign operations.

We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows on the derivative hedging instrument with the changes in fair value or cash flows on the designated hedged item or transaction. For derivatives not designated as accounting hedges, changes in fair value are recognized in earnings.

Our objectivesThe remaining balances of any derivative instruments terminated prior to maturity, including amounts in using derivativesaccumulated other comprehensive income (“AOCI”) for swap hedges, are to add stabilityaccreted or amortized to interest income or expense over the period to modify the duration of specific assets or liabilities as we consider advisable, to manage exposuretheir previously stated maturity dates.
Amounts in AOCI are reclassified to interest rate movementsincome as interest is earned on variable-rate loans and as amounts for terminated hedges are accreted or other identified risks, and/oramortized to directly offset derivatives sold to our customers. To accomplish these objectives,earnings. For the 12 months following December 31, 2015, we use interest rate swaps as part of our cash flow hedging strategy. These derivatives are used to hedge the variable cash flows associated with designated commercial loans.estimate that an additional $6.0 million will be reclassified.

Collateral and Credit Risk
Exposure to credit risk arises from the possibility of nonperformance by counterparties. TheseFinancial institutions which are well capitalized and well established are the counterparties primarily consistfor those derivatives entered into for asset liability management and to offset derivatives sold to our customers. The Company reduces its counterparty exposure for derivative contracts by centrally clearing all eligible derivatives.

121

For those derivatives that are not centrally cleared, the counterparties are typically financial institutions or customers of the Company. For those that are well establishedfinancial institutions, we manage our credit exposure through the use of a Credit Support Annex (“CSA”) to International Swaps and well capitalized. Derivative Association (“ISDA”) master agreements. Eligible collateral types are documented by the CSA and controlled under the Company’s general credit policies. They are typically monitored on a daily basis. A valuation haircut policy reflects the fact that collateral may fall in value between the date the collateral is called and the date of liquidation or enforcement. In practice, all of the Company’s collateral held as credit risk mitigation under a CSA is cash.
We control thisoffer interest rate swaps to our customers to assist them in managing their exposure to changing interest rates. Upon issuance, all of these customer swaps are immediately offset through matching derivative contracts, such that the Company minimizes its interest rate risk exposure resulting from such transactions. Most of these customers do not have the capability for centralized clearing. Therefore we manage the credit risk through loan underwriting which includes a credit risk exposure formula for the swap, the same collateral and guarantee protection applicable to the loan and credit approvals, limits, pledges of collateral, and monitoring procedures. Fee income from customer swaps is included in other service charges, commissions and fees. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. Nevertheless, the related credit risk is considered and measured when and where appropriate. See Note 6 and 17 for further discussion of our underwriting, collateral requirements, and other procedures used to address credit risk.

Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position by greater than specified amounts.at a given balance sheet date. Certain of these derivative contracts contain credit-risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit-risk-related feature were triggered, such as a downgrade of our credit rating. However, in past situations, not all counterparties have demanded that additional collateral be pledged when provided for under their contracts. At December 31, 2014,2015, the fair value of our derivative liabilities was $66.1$72.6 million,, for which we were required to pledge cash collateral of approximately $51.0$56.6 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s or Moody’s at December 31, 2014,2015, the additional amount of collateral we could be required to pledge is $1.6 million. Since June 2013, as required byapproximately $1.6 million. As a result of the Dodd-Frank Act, all newnewly eligible derivatives entered into are cleared through a central clearinghouse. Derivatives that are centrally cleared do not have credit-risk-related features that require additional collateral if our credit rating iswere downgraded.

129


Interest rate swap agreements designated as cash flow hedges involve the receipt of fixed-rate amounts in exchange for variable-rate payments over the life of the agreements without exchange of the underlying principal amount. Derivatives not designated as accounting hedges, including basis swap agreements, are not speculative and are used to economically manage our exposure to interest rate movements and other identified risks, but do not meet the strict hedge accounting requirements.

Derivative Amounts
Selected information with respect to notional amounts and recorded gross fair values at December 31, 20142015 and 2013,2014, and the related gain (loss) of derivative instruments for the years then ended is summarized as follows:
December 31, 2014 December 31, 2013December 31, 2015 December 31, 2014
Notional
amount
 Fair value 
Notional
amount
 Fair value
Notional
amount
 Fair value 
Notional
amount
 Fair value
(In thousands)
Other
assets
 
Other
liabilities
 
Other
assets
 
Other
liabilities
Other
assets
 
Other
liabilities
 
Other
assets
 
Other
liabilities
Derivatives designated as hedging instruments                      
Cash flow hedges 1:
           
Cash flow hedges: 1
           
Interest rate swaps$275,000
 $1,508
 $123
 $100,000
 $202
 $583
$1,387,500
 $5,461
 $956
 $275,000
 $1,508
 $123
Total derivatives designated as hedging instruments275,000
 1,508
 123
 100,000
 202
 583
1,387,500
 5,461
 956
 275,000
 1,508
 123
Derivatives not designated as hedging instruments                      
Interest rate swaps—
 —
 —
 65,850
 420
 421
40,314
 —
 8
 —
 —
 —
Interest rate swaps for customers 2
2,770,052
 48,287
 50,669
 2,902,776
 55,447
 54,688
3,256,190
 51,353
 53,843
 2,770,052
 48,287
 50,669
Foreign exchange443,721
 16,625
 15,272
 751,066
 9,614
 8,643
463,064
 20,824
 17,761
 443,721
 16,625
 15,272
Total return swap—
 —
 —
 1,159,686
 —
 4,062
Total derivatives not designated as hedging instruments3,213,773
 64,912
 65,941
 4,879,378
 65,481
 67,814
3,759,568
 72,177
 71,612
 3,213,773
 64,912
 65,941
Total derivatives$3,488,773
 $66,420
 $66,064
 $4,979,378
 $65,683
 $68,397
$5,147,068
 $77,638
 $72,568
 $3,488,773
 $66,420
 $66,064

130122


Year Ended December 31, 2014 Year Ended December 31, 2013Year Ended December 31, 2015 Year Ended December 31, 2014
Amount of derivative gain (loss) recognized/reclassifiedAmount of derivative gain (loss) recognized/reclassified
(In thousands)

OCI 
Reclassified
from AOCI
to interest
income
 
Noninterest
income
(expense)
 
Offset to
interest
expense
 OCI 
Reclassified
from AOCI
to interest
income
 
Noninterest
income
(expense)
 
Offset to
interest
expense
OCI 
Reclassified
from AOCI
to interest
income
 
Noninterest
income
(expense)
 
Offset to
interest
expense
 OCI 
Reclassified
from AOCI
to interest
income
 
Noninterest
income
(expense)
 
Offset to
interest
expense
Derivatives designated as hedging instruments                              
Asset derivatives               
Cash flow hedges 1:
               
Cash flow hedges: 1
               
Interest rate swaps$4,361
 $2,594
     $(225) $2,647
    $12,124
 $9,004
     $4,361
 $2,594
    
4,361
 2,594
3 


   (225) 2,647
3 


  12,124
 9,004
3 


   4,361
 2,594
3 


  
Liability derivatives               
Fair value hedges:                              
Terminated swaps on long-term debt      $(2,309)       $3,120
      $1,504
       $2,309
Total derivatives designated as hedging instruments4,361
 2,594
 

 (2,309) (225) 2,647
 

 3,120
12,124
 9,004
 

 1,504
 4,361
 2,594
 

 2,309
Derivatives not designated as hedging instruments                              
Interest rate swaps    $355
       $(493)      $—
       $355
  
Interest rate swaps for customers 2
    467
       10,918
      7,438
       467
  
Futures contracts    —
       2
      2
       —
  
Foreign exchange    8,344
       9,190
      9,519
       8,344
  
Total return swap    (7,894)       (21,753)      —
       (7,894)  
Total derivatives not designated as hedging instruments    1,272
       (2,136)      16,959
       1,272
  
Total derivatives$4,361
 $2,594
 $1,272
 $(2,309) $(225) $2,647
 $(2,136) $3,120
$12,124
 $9,004
 $16,959
 $1,504
 $4,361
 $2,594
 $1,272
 $2,309
Note: These schedules are not intended to present at any given time the Company’s long/short position with respect to its derivative contracts.
1 Amounts recognized in OCI and reclassified from AOCI represent the effective portion of the derivative gain (loss).
2 Amounts include both the customer swaps and the offsetting derivative contracts.
3 Amounts of $2.6 million for both 2014 and 2013 are the amounts of reclassification to earnings presented in the tabular changes of AOCI in Note 13.
1
Amounts recognized in OCI and reclassified from AOCI represent the effective portion of the derivative gain (loss).
2
Amounts include both the customer swaps and the offsetting derivative contracts.
3
Amounts of $9.0 million for 2015 and $2.6 million for 2014 are the amounts of reclassification to earnings presented in the tabular changes of AOCI in Note 13.
The fair valuesvalue of derivative assets werewas reduced by a net credit valuation adjustmentsadjustment of $2.4$2.4 million and $1.6 millionat both December 31,2014 2015 and 2013, respectively. No increase was made to2014. The adjustment for derivative liabilities at December 31,2014 and $1.6 millionwas madenot significant at December 31, 2013.2015 and 2014. These adjustments are required to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.
Under master netting arrangements, we offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against recognized fair value amounts of derivatives executed with the same counterparty. At both December 31, 2014 and 2013, no cash collateral was used for such offsets.
We offer interest rate swaps to our customers to assist them in managing their exposure to changing interest rates. Upon issuance, all of these customer swaps are immediately “hedged” by offsetting derivative contracts, such that the Company minimizes its net risk exposure resulting from such transactions. Fee income from customer swaps is included in other service charges, commissions and fees. As with other derivative instruments, we have credit risk for any nonperformance by counterparties. See Notes 6 and 17 for further discussion of our underwriting, collateral requirements, etc., that we use to address credit risk.
The remaining balances of any derivative instruments terminated prior to maturity, including amounts in accumulated other comprehensive income (“AOCI”) for swap hedges, are accreted or amortized to interest income or expense over the period to their previously stated maturity dates.

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Amounts in AOCI are reclassified to interest income as interest is earned on variable rate loans and as amounts for terminated hedges are accreted or amortized to earnings. For the 12 months following December 31, 2014, we estimate that an additional $3.2 million will be reclassified.

Total Return Swap
Effective April 28, 2014, we canceled the total return swap (“TRS”) and related interest rate swaps relating to a portfolio of $1.16 billion notional amount of our bank and insurance trust preferred CDOs. Prior to cancellation of the TRS, the actual portfolio par balance had been reduced to $545 million due to sales, paydowns and payoffs. Following the cancellation, the TRS derivative liability was extinguished and the Company’s regulatory risk weighted assets increased by approximately $0.9 billion.

8.PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:
(In thousands)December 31,December 31,
2014 20132015 2014
      
Land$233,300
 $185,119
$229,693
 $233,300
Buildings551,603
 509,151
598,643
 551,603
Furniture and equipment458,703
 455,625
459,975
 458,703
Leasehold improvements133,624
 129,056
138,765
 133,624
Software239,670
 208,931
295,428
 239,670
Total1,616,900
 1,487,882
1,722,504
 1,616,900
Less accumulated depreciation and amortization787,091
 761,510
817,042
 787,091
Net book value$829,809
 $726,372
$905,462
 $829,809
9.GOODWILL AND OTHER INTANGIBLE ASSETS
Core deposit and other intangible assets and related accumulated amortization are as follows at December 31:31:
 Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount
(In thousands) 2014 2013 2014 2013 2014 2013 2015 2014 2015 2014 2015 2014
                        
Core deposit intangibles $170,688
 $180,290
 $(146,842) $(146,557) $23,846
 $33,733
 $166,518
 $170,688
 $(151,157) $(146,842) $15,361
 $23,846
Customer relationships and other intangibles 28,014
 29,064
 (26,340) (26,353) 1,674
 2,711
 28,014
 28,014
 (27,103) (26,340) 911
 1,674
Total $198,702
 $209,354
 $(173,182) $(172,910) $25,520
 $36,444
 $194,532
 $198,702
 $(178,260) $(173,182) $16,272
 $25,520
The amount of amortization expense of core deposit and other intangible assets is separately reflected in the statement of income.

Estimated amortization expense for core deposit and other intangible assets is as follows for the five years succeeding December 31, 2014:2015:
(In thousands)    
    
2015 $9,247
2016 7,888
 $7,888
2017 6,370
 6,369
2018 1,556
 1,556
2019 459
 459
2020 —

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Changes in the carrying amount of goodwill for operating segments with goodwill are as follows:
(In thousands) Zions Bank CB&T Amegy Consolidated Company Zions Bank CB&T Amegy Consolidated Company
                
Balance at December 31, 2012 $19,514
 $379,024
 $615,591
 $1,014,129
Impairment losses —
 —
 —
 —
Balance at December 31, 2013 19,514
 379,024
 615,591
 1,014,129
 $19,514
 $379,024
 $615,591
 $1,014,129
Impairment losses —
 —
 —
 —
 —
 —
 —
 —
Balance at December 31, 2014 $19,514
 $379,024
 $615,591
 $1,014,129
 19,514
 379,024
 615,591
 1,014,129
Impairment losses —
 —
 —
 —
Balance at December 31, 2015 $19,514
 $379,024
 $615,591
 $1,014,129

A Company-wide annual impairment test is conducted as of October 1 of each year and updated on a more frequent basis when events or circumstances indicate that impairment could have taken place. Results of the testing for 20142015 and 20132014 concluded that no impairment was present in any of the operating segments.

123


10.DEPOSITS
At December 31, 20142015, the scheduled maturities of all time deposits were as follows:
(In thousands)    
    
2015 $1,933,406
2016 266,023
 $1,667,431
2017 126,377
 248,709
2018 115,281
 128,548
2019 100,763
 86,471
2020 110,674
Thereafter 662
 973
Total $2,542,512
 $2,242,806

124

At December 31, 20142015, the contractual maturities of domestic time deposits with a denomination of $100,000 and over were as follows: $368$334 million in 3 months or less, $277$219 million over 3 months through 6 months, $340$278 million over 6 months through 12 months, and $301$300 million over 12 months.
Domestic time deposits in denominations that meet or exceed the current FDIC insurance limit of $250,000 were $0.7 billion$584 million and $0.6 billion$657 million at December 31, 20142015 and 2013,2014, respectively. Domestic time deposits under $250,000 were $1.7$1.5 billion and $2.0$1.7 billion at December 31, 20142015 and 2013,2014, respectively. Foreign time deposits $250,000 and over were $135$112 million and $252$135 million at December 31, 20142015 and 2013,2014, respectively.
Deposit overdrafts reclassified as loan balances were $15$14 million and $39$15 million at December 31, 20142015 and 2013,2014, respectively.


133

11.SHORT-TERM BORROWINGS
Selected information for federal funds and other short-term borrowings is as follows:
(Amounts in thousands) 2014 2013 2012 2015 2014 2013
Federal funds purchased            
Average amount outstanding $104,358
 $150,217
 $280,859
 $105,910
 $104,358
 $150,217
Weighted average rate 0.17% 0.15% 0.19% 0.18% 0.17% 0.15%
Highest month-end balance 124,093
 206,450
 560,674
 122,461
 124,093
 206,450
Year-end balance 100,193
 129,131
 175,468
 111,263
 100,193
 129,131
Weighted average rate on outstandings at year-end 0.15% 0.14% 0.13% 0.25% 0.15% 0.14%
            
Security repurchase agreements            
Average amount outstanding 116,190
 124,929
 190,365
 127,358
 116,190
 124,929
Weighted average rate 0.06% 0.05% 0.04% 0.11% 0.06% 0.05%
Highest month-end balance 156,710
 137,611
 264,187
 205,566
 156,710
 137,611
Year-end balance 118,600
 137,611
 145,010
 205,566
 118,600
 137,611
Weighted average rate on outstandings at year-end 0.13% 0.05% 0.04% 0.15% 0.13% 0.05%
            
Other short-term borrowings, year-end balances
            
Securities sold, not yet purchased 24,230
 73,606
 26,735
 30,158
 24,230
 73,606
Other 1,200
 —
 5,409
 —
 1,200
 —
Total federal funds and other short-term borrowings $244,223
 $340,348
 $352,622
 $346,987
 $244,223
 $340,348

Federal funds purchased and security repurchase agreements generally mature in less than 30 days. Our participation in security repurchase agreements is on an overnight or term basis (e.g., 30 or 60 days). Certain of ourOur subsidiary banks executebank executes overnight repurchase agreements with sweep accounts in conjunction with a master repurchase agreement. When this occurs, securities under their control are pledged and interest is paid on the collected balance of the customers’ accounts. For term repurchase agreements, securities are transferred to the applicable counterparty. The counterparty, in certain instances, is contractually entitled to sell or repledge securities accepted as collateral. Of the total security repurchase agreements at December 31, 20142015, $68$63 million were overnight and $51$143 million were term.

OurPrior to the consolidation of our subsidiary bank charters on December 31, 2015, the subsidiary banks maycould borrow from the FHLB under their lines of credit that are secured under blanket pledge arrangements. The subsidiary banks maintainmaintained unencumbered collateral with carrying amounts adjusted for the types of collateral pledged, equal to at least 100% of the outstanding advances. At December 31, 20142015, the amount available for FHLB advances was approximately $11.69.1 billion. Note 12 presents the balance of FHLB advances made to the Company against this pledged collateral. At December 31, 2014, and no short-term FHLB advances were outstanding.


125

OurAdditionally, prior to the consolidation of our subsidiary bank charters on December 31, 2015, the subsidiary banks could also borrow from the Federal Reserve based on the amount of collateral pledged to a Federal Reserve Bank. At December 31, 20142015, the amount available for additional Federal Reserve borrowings was approximately $5.04.3 billion.

134

12.LONG-TERM DEBT
Long-term debt is summarized as follows:
 December 31, December 31,
(In thousands) 2014 2013 2015 2014
        
Junior subordinated debentures related to trust preferred securities $168,043
 $168,043
 $164,950
 $168,043
Convertible subordinated notes 132,838
 184,147
 —
 132,838
Subordinated notes 335,798
 443,231
 249,891
 335,798
Senior notes 432,385
 1,454,779
 401,595
 432,385
FHLB advances 22,156
 22,736
 —
 22,156
Capital lease obligations and other 1,062
 639
Capital lease obligations 912
 1,062
Total $1,092,282
 $2,273,575
 $817,348
 $1,092,282

The preceding amounts represent the par value of the debt adjusted for any unamortized premium or discount or other basis adjustments, including the value of associated hedges.hedges for 2014.

Trust Preferred Securities
Junior subordinated debentures related to trust preferred securities issued to the following trusts were outstanding at December 31, 20142015 as follows:
(Amounts in thousands) Balance 
Coupon rate 1
 Maturity Balance 
Coupon rate 1
 Maturity
      
Amegy Statutory Trust I $51,547
 3mL+2.85% (3.09%) Dec 2033 $51,547
 3mL+2.85% (3.38%) Dec 2033
Amegy Statutory Trust II 36,083
 3mL+1.90% (2.13%) Oct 2034 36,083
 3mL+1.90% (2.22%) Oct 2034
Amegy Statutory Trust III 61,856
 3mL+1.78% (2.02%) Dec 2034 61,856
 3mL+1.78% (2.29%) Dec 2034
Stockmen’s Statutory Trust II 7,732
 3mL+3.15% (3.40%) Mar 2033 7,732
 3mL+3.15% (3.75%) Mar 2033
Stockmen’s Statutory Trust III 7,732
 3mL+2.89% (3.13%) Mar 2034 7,732
 3mL+2.89% (3.42%) Mar 2034
Intercontinental Statutory Trust I 3,093
 3mL+2.85% (3.09%) Mar 2034
Total $168,043
  $164,950
 
1 
Designation of “3mL” is three-month LIBOR; effective interest rate at the beginning of the accrual period commencing on or before December 31, 20142015 is shown in parenthesis.

The junior subordinated debentures are issued or have beenfor the Amegy and Stockmen’s Trusts were assumed by the Parent or Amegy.through previous acquisitions and mergers, and are direct and unsecured obligations of the Parent. They are subordinate to other indebtedness and general creditors.

The Parent has assumed the unconditional guarantees of the obligations of the Amegy and Stockmen’s trusts with respect to their respective series of trust preferred securities to the extent set forth in the applicable guarantee agreements. Each trust has issued a corresponding series of trust preferred security obligations. The trust obligations are in the form of capital securities subject to mandatory redemption upon repayment of the junior subordinated debentures by the Parent or Amegy, as the case may be.Parent. The sole assets of the trusts are the junior subordinated debentures.

Interest distributions are made quarterly at the same rates earned by the trusts on the junior subordinated debentures; however, we may defer the payment of interest on the junior subordinated debentures. Early redemption is currently possible on all of the debentures and requires the approval of banking regulators.

The debentures for the Amegy and Intercontinental trusts are direct and unsecured obligations of Amegy and are subordinate to other indebtedness and general creditors. The debentures for the Stockmen’s trusts are unsecured obligations of Stockmen’s assumed by the Parent in connection with the acquisition of Stockmen’s by NBAZ. Amegy has unconditionally guaranteed the obligations of the Amegy and Intercontinental trusts with respect to their respective series of trust preferred securities to the extent set forth in the applicable guarantee agreements. The Parent has assumed Stockmen’s unconditional guarantees of the obligations of the Stockmen’s trusts with respect to their respective series of trust preferred securities to the extent set forth in the applicable guarantee agreements.


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Subordinated Notes
Subordinated notes consist of the following at December 31, 20142015:
(Amounts in thousands) 
Convertible
subordinated notes
 Subordinated notes  Subordinated notes 
Coupon rate Balance Par amount Balance Par amount Maturity Balance Par amount Maturity
                
6.00% $70,432
 $79,291
 $32,894
 $32,366
 Sep 2015
5.50% 62,406
 71,592
 53,013
 52,078
 Nov 2015
5.65%     162,000
 162,000
 Nov 2023 $162,000
 $162,000
 Nov 2023
6.95%     87,891
 87,891
 Sep 2028 87,891
 87,891
 Sep 2028
Total $132,838
 $150,883
 $335,798
 $334,335
  $249,891
 $249,891
 
These notes are unsecured, and are not redeemable prior to maturity, except those noted subsequently. Also, see Debt Redemptions and Repurchases following. Interestinterest is payable semiannuallyquarterly on all these notes except for the 6.95% notes whose quarterlyand semiannually on the 5.65% notes. For the 6.95% notes, interest payments commenced December 15, 2013 to the earliest possible redemption date of September 15, 2023, after which the interest rate changes to an annual floating rate equal to 3mL+3.89%. Interest payments on the 5.65% notes commenced May 15, 2014 to the earliest possible redemption date of November 15, 2018, after which they are payable quarterly at an annual floating rate equal to 3mL+4.19%.

Convertible Subordinated Notes
The convertible subordinated notes resulted from the modification in 2009 of $1.2 billion par value of subordinated notes. The convertible subordinated notes permit conversion on a par-for-par basis into either the Company’s Series A or Series C preferred stock. The carrying value of the subordinated notes at the time of modification included associated terminated fair value hedges. Holders of the convertible subordinated notes are allowed to convert on the interest payment dates of the debt. As discussed in Note 13, we recorded the intrinsic value of the beneficial conversion feature directly in common stock in connection with the modification of the subordinated notes. Note 13 also discusses the redemption in September 2013 of all of the $800 million par amount of Series C preferred stock. Subordinated notes converted to preferred stock prior to this redemption amounted to $1.2 million in 2013 and $89.6 million in 2012. Immaterial amounts were converted into Series A preferred stock in 2014.
The convertible debt discount recorded in connection with the subordinated debt modification is amortized to interest expense using the interest method over the remaining terms of the convertible subordinated notes. When holders of the convertible subordinated notes exercise their rights to convert to preferred stock, the rate of amortization is accelerated by immediately expensing any unamortized discount associated with the converted debt. Amortization of the convertible debt discount is summarized as follows:
(In thousands) 2014 2013 2012
       
Balance at beginning of year $42,444
 $149,333
 $224,206
Discount amortization on convertible subordinated debt (24,397) (48,378) (43,341)
Accelerated discount amortization on convertible subordinated debt (1) (368) (31,532)
Accelerated discount amortization resulting from tender offer for debt repurchases (subsequently discussed) —
 (58,143) —
Total amortization (24,398) (106,889) (74,873)
Balance at end of year $18,046
 $42,444
 $149,333

In addition, interest expense on convertible subordinated notes was $10.3 million in 2014, $25.3 million in 2013, and $28.2 million in 2012.

As discussed in Note 7, we terminated all fair value hedges that had been used for the subordinated notes. The remaining value of $1.5 million and $3.8 million at December 31, 2014 and 2013, respectively, is amortized as a reduction of interest expense over the periods to the previously stated maturity dates of the notes.

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Senior Notes
Senior notes consist of the following at December 31, 20142015:
(Amounts in thousands)    
Coupon rate Balance Par amount Maturity
       
4.0% $88,697
 $89,360
 June 2016
4.5% 160,503
 163,857
 March 2017
4.5% 144,876
 145,231
 June 2023
3.30% - 3.70% 38,309
 38,389
 Feb - Jul 2018
Total $432,385
 $436,837
  
(Amounts in thousands) Senior notes  
Coupon rate Balance Par amount Maturity
       
4.00% $88,210
 $89,360
 Jun 2016
4.50% 160,950
 163,857
 Mar 2017
4.50% 141,328
 145,231
 Jun 2023
3.60% 11,107
 11,108
 July 2018
Total $401,595
 $409,556
  

These notes are unsecured and interest is payable semiannually. The notes were issued under a shelf registration filed with the SEC and were sold via the Company’s online auction process and direct sales. The notes are not redeemable prior to maturity except for the $38.3$11.1 million notes that have an optional early redemptions as follows: $27.2 millionredemption in 2015 (on February 17, 2015, $8.0 million of this amount was redeemed) and $11.1 million inJune 2016.

Debt Redemptions and Repurchases
We redeemed or repurchased the following amounts of long-term debt during 20142015 and 2013:2014:
(Amounts in thousands) 2014 2013
Note type Coupon rate Par amount Coupon rate Par amount
         
Senior notes 7.75% $240,769
 7.75% $257,615
  4.0%, 4.5% 499,980
    
  3.5% 50,000
    
  2.55% - 5.50% 247,512
    
    1,038,261
    
         
Subordinated notes 5.65% 30,173
 5.5%, 6.0% 231,047
  3mL+1.25% 75,000
    
    105,173
    
         
Convertible subordinated notes 5.65% 75,674
 5.5%, 6.0% 19,937
Trust preferred   —
 8.0% 285,000
         
Total   $1,219,108
   $793,599

Total debt extinguishment costs for certain of these redemptions were $44.4 million in 2014 and $120.2 million in 2013, which consisted of $34.0 million and $45.8 million of early tender premiums, and $10.4 million and $74.4 million in write-offs of unamortized debt discount and issuance costs and fees, in 2014 and 2013, respectively.

Federal Home Loan Bank Advances
The FHLB advances were issued to Amegy and have maturities primarily from October 2030 to September 2041 at interest rates from 3.27% to 5.66%. The weighted average interest rate on advances outstanding was 4.5% at both December 31, 2014 and 2013.

(Amounts in thousands) 2015 2014
Note type Coupon rate Par amount Coupon rate Par amount
         
Trust preferred 3mL + 2.85%
 $3,093
    
Convertible subordinated notes     5.65% $75,674
  6.00% 79,276
    
  5.50% 71,592
    
    150,868
   75,674
Subordinated notes     5.65% 30,173
      3mL+1.25%
 75,000
  6.00% 32,366
    
  5.50% 52,078
    
    84,444
   105,173
Senior notes     7.75% 240,769
      4.0%, 4.5%
 499,980
      3.50% 50,000
      2.55% - 5.50%
 247,512
  3.30% - 3.70% 27,281
    
    27,281
   1,038,261
FHLB Advances   22,009
    
Total   $287,695
   $1,219,108

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Debt Extinguishment Costs
Debt extinguishment costs are as follows for the years 2015, 2014 and 2013:
(In thousands) 2015 2014 2013
       
Early tender premiums $2,395
 $33,971
 $45,812
Write-offs of unamortized debt discount and issuance costs and fees 135
 10,451
 74,380
Total $2,530
 $44,422
 $120,192

Maturities of Long-term Debt
Maturities of long-term debt are as follows for the years succeeding December 31, 20142015:

(In thousands) Consolidated Parent only Consolidated Parent only
        
2015 $217,392
 $217,240
2016 88,869
 88,698
 $88,382
 $88,210
2017 160,700
 160,503
 161,147
 160,951
2018 38,534
 38,309
 11,332
 11,107
2019 259
 —
 259
 —
2020 60
 —
Thereafter 585,024
 410,231
 556,168
 556,168
Total $1,090,778
 $914,981
 $817,348
 $816,436

These maturities do not include the associated hedges. The $410.2$556.2 million of Parent only maturities payable after 20192020 consist of $15.5the $165.0 million of junior subordinated debentures payable to Stockmen’s Trust IItrust preferred securities and III and $394.7$391.2 million of senior notes.

13.SHAREHOLDERS’ EQUITY
Preferred Stock
Preferred stock is without par value and has a liquidation preference of $1,000 per share, or $25 per depositary share. Except for Series I and J, all preferred shares were issued in the form of depositary shares, with each depositary share representing a 1/40th ownership interest in a share of the preferred stock. All preferred shares are registered with the SEC.

In general, preferred shareholders may receive asset distributions before common shareholders; however, preferred shareholders have only limited voting rights generally with respect to certain provisions of the preferred stock, the issuance of senior preferred stock, and the election of directors. Preferred stock dividends reduce earnings available to common shareholders and are paid on the 15th day of the months indicated in the following schedule. Dividends are approved by the Board of Directors and are subject to regulatory non-objection to a stress test and capital plan submitted to the Federal Reserve pursuant to the annual Comprehensive Capital Analysis and Review (“CCAR”) process. Redemption of the preferred stock is at the Company’s option after the expiration of any applicable redemption restrictions. The redemption amount is computed at the per share liquidation preference plus any declared but unpaid dividends. Redemptions are subject to certain regulatory provisions, including the previously noted capital plan non-objection.

non-objection for a submitted capital plan in a given year.

138128

Preferred stock is summarized as follows:

Preferred stock is summarized as follows:

Preferred stock is summarized as follows:

(Amounts in
thousands)
 Carrying value at
December 31,		 Shares at
December 31, 2014		 Dividends payable 
Earliest
redemption date
 Rate following earliest redemption date Dividends payable after rate change
2014 2013 Authorized Outstanding Rate 
(Amounts in thousands except share amounts) Carrying value at
December 31,		 Shares at
December 31, 2015		 Dividends payable 
Earliest
redemption date
 Rate following earliest redemption date Dividends payable after rate change
2015 2014 Authorized Outstanding Rate 
             (when applicable)             (when applicable)
Series A $66,168
 $66,127
 140,000
 66,034
 > of 4.0% or 3mL+0.52% Qtrly Mar,Jun,Sep,Dec Dec 15, 2011 
 
 $66,316
 $66,168
 140,000
 66,139
 > of 4.0% or 3mL+0.52% Qtrly Mar,Jun,Sep,Dec Dec 15, 2011 
 
Series F 143,750
 143,750
 250,000
 143,750
 7.9% Qtrly Mar,Jun,Sep,Dec Jun 15, 2017 
 
 143,750
 143,750
 250,000
 143,750
 7.9% Qtrly Mar,Jun,Sep,Dec Jun 15, 2017 
 
Series G 171,827
 171,827
 200,000
 171,827
 6.3% Qtrly Mar,Jun,Sep,Dec Mar 15, 2023 annual float-ing rate = 3mL+4.24% 
 171,827
 171,827
 200,000
 171,827
 6.3% Qtrly Mar,Jun,Sep,Dec Mar 15, 2023 annual float-ing rate = 3mL+4.24% 
Series H 126,221
 126,221
 126,221
 126,221
 5.75% Qtrly Mar,Jun,Sep,Dec Jun 15, 2019 
 
 126,221
 126,221
 126,221
 126,221
 5.75% Qtrly Mar,Jun,Sep,Dec Jun 15, 2019 
 
Series I 300,893
 300,893
 300,893
 300,893
 5.8% Semi-annually Jun,Dec Jun 15, 2023 annual float-ing rate = 3mL+3.8% Qtrly Mar,Jun,Sep,Dec 125,224
 300,893
 300,893
 125,224
 5.8% Semi-annually Jun,Dec Jun 15, 2023 annual float-ing rate = 3mL+3.8% Qtrly Mar,Jun,Sep,Dec
Series J 195,152
 195,152
 195,152
 195,152
 7.2% Semi-annually Mar,Sep Sep 15, 2023 annual float-ing rate = 3mL+4.44% Qtrly Mar,Jun,Sep,Dec 195,152
 195,152
 195,152
 195,152
 7.2% Semi-annually Mar,Sep Sep 15, 2023 annual float-ing rate = 3mL+4.44% Qtrly Mar,Jun,Sep,Dec
Total $1,004,011
 $1,003,970
      $828,490
 $1,004,011
     

Series C Preferred Stock RedemptionRedemptions
OnEffective November 18, 2015, we redeemed approximately $175.7 million of Series I preferred stock through a cash tender offer. The offer amount of $180 million, or $24.65 per share, differed from the redemption amount by approximately $4.3 million of accrued dividends. The size and terms of the offer were determined in accordance with the Company’s 2015 capital plan.

In September 15, 2013, we redeemed all of the outstanding $800 million par amount (799,467 shares) of our 9.5% Series C preferred stock at 100%through the issuance of the $25 per depositary share redemption amount. As shown in the previous schedule, the summation of December 31, 2013 carrying values for Series G, H, I and J, plus the $5.9 million increase in carrying value for Series A during 2013 (reflecting the reopening of Series A preferred shares), equals the $800 million used to fund this redemption. The Federal Reserve did not object to the element of our capital plan to redeem the entire $800 million of our Series C preferred stock subject to issuing an aggregate equivalent amount of newother series of preferred shares.

stock. The redemption reduced preferred stock by thereduction of $926 million carrying value (at the time of redemption) of the Series Cin preferred stock. The differencestock differed from the par amount orby $126 million, related towhich was the intrinsic value of the beneficial conversion feature (“BCF”) associated with the convertible subordinated debt. The BCF represented the difference on the original commitment date of the fair values ofhad been accumulating as the convertible subordinated debt and the preferred stock into which the debt was convertible. The total BCF of $203 million was included in common stock when the subordinated debt was modified to convertible subordinated debt in June 2009. The Company has “no par” common stock and all additional paid-in capital transactions such as this are recorded in common stock.

Portions of the BCF have been transferred since July 2009 from common stock to preferred stock as holders of convertible subordinated debt exercised rights to convertconverted to the Series C preferred stock. Prior to the redemption, these BCF transfers amounted to $0.2 million in 2013 and $15.2 million in 2012. Amounts transferred became part of the carrying value of the preferred stock. The $126 million BCF transfer was recorded as a preferred stock redemption in the 2013 statement of income. At December 31, 2014,As shown in Note 12, the remaining balance in common stock of the BCF was approximately $76.4 million. Although the legal right to convert continues to exist, if no further conversions occur or the convertible subordinated debt matures, the current amount of the BCF will remain in common stock.matured during 2015.


139

Other Preferred Stock Redemptions
The Series D preferred stock was redeemed in two equal installments by September 26, 2012. The total of $1.4 billion had been issued by the U.S. Department of the Treasury under the Troubled Asset Relief Program (“TARP”). The associated warrants to purchase 5.8 million shares of common stock were auctioned by the U.S. Treasury in December 2012. The Company did not receive any proceeds from the warrant auction. The warrants have an exercise price of $36.27 per share and expire November 14, 2018. The TARP redemption accelerated the amortization to preferred stock dividends in 2012 of the entire remaining unamortized discount. Amortization amounted to $44.7 million in 2012.

The entire Series E preferred stock of $142.5 million was redeemed on its call date of June 15, 2012. Commissions and fees of $3.8 million previously recorded in common stock were charged to retained earnings. Proceeds from the Series F preferred stock were used to redeem the Series E preferred stock.

Common Stock
OnIn July 28, 2014, we issued $525 million of common stock, which consisted of approximately 17.6 million shares at a price of $29.80 per share. Net of commissions and fees, this issuance added approximately $516 million to common stock. Followingstock and was permitted under the Federal Reserve’s announcement on July 25, 2014 that it had not objected to ourCompany’s resubmitted 2014 capital plan, which included the issuance of $400 million of new common equity in the third quarter of 2014, the Company decided to increase the issuance amount to $525 million .plan.

Common Stock Warrants
We have 5.8 million common stock warrants at an exercise price of $36.27 per share which expire November 14, 2018. These warrants were associated with the preferred stock issued under the Troubled Asset Relief Program (“TARP”) which was redeemed in 2012. In addition, to the TARP warrants previously discussed, we have issued a total of 29.3 million common stock warrants thatwhich can each be exercised for a share of common stock at a price of $36.36$36.14 as of December 31, 20142015 through May 22, 2020.


129

Accumulated Other Comprehensive Income
Changes in AOCI by component are as follows:
(In thousands)

 Net unrealized gains (losses) on investment securities Net unrealized gains (losses) on derivatives and other Pension and post-retirement Total Net unrealized gains (losses) on investment securities Net unrealized gains (losses) on derivatives and other Pension and post-retirement Total
2014:        
2015        
Balance at December 31, 2014 $(91,921) $2,226
 $(38,346) $(128,041)
                
Other comprehensive income (loss) before reclassifications, net of tax (12,471) 4,903
 (3,161) (10,729)
Amounts reclassified from AOCI, net of tax 86,023
 (5,583) 3,718
 84,158
Other comprehensive income (loss) 73,552
 (680) 557
 73,429
Balance at December 31, 2015 $(18,369) $1,546
 $(37,789) $(54,612)
        
Income tax expense (benefit) included in other comprehensive income (loss) $48,422
 $(331) $374
 $48,465
        
2014        
Balance at December 31, 2013 $(168,805) $1,556
 $(24,852) $(192,101) $(168,805) $1,556
 $(24,852) $(192,101)
                
Other comprehensive income (loss) before reclassifications, net of tax 82,204
 2,275
 (15,284) 69,195
 82,204
 2,275
 (15,284) 69,195
Amounts reclassified from AOCI, net of tax (5,320) (1,605) 1,790
 (5,135) (5,320) (1,605) 1,790
 (5,135)
Other comprehensive income (loss) 76,884
 670
 (13,494) 64,060
 76,884
 670
 (13,494) 64,060
Balance at December 31, 2014 $(91,921) $2,226
 $(38,346) $(128,041) $(91,921) $2,226
 $(38,346) $(128,041)
                
Income tax expense (benefit) included in other comprehensive income (loss) $60,795
 $467
 $(8,764) $52,498
 $60,795
 $467
 $(8,764) $52,498
        
2013:        
        
Balance at December 31, 2012 $(403,893) $8,071
 $(50,335) $(446,157)
        
Other comprehensive income (loss) before reclassifications, net of tax 132,152
 (4,935) 20,577
 147,794
Amounts reclassified from AOCI, net of tax 102,936
 (1,580) 4,906
 106,262
Other comprehensive income (loss) 235,088
 (6,515) 25,483
 254,056
Balance at December 31, 2013 $(168,805) $1,556
 $(24,852) $(192,101)
        
Income tax expense (benefit) included in other comprehensive income (loss) $147,133
 $(3,651) $16,625
 $160,107

140

   
Statement of income (SI) Balance sheet
(BS)
    
Statement of Income (SI) Balance Sheet
(BS)
 
(In thousands) 
Amounts reclassified from AOCI 1
  
Amounts reclassified from AOCI 1
 
Details about AOCI components 2014 2013 2012 Affected line item 2015 2014 2013 Affected line item
              
Net realized gains (losses) on investment securities $10,419
 $(2,898) $19,544
 SI Fixed income securities gains (losses), net $(138,735) $10,419
 $(2,898) SI Fixed income securities gains (losses), net
Income tax expense (benefit) 3,971
 (1,123) 7,340
  (52,712) 3,971
 (1,123) 
 6,448
 (1,775) 12,204
  (86,023) 6,448
 (1,775) 
              
Net unrealized losses on investment
securities
 (27) (164,732) (103,720) SI Net impairment losses on investment securities —
 (27) (164,732) SI Net impairment losses on investment securities
Income tax benefit (10) (64,829) (40,156)  —
 (10) (64,829) 
 (17) (99,903) (63,564)  —
 (17) (99,903) 
              
Accretion of securities with noncredit-related impairment losses not expected to be sold (1,878) (2,106) (11,351) BS Investment securities, held-to-maturity —
 (1,878) (2,106) BS Investment securities, held-to-maturity
Deferred income taxes 767
 848
 4,488
 BS Other assets —
 767
 848
 BS Other assets
 $5,320
 $(102,936) $(58,223)  $(86,023) $5,320
 $(102,936) 
              
Net unrealized gains on derivative instruments $2,594
 $2,647
 $13,062
 SI Interest and fees on loans $9,004
 $2,594
 $2,647
 SI Interest and fees on loans
Income tax expense 989
 1,067
 5,220
  3,421
 989
 1,067
 
 $1,605
 $1,580
 $7,842
  $5,583
 $1,605
 $1,580
 
              
Amortization of net actuarial loss $(2,843) $(8,127) $(8,983) SI Salaries and employee benefits $(5,996) $(2,843) $(8,127) SI Salaries and employee benefits
Amortization of prior service credit (cost) (50) 27
 120
 SI Salaries and employee benefits —
 (50) 27
 SI Salaries and employee benefits
Income tax benefit (1,103) (3,194) (3,497)  (2,278) (1,103) (3,194) 
 $(1,790) $(4,906) $(5,366)  $(3,718) $(1,790) $(4,906) 
1 Negative reclassification amounts indicate decreases to earnings in the statement of income and increases to balance sheet assets. The opposite applies to positive reclassification amounts.
1
Negative reclassification amounts indicate decreases to earnings in the statement of income and increases to balance sheet assets. The opposite applies to positive reclassification amounts.

130

Deferred Compensation
Deferred compensation consists of invested assets, including the Company’s common stock, which are held in rabbi trusts for certain employees and directors. At December 31, 20142015 and 20132014, the cost of the common stock included in retained earnings was approximately $14.3$15.2 million and $15.0$14.3 million, respectively. We consolidate the fair value of invested assets of the trusts along with the total obligations and include them in other assets and other liabilities, respectively, in the balance sheet. At December 31, 20142015 and 20132014, total invested assets were approximately $86.6$81.8 million and $83.786.6 million and total obligations were approximately $100.9$96.9 million and $98.7100.9 million, respectively.

Noncontrolling Interests
In June 2013, we removed the entire noncontrolling interest amount of approximately $4.8 million at that time from the Company’s balance sheet following settlement with the remaining owner.


141

14.INCOME TAXES
Income taxes (benefit) aretax expense is summarized as follows:
(In thousands) 2014 2013 2012 2015 2014 2013
Federal:            
Current $178,450
 $173,418
 $185,404
 $158,164
 $178,450
 $173,418
Deferred 14,277
 (51,475) (20,086) (31,843) 14,277
 (51,475)
 192,727
 121,943
 165,318
 126,321
 192,727
 121,943
State:            
Current 18,573
 29,676
 (1,775) 14,027
 18,573
 29,676
Deferred 11,661
 (8,642) 29,873
 2,040
 11,661
 (8,642)
 30,234
 21,034
 28,098
 16,067
 30,234
 21,034
 $222,961
 $142,977
 $193,416
 $142,388
 $222,961
 $142,977

Income tax expense computed at the statutory federal income tax rate of 35% reconciles to actual income tax expense as follows:
(In thousands) 2014 2013 2012 2015 2014 2013
            
Income tax expense at statutory federal rate $217,498
 $142,251
 $189,548
 $158,151
 $217,498
 $142,251
State income taxes, net 19,652
 13,672
 18,264
State income taxes including credits, net 10,443
 19,652
 13,672
Other nondeductible expenses 2,949
 2,574
 11,291
 3,205
 2,949
 2,574
Nontaxable income (17,869) (17,071) (20,137) (20,397) (17,869) (17,071)
Tax credits and other taxes (1,717) (2,628) (3,172) (2,926) (1,717) (2,628)
Other 2,448
 4,179
 (2,378) (6,088) 2,448
 4,179
Total $222,961
 $142,977
 $193,416
 $142,388
 $222,961
 $142,977


142131

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (“DTA”) and deferred tax liabilities are presented below:
(In thousands) December 31, December 31,
2014 2013 2015 2014
Gross deferred tax assets:        
Book loan loss deduction in excess of tax $259,855
 $315,025
 $254,223
 $258,488
Pension and postretirement 25,142
 16,380
 24,749
 25,142
Deferred compensation 92,864
 85,846
 91,665
 93,023
Other real estate owned 1,252
 7,099
Security investments and derivative fair value adjustments 22,438
 155,900
 11,254
 22,440
Net operating losses, capital losses and tax credits 5,442
 6,111
 4,659
 5,442
FDIC-supported transactions 19,084
 10,488
 9,157
 15,636
Other 43,243
 49,675
 46,016
 46,521
 469,320
 646,524
 441,723
 466,692
Valuation allowance (4,261) (4,261) (4,261) (4,261)
Total deferred tax assets 465,059
 642,263
 437,462
 462,431
        
Gross deferred tax liabilities:        
Core deposits and purchase accounting (8,852) (13,556) (3,392) (6,559)
Premises and equipment, due to differences in depreciation (10,361) (13,014) (10,588) (10,361)
FHLB stock dividends (12,376) (12,668) (10,042) (12,376)
Leasing operations (80,383) (94,637) (85,255) (76,148)
Prepaid expenses (9,337) (8,909) (9,001) (9,337)
Prepaid pension reserves (18,333) (16,909) (18,087) (18,491)
Mortgage servicing (6,845) (5,834)
Subordinated debt modification (64,030) (148,820) (46,451) (64,030)
Deferred loan fees (22,774) (21,591) (23,723) (22,774)
Equity investments (10,470) (5,225) (21,037) (12,262)
Other (3,884) (2,553)
Total deferred tax liabilities (240,800) (337,882) (234,421) (238,172)
Net deferred tax assets $224,259
 $304,381
 $203,041
 $224,259

The amount of net deferred tax assets (“DTAs”)DTAs is included with other assets in the balance sheet. The $4.3$4.3 million valuation allowance at December 31, 20142015 and 20132014 was for certain acquired net operating loss carryforwards included in our acquisition of the remaining interests in a less significant subsidiary. At December 31, 2014,2015, excluding the $4.3$4.3 million,, the tax effect of remaining net operating loss and tax credit carryforwards was approximately $1.2$0.4 million expiring through 2030.2030.

We evaluate the net DTAs on a regular basis to determine whether an additional valuation allowance is required. In conducting this evaluation, we have considered all available evidence, both positive and negative, based on the more likely than not criteria that such assets will be realized. This evaluation includes, but is not limited to: (1) available carryback potential to prior tax years; (2) potential future reversals of existing deferred tax liabilities, which historically have a reversal pattern generally consistent with DTAs; (3) potential tax planning strategies; and (4) future projected taxable income. Based on this evaluation, and considering the weight of the positive evidence compared to the negative evidence, we have concluded that an additional valuation allowance is not required as of December 31, 2014.2015.

The Company has received federal income tax credits under the U.S. Government’s Community Development Financial Institutions Fund that are recognized over a seven-year period from the year of investment. The effect of these tax credits provided an income tax benefit of $0.6 million in 2013 and $1.2 million in 2012. Under the terms of the agreement, our involvement in this program terminated in 2014.


143

We have a liability for unrecognized tax benefits relating to uncertain tax positions primarily for various state tax contingencies in several jurisdictions. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:


132

(In thousands) 2014 2013 2012 2015 2014 2013
            
Balance at beginning of year $2,385
 $2,385
 $13,722
 $3,255
 $2,385
 $2,385
Tax positions related to current year:            
Additions —
 —
 —
 786
 —
 —
Reductions —
 —
 —
 —
 —
 —
Tax positions related to prior years:            
Additions 870
 —
 —
 1,407
 870
 —
Reductions —
 —
 (11,337) —
 —
 —
Settlements with taxing authorities —
 —
 —
 —
 —
 —
Lapses in statutes of limitations —
 —
 —
 —
 —
 —
Balance at end of year $3,255
 $2,385
 $2,385
 $5,448
 $3,255
 $2,385

At December 31, 20142015 and 20132014, the liability for unrecognized tax benefits included approximately $2.1$3.9 million and $1.6$2.1 million, respectively (net of the federal tax benefit on state issues) that, if recognized, would affect the effective tax rate. There are is approximately $3.3 millionnoof gross unrecognized tax benefits that may decrease during the 12 months subsequent to December 31, 2014.2015.

The $11.3 million reduction to this liability in 2012 was made following closure of an audit by a state taxing authority. We reduced income tax expense by a net amount including interest/penalty of $2.3 million in 2012 due to the audit closure.

Interest and penalties related to unrecognized tax benefits are included in income tax expense in the statement of income. At December 31, 20142015 and 2013,2014, accrued interest and penalties recognized in the balance sheet, net of any federal and/or state tax benefits, were approximately $0.6$0.7 million and $0.3$0.6 million, respectively.

The Company and its subsidiaries file income tax returns in U.S. federal and various state jurisdictions. The Company is no longer subject to income tax examinations for years prior to 20072012 for federal returns and 2007 for certain state returns.



144

15.NET EARNINGS PER COMMON SHARE
Basic and diluted net earnings per common share based on the weighted average outstanding shares are summarized as follows:

(In thousands, except per share amounts) 2014 2013 2012 2015 2014 2013
Basic:            
Net income applicable to controlling interest $398,462
 $263,791
 $349,516
 $309,471
 $398,462
 $263,791
Less common and preferred dividends 103,111
 (6,094) 178,277
 107,990
 103,111
 (6,094)
Undistributed earnings 295,351
 269,885
 171,239
 201,481
 295,351
 269,885
Less undistributed earnings applicable to nonvested shares 2,933
 2,832
 1,600
 1,836
 2,933
 2,832
Undistributed earnings applicable to common shares 292,418
 267,053
 169,639
 199,645
 292,418
 267,053
Distributed earnings applicable to common shares 30,983
 23,916
 7,321
 44,816
 30,983
 23,916
Total earnings applicable to common shares $323,401
 $290,969
 $176,960
 $244,461
 $323,401
 $290,969
            
Weighted average common shares outstanding 192,207
 183,844
 183,081
 203,265
 192,207
 183,844
            
Net earnings per common share $1.68
 $1.58
 $0.97
 $1.20
 $1.68
 $1.58
            
Diluted:            
Total earnings applicable to common shares $323,401
 $290,969
 $176,960
 $244,461
 $323,401
 $290,969
Additional undistributed earnings allocated to incremental shares —
 —
 —
 —
 —
 —
Diluted earnings applicable to common shares $323,401
 $290,969
 $176,960
 $244,461
 $323,401
 $290,969
            
Weighted average common shares outstanding 192,207
 183,844
 183,081
 203,265
 192,207
 183,844
Additional weighted average dilutive shares 582
 453
 155
 433
 582
 453
Weighted average diluted common shares outstanding 192,789
 184,297
 183,236
 203,698
 192,789
 184,297
            
Net earnings per common share $1.68
 $1.58
 $0.97
 $1.20
 $1.68
 $1.58

133

For 2013, preferred dividends were offset by a preferred stock redemption of approximately $126 million that resulted from the redemption of the Company’s Series C preferred stock. See further discussion in Note 13.

16.SHARE-BASED COMPENSATION
We have a stock option and incentive plan which allows us to grant stock options, restricted stock, restricted stock units (“RSUs”), and other awards to employees and nonemployee directors. Total shares authorized under the plan were 19,500,0009,000,000 at December 31, 20142015, of which 4,353,9677,523,768 were available for future grants.

All share-based payments to employees, including grants of employee stock options, are recognized in the statement of income based on their fair values. The fair value of an equity award is estimated on the grant date without regard to service or performance vesting conditions.

Compensation expense and the related tax benefit forWe classify all share-based awards were as follows:
(In thousands) 2014 2013 2012
       
Compensation expense $23,632
 $28,052
 $31,533
Reduction of income tax expense 7,767
 9,123
 10,724

equity instruments. Compensation expense is included in salaries and employee benefits in the statement of income, with the corresponding increase included in common stock, except for the portion related to the salary stock units (“SSUs”)
granted in 2012, which was settled in cash. See subsequent discussion.

145


We classify all share-based awards as equity instruments except for the 2012 SSUs that were classified as liabilities.stock. Substantially all awards of stock options, restricted stock, and RSUs have graded vesting that is recognized on a straight-line basis over the vesting period.

Compensation expense and the related tax benefit for all share-based awards were as follows:
(In thousands) 2015 2014 2013
       
Compensation expense $24,974
 $23,632
 $28,052
Reduction of income tax expense 8,284
 7,767
 9,123

As of December 31, 20142015, compensation expense not yet recognized for nonvested share-based awards was approximately $26.3$26.6 million, which is expected to be recognized over a weighted average period of 2.52.4 years.

The tax effects recognized from the exercise of stock options and the vesting of restricted stock and RSUs decreased common stock by approximately $0.8 million in 2015, and increased common stock by approximately $0.4 million in 2014, and $0.3 million in 2013, and decreased common stock by approximately $2.8 million in 2012.2013. These amounts are included in the net activity under employee plans and related tax benefits in the statement of changes in shareholders’ equity.

Stock Options
Stock options granted to employees generally vest at the rate of one third each year and expire seven years after the date of grant. For all stock options granted in 20142015, 20132014, and 20122013, we used the Black-Scholes option pricing model to estimate the fair values of stock options in determining compensation expense. The following summarizes the weighted average of fair value and the significant assumptions used in applying the Black-Scholes model for options granted:

 2014 2013 2012 2015 2014 2013
Weighted average of fair value for options granted $6.10
 $6.79
 $4.88
 $6.17
 $6.10
 $6.79
Weighted average assumptions used:            
Expected dividend yield 1.3% 1.3% 1.5% 1.3% 1.3% 1.3%
Expected volatility 25.1% 32.5% 35.0% 25.0% 25.1% 32.5%
Risk-free interest rate 1.55% 0.78% 0.67% 1.57% 1.55% 0.78%
Expected life (in years) 5.0
 4.5
 4.5
 5.0
 5.0
 4.5

The assumptions for expected dividend yield, expected volatility, and expected life reflect management’s judgment and include consideration of historical experience. Expected volatility is based in part on historical volatility. The

134

risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option.


146

The following summarizes our stock option activity for the three years ended December 31, 2014:2015:
Number of shares Weighted average exercise priceNumber of shares Weighted average exercise price
      
Balance at December 31, 20115,933,870
 $43.06
Granted867,968
 18.87
Exercised(129,616) 14.64
Expired(568,546) 61.90
Forfeited(141,351) 21.36
Balance at December 31, 20125,962,325
 38.87
5,962,325
 $38.87
Granted1,047,781
 27.41
1,047,781
 27.41
Exercised(488,479) 20.11
(488,479) 20.11
Expired(574,157) 70.12
(574,157) 70.12
Forfeited(72,880) 22.25
(72,880) 22.25
Balance at December 31, 20135,874,590
 35.54
5,874,590
 35.54
Granted947,758
 28.67
947,758
 28.67
Exercised(489,905) 21.60
(489,905) 21.60
Expired(618,207) 73.28
(618,207) 73.28
Forfeited(83,734) 25.72
(83,734) 25.72
Balance at December 31, 20145,630,502
 31.60
5,630,502
 31.60
Granted740,300
 29.01
Exercised(1,165,287) 25.11
Expired(1,322,067) 48.44
Forfeited(79,353) 28.09
Balance at December 31, 20153,804,095
 27.30
      
Outstanding stock options exercisable as of:Outstanding stock options exercisable as of: Outstanding stock options exercisable as of: 
December 31, 20152,187,259
 $26.35
December 31, 20143,804,873
 $33.86
3,804,873
 33.86
December 31, 20134,101,928
 40.40
4,101,928
 40.40
December 31, 20124,379,630
 45.26
We issue new authorized shares for the exercise of stock options. The total intrinsic value of stock options exercised was approximately $6.7 million in 2015, $3.9 million in 2014, and $4.0 million in 2013, and $0.7 million in 2012. Cash received from the exercise of stock options was $22.7 million in 2015, $10.6 million in 2014, and $9.8 million in 2013, and $1.9 million in 2012.
Additional selected information on stock options at December 31, 20142015 follows:
 Outstanding stock options Exercisable stock options Outstanding stock options Exercisable stock options
  Number of shares Weighted average exercise price Weighted average remaining contractual life (years)   Number of shares Weighted average exercise price Weighted average remaining contractual life (years) 
Exercise price range  Number of shares Weighted average exercise price  Number of shares Weighted average exercise price
                
$0.32 to $19.99 802,357
 $17.33
 3.5
1 
 553,234
 $16.64
$ 0.32 to $19.99 552,618
 $17.20
 2.6
1 
 552,618
 $17.20
$20.00 to $24.99 889,257
 23.84
 2.9 870,455
 23.83
 709,462
 23.84
 1.9 700,060
 23.83
$25.00 to $29.99 2,426,924
 28.02
 4.5 921,599
 27.81
 2,344,883
 28.35
 5.3 772,369
 27.88
$30.00 to $39.99 62,379
 30.48
 5.5 10,000
 32.45
$40.00 to $44.99 14,000
 41.69
 0.8 14,000
 41.69
$45.00 to $49.99 1,231,263
 47.28
 0.5 1,231,263
 47.28
$50.00 to $59.99 91,217
 58.12
 0.4 91,217
 58.12
$30.00 to $44.99 52,379
 30.10
 4.3 17,459
 30.10
$45.00 to $59.99 70,200
 47.10
 2.2 70,200
 47.10
$60.00 to $79.99 41,105
 70.97
 0.5 41,105
 70.97
 2,553
 72.08
 1.1 2,553
 72.08
$80.00 to $81.99 36,000
 80.65
 1.3 36,000
 80.65
 36,000
 80.65
 0.3 36,000
 80.65
$82.00 to $83.38 36,000
 83.38
 2.3 36,000
 83.38
 36,000
 83.38
 1.4 36,000
 83.38
 5,630,502
 31.60
 3.1
1 
 3,804,873
 33.86
 3,804,095
 27.30
 4.1
1 
 2,187,259
 26.35
1 
The weighted average remaining contractual life excludes 21,252 stock options without a fixed expiration date that were obtainedassumed with the Amegy acquisition. They expire between the date of termination and one year from the date of termination, depending upon certain circumstances.

147135


The aggregate intrinsic value of outstanding stock options at December 31, 20142015 and 20132014 was $14.4$8.0 million and $23.614.4 million, respectively, while the aggregate intrinsic value of exercisable options was $11.3$8.0 million and $13.711.3 million at the same respective dates. For exercisable options, the weighted average remaining contractual life was 1.83.1 years and 2.11.8 years at December 31, 20142015 and 20132014, respectively, excluding the stock options previously noted without a fixed expiration date. At December 31, 2014, 1,775,5032015, 1,579,501 stock options with a weighted average exercise price of $26.87,$28.59, a weighted average remaining life of 5.75.6 years, and an aggregate intrinsic value of $3.1 million,$27.3 thousand, were expected to vest.

The previous schedules do not include stock options for employees of our TCBO subsidiary to purchase common stock of TCBO. At December 31, 2014, there were fully-vested options to purchase 43,400 TCBO shares at exercise prices from $17.85 to $20.58, expiring in June 2018. At December 31, 2014, there were 1,038,000 issued and outstanding shares of TCBO common stock. In connection with TCBO’s merger with TCBW as discussed in Note 1, these out-of-the-money stock options will be canceled on February 28, 2015 with no payout to the option holders.

Restricted Stock and Restricted Stock Units
Restricted stock is common stock with certain restrictions that relate to trading and the possibility of forfeiture. Generally, restricted stock vests over four years. Holders of restricted stock have full voting rights and receive dividend equivalents during the vesting period. In addition, holders of restricted stock can make an election to be subject to income tax on the grant date rather than the vesting date.

RSUs represent rights to one share of common stock for each unit and generally vest over four years. Holders of RSUs receive dividend equivalents during the vesting period, but do not have voting rights.

Compensation expense is determined based on the number of restricted shares or RSUs granted and the market price of our common stock at the issue date.

Nonemployee directors were granted 31,080 RSUs in 2015; 16,670 shares of restricted stock and 6,656 RSUs in 2014;2014; and 17,444 shares of restricted stock and 4,984 RSUs in 2013;2013. The 2015 RSUs vested immediately upon grant, and 25,536 shares of restricted stockthe 2014 and 7,296 RSUs in 2012, which2013 awards vested over six months.

The following summarizes our restricted stock activity for the three years ended December 31, 2014:2015:
Number of shares Weighted average issue priceNumber of shares Weighted average issue price
      
Nonvested restricted shares at December 31, 20111,399,854
 $23.74
Issued87,480
 17.57
Vested(582,361) 25.34
Forfeited(53,737) 22.83
Nonvested restricted shares at December 31, 2012851,236
 22.07
851,236
 $22.07
Issued56,774
 24.55
56,774
 24.55
Vested(452,743) 21.80
(452,743) 21.80
Forfeited(44,317) 24.31
(44,317) 24.31
Nonvested restricted shares at December 31, 2013410,950
 22.46
410,950
 22.46
Issued16,670
 28.87
16,670
 28.87
Vested(256,890) 23.23
(256,890) 23.23
Forfeited(9,510) 23.68
(9,510) 23.68
Nonvested restricted shares at December 31, 2014161,220
 21.82
161,220
 21.82
Issued22,441
 29.02
Vested(123,161) 22.32
Forfeited(1,130) 23.54
Nonvested restricted shares at December 31, 201559,370
 23.49


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The following summarizes our RSU activity for the three years ended December 31, 20142015:
Number of restricted stock units Weighted average grant priceNumber of restricted stock units Weighted average grant price
      
Restricted stock units at December 31, 2011146,165
 $23.69
Granted726,779
 18.29
Vested(34,885) 22.46
Forfeited(15,306) 20.22
Restricted stock units at December 31, 2012822,753
 19.04
822,753
 $19.04
Granted949,418
 25.99
949,418
 25.99
Vested(160,580) 20.17
(160,580) 20.17
Forfeited(89,553) 20.13
(89,553) 20.13
Restricted stock units at December 31, 20131,522,038
 23.19
1,522,038
 23.19
Granted727,300
 28.81
727,300
 28.81
Vested(416,755) 22.26
(416,755) 22.26
Forfeited(63,163) 25.48
(63,163) 25.48
Restricted stock units at December 31, 20141,769,420
 25.64
1,769,420
 25.64
Granted790,929
 29.06
Vested(673,385) 24.78
Forfeited(88,421) 27.17
Restricted stock units at December 31, 20151,798,543
 27.39

The total fair value at grant date of restricted stock and RSUs vested during the year was $19.4 million in 2015, $15.2 million in 2014, and $13.1 million in 2013, and $15.5 million in 2012. At December 31, 2014, 159,6682015, 59,370 shares of restricted stock and 1,271,1351,192,702 RSUs were expected to vest with an aggregate intrinsic value of $4.6$1.6 million and $36.2$32.6 million, respectively.

Salary Stock Units
We granted 456,275 SSUs in 2012 which vested immediately upon grant. Each SSU represents a right to one share of our common stock.

The SSUs granted in 2012 were classified as liabilities and were settled by cash payments of $4.5 million for 225,214 SSUs in 2012 and $5.7 million for 231,061 in 2013. The amount of cash paid was recorded as compensation expense and was determined by the number of SSUs being settled and the Company’s average closing common stock price for each trading day during the 30 trading-day period immediately prior to such payment date.

17.COMMITMENTS, GUARANTEES, CONTINGENT LIABILITIES, AND RELATED PARTIES
Commitments and Guarantees
We use certain financial instruments, including derivative instruments, in the normal course of business to meet the financing needs of our customers, to reduce our own exposure to fluctuations in interest rates, and to make a market in U.S. Government, agency, corporate, and municipal securities. These financial instruments involve, to varying degrees, elements of credit, liquidity, and interest rate risk in excess of the amounts recognized in the balance sheet. Derivative instruments are discussed in Notes 7 and 20.

Contractual amounts of the off-balance sheet financial instruments used to meet the financing needs of our customers are as follows:

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December 31,December 31,
(In thousands)2014 20132015 2014
      
Net unfunded commitments to extend credit 1
$16,658,757
 $16,174,083
$17,169,785
 $16,658,757
Standby letters of credit:      
Financial745,895
 779,811
661,554
 745,895
Performance183,482
 159,485
216,843
 183,482
Commercial letters of credit32,144
 80,218
18,447
 32,144
Total unfunded lending commitments$17,620,278
 $17,193,597
$18,066,629
 $17,620,278
1Net of participations
1
Net of participations.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The amount of collateral obtained, if deemed necessary by us upon extension of

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credit, is based on our initial credit evaluation of the counterparty. Types of collateral vary, but may include accounts receivable, inventory, property, plant and equipment, and income-producing properties.

While establishing commitments to extend credit creates credit risk, a significant portion of such commitments is expected to expire without being drawn upon. As of December 31, 20142015, $4.6$4.9 billion of commitments expire in 20152016. We use the same credit policies and procedures in making commitments to extend credit and conditional obligations as we do for on-balance sheet instruments. These policies and procedures include credit approvals, limits, and monitoring.

We issue standby and commercial letters of credit as conditional commitments generally to guarantee the performance of a customer to a third party. The guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Standby letters of credit include remaining commitments of $714$684 million expiring in 20152016 and $215$195 million expiring thereafter through 2027. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. We generally hold marketable securities and cash equivalents as collateral supporting those commitments for which collateral is deemedwhen necessary. At December 31, 20142015, the Company had recorded approximately $13.2$5.3 million as a liability for these guarantees, which consisted of $10.0$2.2 million attributable to the reserve for unfunded lending commitmentsRULC and $3.2$3.1 million of deferred commitment fees.

Certain mortgage loans sold have limited recourse provisions for periods ranging from three months to one year. The amount of losses resulting from the exercise of these provisions has not been significant.

At December 31, 20142015, we had unfunded commitments for private equity investmentsPEIs of approximately $25$22 million. These obligations have no stated maturity. Substantially allApproximately $7 million of the PEIs related to these commitments are prohibited by the Volcker Rule.VR. See related discussions about these investments in Notes 5 and 20.

The contractual or notional amount of financial instruments indicates a level of activity associated with a particular class of financial instrument class and is not a reflection of the actual level of risk. As of December 31, 20142015 and 20132014, the regulatory risk-weighted values assigned to all off-balance sheet financial instruments and derivative instruments described herein were $5.9$6.3 billion and $5.6$5.9 billion,, respectively.

At December 31, 20142015, we were required to maintain cash balances of $201.3$295.2 million with the Federal Reserve Banks to meet minimum balance requirements in accordance with Federal Reserve Board (“FRB”) regulations.

As of December 31, 20142015, the Parent has guaranteed approximately $15$165 million of debt of affiliated trusts issuing trust preferred securities, as discussed in Note 12.


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Leases
We have commitments for leasing premises and equipment under the terms of noncancelable capital and operating leases expiring from 20152016 toand 2052. Premises leased under capital leases at December 31, 20142015, were $1.2 million and accumulated amortization was $0.8$0.9 million. Amortization applicable to premises leased under capital leases is included in depreciation expense.


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Future aggregate minimum rental payments under existing noncancelable operating leases at December 31, 20142015, are as follows:
(in thousands)    
2015 $47,304
2016 46,690
 $44,668
2017 41,211
 43,730
2018 36,519
 39,158
2019 30,226
 32,524
2020 27,258
Thereafter 125,400
 102,313
 $327,350
 $289,651
Future aggregate minimum rental payments have been reduced by noncancelable subleases as follows: $1.4 million in 2015, $1.6$1.5 million in 2016, $1.6$1.7 million in 2017, $1.6 million in 2018, $1.5 million in 2019, $0.6 million in 2020, and $3.6$2.7 million thereafter. Aggregate rental expense on operating leases amounted to $59.2$62.5 million in 2014, $58.42015, $59.2 million in 2013,2014, and $58.7$58.4 million in 2012.2013.

Legal Matters
We are subject to litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies. At any given time, litigationLitigation may relate to lending, deposit and other customer relationships, vendor and contractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. While most matters relate to individual claims, we are also subject to putative class action claims and similar broader claims. Putative class actions and similar claims that were outstanding at December 31, 2014 included the following:
a complaint relating to our banking relationships with customers that allegedly engaged in wrongful telemarketing practices in which the plaintiff seeks a trebled monetary award under the federal RICO Act, Reyes v. Zions First National Bank, et. al., pending in the United States District Court for the Eastern District of Pennsylvania; and
a complaint arising from our banking relationships with Frederick Berg and a number of investment funds controlled by him using the “Meridian” brand name, in which the liquidating trustee for the funds seeks an award from us, on the basis of aiding and abetting and other claims, for monetary damages suffered by victims of a fraud allegedly perpetrated by Berg, In re Consolidated Meridian Funds a/k/a Meridian Investors Trust, Mark Calvert as Liquidating Trustee, et. al. vs. Zions Bancorporation and The Commerce Bank of Washington, N.A., pending in the United States Bankruptcy Court for the Western District of Washington.

In the third quarter of 2013, the District Court denied the plaintiff’s motion for class certification in the Reyes case. The plaintiff appealed the District Court decision to the Third Circuit Court of Appeals. The Third Circuit had not ruled on the appeal as of February 2015. In February 2015, the Company settled the Meridian Funds case. The settlement award was substantially covered by our recorded accruals for legal risks as of December 31, 2014 included in our consolidated financial statements.

At any given time, proceedings,Proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies may relate to our banking, investment advisory, trust, securities, and

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other products and services; our customers’ involvement in money-laundering,money laundering, fraud, securities violations and other illicit activities or our policies and practices relating to such customer activities; and our compliance with the broad range of banking, securities and other laws and regulations applicable to us. At any given time, we may be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters. Significant investigations or inquiries to which we may have been subject at
As of December 31, 2014 included2015, we were subject to the following:following material litigation and governmental inquiries:
a class action case, Reyes v. Zions First National Bank, et. al., which was brought in the United States District Court for the Eastern District of Pennsylvania in early 2010. This case relates to our banking relationships with customers that allegedly engaged in wrongful telemarketing practices. The plaintiff is seeking a trebled monetary award under the federal RICO Act. In the third quarter of 2013, the District Court denied the plaintiff’s motion for class certification in the Reyes case. The plaintiff appealed the District Court decision to the Third Circuit Court of Appeals. In the third quarter of 2015, the Third Circuit vacated the District Court’s decision denying class certification and remanded the matter to the District Court with instructions to reconsider the class certification determination in light of particular standards articulated by the Third Circuit in its opinion. Following the Third Circuit’s decision, the parties participated in mediation sessions in the fourth quarter of 2015 and the first quarter of 2016. We do not know whether these discussions will result in a settlement.
a governmental inquiry into possible money laundering activities of a customer of one of our subsidiary banksbank customers and theour anti-money laundering practices ofrelating to that bankcustomer (conducted by the United States Attorney’s Office for the Southern District of New York); and. Our first contact with the United States Attorney’s Office relating to this matter occurred in early 2012. We are unclear about the status of this inquiry.
thea governmental inquiry into our payment processing practices of our subsidiary, Zions Bank; our former subsidiary, NetDeposit, LLC; and possibly other of our affiliates relating primarily to payment processing forcertain allegedly fraudulent telemarketers and other customer types (conducted by the Department of Justice). Similar inquiries directed towards banks unrelated to us have resulted in a number of enforcement actions. Our first contact with the

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Department of Justice relating to this matter occurred in early 2013. It appears that the Department of Justice’s inquiry into our practice is continuing.
a civil suit, Liu Aifang, et al. v. Velocity VIII, et al., brought against us in the United States District Court for the Central District of California in April 2015. The case relates to our banking relationships with customers who were approved promoters of an EB-5 Visa Immigrant Investment Program that allegedly misappropriated investors’ funds. On September 30, 2015, the Court granted in part and denied in part our Motion to Dismiss Plaintiffs’ claims.  The Plaintiffs’ remaining claims assert negligence and that the bank aided and abetted the promoter customers’ conversion of the investors’ funds deposited with us. Discovery is ongoing and trial is scheduled for June 2016.

At least quarterly, we review outstanding and new legal matters, utilizing then available information. In accordance with applicable accounting guidance, if we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. In the absence of such a determination, no accrual is made. Once established, accruals are adjusted to reflect developments relating to the matters.

In our review, we also assess whether we can determine the range of reasonably possible losses for significant matters in which we are unable to determine that the likelihood of a loss is remote. Because of the difficulty of predicting the outcome of legal matters, discussed subsequently, we are able to meaningfully estimate such a range only for a limited number of matters. Based on information available as of December 31, 2014,2015, we estimated that the aggregate range of reasonably possible losses for those matters to be from $0$0 million to roughly $50$60 million in excess of amounts accrued. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which a meaningful estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.

Based on our current knowledge, we believe that our current estimated liability for litigation and other legal actions and claims, reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate and that liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions and claims for which an estimate as previously described is possible, will not have a material impact on our financial condition, results of operations, or cash flows. However, in light of the significant uncertainties involved in these matters, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our financial condition, results of operations, or cash flows for any given reporting period.
Any estimate or determination relating to the future resolution of litigation, arbitration, governmental or self-regulatory examinations, investigations or actions or similar matters is inherently uncertain and involves significant judgment. This is particularly true in the early stages of a legal matter, when legal issues and facts have not been well articulated, reviewed, analyzed, and vetted through discovery, preparation for trial or hearings, substantive and productive mediation or settlement discussions, or other actions. It is also particularly true with respect to class action and similar claims involving multiple defendants, matters with complex procedural requirements or substantive issues or novel legal theories, and examinations, investigations and other actions conducted or brought by governmental and self-regulatory agencies, in which the normal adjudicative process is not applicable. Accordingly, we usually are unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely, or probable, or to estimate the amount or range of a probable or reasonably likely loss, until relatively late in the course of a legal matter, sometimes not until a number of years have elapsed. Accordingly, our judgments and estimates relating to claims will change from time to time in light of developments and actual outcomes will differ from our estimates. These differences may be material.


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Related Party Transactions
We have no material related party transactions requiring disclosure. In the ordinary course of business, the Company and its subsidiary banksbank extend credit to related parties, including executive officers, directors, principal

140

shareholders, and their associates and related interests. These related party loans are made in compliance with applicable banking regulations under substantially the same terms as comparable third-party lending arrangements.regulations.

18.REGULATORY MATTERS
We are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory – and possibly additional discretionary – actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Required capital levels are also subject to judgmental review by regulators.

The Basel III capital rules, which effectively replaced the Basel I rules, became effective for the Company on January 1, 2015 (subject to phase-in periods for certain of their components). In 2013, the FRB, FDIC, and OCC published final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The rules implement the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act. The Basel III capital rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company, compared to the Basel I U.S. risk-based capital rules.

Under prior Basel I capital standards, the effects of AOCI items included in capital were excluded for purposes of determining regulatory capital and capital ratios. As a “non-advanced approaches banking organization,” we made a one-time permanent election as of January 1, 2015 to continue to exclude these items, as allowed under the Basel III Capital Rules.

Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the following schedule) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of December 31, 2014, we exceeded all capital adequacy requirements to which we are subject.

As of December 31, 2014,2015, all capital ratios of the Company and each of its subsidiary banksbank exceeded the “well capitalized”“well-capitalized” levels under the regulatory framework for prompt corrective action. Dividends declared by our subsidiary banksbank in any calendar year may not, without the approval of the appropriate federal regulators, exceed specified criteria.

Appropriate capital levels and distributions of capital to shareholders for the Company and other “systemically important financial institutions” (“SIFIs”) are also subject to annual “stress tests” performed as a part of the Federal Reserve’s CCAR process.

The stress tests seek to comprehensively measure all risks to which the institution is exposed, including credit, liquidity, market, operating and other risks, the losses that could result from those risk exposures under adverse scenarios, and the institution’s resulting capital levels. These stress tests have both a qualitative and a quantitative component. The qualitative component evaluates the robustness of the Company’s risk identification, stress risk modeling, policies, capital planning, governance processes, and other components of a Capital Adequacy Process. The quantitative process subjects the Company’s balance sheet and other risk characteristics to stress testing and independent determination by the Federal Reserve using its own models. Most capital actions, including for example, payment of dividends and repurchasing stock, are subject to non-objection by the Federal Reserve to a capital plan based on both the qualitative and quantitative assessments of the plan.

Each ofBecause the Company’s subsidiary banks withbank has assets greater than $10 billion also it is subject to annual stress testing and capital planning processes examined by their respective bank regulators (Officethe Office of the Comptroller of the Currency (“OCC”) or FDIC), known as the Dodd-Frank Act Stress Test (“DFAST”).


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The actual capital amounts and ratios for the Company and its three largest subsidiary banksbank under Basel III are as follows:
 Actual To be well-capitalized
(Amounts in thousands)Amount Ratio Amount Ratio
As of December 31, 2014       
Total capital (to risk-weighted assets)       
The Company$7,443,301
 16.27% $4,573,768
 10.00%
Zions First National Bank2,108,904
 15.27
 1,381,243
 10.00
California Bank & Trust1,286,095
 14.18
 906,915
 10.00
Amegy Bank1,741,586
 14.09
 1,236,244
 10.00
Tier 1 capital (to risk-weighted assets)       
The Company6,620,282
 14.47
 2,744,261
 6.00
Zions First National Bank1,942,856
 14.07
 828,746
 6.00
California Bank & Trust1,179,129
 13.00
 544,149
 6.00
Amegy Bank1,586,686
 12.83
 741,747
 6.00
Tier 1 capital (to average assets)       
The Company6,620,282
 11.82
 na
 
 na 1

Zions First National Bank1,942,856
 10.52
 923,193
 5.00
California Bank & Trust1,179,129
 10.78
 547,086
 5.00
Amegy Bank1,586,686
 11.79
 672,996
 5.00
As of December 31, 2013       
Total capital (to risk-weighted assets)       
The Company$6,621,539
 14.67% $4,514,553
 10.00%
Zions First National Bank1,997,525
 14.52
 1,375,382
 10.00
California Bank & Trust1,252,860
 13.65
 917,950
 10.00
Amegy Bank1,714,314
 14.86
 1,153,382
 10.00
Tier 1 capital (to risk-weighted assets)       
The Company5,763,463
 12.77
 2,708,732
 6.00
Zions First National Bank1,831,720
 13.32
 825,208
 6.00
California Bank & Trust1,137,848
 12.40
 550,770
 6.00
Amegy Bank1,569,696
 13.61
 692,029
 6.00
Tier 1 capital (to average assets)       
The Company5,763,463
 10.48
 na
 
 na 1

Zions First National Bank1,831,720
 10.02
 913,592
 5.00
California Bank & Trust1,137,848
 10.75
 529,067
 5.00
Amegy Bank1,569,696
 12.09
 649,387
 5.00
 December 31, 2015 To be well-capitalized
(Amounts in thousands)Amount Ratio Amount Ratio
Transitional Basis Basel III Regulatory Capital Rules       
Total capital (to risk-weighted assets)       
The Company$7,535,760
 16.12% $4,674,725
 10.00%
ZB, National Association6,918,312
 14.84
 4,661,581
 10.00
Tier 1 capital (to risk-weighted assets)       
The Company6,580,326
 14.08
 3,739,780
 8.00
ZB, National Association6,334,391
 13.59
 3,729,265
 8.00
Common equity tier 1 capital (Basel III)       
The Company5,711,836
 12.22
 3,038,571
 6.50
ZB, National Association5,503,491
 11.81
 3,030,028
 6.50
Tier 1 capital (to average assets)       
The Company6,580,326
 11.26
 na
 
 na 1

ZB, National Association6,334,391
 10.97
 2,886,732
 5.00
1 
There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.
Basel III Capital Framework
In 2013,The actual capital amounts and ratios for the FRB, FDIC,Company and OCC issued final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. These new rules implementits three largest subsidiary banks prior to the Basel Committee’s December 2010 framework, commonly referred to as Basel III, and replace the currentcharter consolidation under Basel I are as follows:
 December 31, 2014 To be well-capitalized
(Amounts in thousands)Amount Ratio Amount Ratio
Basel I Regulatory Capital Rule       
Total capital (to risk-weighted assets)       
The Company$7,443,301
 16.27% $4,573,768
 10.00%
Zions Bank2,108,904
 15.27
 1,381,243
 10.00
California Bank & Trust1,286,095
 14.18
 906,915
 10.00
Amegy Bank1,741,586
 14.09
 1,236,244
 10.00
Tier 1 capital (to risk-weighted assets)       
The Company6,620,282
 14.47
 2,744,261
 6.00
Zions Bank1,942,856
 14.07
 828,746
 6.00
California Bank & Trust1,179,129
 13.00
 544,149
 6.00
Amegy Bank1,586,686
 12.83
 741,747
 6.00
Tier 1 capital (to average assets)       
The Company6,620,282
 11.82
 na
 
 na 1

Zions Bank1,942,856
 10.52
 923,193
 5.00
California Bank & Trust1,179,129
 10.78
 547,086
 5.00
Amegy Bank1,586,686
 11.79
 672,996
 5.00
1
There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.

Zions is also subject to “capital conservation buffer” regulatory capital calculations. Therequirements. When fully phased-in on January 1, 2019, the Basel III Capital Rules will become effective forrequire the Company and its subsidiary bank to maintain a 2.5% capital conservation buffer, designed to absorb losses during periods of economic stress, composed entirely of CET1, on top of the minimum risk-weighted asset ratios, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) Total capital to risk-weighted assets of at least 10.5%. Banking institutions with a ratio of CET1 to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases, and compensation. The implementation of the buffer will be phased-in beginning January 1, 2016 at the 0.625% level

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and increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2015, with2019. Zions’ triggers and limits under actual conditions and baseline projections are more restrictive than the fully phased-in requirements becoming effective in 2018.capital conservation buffer
requirements.

Among other things, the new rules revise capital adequacy guidelines and the regulatory framework for prompt corrective action, and they modify specified quantitative measures of our assets, liabilities, and capital. The impact of these new rules will require the Company to maintain capital in excess of current “well-capitalized” regulatory standards, and in excess of historical levels.

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19.RETIREMENT PLANS
Defined Benefit Plans
Pension -– This qualified noncontributory defined benefit plan has been frozen to new participation. No service-related benefits accrued for existing participants except for those with certain grandfathering provisions. Effective July 1, 2013, the plan was amended to remove the exception for grandfathered participants. The effect of this change was not significant to the plan. Benefits vest under the plan upon completion of five years of vesting service and allAll participants in the planPlan are currently 100% vested in their benefits. Plan assets consist principally of corporate equity securities, mutual fund investments, real estate, and fixed income investments. Plan benefits are paid as a lump-sum cash value or an annuity at retirement age. Contributions to the plan are based on actuarial recommendation and pension regulations. Currently, it is expected thatno minimum regulatory contributions will be required in 2015.2016.

Supplemental Retirement – These unfunded nonqualified plans are for certain current and former employees. Each year, Company contributions to these plans are made in amounts sufficient to meet benefit payments to plan participants.

Postretirement Medical/Life – This unfunded health care and life insurance plan provides postretirement medical benefits to certain full-time employees who meet minimum age and service requirements. The plan also provides specified life insurance benefits to certain employees. The plan is contributory with retiree contributions adjusted annually, and contains other cost-sharing features such as deductibles and coinsurance. Plan coverage is provided by self-funding or health maintenance organization options. Our contribution towards the retiree medical premium has been permanently frozen at an amount that does not increase in any future year. Retirees pay the difference between the full premium rates and our capped contribution.

Because our contribution rate is capped, there is no effect on the postretirement plan from assumed increases or decreases in health care cost trends. Each year, Company contributions to the plan are made in amounts sufficient to meet the portion of the premiums that are the Company’s responsibility.


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The following presents the change in benefit obligation, change in fair value of plan assets, and funded status, of the plans and amounts recognized in the balance sheet as of the measurement date of December 31:
(In thousands) Pension 
Supplemental
Retirement
 Postretirement Pension 
Supplemental
Retirement
 Postretirement
2014 2013 2014 2013 2014 2013 2015 2014 2015 2014 2015 2014
Change in benefit obligation:                        
Benefit obligation at beginning of year $169,092
 $191,208
 $10,276
 $11,234
 $1,062
 $1,129
 $185,944
 $169,092
 $10,595
 $10,276
 $1,067
 $1,062
Service cost —
 —
 —
 —
 31
 32
 —
 —
 —
 —
 33
 31
Interest cost 7,468
 6,885
 454
 404
 47
 41
 7,094
 7,468
 403
 454
 40
 47
Actuarial (gain) loss 20,859
 (16,341) 738
 (426) 19
 (53) (8,085) 20,859
 (226) 738
 (121) 19
Settlements —
 96
 —
 —
 —
 —
Benefits paid (11,475) (12,756) (873) (936) (92) (87) (11,745) (11,475) (778) (873) (65) (92)
Benefit obligation at end of year 185,944
 169,092
 10,595
 10,276
 1,067
 1,062
 173,208
 185,944
 9,994
 10,595
 954
 1,067
                        
Change in fair value of plan assets:                        
Fair value of plan assets at beginning of year 171,905
 157,082
 —
 —
 —
 —
 170,199
 171,905
 —
 —
 —
 —
Actual return on plan assets 9,769
 27,579
 —
 —
 —
 —
 (1,136) 9,769
 —
 —
 —
 —
Employer contributions —
 —
 873
 936
 92
 87
 —
 —
 778
 873
 65
 92
Benefits paid (11,475) (12,756) (873) (936) (92) (87) (11,745) (11,475) (778) (873) (65) (92)
Fair value of plan assets at end of year 170,199
 171,905
 —
 —
 —
 —
 157,318
 170,199
 —
 —
 —
 —
Funded status $(15,745) $2,813
 $(10,595) $(10,276) $(1,067) $(1,062) $(15,890) $(15,745) $(9,994) $(10,595) $(954) $(1,067)
                        
Amounts recognized in balance sheet:                        
Asset (liability) for pension/postretirement benefits $(15,745) $2,813
 $(10,595) $(10,276) $(1,067) $(1,062)
Liability for pension/postretirement benefits $(15,890) $(15,745) $(9,994) $(10,595) $(954) $(1,067)
Accumulated other comprehensive income (loss) (60,581) (39,082) (2,637) (1,968) 264
 354
 (60,067) (60,581) (2,288) (2,637) (332) 264
                        
Accumulated other comprehensive income (loss) consists of:Accumulated other comprehensive income (loss) consists of:                       
Net gain (loss) $(60,581) $(39,082) $(2,637) $(1,918) $264
 $354
 $(60,067) $(60,581) $(2,288) $(2,637) $(332) $264
Prior service credit (cost) —
 —
 —
 (50) —
 —
 $(60,581) $(39,082) $(2,637) $(1,968) $264
 $354

For 2014,2015, the pension plan benefit obligation at end of year increaseddecreased due to the updated mortality table issued by the Society of Actuaries that reflects increased life expectancy assumptions, and a declinean increase in the year-end discount rate. The liability for pension/postretirement benefits is included in other liabilities in the balance sheet. The accumulated benefit obligation is the same as the benefit obligation shown in the preceding schedule.

The amounts in accumulated other comprehensive incomeAOCI (loss) at December 31, 20142015 expected to be recognized as an expense component of net periodic benefit cost in 20152016 for the plans are estimated as follows:
(In thousands) Pension Supplemental Retirement Postretirement Pension Supplemental Retirement Postretirement
              
Net gain (loss) $(6,295) $(123) $53
  $(6,638) $(117) $66
 


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The following presents the components of net periodic benefit cost (credit) for the plans:
 Pension 
Supplemental
Retirement
 Postretirement Pension 
Supplemental
Retirement
 Postretirement
(In thousands) 2014 2013 2012 2014 2013 2012 2014 2013 2012 2015 2014 2013 2015 2014 2013 2015 2014 2013
                                    
Service cost $—
 $—
 $29
 $—
 $—
 $—
 $31
 $32
 $36
 $—
 $—
 $—
 $—
 $—
 $—
 $33
 $31
 $32
Interest cost 7,468
 6,885
 7,558
 454
 404
 460
 47
 41
 47
 7,094
 7,468
 6,885
 403
 454
 404
 40
 47
 41
Expected return on plan assets (13,305) (12,109) (11,308)             (12,360) (13,305) (12,109)            
Amortization of net actuarial (gain) loss 2,895
 8,132
 9,184
 19
 70
 (114) (71) (75) (87) 5,926
 2,895
 8,132
 123
 19
 70
 (53) (71) (75)
Amortization of prior service (credit) cost       50
 124
 124
 —
 (151) (244)       —
 50
 124
 —
 —
 (151)
Settlement loss —
 1,814
 —
 —
 —
 —
       —
 —
 1,814
 —
 —
 —
      
Net periodic benefit cost (credit) $(2,942) $4,722
 $5,463
 $523
 $598
 $470
 $7
 $(153) $(248) $660
 $(2,942) $4,722
 $526
 $523
 $598
 $20
 $7
 $(153)


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Weighted average assumptions based on the pension plan are the same where applicable for each of the plans and are as follows:
2014 2013 20122015 2014 2013
Used to determine benefit obligation at year-end:          
Discount rate3.95% 4.60% 3.75%4.20% 3.95% 4.60%
Rate of compensation increase 1
na na 3.50
na na na
Used to determine net periodic benefit cost for the years ended December 31:          
Discount rate4.60
 3.75
 4.25
3.95
 4.60
 3.75
Expected long-term return on plan assets8.00
 8.00
 8.00
7.50
 8.00
 8.00
Rate of compensation increase 1
na 3.50
 3.50
na na 3.50
1 
As previously discussed, the pension plan became fully frozen effective July 1, 2013 by a plan amendment that eliminated the remaining grandfather provisions. This action eliminated the need to continue using the rate of compensation increase assumption as of December 31, 2013.

The discount rate reflects the yields available on long-term, high-quality fixed income debt instruments with cash flows similar to the obligations of the pension plan, and is reset annually on the measurement date. The expected long-term rate of return on plan assets is based on a review of the target asset allocation of the plan. This rate is intended to approximate the long-term rate of return that we anticipate receiving on the plan’s investments, considering the mix of the assets that the plan holds as investments, the expected return on these underlying investments, the diversification of these investments, and the rebalancing strategies employed. An expected long-term rate of return is assumed for each asset class and an underlying inflation rate assumption is determined. The projected rate of compensation increases is management’s estimate of future pay increases that the remaining eligible employees will receive until their retirement.

Benefit payments to the plans’ participants which reflect expected future service as appropriate, are estimated as follows for the years succeeding December 31, 20142015:
(In thousands) Pension Supplemental Retirement Postretirement Pension Supplemental Retirement Postretirement
              
2015 $9,960
 $1,763
 $95
 
2016 9,713
 1,106
 100
  $9,876
 $1,870
 $80
 
2017 10,059
 825
 105
  10,307
 845
 93
 
2018 10,421
 818
 104
  10,373
 838
 98
 
2019 10,577
 854
 102
  10,253
 871
 98
 
Years 2019 - 2023 54,108
 3,553
 465
 
2020 10,702
 819
 102
 
Years 2021 - 2025 53,028
 3,459
 445
 


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We are also obligated under other supplemental retirement plans for certain current and former employees. Our liability for these plans was $6.3$6.9 million and $6.06.3 million at December 31, 20142015 and 20132014, respectively.

For the pension plan, the investment strategy is predicated on its investment objectives and the risk and return expectations of asset classes appropriate for the plan. Investment objectives have been established by considering the plan’s liquidity needs and time horizon and the fiduciary standards under the Employee Retirement Income Security Act of 1974. The asset allocation strategy is developed to meet the plan’s long-term needs in a manner designed to control volatility and to reflect risk tolerance. Target investment allocation percentages as of December 31, 20142015 are 65% in equity, 30% in fixed income and cash, and 5% in real estate assets.


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The following presents the fair values of pension plan investments according to the fair value hierarchy described in Note 20, and the weighted average allocations:
(Amounts in thousands) December 31, 2014 December 31, 2013 December 31, 2015 December 31, 2014
Level 1 Level 2 Level 3 Total % Level 1 Level 2 Level 3 Total % Level 1 Level 2 Level 3 Total % Level 1 Level 2 Level 3 Total %
                                        
Company common stock $7,560
     $7,560
 4
 $8,098
     $8,098
 5
 $6,482
     $6,482
 4
 $7,560
     $7,560
 4
Mutual funds:                                        
Equity —
     —
 —
 —
     —
 —
Debt 6,047
     6,047
 4
 6,559
     6,559
 4
 5,250
     5,250
 4
 6,047
     6,047
 4
Insurance company pooled separate accounts:                                        
Equity investments   $97,094
   97,094
 57
   $102,603
   102,603
 60
   $88,355
   88,355
 56
   $97,094
   97,094
 57
Debt investments   33,167
   33,167
 19
   29,091
   29,091
 17
   31,659
   31,659
 20
   33,167
   33,167
 19
Real estate   8,611
   8,611
 5
   7,680
   7,680
 4
   9,909
   9,909
 6
   8,611
   8,611
 5
Guaranteed deposit account     $11,515
 11,515
 7
     $12,582
 12,582
 7
     $9,484
 9,484
 6
     $11,515
 11,515
 7
Limited partnerships     6,205
 6,205
 4
     5,292
 5,292
 3
     6,179
 6,179
 4
     6,205
 6,205
 4
 $13,607
 $138,872
 $17,720
 $170,199
 100
 $14,657
 $139,374
 $17,874
 $171,905
 100
 $11,732
 $129,923
 $15,663
 $157,318
 100
 $13,607
 $138,872
 $17,720
 $170,199
 100

No transfers of assets occurred among Levels 1, 2 or 3 during 20142015 or 2013.2014.

The following describes the pension plan investments and the valuation methodologies used to measure their fair value:

Company common stock – Shares of the Company’s common stock are valued at the last reported sales price on the last business day of the plan year in the active market where individual securities are traded.

Mutual funds – These funds are valued at quoted market prices which represent the net asset values (“NAVs”)NAVs of shares held by the plan at year-end.

Insurance company pooled separate accounts – These funds are invested in by more than one investor. They are offered through separate accounts of the trustee’s insurance company and managed by internal and professional advisors. Participation units in these accounts are valued at the NAV as the practical expedient for fair value as determined by the insurance company.

Guaranteed deposit account – This account is a group annuity product issued by the trustee’s insurance company with guaranteed crediting rates established at the beginning of each calendar year. The account balance is stated at fair value as estimated by the trustee. The account is credited with deposits made, plus earnings at guaranteed crediting rates, less withdrawals and administrative expenses. The underlying investments generally include investment gradeinvestment-grade public and privately traded debt securities, mortgage loans and, to a lesser extent, real estate and other equity investments. Market value adjustments are applied at the time of redemption if certain withdrawal limits are exceeded.


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Additional fair value quantitative information for the guaranteed deposit account is a follows:

Principal valuation techniques Significant unobservable inputs 
Range (weighted average)
of significant input values
       
For the underlying investments – reported fair values when available for market traded investments; when not applicable, discounted cash flows under an income approach using U.S. Treasury rates and spreads based on cash flow timing and quality of assets. Earnings at guaranteed crediting rate Gross guaranteed crediting rate must be greater than or equal to contractual minimum crediting rate
 Composite market value factor At December 31,
  20150.995927 - 1.049539 (actual = 1.042254)
2014 1.018148 - 1.081039 (actual = 1.063133)
20130.988035 - 1.073235 (actual = 1.05329)

The Company’s Benefits Committee evaluates the methodology and factors used, including review of the contract, economic conditions, industry and market developments, and overall credit ratings of the underlying investments.

Limited partnerships – These partnerships invest in limited partnerships, limited liability companies, or similar investment vehicles that consist of private equity investmentsPEIs in a wide variety of investment types, including venture and growth capital, real estate, energy and natural resources, and other private investments. The plan’s investments are valued by the limited partnerships at NAV as the practical expedient for fair value. The estimation process takes into account the plan’s proportional interests credited with realized and unrealized earnings from the underlying investments and charged for operating expenses and distributions. Investments are increased by capital calls and are part of an overall capital commitment by the plan of up to approximately $8.75 million at December 31, 2014.2015.

The following presents additional information as of December 31, 20142015 and 20132014 for the pooled separate accounts and limited partnerships whose fair values under Levels 2 and 3 are based on NAV per share:

Investment 
Unfunded commitments
(in thousands, approximately)
 Redemption 
Unfunded commitments
(in thousands, approximately)
 Redemption
 Frequency Notice period  Frequency Notice period
      
Pooled separate accounts na Daily 
< td million, 1 day
>= td million, 3 days
 na Daily 
< td million, 1 day
>= td million, 3 days
      
Limited partnerships $2,200
 Investments in these limited partnerships are illiquid and voluntary withdrawal is prohibited. $1,600
 Investments in these limited partnerships are illiquid and voluntary withdrawal is prohibited.
      


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The following reconciles the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs:
 Level 3 Instruments Level 3 Instruments
 Year Ended December 31, Year Ended December 31,
 2014 2013 2015 2014
(In thousands) Guaranteed deposit account Limited partnerships Guaranteed deposit account Limited partnerships Guaranteed deposit account Limited partnerships Guaranteed deposit account Limited partnerships
                  
Balance at beginning of year $12,582
 $5,292
 $13,869
 $4,689
  $11,515
 $6,205
 $12,582
 $5,292
 
Net increases (decreases) included in plan statement of change in net assets available for benefits:Net increases (decreases) included in plan statement of change in net assets available for benefits:         Net increases (decreases) included in plan statement of change in net assets available for benefits:         
Net operating fees and expenses (267) (93) (346) (83)  (376) (88) (267) (93) 
Net appreciation (depreciation) in fair value of investments:                  
Realized —
 211
 —
 (74)  —
 539
 —
 211
 
Unrealized 375
 925
 (398) 732
  (628) 157
 375
 925
 
Interest and dividends 359
 —
 486
 —
  284
 —
 359
 —
 
Purchases 9,995
 1,014
 11,722
 760
  10,428
 1,110
 9,995
 1,014
 
Sales (11,529) —
 (12,751) —
  (11,739) —
 (11,529) —
 
Settlements —
 (1,144) —
 (732)  —
 (1,744) —
 (1,144) 
Balance at end of year $11,515
 $6,205
 $12,582
 $5,292
  $9,484
 $6,179
 $11,515
 $6,205
 

Shares of Company common stock were 262,209233,849 and 270,305262,209 at December 31, 20142015 and 20132014, respectively. Dividends received by the plan were approximately $43$56 thousand in 20142015 and $4143 thousand in 20132014.

Defined Contribution Plan
The Company offers a 401(k) and employee stock ownership plan under which employees select from several investment alternatives. Employees can contribute up to 80% of their earnings subject to the annual maximum allowed contribution. The Company matches 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions. Matching contributions to participants, which were shares of the Company’s common stock purchased in the open market, amounted to $25.5 million in 2015, $24.3 million in 2014, and $22.7 million in 2013, and $21.6 million in 2012.

The 401(k) plan also has a noncontributory profit sharing feature which is discretionary and may range from 0% to 6% of eligible compensation based upon the Company’s return on average common equity for the year. For all years presented, theThe profit sharing expense was computed at a contribution rate of 1% for 2015 and 2%, for 2014 and 2013, and amounted to $6.1 million for 2015, $12.0 million for 2014and $11.8$11.8 millionfor both 2013 and 2012.2013. The profit sharing contribution to participants consisted of shares of the Company’s common stock purchased in the open market.

20.FAIR VALUE
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities in active markets that the Company has the ability to access;

148

Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in less active markets, observable inputs other

160

than quoted prices that are used in the valuation of an asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means; and
Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined by pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety. Market activity is presumed to be orderly in the absence of evidence of forced or disorderly sales, although such sales may still be indicative of fair value. Applicable accounting guidance precludes the use of blockage factors or liquidity adjustments due to the quantity of securities held by an entity.

We use fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. Fair value is used on a nonrecurring basis to measure certain assets when adjusting carrying values, such as the application of lower of cost or fair value accounting, including recognition of impairment on assets. Fair value is also used when providing required disclosures for certain financial instruments.

Fair Value Policies and Procedures
We have various policies, processes and controls in place to ensure that fair values are reasonably developed, reviewed and approved for use. These include a Securities Valuation and Securitization Oversight Committee (“SOC”SVC”) comprised of executive management appointed by the Board of Directors. The SOCSVC reviews and approves on a quarterly basis the key components of fair value estimation, including critical valuation assumptions for Level 3 modeling. Attribution analyses are completed when significant changes occur between quarters. The SOC also requires quarterly back testing of certain significant assumptions. A Model Risk Management Group conducts model validations, including the internal model,models, and sets policies and procedures for revalidation, including the timing of revalidation.

Third Party Service Providers
We use a third party pricing service to provide pricingfair value measurements for approximately 90%92% of our AFS Level 2 securities, and an internal model to estimate fair value for approximately 98% of our AFS Level 3 securities. Fair valuesvalue measurements for the remainingother AFS Level 2 and Level 3 securities generally use certain inputs corroborated by market data and include standard form discounted cash flow modeling with certain inputs corroborated by market data.modeling.

For Level 2 securities, the third party pricing service provides documentation on an ongoing basis that presents market corroborative data, including detail pricing information and market reference data. The documentation includes benchmark yields, reported trades, broker/dealerbroker-dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data, including information from the vendor trading platform. We review, test and validate this information as appropriate. Absent observable trade data, we do not adjust prices from our third party sources.

For Level 3 securities, we review and evaluate on a quarterly basis the relevant modeling assumptions. These include PDs, loss given default rates, over-collateralization levels, and rating transition probability matrices from ratings agencies. In addition, we also compare the results and valuation with our information about market trends and trading data. This includes information regarding trading prices, implied discounts, outlier information, valuation assumptions, etc.

The following describes the hierarchy designations, valuation methodologies, and key inputs to measure fair value on a recurring basis for designated financial instruments:

Available-for-Sale and Trading
U.S. Treasury, Agencies and Corporations

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U.S. Treasury securities are measured under Level 1 using quoted market prices.prices when available. U.S. agencies and corporations are measured under Level 2 generally using the previously-discussedpreviously discussed third party pricing service.

Municipal Securities
Municipal securities are measured under Level 2 generally using the third party pricing service or under Level 3 using a discounted cash flow approach.an internal model. Valuation inputs include Baa municipal curves, as well as FHLB and London Interbank Offered Rate (“LIBOR”) swap curves. Additional valuation inputs include internal credit scoring, and security- and client-type groupings.

Asset-Backed Securities: Trust Preferred Collateralized Debt Obligations
The majority of the CDO portfolio is measured under Level 3 primarily with the internal model using an income-based cash flow modeling approach incorporating several methodologies. The Company inputs its own key valuation assumptions:
Trust preferred – banks and insurance: We primarily use an internal model for our bank and insurance CDO securities. Our “ratio-based approach” utilizes a statistical regression of regulatory ratios we have identified as predictive of future bank failures and bank holding company defaults to create a credit-specific PD for each bank issuer. The approach generally references trailing quarter regulatory data, financial ratios and macroeconomic factors.
The PDs used depend on whether the collateral is performing or deferring. Deferring PDs increase, all else being equal, as the deferral ages and approaches the end of its allowable five-year deferral period. The internal model includes the expectation that deferrals that do not default will pay their contractually required back interest and return to a current status at the end of five years. Estimates of loss for the individual pieces of underlying collateral are aggregated to arrive at a pool-level loss rate for each CDO. These loss assumptions are applied to the CDO’s structure to generate cash flow projections for each tranche of the CDO.
We utilize a present value technique to identify both the OTTI present in the CDO tranches and to estimate fair value. To estimate fair value, we discount the credit-adjusted cash flows of each CDO tranche at a tranche-specific discount rate derived from trading data and a measure of the credit risk in the CDO tranche. Because these securities are not traded on exchanges and trading prices are not posted on the TRACE® system (Trade Reporting and Compliance Engine®), we seek information from market participants to obtain trade price information.
Trading data is generally limited and may include trades of tranches within our same CDO. We use this limited trade data along with our modeled expected credit adjusted cash flows to determine a relationship between the market required yield and the downside variability of the returns of each CDO security. The downside variability for this purpose is a measure of the downside variability of cash flows from the mean estimate of cash flow.
During the first quarter of 2014, two insurance CDO securities and two single-name bank trust preferred securities were transferred from Level 3 to Level 2 primarily due to the increasing ability to utilize fair value inputs corroborated by observed market data. The two insurance CDO securities were sold or paid off prior to December 31, 2014. The two single-name bank trust preferred securities remain at Level 2 at December 31, 2014 as shown in the Level 3 reconciliation schedules following. These two remaining securities constitute the Company’s entire holding of the asset class.

Trust preferred – REITs, Other: During the first quarter of 2014, all of these securities were sold, as discussed in Note 5.

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Auction Rate Securities(“LIBOR”) swap curves. Our valuation methodology for non-rated municipal securities changed at year end to utilize more observable inputs, primarily municipal market yield curves, and fewer unobservable inputs as compared to our previous valuation method. The resulting values were determined to be Level 2.
Auction rateMoney Market Mutual Funds and Other
Money market mutual funds and other securities are measured under Level 3 primarily1 or Level 2. For Level 1, quoted market prices are used which may include NAVs or their equivalents. Level 2 valuations generally use quoted prices for similar securities.

Trading Account
Securities in the trading account are generally measured under Level 2 using valuation inputs that include AAA corporate bond yield curves, municipal yield curves, credit ratings and leverage of each closed-end fund, market yields for commercial paper, and any observable trade commentaries.third party pricing service providers as described previously.
Bank-Owned Life Insurance
Bank-owned life insurance (“BOLI”) is measured under Level 2 according to cash surrender values (“CSVs”) of the insurance policies that are provided by a third party service. Nearly all CSVspolicies are computedgeneral account policies with CSVs based on valuations and earningsthe Company’s claims on the assets of the underlying assets in theinsurance companies. The insurance companies’ general accounts. The underlying investments include predominantly fixed income securities consisting of investment gradeinvestment-grade corporate bonds and various types of mortgage instruments. Average duration ranges from five to eight years. Management regularly reviews its BOLI investment performance, including concentrations of investments and regulatory restrictions.among insurance providers.
Private Equity Investments
Private equity investments are measured under Level 2 or Level 3. The Equity Investments Committee, consisting of executives familiar with the investments, reviews periodic financial information, including audited financial statements when available. Certain analytics may be employed that include current and projected financial performance, recent financing activities, economic and market conditions, market comparables, market liquidity, sales restrictions, and other factors. The amount of unfunded commitments to invest is disclosed in Note 17. Certain restrictions apply for the redemption of these investments and certain investments are prohibited by the Volcker Rule.VR. See discussions in Notes 5 and 17.
Private equity investments under Level 2 include partnerships that invest in certain financial services and real estate companies, some of which are publicly traded. Fair values are determined from NAVs, or their equivalents, provided by the partnerships. These fair values are determined on the last business day of the month using values from the primary exchange. In the case of illiquid or nontraded assets, the partnerships obtain fair values from independent sources.
Private equity investments are measured under Level 3 primarily using current and projected financial performance, recent financing activities, economic and market conditions, market comparables, market liquidity, sales restrictions, and other factors.
Agriculture Loan Servicing
This asset results from our servicing of agriculture loans approved and funded by FAMC. We provide this servicing under an agreement with Farmer MacFAMC for loans they own. The asset’s fair value represents our projection of the present value of future cash flows measured under Level 3 using discounted cash flow methodologies.
Interest-Only Strips
Interest-only strips are created as a by-product of the securitization process. When the guaranteed portions of SBA 7(a) loans are pooled, interest-only strips may be created in the pooling process. The asset’s fair value represents our projection of the present value of future cash flows measured under Level 3 using discounted cash flow methodologies.
Deferred Compensation Plan Assets and Obligations
Invested assets in the deferred compensation plan consistsconsist of shares of registered investment companies. These mutual funds are valued under Level 1 at quoted market prices, which represents the NAV of shares held by the plan at the end of the period.
Derivatives
Derivatives are measured according to their classification as either exchange-traded or over-the-counter (“OTC”). Exchange-traded derivatives consist of forwardforeign currency exchange contracts measured under Level 1 because they are traded in active markets. OTC derivatives, including those for customers, consist of interest rate swaps and options. These derivatives are measured under Level 2 using third party services. Observable market inputs include yield curves (the LIBOR swap curve and relevant overnight index swap curves), foreign exchange rates, commodity

150

prices, option volatilities, counterparty credit risk, and other related data. Credit valuation adjustments are required

163

to reflect nonperformance risk for both the Company and the respective counterparty. These adjustments are determined generally by applying a credit spread to the total expected exposure of the derivative.
Securities Sold, Not Yet Purchased
Securities sold, not yet purchased, included in “Federal funds and other short-term borrowings” on the balance sheet, are measured under Level 1 using quoted market prices. If not available, quoted prices under Level 2 for similar securities are used.

Quantitative Disclosure by Fair Value Hierarchy
Assets and liabilities measured at fair value by class on a recurring basis are summarized as follows:
(In thousands)December 31, 2014December 31, 2015
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
ASSETS              
Investment securities:              
Available-for-sale:              
U.S. Treasury, agencies and corporations

 $3,098,208
   $3,098,208
$—
 $7,100,844
 $—
 $7,100,844
Municipal securities  185,093
 $4,164
 189,257
  418,695
 

 418,695
Asset-backed securities:       
Trust preferred – banks and insurance  22,701
 393,007
 415,708
Auction rate  
 4,761
 4,761
Other  666
 25
 691
Mutual funds and other$105,348
 30,275
   135,623
Other debt securities  22,941
 

 22,941
Money market mutual funds and other61,807
 38,829
   100,636
105,348
 3,336,943
 401,957
 3,844,248
61,807
 7,581,309
 —
 7,643,116
Trading account  70,601
   70,601
  48,168
   48,168
Other noninterest-bearing investments:              
Bank-owned life insurance  476,290
   476,290
  485,978
   485,978
Private equity  

 99,865
 99,865
Private equity investments  

 120,027
 120,027
Other assets:              
Agriculture loan servicing and interest-only strips    12,227
 12,227
    13,514
 13,514
Deferred compensation plan assets88,878
     88,878
84,570
     84,570
Derivatives:              
Interest rate related and other  1,508
   1,508
  5,966
   5,966
Interest rate swaps for customers  48,287
   48,287
  51,353
   51,353
Foreign currency exchange contracts16,625
     16,625
20,824
     20,824
16,625
 49,795
   66,420
20,824
 57,319
   78,143
$210,851
 $3,933,629
 $514,049
 $4,658,529
$167,201
 $8,172,774
 $133,541
 $8,473,516
LIABILITIES              
Securities sold, not yet purchased$24,230
 

   $24,230
$30,158
 $—
 $—
 $30,158
Other liabilities:              
Deferred compensation plan obligations88,878
     88,878
84,570
     84,570
Derivatives:              
Interest rate related and other  $297
   297
  835
   835
Interest rate swaps for customers  50,669
   50,669
  53,843
   53,843
Foreign currency exchange contracts15,272
     15,272
17,761
     17,761
15,272
 50,966
 —
 66,238
17,761
 54,678
 —
 72,439
Other    $13
 13
    

 —
$128,380
 $50,966
 $13
 $179,359
$132,489
 $54,678
 $—
 $187,167


164151

(In thousands)December 31, 2013
 Level 1 Level 2 Level 3 Total
ASSETS       
Investment securities:       
Available-for-sale:       
U.S. Treasury, agencies and corporations

 $2,059,105
   $2,059,105
Municipal securities  55,602
 $10,662
 66,264
Asset-backed securities:       
Trust preferred – banks and insurance  

 1,238,820
 1,238,820
Trust preferred – real estate investment trusts    22,996
 22,996
Auction rate    6,599
 6,599
Other  2,099
 25,800
 27,899
Mutual funds and other$259,750
 20,453
   280,203
 259,750
 2,137,259
 1,304,877
 3,701,886
Trading account  34,559
   34,559
Other noninterest-bearing investments:       
Bank-owned life insurance  466,428
   466,428
Private equity  4,822
 82,410
 87,232
Other assets:      

Agriculture loan servicing and interest-only strips    8,852
 8,852
Deferred compensation plan assets86,184
     86,184
Derivatives:       
Interest rate related and other  1,100
   1,100
Interest rate swaps for customers  55,447
   55,447
Foreign currency exchange contracts9,614
     9,614
 9,614
 56,547
   66,161
 $355,548
 $2,699,615
 $1,396,139
 $4,451,302
LIABILITIES       
Securities sold, not yet purchased$73,606
 

   $73,606
Other liabilities:      

Deferred compensation plan obligations86,184
     86,184
Derivatives:       
Interest rate related and other  $1,004
   1,004
Interest rate swaps for customers  54,688
   54,688
Foreign currency exchange contracts8,643
     8,643
Total return swap    $4,062
 4,062
 8,643
 55,692
 4,062
 68,397
Other    241
 241
 $168,433
 $55,692
 $4,303
 $228,428
The fair value of the Level 3 bank and insurance CDO portfolio would generally be adversely affected by significant increases in the constant default rate (“CDR”) for performing collateral, the loss percentage expected from deferring collateral, and the discount rate used. The fair value of the portfolio would generally be positively affected by increases in prepayment rates. For a specific tranche within a CDO, the directionality of the fair value change for a given assumption change may differ depending on the seniority level of the tranche. For example, faster prepayment may increase the fair value of a senior most tranche of a CDO while decreasing the fair value of a more junior tranche.

(In thousands)December 31, 2014
 Level 1 Level 2 Level 3 Total
ASSETS       
Investment securities:       
Available-for-sale:       
U.S. Treasury, agencies and corporations$—
 $3,098,208
 $—
 $3,098,208
Municipal securities  185,093
 4,164
 189,257
Asset-backed securities:       
Trust preferred – banks and insurance  22,701
 393,007
 415,708
Auction rate    4,761
 4,761
Other  666
 25
 691
Money market mutual funds and other105,348
 30,275
   135,623
 105,348
 3,336,943
 401,957
 3,844,248
Trading account  70,601
   70,601
Other noninterest-bearing investments:       
Bank-owned life insurance  476,290
   476,290
Private equity investments  

 97,649
 97,649
Other assets:      

Agriculture loan servicing and interest-only strips    12,227
 12,227
Deferred compensation plan assets88,878
     88,878
Derivatives:       
Interest rate related and other  1,508
   1,508
Interest rate swaps for customers  48,287
   48,287
Foreign currency exchange contracts16,625
     16,625
 16,625
 49,795
   66,420
 $210,851
 $3,933,629
 $511,833
 $4,656,313
LIABILITIES       
Securities sold, not yet purchased$24,230
 $—
 $—
 $24,230
Other liabilities:      

Deferred compensation plan obligations88,878
     88,878
Derivatives:       
Interest rate related and other  297
   297
Interest rate swaps for customers  50,669
   50,669
Foreign currency exchange contracts15,272
     15,272
 15,272
 50,966
 —
 66,238
Other    13
 13
 $128,380
 $50,966
 $13
 $179,359

165152

Reconciliation of Level 3 Fair Value Measurements
The following reconciles the beginning and ending balances of assets and liabilities that are measured at fair value by class on a recurring basis using Level 3 inputs:
Level 3 InstrumentsLevel 3 Instruments
Year Ended December 31, 2014Year Ended December 31, 2015
(In thousands)Municipal
securities		 Trust 
preferred – banks and insurance		 Trust
preferred
 – REIT		 Auction
rate		 Other
asset-backed		 Private
equity
investments		 Ag loan svcg and int-only strips Derivatives
and other
liabilities		Municipal
securities		 Trust 
preferred – banks and insurance		 Other Private
equity
investments		 Ag loan svcg and int-only strips Derivatives
and other
liabilities
                          
Balance at December 31, 2013$10,662
 $1,238,820
 $22,996
 $6,599
 $25,800
 $82,410
 $8,852
 $(4,303)
Balance at December 31, 2014$4,164
 $393,007
 $4,761
 $97,649
 $12,227
 $(12)
Total net gains (losses) included in:                          
Statement of income:                          
Accretion of purchase discount on securities available-for-sale32
 2,151
 

 3
 

      3
 471
 

      
Dividends and other investment income          6,192
    
Fair value and nonhedge derivative loss            
 (7,894)
Dividends and other investment loss      (3,657)    
Equity securities gains, net          5,869
          7,270
    
Fixed income securities gains (losses), net126
 (3,097) 1,399
 50
 10,917
      
Fixed income securities losses, net(344) (136,691) (606)      
Other noninterest income            857
          1,480
  
Other noninterest expense              228
          12
Other comprehensive
income (loss)
(376) 146,303
 

 (19) (15)      687
 141,547
 (74)      
Fair Value of HTM securities reclassified as AFS  57,308
        
Purchases  
       21,768
 3,351
    
   24,898
 993
  
Sales(5,679) (818,647) (24,395) (922) (36,670) (10,448)    (2,651) (440,055) (4,081) (4,107)    
Redemptions and paydowns(601) (103,330)   (950) (7) (5,926) (833) 11,956
(1,859) (15,587) 

 (2,026) (1,186) 

Transfers to Level 2  (69,193)            
Balance at December 31, 2014$4,164
 $393,007

$—

$4,761

$25

$99,865

$12,227

$(13)
Balance at December 31, 2015$—
 $—

$—

$120,027

$13,514

$—

Level 3 InstrumentsLevel 3 Instruments
Year Ended December 31, 2013Year Ended December 31, 2014
(In thousands)Municipal
securities		 Trust 
preferred – banks and insurance		 Trust
preferred
 – REIT		 Auction
rate		 Other
asset-backed		 Private
equity
investments		 Ag loan svcg and int-only strips Derivatives
and other
liabilities		Municipal
securities		 Trust 
preferred – banks and insurance		 
Trust
preferred
 – REIT 1
 Auction
rate		 Other
asset-backed		 Private
equity
investments		 Ag loan svcg and int-only strips Derivatives
and other
liabilities
                              
Balance at December 31, 2012$16,551
 $949,271
 $16,403
 $6,515
 $15,160
 $64,223
 $8,334
 $(5,251)
Balance at December 31, 2013$10,662
 $1,238,820
 $22,996
 $6,599
 $25,800
 $82,410
 $8,852
 $(4,303)
Total net gains (losses) included in:                              
Statement of income:                              
Accretion of purchase discount on securities available-for-sale41
 3,166
 254
 3
 82
      32
 2,151
 

 3
 

      
Dividends and other investment income          6,662
              3,976
    
Fair value and nonhedge derivative loss            
 (21,753)            
 (7,894)
Equity securities gains, net          3,732
              5,869
    
Fixed income securities gains (losses), net239
 (3,160) (201) 

 55
      126
 (3,097) 1,399
 50
 10,917
      
Net impairment losses on investment securities  (136,221) (17,430)   (11,080)      
Other noninterest income            1,587
              857
  
Other noninterest expense              (117)              228
Other comprehensive
income (loss)
1,540
 377,357
 24,081
 81
 6,950
      (376) 146,303
 

 (19) (15)      
Purchases          10,548
              21,768
 3,351
  
Sales
 (66,303) (111) 
 (1) (2,244)    (5,679) (818,647) (24,395) (922) (36,670) (10,448)    
Redemptions and paydowns(7,709) (60,989)   

 (5,780) (511) (1,069) 22,818
(601) (103,330)   (950) (7) (5,926) (833) 11,956
Reclassifications  175,699
     20,414
      
Balance at December 31, 2013$10,662

$1,238,820

$22,996

$6,599

$25,800

$82,410

$8,852

$(4,303)
Transfers to Level 2  (69,193)            
Balance at December 31, 2014$4,164

$393,007

$—

$4,761

$25

$97,649

$12,227

$(13)
1
Real Estate Investment Trust

166153

Except for the transfers included in the previous schedule, no transfers of assets or liabilities occurred among Levels 1, 2 or 3 for 2015 and 2014. Transfers are considered to have occurred as of the end of the reporting period.

The preceding reconciling amounts using Level 3 inputs include the following realized gains/losses in the statement of income:
 
(In thousands)
Year Ended
December 31,
Year Ended
December 31,
2014 20132015 2014
      
Dividends and other investment income (loss)$518
 $(133)$(2) $518
Equity securities losses, net—
 (2,452)(11,311) —
Fixed income securities gains (losses), net9,395
 (3,067)(137,641) 9,395

Except as previously discussed, no other transfers of assets or liabilities occurred among Levels 1, 2 or 3 for 2014 and 2013. Transfers are considered to have occurred as of the end of the reporting period.

Following is a summary of quantitative information relating to the principal valuation techniques and significant unobservable inputs for Level 3 instruments measured on a recurring basis:
 Level 3 Instruments
 Quantitative information at December 31, 2014
(Dollar amounts in thousands)Fair value Principal valuation techniques Significant unobservable inputs 
Range of inputs
(% annually)
Asset-backed securities:       
Trust preferred – predominantly banks$393,007
 Discounted cash flow
Market comparables		 Constant prepayment rate until maturity – 2.0%
   
   
     Constant default rate yr 1 – 0.3% to 0.8%
       yrs 2-5 – 0.5% to 0.9%
       yrs 6 to maturity – 0.6% to 0.7%
     Loss given default 100%
     Loss given deferral 14.5% to 100%
     Discount rate
(spread over forward LIBOR)		 3.4% to 5.6%


167

 Level 3 Instruments
 Quantitative information at December 31, 2013
(Dollar amounts in thousands)Fair value Principal valuation techniques Significant unobservable inputs 
Range of inputs
(% annually)
Asset-backed securities:       
Trust preferred – predominantly banks$870,106
 Discounted cash flow
Market comparables		 Constant prepayment rate until 2016 – 5.50% to 20.73%
   
   2016 to maturity – 3.0%
     Constant default rate yr 1 – 0.30% to 1.94%
       yrs 2-5 – 0.49% to 1.14%
       yrs 6 to maturity – 0.58% to 0.65%
     Loss given default 100%
     Loss given deferral 14.39% to 100%
     Discount rate
(spread over forward LIBOR)		 5.6% to 7.7%
        
Trust preferred – predominantly insurance346,390
 Discounted cash flow
Market comparables		 Constant prepayment rate until maturity – 5.0%
   
 Constant default rate yr 1 – 0.38% to 1.03%
       yrs 2-5 – 0.53% to 0.89%
       yrs 6 to maturity – 0.50% to 0.55%
     Loss given default 100%
     Loss given deferral 2.18% to 30.13%
     Discount rate
(spread over forward LIBOR)		 3.72% to 6.49%
        
Trust preferred – individual banks22,324
 Market comparables Yield 6.6% to 7.8%
     Price 81.25% to 109.6%
Subtotal trust preferred – banks and insurance1,238,820
      
        
Trust preferred – real estate investment trust22,996
 Discounted cash flow
Market comparables		 Constant prepayment rate until maturity – 0.0%
   
 Constant default rate yr 1 – 4.1% to 10.6%
       yrs 2-3 – 4.6% to 5.5%
       yrs 4-6 – 1.0%
       yrs 7 to maturity – 0.50%
     Loss given default 60% to 100%
     Discount rate
(spread over forward LIBOR)		 5.5% to 15%
        
Other (predominantly ABS CDOs)25,800
 Discounted cash flow Constant default rate 0.01% to 100%
     Loss given default 70% to 92%
     Discount rate
(spread over forward LIBOR)		 9% to 22%


168

Nonrecurring Fair Value Measurements
Included in the balance sheet amounts are the following amounts of assets that had fair value changes measured on a nonrecurring basis:
(In thousands)Fair value at December 31, 2014 
Gains (losses) from
fair value changes
Year Ended
December 31, 2014
Fair value at December 31, 2015 
Gains (losses) from
fair value changes
Year Ended
December 31, 2015
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 
ASSETS                    
HTM securities adjusted for OTTI$—
 $—
 $—
 $—
 $—
 
Private equity investments, carried at cost—
 —
 23,454
 23,454
 (2,527) $—
 $—
 $10,707
 $10,707
 $(5,119) 
Impaired loans—
 18,854
 —
 18,854
 (2,304) —
 10,991
 —
 10,991
 (12,039) 
Other real estate owned—
 8,034
 —
 8,034
 (6,784) —
 2,388
 —
 2,388
 (2,467) 
$—
 $26,888
 $23,454
 $50,342
 $(11,615) $—
 $13,379
 $10,707
 $24,086
 $(19,625) 
(In thousands)Fair value at December 31, 2013 
Gains (losses) from
fair value changes Year Ended December 31, 2013
Fair value at December 31, 2014 
Gains (losses) from
fair value changes Year Ended December 31, 2014
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 
ASSETS                    
HTM securities adjusted for OTTI$—
 $—
 $8,483
 $8,483
 $(403) 
Private equity investments, carried at cost—
 —
 13,270
 13,270
 (5,700) $—
 $—
 $23,454
 $23,454
 $(2,527) 
Impaired loans—
 11,765
 —
 11,765
 (1,575) —
 19,453
 —
 19,453
 (9,776) 
Other real estate owned—
 24,684
 —
 24,684
 (13,158) —
 8,034
 —
 8,034
 (6,784) 
$—
 $36,449
 $21,753
 $58,202
 $(20,836) $—
 $27,487
 $23,454
 $50,941
 $(19,087) 

The previous fair values may not be current as of the dates indicated, but rather as of the date the fair value change occurred, such as a charge for impairment. Accordingly, carrying values may not equal current fair value.

We recognized net gains of $8.8$4.0 million in 20142015 and $15.6$8.8 million in 20132014 from the sale of OREO properties that had a carrying value at the time of sale of approximately $41.4$19.2 million in 20142015 and $82.5$41.4 million in 2013.2014. Previous to their sale in these years, we recognized impairment on these properties of $0.7$0.6 million in 20142015 and $0.8$0.7 million in 2013.

HTM securities adjusted for OTTI were measured at fair value using the same methodology for trust preferred CDO securities.2014.

Private equity investments carried at cost were measured at fair value for impairment purposes according to the methodology previously discussed.discussed for these investments. Amounts of private equity investmentsPEIs carried at cost were $39.1$25.3 million and $53.6$39.1 million at December 31, 20142015 and 2013,2014, respectively. Amounts of other noninterest-bearing investments carried at cost were $250.7$191.5 million and $248.4$224.4 million at December 31, 20142015 and 2013,2014, respectively, which were comprised of Federal Reserve Federal Home Loan Bank, and Farmer MacFHLB stock.


154

Impaired (or nonperforming) loans that are collateral-dependent were measured at fair value based on the fair value of the collateral. OREO was measured initially at fair value at the lower of cost or fair value based on property appraisals at the time of transfer and subsequently at the property is recorded in OREO and as appropriate thereafter.lower of cost or fair value.

Measurement of fair value for collateral-dependent loans and OREO was based on third party appraisals that utilize one or more valuation techniques (income, market and/or cost approaches). Any adjustments to calculated fair value were made based on recently completed and validated third party appraisals, third party appraisal services, automated valuation services, or our informed judgment. Evaluations were made to determine that the appraisal process met the relevant concepts and requirements of applicable accounting guidance.

169


Automated valuation services may be used primarily for residential properties when values from any of the previous methods were not available within 90 days of the balance sheet date. These services use models based on market, economic, and demographic values. The use of these models has only occurred in a very few instances and the related property valuations have not been significant to consider disclosure under Level 3 rather than Level 2.

Impaired loans that are not collateral-dependent were measured at fair valued based on the present value of future cash flows discounted at the expected coupon rates over the lives of the loans. Because the loans were not discounted at market interest rates, the valuations do not represent fair value and have been excluded from the nonrecurring fair value balance in the preceding schedules.

Fair Value of Certain Financial Instruments
Following is a summary of the carrying values and estimated fair values of certain financial instruments:
December 31, 2014 December 31, 2013December 31, 2015 December 31, 2014
(Amounts in thousands)
Carrying
value
 
Estimated
fair value
 Level 
Carrying
value
 
Estimated
fair value
 Level
Carrying
value
 
Estimated
fair value
 Level 
Carrying
value
 
Estimated
fair value
 Level
Financial assets:                
HTM investment securities$647,252
 $677,196
 3 $588,981
 $609,547
 3$545,648
 $552,088
 2 $647,252
 $677,196
 3
Loans and leases (including loans held for sale), net of allowance39,591,857
 39,426,498
 3 38,468,402
 38,088,242
 340,193,374
 39,535,365
 3 39,591,499
 39,426,141
 3
Financial liabilities:                
Time deposits2,406,924
 2,408,550
 2 2,593,038
 2,602,955
 22,130,680
 2,129,742
 2 2,406,924
 2,408,550
 2
Foreign deposits328,391
 328,447
 2 1,980,161
 1,979,805
 2294,391
 294,321
 2 328,391
 328,447
 2
Long-term debt (less fair value hedges)1,090,778
 1,159,287
 2 2,269,762
 2,423,643
 2817,348
 838,796
 2 1,090,778
 1,159,287
 2

This summary excludes financial assets and liabilities for which carrying value approximates fair value. Forvalue and financial assets, theseinstruments that are recorded at fair value on a recurring basis. Financial instruments for which carrying values approximate fair value include cash and due from banks, and money market investments. For financial liabilities, these includeinvestments, demand, savings and money market deposits, and federal funds purchased and security repurchase agreements. The estimated fair value of demand, savings and money market deposits is the amount payable on demand at the reporting date. Carrying value is used because the accounts have no stated maturity and the customer has the ability to withdraw funds immediately. Also excluded from the summary are financial instruments recorded at fair value on a recurring basis, as previously described.

HTM investment securities primarily consist of municipal securities and bank and insurance trust preferred CDOs.securities. They were measured at fair value according to the methodologiesmethodology previously discussed for these investment types.discussed.

Loans are measured at fair value according to their status as nonimpaired or impaired. For nonimpaired loans, fair value is estimated by discounting future cash flows using the LIBOR yield curve adjusted by a factor which reflects the credit and interest rate risk inherent in the loan. These future cash flows are then reduced by the estimated “life-of-the-loan” aggregate credit losses in the loan portfolio. These adjustments for lifetime future credit losses are derived from the methods used to estimate the ALLL for our loan portfolio and are adjusted quarterly as necessary

155

to reflect the most recent loss experience. Impaired loans that are collateral-dependent are already considered to be held at fair value, except those whose fair value is determined by discountingvalue. Impaired loans that are not collateral-dependent have future cash flows as discussed previously.reduced by the estimated “life-of-the-loan” credit loss derived from methods used to estimate the ALLL for these loans. See Impaired Loans in Note 6 for details on the impairment measurement method for impaired loans. Loans, other than those held for sale, are not normally purchased and sold by the Company, and there are no active trading markets for most of this portfolio. At December 31, 2015, oil and gas-related loan fair value measurement incorporated an illiquidity risk premium in addition to credit and interest rate risk adjustments.

Time and foreign deposits, and any other short-term borrowings, are measured at fair value by discounting future cash flows using the LIBOR yield curve to the given maturity dates.


170

Long-term debt is measured at fair value based on actual market trades (i.e., an asset value) when available, or discounting cash flows to maturity using the LIBOR yield curve adjusted for credit spreads.

These fair value disclosures represent our best estimates based on relevant market information and information about the financial instruments. Fair value estimates are based on judgments regarding current economic conditions, future expected loss experience, risk characteristics of the various instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of significant judgment, and cannot be determined with precision. Changes in these methodologies and assumptions could significantly affect the estimates.

21.OPERATING SEGMENT INFORMATION
We manage our operations and prepare management reports and other information with a primary focus on geographical area. As discussed in Note 1, following the close of business on December 31, 2015, the Company’s seven subsidiary banks and certain other subsidiaries were merged into a single entity, whose name was changed to ZB, N.A. Effective April 1, 2015, TCBO was merged into TCBW. These consolidations will affect the presentation of segment reporting, although certain geographical information will continue. Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications did not affect net income.
As of December 31, 20142015, we operateour banking business is conducted through eightseven community/regional bankslocally managed and branded segments in distinct geographical areas. Performance assessment and resource allocation are based upon this geographical structure. Zions Bank operates 10099 branches in Utah, 2524 branches in Idaho, and one branch in Wyoming. CB&T operates 94 branches in California. Amegy operates 8077 branches in Texas. NBAZ operates 7167 branches in Arizona. NSB operates 5049 branches in Nevada. Vectra operates 36 branches in Colorado and one branch in New Mexico. TCBW operates one branch in the state of Washington. TCBO operatesWashington and one branch in Oregon. See Note 1 regarding the upcoming merger of TCBO into TCBW.

The operating segment identified as “Other” includes the Parent, Zions Management Services Company (“ZMSC”) (which was merged into Zions First National Bank on December 31,2015), certain nonbank financial service subsidiaries, TCBO, and eliminations of transactions between segments. The Parent’s operations are significant to the Other segment. The Company’s net interest income is substantially affected by the Parent’s interest expense on long-term debt. The Parent’s financial statements in Note 23 provide more information about the Parent’s activities. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the Other segment.

ZMSC providesprovided internal technology and operational services to affiliated operating businesses of the Company. ZMSC charges most of its costs to the affiliates on an approximate break-even basis.

The accounting policies of the individual operating segments are the same as those of the Company. Transactions between operating segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. Operating segments pay for centrally provided services based upon estimated or actual usage of those services.


156

The following is a summary of selected operating segment information:
(In millions)Zions Bank Amegy CB&T
2015 2014 2013 2015 2014 2013 2015 2014 2013
CONDENSED INCOME STATEMENT                 
Net interest income$583.0
 $581.4
 $595.0
 $398.0
 $386.8
 $386.5
 $390.8
 $412.5
 $469.0
Provision for loan losses(28.3) (58.5) (40.5) 91.3
 32.2
 4.2
 (4.4) (20.1) (16.7)
Net interest income after provision for loan losses611.3
 639.9
 635.5
 306.7
 354.6
 382.3
 395.2
 432.6
 485.7
Net impairment losses on investment securities—
 —
 (7.7) —
 —
 —
 —
 —
 —
Loss on sale of investment securities to Parent—
 —
 —
 —
 —
 —
 —
 —
 —
Other noninterest income136.3
 206.4
 199.9
 137.9
 140.4
 137.0
 74.1
 53.9
 79.3
Noninterest expense514.7
 494.3
 481.4
 379.8
 357.3
 333.3
 295.9
 321.3
 352.4
Income (loss) before income taxes and minority interest232.9
 352.0
 346.3
 64.8
 137.7
 186.0
 173.4
 165.2
 212.6
Income tax expense (benefit)82.6
 130.4
 121.7
 20.0
 44.5
 58.6
 67.2
 63.9
 72.5
Net income (loss)150.3
 221.6
 224.6
 44.8
 93.2
 127.4
 106.2
 101.3
 140.1
Net income (loss) applicable to noncontrolling interests0.9
 1.2
 —
 —
 —
 —
 —
 —
 —
Net income (loss) applicable to controlling interest$149.4
 $220.4
 $224.6
 $44.8
 $93.2
 $127.4
 $106.2
 $101.3
 $140.1
YEAR-END BALANCE SHEET DATA                 
Total assets$19,744
 $19,079
 $18,590
 $14,062
 $13,888
 $13,620
 $12,187
 $11,340
 $10,923
Cash and due from banks375
 385
 362
 228
 219
 407
 56
 85
 157
Money market investments1,118
 3,384
 3,890
 2,072
 2,199
 2,551
 1,814
 1,670
 1,108
Total securities5,103
 2,331
 1,520
 465
 277
 362
 714
 296
 331
Total loans12,334
 12,251
 12,259
 10,115
 10,077
 9,217
 8,832
 8,530
 8,574
Total deposits16,900
 16,633
 16,257
 11,634
 11,491
 11,199
 10,520
 9,707
 9,328
Shareholders’ equity:                 
Preferred equity280
 280
 280
 226
 226
 226
 162
 162
 162
Common equity1,693
 1,615
 1,523
 2,030
 1,998
 1,988
 1,424
 1,390
 1,342
Noncontrolling interests32
 11
 —
 —
 —
 —
 —
 —
 —
Total shareholders’ equity2,005
 1,906
 1,803
 2,256
 2,224
 2,214
 1,586
 1,552
 1,504
(In millions)NBAZ NSB Vectra
2015 2014 2013 2015 2014 2013 2015 2014 2013
CONDENSED INCOME STATEMENT                 
Net interest income$160.6

$162.0
 $163.0

$112.9

$112.9
 $113.6
 $103.7
 $102.1
 $102.7
Provision for loan losses7.9

(21.5) (15.0)
(28.3)
(20.9) (12.0) 4.7
 (8.4) (4.9)
Net interest income after provision for loan losses152.7
 183.5
 178.0
 141.2
 133.8
 125.6
 99.0
 110.5
 107.6
Net impairment losses on investment securities—

—
 —

—

—
 (3.3) —
 —
 (0.1)
Loss on sale of investment securities to Parent—

—
 —

—

—
 —
 —
 —
 —
Other noninterest income38.6

36.0
 35.0

35.7

32.2
 37.8
 21.0
 19.9
 24.6
Noninterest expense131.5

145.1
 142.7

129.5

132.8
 131.8
 97.2
 98.3
 99.5
Income (loss) before income taxes and minority interest59.8
 74.4
 70.3
 47.4
 33.2
 28.3
 22.8
 32.1
 32.6
Income tax expense (benefit)17.8

27.9
 26.4

15.9

10.9
 9.5
 7.1
 10.7
 11.2
Net income (loss)42.0

46.5

43.9

31.5

22.3

18.8

15.7

21.4

21.4
Net income (loss) applicable to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
Net income (loss) applicable to controlling interest$42.0
 $46.5
 $43.9
 $31.5
 $22.3
 $18.8
 $15.7
 $21.4
 $21.4
YEAR-END BALANCE SHEET DATA                 
Total assets$5,024

$4,771
 $4,579

$4,441

$4,096
 $3,980
 $3,310
 $2,999
 $2,571
Cash and due from banks80
 51
 77
 54
 51
 79
 32
 28
 51
Money market investments238
 371
 221
 1,036
 655
 710
 475
 407
 6
Total securities601
 395
 362
 920
 831
 774
 274
 179
 166
Total loans3,909

3,750
 3,724

2,285

2,421
 2,297
 2,468
 2,320
 2,278
Total deposits4,369

4,133
 3,931

4,035

3,690
 3,590
 2,889
 2,591
 2,178
Shareholders’ equity:                 
Preferred equity85

85
 120

50

50
 50
 25
 25
 70
Common equity522

481
 418

330

332
 317
 331
 315
 246
Noncontrolling interests—

—
 —

—

—
 —
 —
 —
 —
Total shareholders’ equity607
 566
 538
 380
 382
 367
 356
 340
 316

171157

(In millions)Zions Bank Amegy CB&T
2014 2013 2012 2014 2013 2012 2014 2013 2012
CONDENSED INCOME STATEMENT                 
Net interest income$581.4
 $595.0
 $657.1
 $382.2
 $381.5
 $371.5
 $412.5
 $469.0
 $466.7
Provision for loan losses(58.5) (40.5) 88.3
 32.2
 4.2
 (63.9) (20.1) (16.7) (7.9)
Net interest income after provision for loan losses639.9
 635.5
 568.8
 350.0
 377.3
 435.4
 432.6
 485.7
 474.6
Net impairment losses on investment securities—
 (7.7) (3.2) —
 —
 —
 —
 —
 —
Loss on sale of investment securities to Parent—
 —
 —
 —
 —
 —
 —
 —
 (9.2)
Other noninterest income206.4
 199.9
 221.4
 145.7
 146.4
 156.1
 53.9
 79.3
 75.3
Noninterest expense494.3
 481.4
 493.1
 357.3
 333.4
 340.2
 321.3
 352.4
 330.2
Income (loss) before income taxes and minority interest352.0
 346.3
 293.9
 138.4
 190.3
 251.3
 165.2
 212.6
 210.5
Income tax expense (benefit)130.4
 121.7
 104.6
 44.5
 59.8
 84.6
 63.9
 72.5
 83.4
Income (loss)221.6
 224.6
 189.3
 93.9
 130.5
 166.7
 101.3
 140.1
 127.1
Net income (loss) applicable to noncontrolling interests1.2
 —
 —
 —
 —
 —
 —
 —
 —
Net income (loss) applicable to controlling interest$220.4
 $224.6
 $189.3
 $93.9
 $130.5
 $166.7
 $101.3
 $140.1
 $127.1
YEAR-END BALANCE SHEET DATA                 
Total assets$19,079
 $18,590
 $17,930
 $13,929
 $13,705
 $13,119
 $11,340
 $10,923
 $11,069
Cash and due from banks388
 363
 650
 219
 437
 754
 85
 157
 205
Money market investments3,381
 3,888
 2,855
 2,199
 2,551
 2,308
 1,670
 1,108
 1,449
Total securities2,331
 1,520
 1,273
 277
 362
 439
 296
 331
 350
Total loans12,251
 12,259
 12,490
 10,077
 9,217
 8,450
 8,530
 8,574
 8,259
Total deposits16,633
 16,257
 15,575
 11,447
 11,198
 10,706
 9,707
 9,327
 9,483
Shareholder’s equity:                 
Preferred equity280
 280
 280
 226
 226
 251
 162
 162
 162
Common equity1,615
 1,523
 1,519
 1,930
 1,845
 1,725
 1,390
 1,342
 1,322
Noncontrolling interests11
 —
 —
 —
 —
 —
 —
 —
 —
Total shareholder’s equity1,906
 1,803
 1,799
 2,156
 2,071
 1,976
 1,552
 1,504
 1,484
(In millions)NBAZ NSB Vectra
2014 2013 2012 2014 2013 2012 2014 2013 2012
CONDENSED INCOME STATEMENT                 
Net interest income$162.0

$163.0
 $167.7

$112.9

$113.6
 $123.4
 $102.1
 $102.7
 $108.7
Provision for loan losses(21.5)
(15.0) (0.6)
(20.9)
(12.0) (9.6) (8.4) (4.9) 7.0
Net interest income after provision for loan losses183.5
 178.0
 168.3
 133.8
 125.6
 133.0
 110.5
 107.6
 101.7
Net impairment losses on investment securities—

—
 —

—

(3.3) —
 —
 (0.1) (0.6)
Loss on sale of investment securities to Parent—

—
 —

—

—
 —
 —
 —
 —
Other noninterest income36.0

35.0
 32.1

32.2

37.8
 33.7
 19.9
 24.6
 25.3
Noninterest expense145.1

142.7
 152.5

132.8

131.8
 133.6
 98.3
 99.5
 98.3
Income (loss) before income taxes and minority interest74.4

70.3
 47.9

33.2

28.3
 33.1
 32.1
 32.6
 28.1
Income tax expense (benefit)27.9

26.4
 17.0

10.9

9.5
 11.3
 10.7
 11.2
 9.2
Income (loss)$46.5

$43.9

$30.9

$22.3

$18.8

$21.8

$21.4

$21.4

$18.9
Net income (loss) applicable to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 —
 —
Net income (loss) applicable to controlling interest$46.5
 $43.9
 $30.9
 $22.3
 $18.8
 $21.8
 $21.4
 $21.4
 $18.9
YEAR-END BALANCE SHEET DATA                 
Total assets$4,771

$4,579
 $4,575

$4,096

$3,980
 $4,061
 $2,999
 $2,571
 $2,511
Cash and due from banks51
 77
 86
 51
 79
 59
 29
 51
 58
Money market investments370
 220
 385
 655
 710
 1,031
 407
 6
 31
Total securities395
 362
 263
 831
 774
 742
 179
 166
 187
Total loans3,750

3,724
 3,604

2,421

2,297
 2,100
 2,320
 2,278
 2,128
Total deposits4,133

3,931
 3,874

3,690

3,590
 3,604
 2,591
 2,178
 2,164
Shareholder’s equity:                 
Preferred equity85

120
 180

50

50
 140
 25
 70
 70
Common equity481

418
 399

332

317
 298
 315
 246
 224
Noncontrolling interests—

—
 —

—

—
 —
 —
 —
 —
Total shareholder’s equity566

538
 579

382

367
 438
 340
 316
 294

172


(In millions)TCBW Other Consolidated CompanyTCBW Other Consolidated Company
2014 2013 2012 2014 2013 2012 2014 2013 20122015 2014 2013 2015 2014 2013 2015 2014 2013
CONDENSED INCOME STATEMENT                                  
Net interest income$28.8
 $27.3
 $27.4
 $(101.9) $(155.8) $(190.6) $1,680.0
 $1,696.3
 $1,731.9
$30.2
 $31.5
 $30.1
 $(63.9) $(109.2) $(163.6) $1,715.3
 $1,680.0
 $1,696.3
Provision for loan losses(0.6) (1.8) 0.4
 (0.3) (0.4) 0.5
 (98.1) (87.1) 14.2
(2.9) (0.9) (2.3) —
 —
 0.1
 40.0
 (98.1) (87.1)
Net interest income after provision for
loan losses
29.4
 29.1
 27.0
 (101.6) (155.4) (191.1) 1,778.1
 1,783.4
 1,717.7
33.1
 32.4
 32.4
 (63.9) (109.2) (163.7) 1,675.3
 1,778.1
 1,783.4
Net impairment losses on investment securities—
 —
 —
 —
 (154.0) (100.3) —
 (165.1) (104.1)—
 —
 —
 —
 —
 (154.0) —
 —
 (165.1)
Loss on sale of investment securities to Parent—
 (2.7) —
 —
 2.7
 9.2
 —
 —
 —
—
 —
 (2.7) —
 —
 2.7
 —
 —
 —
Other noninterest income2.0
 4.1
 3.8
 12.5
 (24.6) (23.7) 508.6
 502.5
 524.0
4.8
 2.5
 4.6
 (71.3) 17.3
 (15.7) 377.1
 508.6
 502.5
Noninterest expense29.7
 18.8
 18.9
 86.5
 154.4
 29.2
 1,665.3
 1,714.4
 1,596.0
16.5
 33.4
 22.2
 35.4
 82.8
 151.1
 1,600.5
 1,665.3
 1,714.4
Income (loss) before income taxes and minority interest1.7
 11.7
 11.9
 (175.6) (485.7) (335.1) 621.4
 406.4
 541.6
21.4
 1.5
 12.1
 (170.6) (174.7) (481.8) 451.9
 621.4
 406.4
Income tax expense (benefit)0.5
 4.0
 4.0
 (65.9) (162.2) (120.7) 222.9
 142.9
 193.4
7.2
 0.5
 4.2
 (75.4) (65.9) (161.2) 142.4
 222.9
 142.9
Income (loss)1.2
 7.7
 7.9
 (109.7) (323.5) (214.4) 398.5
 263.5
 348.2
Net income (loss)14.2
 1.0
 7.9
 (95.2) (108.8) (320.6) 309.5
 398.5
 263.5
Net income (loss) applicable to noncontrolling interests—
 —
 —
 (1.2) (0.3) (1.3) —
 (0.3) (1.3)—
 —
 —
 (0.9) (1.2) (0.3) —
 —
 (0.3)
Net income (loss) applicable to controlling interest$1.2
 $7.7
 $7.9
 $(108.5) $(323.2) $(213.1) $398.5
 $263.8
 $349.5
$14.2
 $1.0
 $7.9
 $(94.3) $(107.6) $(320.3) $309.5
 $398.5
 $263.8
YEAR-END BALANCE SHEET DATA                                  
Total assets$892
 $943
 $961
 $103
 $740
 $1,286
 $57,209
 $56,031
 $55,512
$1,198
 $970
 $1,010
 $(296) $66
 $758
 $59,670
 $57,209
 $56,031
Cash and due from banks29
 28
 22
 (6) (17) 8
 846
 1,175
 1,842
22
 34
 31
 (49) (11) 9
 798
 842
 1,173
Money market investments113
 181
 251
 (235) (207) 444
 8,560
 8,457
 8,754
349
 123
 182
 (374) (245) (209) 6,728
 8,564
 8,459
Total securities72
 91
 104
 181
 719
 519
 4,562
 4,325
 3,877
110
 83
 93
 50
 170
 717
 8,237
 4,562
 4,325
Total loans661
 630
 571
 54
 64
 63
 40,064
 39,043
 37,665
704
 713
 689
 3
 2
 5
 40,650
 40,064
 39,043
Total deposits752
 793
 791
 (1,106) (912) (64) 47,847
 46,362
 46,133
986
 816
 845
 (959) (1,213) (965) 50,374
 47,848
 46,363
Shareholder’s equity:                 
Shareholders’ equity:                 
Preferred equity3
 3
 3
 173
 93
 42
 1,004
 1,004
 1,128
3
 3
 3
 (2) 173
 93
 829
 1,004
 1,004
Common equity89
 87
 82

214
 (317) (645) 6,366
 5,461
 4,924
116
 103
 101

233
 132
 (474) 6,679
 6,366
 5,461
Noncontrolling interests—
 —
 —
 (11) —
 (3) —
 —
 (3)—
 —
 —
 (32) (11) —
 —
 —
 —
Total shareholder’s equity92
 90
 85
 376
 (224) (606) 7,370
 6,465
 6,049
Total shareholders’ equity119
 106
 104
 199
 294
 (381) 7,508
 7,370
 6,465


173158

22.QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information by quarter for 20142015 and 20132014 is as follows:
 Quarters   Quarters  
(In thousands, except per share amounts) First Second Third Fourth Year First Second Third Fourth Year
2014:          
2015          
Gross interest income $448,446
 $455,236
 $456,230
 $473,559
 $1,833,471
Net interest income 417,346
 423,704
 425,377
 448,833
 1,715,260
Provision for loan losses (1,494) 566
 18,262
 22,701
 40,035
Noninterest income:          
Investment securities gains (losses), net 3,114
 (133,597) 3,577
 46
 (126,860)
Other noninterest income 118,708
 134,018
 127,236
 124,018
 503,980
Noninterest expense 397,461
 404,100
 396,149
 402,776
 1,600,486
Income before income taxes 143,201
 19,459
 141,779
 147,420
 451,859
Net income 92,025
 13,960
 100,999
 102,487
 309,471
Preferred stock dividends (16,746) (15,060) (16,761) (14,290) (62,857)
Net earnings (loss) applicable to common shareholders 75,279
 (1,100) 84,238
 88,197
 246,614
          
Net earnings (loss) per common share:          
Basic $0.37
 $(0.01) $0.41
 $0.43
 $1.20
Diluted 0.37
 (0.01) 0.41
 0.43
 1.20
          
2014          
Gross interest income $467,568
 $463,191
 $460,275
 $461,959
 $1,852,993
 $467,574
 $463,192
 $460,276
 $461,960
 $1,853,002
Net interest income 416,465
 416,283
 416,818
 430,429
 1,679,995
 416,471
 416,284
 416,819
 430,430
 1,680,004
Provision for loan losses (610) (54,416) (54,643) 11,587
 (98,082) (610) (54,416) (54,643) 11,587
 (98,082)
Noninterest income:                    
Net impairment losses on investment securities (27) —
 —
 —
 (27) (27) —
 —
 —
 (27)
Investment securities gains (losses), net 31,826
 7,539
 (13,461) (2,014) 23,890
 31,826
 7,539
 (13,461) (2,014) 23,890
Other noninterest income 106,520
 117,311
 129,533
 131,411
 484,775
 106,514
 117,310
 129,532
 131,410
 484,766
Noninterest expense 398,063
 406,027
 438,536
 422,666
 1,665,292
 398,063
 406,027
 438,536
 422,666
 1,665,292
Income before income taxes 157,331
 189,522
 148,997
 125,573
 621,423
 157,331
 189,522
 148,997
 125,573
 621,423
Net income 101,210
 119,550
 95,888
 81,814
 398,462
 101,210
 119,550
 95,888
 81,814
 398,462
Preferred stock dividends (25,020) (15,060) (16,761) (15,053) (71,894) (25,020) (15,060) (16,761) (15,053) (71,894)
Net earnings applicable to common shareholders 76,190
 104,490
 79,127
 66,761
 326,568
 76,190
 104,490
 79,127
 66,761
 326,568
                    
Net earnings per common share:                    
Basic $0.41
 $0.56
 $0.40
 $0.33
 $1.68
 $0.41
 $0.56
 $0.40
 $0.33
 $1.68
Diluted 0.41
 0.56
 0.40
 0.33
 1.68
 0.41
 0.56
 0.40
 0.33
 1.68
          
2013:          
Gross interest income $484,748
 $493,233
 $473,407
 $490,017
 $1,941,405
Net interest income 418,115
 430,657
 415,521
 432,035
 1,696,328
Provision for loan losses (29,035) (21,990) (5,573) (30,538) (87,136)
Noninterest income:          
Net impairment losses on investment securities (10,117) (4,217) (9,067) (141,733) (165,134)
Investment securities gains (losses), net 6,131
 1,056
 4,745
 (6,310) 5,622
Other noninterest income 125,205
 128,309
 126,512
 116,893
 496,919
Noninterest expense 397,348
 451,678
 370,663
 494,750
 1,714,439
Income before income taxes (benefit) 171,021
 126,117
 172,621
 (63,327) 406,432
Net income (loss) 110,387
 83,026
 111,514
 (41,472) 263,455
Net income (loss) applicable to controlling interest 110,723
 83,026
 111,514
 (41,472) 263,791
Preferred stock dividends (22,399) (27,641) (27,507) (17,965) (95,512)
Preferred stock redemption —
 —
 125,700
 —
 125,700
Net earnings (loss) applicable to common shareholders 88,324
 55,385
 209,707
 (59,437) 293,979
          
Net earnings (loss) per common share:          
Basic $0.48
 $0.30
 $1.13
 $(0.32) $1.58
Diluted 0.48
 0.30
 1.12
 (0.32) 1.58
Certain prior year amounts have been reclassified to conform with the current year presentation. These reclassifications did not affect net income. See related discussion in Note 1.
As discussed in Note 5, we maderecognized a significant 2013 fourthloss during the second quarter adjustment recognizing OTTI for certain impairment lossesof 2015 on the sale of our remaining CDO investment securities.

174159

23.PARENT COMPANY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
(In thousands) December 31, December 31,
2014 2013 2015 2014
ASSETS        
Cash and due from banks $2,023
 $902,697
 $18,375
 $23,774
Interest-bearing deposits 1,007,916
 72
 775,649
 1,007,916
Security resell agreements 100,000
 —
Investment securities:        
Held-to-maturity, at adjusted cost (approximate fair value $34,691 and $31,422) 17,292
 17,359
Held-to-maturity, at adjusted cost (approximate fair value $0 and $34,691) —
 17,292
Available-for-sale, at fair value 130,964
 675,895
 45,168
 130,964
Other noninterest-bearing investments 29,091
 37,154
 28,178
 33,577
Investments in subsidiaries:        
Commercial banks and bank holding company 6,995,000
 6,700,315
Other operating companies 22,948
 31,535
Nonoperating – ZMFU II, Inc.1
 44,792
 44,511
Commercial bank 7,312,654
 7,094,597
Other subsidiaries 84,010
 94,681
Receivables from subsidiaries:        
Other operating companies 15,060
 —
Other subsidiaries 60
 15,060
Other assets 106,224
 278,392
 83,710
 106,233
 $8,371,310
 $8,687,930
 $8,447,804
 $8,524,094
        
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Other liabilities $85,275
 $200,729
 $123,849
 $85,480
Subordinated debt to affiliated trusts 15,464
 15,464
 164,950
 168,043
Long-term debt:        
Due to affiliates 20
 17
 —
 20
Due to others 901,021
 2,007,157
 651,486
 901,021
Total liabilities 1,001,780
 2,223,367
 940,285
 1,154,564
Shareholders’ equity:        
Preferred stock 1,004,011
 1,003,970
 828,490
 1,004,011
Common stock 4,723,855
 4,179,024
 4,766,731
 4,723,855
Retained earnings 1,769,705
 1,473,670
 1,966,910
 1,769,705
Accumulated other comprehensive loss (128,041) (192,101) (54,612) (128,041)
Total shareholders’ equity 7,369,530
 6,464,563
 7,507,519
 7,369,530
 $8,371,310
 $8,687,930
 $8,447,804
 $8,524,094
1
ZMFU II, Inc. is a wholly-owned nonoperating subsidiary whose sole purpose is to hold a portfolio of municipal bonds, loans and leases.

Prior period amounts have been adjusted to reflect changes in the legal entity structure resulting from our charter consolidation discussed in Note 1.

175160

CONDENSED STATEMENTS OF INCOME
(In thousands) Year Ended December 31, Year Ended December 31,
2014 2013 2012 2015 2014 2013
Interest income:            
Commercial bank subsidiaries $1,067
 $757
 $836
Other subsidiaries and affiliates 438
 105
 386
Loans and securities 10,900
 17,764
 18,993
Commercial bank $1,162
 $1,489
 $862
Other subsidiaries 3
 16
 —
Other loans and securities 3,014
 10,900
 17,764
Total interest income 12,405
 18,626
 20,215
 4,179
 12,405
 18,626
Interest expense:            
Affiliated trusts 511
 8,483
 24,053
 4,308
 4,265
 12,202
Other borrowed funds 116,872
 171,304
 195,195
 63,665
 117,700
 172,480
Total interest expense 117,383
 179,787
 219,248
 67,973
 121,965
 184,682
Net interest loss (104,978) (161,161) (199,033) (63,794) (109,560) (166,056)
Provision for loan losses —
 (23) (10) —
 —
 (23)
Net interest loss after provision for loan losses (104,978) (161,138) (199,023) (63,794) (109,560) (166,033)
            
Other income:            
Dividends from consolidated subsidiaries:            
Commercial banks and bank holding company 236,012
 421,406
 246,606
Other operating companies 400
 200
 5,440
Nonoperating – ZMFU II, Inc. —
 —
 50,000
Commercial bank 233,853
 236,012
 421,406
Other subsidiaries 100
 400
 200
Equity and fixed income securities gains (losses), net 300,275
 (7,332) 86
 37,161
 300,275
 (7,332)
Net impairment losses on investment securities —
 (95,637) (74,153) —
 —
 (95,637)
Other income (loss) 6,362
 (8,397) (6,562) 12,512
 6,475
 (8,285)
 543,049
 310,240
 221,417
 283,626
 543,162
 310,352
Expenses:            
Salaries and employee benefits 17,457
 26,014
 20,507
 24,674
 17,457
 26,014
Debt extinguishment cost 44,422
 120,192
 —
 135
 44,422
 120,192
Other operating expenses 10,557
 1,436
 395
 10,473
 10,559
 1,436
 72,436
 147,642
 20,902
 35,282
 72,438
 147,642
Income before income taxes and undistributed
income/loss of consolidated subsidiaries
 365,635
 1,460
 1,492
Income (loss) before income taxes and undistributed
income (loss) of consolidated subsidiaries
 184,550
 361,164
 (3,323)
Income tax expense (benefit) 57,430
 (133,798) (108,541) (27,140) 55,865
 (135,472)
Income before equity in undistributed income/loss of consolidated subsidiaries 308,205
 135,258
 110,033
Income before equity in undistributed income of consolidated subsidiaries 211,690
 305,299
 132,149
Equity in undistributed income (loss) of consolidated subsidiaries:Equity in undistributed income (loss) of consolidated subsidiaries:     Equity in undistributed income (loss) of consolidated subsidiaries:     
Commercial banks and bank holding company 101,789
 132,906
 304,559
Other operating companies (11,997) (4,887) (15,561)
Nonoperating – ZMFU II, Inc. 465
 514
 (49,515)
Commercial bank 108,350
 97,673
 129,562
Other subsidiaries (10,569) (4,510) 2,080
Net income 398,462
 263,791
 349,516
 309,471
 398,462
 263,791
Preferred stock dividends (71,894) (95,512) (170,885) (62,857) (71,894) (95,512)
Preferred stock redemption —
 125,700
 —
 —
 —
 125,700
Net earnings applicable to common shareholders $326,568
 $293,979
 $178,631
 $246,614
 $326,568
 $293,979

Prior period amounts have been adjusted to reflect changes in the legal entity structure resulting from our charter consolidation discussed in Note 1.


176161

CONDENSED STATEMENTS OF CASH FLOWS
(In thousands) Year Ended December 31, Year Ended December 31,
2014 2013 2012 2015 2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES            
Net income $398,462
 $263,791
 $349,516
 $309,471
 $398,462
 $263,791
Adjustments to reconcile net income to net cash provided by operating activities:            
Undistributed net income of consolidated subsidiaries (90,257) (128,533) (239,483) (97,781) (93,163) (131,642)
Net impairment losses on investment securities —
 95,637
 74,153
 —
 —
 95,637
Debt extinguishment cost 44,422
 120,192
 —
 135
 44,422
 120,192
Other, net 146,374
 69,098
 4,376
 78,580
 149,280
 69,394
Net cash provided by operating activities 499,001
 420,185
 188,562
 290,405
 499,001
 417,372
            
CASH FLOWS FROM INVESTING ACTIVITIES            
Net decrease (increase) in money market investments (1,007,844) 650,736
 305,668
 132,267
 (1,007,844) 650,736
Collection of advances to subsidiaries 15,000
 10,000
 23,190
 56,000
 15,000
 10,000
Advances to subsidiaries (30,060) (10,000) (23,000) (41,000) (30,060) (10,000)
Proceeds from sales and maturities of investment securities 372,357
 27,916
 5,433
 124,419
 372,357
 27,916
Purchases of investment securities —
 (4,858) (3,980) (46,851) —
 (4,858)
Decrease (increase) of investment in subsidiaries (15,060) 175,000
 764,290
Decrease of investment in subsidiaries 15,000
 6,310
 175,000
Other, net 24,319
 10,642
 3,814
 4,010
 24,319
 10,642
Net cash provided by (used in) investing activities (641,288) 859,436
 1,075,415
 243,845
 (619,918) 859,436
            
CASH FLOWS FROM FINANCING ACTIVITIES            
Net change in short-term funds borrowed —
 (3,368) (110,995) —
 —
 (3,368)
Proceeds from issuance of long-term debt —
 646,408
 757,610
 —
 —
 646,408
Repayments of long-term debt (1,147,641) (835,031) (372,312) (271,120) (1,147,641) (835,031)
Debt extinguishment cost paid (35,435) (45,812) —
 (135) (35,435) (45,812)
Proceeds from issuance of preferred stock —
 784,318
 141,342
 —
 —
 784,318
Proceeds from issuance of common stock 526,438
 9,825
 1,898
 22,392
 526,438
 9,825
Cash paid for preferred stock redemptions —
 (799,468) (1,542,500) (175,669) —
 (799,468)
Dividends paid on preferred stock (64,868) (95,512) (126,189) (62,857) (64,868) (95,512)
Dividends paid on common stock (31,262) (24,148) (7,392) (45,198) (31,262) (24,148)
Other, net (5,619) (16,137) (3,449) (7,062) (5,619) (16,137)
Net cash used in financing activities (758,387) (378,925) (1,261,987) (539,649) (758,387) (378,925)
Net increase (decrease) in cash and due from banks (900,674) 900,696
 1,990
 (5,399) (879,304) 897,883
Cash and due from banks at beginning of year 902,697
 2,001
 11
 23,774
 903,078
 5,195
Cash and due from banks at end of year $2,023
 $902,697
 $2,001
 $18,375
 $23,774
 $903,078

The Parent paid interest of $51.4 million in $96.02015, $100.6 million in 2014, and $125.9130.9 million in 2013, and .$124.1 million

Prior period amounts have been adjusted to reflect changes in 2012.the legal entity structure resulting from our charter consolidation discussed in Note 1.


177162

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 20142015. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 20142015. There were no changes in the Company’s internal control over financial reporting during the fourth quarter of 20142015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. See “Report on Management’s Assessment of Internal Control over Financial Reporting” included in Item 8 on page 9384 for management’s report on the adequacy of internal control over financial reporting. Also see “Report on Internal Control over Financial Reporting” issued by Ernst & Young LLP included in Item 8 on page 94.85.

ITEM 9B. OTHER INFORMATION
ITEM 9B.OTHER INFORMATION
None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference from the Company’s Proxy Statement to be subsequently filed.

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.EXECUTIVE COMPENSATION
Incorporated by reference from the Company’s Proxy Statement to be subsequently filed.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
EQUITY COMPENSATION PLAN INFORMATION
The following schedule provides information as of December 31, 20142015 with respect to the shares of the Company’s common stock that may be issued under existing equity compensation plans.
 (a) (b) (c) (a) (b) (c)
Plan category 1
 Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
              
Equity compensation plan approved by security holdersEquity compensation plan approved by security holders              
              
Zions Bancorporation 2005 Stock Option and Incentive Plan 5,513,645
 $31.23
 4,164,478
 
Zions Bancorporation 2015 Omnibus Incentive PlanZions Bancorporation 2015 Omnibus Incentive Plan 720,199
 $29.01
 7,523,768
 
1 
The schedule does not include information for equity compensation plans assumed by the Company in mergers. A total of 116,857 shares of common stock with a weighted average exercise price of $48.84 were issuable upon exercise of options granted under plans assumed in mergers and outstanding as of December 31, 2014. The Company cannot grant additional awards under these assumed plans. Column (a) also excludes 161,22059,370 shares of unvested restricted stock, and 1,769,4201,798,543 restricted stock units (each unit representing the right to one share of common stock).
, and 3,062,644 shares of common stock issuable upon the exercise of stock options, with a weighted average exercise price of $27.06, granted under the prior plan. The schedule also excludes 21,252 shares of common stock issuable upon the exercise of stock options, with a weighted average exercise price of $5.02, granted under plans assumed in mergers that are outstanding.


178163


Other information required by Item 12 is incorporated by reference from the Company’s Proxy Statement to be subsequently filed.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated by reference from the Company’s Proxy Statement to be subsequently filed.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference from the Company’s Proxy Statement to be subsequently filed.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1)    Financial statements – The following consolidated financial statements of Zions Bancorporation and subsidiaries are filed as part of this Form10-K under Item 8, Financial Statements and Supplementary Data:

Consolidated balance sheets – December 31, 20142015 and 20132014
Consolidated statements of income – Years ended December 31, 20142015, 20132014 and 20122013
Consolidated statements of comprehensive income – Years ended December 31, 20142015, 20132014 and 20122013
Consolidated statements of changes in shareholders’ equity – Years ended December 31, 20142015, 20132014 and 20122013
Consolidated statements of cash flows – Years ended December 31, 20142015, 20132014 and 20122013
Notes to consolidated financial statements – December 31, 20142015

(2)    Financial statement schedules – All financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, the required information is contained elsewhere in the Form 10-K, or the schedules are inapplicable and have therefore been omitted.

(3)    List of Exhibits:

Exhibit Number Description 
    
    
3.1 Restated Articles of Incorporation of Zions Bancorporation dated July 8, 2014, incorporated by reference to Exhibit 3.1 of Form 8-K/A filed on July 18, 2014.*
    
3.2 Restated Bylaws of Zions Bancorporation dated November 8, 2011,February 27, 2015, incorporated by reference to Exhibit 3.133.2 of Form 10-Q for the quarter ended September 30, 2011.March 31, 2015.*
    
4.1 Senior Debt Indenture dated September 10, 2002 between Zions Bancorporation and The Bank of New York Mellon Trust Company, N.A. as successor to J.P. Morgan Trust Company, N.A., as trustee, with respect to senior debt securities of Zions Bancorporation, incorporated by reference to Exhibit 4.1 of Form 10-K for the year ended December 31, 2011.*
    

179164

Exhibit Number Description 
    
4.2 Subordinated Debt Indenture dated September 10, 2002 between Zions Bancorporation and The Bank of New York Mellon Trust Company, N.A. as successor to J.P. Morgan Trust Company, N.A., as trustee, with respect to subordinated debt securities of Zions Bancorporation, incorporated by reference to Exhibit 4.2 of Form 10-K for the year ended December 31, 2011.*
    
4.3 Junior Subordinated Indenture dated August 21, 2002 between Zions Bancorporation and The Bank of New York Mellon Trust Company, N.A. as successor to J.P. Morgan Trust Company, N.A., as trustee, with respect to junior subordinated debentures of Zions Bancorporation, incorporated by reference to Exhibit 4.3 of Form 10-K for the year ended December 31, 2011.*
    
4.4 Warrant to purchase up to 5,789,909 shares of Common Stock, issued on November 14, 2008, incorporated by reference to Exhibit 4.4 of Form 10-K for the year ended December 31, 2013.*
    
4.5 Warrant Agreement, between Zions Bancorporation and Zions First National Bank (now known as ZB, N.A.), and Warrant Certificate, incorporated by reference to Exhibit 4.1 of Form 10-Q for the quarter ended September 30, 2010.*
    
10.1 Zions Bancorporation 2012-2014 Value Sharing Plan, incorporated by reference to Exhibit 10.3 of Form 10-K for the year ended December 31, 2012.*
    
10.2 Zions Bancorporation 2013-2015 Value Sharing Plan, incorporated by reference to Exhibit 10.4 of Form 10-Q for the quarter ended September 30, 2013.*
    
10.3 Zions Bancorporation 2014-2016 Value Sharing Plan, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended September 30, 2014.*
    
10.4 Zions Bancorporation 2015-2017 Value Sharing Plan, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended March 31, 2015.*
10.52012 Management Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended June 30, 2012.*
    
10.510.6 Zions Bancorporation Third Restated and Revised Deferred Compensation Plan, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended September 30, 2013.*
    
10.610.7 Zions Bancorporation Fourth Restated Deferred Compensation Plan for Directors, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended September 30, 2013.*
    
10.710.8Amendment to the Zions Bancorporation Fourth Restated Deferred Compensation Plan for Directors (filed herewith).
10.9 Amended and Restated Amegy Bancorporation, Inc. Non-Employee Directors Deferred Fee Plan, incorporated by reference to Exhibit 10.3 of Form 10-Q for the quarter ended September 30, 2013.*
    
10.810.10 Zions Bancorporation First Restated Excess Benefit Plan, (filed herewith).incorporated by reference to Exhibit 10.8 of Form 10-K for the year ended December 31, 2014.*
    
10.910.11 Trust Agreement establishing the Zions Bancorporation Deferred Compensation Plan Trust by and between Zions Bancorporation and Cigna Bank & Trust Company, FSB effective October 1, 2002, incorporated by reference to Exhibit 10.9 of Form 10-K for the year ended December 31, 2012.*
    

165

10.10
Exhibit NumberDescription
10.12 Amendment to the Trust Agreement establishing the Zions Bancorporation Deferred Compensation Plan Trust by and between Zions Bancorporation and Cigna Bank & Trust Company, FSB substituting Prudential Bank & Trust, FSB as the trustee, incorporated by reference to Exhibit 10.12 of Form 10-K for the year ended December 31, 2010.*
    
10.1110.13 Amendment to Trust Agreement Establishing the Zions Bancorporation Deferred Compensation Plans Trust, effective September 1, 2006, incorporated by reference to Exhibit 10.11 of Form 10-K for the year ended December 31, 2012.*
    

180

Exhibit NumberDescription
10.1210.14 Fifth Amendment to Trust Agreement between Fidelity Management Trust Company and Zions Bancorporation for the Deferred Compensation Plans, incorporated by reference to Exhibit 10.5 of Form 10-Q for the quarter September 30, 2013.*
    
10.1310.15Sixth Amendment to Trust Agreement between Fidelity Management Trust Company and Zions Bancorporation for the Deferred Compensation Plans, dated August 17, 2015, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter September 30, 2015.*
10.16 Zions Bancorporation Deferred Compensation Plans Master Trust between Zions Bancorporation and Fidelity Management Trust Company, effective September 1, 2006, incorporated by reference to Exhibit 10.12 of Form 10-K for the year ended December 31, 2012.*
    
10.1410.17 Revised schedule C to Zions Bancorporation Deferred Compensation Plans Master Trust between Zions Bancorporation and Fidelity Management Trust Company, effective September 13, 2006, incorporated by reference to Exhibit 10.13 of Form 10-K for the year ended December 31, 2012.*
    
10.1510.18 Third Amendment to the Zions Bancorporation Deferred Compensation Plans Master Trust agreement between Zions Bancorporation and Fidelity Management Trust Company, dated June 13, 2012, incorporated by reference to Exhibit 10.6 of Form 10-Q for the quarter ended June 30, 2012.*
    
10.1610.19 Zions Bancorporation Restated Pension Plan effective January 1, 2002, including amendments adopted through December 31, 2010, incorporated by reference to Exhibit 10.16 of Form 10-K for the year ended December 31, 2010.*
    
10.1710.20 First amendment to the Zions Bancorporation Pension Plan, dated June 28, 2013, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended June 30, 2013.*
    
10.1810.21 Zions Bancorporation Executive Management Pension Plan, (filed herewith).incorporated by reference to Exhibit 10.18 of Form 10-K for the year ended December 31, 2014.*
    
10.1910.22 Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, Restated and Amended effective January 1, 2002, including amendments adopted thruthrough December 31, 2010, incorporated by reference to Exhibit 10.18 of Form 10-K for the year ended December 31, 2010.*
    
10.2010.23 First Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, dated November 14, 2012, incorporated by reference to Exhibit 10.18 of Form 10-K for the year ended December 31, 2012.*
    
10.2110.24 Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated July 3, 2006, incorporated by reference to Exhibit 10.19 of Form 10-K for the year ended December 31, 2012.*
    
10.22First Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 5, 2010, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended June 30, 2010.*
10.23Second Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 5, 2010, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended June 30, 2010.*
10.24Third Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 30, 2010, incorporated by reference to Exhibit 10.3 of Form 10-Q for the quarter ended June 30, 2010.*

181166

Exhibit Number Description 
    
10.25 First Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 5, 2010 (filed herewith).
10.26Second Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 5, 2010 (filed herewith).
10.27Third Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated April 30, 2010 (filed herewith).
10.28Fourth Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated October 1, 2014, (filed herewith).incorporated by reference to Exhibit 10.25 of Form 10-K for the year ended December 31, 2014.*
    
10.2610.29 Fifth Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, dated October 1, 2014, (filed herewith).incorporated by reference to Exhibit 10.26 of Form 10-K for the year ended December 31, 2014.*
    
10.2710.30 Amended and RestatedSixth Amendment to the Zions Bancorporation 2005Payshelter 401(k) and Employee Stock OptionOwnership Plan Trust Agreement between Zions Bancorporation and Incentive Plan,Fidelity Management Trust Company, dated August 17, 2015, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended JuneSeptember 30, 2012.*
10.28Standard Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.3 of Form 10-Q for the quarter ended June 30, 2012.*
10.29Standard Restricted Stock Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.4 of Form 10-Q for the quarter ended June 30, 2012.*
10.30Standard Restricted Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.5 of Form 10-Q for the quarter ended June 30, 2012.2015.*
    
10.31 Standard Directors Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.294.1 of Form 10-K for the year ended December 31, 2010.S-8 filed on July 1, 2015.*
    
10.32 Form of Standard Directors Restricted Stock Award Agreement, Zions Bancorporation 2005 Stock Option and2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.44.3 of Form 10-Q for the quarter ended June 30, 2009.S-8 filed on July 1, 2015.*
    
10.33 Form of Standard Directors Restricted Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.284.4 of Form 10-K for the year ended December 31, 2011.S-8 filed on July 1, 2015.*
    
10.34 Form of PerformanceStandard Stock Option Award Agreement, 2005 Stock Option andZions Bancorporation 2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.64.6 of Form 10-Q for the quarter ended September 30, 2013.S-8 filed on July 1, 2015.*
    
10.35 Form of Performance RestrictedStandard Directors Stock Unit Award Agreement, 2005 Stock Option andZions Bancorporation 2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 10.74.7 of Form 10-Q for the quarter ended September 30, 2013.S-8 filed on July 1, 2015.*
    
10.36Form of Restricted Stock Award Agreement subject to holding requirement, Zions Bancorporation 2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 4.2 of Form S-8 filed on July 1, 2015.*
10.37Form of Restricted Stock Unit Agreement subject to holding requirement, Zions Bancorporation 2015 Omnibus Incentive Plan, incorporated by reference to Exhibit 4.5 of Form S-8 filed on July 1, 2015.*
10.38 Amegy Bancorporation 2004 (formerly Southwest Bancorporation of Texas, Inc.) Omnibus Incentive Plan incorporated by reference to (filed herewith).

167

Exhibit 10.47 of Form 10-K for the year ended December 31, 2009.Number*Description
    
10.3710.39 Form of Change in Control Agreement between the Company and Certain Executive Officers, incorporated by reference to Exhibit 10.37 of Form 10-K for the year ended December 31, 2012.*
    
10.3810.40 Addendum to Change in Control Agreement, (filed herewith).incorporated by reference to Exhibit 10.38 of Form 10-K for the year ended December 31, 2014.*
    
10.3910.41 Form of Change in Control Agreement between the Company and Dallas E. Haun, dated May 23, 2008, (filed herewith).incorporated by reference to Exhibit 10.39 of Form 10-K for the year ended December 31, 2014.*
    
12 RatioRatios of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Dividends (filed herewith).

182

Exhibit NumberDescription 
    
21 List of Subsidiaries of Zions Bancorporation (filed herewith). 
    
23 Consent of Independent Registered Public Accounting Firm (filed herewith). 
    
31.1 Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). 
    
31.2 Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). 
    
32 Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith). 
    
101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 20142015 and December 31, 2013,2014, (ii) the Consolidated Statements of Income for the years ended December 31, 2014,2015, December 31, 2013,2014, and December 31, 2012,2013, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2014,2015, December 31, 2013,2014, and December 31, 2012,2013, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2014,2015, December 31, 2013,2014, and December 31, 2012,2013, (v) the Consolidated Statements of Cash Flows for the years ended December 31, 2014,2015, December 31, 2013,2014, and December 31, 20122013 and (vi) the Notes to Consolidated Financial Statements (filed herewith). 

* Incorporated by reference

Certain instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments.



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

February 27, 201529, 2016    ZIONS BANCORPORATION

    
By/s/ Harris H. Simmons
 
HARRIS H. SIMMONS, Chairman
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

February 27, 201529, 2016

/s/ Harris H. Simmons /s/ Doyle L. ArnoldPaul E. Burdiss
HARRIS H. SIMMONS, Director, Chairman President
and Chief Executive Officer
(Principal Executive Officer)
 
DOYLE L. ARNOLD,PAUL E. BURDISS, Executive Vice Chairman andPresident
and Chief Financial Officer
(Principal Financial Officer)

/s/ Alexander J. Hume /s/ Jerry C. Atkin
ALEXANDER J. HUME, Controller
(Principal Accounting Officer)
 JERRY C. ATKIN, Director

/s/ John C. Erickson /s/ Patricia Frobes
JOHN C. ERICKSON, Director PATRICIA FROBES, Director

/s/ Suren K. Gupta/s/ J. David Heaney
SUREN K. GUPTA, DirectorJ. DAVID HEANEY, Director

/s/ Vivian S. Lee /s/ Edward F. Murphy
J. DAVID HEANEY,VIVIAN S. LEE, Director EDWARD F. MURPHY, Director

/s/ Roger B. Porter /s/ Stephen D. Quinn
ROGER B. PORTER, Director STEPHEN D. QUINN, Director

/s/ L. E. Simmons /s/ Steven C. Wheelwright
L. E. SIMMONS, Director STEVEN C. WHEELWRIGHT, Director

/s/ Shelley Thomas Williams  
SHELLEY THOMAS WILLIAMS, Director  




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