| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||||||
Zions Bancorporation | 100.0 | 58.0 | 31.8 | 16.8 | 31.8 | 21.4 | ||||||||||||||||||
KBW Bank Index | 100.0 | 78.2 | 41.1 | 40.4 | 49.8 | 38.3 | ||||||||||||||||||
S&P 500 | 100.0 | 105.5 | 66.5 | 84.1 | 96.7 | 98.8 | ||||||||||||||||||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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 endedDecember 31, 2011
OR
For the fiscal year ended December 31, 2012 | |||||
| OR | |||||
¨ | 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)
| 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) |
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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) 524-4787
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (801) 524-4787 | ||||
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of Each Class | Name of Each Exchange on Which Registered | |||
Guarantee related to 8.00% Capital Securities of Zions Capital Trust B | ||||
Convertible 6% Subordinated Notes due September 15, 2015 | ||||
Depositary Shares each representing a 1/40th ownership interest in a share of Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock | ||||
Depositary Shares each representing a 1/40th ownership interest in a share of Series C 9.5% Non-Cumulative Perpetual Preferred Stock | ||||
Depositary Shares each representing a 1/40th ownership interest in a share of Series | ||||
Warrants to Purchase Common Stock of Zions Bancorporation Common Stock, without par value Depositary Shares each representing a 1/40th ownership interest in a share of Series G Fixed/Floating Rate Non-Cumulative Perpetual Preferred Stock Warrants (expiring November 14, 2018) 3.50% Senior Notes due September 15, 2015 | New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange New York Stock Exchange The NASDAQ Stock Market LLC | |||
| The NASDAQ Stock Market LLC New York Stock Exchange The NASDAQ Stock Market LLC New 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, 2012 $3,475,749,090 | ||||
| Number of Common Shares Outstanding at February 15, 2013 184,188,095 shares | ||||
| Documents Incorporated by Reference: Portions of the Company’s Proxy Statement – Incorporated into Part III | ||||
Securities registered pursuant to Section 12(g)
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Item 5. | ||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
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Item 10. | ||||||||
statements with respect to the beliefs, plans, objectives, goals, 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”);
andstatements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.
the Company’s ability to successfully execute its business plans, manage its risks, and achieve its objectives;
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 conditions and fiscal imbalances in the United States and other countries, potential or actual downgrades in rating 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 market conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including without limitation reduced rates of business formation and growth, commercial and residential real estate development and real estate prices;
fluctuations in markets for equity, fixed-income, commercial paper and other 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 Company’s participation in and exit from governmental programs implemented under the EESA and the ARRA, including the TARP and CPP, and the impact of such programs and related regulations on the Company;
the impact of executive compensation rules under the Dodd-Frank Act the EESA and the ARRA,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;
the impact of the Dodd-Frank Act and of new international standards known as Basel III, and rules and regulations thereunder, many of which have not yet been promulgated, on our required regulatory capital and liquidity levels, governmental assessments on us, 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;
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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;
success in gaining regulatory approvals, when required;
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 Board or regulatory agencies; and
increased costs of deposit insurance and changes with respect to FDIC insurance coverage levels.
ABS | Asset-Backed Security | CMC | Capital Management Committee | |
ACL | Allowance for Credit Losses | COSO | Committee of Sponsoring Organizations of the Treadway Commission | |
AFS | Available-for-Sale | CPP | Capital Purchase Program | |
ALCO | Asset/Liability Committee | CPR | Constant Prepayment Rate | |
ALLL | Allowance for Loan and Lease Losses | CRA | Community Reinvestment Act | |
Amegy | Amegy Corporation | CRE | Commercial Real Estate | |
AOCI | Accumulated Other Comprehensive Income | DB | Deutsche Bank AG | |
ARRA | American Recovery and Reinvestment Act | |||
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DBRS | Dominion Bond Rating Service | ||
| Accounting Standards Codification | DDA | Demand Deposit |
| Accounting Standards Update | ||
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Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act | ||
| Automated Teller Machine | DTA | Deferred Tax Asset |
| BCBS | Basel Committee on Banking Supervision | DTL | Deferred Tax Liability |
| BHC Act | Bank Holding Company Act | EESA | Emergency Economic Stabilization Act |
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| Federal Agricultural Mortgage Corporation, or “Farmer Mac” | ||
| Bank Secrecy Act | FASB | Financial Accounting Standards Board |
| California Bank & Trust | FDIC | Federal Deposit Insurance Corporation |
| Collateralized Debt Obligation | FDICIA | Federal Deposit Insurance Corporation Improvement Act |
| CDR | Constant Default Rate | FHLB | Federal Home Loan Bank |
| Common Equity Tier 1 | ||
FICO | Fair Isaac Corporation | ||
| Consumer Financial Protection Bureau | ||
FINRA | Financial Industry Regulatory Authority | ||
| Combined Loan-to-Value Ratio |
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FRB | Federal Reserve Board |
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| Full-time Equivalent | OTC | Over-the-Counter | ||
| GAAP | Generally Accepted Accounting Principles | OTTI | Other-Than-Temporary Impairment | ||
GDP | Gross Domestic Product | Parent | Zions Bancorporation | ||
GLB | Act | Gramm-Leach-Bliley Act | PCAOB | Public Company Accounting Oversight Board | |
HECL | Home Equity Credit Line | ||||
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HTM | Held-to-Maturity | PD | Probability of Default | ||
IA | Indemnification Asset | PIK | Payment in Kind | ||
IFRS | International Financial Reporting Standards | REIT | Real Estate Investment Trust | ||
ISDA | International Swap Dealer Association | ||||
| RSU | Restricted Stock Unit | |||
LCR | Liquidity Coverage Ratio | RULC | Reserve for Unfunded Lending Commitments | |
| Loss Given Default | SBA | Small Business Administration | |
| LIBOR | London Interbank Offered Rate | SBIC | Small Business Investment Company | |
Lockhart | Lockhart Funding LLC | SEC | Securities and Exchange Commission | |
MCC | Model Control Committee | SIFI | Systemically Important Financial Institutions | |
| MD&A | Management’s Discussion and Analysis | |||
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| Market Value of Equity | SSU | Salary Stock Units | |
| NASDAQ | National Association of Securities Dealers Automated Quotations | TARP | Troubled Asset Relief Program | |
| NBA | National Bank of Arizona | TCBO | The Commerce Bank of Oregon | |
NIM | Net Interest Margin | TCBW | The Commerce Bank of Washington | |
| Net Operating Loss | TDR | Troubled Debt Restructuring | |
| NOW | Negotiable Order of Withdrawal | TRS | Total Return Swap | |
| Notices of Proposed Rulemaking | Vectra | Vectra Bank Colorado | |
| NRSRO | Nationally Recognized Statistical Rating Organization | VIE | Variable Interest Entity | |
NSB | Nevada State Bank | WNTC | Western National Trust Company | |
NSFR | Net Stable Funding | ZCTB | Zions Capital Trust B | |
OCC | Office of the Comptroller of the Currency | |||
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| Zions First National Bank | |||
| Other Comprehensive Income | ZMFU | Zions Municipal Funding | |
| OREO | Other Real Estate Owned | ZMSC | Zions Management Services Company |
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. As implemented by the bank regulatory agencies, the stress testing and capital plan process could substantially reduce our flexibility to respond to market developments and opportunities in such areas as capital raising and acquisitions. 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 adopted rules implementing the Volcker Rule. introduces as a new capital measure, Common Equity Tier 1 when fully phased in on January 1, 2019, requires banks to maintain:ITEM 1. BUSINESSDESCRIPTION OF BUSINESSZions 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 and its subsidiaries (collectively “the Company”) own and operate eight commercial banks with a total of 486480 domestic branches at year-end 2011.2012. The Company provides a full range of banking and related services through its banking and other subsidiaries, primarily in Utah, California, Texas, Arizona, Nevada, Colorado, Idaho, Washington, and Oregon. Full-time equivalent employees totaled 10,60610,368 at year-end 2011.2012. For further information about the Company’s industry segments, see “Business Segment Results” on page 4744 in MD&A and Note 2221 of the Notes to Consolidated Financial Statements. For information about the Company’s foreign operations, see “Foreign Operations” on page 4644 in MD&A. The “Executive Summary” on page 2322 in MD&A provides further information about the Company.PRODUCTS AND SERVICESThe Company focuses on providing community banking services by continuously strengthening its core business lines of 1) small and medium-sized business and corporate banking; 2) commercial and residential development, construction and term lending; 3) retail banking; 4) treasury cash management and related products and services; 5) residential mortgage; 6) trust and wealth management; and 7) investment activities. It operates eight different banks5in ten Western and Southwestern states with each bank operating under a different name and each having its own board of directors, chief executive officer, and management team. The banks provide a wide variety of commercial and retail banking and mortgage lending products and services. They also provide 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, time certificates of deposits of various types and maturities, trust services, safe deposit facilities, direct deposit, and 24-hour ATM access. In addition, certain banking subsidiaries provide services to key market segments through their Women’s Financial, Private Client Services, and Executive Banking Groups. We also offer wealth management services through various subsidiaries, including Contango Capital Advisors and Western National Trust Company, and online and traditional brokerage services through Zions Direct and Amegy Investments.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 eight banking subsidiaries, the Company provides SBA 7(a) loans to small businesses throughout the United States and is also one of the largest providers of SBA 504 financing in the nation. The Company owns an equity interest in Farmer Mac and is one of the nation’s top originators of secondary market agricultural real estate mortgage loans through Farmer Mac. The Company is a leader in municipal finance advisory and underwriting services.COMPETITIONThe 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, brokerage firms, securities dealers, investment banking companies, and a variety of other types of companies. Many of these companies have fewer regulatory constraints and some have lower cost structures or tax burdens.The primary factors in competing for business include pricing, convenience of office locations and other delivery methods, range of products offered, and the level of service delivered. The Company must compete effectively along all of these parameters to remain successful.SUPERVISION AND REGULATIONThe 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 depositors. These regulations are not, however, generally intended to protect the interests of our shareholders or creditors. Described below are the material elements of 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 law 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. The BHC Act and other federal statutes, as modified by the GLB Act and the Dodd-Frank Act, provide the regulatory framework for bank holding companies and financial holding companies which have as their umbrella regulator the FRB. The functional regulation of the separately 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 bank subsidiaries 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 banks must satisfy certain ongoing criteria. The Company currently engages in only limited activities for which financial holding company status is required.6The Parent’s subsidiary banks and WNTC are subject to the provisions of the National Bank Act or other statutes governing national banks andor, 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 FRB and the FDIC. They are also under the supervision of, and are continually subject to periodic examination and supervision by the OCC or their respective state banking departments, the FRB, and the FDIC. Many 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. Our brokerage and investment advisory subsidiaries are regulated by the SEC, FINRA and/or state securities regulators.The Dodd-Frank ActThe events of the past few years have led to numerous new laws in the United States and internationally for financial institutions. The Dodd-Frank Wall Street Reform and Consumer Protection Act, (the “Dodd-Frank Act” or “Dodd-Frank”), which was enacted in July 2010, is one of the most far reaching legislative actions affecting the financial services industry in decades and significantly restructures the financial regulatory regime in the United States.The Dodd-Frank Act and regulations adopted under the Dodd-Frank Act broadly affectsaffect the financial services industry by creating new resolution authorities, requiring ongoing stress testing of our capital, mandating higher capital and liquidity requirements, 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:These provisions will require us to maintain greater levels of capital and liquid assets and will limit the forms of capital that we will be able to rely upon for regulatory purposes. For example, provisions of the Dodd-FrankDodd-Frank Act require us to deduct all trust preferred securities from our Tier 1 capital over a three-year phase-inphase-out period beginningthat began January 1, 2013. In addition, in their supervisory role with respect to our stress testing and capital planning, the bank regulatory agencies may effectively regulate certain of our capital-related actions, such as dividends and stock repurchases.The Dodd-Frank Act’s provisions and related regulations also affect the fees we must pay to regulatory agencies and pricing of certain products and services, including the following: This generally increased the insurance fees of larger banks, but had relatively less impact on the Company;repealed effective December 31, 2010; andEffective October 1, 2011, theThe FRB enacted regulations to limit interchange fees charged for debit card transactions to no more than 21 cents per transaction and 5 basis points (“bps”) multiplied by the value of the transaction, which is slightly less than half the generally prevailing fee prior to the regulation.The Dodd-Frank Act also created the CFPB, which is responsible for promulgating regulations designed to protect consumers’ financial interests and examining 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 was recently established and its impact on our subsidiary banks remains uncertain. 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 banks7and their subsidiaries to comply with federal regulatory requirements without complying with various state laws. In addition, the 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.In October 2011 and January 2012,The federal regulators published for commenthave proposed regulations to implement the so-called “Volcker Rule” of the Dodd-Frank Act, which would significantly restrict certain activities by covered bank holding companies, including restrictions on proprietary trading and private equity investing. The public comment period on these proposed regulations has ended, but a final rule hasstatutory provision became effective in July 2012, and banking entities subject to the Volcker Rule have until July 2014 to bring their activities and investments into compliance with the rule’s requirements. However, the federal financial regulatory agencies have not yet been published.The Company and other companies subject to the Dodd-Frank Act isare being subjected 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 and proposed rules. These requirements generally implement the compensation restrictions imposed by the Dodd-Frank Act and include documentation and governance, deferral, and claw-back requirements.As discussed further throughout this section, many aspects of Dodd-Frank are subject to further rulemaking and will take effect over several years, making it difficult to anticipate the overall financial impact on the Company or the industry. More than halfAs of the end of 2012, approximately one-third of the total regulations to implement the Dodd-Frank Act havehad not yet been published for comment or adopted in final form.Individually and collectively, these proposed regulations resulting from the Dodd-Frank Act may materially adversely affect the Company’s business, financial condition, and results of operations.Capital Standards – Basel FrameworkThe FRB has established capital guidelines for financialbank holding companies. The OCC, the FDIC and the FRB have also issued regulations establishing capital requirements for banks. These bank regulatory agencies’ risk-based capital guidelines are based upon the 1988 capital accord (“Basel I”) of the BCBS. The BCBS is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to determine the supervisory policies they apply.In 2004, the BCBS proposed a new capital accord (“Basel II”) to replace Basel I. Basel II provides two approaches for setting capital standards for credit risk—risk, an advanced internal ratings-based approach tailored to individual institutions’ circumstances, and a standardized approach that bases risk weightings on external credit assessments to a much greater extent than permitted in existing guidelines. Basel II also sets capital requirements for operational risk and refines the existing capital requirements for market risk exposures.In December 2007, U.S. banking regulators published the final rule for Basel II implementation, requiring banks with over $250 billion in consolidated total assets or on-balance sheet foreign exposure of $10 billion (core banks) to adopt the advanced approaches of Basel II while allowing other banks to elect to “opt in.” The ParentCompany is not required to comply with Basel II. In July 2008, the agencies issued a proposed rule that would give banking organizations that do not use the advanced approaches the option to implement a new risk-based capital framework which would adopt the standardized approach of Basel II for credit risk, the basic indicator approach of Basel II for operational risk and related disclosure requirements. A definitive rule has not been issued.In December 2010, the BCBS released its final framework for strengthening international capital and liquidity regulation, now officially identified by the BCBS as “Basel III”.III.” Basel III, when implemented by the U.S. bankingbank8regulatory agencies and fully phased-in, will require bank holding companies and their bank subsidiaries to maintain substantially more capital, with a greater emphasis on common equity. TheAs currently proposed, the Basel III final capital framework, among other things:(CET1)(“CET1”), more commonly known in the United States as “Tier 1 Common,” and defines CET1 narrowly by requiring that most adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and expands the scope of the adjustments as compared to existing regulations;◦ as a newly adopted international standard, a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%); ◦ an additional “SIFI buffer” for those large institutions deemed to be systemically important, ranging from 1.0% to 2.5%, and up to 3.5% under certain conditions; Zions is not subject to this buffer under Basel III; however, some FRB officials have indicated that when U.S. implementing regulations are proposed, they may include an additional buffer of 0% to 1.0% for financial institutions defined as systemically important under the Dodd-Frank Act but not so deemed by the BCBS; ◦ a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation); ◦ a minimum ratio of Total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation); and ◦ as a newly adopted international standard, a minimum leverage ratio of 3%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (as the average for each quarter of the month-end ratios for the quarter); and as a newly adopted international standard, a minimum ratio of CET1 to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% CET1 ratio as that buffer is phased in, effectively resulting in a minimum ratio of CET1 to risk-weighted assets of at least 7%);an additional “SIFI buffer” for those large institutions deemed to be systemically important, ranging from 1.0% to 2.5%, and up to 3.5% under certain conditions; Zions is not subject to this buffer under Basel III, however, some FRB officials have indicated that when U. S. implementing regulations are proposed, they may include an additional buffer of 0% to 1.0% for financial institutions defined as systemically important under the Dodd-Frank Act but not so deemed by the BCBS;a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation);a minimum ratio of Total (that is, Tier 1 plus Tier 2) capital to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation); and
as a newly adopted international standard, a minimum leverage ratio of 3%, calculated as the ratio of Tier 1 capital to balance sheet exposures plus certain off-balance sheet exposures (as the average for each quarter of the month-end ratios for the quarter); and
provides for an additional “countercyclical capital buffer”,buffer,” generally to be imposed when national regulators determine that excess aggregate credit growth becomes associated with a buildup of systemic risk, that would be a CET1 add-on to the capital conservation buffer in the range of 0% to 2.5% when fully implemented.
the impact new capital regulations will have on our capital ratios.
In November 2011, the Company was given instructions requiring its participation in the FRB’s 2012 Comprehensive Capital Analysis and Review, which implemented the Dodd-Frank Act requirement that all
Requirements that the Parent serve as a source of strength for its banking subsidiaries. The FRB has had a policy that a bank holding company is expected to act as a source of financial and managerial strength to each of its bank subsidiaries and, under appropriate circumstances, to commit resources to support each subsidiary bank. The Dodd-Frank Act codifies this policy as a statutory requirement. In addition, the OCCregulators may order an assessment of the Parent if the capital of one of its national bank subsidiaries were to fall below capital levels required by the regulators.
Limitations on dividends payable by subsidiaries. A substantial 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 by the Parent’s subsidiary banks. These dividends are subject to various legal and regulatory restrictions. See Note 1918 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. See discussion under “Liquidity Management Actions” on page 85.
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.
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, including standards related to internal controls, information systems, internal audit, loan documentation, credit underwriting, interest rate exposure, asset growth and
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 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 Company’s 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.
Limitations on transactions with affiliates. The Dodd-Frank Act significantly expandsexpanded 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.
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 fail to adequately serve their 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, 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.
open-market operations in U.S. Government and other securities;
adjustment of the discount rates or cost of bank borrowings from the FRB;
imposing or changing reserve requirements against bank deposits;
term auction facilities collateralized by bank loans; and
other programs to purchase assets and inject liquidity directly in various segments of the economy.
U.S. Treasury’s CPP investment, we remain subject to the strict restrictions on incentive compensation contained in the ARRA. Financial institutions which have repurchased the U.S. Treasury’s CPP investment are relieved of the restrictions imposed by the ARRA. Due to these restrictions, we may not be able to successfully compete with financial institutions that have repurchased the U.S. Treasury’s investment to attract, retain and appropriately incentivize high performing employees. In addition, bank regulatory agencies have published guidance and proposed regulations which limit the manner and amount of compensation that banking organizations provide to employees. 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.
We have been unprofitable in two of the last three years and could potentially be unprofitable in the future, and such lack of profitability could have particular adverse effects on us, such as restrictingsignificantly limit our ability to pay dividends or requiring a valuation allowance against our deferred tax asset.
We are a holding company that conducts substantially allrespond to and take advantage of its operations through its banking and other subsidiaries. As a result, our ability to make dividend payments on our common stock will depend primarily upon the receipt of dividends and other distributions from our subsidiaries. We and certain of our subsidiaries have been unprofitable during the two of the last three annual reporting periods. During the last three years, the noncash accelerated discount amortization expense caused by subordinated debt holders converting their debt to preferred stock has contributed to our lack of profitability. Future conversions of subordinated debt into preferred stock may continue to hurt our profitability. The ability of the Company and our subsidiary banks to pay dividends is restricted by regulatory requirements, including profitability and the need to maintain required levels of capital. Lack of profitability exposes us to the risk that regulators could restrict the ability of our subsidiary banks to pay dividends and our ability to declare and pay dividends on our common stock, preferred stock or trust preferred securities. It also increases the risk that the Company may have to establish a “valuation allowance” against its net DTA. Some of the Company’s subsidiary banks have disallowed a portion of their DTA for regulatory capital purposes.
market developments.
Affect
Subjectsubjects the Company to new and/or higher fees paid to various regulatory entities, including but not limited to deposit insurance fees to the FDIC;
Impactimpacts the Company’s ability to invest in certain types of entities or engage in certain activities;
Impactimpacts a number of the Company’s business and risk management strategies;
Regulateregulates the pricing of certain of our products and services and restrictrestricts the revenue that the Company generates from certain businesses;
Subjectsubjects the Company to new capital planning actions, including stress testing or similar actions and timing expectations for capital-raising;
Subjectsubjects the Company to supervision by the Consumer Financial Protection Bureau, with very broad rule-making and enforcement authorities;
Grantgrants authority to state agencies to enforce state and federal laws against national banks;
Subjectsubjects the Company to new and different litigation and regulatory enforcement risks; and
Limitlimits the amount and manner of compensation paid to executive officers and employees generally.
Negative perceptions associated with our continued participation in the U.S. Treasury’s CPP may adversely affect our ability to retain customers, attract investors, and compete for new business opportunities.
Several financial institutions that also participated in the CPP have repurchased their TARP preferred stock. There can be no assurance as to the timing or manner in which the Company may repurchase its Series D Preferred Stock from the U.S. Treasury. Our customers, employees and counterparties in our current and future business relationships could draw negative implications regarding the strength of the Company as a financial institution based on our continued participation in the CPP. Any such negative perceptions could impair our
ability to effectively compete with other financial institutions for business or to retain high performing employees. If this were to occur, our business, financial condition, and results of operations may be adversely affected.
Failure to effectively manage our credit concentration or counterparty risk could adversely affect us.
Increases in 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. The management
base and revenues.
| 2011 | 2010 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
1st Quarter | $ | 25.60 | $ | 22.08 | $ | 23.85 | $ | 12.88 | ||||||||
2nd Quarter | 24.92 | 21.36 | 30.29 | 21.22 | ||||||||||||
3rd Quarter | 24.71 | 14.07 | 24.39 | 17.91 | ||||||||||||
4th Quarter | 18.51 | 13.18 | 24.58 | 18.84 | ||||||||||||
| 2012 | 2011 | |||||||||||||||
| High | Low | High | Low | |||||||||||||
| 1st Quarter | $ | 22.81 | $ | 16.40 | $ | 25.60 | $ | 22.08 | ||||||||
| 2nd Quarter | 21.55 | 17.45 | 24.92 | 21.36 | ||||||||||||
| 3rd Quarter | 21.68 | 17.58 | 24.71 | 14.07 | ||||||||||||
| 4th Quarter | 22.66 | 19.03 | 18.51 | 13.18 | ||||||||||||
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
2011 | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||
2010 | 0.01 | 0.01 | 0.01 | 0.01 | ||||||||||||
| 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
| 2012 | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||
| 2011 | 0.01 | 0.01 | 0.01 | 0.01 | ||||||||||||
The Company cannot increase the common stock dividend above $0.32 per share without the consent
Period | Total number of shares repurchased1 | 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 | 199 | $ | 13.68 | – | $ | – | ||||||||||
November | 251 | 16.18 | – | – | ||||||||||||
December | 8,324 | 14.67 | – | – | ||||||||||||
|
|
|
| |||||||||||||
Fourth quarter | 8,774 | 14.69 | – | |||||||||||||
|
|
|
| |||||||||||||
2012.
1 | Represents common | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company has not repurchased any 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 Common Stock Repurchase Plan since August 16, 2007. It is prohibited from repurchasing any common shares through“withholding shares” provision of an authorized share repurchase program by terms of the CPP until the Company’s Series D preferred stock has been fully repaid or the U.S. Treasury otherwise ceases to own any such preferred stock.
employee share-based compensation plan.
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |||||||||||||||||||
Zions Bancorporation | 100.0 | 58.0 | 31.8 | 16.8 | 31.8 | 21.4 | ||||||||||||||||||
KBW Bank Index | 100.0 | 78.2 | 41.1 | 40.4 | 49.8 | 38.3 | ||||||||||||||||||
S&P 500 | 100.0 | 105.5 | 66.5 | 84.1 | 96.7 | 98.8 | ||||||||||||||||||
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |||||||||||||
| Zions Bancorporation | 100.0 | 54.6 | 28.7 | 54.4 | 36.6 | 48.2 | ||||||||||||
| KBW Bank Index | 100.0 | 52.5 | 51.6 | 63.7 | 48.9 | 65.1 | ||||||||||||
| S&P 500 | 100.0 | 63.0 | 79.7 | 91.7 | 93.6 | 108.6 | ||||||||||||
| FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||
| (In millions, except per share amounts) | 2012/2011 Change | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||
| For the Year | |||||||||||||||||||||||
| Net interest income | -1 | % | $ | 1,731.9 | $ | 1,756.2 | $ | 1,714.3 | $ | 1,885.6 | $ | 1,958.1 | |||||||||||
| Noninterest income | -16 | % | 419.9 | 498.2 | 453.6 | 816.0 | 204.2 | ||||||||||||||||
| Total revenue | -5 | % | 2,151.8 | 2,254.4 | 2,167.9 | 2,701.6 | 2,162.3 | ||||||||||||||||
| Provision for loan losses | -81 | % | 14.2 | 74.5 | 852.7 | 2,017.1 | 648.6 | ||||||||||||||||
| Noninterest expense | -4 | % | 1,595.0 | 1,658.6 | 1,718.3 | 1,671.3 | 1,474.7 | ||||||||||||||||
| Impairment loss on goodwill | — | % | 1.0 | — | — | 636.2 | 353.8 | ||||||||||||||||
| Income (loss) before income taxes | +4 | % | 541.6 | 521.3 | (403.1 | ) | (1,623.0 | ) | (314.8 | ) | |||||||||||||
| Income taxes (benefit) | -3 | % | 193.4 | 198.6 | (106.8 | ) | (401.3 | ) | (43.4 | ) | |||||||||||||
| Net income (loss) | +8 | % | 348.2 | 322.7 | (296.3 | ) | (1,221.7 | ) | (271.4 | ) | |||||||||||||
| Net income (loss) applicable to noncontrolling interests | -18 | % | (1.3 | ) | (1.1 | ) | (3.6 | ) | (5.6 | ) | (5.1 | ) | |||||||||||
| Net income (loss) applicable to controlling interest | +8 | % | 349.5 | 323.8 | (292.7 | ) | (1,216.1 | ) | (266.3 | ) | |||||||||||||
| Net earnings (loss) applicable to common shareholders | +16 | % | 178.6 | 153.4 | (412.5 | ) | (1,234.4 | ) | (290.7 | ) | |||||||||||||
| Per Common Share | |||||||||||||||||||||||
| Net earnings (loss) – diluted | +17 | % | 0.97 | 0.83 | (2.48 | ) | (9.92 | ) | (2.68 | ) | |||||||||||||
| Net earnings (loss) – basic | +17 | % | 0.97 | 0.83 | (2.48 | ) | (9.92 | ) | (2.68 | ) | |||||||||||||
| Dividends declared | — | % | 0.04 | 0.04 | 0.04 | 0.10 | 1.61 | ||||||||||||||||
Book value1 | +7 | % | 26.73 | 25.02 | 25.12 | 27.85 | 42.65 | ||||||||||||||||
| Market price – end | 21.40 | 16.28 | 24.23 | 12.83 | 24.51 | ||||||||||||||||||
Market price – high2 | 22.81 | 25.60 | 30.29 | 25.52 | 57.05 | ||||||||||||||||||
| Market price – low | 16.40 | 13.18 | 12.88 | 5.90 | 17.53 | ||||||||||||||||||
| At Year-End | |||||||||||||||||||||||
| Assets | +4 | % | 55,512 | 53,149 | 51,035 | 51,123 | 55,093 | ||||||||||||||||
| Net loans and leases | +1 | % | 37,665 | 37,258 | 36,830 | 40,260 | 41,712 | ||||||||||||||||
| Deposits | +8 | % | 46,133 | 42,876 | 40,935 | 41,841 | 41,316 | ||||||||||||||||
| Long-term debt | +20 | % | 2,337 | 1,954 | 1,943 | 2,033 | 2,622 | ||||||||||||||||
| Shareholders’ equity: | |||||||||||||||||||||||
| Preferred equity | -53 | % | 1,128 | 2,377 | 2,057 | 1,503 | 1,582 | ||||||||||||||||
| Common equity | +7 | % | 4,924 | 4,608 | 4,591 | 4,190 | 4,920 | ||||||||||||||||
| Noncontrolling interests | -50 | % | (3 | ) | (2 | ) | (1 | ) | 17 | 27 | |||||||||||||
| Performance Ratios | |||||||||||||||||||||||
| Return on average assets | 0.66 | % | 0.63 | % | (0.57 | )% | (2.25 | )% | (0.50 | )% | |||||||||||||
| Return on average common equity | 3.76 | % | 3.32 | % | (9.26 | )% | (28.35 | )% | (5.69 | )% | |||||||||||||
| Net interest margin | 3.57 | % | 3.77 | % | 3.70 | % | 3.91 | % | 4.15 | % | |||||||||||||
Capital Ratios1 | |||||||||||||||||||||||
| Equity to assets | 10.90 | % | 13.14 | % | 13.02 | % | 11.17 | % | 11.85 | % | |||||||||||||
| Tier 1 leverage | 10.96 | % | 13.40 | % | 12.56 | % | 10.38 | % | 9.99 | % | |||||||||||||
| Tier 1 risk-based capital | 13.38 | % | 16.13 | % | 14.78 | % | 10.53 | % | 10.22 | % | |||||||||||||
| Total risk-based capital | 15.05 | % | 18.06 | % | 17.15 | % | 13.28 | % | 14.32 | % | |||||||||||||
| Tangible common equity | 7.09 | % | 6.77 | % | 6.99 | % | 6.12 | % | 5.89 | % | |||||||||||||
| Tangible equity | 9.15 | % | 11.33 | % | 11.10 | % | 9.16 | % | 8.91 | % | |||||||||||||
| Selected Information | |||||||||||||||||||||||
Average common and common-equivalent shares (in thousands) | 183,236 | 182,605 | 166,054 | 124,443 | 108,908 | ||||||||||||||||||
| Common dividend payout ratio | 4.14 | % | 4.80 | % | na | na | na | ||||||||||||||||
| Full-time equivalent employees | 10,368 | 10,606 | 10,524 | 10,529 | 11,011 | ||||||||||||||||||
| Commercial banking offices | 480 | 486 | 495 | 491 | 513 | ||||||||||||||||||
| ATMs | 585 | 589 | 601 | 602 | 625 | ||||||||||||||||||
FINANCIAL HIGHLIGHTS
| (In millions, except per share amounts) | 2011/2010 Change | 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||
For the Year | ||||||||||||||||||||||||
Net interest income | +3 | % | $ | 1,772.5 | $ | 1,727.4 | $ | 1,897.5 | $ | 1,971.6 | $ | 1,882.0 | ||||||||||||
Noninterest income | +9 | % | 481.8 | 440.5 | 804.1 | 190.7 | 412.3 | |||||||||||||||||
Total revenue | +4 | % | 2,254.3 | 2,167.9 | 2,701.6 | 2,162.3 | 2,294.3 | |||||||||||||||||
Provision for loan losses | -91 | % | 74.4 | 852.1 | 2,016.9 | 648.3 | 152.2 | |||||||||||||||||
Noninterest expense | -4 | % | 1,658.7 | 1,718.9 | 1,671.5 | 1,475.0 | 1,404.6 | |||||||||||||||||
Impairment loss on goodwill | – | – | – | 636.2 | 353.8 | – | ||||||||||||||||||
Income (loss) before income taxes | +229 | % | 521.2 | (403.1 | ) | (1,623.0 | ) | (314.8 | ) | 737.5 | ||||||||||||||
Income taxes (benefit) | +286 | % | 198.5 | (106.8 | ) | (401.3 | ) | (43.4 | ) | 235.8 | ||||||||||||||
Net income (loss) | +209 | % | 322.7 | (296.3 | ) | (1,221.7 | ) | (271.4 | ) | 501.7 | ||||||||||||||
Net income (loss) applicable to noncontrolling interests | +69 | % | (1.1 | ) | (3.6 | ) | (5.6 | ) | (5.1 | ) | 8.0 | |||||||||||||
Net income (loss) applicable to controlling interest | +211 | % | 323.8 | (292.7 | ) | (1,216.1 | ) | (266.3 | ) | 493.7 | ||||||||||||||
Net earnings (loss) applicable to common shareholders | +137 | % | 153.4 | (412.5 | ) | (1,234.4 | ) | (290.7 | ) | 479.4 | ||||||||||||||
Per Common Share | ||||||||||||||||||||||||
Net earnings (loss) – diluted | +133 | % | 0.83 | (2.48 | ) | (9.92 | ) | (2.68 | ) | 4.40 | ||||||||||||||
Net earnings (loss) – basic | +133 | % | 0.83 | (2.48 | ) | (9.92 | ) | (2.68 | ) | 4.45 | ||||||||||||||
Dividends declared | – | 0.04 | 0.04 | 0.10 | 1.61 | 1.68 | ||||||||||||||||||
Book value1 | – | 25.02 | 25.12 | 27.85 | 42.65 | 47.17 | ||||||||||||||||||
Market price – end | 16.28 | 24.23 | 12.83 | 24.51 | 46.69 | |||||||||||||||||||
Market price – high2 | 25.60 | 30.29 | 25.52 | 57.05 | 88.56 | |||||||||||||||||||
Market price – low | 13.18 | 12.88 | 5.90 | 17.53 | 45.70 | |||||||||||||||||||
At Year-End | ||||||||||||||||||||||||
Assets | +4 | % | 53,149 | 51,035 | 51,123 | 55,093 | 52,947 | |||||||||||||||||
Net loans and leases | +1 | % | 37,145 | 36,747 | 40,189 | 41,659 | 38,880 | |||||||||||||||||
Deposits | +5 | % | 42,876 | 40,935 | 41,841 | 41,316 | 36,923 | |||||||||||||||||
Long-term debt | +1 | % | 1,954 | 1,943 | 2,033 | 2,622 | 2,591 | |||||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||||||
Preferred equity | +16 | % | 2,377 | 2,057 | 1,503 | 1,582 | 240 | |||||||||||||||||
Common equity | – | 4,608 | 4,591 | 4,190 | 4,920 | 5,053 | ||||||||||||||||||
Noncontrolling interests | -100 | % | (2 | ) | (1 | ) | 17 | 27 | 31 | |||||||||||||||
Performance Ratios | ||||||||||||||||||||||||
Return on average assets | 0.63 | % | (0.57 | )% | (2.25 | )% | (0.50 | )% | 1.01 | % | ||||||||||||||
Return on average common equity | 3.32 | % | (9.26 | )% | (28.35 | )% | (5.69 | )% | 9.57 | % | ||||||||||||||
Net interest margin | 3.81 | % | 3.73 | % | 3.94 | % | 4.18 | % | 4.43 | % | ||||||||||||||
Capital Ratios1 | ||||||||||||||||||||||||
Equity to assets | 13.14 | % | 13.02 | % | 11.17 | % | 11.85 | % | 10.06 | % | ||||||||||||||
Tier 1 leverage | 13.40 | % | 12.56 | % | 10.38 | % | 9.99 | % | 7.37 | % | ||||||||||||||
Tier 1 risk-based capital | 16.13 | % | 14.78 | % | 10.53 | % | 10.22 | % | 7.57 | % | ||||||||||||||
Total risk-based capital | 18.06 | % | 17.15 | % | 13.28 | % | 14.32 | % | 11.68 | % | ||||||||||||||
Tangible common equity | 6.77 | % | 6.99 | % | 6.12 | % | 5.89 | % | 5.70 | % | ||||||||||||||
Tangible equity | 11.33 | % | 11.10 | % | 9.16 | % | 8.91 | % | 6.23 | % | ||||||||||||||
Selected Information | ||||||||||||||||||||||||
Average common and common-equivalent shares | 182,605 | 166,054 | 124,443 | 108,908 | 108,408 | |||||||||||||||||||
Common dividend payout ratio | 4.80 | % | na | na | na | 37.82 | % | |||||||||||||||||
Full-time equivalent employees | 10,606 | 10,524 | 10,529 | 11,011 | 10,933 | |||||||||||||||||||
Commercial banking offices | 486 | 495 | 491 | 513 | 508 | |||||||||||||||||||
ATMs | 589 | 601 | 602 | 625 | 627 | |||||||||||||||||||
1 | At year-end. |
2 | The actual high price for 2008 was $107.21. However, this trading price was an anomaly resulting from electronic orders at the opening of the market on September 19, 2008 in response to the |
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
At December 31, The Company ranked in the top 10 nationally for loans provided to small businesses, under both the Small Business Administration’s 7(a) and 504 programs. The Company provides also public finance, wealth management and brokerage services. Revenues and profits are primarily derived from commercial customers. focus on 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 through superior products, productivity, efficiency and a lower cost of capital; and centralize and standardize policies and expansion. While some states in our footprint GDP growth in our footprint has exceeded nominal U.S. GDP by an average of Job creation within the Zions footprint greatly exceeded the national rate during the past We operate eight different community/regional banks, each under a different name, and each with its own charter, chief executive officer and management team. We believe that this approach allows us to attract and retain exceptional management, and provides service of the highest quality to our targeted customers. The results of this service are evident in the results of the Greenwich Associates annual survey, wherein the Company consistently ranks “Excellent” for overall satisfaction among small and middle-market businesses. This structure helps to ensure that many of the decisions related to customers are made at a local level: Maintain a Sustainable Competitive Advantage Over Community Banks We use the combined scale of all of our banking operations to create a broad product Our larger capital base and product offerings allows us to lend to business customers of For certain products for which economies of scale are believed to be Our combined size and diversification 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. 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 consumer lending, and The Company regularly measures interest rate and liquidity risk and uses capital markets instruments to adjust risks to within Board-approved The Company centrally monitors and oversees operational risk. The Company reported net 2011. Our Increase the loan growth rate, primarily through continued strong business lending and additional growth in residential mortgage lending. Further reduce nonaccrual and classified loans. Carefully manage expenses, including expenses related to loan quality other than the provision for loan losses, e.g. 2011: Driver Average net loans and leases Average money market investments Average noninterest-bearing deposits Average total deposits Net interest income Provision for loan losses Net impairment losses on investment securities Noninterest income Noninterest expense Nonaccrual loans Net interest margin Core net interest margin Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned Ratio of total allowance for credit losses to net loans and leases outstanding Tier 1 common equity to risk-weighted assets Net common shares issued Includes loans for sale 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. current accounting guidance. 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. been specifically identified. The determination of the appropriate level of the allowance is based on periodic evaluations of the portfolios. This process includes a quantitative analysis, as well as a qualitative review of its results. The qualitative review requires a significant amount of losses, plus assumptions regarding the probability and amount of unfunded commitments being drawn. 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 the potential 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. appropriate at the most recent test date. related to goodwill. OTC derivatives, based on a total expected exposure credit model. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, current threshold amounts, mutual puts, and guarantees. Additionally, we actively monitor counterparty credit ratings for significant changes. ’s net interest margin. See Note 1 of the Notes to Consolidated Financial Statements for additional information. $ $67.2 million decrease in other real estate expense; $51.7 million decrease in net impairment losses on investment securities; $ $38.1 million decrease in FDIC The impact of these items was partially offset by the following: $305.4 million increase in income tax expense; $48.9 million increase in salaries and employee benefits; $47.5 million increase in preferred stock dividends; $25.3 million decrease in service charges and fees on deposit accounts; and $14.5 million decrease in gain on subordinated debt exchange. During 2009, the Company executed a subordinated debt modification and exchange transaction. The original discount on the resulting convertible subordinated debt was $679 million and the remaining discount at December 31, Schedule 2: Income (loss) before income taxes (GAAP) Gain on subordinated debt modification Convertible subordinated debt discount amortization Accelerated convertible subordinated debt discount amortization Income (loss) before income taxes, gain on subordinated debt modification, and discount amortization on convertible subordinated debt (non-GAAP) time. 79 for additional information. ASSETS: Money market investments Securities: Held-to-maturity Available-for-sale Trading account Total securities Loans held for sale Loans: Net loans and leases excluding FDIC-supported loans2 FDIC-supported loans Total loans and leases Total interest-earning assets Cash and due from banks Allowance for loan losses Goodwill Core deposit and other intangibles Other assets Total assets LIABILITIES: Interest-bearing deposits: Savings and NOW Money market Time Foreign Total interest-bearing deposits Borrowed funds: Securities sold, not yet purchased Federal funds purchased and security repurchase agreements Other short-term borrowings Long-term debt Total borrowed funds Total interest-bearing liabilities Noninterest-bearing deposits Other liabilities Total liabilities Shareholders’ equity: Preferred equity Common equity Controlling interest shareholders’ equity Noncontrolling interests Total shareholders’ equity Total liabilities and shareholders’ equity Spread on average interest-bearing funds Taxable-equivalent net interest income and net yield on interest-earning assets Average Taxable-equivalent rates used where applicable. INTEREST-EARNING ASSETS: Money market investments Securities: Held-to-maturity Available-for-sale Trading account Total securities Loans held for sale Loans: Net loans and leases excluding FDIC-supported loans2 FDIC-supported loans Total loans and leases Total interest-earning assets INTEREST-BEARING LIABILITIES: Interest-bearing deposits: Savings and NOW Money market Time Foreign Total interest-bearing deposits Borrowed funds: Securities sold, not yet purchased Federal funds purchased and security repurchase agreements Other short-term borrowings Long-term debt Total borrowed funds Total interest-bearing liabilities Change in taxable-equivalent net interest income Taxable-equivalent rates used where applicable. RULC. to 5.1% of the loan portfolio at December 31, 2012 compared to 6.1% a year earlier. quality. 2010. Service charges and fees on deposit accounts Other service charges, commissions and fees Trust and wealth management income Capital markets and foreign exchange Dividends and other investment income Loan sales and servicing income Fair value and nonhedge derivative income (loss) Equity securities gains (losses), net Fixed income securities gains (losses), net Impairment losses on investment securities: Impairment losses on investment securities Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income) Net impairment losses on investment securities Valuation losses on securities purchased Gain on subordinated debt modification Gain on subordinated debt exchange Acquisition related gains Other Total larger gains from loan sales. Loan sales and servicing income remained fairly stable from 2010 to 2011. Nonhedge derivative income Total return swap Fair value decreases on instruments elected under fair value option Derivative fair value credit adjustments Other Total expense recognition. the sale of BServ, Inc. stock, which the Company NetDeposit. Salaries and employee benefits Occupancy, net Furniture and equipment Other real estate expense Credit related expense Provision for unfunded lending commitments Legal and professional services Advertising FDIC premiums Amortization of core deposit and other intangibles Other Total Salaries and bonuses Employee benefits: Employee health and insurance Retirement Payroll taxes and other Total benefits Total salaries and employee benefits Full-time equivalent employees at December 31, a 35.9% reduction in OREO balances during the last 12 months, which resulted in reduced holding expenses, as well as lower write-downs of collateral carrying values. 2011. improved risk factors employed in those formulas. asset declined. 2011. 2010. subsidiaries, TCBO, and eliminations of transactions between segments. KEY FINANCIAL INFORMATION Total assets Total deposits Net income (loss) applicable to controlling interest Net interest margin RISK-BASED CAPITAL RATIOS Tier 1 leverage Tier 1 risk-based capital Total risk-based capital CREDIT QUALITY Provision for loan losses Net loan and lease charge-offs Ratio of net charge-offs to average loans and leases Allowance for loan losses Ratio of allowance for loan losses to net loans and leases, at year-end Nonperforming lending-related assets Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned Accruing loans past due 90 days or more Ratio of accruing loans past due 90 days or more to net loans and leases KEY FINANCIAL INFORMATION Total assets Total deposits Net income (loss) applicable to controlling interest Net interest margin RISK-BASED CAPITAL RATIOS Tier 1 leverage Tier 1 risk-based capital Total risk-based capital CREDIT QUALITY Provision for loan losses Net loan and lease charge-offs Ratio of net charge-offs to average loans Allowance for loan losses Ratio of allowance for loan losses to net loans and Nonperforming lending-related assets Ratio of nonperforming lending-related assets Accruing loans past due 90 days or more Ratio of accruing loans past due 90 2011. 2011. 71.8% in the previous year. investments. securities. Held-to-maturity: Municipal securities Asset-backed securities: Trust preferred securities – predominantly bank Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – predominantly insurance Noninvestment grade Other Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Available-for-sale: U.S. Treasury securities U.S. Government agencies and corporations: Agency securities Agency guaranteed mortgage-backed securities Small Business Administration loan-backed securities Municipal securities Asset-backed securities: Trust preferred securities – predominantly bank AAA rated AA rated A rated BBB rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – predominantly insurance AA rated A rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – single banks Not rated Trust preferred securities – real estate investment trusts Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Auction rate securities AAA rated Other AAA rated AA rated A rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Mutual funds and other Total Held-to-maturity: Municipal securities Asset-backed securities: Trust preferred securities – predominantly bank Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – predominantly insurance Noninvestment grade Other Noninvestment grade Noninvestment grade – OTTI/PIK’d 2 Available-for-sale: U.S. Treasury securities U.S. Government agencies and corporations: Agency securities Agency guaranteed mortgage-backed securities Small Business Administration loan-backed securities Municipal securities Asset-backed securities: Trust preferred securities – predominantly bank A rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – predominantly insurance AA rated A rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Trust preferred securities – single banks Not rated Trust preferred securities – real estate investment trusts Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Auction rate securities AAA rated Other AAA rated AA rated A rated Noninvestment grade Noninvestment grade – OTTI/PIK’d2 Mutual funds and other Total Held-to-maturity: Municipal securities Asset-backed securities: Trust preferred securities – banks and insurance Other Available-for-sale: U.S. Treasury securities U.S. Government agencies and corporations: Agency securities Agency guaranteed mortgage-backed securities Small Business Administration loan-backed securities Municipal securities Asset-backed securities: Trust preferred securities – banks and insurance Trust preferred securities – real estate investment trusts Auction rate securities Other Mutual funds and other Total The amortized cost of investment securities on December 31, 2012 decreased by 8.7% from the balances on December 31, 2011, primarily due to reductions in agency guaranteed mortgage-backed securities, reductions and impairment of asset-backed securities, partially offset by increased investments in U.S. Treasury securities, and mutual funds and other securities. Fair value balance at December 31, 2011 Expected collateral credit losses1 Loss percentage from currently defaulted or deferring collateral2 Projected loss percentage from currently performing collateral 1-year years 2-5 years 6-30 Discount rate3 Weighted average spread over LIBOR Sensitivity of Modeled Assumptions Increase (decrease) in fair value due to increase in projected loss percentage from currently performing collateral4 Increase (decrease) in fair value due to increase in projected loss percentagefrom currently performing collateral4 and the immediate default of all deferring collateral with no recovery Increase (decrease) in fair value due to increase Increase (decrease) in fair value due to increase Increase (decrease) in fair value due to: increase in prepayment assumption5 increase in prepayment assumption6 Regarding Prepayment Rate billion. The pace of these large bank prepayments to date have been consistent with our assumption with just over 40% of large banks having prepaid within our pools by year end 2012. CDOs. Deferral Experience ratings subgroup is presented, not the best and worst single security within the original ratings grouping. The number of issuers and the number of currently performing issuers noted in Schedule 15 –SORTED BY WHETHER OTTI HAS BEEN TAKEN AND BY ORIGINAL RATINGS Original ratings of securities, non-OTTI: Original AAA Original A Original BBB Total non-OTTI Original ratings of securities, OTTI: Original AAA Original A Original BBB Total OTTI Total noninvestment grade bank and insurance CDOs Original ratings of securities, non-OTTI: Original AAA Original A Original BBB Original ratings of securities, OTTI: Original AAA Original A Original BBB Valuation losses relate to securities purchased from Lockhart Funding LLC prior to its consolidation in June 2009. 16 Original ratings of securities, non-OTTI: Original AAA Best Weighted average Worst Original A Best Weighted average Worst Original BBB Best Weighted average Worst Original ratings of securities, OTTI: Original AAA Single security Original A Best Weighted average Worst Original BBB Best Weighted average Worst Excludes both defaulted issuers and issuers that have elected to defer payment of current interest. Collateral is identified as defaulted when a regulator closes an issuing bank. Collateral is identified as deferring when the Company becomes aware that an issuer has announced or elected to defer interest payment on trust preferred debt. This is the same statistic presented in the preceding sensitivity schedule and incorporated in the fair value and OTTI calculations. The statistic is the sum of incremental projected loss percentages from currently paying collateral for year one, years two through five and years six through thirty. Negative subordination is projected to be remedied by excess spread prior to maturity. Collateralization shortfall is projected to be remedied by excess spread prior to maturity.MANAGEMENT’S DISCUSSION AND ANALYSISEXECUTIVE SUMMARYCompany OverviewZions Bancorporation (“the Parent”) and subsidiaries (collectively “the Company,” “Zions,” “we,” “our,” “us”) together comprise a $53$56 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, 2011,2012, the Company was the 1920th largest domestic bank holding company in terms of deposits and is included in the S&P 500 and NASDAQ Financial 100 indices. It is the largest independent regional bankbanking company in the Westernwestern U.S.2011,2012, the Company operated banking businesses through 486480 domestic branches in ten Westernwestern and Southwesternsouthwestern states.•The Company ranked 1st nationally in providing loans to small businesses through the SBA 504 lending program. It ranked 7th nationally in the SBA 7(a) lending program.It has been awarded numerous “Excellence” awards by Greenwich Associates, having received 13 awards for the 2011 survey,2012 survey. Only 11 banks received more than 10 awards, while the nation’s largest banks received betweena median three and five such awards.Long-Term StrategyWe strive to maintain a local communitycommunity/regional bank approach for customer-facing elements of our business. We believe that our target customers, consisting largely of small and mid-sized businesses, appreciate local branding, product customization and speedy decision-making by local management. By retaining a significant degree of autonomy in product offerings and pricing, we believe our banks have a sustainable competitive advantage over larger national banks where loan and deposit products are often homogeneous. However, we strive to centralize noncustomer facing operations, such as risk and capital management, and technology and operations. By centralizing many of these functions, we believe we can generally achieve greater economies of scale and stronger risk management, and that our portfolio of community banks has superior access to the capital markets, investment portfolio and treasury management, liquidity resources, and technological advances than do smaller independent community banks.Our growth strategy is driven by four key factors:management controllingoversight of key risks.Focus on Growth Markets22The Company seeks to grow both organically and through acquisitions in growth markets. The states in our geographic footprint have experienced higher rates of economic growth than other states. Our footprint is well diversified by industry, strong business formation rates, real estate development and general economic have experienced a significant slowing in economic activity during the recent recession, others have experienced above-average growth and stronger resistance to the economic downturn. We believe that the Company can continue to experience above-average revenue growth in the long term, in part because the majority of our footprint is concentrated in states that have above average GDP, population, and job growth, and where the economies are well diversified.0.8%1.1% per year (compounded) over the last ten years; i.e., from 2001-2010,2001-2011, nominal USU.S. GDP grew by 4.0%3.9%, while nominal GDP in Zions’ footprint (weighted by 12/31/12 assets) grew by 4.8%5.1%.Population growth rates in our footprint have exceeded U.S. population growth rates by 1.1% per year (compounded) during the period 2000 thru 2010; i.e. nationally, the U.S. population increased by 10.6% during the last decade, while Zions’ footprint (weighted average) grew by 23.2% during the same period.10ten years. U.S. nonfarm payroll jobs increased by 1.1%3.4% during the last 10ten years; however, job creation in Zions’ footprint increased by 8.8%11.4%.The higher economic growth indicators of GDP and job creation in our footprint are driven by the economies of Texas, California and Utah where more than 75% of the Company’s assets are located.Texas has a well diversified economy that is the third largest in the United States. Significant drivers of its growth are the energy, health care, manufacturing, real estate, and computer technology sectors. These sectors have propelled the Texas economy to outperform the nation, as employers have added jobs in the past 12 months, which has resulted in the unemployment rate declining to 6.1% compared to the national rate of 7.8%. Amegy’s three primary markets, Houston, Dallas and San Antonio, experienced job growth in 2012. Amegy has $13 billion in assets, which represent 24% of the Company’s assets. In addition, the Texas economic environment benefits from business-friendly growth policies, affordable housing markets, and a relatively small percentage of homeowner borrowers in a negative equity situation. See “Business Segment Results” on page 44 for further discussion on the 2012 performance of Amegy.California’s economy is the largest in the United States, representing approximately 13% of the nation’s GDP and is based on a diverse group of business sectors. The state has been experiencing improvements in residential and CRE values. Additionally, voters recently approved increases in taxes to shore up the state’s budget shortfall. However, state and local finances remain under strain; California has one of the lowest state credit ratings, and several major municipalities filed for or remained under bankruptcy protection in 2012. California Bank & Trust’s (“CB&T”) primary markets – the 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 2012 compared to 2011. 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. The state’s unemployment rate declined from its peak as follows – 12.4% in October 2010, 11.2% in December 2011, and 9.8% in December 2012 – but remains well above the 7.8% national average. Unemployment rates are much lower in CB&T’s primary markets compared to the state as a whole. See “Business Segment Results” on page 44 for further discussion on the 2012 performance of CB&T.The Utah economy is primarily based on the energy, agriculture, real estate, computer technology, education, health care, and financial services sectors. During 2012, Utah employment grew at a 2.9% rate compared to the national employment growth rate of 1.4%. This growth decreased Utah’s overall unemployment rate to 5.2% in 2012 from 5.8% in 2011. Zions Bank is the second largest full-service commercial bank in the state of Utah as measured by domestic deposits, and operates in all submarkets of the state. Zions Bank has approximately $18 billion in assets, which represent 32% of the Company’s assets. 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 controlling23government spending levels. See “Business Segment Results” on page 44 for further discussion on the 2012 performance of Zions Bank.Keep Decisions That Affect Customers LocalWe believe that over the long term, ensuring that local management teams retain the authority over many of the decisions that affect their customers is a strategy that ultimately generates superior growth in our banking businesses, as supported by stronger organic loan and deposit growth relative to other banks.◦ 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. branding and marketing strategies;product offerings and pricing; andcredit decisions (within the limits of established corporate policy).To create a sustainable competitive advantage over other smaller community banks, we focus on achieving superior product selection, productivity, economies of scale, availability of liquidity, and a lower cost of capital. Compared to community banks:offering at a lower marginal cost.alla wide range of sizes, from start-up companiessmall businesses to large Fortune 100 companies.important,critical, the Company “manufactures” the product centrally or is able to obtain services from third-party vendors at lower costs due to volume-driven pricing power.Centralize and Standardize Policies and Management ControllingOversight of Key RisksWe 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.consumer lending.targets.24MANAGEMENT’S OVERVIEW OF 20112012 PERFORMANCEThe Company worked aggressively in three key areas during 2011 to improve profitability:Asset quality improvement, resulting in a 42% decline in nonperforming lending-related assets and a 54% decline in net charge-offs.Loan production and returning the company to positive loan growth, after declining in the prior two years. The prior years’ declines were primarily due to attrition in construction loans as part of our efforts to reduce the risk profile of the Company.Further developing our stress testing capabilities and making significant improvements to risk management, and the submission of our formal capital plan to the Federal Reserve on January 9, 2012. This submission included four economic scenarios on all eight of our affiliate banks as well as the consolidated company; additionally, we submitted test results on various asset classes that have unique characteristics, such as our CDO and energy loan portfolios.incomeearnings applicable to common shareholders for 20112012 of $178.6 million or $0.97 per diluted common shared compared to $153.4 million or $0.83 per diluted common share compared to a net loss of $412.5 million or $2.48 per diluted common share for 2010.While we are encouraged with a returnthe 2012 results, we are also encouraged by future opportunities to profitability in 2011, we believe we have much work to do to reach an attractiveexpand our return on equity through both financing and return to an acceptable growth rate for net earnings available to common shareholders.Significant 2011 accomplishmentsAreas Experiencing Strength in 2012The Company returned toimproved its profitability, generating a 3.32%5.18% tangible return on average tangible common equity and common equity per share was generally stablecompared to 4.72% in 2011. Two major items had a significant adverse impact on profitability during the year.The Company worked aggressivelyyear: 1) amortization of the discount related to reduce problem assets. Classified loans, a broad category of loans having an elevated probability of default, declined 40% from one year ago, a faster rate of improvement than the prior year’s 32% improvement.Nonperforming assetsconvertible subordinated debt, and net charge-offs improved significantly, as previously discussed (see Chart 2).Net securities impairment losses on investment securities, declined 61% in 2011, after declining 70% in 2010.Capital levels improved materially. TheCommon equity Tier 1 common capital improved and we began to reduce the cost of our high-cost capital structure (see Chart 3). In 2012, we fully redeemed our $1.4 billion TARP CPP preferred stock. We also refinanced our Series E preferred shares with the lower-cost Series F preferred shares, which resulted in an annualized $91 million preferred dividend expense in the fourth quarter of 2012 compared to an annualized $178 million preferred dividend expense in the fourth quarter of 2011. Our Common Equity Tier 1 ratio increased 7% in 2011further improved to a record high level of 9.57%. Based upon information currently available, management believes9.80% at December 31, 2012.Asset quality improved significantly, with the Company already exceedsexperiencing a 30% decline in nonperforming lending-related assets (see Chart 2) and a 66% decline in net charge-offs. As a result, credit costs, including the new Basel III guidelines; such guidelines have not yet been formally adopted byprovision for loan losses, other real estate expense, and credit-related expense, declined more than 60%.Loans, our primary revenue driver, increased $407 million, or 1.1%, compared to December 31, 2011, including increases of $809 million in commercial and industrial, $429 million in 1-4 family residential, and $180 million in commercial real estate term loans. This loan growth came despite the Federal Reserve, and thus can only be estimated. The Basel III guidelines are scheduled to be fully phasednet run-off of $570 million in by January 2019.We continued to rebalance and reduce the risk of the loan portfolio. During 2011,owner occupied loans, $326 million in construction and land development loans, declined 35% after declining 37%and $223 million in the prior year. They now account for only 6%FDIC-supported loans, all of thewhich were planned reductions to reduce risk. Unfunded lending commitments increased $1.7 billion in 2012, which is expected to result in improved loan portfolio, down from 22% at their peak. These loans have been the largest single source ofgrowth in 2013.Despite a difficult interest rate environment and modest loan losses during this credit cycle, and the concentration reduction represents lower risk for the total portfolio.Despite the significant declinegrowth, we successfully maintained relatively stable net interest income in construction loans, we were successful at increasing loan balances by 1.1% in 2011,2012 compared to 2011 (see Chart 1). We also worked to contain operating costs. Noninterest expense, excluding other real estate and credit-related expenses, was relatively stable during the year, increasing at a year ago. The growth is primarily attributable to commercial and industrial loans. Importantly, loan production increased 15.7%rate less than inflation of only 0.4%.
25
Areas Experiencing Weakness in the fourth quarter of 2011 compared to the same period a year ago.2012We continued to improve liquidity ratios. Cash, money market investments, and certain securities (U.S. Treasury securities, U.S. Government agencies and SBA securities) increased to 19.6% of tangible assets at December 31, 2011 compared to 16.0% at December 31, 2010.
*The reconciliation of net interest income to core net interest income is found in the GAAP to non-GAAP reconciliation (Schedule 40) on page 92.
As of December 31, 2011, the reconciliation of controlling interest shareholders’ equity to Tier 1 common equity is found in the GAAP to non-GAAP reconciliation (Schedule 38) on page 91. Reserves consist of the allowance for loan losses and the reserve for unfunded lending commitments.Areas experiencing weakness in 2011 2011 core net interest margin declined to 3.99%3.57% from 4.12%3.77% in 2010,2011, but continued to remain among the strongest in the industry.reasonably strong relative to other peer banks. This decline was primarilypredominately due to the substantial increase in low-yielding cash balances,money market investments, which was driven by thea strong increase in deposits; excluding the effect of cash balances, the NIM was relatively stable. However, we expectnoninterest-bearing demand deposits. Additional pressure on the NIM in 2012 was also due to loan maturities and resets – certainresets. Many loans that were bookedoriginated in prior years havehad higher rates than current market rates during 2012, and thus when a loan maturessuch loans mature or resets,the rates reset, the yield frequently declines compared to the prior yield. We believeHigh cost debt and preferred equity weighed significantly on returns. The high cost of debt and preferred equity is a byproduct of our efforts to stabilize the Company’s capital base during the recent recession. While we can offset most of this pressure through reduced deposit pricingissued fewer common shares than many banks to shore up our capital base, we did issue high cost debt and perpetual preferred stock.While some growth in the loan portfolio (i.e. volume benefits offsetting rate reductions).While showing dramatic improvement, assetcredit quality ratios, are still below long-term averages.Revenues from nonsufficient fundssuch as net charge-offs as a percentage of average loans, have improved to pre-recession levels, other ratios, such as nonperforming lending-related assets as a percentage of loans and overdraft charges were adversely impacted by changes stemming from the adoption of the Dodd-Frank Act, and specifically the Durbin Amendment within that Congressional act.FDIC premiums, other real estate expense, and credit related expenses, while receding from the prior year levels, continuedowned, are still inferior to have a significantly adverse effect on total noninterest expense.26Areas of focusFocus for 20122013Further reduce nonaccrualReduce costs related to high-cost debt and classified loans, and a reduction in net charge-offs.Increase fee income through changes to product pricing, in response to lost fee income resulting from changes to the aforementioned laws.improved product distribution, and improved cross sales. OREO expense, other real estate and other credit-related expenses.Schedule 1 presents the key drivers of the Company’s performance during 20112012 and 2010.Schedule 1KEY DRIVERS OF PERFORMANCE20112012 COMPARED TO 20102011Driver 2012 2011 Changebetter/(worse) (In billions) Average net loans and leases $ 37.0 $ 36.9 0.27 % Average money market investments 7.9 5.4 46 % Average noninterest-bearing deposits 16.7 14.5 15 % Average total deposits 43.4 41.3 5 % (In millions) Net interest income $ 1,731.9 $ 1,756.2 (1 )% Provision for loan losses (14.2 ) (74.5 ) 81 % Net impairment losses on investment securities (104.1 ) (33.7 ) (209 )% Other noninterest income 524.0 531.9 (1 )% Noninterest expense 1,596.0 1,658.6 4 % Nonaccrual loans 2 648 911 29 % Net interest margin 3.57 % 3.77 % (20) bps Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 1 1.96 % 2.83 % 87 bps Ratio of total allowance for credit losses to net loans and leases outstanding 2.66 % 3.10 % 44 bps Common equity Tier 1 capital ratio 9.80 % 9.57 % 23 bps 1 2011 2010 Change
better/(worse) (In billions) $ 36.8 $ 38.3 (4 )% 5.4 4.1 32 % 14.5 13.3 9 % 41.3 41.7 (1 )% (In millions) $ 1,772.5 $ 1,727.4 3 % (74.4 ) (852.1 ) 91 % (33.7 ) (85.4 ) 61 % 481.8 440.5 9 % 1,658.7 1,718.9 4 % 909.9 1,528.7 40 % 3.81 % 3.73 % 8 bps 3.99 % 4.12 % (13 )bps 2.83 % 4.91 % 208 bps 3.10 % 4.22 % 112 bps 9.57 % 8.95 % 62 bps (In millions of shares) 1.4 32.4 96 % 2 Includes FDIC-supported loansCRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATESNote 1 of the Notes to Consolidated Financial Statements contains a summary of the Company’s significant accounting policies. Further explanations of significant accounting policies are included where applicable in the remaining Notes to Consolidated Financial Statements. 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 certain of these policies, along with the related estimates we are required to make in recording the financial27transactions 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 changeFair Value EstimatesThe 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 measures, ASC 820 establishescurrent 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 analyses.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 inputsand 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 periodically 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, reducedliquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, 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 ASC 825,Financial Instruments.Impairment analysis also relates to long-lived assets, goodwill, and core deposit and other intangible assets. Additionally, we monitor the fair values of OREO and HTM securities and record impairment losses as necessary. An impairment loss is recognized if the carrying amount of the asset is not likely to be recoverable and exceeds its fair28value. 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. Certain CDOs are valued using an internal model and the assumptions are analyzed for sensitivity. “Investment Securities Portfolio” on page 52 49provides 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, 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. All reviews for OTTI consideris considered to have occurred if (1) we intend to sell the particular facts and circumstances duringsecurity; (2) it is “more likely than not” we will be required to sell the reporting period in review.Notes 1, 5, 8, 107, 9 and 2120 of the Notes to Consolidated Financial Statements and “Investment Securities Portfolio” on page 5249 contain further information regarding the use of fair value estimates.Allowance for Credit LossesThe 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 notjudgement,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.There are numerous components that enter into the evaluation of the allowance for loan losses, which includes a quantitative and a qualitative process. 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 a total of $1.5 billion of Pass grade loans were to be immediately classified as Special Mention, Substandard or Doubtful (as defined in Note 6 of the Notes to Consolidated Financial Statements) in the same proportion and in the same loan categories as the existing criticized and classified loans to the whole portfolio, the quantitatively determined amount of the allowance for loan losses at December 31, 20112012 would increase by approximately $68$76 million. This sensitivity analysis is hypothetical and has been provided only to indicate the potential impact that changes in the level of the criticized and classified loans 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.29Note 6 of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 67 64contain further information and more specific descriptions of the processes and methodologies used to estimate the allowance for credit losses.Accounting for GoodwillGoodwill is initially recorded at fair value and is subsequently evaluated at least annually for impairment in accordance with ASC 350,Intangibles—Goodwill and Other.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 calculate value usinggenerally 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 or income flows. Critical assumptions that are used as part of these calculations include:earnings, based on an estimate of the cost of capital;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 which mightand 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, comparingand 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 33%25% was appropriate.Since estimates are an integral part of the impairment computations, changes in these estimates could have a significant impact on any calculated impairment amount. FactorsEstimates 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 discount rates, 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.30During the fourth quarter of 2011,2012, we performed our annual goodwill impairment evaluation of the entire organization, effective October 1, 2011.2012. Upon completion of the evaluation process, we concluded that nonethe Commerce Bank of Oregon was the only one of our subsidiary banks that was impaired andimpaired. The Company recorded an impairment charge of $1 million, which was the total amount of goodwill associated with that subsidiary. Furthermore, the evaluation process determined that the fair values of Amegy, CB&T, and Zions Bank exceeded their carrying values by 23%18%, 21%33% and 22%15%, 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 150 basis points,100 bps, then the fair values of Amegy, CB&T, and Zions Bank would exceed their carrying values by 14%12%, 12%28%, and 3%5%, respectively.Over the prior four years, we have recorded impairment losses of $990 million in connection with our annual goodwill impairment evaluation. During 2009, we recorded goodwill impairment of $636 million that related primarily to Amegy.Notes 1 and 10 Note 9 of the Notes to Consolidated Financial Statements containcontains additional information including recently issued accounting guidance that affects the calculation process.Accounting for DerivativesOur interest rate risk management strategy involves the use of hedging to mitigate our exposure to potential adverse effects from changes in interest rates.The derivative contracts used by the Company are exchange-traded or OTC. Exchange-traded derivatives consist of forward currency exchange contracts, which are part of the Company’s services provided to commercial customers. OTC derivatives consist of interest rate swaps, options and futures contracts.We record all derivatives at fair value on the balance sheet in accordance with ASC 815,Derivatives and Hedging.sheet. When quoted market prices are not available, the valuation of derivative instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. These future net cash flows, however, are susceptible to change due primarily to fluctuations in interest rates (most significantly), and foreign exchange rates. As a result, the estimated values of these derivatives will change over time as cash is received and paid and as market conditions change. As these changes take place, they may have a positive or negative impact on our estimated valuations.We incorporate credit valuation adjustments to appropriately reflect both the Company’s own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of itsNotes 1, 87 and 2120 of the Notes to Consolidated Financial Statements and “Interest Rate and Market Risk Management” on page 7978 contain further information on our use of derivatives and the methodologies used to estimate fair value.Income TaxesThe 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 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 re-interpretationreinterpretation based on management’s ongoing assessment of facts and evolving case law.The Company had net DTAsDeferred Tax Assets (“DTAs”) of $406 million at December 31, 2012, compared to $509 million at December 31, 2011, compared to $540 million at December 31, 2010.2011. The most significant portions of the deductible temporary differences relate to (1) the allowance for loan losses and (2) fair value adjustments or impairment write-downs related to securities. No valuation allowance has been recorded as of December 31, 20112012 related to DTAs except for a full valuation reserve31related 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. Despite the negative evidence of a cumulative three-year loss, theThe ultimate realization of DTAs is based on the Company’s ability to (1) carry back net operating losses to prior tax periods, (2) implement tax planning strategies that are prudent and feasible, (3) utilize the reversal of taxable temporary differences to offset deductible temporary differences, and (4) generate future taxable income.The Company does not have any available carryback potential to prior tax years.Tax planning strategies represent a source of positive evidence that must be considered when assessing the need for a valuation allowance. Tax planning strategies must be prudent and feasible (and within the control of a company), something that a company might not ordinarily implement, but would implement to prevent an operating loss or tax credit carryforward from expiring unused, and would result in the realization of DTAs. The Company has evaluated a number of tax planning strategies that, if implemented, could result in the realization of a majority of the net DTA balance that exists at December 31, 2011. These strategies mainly involve the sale of highly appreciated assets (e.g., certain fixed assets, publicly-traded securities and insurance policies). Management would not expect that the execution of any of the actions would involve a significant amount of expense.The Company has taxable temporary differences, or DTLs that will reverse and offset DTAs in the periods prior to the expiration of any benefits. Based on our analysis and experience, the general reversal pattern of DTLs against DTAs would be somewhat similar in character and timing. Because of this generally consistent reversal pattern, we believe it is appropriate to reduce our gross DTAs by our DTLs.The Company has a strong history of positive earnings and has generated significant levels of net income in the past. While the recent economic downturn has been severe, the Company has consistently maintained strong levels of core net interest income. The Company is well positioned in the highest growth areas in the country and is fundamentally strong in its capital, liquidity, business practices, and has experienced growth in loan production and strong deposit growth. The Company was profitable in 2011 and most indicators of future profitability suchas asset quality ratios, loan portfolio balances, loan production volume, and deposit growth strengthened as the company improved throughout the year. The Company is relying on future taxable income to realize some of its DTAs and expects to generate such income in 2012 and to remain profitable in future periods.After evaluating all of the factors previously summarized and 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, 20112012 of approximately $4.1$1.8 million, net of federal and/or state benefits, for uncertain tax positions primarily for various state tax contingencies in several jurisdictions.Note 1514 of the Notes to Consolidated Financial Statements and “Income Taxes” on page 4731 contain additional information.RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTSNote 2 of the Notes to Consolidated Financial Statements discusses the expected impact of accounting pronouncements recently issued but not yet required to be adopted. Where applicable, the other Notes to Consolidated Financial Statements and MD&A discuss new accounting pronouncements adopted during 20112012 to the extent they materially affect the Company’s financial condition, results of operations, or liquidity.RESULTS OF OPERATIONSIn 2012, the Company reclassified credit card interchange fee income from interest and fees on loans to other service charges, commissions and fees. Additionally, income on factored receivables was reclassified from other service charges, commissions and fees to interest and fees on loans. There was no change in net earnings for any prior year presented and the reclassification did not significantly impact the CompanyThe Company reported net earnings applicable to common shareholders for 2012 of $178.6 million, or $0.97 per diluted share, compared to $153.4 million, or $0.83 per diluted share for 2011. The following changes had a favorable impact on net earnings:$60.3 million decrease in the provision for loan losses;$57.8 million decrease in other real estate expense;$20.5 million decrease in FDIC premiums;$13.4 million increase in dividends and other investment income; and$11.9 million increase in loan sales and servicing income.The impact of these items was partially offset by the following:$70.4 million increase in net impairment losses on investment securities;$24.2 million decrease in net interest income;$16.8 million increase in fair value and nonhedge derivative loss;$16.5 million decrease in other noninterest income; and$13.7 million increase in the provision for unfunded lending commitments.32The Company reported net earnings applicable to common shareholders for 2011 of $153.4 million, or $0.83 per diluted share, compared to a net loss applicable to common shareholders of $412.5 million, or $2.48 per diluted share for 2010. The significant improvement in net earnings was mainly caused by the following favorable changes:777.7778.2 million decrease in the provision for loan losses;45.141.9 million increase in net interest income;premiums;$12.5 million increase in equity securities gains; and$10.8 million decrease in fair value and nonhedge derivative loss.The Company reported a net loss applicable to common shareholders for 2010 of $412.5 million, or $2.48 per diluted share, compared to a net loss applicable to common shareholders of $1,234.4 million, or $9.92 per diluted share for 2009. The significant reduction in net loss was mainly caused by the following favorable changes:$1,164.8 million decline in the provision for loan losses;$636.2 million decrease in impairment loss on goodwill;$212.1 million decrease in valuation losses on securities purchased;$195.1 million reduction in net impairment losses on investment securities;$70.2 million decline in the provision for unfunded lending commitments;$14.5 million gain on subordinated debt exchange; and$6.4 million improvement in dividends and other investment income.The impact of these items was partially offset by the following:$508.9 million reduction in gain on subordinated debt modification;$294.5 million decrease in income tax benefit;$169.2 million decline in acquisition related gains;$136.7 million increase in accelerated convertible subordinated debt discount amortization recognized in interest expense;$129.6 million reduction in fair value and nonhedge derivative income;$48.8 million growth in other noninterest expense;$34.0 million increase in other real estate expense; and$26.2 million rise in credit related expense.20112012 was $224$149 million. It included the following components:Thethe fair value discount on the debt; andThethe value of the beneficial conversion feature which added the right of the debt holder to convert the debt into preferred stock.The discount associated with the convertible subordinated debt is amortized to interest expense, a noncash expense using the interest method over the remaining term of the subordinated debt (referred to herein as “discount amortization”). When holders of the convertible subordinated notes convert tointo preferred stock, the rate of amortization is accelerated by immediately expensing any unamortized discount associated with the converted debt (referred to herein as “accelerated discount amortization”).Excluding the impact of these noncash expenses, income before income taxes and subordinated debt conversions for 2011 increased2012 was $616.4 million compared to $682.8 million compared to a loss of $172.7 millionfor 2011, as shown in 2010.Schedule 2IMPACT OF CONVERTIBLE SUBORDINATED DEBT Year Ended December 31, (In millions) 2011 2010 2009 $ 521.2 $ (403.1 ) $ (1,623.0 ) (508.9 ) 46.0 58.0 26.9 115.6 172.4 35.7 $ 682.8 $ (172.7 ) $ (2,069.3 ) (In millions) Year Ended December 31, 2012 2011 2010 Income (loss) before income taxes (GAAP) $ 541.6 $ 521.3 $ (403.1 ) Convertible subordinated debt discount amortization 43.3 46.0 58.0 Accelerated convertible subordinated debt discount amortization 31.5 115.6 172.4 Income (loss) before income taxes and subordinated debt conversions (non-GAAP) $ 616.4 $ 682.9 $ (172.7 ) The impact of the conversion of subordinated debt into preferred stock is further detaileddiscussed in “Capital Management” on page 88.33Net Interest Income, Margin and Interest Rate SpreadsNet interest income is the difference between interest earned on interest-earning assets and interest incurred on interest-bearing liabilities. Taxable-equivalent net interest income is the largest portion of Zions’the Company’s revenue. For the year 2011,2012, taxable-equivalent net interest income was $1,792.7$1,750.2 million, compared to $1,749.1 million in 2010 and $1,920.8 million in 2009. For the year 2011, it was 78.8% of our taxable-equivalent revenues, practically unchanged from the 79.9% in 2010; in 2009, taxable-equivalent net interest income was 70.5% of our taxable-equivalent revenues. A larger portion of our taxable-equivalent revenue in 2009 resulted from gains, including a gain on subordinated debt modification of $508.9$1,776.4 million and gains of $169.2$1,736.0 million on acquisitions of failed banks from the FDIC.for 2011and 2010, respectively. The tax rate used for calculating all taxable-equivalent adjustments was 35% for all yearsperiods presented.By its nature,Net interest margin in 2012 vs. 2011The net interest income is especially vulnerablemargin was 3.57% and 3.77% for 2012 and 2011, respectively. The 20 bps decrease was primarily caused by:lower yields on loans; andincreased balance of low-yielding money market investments.The impact of these items was partially offset by the following favorable developments:decreased accelerated amortization on convertible subordinated debt; andlower cost of funding due to changescontinued favorable change in the mix of funding sources and amounts of interest-earning assets and interest-bearing liabilities. In addition, changesrates.Even though the Company’s average loan portfolio, excluding FDIC-supported loans, was $359 million higher in 2012 than in the previous year, the average interest rate earned on those assets was 41 bps lower. The decline in interest income was primarily caused by (1) 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 yields associated(2) maturing loans, many of which had rate floors, being replaced with these assets and liabilities can significantly impact net interest income. new loans at lower original coupons and/or lower floors compared to the rates at which loans were originated when spreads were higher.During 2011, average loans decreased faster than average deposits, and2012, most of the resultingCompany’s excess liquidity was invested in money market assets, primarily deposits with the Federal Reserve Bank. Average money market investments increased to 16.2% of total interest-earning assets in 2012 compared to 11.4% in the previous year. The average rate earned by these investments was 0.27% in 2012, essentially unchanged from 2011.Noninterest-bearing demand deposits provided the Company with low cost funding and comprised 38.4% of average total deposits in 2012 compared to 35.2% in 2011. Additionally, the average rate paid on interest-bearing deposits in 2012 decreased by 18 bps from the previous year.Net interest margin in 2011 vs. 2010In 2011 the net interest margin increased by 7 bps to 3.77% compared to 3.70% in 2010. The increase was primarily caused by:lower yieldingamortization and accelerated amortization expense on convertible subordinated debt;lower rates paid on interest-bearing deposits; andlower cost of funding due to favorable change in the mix of funding sources and rates.The impact of these positive developments was partially offset by:decreased loan portfolio and lower yields on loans; andincreased balance of, and lower rates earned on low-yielding money market investments.The Company has undertakenaverage rate paid on interest-bearing deposits declined 21 bps to 0.48% in 2011 from 0.69% in 2010. The decline in interest rates paid during 2011 reflects a lower interest rate environment, and management’s efforts to actively reducecontrol excess liquidity while preserving key customer relationships; despite these efforts, however,relationships. Average noninterest-bearing demand deposits increased during 2011 and were 35.2% of average total liquidity has continued to increase. Low-yielding money market investments increased to 11.4% of interest-earning assets for 2011,deposits compared to 8.7% and 4.9% for 2010 and 2009, respectively, which adversely affected31.9% in 2010.34The average loan portfolio, excluding FDIC-supported loans, decreased to $36.0 billion in 2011 from $37.1 billion in 2010. The average interest rate earned on these loans declined 20 bps to 5.34% in 2011 from 5.54% in 2010.Chart 4 illustrates recent trends in the net interest margin. margin and the average federal funds rate.
See “Interest Rate and Market Risk Management” on page 79 78for further discussion of how we manage the portfolios of interest-earning assets, interest-bearing liabilities, and associated risk.The increased net interest margin for 2011 compared to 2010 resulted primarily from the impact of lower discount amortization and accelerated discount amortization of convertible subordinated debt discount expense. The average rate paid on interest-bearing deposits declined 21 basis points to 0.48% in 2011 from 0.69% in 2010, and the average interest rate earned on net loans and leases excluding FDIC-supported loans, which declined 19 basis points to 5.40% in 2011 from 5.59% in 2010. The average rate earned on money market investments decreased by 1 bp from the prior year. Average total loans and leases for 2011 were $1.5 billion or 3.8% lower than for 2010 due to net loan payoffs, pay-downs and charge-offs. Average interest-bearing deposits decreased $1.7 billion from 2010; the decrease was driven primarily by time and money market deposits. Average borrowed funds decreased $0.4 billion compared to 2010, primarily due to reduced amounts of federal funds purchased and security repurchase agreements along with conversions of subordinated debt into preferred stock. Additionally, the mix of low-cost deposit funding improved. For 2011, average noninterest-bearing deposits accounted for 35.2% of total average deposits as compared to 31.9% in 2010.The decreased net interest margin for 2010 compared to 2009 resulted from the impact of the discount amortization on the modified subordinated debt, including the effect of the conversion of subordinated debt into preferred stock; increased nonaccrual loans and securities; and higher money market investment balances earning lower rates. This was offset in part by a lower cost mix of deposit funding, lower rates paid on interest-bearing deposits, and larger incremental spreads on new loan generation. Average loans and leases decreased $3.3 billion due to loan payoffs and charge-offs, and average money market investments increased $1.7 billion as the Company chose not to invest excess liquidity in longer-duration securities. Average interest-bearing deposits decreased $3.4 billion from 2009, with the decrease being driven primarily by time and money market deposits. Average borrowed funds decreased $1.6 billion compared to 2009, primarily due to reduced amounts of federal funds purchased and security repurchase agreements along with conversions of subordinated debt into preferred stock. Average noninterest-bearing deposits increased $2.3 billion compared to 2009 and were 31.9% of total average deposits for 2010, compared to 25.8% for 2009.A gauge that we use to measure the Company’s success in managing its net interest income is the level and stability of the net interest margin. The net interest margin was 3.81% for 2011, compared to 3.73% in 2010, and 3.94% in 2009; however, the Company believes that its “core net interest margin” is more reflective of its operating performance than the reported net interest margin. We calculate the core net interest margin by excluding the impact of discount amortization on convertible subordinated debt, accelerated discount amortization on convertible subordinated debt, and additional accretion of interest income on acquired loans from the net interest margin. The core net interest margin was relatively stable and high at 3.99%, 4.12% and 4.07% for 2011, 2010, and 2009, respectively. See Schedule 39 on page 92 for a reconciliation between the GAAP net interest margin and the non-GAAP core net interest margin.Chart 4 illustrates recent trends of the net interest margin, core net interest margin, and the average federal funds rate.
The spread on average interest-bearing funds was 3.26%3.16%, 3.21%, and 3.08% for 2012, 2011, compared to 3.12% and 3.52% in 2010, and 2009, respectively. The spread on average interest-bearing funds for 20112012 was also affected by most of the same factors that had an impact on the net interest margin.TheWe believe the following factors may positively impact net interest margin will continue to be positively impactedincome in future quarters by the next several quarters: decreased level of nonperforming assets, decreased long-term debt service cost, and moderate loan growth. However, net loan growth has proven to be difficult to forecast, even though our pipelines and new commitment originations remain relatively strong. We also believe the following factors may adversely affected byaffect net interest income: competitive loan pricing conditions, lower yields on resetting or maturing older loans, and declines in the reference index rates for adjustable rate resets on 5-year reset loans made priorloans. On balance, we expect the trend in net interest income to be generally stable for the economic downturn, and the discount amortization related to the debt modification transactions, including the accelerated discount amortization to the extent that holders of the modified debt electto convert their holdings to preferred stock. next several quarters.The unamortized discount on the convertible subordinated debt was $224$149 million as of December 31, 2011,2012, or 41.0%32.6% of the total $547$458 million of remaining outstanding convertible subordinated notes, and will be amortized asto interest expense over the remaining life of the debt using the interest method.During the fourth quarter of At December 31, 2011 the net interest marginunamortized discount on the convertible subordinated debt was impacted by two loan repricing factors. First, adjustable rate loans originated in$224 million, or 41% of the past are resetting to lower rates as the current repricing index is lower than when those loans$547 million of convertible subordinated notes which were originated. Secondly, maturing loans, many of which have rate floors, were replaced with new loansoutstanding at lower original coupons or lower floors compared to the loans originated when spreads were higher. We expect that these factors may again compress the net interest margin in 2012. This margin pressure may be offset by increased loan originations. The net interest margin may also be adversely affected by the competitive market pricing for high quality loans, repricing of variable rate loans, and the potential reduction of noninterest-bearing deposits when the unlimited deposit insurance ends on December 31, 2012.The Company expects to continue its efforts over the long run to maintain a slightlyremain “asset-sensitive” position with regard to interest rate risk. The current period of historically low interest rates has lasted for several years. During this time, the Company has maintained an interest rate risk position that is more asset sensitive than it was prior to the economic crisis, and more than most peers, and it expects to maintain this more asset sensitive position for what may be a prolonged period. With interest rates at historically low levels, there is a reduced need to protect against falling interest rates. 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. Further detail on interest rate risk is discussed in “InterestSee ”Interest Rate Risk” on page 80.Schedule 3 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. Note that the “amount35Schedule 3DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS’ EQUITYAVERAGE BALANCE SHEETS, YIELDS AND RATES 2012 2011 (Amounts in millions) Averagebalance Amount ofinterest 1 Averagerate Averagebalance Amount ofinterest 1 AveragerateASSETS Money market investments $ 7,930 $ 21.1 0.27 % $ 5,356 $ 13.8 0.26 % Securities: Held-to-maturity 774 42.3 5.47 818 44.7 5.47 Available-for-sale 3,047 94.2 3.09 3,895 89.6 2.30 Trading account 24 0.7 3.13 58 2.0 3.45 Total securities 3,845 137.2 3.57 4,771 136.3 2.86 Loans held for sale 187 6.6 3.51 146 5.7 3.94 Loans 2: Loans and leases 36,400 1,796.1 4.93 36,041 1,924.5 5.34 FDIC-supported loans 637 95.9 15.06 856 128.5 15.01 Total loans 37,037 1,892.0 5.11 36,897 2,053.0 5.56 Total interest-earning assets 48,999 2,056.9 4.20 47,170 2,208.8 4.68 Cash and due from banks 1,102 1,056 Allowance for loan losses (986 ) (1,272 ) Goodwill 1,015 1,015 Core deposit and other intangibles 60 78 Other assets 3,089 3,363 Total assets $ 53,279 $ 51,410 LIABILITIES Interest-bearing deposits: Saving and money market $ 22,061 52.3 0.24 $ 21,476 84.8 0.39 Time 3,208 23.1 0.72 3,750 35.6 0.95 Foreign 1,493 4.7 0.31 1,515 8.1 0.53 Total interest-bearing deposits 26,762 80.1 0.30 26,741 128.5 0.48 Borrowed funds: Securities sold, not yet purchased 8 0.2 2.58 33 1.4 4.21 Federal funds purchased and security repurchase agreements 471 0.6 0.13 653 0.8 0.12 Other short-term borrowings 19 0.6 2.96 146 4.5 3.08 Long-term debt 2,235 225.2 10.08 1,913 297.2 15.54 Total borrowed funds 2,733 226.6 8.29 2,745 303.9 11.07 Total interest-bearing liabilities 29,495 306.7 1.04 29,486 432.4 1.47 Noninterest-bearing deposits 16,668 14,531 Other liabilities 605 523 Total liabilities 46,768 44,540 Shareholders’ equity: Preferred equity 1,768 2,257 Common equity 4,745 4,614 Controlling interest shareholders’ equity 6,513 6,871 Noncontrolling interests (2 ) (1 ) Total shareholders’ equity 6,511 6,870 Total liabilities and shareholders’ equity $ 53,279 $ 51,410 Spread on average interest-bearing funds 3.16 % 3.21 % Taxable-equivalent net interest income and net yield on interest-earning assets $ 1,750.2 3.57 % $ 1,776.4 3.77 % 1 2011 2010 (Amounts in millions) Average
balance Amount of
interest1 Average
rate Average
balance Amount of
interest1 Average
rate $ 5,356 $ 13.8 0.26 % $ 4,085 $ 11.0 0.27 % 817 44.7 5.47 866 44.3 5.12 3,895 89.6 2.30 3,416 91.5 2.68 58 2.0 3.45 61 2.2 3.64 4,770 136.3 2.86 4,343 138.0 3.18 146 5.7 3.94 187 8.9 4.78 35,942 1,940.8 5.40 37,040 2,069.3 5.59 856 128.5 15.01 1,210 114.4 9.46 36,798 2,069.3 5.62 38,250 2,183.7 5.71 47,070 2,225.1 4.73 46,865 2,341.6 5.00 1,056 1,214 (1,270 ) (1,555 ) 1,015 1,015 78 101 3,461 3,987 $ 51,410 $ 51,627 $ 6,613 18.1 0.27 $ 6,138 20.5 0.33 14,863 66.7 0.45 15,901 106.0 0.67 3,750 35.6 0.95 4,746 59.8 1.26 1,515 8.1 0.53 1,627 9.8 0.60 26,741 128.5 0.48 28,412 196.1 0.69 33 1.4 4.21 40 1.8 4.50 653 0.8 0.12 920 1.5 0.16 146 4.5 3.08 189 9.3 4.93 1,913 297.2 15.54 1,980 383.8 19.38 2,745 303.9 11.07 3,129 396.4 12.67 29,486 432.4 1.47 31,541 592.5 1.88 14,531 13,318 523 576 44,540 45,435 2,257 1,732 4,614 4,452 6,871 6,184 (1 ) 8 6,870 6,192 $ 51,410 $ 51,627 3.26 % 3.12 % $ 1,792.7 3.81 % $ 1,749.1 3.73 % 1Taxable-equivalent rates used where applicable.2Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.2009 2008 2007
balance Amount of
interest1 Average
rate Average
balance Amount of
interest1 Average
rate Average
balance Amount of
interest1 Average
rate $ 2,380 $ 7.9 0.33 % $ 1,889 $ 47.8 2.53 % $ 834 $ 43.7 5.24 % 1,263 66.9 5.29 1,516 101.3 6.68 684 47.7 6.97 3,313 104.1 3.14 3,266 162.1 4.97 4,661 269.2 5.78 75 2.7 3.65 43 1.9 4.41 61 3.3 5.40 4,651 173.7 3.73 4,825 265.3 5.50 5,406 320.2 5.92 226 11.0 4.88 182 10.1 5.52 233 14.9 6.37 40,455 2,281.6 5.64 40,795 2,674.4 6.56 36,575 2,852.7 7.80 1,058 64.4 6.09 – – – – – – 41,513 2,346.0 5.65 40,795 2,674.4 6.56 36,575 2,852.7 7.80 48,770 2,538.6 5.21 47,691 2,997.6 6.29 43,048 3,231.5 7.51 1,245 1,380 1,477 (1,104 ) (546 ) (391 ) 1,174 1,937 2,005 125 137 181 3,838 3,163 2,527 $ 54,048 $ 53,762 $ 48,847 $ 5,035 21.6 0.43 $ 4,446 35.6 0.80 $ 4,443 41.4 0.93 17,513 216.4 1.24 13,739 335.0 2.44 11,962 437.9 3.66 7,235 168.0 2.32 7,077 258.1 3.65 7,308 341.9 4.68 2,011 18.7 0.93 3,166 84.2 2.66 2,710 130.5 4.81 31,794 424.7 1.34 28,428 712.9 2.51 26,423 951.7 3.60 41 2.2 5.22 33 1.5 4.82 30 1.4 4.56 1,923 5.7 0.30 2,733 53.3 1.95 3,211 148.5 4.62 305 6.8 2.24 4,699 124.0 2.64 1,355 68.8 5.08 2,438 178.4 7.32 2,577 110.5 4.29 2,496 153.0 6.13 4,707 193.1 4.10 10,042 289.3 2.88 7,092 371.7 5.24 36,501 617.8 1.69 38,470 1,002.2 2.61 33,515 1,323.4 3.95 11,053 9,145 9,401 558 578 647 48,112 48,193 43,563 1,558 432 240 4,354 5,108 5,008 5,912 5,540 5,248 24 29 36 5,936 5,569 5,284 $ 54,048 $ 53,762 $ 48,847 3.52 % 3.68 % 3.56 % $ 1,920.8 3.94 % $ 1,995.4 4.18 % $ 1,908.1 4.43 % 2 Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.362010 2009 2008 Averagebalance Amount ofinterest 1 Averagerate Averagebalance Amount ofinterest 1 Averagerate Averagebalance Amount ofinterest 1 Averagerate $ 4,085 $ 11.0 0.27 % $ 2,380 $ 7.9 0.33 % $ 1,889 $ 47.8 2.53 % 866 44.3 5.12 1,263 66.9 5.29 1,516 101.3 6.68 3,416 91.5 2.68 3,313 104.2 3.14 3,266 162.1 4.97 61 2.2 3.64 75 2.7 3.65 43 1.9 4.41 4,343 138.0 3.18 4,651 173.8 3.73 4,825 265.3 5.50 187 8.9 4.78 226 11.0 4.88 182 10.1 5.52 37,116 2,056.1 5.54 40,511 2,269.7 5.60 40,835 2,660.9 6.52 1,210 114.4 9.46 1,058 64.4 6.09 — — 38,326 2,170.5 5.66 41,569 2,334.1 5.62 40,835 2,660.9 6.52 46,941 2,328.4 4.96 48,826 2,526.8 5.17 47,731 2,984.1 6.25 1,214 1,245 1,380 (1,556 ) (1,105 ) (547 ) 1,015 1,174 1,937 101 125 137 3,912 3,783 3,124 $ 51,627 $ 54,048 $ 53,762 $ 22,039 126.5 0.57 $ 22,548 238.0 1.06 $ 18,185 370.6 2.04 4,747 59.8 1.26 7,235 168.0 2.32 7,077 258.1 3.65 1,626 9.8 0.60 2,011 18.7 0.93 3,166 84.2 2.66 28,412 196.1 0.69 31,794 424.7 1.34 28,428 712.9 2.51 40 1.8 4.50 41 2.2 5.22 33 1.6 4.82 920 1.4 0.16 1,923 5.7 0.30 2,733 53.3 1.95 189 9.3 4.93 305 6.8 2.24 4,699 124.0 2.64 1,980 383.8 19.38 2,438 178.4 7.32 2,577 110.5 4.29 3,129 396.3 12.67 4,707 193.1 4.10 10,042 289.4 2.88 31,541 592.4 1.88 36,501 617.8 1.69 38,470 1,002.3 2.61 13,318 11,053 9,145 576 558 578 45,435 48,112 48,193 1,732 1,558 432 4,452 4,354 5,108 6,184 5,912 5,540 8 24 29 6,192 5,936 5,569 $ 51,627 $ 54,048 $ 53,762 3.08 % 3.48 % 3.64 % $ 1,736.0 3.70 % $ 1,909.0 3.91 % $ 1,981.8 4.15 % 37Schedule 4 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 4ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND RATE 2012 over 2011 2011 over 2010 Changes due to Total changes Changes due to Total changes (Amounts in millions) Volume Rate1 Volume Rate1 INTEREST-EARNING ASSETS Money market investments $ 6.7 $ 0.6 $ 7.3 $ 3.1 $ (0.3 ) $ 2.8 Securities: Held-to-maturity (2.4 ) — (2.4 ) (2.4 ) 2.8 0.4 Available-for-sale (19.5 ) 24.1 4.6 11.0 (12.9 ) (1.9 ) Trading account (1.1 ) (0.2 ) (1.3 ) (0.1 ) (0.1 ) (0.2 ) Total securities (23.0 ) 23.9 0.9 8.5 (10.2 ) (1.7 ) Loans held for sale 1.5 (0.6 ) 0.9 (1.6 ) (1.6 ) (3.2 ) Loans 2: Loans and leases 19.3 (147.7 ) (128.4 ) (57.5 ) (74.1 ) (131.6 ) FDIC-supported loans (32.9 ) 0.3 (32.6 ) (33.4 ) 47.5 14.1 Total loans (13.6 ) (147.4 ) (161.0 ) (90.9 ) (26.6 ) (117.5 ) Total interest-earning assets (28.4 ) (123.5 ) (151.9 ) (80.9 ) (38.7 ) (119.6 ) INTEREST-BEARING LIABILITIES Interest-bearing deposits: Saving and money market 0.8 (33.3 ) (32.5 ) (1.2 ) (40.5 ) (41.7 ) Time (3.9 ) (8.6 ) (12.5 ) (9.5 ) (14.7 ) (24.2 ) Foreign — (3.4 ) (3.4 ) (0.5 ) (1.2 ) (1.7 ) Total interest-bearing deposits (3.1 ) (45.3 ) (48.4 ) (11.2 ) (56.4 ) (67.6 ) Borrowed funds: Securities sold, not yet purchased (0.6 ) (0.6 ) (1.2 ) (0.3 ) (0.1 ) (0.4 ) Federal funds purchased and security repurchase agreements (0.2 ) — (0.2 ) (0.3 ) (0.3 ) (0.6 ) Other short-term borrowings (3.8 ) (0.1 ) (3.9 ) (1.3 ) (3.5 ) (4.8 ) Long-term debt 32.4 (104.4 ) (72.0 ) (10.5 ) (76.1 ) (86.6 ) Total borrowed funds 27.8 (105.1 ) (77.3 ) (12.4 ) (80.0 ) (92.4 ) Total interest-bearing liabilities 24.7 (150.4 ) (125.7 ) (23.6 ) (136.4 ) (160.0 ) Change in taxable-equivalent net interest income $ (53.1 ) $ 26.9 $ (26.2 ) $ (57.3 ) $ 97.7 $ 40.4 1 2011 over 2010 2010 over 2009 Changes due to Total
changes Changes due to Total
changes (Amounts in millions) Volume Rate1 Volume Rate1 $ 3.2 $ (0.4 ) $ 2.8 $ 4.5 $ (1.4 ) $ 3.1 (2.4 ) 2.8 0.4 (20.4 ) (2.2 ) (22.6 ) 11.0 (12.9 ) (1.9 ) 2.7 (15.3 ) (12.6 ) (0.1 ) (0.1 ) (0.2 ) (0.5 ) – (0.5 ) 8.5 (10.2 ) (1.7 ) (18.2 ) (17.5 ) (35.7 ) (1.6 ) (1.6 ) (3.2 ) (1.9 ) (0.2 ) (2.1 ) (59.4 ) (69.1 ) (128.5 ) (192.1 ) (20.2 ) (212.3 ) (33.4 ) 47.5 14.1 10.3 39.7 50.0 (92.8 ) (21.6 ) (114.4 ) (181.8 ) 19.5 (162.3 ) (82.7 ) (33.8 ) (116.5 ) (197.4 ) 0.4 (197.0 ) 1.5 (3.9 ) (2.4 ) 3.9 (5.0 ) (1.1 ) (4.9 ) (34.4 ) (39.3 ) (11.4 ) (99.0 ) (110.4 ) (9.5 ) (14.7 ) (24.2 ) (31.4 ) (76.8 ) (108.2 ) (0.5 ) (1.2 ) (1.7 ) (2.3 ) (6.6 ) (8.9 ) (13.4 ) (54.2 ) (67.6 ) (41.2 ) (187.4 ) (228.6 ) (0.3 ) (0.1 ) (0.4 ) (0.1 ) (0.3 ) (0.4 ) (0.3 ) (0.4 ) (0.7 ) (1.6 ) (2.6 ) (4.2 ) (1.3 ) (3.5 ) (4.8 ) (2.6 ) 5.1 2.5 (10.5 ) (76.1 ) (86.6 ) (33.4 ) 238.8 205.4 (12.4 ) (80.1 ) (92.5 ) (37.7 ) 241.0 203.3 (25.8 ) (134.3 ) (160.1 ) (78.9 ) 53.6 (25.3 ) $ (56.9 ) $ 100.5 $ 43.6 $ (118.5 ) $ (53.2 ) $ (171.7 ) 1Taxable-equivalent income used where applicable.2Net of unearned income and fees. Loans include nonaccrual and restructured loans.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 LossesThe 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 upon the inherent risks in the loan portfolio. The provision for unfunded lending commitments is used to maintain the reserve for unfunded lending commitments at an adequate level based38upon the inherent risks associated with such commitments. In determining adequate levels of the allowance and reserve, we perform periodic evaluations of the Company’s various loan portfolios, the levels of actual charge-offs, credit trends, and environmentalexternal factors. See Note 6of the Notes to Consolidated Financial Statements and “Credit Risk Management” on page 6764 for more information on how we determine the appropriate level for the allowance for loan and lease lossesALLL and the reserve for unfunded lending commitments.The provision for loan losses for 20112012 was $74.4$14.2 million compared to $852.1$74.5 million and $2,016.9$852.7 million for 2010 and 2009, respectively. The decrease in the provision during both 2011 and 2010, reflects anrespectively. The Company continues to exercise caution with regard to the appropriate level of the allowance for loan losses, given the slow economic recovery. However, during the past 24 months, the Company has experienced a significant improvement in credit quality metrics, including lower levels of criticized and classified loans and lower realized loss rates in most loan segments,segments. At December 31, 2012, classified loans were $1.9 billion, compared to $2.3 billion and lower balances in$3.7 billion at December 31, 2011 and December 31, 2010, respectively. Additionally, construction and land development loans which declined by 35.0% and 37.0% during 2011 and 2010, respectively.Net loan and lease charge-offs felldeclined to $455.9$155 million in 2012 from $456 million in 2011 compared to $983.0and $983 million in 20102010. In the fourth quarter of 2012, the annualized ratio of net loan and $1,174.9lease charge-offs to average loans declined to 0.20%, and is approaching prerecessionary levels. The ratio of net loan and lease charge-offs to average loans was 0.17% in 2007. However, net charge-offs were favorably impacted by a relatively high level of recoveries in 2012. Gross charge-offs for the fourth quarter of 2012 were $54.7 million, in 2009.or 0.59% annualized of average loans. See “Nonperforming Assets” on page 7573 and “Allowance and Reserve for Credit Losses” on page 7876 for further details.During 2012, the Company recorded a $4.4 million provision for unfunded lending commitments compared to reductions in the provision of $9.3 million in 2011 and $4.7 million in 2010. The increased provision for 2012 is primarily caused by a higher level of unfunded loan commitments, which outpaced improvements in credit quality. During 2011 and 2010, the Company experienced improved credit quality of unfunded lendingloans improved more rapidly than the increase in unfunded loan commitments, and released $9.3 million fromallowing the related reserve, while it had released $4.7 million in 2010 and incurred $65.5 million of provision expense in 2009.Company to release previously recorded reserves. From period to period, the expense related to the reserve for unfunded lending commitments may be subject to sizeable fluctuations due to changes in the timing and volume of loan commitments, originations, and funding, as well as fluctuations in credit quality and historical loss experience.Although classified and nonperforming loan volumes continue to be elevated when compared to long-term historical levels, most measures of credit quality continued to show significant improvement in 2011. The Company also experienced a decrease in special mention, classified, nonaccrual, and past due loans, as well as improvements in other credit metrics.2012. Barring any significant economic downturn, we expect the Company’s credit costs to remain low for the next several quarters. We also anticipate continued reductionsdeclines in balances of criticized and classified loans of most types, and continued reduction inlow levels of net charge-offs for the next several quarters, compared to the elevated levels experienced from 2008 through 2011.Noninterest IncomeNoninterest income represents revenues the Company earns for products and services that have no interest rate or yield associated with them. For 2011,2012, noninterest income was $481.8$419.9 million compared to $440.5$498.2 million in 20102011 and $804.1$453.6 million in 2009.Schedule 5 presents a comparison of the major components of noninterest income for the past three years.39Schedule 5NONINTEREST INCOME(Amounts in millions) 2011 Percent
change 2010 Percent
change 2009 $ 174.4 (12.7 )% $ 199.7 (6.1 )% $ 212.6 169.5 2.5 165.3 5.6 156.5 26.7 (2.9 ) 27.5 (8.3 ) 30.0 31.4 (16.5 ) 37.6 (25.2 ) 50.3 42.4 28.1 33.1 24.4 26.6 28.1 (4.4 ) 29.4 31.8 22.3 (5.0 ) 68.4 (15.8 ) (113.9 ) 113.8 6.5 208.3 (6.0 ) (233.3 ) (1.8 ) 11.9 7.2 11.1 392.1 (3.8 ) (77.3 ) 50.6 (156.5 ) 72.5 (569.9 ) 43.6 (38.7 ) 71.1 (75.4 ) 289.4 (33.7 ) 60.5 (85.4 ) 69.6 (280.5 ) – – – 100.0 (212.1 ) – – – (100.0 ) 508.9 – (100.0 ) 14.5 100.0 – – – – (100.0 ) 169.2 29.6 0.3 29.5 143.8 12.1 $ 481.8 9.4 $ 440.5 (45.2 ) $ 804.1 (Amounts in millions) 2012 Percent change 2011 Percent change 2010 Service charges and fees on deposit accounts $ 176.4 1.1 % $ 174.4 (12.7 )% $ 199.7 Other service charges, commissions and fees 174.4 (6.2 ) 185.9 4.2 178.4 Trust and wealth management income 28.4 6.4 26.7 (2.9 ) 27.5 Capital markets and foreign exchange 26.8 (14.6 ) 31.4 (16.5 ) 37.6 Dividends and other investment income 55.8 31.6 42.4 28.1 33.1 Loan sales and servicing income 40.0 42.3 28.1 (4.4 ) 29.4 Fair value and nonhedge derivative loss (21.8 ) (336.0 ) (5.0 ) 68.4 (15.8 ) Equity securities gains (losses), net 11.3 73.8 6.5 208.3 (6.0 ) Fixed income securities gains, net 19.6 64.7 11.9 7.2 11.1 Impairment losses on investment securities: Impairment losses on investment securities (166.3 ) (115.1 ) (77.3 ) 50.6 (156.5 ) Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income) 62.2 42.7 43.6 (38.7 ) 71.1 Net impairment losses on investment securities (104.1 ) (208.9 ) (33.7 ) 60.5 (85.4 ) Gain on subordinated debt exchange — — — (100.0 ) 14.5 Other 13.1 (55.7 ) 29.6 0.3 29.5 Total $ 419.9 (15.7 ) $ 498.2 9.8 $ 453.6 Service charges and fees on deposit accounts remained stable in 2012 when compared to the prior year. In 2011, this revenue decreased by $25.3 million or 12.7% from 2010, primarily due to a decline in nonsufficient-fundsnonsufficient funds fees and a decrease in fees earned from business accounts. Service charges and fees on deposit accounts decreased by $12.9 million, or 6.1% between 2009 and 2010.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 increaseddecreased by $4.2$11.5 million in 2012 from the prior year. Most of the decline can be attributed to decreased debit card interchange and ATM fees, partially offset by growth in credit card interchange fees and loan fees. See Note 1 of the Notes to the Consolidated Financial Statements for information regarding the reclassification of fees.On June 29, 2011, the Federal Reserve voted to adopt regulations implementing the Durbin Amendment of The Dodd-Frank Act, which placed limits on debit card interchange fees charged by banks. The Durbin Amendment became effective in the fourth quarter of 2011 and resulted in a significant decrease in other service charges, commissions, and fees during 2012.Other service charges, commissions, and fees increased $7.5 million in 2011 compared to 2010. Most of the increase can be attributed to higherincreased credit card fees, loan fees and fees earned from other banks’ customers using the Company’s ATMs, partially offset by decreased debit card fees and remote deposit capture licensing fees. The Company sold substantially all of the assets of its NetDeposit subsidiary in the third quarter of 2010, and therefore did not earn any licensing fees in 2011.On June 29, 2011, the Federal Reserve voted to adopt regulations implementing the Durbin Amendment of the Dodd-Frank Act, which placed limits on debit card interchange fees charged by banks. The Durbin Amendment became effective in the fourth quarter of 2011 and resulted in an $8.0 million decrease in other service charges, commissions, and fees during that quarter. The Company estimates its current annualized rate of interchange bankcard fees to be approximately $30 million, a reduction from the $65 million earned before the enactment of the Durbin Amendment. The Company will reevaluate the pricing of other services in order to replace some of the lost revenue that resulted from the Durbin Amendment.Other service charges, commissions and fees were $165.3 million in 2010 and $156.5 million in 2009. The increase was mainly due to increased loan, ATM, debit card, and bankcard fees, partially offset by decreased licensing fees and mutual fund commissions. The decrease in licensing fees was primarily attributable to the sale of NetDeposit’s assets.Capital markets and foreign exchange includes trading income, public finance fees, foreign exchange income, and other capital market related fees. In 2011 this2012 these fees were $26.8 million compared to $31.4 million in the prior year. The decrease was primarily caused by lower income from trading fixed income corporate bonds and decreased foreign exchange income, partially offset by higher fees from municipal bond transactions. In 2012, in anticipation of the adoption of the “Volcker Rule” of the Dodd-Frank Act, the Company discontinued the trading of corporate bonds.40Capital markets and foreign exchange income was $31.4 million in 2011, compared to $37.6 million earned in the prior year.2010. The decrease was caused mainly by lower income from trading fixed income corporate bonds and a reduction in consulting fees related to municipal bond transactions.In 2010 capital markets and foreign exchange income decreased to $37.6 million from $50.3 million earned in 2009. Most of this decline was caused by decreases in commissions and trading income.Dividends and other investment income consistconsists of revenue from the Company’s bank-owned life insurance program and revenues from other investments. Revenues from other investments include dividends on FHLB stock,and Federal Reserve Bank stock, and earnings from unconsolidated affiliatesother equity investments including Federal Agricultural Mortgage Corporation and certain alternative venture investments. For 2011,2012, this income increased by 28.1%31.6% from the prior year, mainly due to higher earnings from unconsolidated subsidiaries.Dividends and other investment income increased by 28.1% in 2011 from $33.1 million earned duringin 2010. For the most part, theThe increase was primarily caused by higher income from several unconsolidated affiliates, partially offset by decreased income from bank-owned life insurance contracts.DividendsLoan sales and other investmentservicing income increased by $6.5$11.9 million in 2010 compared to 2009. Most of this gain was caused by increased income2012 or 42.3% from investments in several unconsolidated affiliates, and anthe prior year. The increase in dividends on Federal Reserve stock, partially offset by decreased income from bank-owned life insurance contracts. Income from bank-owned life insurance decreasedis primarily due to the Company surrendering certain life insurance contracts during 2010.Fair value and nonhedge derivative income (loss)loss consists of the following:Schedule 6FAIR VALUE AND NONHEDGE DERIVATIVE INCOME (LOSS)(Amounts in millions) 2011 Percent
change 2010 Percent
change 2009 $ 6.8 (35.2 )% $ 10.5 (90.6 )% $ 111.9 (10.7 ) 53.1 (22.8 ) (100.0 ) – – – – 100.0 (0.9 ) (1.1 ) 68.6 (3.5 ) (216.7 ) 3.0 – – – 100.0 (0.2 ) $ (5.0 ) 68.4 $ (15.8 ) (113.9 ) $ 113.8 Losses from fairLOSS(Amounts in millions) 2012 Percent change 2011 Percent change 2010 Nonhedge derivative income $ (1.5 ) (122.1 )% $ 6.8 (35.2 )% $ 10.5 Total return swap (21.7 ) (102.8 ) (10.7 ) 53.1 (22.8 ) Derivative fair value credit adjustments 1.4 227.3 (1.1 ) 68.6 (3.5 ) Total $ (21.8 ) 336.0 $ (5.0 ) 68.4 $ (15.8 ) Fair value and nonhedge derivatives decreased toderivative losses were $21.8 million in 2012, $5.0 million in 2011, compared to aand $15.8 million in 2010. The increased loss in the prior year. The decreased loss2012 is primarily the result of smaller expensesmainly due to higher fees related to the TRS agreement partially offset byand a decrease in income from Eurodollar futures.During 2010, the Company terminated fewer cash flow hedges TRS fees were lower in 2011 than in 2009. Nonhedge derivative income included $9.0 million in2012 and 2010 and $104.7 million in 2009 due to the accelerationtiming of income from OCI to earnings for certain terminated cash flow hedges. The amount accelerated in 2009 was due to declining loan balances, which caused the reclassification to earnings of 100% of the OCI balances for many of the terminated hedges. There were fewer reclassifications in 2010. The Company also recorded $22.8 million of negative fair value on the TRS agreement entered into during the third quarter of 2010. For information regarding the TRS agreement, refer to Note 8 of the Notes to Consolidated Financial Statements.During 2011,2012, the Company recorded $6.5$11.3 million in equity securities gains, compared to $6.5 million in 2011, and losses of $6.0 million and $1.8 million in 2010 and 2009, respectively.2010. The gains recognized in 2012 were primarily attributable to SBIC investments. The gains realized in 2011 were principally due to had acquired in September 2010 when it sold the assets of its NetDeposit subsidiary. The loss incurred in 2010 was primarily caused bythe result of valuation losses related to venture fund investments.The Company recorded $19.6 million of fixed income securities gains in 2012, compared to $11.9 million in 2011 and $11.1 million in 2010. Gains in 2012 and 2011 were primarily the result of cash principal payments received on CDOs that were originally purchased from Lockhart Funding and written down to fair value at the time of purchase. The gains in 2010 are mainly the result of the sale of certain auction rate securities which were previously written down to fair value but sold at par.The Company recognized net credit related impairment losses on CDO investment securities of $33.7$104.1 million $85.4 million, and $280.5in 2012, $33.7 million in 2011 2010, and 2009, respectively.$85.4 million in 2010. See “Investment Securities Portfolio” on page 5249 for additional information.Valuation losses on securities purchased in 2009 consisted41During 2010, the Company exchanged $55.6 million of nonconvertible subordinated debt for 2,165,391 shares of common stock, resulting in a $14.5 million gain.Acquisition related gains of $169.2Other noninterest income for 2012 was $13.1 million, compared to $29.6 million in 2009 resulted from2011. In 2011, the Company’s acquisition of failed banksCompany received payments from the FDIC with loss sharing agreements. The Company recognized $146.5 million of gains resulting from the acquisition of Vineyard Bank, acquired from the FDIC on July 17, 2009. The remaining $22.7 million of acquisition related gains were from the acquisitions of the failed Alliance Bank on February 6, 2009 by CB&T and Great Basin Bank on April 17, 2009 by NSB. The gains resulted from the acquisition of assets that had fair values in excess of the fair value of liabilities assumed.Other noninterest income was $29.6 million, $29.5 million and $12.1 million in 2011, 2010, and 2009, respectively. Most of the 2011 income is attributable to amounts received from the FDIC on certain acquired loans which werehad been determined to be covered by thea loss sharing agreement. In September 2010, other noninterest income was $29.5 million, which included a $13.7 million pretax gain recognized from the Company soldsale of substantially all of the assets of a wholly-owned subsidiary, NetDeposit, resulting in a $13.7 million pretax gain.Noninterest ExpenseNoninterest expense decreased by 3.5% from 2010; this expense was 2.8% higher3.8% to $1,596.0 million in 2010 than in 2009.2012 compared to 2011. During 2011,the past year, the Company made significant progress in resolving problem loans and improving the credit quality of its loan portfolio, which causedresulted in significantly lower other real estate expense and credit related expense.credit-related expenses. The improved credit quality also resulted in a reduction ofcontributed to lower FDIC premiums. Schedule 7 presents a comparison of the major components of noninterest expense for the past three years.Schedule 7NONINTEREST EXPENSE(Amounts in millions) 2011 Percent
change 2010 Percent
change 2009 $ 874.3 5.9 % $ 825.3 0.8 % $ 818.8 112.5 (1.0 ) 113.6 1.2 112.2 105.7 4.5 101.1 1.2 99.9 77.6 (46.4 ) 144.8 30.7 110.8 61.6 (13.5 ) 71.2 58.2 45.0 (9.3 ) (97.9 ) (4.7 ) (107.2 ) 65.5 39.0 (1.3 ) 39.5 6.2 37.2 27.2 9.7 24.8 7.8 23.0 63.9 (37.4 ) 102.0 1.5 100.5 20.1 (21.2 ) 25.5 (19.6 ) 31.7 286.1 3.7 275.8 21.6 226.9 $ 1,658.7 (3.5 ) $ 1,718.9 2.8 $ 1,671.5 (Amounts in millions) 2012 Percent change 2011 Percent change 2010 Salaries and employee benefits $ 885.7 1.3 % $ 874.3 5.9 % $ 825.3 Occupancy, net 112.9 0.4 112.5 (1.0 ) 113.6 Furniture and equipment 109.0 3.1 105.7 4.5 101.1 Other real estate expense 19.7 (74.6 ) 77.6 (46.4 ) 144.8 Credit-related expense 50.5 (18.0 ) 61.6 (13.5 ) 71.2 Provision for unfunded lending commitments 4.4 147.3 (9.3 ) (97.9 ) (4.7 ) Legal and professional services 52.5 34.6 39.0 (1.3 ) 39.5 Advertising 25.7 (5.5 ) 27.2 9.7 24.8 FDIC premiums 43.4 (32.1 ) 63.9 (37.4 ) 102.0 Amortization of core deposit and other intangibles 17.0 (15.4 ) 20.1 (21.2 ) 25.5 Other 275.2 (3.8 ) 286.0 3.9 275.2 Total $ 1,596.0 (3.8 ) $ 1,658.6 (3.5 ) $ 1,718.3 Salaries and employee benefits increased by 1.3% during 2012 compared to 5.9% in 2011. Salary expense for 2012 included share-based compensation expense of $31.5 million. Bonus and incentive expenses were lower in 2012 than in 2011 because certain long-term incentive compensation plans are no longer expected to pay out, or to pay out at a reduced amount. Additionally, the Company’s workforce declined by 2.2% during 2012.Salary and bonus expense increased in 2011 by 3.4% from the prior year.2010. Most of the increase during 2011 iswas due to higher base salary and bonus expenses, which resulted from the hiring of additional staff necessary to meet new regulatory reporting requirements and from the Company’s improved financial performance. Salary expense for 2011 included share-based compensation expense of approximately $29.0 million. Retirement expensesexpense and the cost of employee health and other insurance benefits also increased, mostlymainly due to higher retirement related accruals.During 2010, salary costs increased by 2.5% compared to 2009. Base salaries remained constant but the Company’s employees earned higher bonuses and incentives. The salary costs for 2010 and 2009 included share-based compensation expense of approximately $26.8 million and $29.8 million, respectively. Employee health and insurance benefits declined by 17.1% in 2010 compared to 2009, mostly due to a reduction in the accrual for incurred-but-not-reported health care claims.Salaries and employee benefits are shown in greater detail in Schedule 8.42Schedule 8SALARIES AND EMPLOYEE BENEFITS(Dollar amounts in millions) 2011 Percent
change 2010 Percent
change 2009 $ 733.7 3.4 % $ 709.5 2.5 % $ 692.3 49.1 13.9 43.1 (17.1 ) 52.0 42.5 58.0 26.9 (10.3 ) 30.0 49.0 7.0 45.8 2.9 44.5 140.6 21.4 115.8 (8.5 ) 126.5 $ 874.3 5.9 $ 825.3 0.8 $ 818.8 10,606 0.8 10,524 – 10,529 Furniture and equipment(Dollar amounts in millions) 2012 Percent change 2011 Percent change 2010 Salaries and bonuses $ 745.7 1.6 % $ 733.7 3.4 % $ 709.5 Employee benefits: Employee health and insurance 48.6 (1.0 ) 49.1 13.9 43.1 Retirement 40.8 (4.0 ) 42.5 58.0 26.9 Payroll taxes and other 50.6 3.3 49.0 7.0 45.8 Total benefits 140.0 (0.4 ) 140.6 21.4 115.8 Total salaries and employee benefits $ 885.7 1.3 $ 874.3 5.9 $ 825.3 Full-time equivalent (“FTE”) employees at December 31 10,368 (2.2 ) 10,606 0.8 10,524 Other real estate expense increaseddecreased in 20112012 by 4.5%74.6% from the prior year. This increase was mostlyThe decrease is primarily due to higher software and computer equipment maintenance costs. During 2010, furniture and equipment costs grew by only 1.2% from 2009.Other real estate expense decreased by 46.4% in 2011 compared to 2010. The decrease is primarily driven by a 48.9% reduction in OREO balances between these two years, lower write-downs of OREO values during work-out, as well as larger net gains from OREO property sales. OREO expenses decreased at Zions Bank, NSB, NBA, Amegy, and CB&T, but increased slightly at Vectra.Other real estate expense increased to $144.8 million in 2010 compared to $110.8 million in 2009. The increase is primarily due to higher volumes of foreclosed properties added to OREO, and continued declines in real estate values, which resulted in increased write-downs of OREO during work-out, partially offset by an increase in net gains from some property sales.Credit related expense includes costs incurred during the foreclosure process prior 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. TheseCredit related expense was $50.5 million in 2012 compared to $61.6 million in 2011. The decrease is primarily attributable to lower property tax and legal costs incurred during work-out. In 2011 credit related expenses were 13.5% lower in 2011 than in 2010, mainly due to a reduction in collection and foreclosure costs. Credit related expensesLegal and professional services were $71.2$13.5 million higher in 2012 than in the previous year. The increase is mostly due to regulatory, legal, and contractual matters. Legal and professional services remained practically unchanged from 2010 compared to $45.0 million in 2009. This increase was a reflection of the Company’s higher levels of problem loans and its efforts to resolve them.FDIC premiums for 2011 decreased by 32.1% during 2012, following a 37.4% compared to 2010. The decrease is mostly caused byin the prior year. These decreases resulted from the combination of a change in the premium assessment formulas prescribed by the FDIC. FDIC premiums were essentially unchanged between 2009 and 2010.Other noninterest expense decreased by $10.8 million in 2012 from the previous year. The decline is primarily the result of lower write-downs of the FDIC indemnification asset attributable to loans purchased from the FDIC in 2009. FDIC-supported loans continued to perform better than expected, including pay-offs and pay-downs. The balance of the FDIC indemnification asset continues to decline although at a slower rate compared to prior years. Other noninterest expense in 2012 included a $1.0 million goodwill impairment.Other noninterest expense for 2011 increased by 3.7%3.9% compared to 2010, primarily as a result of aan increased write-down of the FDIC indemnification asset attributable to loans purchased from the FDIC in 2009. FDIC-supported loans continued to perform better than expected and therefore the indemnification asset declined in value.In 2010, other noninterest expense was $275.8 million compared to $226.9 million in 2009. The increase was mostly caused by a one-time structuring fee related to the TRS transaction, and write-downsbalance of the FDIC indemnification asset. Also, during 2010 the Company accrued $8.0 million for an expected non-tax deductible civil money penalty related to alleged violations of the Bank Secrecy Act expected to be assessed by the OCC and the U.S. Treasury Department’s FinCEN bureau. A penalty of this amount was announced by the OCC and FinCEN on February 11, 2011.Impairment Loss on GoodwillThe Company performed a goodwill impairment analysis in the fourth quarter of 2011,2012, and concludedrecorded a $1.0 million goodwill impairment loss at The Commerce Bank of Oregon. This goodwill originally arose from the Company’s acquisition of a bank in order to operate a bank in Oregon. In 2012, Oregon law was changed to no longer require43the purchase of an existing bank by a bank holding company seeking to enter that it had not experienced any impairment loss.state. No goodwill impairment loss was incurred in 2011 or 2010. In 2009, the Company recorded $636.2 million of impairment losses, almost entirely at Amegy.The primary causes of the impairment losses on goodwill in 2009 at the Company’s banking reporting units were declines in market values of comparable companies and reduced earnings at the reporting units, which resulted primarily from deterioration in credit quality of the loan portfolios. See Note 109 of the Notes to Consolidated Financial Statements and “Accounting for Goodwill” on page 30 for additional information.Foreign OperationsZions Bank and Amegy operate foreign branches in Grand Cayman, Grand Cayman Islands, B.W.I. The foreign branches only accept deposits from qualified domestic customers. While deposits in these branches 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, 2012 and 2011 2010,were $1.8 billion and 2009, totaled $1.6 billion, $1.7 billion, $1.7 billion, respectively, and averaged $1.5 billion for 2011, $1.6 billion for 2010,both 2012 and $2.0 billion for 2009. All of these foreign2011. Foreign deposits wereare related to domestic customers of our subsidiary banks.Income TaxesThe Company’s income tax expense was $193.4 million for 2012 compared to $198.6 million for 2011 was $198.6 million compared toand an income tax benefit of $106.8 million and $401.3 million for 2010 and 2009, respectively.2010. The Company’s effective income tax rates, including the effects of noncontrolling interests, were 35.6% in 2012, 38.0% in 2011, and 26.7% in 2010 and 24.8% in 2009.2010. The tax expense raterates for 2012 and 2011 waswere reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance. ThisThese rate reduction wasreductions were mostly offset by the nondeductibility of a portion of the accelerated discount amortization from the conversion of subordinated debt to preferred stock during both years. However, in 2011, the year. The tax benefit rate for 2010 was reduced by the taxable surrender of certain bank-owned life insurance policies and the nondeductibility of a portionamount of the accelerated discountnondeductible amortization from the conversionconversions of subordinated debt to preferred stock. The lowerstock was significantly higher than the amount in 2012, increasing the tax benefit rate for 2009 was mainly due to nondeductible goodwill impairment charges incurred during the year.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 $1.2 million in 2012, $2.4 million in 2011, and $6.0 million in 2010, and $5.9 million in 2009.The Company had a net DTA balance of approximately $406 million at December 31, 2012, compared to $509 million at December 31, 2011, compared to $540 million at December 31, 2010.2011. The decrease in the net DTA resulted primarily from items related to nonaccruing loans, and OREO. This decrease was offset by an increase in DTAs from fair value adjustments or impairment write-downs related toon securities, NOL utilization, and an increase in unfunded pension obligations.OREO. The net decrease in DTA was also offset by a decrease in the deferred tax liabilitiesliability related to FDIC-supported transactions and the nondeductibility of a portion of the accelerated discount amortization from the conversion of subordinated debt to preferred stock. The Company did not record any additional valuation allowance for GAAP purposes as of December 31, 2011.2012. See Note 1514 of the Notes to Consolidated Financial Statements and “Critical Accounting Policies and Significant Estimates” on page 28 27for moreadditional information.BUSINESS SEGMENT RESULTSThe Company manages its banking operations and prepares management reports with a primary focus on its subsidiary banks and the geographies in which they operate. As discussed in the Executive Summary,“Executive Summary” on page 22, 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, NBA, Vectra, and TCBW) are subject to regulatory oversight by the OCC. Those with state charters (CB&T, NSB, and TCBO) are overseenregulated by the FDIC and applicable state authorities. In addition to its banking businesses, the Company has an OtherThe operating segment whichidentified as “Other” includes the Parent, ZMSC, TCBO, andZions Management Services Company, certain nonbank financial service subsidiaries. These entities are not considered significant to the Company as a whole.The accounting policies of the individual segments are the same as those of the Company. The Company allocates the cost of centrally provided services to the business segments based upon estimated or actual usage of those44services. Note 2221 of the Notes to Consolidated Financial Statements contains selected information from the respective balance sheets and statements of income for all segments.During 2012, the Company’s banking subsidiaries experienced improved financial performance. Common areas of financial performance experienced at various levels of the segments include:improved levels of profitability;declining credit-related costs including reduced provisions for loan losses;slow recovering loan growth; andhigh levels of deposit growth invested in low-yielding cash-equivalent assets.Schedule 9SELECTED SEGMENT INFORMATION(Dollar amounts in millions) Zions Bank CB&T Amegy NBA 2011 2010 2009 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 17,531 $ 16,157 $ 17,652 $ 10,894 $ 10,766 $ 11,097 $ 12,282 $ 11,406 $ 11,145 $ 4,485 $ 4,397 $ 4,524 14,905 13,631 13,823 9,192 9,219 9,760 9,731 8,906 8,880 3,731 3,696 3,784 150.5 (48.4 ) (202.9 ) 134.4 58.8 (50.2 ) 161.6 58.6 (780.4 ) 25.5 (7.9 ) (144.2 ) 4.65 % 4.39 % 3.68 % 5.20 % 5.04 % 4.88 % 3.91 % 3.98 % 3.90 % 4.14 % 4.30 % 3.95 % 11.59 % 10.43 % 8.84 % 10.96 % 9.94 % 8.81 % 14.41 % 13.84 % 11.79 % 13.65 % 12.71 % 11.59 % 13.37 % 11.66 % 10.29 % 13.81 % 12.40 % 10.25 % 15.99 % 15.60 % 12.29 % 17.71 % 16.90 % 14.46 % 14.61 % 12.88 % 11.52 % 15.08 % 13.68 % 11.51 % 17.26 % 16.89 % 13.57 % 18.98 % 18.19 % 15.76 % $ 128.3 $ 350.6 $ 400.4 $ (9.5 ) $ 149.9 $ 251.5 $ (37.5 ) $ 118.7 $ 406.1 $ 9.6 $ 53.4 $ 291.7 179.5 321.8 255.1 53.9 152.0 144.4 71.4 157.9 143.2 54.4 111.8 214.2 1.41 % 2.39 % 1.77 % 0.65 % 1.77 % 1.65 % 0.92 % 2.02 % 1.65 % 1.66 % 3.33 % 5.54 % $ 336 $ 388 $ 359 $ 186 $ 258 $ 223 $ 231 $ 340 $ 379 $ 98 $ 143 $ 201 2.64 % 3.01 % 2.57 % 2.22 % 3.05 % 2.50 % 2.91 % 4.55 % 4.58 % 2.96 % 4.36 % 5.57 % $ 287.6 $ 563.0 $ 772.7 $ 198.9 $ 273.6 $ 657.7 $ 248.4 $ 409.2 $ 549.5 $ 130.1 $ 209.9 $ 320.2 2.23 % 4.31 % 5.45 % 2.36 % 3.22 % 7.28 % 3.11 % 5.40 % 6.52 % 3.89 % 6.22 % 8.66 % $ 5.1 $ 8.9 $ 53.0 $ 79.8 $ 123.3 $ 67.8 $ 4.8 $ 7.8 $ 14.4 $ 3.9 $ 1.6 $ 14.2 0.04 % 0.07 % 0.38 % 0.95 % 1.46 % 0.76 % 0.06 % 0.10 % 0.17 % 0.12 % 0.05 % 0.39 % NSB Vectra TCBW 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 4,100 $ 4,017 $ 4,187 $ 2,341 $ 2,299 $ 2,440 $ 874 $ 850 $ 835 3,546 3,424 3,526 2,004 1,923 2,005 693 662 632 46.6 (70.3 ) (352.0 ) (10.1 ) 6.6 (25.6 ) 2.7 (0.5 ) 1.6 3.41 % 3.60 % 3.50 % 4.92 % 5.02 % 4.52 % 3.61 % 3.84 % 4.06 % 11.70 % 12.66 % 13.10 % 11.01 % 12.05 % 10.91 % 10.10 % 10.62 % 10.57 % 21.58 % 21.12 % 18.71 % 12.52 % 12.55 % 10.93 % 13.63 % 12.90 % 12.60 % 22.89 % 22.48 % 20.07 % 13.79 % 13.83 % 12.21 % 14.90 % 14.16 % 13.86 % $ (38.3 ) $ 133.3 $ 563.7 $ 14.0 $ 28.2 $ 78.5 $ 7.8 $ 17.4 $ 22.5 55.1 190.5 368.7 32.5 32.3 31.8 9.0 15.7 15.3
and leases 2.32 % 7.48 % 11.94 % 1.77 % 1.72 % 1.57 % 1.55 % 2.72 % 2.59 % $ 132 $ 226 $ 280 $ 51 $ 70 $ 74 $ 14 $ 15 $ 13
leases, at year-end 5.89 % 9.42 % 10.17 % 2.67 % 3.84 % 3.72 % 2.49 % 2.65 % 2.32 % $ 114.7 $ 250.6 $ 333.4 $ 70.7 $ 100.3 $ 105.9 $ 12.0 $ 20.9 $ 29.5
to net loans and leases and other real
estate owned 5.07 % 10.31 % 11.88 % 3.61 % 5.44 % 5.29 % 2.12 % 3.64 % 5.09 % $ 0.1 $ 0.2 $ 12.5 $ 0.1 $ 0.2 $ 1.4 $ – $ – $ –
days or more to net loans and leases 0.01 % 0.01 % 0.45 % – 0.01 % 0.07 % – – – (Dollar amounts in millions) Zions Bank CB&T Amegy 2012 2011 2010 2012 2011 2010 2012 2011 2010 KEY FINANCIAL INFORMATION Total assets $ 17,930 $ 17,531 $ 16,157 $ 11,069 $ 10,894 $ 10,766 $ 13,119 $ 12,282 $ 11,406 Total deposits 15,575 14,905 13,631 9,483 9,192 9,219 10,706 9,731 8,906 Net income (loss) 189.3 150.5 (48.3 ) 127.1 134.4 58.8 166.7 161.6 58.6 Net interest margin 4.04 % 4.53 % 4.29 % 4.71 % 5.17 % 5.02 % 3.44 % 3.95 % 4.02 % RISK-BASED CAPITAL RATIOS Tier 1 leverage 10.58 % 11.59 % 10.43 % 10.37 % 10.96 % 9.94 % 12.03 % 14.41 % 13.84 % Tier 1 risk-based capital 12.96 % 13.37 % 11.66 % 12.92 % 13.81 % 12.40 % 13.91 % 15.99 % 15.60 % Total risk-based capital 14.17 % 14.61 % 12.88 % 14.18 % 15.08 % 13.68 % 15.17 % 17.26 % 16.89 % CREDIT QUALITY Provision for loan losses $ 88.3 $ 128.3 $ 350.6 $ (7.9 ) $ (9.5 ) $ 149.9 $ (63.9 ) $ (37.4 ) $ 119.3 Net loan and lease charge-offs 74.4 179.5 321.8 19.8 53.9 152.0 4.6 71.4 157.9 Ratio of net charge-offs to average loans and leases 0.60 % 1.41 % 2.39 % 0.24 % 0.65 % 1.77 % 0.06 % 0.91 % 2.00 % Allowance for loan losses $ 350 $ 336 $ 388 $ 146 $ 186 $ 258 $ 164 $ 233 $ 342 Ratio of allowance for loan losses to net loans and leases, at year-end 2.80 % 2.64 % 3.01 % 1.77 % 2.22 % 3.05 % 1.94 % 2.89 % 4.52 % Nonperforming lending-related assets $ 259.0 $ 287.6 $ 563.0 $ 150.7 $ 200.2 $ 273.6 $ 138.8 $ 248.4 $ 409.2 Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 2.05 % 2.23 % 4.31 % 1.82 % 2.37 % 3.22 % 1.63 % 3.07 % 5.34 % Accruing loans past due 90 days or more $ 2.6 $ 5.1 $ 8.9 $ 54.2 $ 79.7 $ 123.3 $ 3.4 $ 4.8 $ 7.8 Ratio of accruing loan past due 90 days or more to net loans and leases 0.02 % 0.04 % 0.07 % 0.66 % 0.95 % 1.46 % 0.04 % 0.06 % 0.10 % 45(Dollar amounts in millions) NBA NSB Vectra TCBW 2012 2011 2010 2012 2011 2010 2012 2011 2010 2012 2011 2010 KEY FINANCIAL INFORMATION Total assets $ 4,575 $ 4,485 $ 4,397 $ 4,061 $ 4,100 $ 4,017 $ 2,511 $ 2,341 $ 2,299 $ 961 $ 874 $ 850 Total deposits 3,874 3,731 3,696 3,604 3,546 3,424 2,164 2,004 1,923 791 693 662 Net income (loss) 30.9 25.5 (7.9 ) 21.8 46.6 (70.3 ) 18.9 (10.1 ) 6.6 7.9 2.7 (0.5 ) Net interest margin 4.00 % 4.14 % 4.30 % 3.19 % 3.41 % 3.60 % 4.82 % 4.92 % 5.02 % 3.25 % 3.52 % 3.76 % RISK-BASED CAPITAL RATIOS Tier 1 leverage 12.12 % 13.65 % 12.71 % 10.30 % 11.70 % 12.66 % 11.52 % 11.01 % 12.05 % 9.39 % 10.10 % 10.62 % Tier 1 risk-based capital 14.53 % 17.71 % 16.90 % 18.94 % 21.58 % 21.12 % 12.32 % 12.52 % 12.55 % 12.30 % 13.63 % 12.90 % Total risk-based capital 15.79 % 18.98 % 18.19 % 20.22 % 22.89 % 22.48 % 13.58 % 13.79 % 13.83 % 13.56 % 14.90 % 14.16 % CREDIT QUALITY Provision for loan losses $ (0.6 ) $ 9.6 $ 53.4 $ (9.6 ) $ (38.3 ) $ 133.3 $ 7.0 $ 14.0 $ 28.2 $ 0.4 $ 7.8 $ 17.4 Net loan and lease charge-offs 14.0 54.4 111.8 29.8 55.1 190.5 9.1 32.5 32.3 2.7 9.0 15.7 Ratio of net charge-offs to average loans and leases 0.41 % 1.66 % 3.33 % 1.38 % 2.32 % 7.48 % 0.45 % 1.77 % 1.72 % 0.48 % 1.55 % 2.72 % Allowance for loan losses $ 83 $ 98 $ 143 $ 90 $ 132 $ 226 $ 49 $ 51 $ 70 $ 12 $ 14 $ 15 Ratio of allowance for loan losses to net loans and leases, at year-end 2.31 % 2.96 % 4.36 % 4.30 % 5.89 % 9.42 % 2.30 % 2.67 % 3.84 % 2.06 % 2.49 % 2.65 % Nonperforming lending-related assets $ 70.9 $ 130.1 $ 209.9 $ 73.1 $ 114.7 $ 250.6 $ 42.3 $ 70.7 $ 100.3 $ 10.7 $ 12.0 $ 20.9 Ratio of nonperforming lending-related assets to net loans and leases and other real estate owned 1.94 % 3.89 % 6.22 % 3.47 % 5.07 % 10.31 % 1.93 % 3.61 % 5.44 % 1.88 % 2.12 % 3.64 % Accruing loans past due 90 days or more $ 0.6 $ 3.9 $ 1.6 $ 0.9 $ 0.1 $ 0.2 $ — $ 0.1 $ 0.2 $ — $ — $ — Ratio of accruing loans past due 90 days or more to net loans and leases 0.02 % 0.12 % 0.05 % 0.04 % 0.01 % 0.01 % — % — % 0.01 % — % — % — % The above amounts do not include intercompany eliminations.Zions First National BankZions Bank is headquartered in Salt Lake City, Utah and is primarily responsible for conducting the Company’s operations in Utah and Idaho. Zions Bank is the 32rdnd largest full-service commercial bank in Utah and the 3rd largest in Idaho, as measured by domestic deposits in these states. Zions Bank includes mostconducts the largest portion of the Company’s Capital Markets operations, which include Zions Direct, Inc., fixed income securities trading, correspondent banking, public finance, trust and investment advisory services, and Western National Trust Company.The net interest margin increased substantiallydecreased to 4.65%4.04% in 20112012 from 4.39%4.53% in 2010.2011. Nonperforming lending-related assets decreased 48.9%9.9% from the prior year due to extensive efforts to work out problem loans and to sell OREO properties. Additionally, the higher credit quality of loans originated since the beginning of the financial crisis also contributed to the higherimproved credit quality of the portfolio.The loan portfolio decreased by $146$261 million during 2011,2012, which included a $199$73 million decrease in commercial real estateCRE loans, a $37$24 million decrease in consumer loans, partially offset byand a $90$164 million increasedecrease in commercial loans. The decline in commercial loans was the result of a reduction in the National Real Estate owner occupied loan portfolio. Accruing loans past due 90 days or more at December 31, 20112012 decreased to $5$3 million from $9$5 million a year earlier. Total deposits at December 31, 20112012 were 9.35%4.5% higher than at December 31, 2010.46California Bank & TrustCalifornia Bank & Trust is the 14th largest full-service commercial bank in California as measured by domestic deposits in the state.CB&T’sdeposits. 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. In 2009, CB&T acquired certain assets’s profitability during 2012 and liabilities of Alliance Bank and Vineyard Bank from the FDIC as receiver of these failed banks. The loans and other real estate acquired are covered2011 was favorably impacted by loss sharing agreements with the FDIC.During both 2011 and 2010, CB&T’s net interest margin exceeded our other subsidiary banks. For both years the better-than-expected performance of the acquired loans from the failed banks contributed to CB&T’s profitability.FDIC-supported loans. In 2011,2012, CB&T was able to significantly reduce its nonperforming lending-related assets, which declined 27.3%24.5% from the prior year. Total deposits were virtually unchangedincreased 3.2% from December 31, 2010.Excluding the impact of FDIC-supported loans, theCB&T’s loan portfolio increased in 2012 by $157$78 million from the prior year. In 2011,2012, consumer loans increased $153$16 million and commercial real estateCRE loans increased $124$74 million, offset by a $120$12 million decrease in commercial lending. FDIC-supported loans declined by $206$211 million in 2011.2012. The balance of FDIC-supported loans declinescontinues to decline over time as the portfolio matures, and no additional loans have been purchased since the 2009 acquisitions. The credit quality of CB&T’s loan portfolio improved during 2011,2012, resulting in a 64.5%63.3% reduction in net loan and lease charge-offs.Amegy CorporationAmegy is headquartered in Houston, Texas and operates Amegy Bank, Amegy Mortgage Company, Amegy Investments, and Amegy Insurance Agency. Amegy Bank is the 89th largest full-service commercial bank in Texas as measured by domestic deposits in the state.Over the past three years, Amegy has been able to maintain a relativelyincreased profitability over each year even with constant net interest margin and achieved profitability in 2011 and 2010 after experiencing a loss in 2009 primarily due to a goodwill impairment charge.compression during this same time frame. Nonperforming lending-related assets decreased by 39.3%44.1% from the prior year. Total deposits increased 10.0% from 2010 by 9.3%,2011, driven by higher balances in business customers’ accounts. During 2011,2012, Amegy’s loan portfolio increased by $457$419 million. Commercial loans grew by $962$376 million and consumer loans increased by $179$222 million, offset by a $684$179 million decrease in commercial real estateCRE loans.National Bank of ArizonaNational Bank of Arizona is the 54th largest full-service commercial bank in Arizona as measured by domestic deposits in the state.NBA had net income of $25.5$30.9 million in 2011 after posting2012, a net loss of $7.9$5.4 million in 2010.or 21.2% increase from 2011. Nonperforming lending-related assets decreased by 38.0%45.5% from the prior year. During 2011,2012, the loan portfolio grewincreased by $29 million. Increases$300 million in all lending product segments, including $114 million in commercial lending, and$144 million in commercial real estate, loans of $70and $42 million and $14 million, respectively, were partially offset by a $55 million decrease in consumer loans. Total deposits were essentially unchanged fromincreased 3.8% over the prior year.Nevada State BankNevada State Bank is the 4th 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 in relationship banking.The markets in which NSB operates are dependent on tourism and construction, and were severely impacted by the recent recession. At December 31, 2011,2012, Nevada’s unemployment rate was the highest in the nation, and its housing market continued to suffer from a high rate of foreclosures. Despite economic challenges in the local market, many of NSB’s results improved over the previous year. In 2011,2012, NSB had net income of $46.6$21.8 million compared to a net loss of $70.3$46.6 million in 2010.2011. Net loan and lease charge-offs declined 71.1%,45.9% from 2011, and nonperforming lending-related assets by 54.2%declined 36.3%. Deposits increased 3.6%1.6% and the net interest margin decreased 1922 bps from the prior year.47During 2011,2012, NSB’s commercial lending and commercial real estate and commercial lending portfolios contracteddeclined by $260$101 million and $10$68 million, respectively, but was partially offset by a $122$45 million increase in consumer loans.Vectra Bank ColoradoVectra Bank Colorado, N.A. is the 107th largest full-service commercial bank in Colorado as measured by domestic deposits in the state.Vectra had a’s net interest margin ofwas 4.82% in 2012 compared to 4.92% in 2011 compared to 5.02% in 2010, while the balance of outstanding2011. Total loans increased $214 million during the year. Increases2012, including increases of $140 million in consumer loans of $67and $126 million andin commercial real estate loans of $47 million werelending, partially offset by a $10decrease of $52 million decline in commercial lending.real estate loans. Nonperforming lending-related assets decreased 29.5%40.2% from the prior year and the provision for loan losses decreased 50.4%.year. Total deposits at December 31, 20112012 were 4.2%8.0% higher than a year earlier.The Commerce Bank of WashingtonThe Commerce Bank of Washington is headquartered in Seattle, Washington, and operates out of a single office located in the Seattle central business district. 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 region without requiring extensive investments intoin a traditional branch network. It has been innovative in effectively utilizing couriers, bank by mail, remote deposit image capture, and other technologies.TCBW had net income of $7.9 million in 2012 compared to $2.7 million in 2011, following a net a loss of $0.5 million in 2010.2011. Nonperforming lending-related assets decreased 42.6% and the provision for loan losses decreased 55.2%10.8% from the prior year. The commercial lending portfolio increased by $22$2 million butand commercial real estate loans decreasedincreased by $11 million and$8 million; however, consumer loans decreased by $21$1 million. Total deposits were 4.7%14.1% higher at December 31, 20112012 than a year earlier.Other SegmentOperating 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.Significant changes in 2012 compared to 2011 include (1) a $75.6 million improvement in net interest income primarily related to lower interest expense resulting from reduced accelerated discount amortization on convertible subordinated debt, as discussed in “Net Interest Income, Margin and Interest Rate Spreads” on page 34, and (2) a $68.2 million increase in net impairment losses on investment securities, as discussed in “Investment Securities Portfolio” on page 49. Significant changes in 2011 compared to 2010 include a $73.3 million improvement in net interest income related to reduced accelerated discount amortization, and a $51.3 million reduction in net impairment losses on investment securities.BALANCE SHEET ANALYSISInterest-Earning AssetsInterest-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, and loans, and leases. Schedule 3, which we referred to in our discussion of net interest income, includes the average balances of the Company’s interest earning assets, the amount of revenue generated by them, and their respective yields. Another of our goalsgoal is to maintain a higher-yielding mix of interest earninginterest-earning assets, such as loans, relative to lower-yielding assets, such as money market investments and securities, while maintaining adequate levels of highly liquid assets. The current period of slow economic growth accompanied by the lowmoderate loan demand experienced in recent quarters has made it difficult to consistently achieve these goals due to higher levelsgoals.48Average interest-earning assets were $47.1$49.0 billion for 2011in 2012 compared to $46.9$47.2 billion for 2010.in the previous year. Average interest-earning assets as a percentage of total average assets were 92.0% in 2012 and 91.8% in 2011.Average loans, including FDIC-supported loans, were $37.0 billion and $36.9 billion in 2012 and 2011, respectively. Average loans as a percentage of total average assets in 2012 was 91.6% for 201169.5% compared to 90.8% for 2010.Average money market investments, consisting of interest-bearing deposits, federal funds sold and security resell agreements, grewincreased by 31.1%48.1% to $7.9 billion in 2012 compared to $5.4 billion in 2011 compared to $4.1 billion in 2010.2011. Average securities increaseddecreased by 9.8% during19.4% from 2011. Average total deposits decreasedincreased by 1.1%5.2% while average nettotal loans and leases decreasedincreased by 3.8%0.4% for 20112012 when compared to 2010. The increasesthe prior year. Increased deposits combined with moderate loan growth resulted in averagehigher balances of excess cash available for money market investments and average securities are a reflection of the fact that loan balances have decreased at a faster pace than the net decrease in customer deposits and other funding sources.Chart 5 illustrates recent trends in loan and deposit balances.
Investment Securities PortfolioWe invest in securities to generate revenues for the Company; portions of the portfolio are also available as a source of liquidity. The following schedules presentSchedule 10 presents a profile of the Company’s investment securities portfolio with asset-backed securities classified by credit ratings.portfolio. The amortized cost amounts represent the Company’s original cost forof the investments, adjusted for related accumulated amortization or accretion of any yield adjustments, related to the security, and for credit impairment losses. The estimated fair value measurement levels and methodology are discussed in detail in Note 21 20of the Notes to Consolidated Financial Statements.Schedules 10 and 11 present the Company’s asset-backed securities, classified by the highest of the ratings and the lowest of the ratings, respectively, from any of Moody’s Investors Service, Fitch Ratings or Standard & Poors.In the discussion of our investment portfolio that follows, weWe have included certainselected credit rating information for certain of the investment securities schedules because thatthis 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. The Dodd-Frank Act requiresrequired that after July 21, 2011, federal agencies could no longer mandate the use of rating agency ratings cannot be mandated by any federal agencyratings. Final regulations and effective dates for any purpose after July 21, 2011. However, regulations implementing this requirement have not yet been finalized, and thereforeprovision were issued in June 2012. Pursuant to these rules, during 2012 the Company cannot assessbegan relying on its internal credit quality methodology to determine credit quality grading for investment securities held by the impact, if any, this new requirement will havesubsidiary banks, which had the effect of improving the credit quality grades on the regulatory treatmentsome of the Company’s investment securities, or when this might occur.49Schedule 10INVESTMENT SECURITIES PORTFOLIO December 31, 2012 December 31, 2011 (In millions) Amortizedcost Carryingvalue Estimatedfairvalue Amortizedcost Carryingvalue EstimatedfairvalueHeld-to-maturity Municipal securities $ 525 $ 525 $ 537 $ 565 $ 565 $ 572 Asset-backed securities: Trust preferred securities – banks and insurance 255 213 126 263 222 144 Other 22 19 12 24 21 14 802 757 675 852 808 730 Available-for-sale U.S. Treasury securities 104 105 105 4 5 5 U.S. Government agencies and corporations: Agency securities 109 113 113 153 158 158 Agency guaranteed mortgage-backed securities 407 425 425 535 553 553 Small Business Administration loan-backed securities 1,124 1,153 1,153 1,153 1,161 1,161 Municipal securities 75 76 76 121 122 122 Asset-backed securities: Trust preferred securities – banks and insurance 1,596 949 949 1,794 930 930 Trust preferred securities – real estate investment trusts 41 16 16 40 19 19 Auction rate securities 7 7 7 71 70 70 Other 26 19 19 65 50 50 3,489 2,863 2,863 3,936 3,068 3,068 Mutual funds and other 228 228 228 163 163 163 3,717 3,091 3,091 4,099 3,231 3,231 Total $ 4,519 $ 3,848 $ 3,766 $ 4,951 $ 4,039 $ 3,961 ASSET-BACKED SECURITIES CLASSIFIED AT HIGHEST CREDIT RATING*AT DECEMBER 31, 2011(In millions) Par
value Amortized
cost Net unrealized
gains (losses)
recognized in
OCI1 Carrying
value Net unrealized
gains (losses)
not recognized
in OCI 1 Estimated
fair value $ 567 $ 565 $ – $ 565 $ 7 $ 572 57 57 (6 ) 51 (34 ) 17 31 30 (21 ) 9 – 9 88 87 (27 ) 60 (34 ) 26 176 176 (14 ) 162 (44 ) 118 176 176 (14 ) 162 (44 ) 118 19 18 – 18 (7 ) 11 11 6 (3 ) 3 – 3 30 24 (3 ) 21 (7 ) 14 861 852 (44 ) 808 (78 ) 730 5 4 1 5 5 153 153 5 158 158 518 535 18 553 553 1,065 1,153 8 1,161 1,161 123 121 1 122 122 4 4 – 4 4 69 48 1 49 49 271 219 (6 ) 213 213 172 167 (60 ) 107 107 383 350 (159 ) 191 191 971 702 (552 ) 150 150 1,870 1,490 (776 ) 714 714 59 54 – 54 54 32 31 (4 ) 27 27 188 188 (72 ) 116 116 6 6 (3 ) 3 3 285 279 (79 ) 200 200 25 25 (9 ) 16 16 25 25 (9 ) 16 16 25 16 (2 ) 14 14 45 24 (19 ) 5 5 70 40 (21 ) 19 19 76 71 (1 ) 70 70 76 71 (1 ) 70 70 7 6 1 7 7 11 11 (5 ) 6 6 25 25 – 25 25 5 4 (1 ) 3 3 48 19 (10 ) 9 9 96 65 (15 ) 50 50 4,286 3,936 (868 ) 3,068 3,068 163 163 – 163 163 4,449 4,099 (868 ) 3,231 3,231 $ 5,310 $ 4,951 $ (912 ) $ 4,039 $ (78 ) $ 3,961 *Ratings categories include entire range. For example, “A rated” includes A+, A and A-. Split rated securities with more than one rating are categorized at the highest rating level.1Other comprehensive income. All amounts reported are pretax.2Consists of securities determined to have OTTI and/or securities whose interest payment was capitalized as opposed to being paid in cash, as permitted under the terms of the security. This capitalization feature is known as Payment In Kind (“PIK”) and where exercised the security is called PIK’d.Schedule 11INVESTMENT SECURITIES PORTFOLIOASSET-BACKED SECURITIES CLASSIFIED AT LOWEST CREDIT RATING*AT DECEMBER 31, 2011(In millions) Par
value Amortized
cost Net unrealized
gains (losses)
recognized in
OCI1 Carrying
value Net unrealized
gains (losses)
not recognized
in OCI1 Estimated
fair value $ 567 $ 565 $ – $ 565 $ 7 $ 572 57 57 (6 ) 51 (34 ) 17 31 30 (21 ) 9 – 9 88 87 (27 ) 60 (34 ) 26 176 176 (14 ) 162 (44 ) 118 176 176 (14 ) 162 (44 ) 118 19 18 – 18 (7 ) 11 11 6 (3 ) 3 – 3 30 24 (3 ) 21 (7 ) 14 861 852 (44 ) 808 (78 ) 730 5 4 1 5 5 153 153 5 158 158 518 535 18 553 553 1,065 1,153 8 1,161 1,161 123 121 1 122 122 69 48 1 49 49 830 740 (225 ) 515 515 971 702 (552 ) 150 150 1,870 1,490 (776 ) 714 714 55 50 – 50 50 4 4 – 4 4 220 219 (76 ) 143 143 6 6 (3 ) 3 3 285 279 (79 ) 200 200 25 25 (9 ) 16 16 25 25 (9 ) 16 16 25 16 (2 ) 14 14 45 24 (19 ) 5 5 70 40 (21 ) 19 19 76 71 (1 ) 70 70 76 71 (1 ) 70 70 6 5 1 6 6 11 11 (5 ) 6 6 26 26 – 26 26 5 4 (1 ) 3 3 48 19 (10 ) 9 9 96 65 (15 ) 50 50 4,286 3,936 (868 ) 3,068 3,068 163 163 – 163 163 4,449 4,099 (868 ) 3,231 3,231 $ 5,310 $ 4,951 $ (912 ) $ 4,039 $ (78 ) $ 3,961 *Ratings categories include entire range. For example, “A rated” includes A+, A and A-. Split rated securities with more than one rating are categorized at the lowest rating level.1Other comprehensive income. All amounts reported are pretax.2Consists of securities determined to have OTTI and/or securities whose interest payment was capitalized as opposed to being paid in cash, as permitted under the terms of the security. This capitalization feature is known as Payment In Kind (“PIK”) and where exercised the security is called PIK’d.Schedule 12INVESTMENT SECURITIES PORTFOLIO December 31, 2011 December 31, 2010 December 31, 2009 (In millions) Amortized
cost Carrying
value Estimated
fair value Amortized
cost Carrying
value Estimated
fair value Amortized
cost Carrying
value Estimated
fair value $ 565 $ 565 $ 572 $ 578 $ 578 $ 582 $ 606 $ 606 $ 609 263 222 144 263 239 189 265 239 208 24 21 14 28 24 17 30 25 16 $ 852 $ 808 $ 730 $ 869 $ 841 $ 788 $ 901 $ 870 $ 833 $ 4 $ 5 $ 5 $ 705 $ 706 $ 706 $ 26 $ 26 $ 26 153 158 158 201 208 208 243 249 249 535 553 553 566 576 576 374 385 385 1,153 1,161 1,161 867 868 868 782 768 768 121 122 122 156 158 158 237 242 242 1,794 930 930 1,947 1,243 1,243 2,023 1,361 1,361 40 19 19 46 19 19 56 24 24 71 70 70 111 110 110 160 160 160 65 50 50 103 81 81 127 77 77 3,936 3,068 3,068 4,702 3,969 3,969 4,028 3,292 3,292 163 163 163 237 237 237 364 364 364 4,099 3,231 3,231 4,939 4,206 4,206 4,392 3,656 3,656 $ 4,951 $ 4,039 $ 3,961 $ 5,808 $ 5,047 $ 4,994 $ 5,293 $ 4,526 $ 4,489 The amortized cost of investment securities at December 31, 2011 decreased by 14.8% from the balances on December 31, 2010,previous year. This was primarily due to the sale of investments in U.S. Treasury securities and reductions in asset-backed securities, partially offset by increased investments in SBA loan-backed securities.The amortized costAs of investment securities at December 31, 2010 increased by 9.7% from2012, 10.4% of the previous year. This$3.1 billion fair value of available-for-sale (“AFS”) securities portfolio was primarily due to increased investments in short-term U.S. Treasury securities, agency guaranteed mortgage-backed securities,valued at Level 1, 57.1% was valued at Level 2, and Small Business Administration loan-backed securities, partially offset by decreased investments in auction rate securities, mutual funds and other, as well as municipal securities.As of32.5% was valued at Level 3 under the GAAP fair value accounting valuation hierarchy. At December 31, 2011, 5.0% of the $3.2 billion fair value of available-for-saleAFS securities portfolio was valued at Level 1, 61.6% was valued at Level 2, and 33.4% was valued at Level 3 under the GAAP fair value accounting valuation hierarchy. As of December 31, 2010 the fair value of available-for-sale securities totaled $4.2 billion, of which 22.2% was valued at Level 1, 43.0% at Level 2, and 34.8% at Level 3. See Note 2120 of the Notes to Consolidated Financial Statements for further discussion of fair value accounting.The amortized cost of available-for-saleAFS investment securities valued at Level 3 was $1,983$1,684 million at December 31, 20112012 and the fair value of these securities was $1,079$1,004 million. The securities valued at Level 3 were comprised of ABS CDOs, primarily bank and auction rateinsurance company trust preferred CDOs, and municipal securities. For these Level 3 securities, net pretax unrealized loss recognized in OCI at the end of 2011December 31, 2012 was $904$680 million. As of December 31, 2011,2012, we believe that we will receive on settlement or maturity at least the amortized costamounts of the Level 3 available-for-saleAFS securities. This expectation applies to both those securities for which OTTI has been recognized and those for which no OTTI has been recognized.Valuation Sensitivity50Schedule 11 presents the Company’s CDOs according to performing tranches without credit impairment, and Insurancenonperforming tranches. These CDOsThe following schedule sets forth are the sensitivitymajority of our asset-backed securities and consist of both HTM and AFS securities.Schedule 11CDOs BY PERFORMANCE STATUS December 31, 2012 % of carrying value to par Net unrealized losses recognized in AOCI 1 Weighted average discount rate 2 (Amounts in millions) No. oftranches Paramount Amortizedcost Carryingvalue December 31, 2012 2011 Change Performing CDOs Predominantly bank CDOs 28 $ 811 $ 727 $ 538 $ (189 ) 7.8 % 66 % 64 % 2 % Insurance-only CDOs 22 454 449 327 (122 ) 8.6 72 79 (7 ) Other CDOs 6 54 43 38 (5 ) 9.4 70 76 (6 ) Total performing CDOs 56 1,319 1,219 903 (316 ) 8.1 68 69 (1 ) Nonperforming CDOs 3 CDOs credit impaired prior to last 12 months 18 369 251 109 (142 ) 10.7 30 18 12 CDOs credit impaired during last 12 months 39 732 441 181 (260 ) 9.6 25 12 13 Total nonperforming CDOs 57 1,101 692 290 (402 ) 10.0 26 16 10 Total CDOs 113 $ 2,420 $ 1,911 $ 1,193 $ (718 ) 9.0 49 47 2 December 31, 2011 (Amounts in millions) No. oftranches ParamountAmortizedcostCarryingvalueNet unrealized losses recognized in AOCI 1 Weighted average discount rate 2 % of carrying value to par Performing CDOs Predominantly bank CDOs 32 $ 956 $ 846 $ 615 $ (231 ) 7.1% 64% Insurance-only CDOs 21 455 449 359 (90 ) 5.8 79 Other CDOs 7 86 74 65 (9 ) 6.9 76 Total performing CDOs 60 1,497 1,369 1,039 (330 ) 6.7 69 Nonperforming CDOs 3 Deferring interest, but no credit impairment 3 72 72 17 (55 ) 15.2 24 Credit impairment prior to last 12 months 37 676 498 120 (378 ) 15.3 18 Credit impairment during last 12 months 18 365 217 43 (174 ) 16.2 12 Total nonperforming CDOs 58 1,113 787 180 (607 ) 15.6 16 Total CDOs 118 $ 2,610 $ 2,156 $ 1,219 $ (937 ) 10.5 47 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.51As shown in Schedule 12, the Company had 36 of its CDO securities, representing 42.4% of the current CDO portfolio’s fair values, using an internalvalue at December 31, 2012, that were upgraded by one or more NRSROs during the previous 12 months. These upgrades were attributed to improvements in over-collateralization ratios and deleveraging combined with less severe rating agency assumptions and methodology.Schedule 12BANK AND INSURANCE TRUST PREFERRED CDOs December 31, 2012 (In millions) No. of securities Paramount Amortized cost FairvalueYear-to-date rating changes 1 Upgrade 36 $ 994 $ 898 $ 448 No change 61 1,227 881 501 Downgrade 5 69 48 106 102 $ 2,290 $ 1,827 $ 1,055 1 By any NRSROSignificant Assumption Changes for 2012Probability of Default of Deferring Bank Holding Company Trust Preferred CollateralHistorically, our ratio-based valuation model assessed both performing and deferring issuers. Ratios predictive of bank failure were used in our model to changesidentify the PD of bank holding company issuers of trust preferred securities. The reduction of the weighted average assumed loss rate on deferring collateral from 2009 onward was due to a combination of factors. These included the increased predictive ability of the model during that period in identifying which holding companies would have its sole bank or primary bank closed by regulators and which did not appear to be in danger of closure. Bank closures were largely the most significant assumptions utilized in the model.Schedule 13SENSITIVITY OF INTERNAL MODEL(Amounts in millions) Bank and insurance CDOs at Level 3 Held-to-maturity Available-for-sale $ 144 $ 910 Currently Modeled Assumptions Incremental Cumulative Incremental Cumulative 4.3 % 20.0 % 0.3 % 4.6 % 0.4 % 20.4 % 1.7 % 6.3 % 1.3 % 21.7 % 11.0 % 17.3 % 9.2 % 30.9 % 827 bp 1170 bp 25 % $ (0.6 ) $ (4.6 ) 50 % (1.2 ) (8.6 ) 100 % (2.3 ) (17.2 ) 25 % $ (5.8 ) $ (99.2 ) 50 % (6.3 ) (103.6 ) 100 % (7.0 ) (112.4 )
in discount rate + 100 bp $ (12.7 ) $ (61.3 ) + 200 bp (24.0 ) (115.8 )
in Forward LIBOR Curve + 100 bp $ 7.5 $ 43.4 +1 % $ 3.0 $ 29.6 +2 % 5.9 57.1 1The 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.2Weighted 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 LIBOR swap yield curve at the date of valuation.4Percentage increase is applied to incremental projected loss percentages from currently performing collateral. For example, the 50% and 100% stress scenarios for AFSdriver of bank holding company defaults on trust preferred securities would result in cumulative 30 year losses of 36.4% = 30.9%+50%(0.4%+1.3%+9.2%) and 41.8% = 30.9%+100%(0.4%+1.3%+9.2%) respectively.5Prepayment rate for small banks increased to 4% per year for each year through maturity.6Prepayment rate for small banks increased to 5% per year for each year through maturity.The 2011 sensitivity analysis of valuation assumptions, when compared to the same projection for 2010, identifies that actual collateral credit losses in 2011 were slightly lower than those projected. However, lifetime collateral loss projections increased year-over-year because in 2011 the Company increased the assumed medium-term and long-term PDs for the best performing collateral. These more severe assumptions muted the effect of increased financial ratio improvement in some collateral.The discount rates applicable to CDO tranches increased during the year especially for lower priority tranches, due2009 to an increase in distressed debt spreads overlate 2012 period. As the risk-free-rate. The higher discount rates causedhighest PD institutions defaulted, and relatively stronger new deferrals were added, the portfolio fair valueaverages declined. For more information about the ratio-based model, please refer to be less sensitive than it was at the start of 2011 to the specific additional adverse assumption changes set out in the preceding schedule. The weighted average discount rate increased by 300 bps during 2011. The valuation of the AFS and HTM portfolios, including the use of trading prices, is further discussed in Note 2120 of the Notes to Consolidated Financial Statements.DuringEffective in the coursefourth quarter of 2012, we developed and began using an additional probability of default overlay model for deferring bank trust preferred issuers. We utilized the higher of the year,PDs from the ratio-based model and the PD overlay model, thus increasing the PD of deferring issuers. The majority of these deferring issuers face a reperformance-or-default deadline within the next two and a half years. Increased regulatory and restructuring risk as evidenced by several fourth quarter 2012 events and developments led to our modeling change.Prior to the fourth quarter of 2012, we madehad observed only a few bankruptcies of holding company issuers of trust preferred securities. These were generally confined to the following significantweakest institutions. Thus we assumed no recovery.In the fourth quarter of 2012, several regulatory and restructuring events were observed that negatively affected our assessment of current conditions for those issuers still in deferral and our forecast for these deferrals:1) We observed the first Section 363 bankruptcy of a bank holding company whose bank did not appear to be in danger of regulatory closure. While the bank had a 2.18% modeled PD, the effective loss will be all of the back interest or approximately 8% of the par amount. In this case, the relative strength of the bank did not bring a sale price for the bank stock held by the holding company sufficient to fully pay off the trust preferred security issued by the holding company. 2) We observed the uncertainty of recovery amounts for trust preferred securities issued by bank holding companies when those holding companies file Section 363 bankruptcies. The extent to which a recovery is achieved for the trust preferred security is highly dependent on multiple factors, including the active 52participation by CDO trustees under the direction of collateral managers or noteholders. We cannot assume that high levels of participation will be achieved in every future case.3) We observed what appeared to be the first instance of regulatory involvement in support of a bank holding company bankruptcy. 4) We observed bank holding companies starting into the last year of the allowable five-year deferral period with a well capitalized and in some cases also a profitable bank and several years of improved financial performance and related ratios. In particular, we observed maintenance of regulatory orders precluding, or requiring permission for, holding companies bringing deferred payments current and subsidiary banks making dividend payments to the holding company which, if left in place, will trigger default of the trust preferred securities issued by the holding company and collateralizing the CDOs. After discussion with regulators, we are unable to rule out the possibility that such regulatory orders may cause default. 5) We observed a collateral manager for a CDO allowing the restructuring of a holding company trust preferred security from an issuer with a relatively strong underlying bank such that the loss exceeded our modeled PD. The issuers with the earliest deferrals to which we are exposed will face the end of the allowable deferral period starting in 2013. Our fourth quarter 2012 experiences and observations led us to identify greater than previously assessed risk to the collectability of deferring bank holding company issuers, even when the underlying bank is not at risk of regulatory closure. Events seen in the fourth quarter of 2012 indicated that our previous assumption changesthat a well capitalized and profitable bank has a low probability of its bank holding company defaulting should be supplemented with additional analysis. Said differently, the subsidiary of a deferring bank holding company may be in an apparently reasonable financial condition, but because cash may be trapped at the subsidiary due to regulatory constraints, the bank holding company may simply be unable to bring the trust preferred obligation current once its five-year deferral period is up. Alternatively, debt restructurings approved by a CDO collateral manager and Section 363 bankruptcies approved by relevant courts may result in losses greater than our previously modeled probabilities of default.The addition of the “deferral PD overlay model” to our historic ratio-based PD model in the fourth quarter of 2012, addresses these risks by sorting remaining deferrals within our CDO pools into four “buckets” based on four factors indicative of bank holding company strength at the start of their deferral period. We then assume that the historical failure rate we have observed within our CDO pool for collateral in each bucket will be the future default rate of current deferrals in each bucket. Where the overlay PD of a deferral is higher than the PD identified by our traditional ratio-based PD model, we use the higher overlay PD. We expect to recalibrate the expected default curve for each bucket periodically as evidence developed:Significant the outcome for more deferring issuers becomes known over time.Adoption and utilization of the PD overlay model for deferrals effective December 31, 2012 raised our weighted average loss assumption on deferring collateral from 20% under our base model to 49% under the overlay model. The assumption change generated $50.4 million pretax of OTTI.Assumption Changes for 2011In the thirdfourth quarter of 20112012, the Company increased the prepayment assumptions for small banks because of the extent of observed prepayments made by these types of banks. The prepayment rate assumption for small banks was increased from 0% for five years and 2% thereafter to 3% per year for each year.year to 10% per year for three years and 3% thereafter. The Company expects a few years of this higher prepayment rate as regulatory and economic driven capital restructuring and industry consolidation continues in the near term, a period we estimate will continue through 2015. This produced $11$2.4 million of OTTI by itself and the Company maintained that assumption through the endanother $30.7 million of the year.OTTI in combination with PD increases on deferring issuers described previously. We changed this assumption because our CDO pools experienced significant and increasing prepayments of small bank trust preferred securities during 2011.the latter part of 2012. We define “small banks” as collateral that is not subject to the phased-in disallowance of bank trust preferred securities as Tier 1 Capital53required by the Dodd-Frank Act.Act, the majority of which would be subject to a more lengthy phased-in disallowance under capital rules proposed by the Federal Reserve and other banking regulators. These are primarily banks with assets below $15 billion and, to a lesser extent, insurance companies in mixed bank and insurance company CDOs.Since the third quarter of 2010, we have assumed that large banks with investment grade ratings will fully prepay by the end of 2015. We also assume that prepayment behaviors will be skewed toward the end of the disallowance period. The Dodd-Frank Act became effective during the third quarter of 2010, and it phases in the disallowance of the inclusion of trust preferred securities in Tier 1 capital for banks with assets over $15 billion (“large banks”). For those institutions within each pool with investment grade ratings, we assume that trust preferred securities will be called prior to the end of the disallowance period.Given the 3%10% small bank prepayment rate assumption until the end of 2015 and 3% thereafter and the differing extent of biglarge banks remaining in CDO pools, the pool specific prepayment rate until the end of 2015 is calculated with reference to both (a) the percentage of each pool’s performing collateral consisting of small banks, as well as, (b) the percentage which consists of collateral from large banks with investment grade ratings. After 2015 each pool is assumed to prepay at a 3% annual rate.For the fourth quarter of 2011,2012, the resulting average annual prepayment rate assumption for pools, which includeincludes both large and small banks, is 6.67%14% for each year through 2015, followed by an annual prepayment rate assumption of 3% thereafter. For pools without large banks, we assume a 3%10% annual prepayment rate.rate for each year through 2015 and 3% thereafter. Increased prepayment rates are generally favorable for the fair value of the most senior tranches and adverse to the fair value of the more junior tranches. IncreasingSchedule 13EFFECT OF BANK AND INSURANCE CDO ASSUMPTION CHANGES ON OTTI AND FAIR VALUES Bank and insurance CDOs at Level 3 (In millions) Held-to-maturity Available-for-sale OTTI Old assumptions $ (0.2 ) $ — Old assumptions with: PD overlay (4.5 ) (46.2 ) Increased prepayment (1.1 ) (1.6 ) New assumptions PD overlay and increased prepayment (6.4 ) (77.4 ) Effect of new assumptions on OTTI (6.2 ) (77.4 ) Fair value Old assumptions 123 884 Old assumptions with: PD overlay 122 857 Increased prepayment 125 930 PD overlay and increased prepayment 123 901 New assumptions PD overlay, increased prepayment and fourth quarter 2012 discount rate 126 925 Effect of new assumptions on fair value 3 41 54Valuation Sensitivity of Level 3 Bank and Insurance CDOsSchedule 14 sets forth the prepaymentsensitivity of the current internally modeled CDOs’ fair values to changes in the most significant assumptions utilized in the model.Schedule 14SENSITIVITY OF INTERNAL MODEL(Amounts in millions) Held-to-maturity Available-for-sale Fair value at December 31, 2012 $ 126 $ 925 Incremental Cumulative Incremental Cumulative Currently Modeled Assumptions Expected collateral credit losses 1 Loss percentage from currently defaulted or deferring collateral 2 5.8 % 24.3 % Projected loss percentage from currently performing collateral 1-year 0.3 % 6.1 % 0.3 % 24.6 % years 2-5 1.7 % 7.8 % 1.3 % 25.9 % years 6-30 11.1 % 18.9 % 9.4 % 35.3 % Discount rate 3 Weighted average spread over LIBOR 860 bps 859 bps Sensitivity of Modeled Assumptions Increase (decrease) in fair value due to increase in projected loss percentage from currently performing collateral 425% $ (0.8 ) $ (8.8 ) 50% (1.5 ) (17.3 ) 100% (3.1 ) (34.5 ) 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 recovery25% $ (6.4 ) $ (104.8 ) 50% (7.2 ) (111.1 ) 100% (9.0 ) (124.1 ) Increase (decrease) in fair value due toincrease in discount rate+100 bps $ (11.0 ) $ (56.8 ) +200 bps (20.6 ) (107.3 ) Increase (decrease) in fair value due to increase in forward LIBOR curve +100 bps $ 8.6 $ 37.0 Increase (decrease) in fair value due to: increase in prepayment assumption5+1% $ 4.1 $ 25.3 increase in prepayment assumption6+2% 8.3 48.2 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.2Weighted 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 12.03% 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 40.8% = 35.3%+50%(0.3%+1.3%+9.4%) and 46.3% = 35.3%+100%(0.3%+1.3%+9.4%), respectively.5 Prepayment rate for small bank collateral frombanks increased to 11% per year for the assumed 3% CPRfirst three years and to a 4% or 5% CPR increasesper year thereafter through maturity.6Prepayment rate for small banks increased to 12% per year for the first three years and to 5% per year thereafter through maturity. The 2012 sensitivity analysis of valuation assumptions, when compared to the fair valuesame projection for 2011, identifies the impact of the portfolio, while decreasing thefaster prepayment rate to 1% would slightly reduce the fair value.Short-Term Probabilities of DefaultFor the third quarter of 2011, the Company set a floor PD of 30 bps for years one through five for collateral where the higher of the one-year PDs from our ratio based approach and those from our third party licensedmodel would have been lower. The Company set the floor at 30 bps in order to be consistentassumption change combined with the short-termincreased PD that we would apply if we had direct lending exposuresassigned to CDO pool collateral. This change had no material impact on fair value or the recordingcollateral55remaining in the banking sector. Previously, the Company haddeferral at year end. The effect was to increase assumed a floor on PDs of 30 bps for years one through five, and then stepped the PD up to 65 bps in year six and beyond. Beginning in the fourth quarter, we changed this step-up assumption to an assumed floor on PDs of 48 bps for years two to five followed by a second step-up to the assumed 65 bps default rate in year six. These increases in the medium-term PDs of the best performing banks created additional medium-term collateral credit losses because financial ratio improvement in certain bank collateral only partially offsetboth the assumption change. Whileshort- and long-term beyond those projected at 2011.The discount rates applicable to CDO tranches decreased during the changes had no material impact on fair value, it did require the company to record $4.6 million of credit-related OTTIyear consistent with observed improved discount rates for riskier assets. The result was an increase in the fourth quarter of 2011.Long-Term Probabilities of DefaultIn the second quarter of 2011, the Company raised its long-term floor PD for bank collateral for years six to maturity from 30 bps to 50 bps to be more consistent with historical bank failure rates over long periods of time. This change resulted in $2.5 million of OTTI in the second quarter of 2011. In the third quarter of 2011 this assumption was increased to 65 bps, and the 65 bps long-term floor PD assumption was further maintained for the fourth quarter of 2011. The Company’s increase to an assumed 65 bps minimum floor PD for bank collateral starting in year 6 was more consistent with greater weighting for more recent bank failures. The assumption increase was also driven by the observed pattern that banks which issued trust preferred have and may continue to fail at rates in excessfair values of the failure rate of the general universe of banks. While this change had no material impact on the fair value, it did require the Company to record $2.5 million of OTTI.Bank Collateral DeferralsThe Company’s loss and recovery experience as of December 31, 20112012 (and our Level 3 modeling assumption) is essentially a 100% loss on defaults of bank collateral in CDOs, although we have, to date, received several, generally small, recoveries on defaults. Our experience with deferring bank collateral has been that of all collateral that has elected to defer beginning in 2007 or thereafter, 49%50% has defaulted, and approximately 42%30% remains within the allowable deferral period. Additionally, thirty-threeThis 30% is comprised of 196 deferring bank holding companies. Late 2012 events led the Company to increase its loss assumptions on these remaining deferrals, most of which are more than half-way through their allowable deferral period. We expect that future losses on these deferrals may result from actions other than bank failures - primarily bankruptcies and debt restructurings.In contrast, a significant number of previous deferrals have resumed interest payments. 71 issuing banks, with collateral aggregating to 9%20% of all deferrals and 18%40% of all surviving deferrals, have either come current and resumed interest payments on their trust preferred securities or willhave announced that they intend to do so at the next payment date. Older deferrals areBanks may come current on their trust preferred securities for one or more likely to have defaulted. Approximately 91%quarters and then re-defer. This pattern has occurred in seven of the bank collateral71 banks which first deferred prior to January 1, 2009 had defaulted by December 31, 2011. For bank collateral which first deferred on orresumed payment after January 1, 2009, 34% had defaulted by December 31, 2011. New deferrals peaked in 2009. In 2008, 9% of collateral performing at the start of the year elected to defer by year end. This contrasts with 19% in 2009, and 10% in 2010. A total of $509.9 million of bank collateral elected to defer in 2011 which comprises 4.6% of the collateral performing at the start of 2011. In 2010 $1,237.3 million of bank collateral elected to defer.deferring. Further information on the Company’s valuation process is detailed in Note 2120 of the Notes to Consolidated Financial Statements.Schedules 1415 and 1516 provide additional information on the below-investment-grade rated bank and insurance trust preferred CDOs’ portion 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 OTTI, and by original ratings level to provide granularity on the seniority level of the securities and the distribution of unrealized losses. The best and worst pool-level statistic for each original1516 are from the same security. The remaining statistics may not be from the same security.56Schedule 14BELOW-INVESTMENT-GRADE RATED BANK AND INSURANCE TRUST PREFERRED CDOSCDO VALUES CURRENTLY RATED BELOW-INVESTMENT-GRADE LEVELAT DECEMBERAt December 31, 20112012 Total Credit loss Valuation losses 1(Dollar amounts in millions) Numberof securities % ofportfolio Parvalue Amortizedcost Estimatedfair value Unrealizedloss Currentyear Life-to-date Life-to-dateOriginal ratings of securities, no OTTI recognized: Original AAA 24 34.4 % $ 752 $ 680 $ 495 $ (185 ) $ — $ — $ (98 ) Original A 16 16.5 361 361 177 (184 ) — — — Original BBB 5 2.1 46 46 20 (26 ) — — — Total Non-OTTI 53.0 1,159 1,087 692 (395 ) — — (98 ) Original ratings of securities, OTTI recognized: Original AAA 1 2.3 50 44 20 (24 ) — (5 ) (2 ) Original A 45 41.6 908 600 254 (346 ) (87 ) (312 ) — Original BBB 6 3.1 67 7 3 (4 ) (17 ) (60 ) — Total OTTI 47.0 1,025 651 277 (374 ) (104 ) (377 ) (2 ) Total below-investment-grade bank and insurance CDOs 100.0 % $ 2,184 $ 1,738 $ 969 $ (769 ) $ (104 ) $ (377 ) $ (100 ) Average amount of each security held 2(In millions) Parvalue Amortizedcost Estimatedfair value Unrealizedgain (loss)Original ratings of securities, no OTTI recognized: Original AAA $ 30 $ 27 $ 20 $ (7 ) Original A 15 15 7 (8 ) Original BBB 9 9 4 (5 ) Original ratings of securities, OTTI recognized: Original AAA 50 43 20 (23 ) Original A 17 11 5 (6 ) Original BBB 11 1 1 — 1 Number
of securities % of
portfolio Total Credit loss Valuation
losses1 (Dollar amounts in millions) Par
value Amortized
cost Estimated
fair value Unrealized
loss Current
year Life-to-
date Life-to-
date 27 37.4 % $ 857.3 $ 766.3 $ 538.7 $ (227.6 ) $ – $ – $ (99.6 ) 20 19.7 451.5 451.6 248.9 (202.7 ) – – – 5 2.0 46.5 46.5 23.0 (23.5 ) – – – 59.1 1,355.3 1,264.4 810.6 (453.8 ) – – (99.6 ) 1 2.2 50.0 43.4 16.5 (26.9 ) – (4.8 ) (1.9 ) 42 35.8 820.0 598.6 125.9 (472.7 ) (18.1 ) (223.8 ) – 6 2.9 67.1 24.2 2.5 (21.7 ) (10.1 ) (42.8 ) – 40.9 937.1 666.2 144.9 (521.3 ) (28.2 ) (271.4 ) (1.9 ) 100.0 % $ 2,292.4 $ 1,930.6 $ 955.5 $ (975.1 ) $ (28.2 ) $ (271.4 ) $ (101.5 ) Average holding2 Par
value Amortized
cost Estimated
fair value Unrealized
gain (loss) $ 30.6 $ 27.4 $ 19.2 $ (8.2 ) 16.1 16.1 8.9 (7.2 ) 9.3 9.3 4.6 (4.7 ) 50.0 43.4 16.5 (26.9 ) 15.8 11.5 2.4 (9.1 ) 11.2 4.0 0.4 (3.6 ) 1Valuation losses relate to securities purchased from Lockhart Funding LLC prior to its consolidation in June 2009.2The Company may have more than one holding of the same security.2 The Company may have more than one holding of the same security.57Schedule 15POOL LEVEL PERFORMANCE AND PROJECTIONS FOR BELOW-INVESTMENT-GRADE RATED BANK AND INSURANCE TRUST PREFERRED CDOsAT DECEMBERAt December 31, 2011 Current
lowest
rating # of
issuers in
collateral
pool # of
issuers
currently
performing1 % of
original
collateral
defaulted 2 % of
original
collateral
deferring3 Subordination
as a % of
performing
collateral4 Collateral-
ization %5 Present
value of
expected
cash flows
discounted at
coupon rate
as a % of par6 Lifetime
additional
projected
loss from
performing
collateral7 BB 23 21 1.14 % 4.26 % 93.16 % 1,461.59 % 100 % – 89 58 15.52 13.25 41.14 261.15 100 10.43 % CC 17 7 28.71 26.91 8.96 159.86 100 14.33 B 34 34 – – 27.76 347.12 100 10.25 17 15 3.39 6.52 11.82 138.44 100 12.53 C 6 4 10.31 26.91 (10.66 )8 69.56 9 100 14.57 CCC 34 34 – – 16.70 355.80 100 11.20 26 23 1.75 4.05 9.16 238.30 100 12.51 CC 24 20 6.13 9.26 2.73 152.53 100 13.70 CCC 43 24 16.89 25.82 29.04 231.15 93 9.50 CCC 37 31 – 1.89 54.27 169.99 100 – 53 33 11.99 17.09 (13.62 ) 63.52 81 11.02 C 3 – 27.50 29.55 (50.23 ) 7.40 36 15.93 C 42 38 6.28 1.84 (5.82 )8 82.89 9 100 8.77 78 52 13.72 18.25 (25.61 ) (143.24 ) 44 10.92 C 36 17 20.80 25.82 (44.86 ) (275.63 ) – 14.57 Currentlowestrating # of issuersin collateralpool # of issuerscurrentlyperforming1 % of originalcollateraldefaulted 2 % of originalcollateraldeferring 3 Subordination as a % of performing collateral 4 Collateral- ization %5 Present value of expectedcash flows discounted ateffective rate as a % of par Lifetimeadditionalassumed incurred lossfrom performingcollateral 6 Original ratings of securities, non-OTTI: Original AAA Best BB 22 20 2.6 % 4.3 % 79.9 % 643.0 % 100 % — Weighted average 16.9 10.2 40.1 242.5 100 10.5 % Worst CC 31 15 28.7 23.1 12.4 145.1 100 13.7 Original A Best B 32 32 — — 27.0 309.3 100 11.6 Weighted average 2.1 4.4 18.3 153.5 100 12.6 Worst CC 6 4 9.0 7.1 (0.7 ) 7 97.3 8 100 13.7 Original BBB Best CCC 32 32 — — 19.4 355.8 100 11.6 Weighted average 1.3 3.2 12.5 275.8 100 12.8 Worst CC 21 18 4.0 6.7 7.6 234.7 100 13.7 Original ratings of securities, OTTI: Original AAA Single security CCC 43 26 19.9 18.8 23.6 195.0 100 9.7 Original A Best CC 35 30 0.8 1.9 (5.9 ) 87.4 99 — Weighted average 12.5 12.7 (22.3 ) 52.5 68 11.4 Worst C 3 — 33.3 27.2 (131.9 ) 12.8 25 16.3 Original BBB Best C 40 34 6.3 6.5 (8.1 ) 62.3 66 7.1 Weighted average 16.7 15.9 (44.5 ) (220.1 ) 10 9.9 Worst C 32 13 22.0 19.6 (84.1 ) (407.3 ) — 13.4 1 2 3 4 Utilizes the Company’s loss assumption of 100% on defaulted collateral and the Company’s issuer specific loss assumption of from 2.18% to 100% dependent on credit for each deferring piece of collateral. “Subordination”“Subordination” in the schedule includes the effects of seniority level within the CDOs’ liability structure, the Company’s loss and recovery rate assumption for deferring but not defaulted collateral and a 0% recovery rate for defaulted collateral. The numerator is all collateral less the sum of (i) 100% of the defaulted collateral, (ii) the sum of the projected net loss amounts for each piece of deferring but not defaulted collateral and (iii) the amount of each CDO’s debt which is either senior to or pari passu with our security’s priority level. The denominator is all collateral less the sum of (i) 100% of the defaulted collateral and (ii) the sum of the projected net loss amounts for each piece of deferring but not defaulted collateral.5Utilizes The calculations utilize the Company’s loss assumption of 100% on defaulted collateral and the Company’s issuer specific loss assumption rangingof from 2.18%12.03% to 100% dependent on credit for each deferring piece of collateral. “Collateralization”5“Collateralization” in the schedule identifies the portion of a CDO tranche that is backed by nondefaulted collateral. The numerator is all collateral less the sum of (i) 100% of the defaulted collateral, (ii) the sum of the projected net loss amounts for each piece of deferring but not defaulted collateral and (iii) the amount of each CDO’s debt which is senior to our security’s priority level. The denominator is the par amount of the tranche. Par is defined as the original par less any principal paydowns. The calculations utilize the Company’s loss assumption of 100% on defaulted collateral and the Company’s issuer specific loss assumption ranging from 12.03% to 100% dependent on credit for each deferring piece of collateral. 6 For OTTI securities, this statistic approximates the extent of OTTI credit losses taken.787 98
17
AT DECEMBER
| (Amounts in millions) | Total securities | Within one year | After one but within five years | After five but within ten years | After ten years | |||||||||||||||||||||||||||||||||||
| Amount | Yield* | Amount | Yield* | Amount | Yield* | Amount | Yield* | Amount | Yield* | |||||||||||||||||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||||||||||||||
Municipal securities | $ | 565 | 6.5 | % | $ | 53 | 6.1 | % | $ | 200 | 6.5 | % | $ | 130 | 6.5 | % | $ | 182 | 6.7 | % | ||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 263 | 2.3 | – | 1 | 2.8 | 39 | 2.4 | 223 | 2.3 | |||||||||||||||||||||||||||||||
Other | 24 | 1.2 | – | 11 | 1.3 | 10 | 1.2 | 3 | 1.1 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
| 852 | 5.1 | 53 | 6.1 | 212 | 6.2 | 179 | 5.3 | 408 | 4.3 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury securities | 4 | 2.5 | 3 | 0.1 | 1 | 8.5 | – | – | ||||||||||||||||||||||||||||||||
U.S. Government agencies and corporations: | ||||||||||||||||||||||||||||||||||||||||
Agency securities | 153 | 4.9 | 20 | 4.8 | 56 | 4.9 | 53 | 4.6 | 24 | 5.4 | ||||||||||||||||||||||||||||||
Agency guaranteed mortgage-backed securities | 535 | 4.3 | 90 | 4.3 | 235 | 4.3 | 126 | 4.2 | 84 | 4.2 | ||||||||||||||||||||||||||||||
Small Business Administration loan-backed securities | 1,153 | 3.5 | 230 | 3.5 | 546 | 3.5 | 266 | 3.5 | 111 | 3.5 | ||||||||||||||||||||||||||||||
Municipal securities | 121 | 6.4 | 6 | 4.2 | 29 | 6.0 | 63 | 7.6 | 23 | 4.0 | ||||||||||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 1,794 | 1.1 | 63 | 1.6 | 191 | 1.3 | 257 | 1.2 | 1,283 | 1.0 | ||||||||||||||||||||||||||||||
Trust preferred securities – real estate investment trusts | 40 | 0.9 | – | – | 8 | 0.9 | 32 | 0.9 | ||||||||||||||||||||||||||||||||
Auction rate securities | 71 | 0.2 | – | – | 3 | 0.3 | 68 | 0.2 | ||||||||||||||||||||||||||||||||
Other | 65 | 1.5 | 30 | 1.4 | 17 | 1.9 | 5 | 1.4 | 13 | 1.4 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
| 3,936 | 2.5 | 442 | 3.3 | 1,075 | 3.4 | 781 | 3.2 | 1,638 | 1.4 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Mutual funds and other | 163 | 163 | – | – | – | |||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
| 4,099 | 2.4 | 605 | 2.4 | 1,075 | 3.4 | 781 | 3.2 | 1,638 | 1.4 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Total | $ | 4,951 | 2.9 | $ | 658 | 2.7 | $ | 1,287 | 3.9 | $ | 960 | 3.6 | $ | 2,046 | 2.0 | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
2012
| Total 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* | ||||||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||||||||||||||||
| Municipal securities | $ | 525 | 6.2 | % | $ | 67 | 5.8 | % | $ | 192 | 5.9 | % | $ | 126 | 6.2 | % | $ | 140 | 6.8 | % | ||||||||||||||
| Asset-backed securities: | ||||||||||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 255 | 2.1 | 1 | 2.4 | 2 | 2.3 | 45 | 2.1 | 207 | 2.1 | ||||||||||||||||||||||||
| Other | 22 | 1.1 | — | 7 | 1.2 | 11 | 1.2 | 4 | 1.0 | |||||||||||||||||||||||||
| 802 | 4.8 | 68 | 5.7 | 201 | 5.7 | 182 | 4.9 | 351 | 4.0 | |||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||||||||||
| U.S. Treasury securities | 104 | 0.2 | 103 | 0.1 | 1 | 8.3 | — | — | ||||||||||||||||||||||||||
| U.S. Government agencies and corporations: | ||||||||||||||||||||||||||||||||||
| Agency securities | 109 | 4.5 | 15 | 4.5 | 43 | 4.4 | 37 | 4.2 | 14 | 5.0 | ||||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 407 | 3.0 | 67 | 3.0 | 174 | 3.0 | 98 | 2.9 | 68 | 2.9 | ||||||||||||||||||||||||
| Small Business Administration loan-backed securities | 1,124 | 2.5 | 224 | 2.5 | 540 | 2.5 | 249 | 2.5 | 111 | 2.4 | ||||||||||||||||||||||||
| Municipal securities | 75 | 6.7 | 2 | 7.5 | 18 | 6.7 | 34 | 8.2 | 21 | 4.2 | ||||||||||||||||||||||||
| Asset-backed securities: | ||||||||||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 1,596 | 1.2 | 100 | 1.4 | 262 | 1.3 | 199 | 1.2 | 1,035 | 1.1 | ||||||||||||||||||||||||
| Trust preferred securities – real estate investment trusts | 41 | 0.8 | — | — | 6 | 0.8 | 35 | 0.8 | ||||||||||||||||||||||||||
| Auction rate securities | 7 | 1.0 | — | — | — | 7 | 1.0 | |||||||||||||||||||||||||||
| Other | 26 | 1.7 | 4 | 3.3 | 9 | 1.6 | 4 | 1.2 | 9 | 1.2 | ||||||||||||||||||||||||
| 3,489 | 2.0 | 515 | 1.9 | 1,047 | 2.4 | 627 | 2.5 | 1,300 | 1.4 | |||||||||||||||||||||||||
| Mutual funds and other | 228 | 1.3 | 228 | 1.3 | — | — | — | |||||||||||||||||||||||||||
| 3,717 | 1.9 | 743 | 1.7 | 1,047 | 2.4 | 627 | 2.5 | 1,300 | 1.4 | |||||||||||||||||||||||||
| Total | $ | 4,519 | 2.4 | $ | 811 | 2.1 | $ | 1,248 | 2.9 | $ | 809 | 3.1 | $ | 1,651 | 1.9 | |||||||||||||||||||
In addition to the amounts shown in Schedule 17
18, we invest in debt securities of certain U.S. Government agencies and corporations which, while considered to be of high credit quality, are not specifically rated by any NRSROs.
| December 31, | ||||||||
| (In millions) | 2011 | 2010 | ||||||
Municipal securities | $ | 554 | $ | 566 | ||||
Other nonrated debt securities | 53 | 46 | ||||||
|
|
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| |||||
| $ | 607 | $ | 612 | |||||
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| |||||
| December 31, | ||||||||
| (In millions) | 2012 | 2011 | ||||||
| Municipal securities | $ | 515 | $ | 554 | ||||
| Other nonrated debt securities | 63 | 53 | ||||||
| $ | 578 | $ | 607 | |||||
Under ASC 320, the full extent of the difference between amortized cost and fair value is recognized through earnings if fair value is below amortized cost and the investor either intends to sell the security or has found that it is more likely than not that the investor will be forced to sell prior to recovery of its amortized cost basis. ASC 320 distinguishes the difference between amortized cost and fair value that is due to credit, from the difference that is due to illiquidity and all other factors. For holders who neither intend to sell nor judge it more likely than not that they will be required to sell prior to recovery of amortized cost, which might be maturity, only the amount of impairment representing credit loss is recognized in earnings.
We utilize a present value technique to both identify the OTTI present in the CDO tranches and to estimate fair value. For purposes of determining the portion of the difference between fair value and amortized cost that is
due to credit, we follow ASC 310, which includes paragraphs 12-16 of the former SFAS No. 114. The standard specifies that a cash flow projection can be present valued at the security specific effective interest rate and the resulting present value compared to the amortized cost in order to quantify the credit component of impairment. Since our early adoption of the new guidance under ASC 320 on January 1, 2009, we have followed this methodology to identify the credit component of impairment to be recognized in earnings each quarter.
SOURCES
| December 31, | ||||||||
| (In millions) | 2012 | 2011 | ||||||
| Assumption changes on bank collateral: | ||||||||
Increased prepayment rate 1 | $ | 2.4 | $ | 11.0 | ||||
| PD overlay | 50.4 | |||||||
Combination of increased prepayment rate and PD overlay | 30.7 | |||||||
Increased medium-term PDs 2 | 4.6 | |||||||
Increased long-term PDs 2 | 2.5 | |||||||
| Prepayments in our CDO pools | 6.2 | |||||||
| Credit deterioration | 14.4 | 11.3 | ||||||
| Homebuilder bankruptcy | 4.3 | |||||||
| $ | 104.1 | $ | 33.7 | |||||
OTTI BREAKDOWNFor 2012, we increased prepayment rates for small banks for the first 3 years to 10%, then 3% thereafter; for 2011, we increased prepayment rates to 3% for each year.
| (In millions) | December 31, 2011 | |||
Assumption changes on bank collateral | ||||
Increased prepayment rate1 | $ | 11.0 | ||
Increased medium-term PDs2 | 4.6 | |||
Increased long-term PDs2 | 2.5 | |||
Credit deterioration | 11.3 | |||
Homebuilder bankruptcy | 4.3 | |||
|
| |||
| $ | 33.7 | |||
|
| |||
|
|
the municipalities.
municipalities:
20
| December 31, | ||||||||
| (In millions) | 2011 | 2010 | ||||||
Loans and leases | $ | 442 | $ | 439 | ||||
Held-to-maturity – municipal securities | 564 | 578 | ||||||
Available-for-sale – municipal securities | 122 | 158 | ||||||
Available-for-sale – auction rate securities | 70 | 109 | ||||||
Trading account – municipal securities | 9 | 12 | ||||||
Unused commitments to extend credit | 103 | 140 | ||||||
|
|
|
| |||||
Total direct exposure to municipalities | $ | 1,310 | $ | 1,436 | ||||
|
|
|
| |||||
| December 31, | |||||||
| (In millions) | 2012 | 2011 | |||||
| Loans and leases | $ | 494 | $ | 441 | |||
| Held-to-maturity – municipal securities | 525 | 565 | |||||
| Available-for-sale – municipal securities | 75 | 121 | |||||
| Available-for-sale – auction rate securities | 7 | 70 | |||||
| Trading account – municipal securities | 21 | 9 | |||||
| Unused commitments to extend credit | 33 | 103 | |||||
| Total direct exposure to municipalities | $ | 1,155 | $ | 1,309 | |||
equipment, and approximately 78%94% of the outstanding credits were originated by Zions Bank, Vectra,CB&T, Amegy, and CB&T.Vectra. See Note 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans.
79.
21
| December 31, 2011 | ||||||||||||||||||||||||||||||||
| One year or less | One year through five years | Over five years | Total | December 31, | ||||||||||||||||||||||||||||
| (In millions) | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||
Commercial: | ||||||||||||||||||||||||||||||||
Commercial and industrial | $ | 5,729 | $ | 3,556 | $ | 1,109 | $ | 10,394 | $ | 9,167 | $ | 9,631 | $ | 11,202 | $ | 10,182 | ||||||||||||||||
Leasing | 49 | 303 | 70 | 422 | 410 | 466 | 431 | 503 | ||||||||||||||||||||||||
Owner occupied | 454 | 1,473 | 6,239 | 8,166 | 8,218 | 8,752 | 8,743 | 7,545 | ||||||||||||||||||||||||
Municipal | 91 | 86 | 265 | 442 | 439 | 356 | 288 | 274 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total commercial | 6,323 | 5,418 | 7,683 | 19,424 | 18,234 | 19,205 | 20,664 | 18,504 | ||||||||||||||||||||||||
Commercial real estate: | ||||||||||||||||||||||||||||||||
Construction and land development | 1,081 | 973 | 222 | 2,276 | 3,499 | 5,552 | 7,516 | 7,869 | ||||||||||||||||||||||||
Term | 893 | 3,350 | 3,663 | 7,906 | 7,650 | 7,255 | 6,196 | 5,336 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total commercial real estate | 1,974 | 4,323 | 3,885 | 10,182 | 11,149 | 12,807 | 13,712 | 13,205 | ||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||
Home equity credit line | 20 | 157 | 2,008 | 2,185 | 2,142 | 2,135 | 2,005 | 1,608 | ||||||||||||||||||||||||
1-4 family residential | 35 | 179 | 3,701 | 3,915 | 3,499 | 3,642 | 3,877 | 3,975 | ||||||||||||||||||||||||
Construction and other consumer real estate | 96 | 39 | 172 | 307 | 343 | 459 | 774 | 945 | ||||||||||||||||||||||||
Bankcard and other revolving plans | 146 | 131 | 14 | 291 | 297 | 341 | 374 | 347 | ||||||||||||||||||||||||
Other | 35 | 156 | 32 | 223 | 233 | 293 | 385 | 460 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total consumer | 332 | 662 | 5,927 | 6,921 | 6,514 | 6,870 | 7,415 | 7,335 | ||||||||||||||||||||||||
FDIC-supported loans | 201 | 257 | 293 | 751 | 971 | 1,445 | – | – | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total loans | $ | 8,830 | $ | 10,660 | $ | 17,788 | $ | 37,278 | $ | 36,868 | $ | 40,327 | $ | 41,791 | $ | 39,044 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Loans maturing: | ||||||||||||||||||||||||||||||||
With fixed interest rates | $ | 1,363 | $ | 4,370 | $ | 3,377 | $ | 9,110 | ||||||||||||||||||||||||
With variable interest rates | 7,467 | 6,290 | 14,411 | 28,168 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 8,830 | $ | 10,660 | $ | 17,788 | $ | 37,278 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
| December 31, 2012 | December 31, | ||||||||||||||||||||||||||||||
| (Amounts in millions) | One year or less | One year through five years | Over five years | Total | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||||
| Commercial: | |||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 6,416 | $ | 3,687 | $ | 1,154 | $ | 11,257 | $ | 10,448 | $ | 9,198 | $ | 9,653 | $ | 11,210 | |||||||||||||||
| Leasing | 39 | 283 | 101 | 423 | 380 | 365 | 409 | 381 | |||||||||||||||||||||||
| Owner occupied | 385 | 1,307 | 5,897 | 7,589 | 8,159 | 8,212 | 8,745 | 8,737 | |||||||||||||||||||||||
| Municipal | 46 | 104 | 344 | 494 | 441 | 438 | 355 | 288 | |||||||||||||||||||||||
| Total commercial | 6,886 | 5,381 | 7,496 | 19,763 | 19,428 | 18,213 | 19,162 | 20,616 | |||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||
| Construction and land development | 735 | 1,007 | 197 | 1,939 | 2,265 | 3,558 | 5,535 | 7,490 | |||||||||||||||||||||||
| Term | 1,011 | 3,282 | 3,770 | 8,063 | 7,883 | 7,564 | 7,240 | 6,183 | |||||||||||||||||||||||
| Total commercial real estate | 1,746 | 4,289 | 3,967 | 10,002 | 10,148 | 11,122 | 12,775 | 13,673 | |||||||||||||||||||||||
| Consumer: | |||||||||||||||||||||||||||||||
| Home equity credit line | 26 | 122 | 2,030 | 2,178 | 2,187 | 2,145 | 2,138 | 2,009 | |||||||||||||||||||||||
| 1-4 family residential | 37 | 129 | 4,184 | 4,350 | 3,921 | 3,504 | 3,647 | 3,881 | |||||||||||||||||||||||
| Construction and other consumer real estate | 132 | 12 | 177 | 321 | 306 | 342 | 458 | 773 | |||||||||||||||||||||||
| Bankcard and other revolving plans | 144 | 139 | 24 | 307 | 291 | 297 | 341 | 374 | |||||||||||||||||||||||
| Other | 31 | 158 | 27 | 216 | 226 | 236 | 294 | 386 | |||||||||||||||||||||||
| Total consumer | 370 | 560 | 6,442 | 7,372 | 6,931 | 6,524 | 6,878 | 7,423 | |||||||||||||||||||||||
| FDIC-supported loans | 158 | 215 | 155 | 528 | 751 | 971 | 1,445 | — | |||||||||||||||||||||||
| Total net loans | $ | 9,160 | $ | 10,445 | $ | 18,060 | $ | 37,665 | $ | 37,258 | $ | 36,830 | $ | 40,260 | $ | 41,712 | |||||||||||||||
| Loans maturing: | |||||||||||||||||||||||||||||||
| With fixed interest rates | $ | 1,259 | $ | 4,016 | $ | 3,517 | $ | 8,792 | |||||||||||||||||||||||
| With variable interest rates | 7,901 | 6,429 | 14,543 | 28,873 | |||||||||||||||||||||||||||
| Total | $ | 9,160 | $ | 10,445 | $ | 18,060 | $ | 37,665 | |||||||||||||||||||||||
CB&T.
investments:
22
| December 31, | ||||||||
| (In millions) | 2011 | 2010 | ||||||
Bank-owned life insurance | $ | 443 | $ | 428 | ||||
Federal Home Loan Bank stock | 116 | 125 | ||||||
Federal Reserve stock | 132 | 128 | ||||||
SBIC investments | 39 | 38 | ||||||
Non-SBIC investment funds and other | 121 | 125 | ||||||
Trust preferred securities | 14 | 14 | ||||||
|
|
|
| |||||
| $ | 865 | $ | 858 | |||||
|
|
|
| |||||
| December 31, | |||||||
| (In millions) | 2012 | 2011 | |||||
| Bank-owned life insurance | $ | 456 | $ | 443 | |||
| Federal Home Loan Bank stock | 109 | 116 | |||||
| Federal Reserve stock | 123 | 132 | |||||
| SBIC investments | 46 | 39 | |||||
| Non-SBIC investment funds and other | 107 | 121 | |||||
| Trust preferred securities | 14 | 14 | |||||
| $ | 855 | $ | 865 | ||||
2011.
Demand, savings and money market deposits comprised 88.4%89.7% of total deposits at the end of 2011,December 31, 2012, compared with 85.8%88.4% at December 31, 2010.
2011.
2011.
off-balance sheet credit instruments.
Committee.
2012.
limits related to other types of lending including leveraged lending and lending to municipalities and to the energy sector. All of these limits are continually monitored and revised as necessary. These concentration limits, particularly with regard to various categories of CRE and real estate development are materially lower than they were in 2007 and 2008, just prior to the emergence of the recent economic downturn. The majority of the Company’s business activity is with customers located within the geographical footprint of its banking subsidiaries.
2011. Construction and land development loans have declined significantly from a pre-recession level of 20.1% of total loans at the end of 2007.
23
| December 31, 2011 | December 31, 2010 | |||||||||||||||
| (Amounts in millions) | Amount | % of total loans | Amount | % of total loans | ||||||||||||
Commercial: | ||||||||||||||||
Commercial and industrial | $ | 10,394 | 27.9 | % | $ | 9,167 | 24.9 | % | ||||||||
Leasing | 422 | 1.1 | 410 | 1.1 | ||||||||||||
Owner occupied | 8,166 | 21.9 | 8,218 | 22.3 | ||||||||||||
Municipal | 442 | 1.2 | 439 | 1.2 | ||||||||||||
|
|
|
| |||||||||||||
Total commercial | 19,424 | 18,234 | ||||||||||||||
Commercial real estate: | ||||||||||||||||
Construction and land development | 2,276 | 6.1 | 3,499 | 9.5 | ||||||||||||
Term | 7,906 | 21.2 | 7,650 | 20.8 | ||||||||||||
|
|
|
| |||||||||||||
Total commercial real estate | 10,182 | 11,149 | ||||||||||||||
Consumer: | ||||||||||||||||
Home equity credit line | 2,185 | 5.9 | 2,142 | 5.8 | ||||||||||||
1-4 family residential | 3,915 | 10.5 | 3,499 | 9.5 | ||||||||||||
Construction and other consumer real estate | 307 | 0.8 | 343 | 0.9 | ||||||||||||
Bankcard and other revolving plans | 291 | 0.8 | 297 | 0.8 | ||||||||||||
Other | 223 | 0.6 | 233 | 0.6 | ||||||||||||
|
|
|
| |||||||||||||
Total consumer | 6,921 | 6,514 | ||||||||||||||
FDIC-supported loans | 751 | 2.0 | 971 | 2.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loans | $ | 37,278 | 100.0 | % | $ | 36,868 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2012 | December 31, 2011 | ||||||||||||
| (Amounts in millions) | Amount | % of total loans | Amount | % of total loans | |||||||||
| Commercial: | |||||||||||||
| Commercial and industrial | $ | 11,257 | 29.9 | % | $ | 10,448 | 28.0 | % | |||||
| Leasing | 423 | 1.1 | 380 | 1.0 | |||||||||
| Owner occupied | 7,589 | 20.1 | 8,159 | 21.9 | |||||||||
| Municipal | 494 | 1.3 | 441 | 1.2 | |||||||||
| Total commercial | 19,763 | 19,428 | |||||||||||
| Commercial real estate: | |||||||||||||
| Construction and land development | 1,939 | 5.1 | 2,265 | 6.1 | |||||||||
| Term | 8,063 | 21.4 | 7,883 | 21.2 | |||||||||
| Total commercial real estate | 10,002 | 10,148 | |||||||||||
| Consumer: | |||||||||||||
| Home equity credit line | 2,178 | 5.8 | 2,187 | 5.9 | |||||||||
| 1-4 family residential | 4,350 | 11.6 | 3,921 | 10.5 | |||||||||
| Construction and other consumer real estate | 321 | 0.9 | 306 | 0.8 | |||||||||
| Bankcard and other revolving plans | 307 | 0.8 | 291 | 0.8 | |||||||||
| Other | 216 | 0.6 | 226 | 0.6 | |||||||||
| Total consumer | 7,372 | 6,931 | |||||||||||
| FDIC-supported loans | 528 | 1.4 | 751 | 2.0 | |||||||||
| Total net loans | $ | 37,665 | 100.0 | % | $ | 37,258 | 100.0 | % | |||||
| Inception through December 31, 2012 | |||||||||||
| (In millions) | Total actual net losses | Threshold | |||||||||
| Alliance Bank | $ | 171 | $ | 275 | |||||||
| Great Basin Bank | 11 | 40 | |||||||||
| Vineyard Bank | 210 | 465 | |||||||||
| $ | 392 | $ | 780 | ||||||||
2011, 2012, the principal balance of suchthese loans
loans:
25
| (Amounts in millions) | December 31, 2011 | Percent guaranteed | ||||||
Commercial | $ | 581 | 74 | % | ||||
Commercial real estate | 20 | 75 | ||||||
Consumer | 2 | 100 | ||||||
|
| |||||||
Total excluding FDIC-supported loans | $ | 603 | 74 | |||||
|
| |||||||
The credit quality of the Company’s loan portfolio continued to improve throughout 2011. Nonperforming lending related assets decreased by 41.9% from December 31, 2010. Gross charge-offs declined to $560 million compared to $1,074 million in 2010. Net charge-offs decreased to $456 million in 2011 from $983 million in 2010.
| (Amounts in millions) | December 31, 2012 | Percent guaranteed | December 31, 2011 | Percent guaranteed | |||||||||||||||
| Commercial | $ | 567 | 74% | $ | 581 | 74% | |||||||||||||
| Commercial real estate | 20 | 76 | 20 | 75 | |||||||||||||||
| Consumer | 3 | 100 | 2 | 100 | |||||||||||||||
| Total loans excluding FDIC-supported loans | $ | 590 | 75 | $ | 603 | 74 | |||||||||||||
portfolio:
26
| (Amounts in millions) | December 31, 2012 | December 31, 2011 | |||||||||||
| Amount | Percent | Amount | Percent | ||||||||||
| Real estate, rental and leasing | $ | 2,782 | 14.1 | % | $ | 2,755 | 14.2 | % | |||||
| Manufacturing | 1,999 | 10.1 | 2,069 | 10.6 | |||||||||
| Mining, quarrying and oil and gas extraction | 1,992 | 10.1 | 1,763 | 9.1 | |||||||||
| Retail trade | 1,661 | 8.4 | 1,646 | 8.5 | |||||||||
| Wholesale trade | 1,521 | 7.7 | 1,600 | 8.2 | |||||||||
| Healthcare and social assistance | 1,205 | 6.1 | 1,245 | 6.4 | |||||||||
| Finance and insurance | 1,093 | 5.5 | 865 | 4.5 | |||||||||
| Construction | 1,016 | 5.1 | 1,083 | 5.6 | |||||||||
| Transportation and warehousing | 1,001 | 5.1 | 949 | 4.9 | |||||||||
| Professional, scientific and technical services | 968 | 4.9 | 953 | 4.9 | |||||||||
| Accommodation and food services | 786 | 4.0 | 825 | 4.2 | |||||||||
Other 1 | 3,739 | 18.9 | 3,675 | 18.9 | |||||||||
| Total | $ | 19,763 | 100.0 | % | $ | 19,428 | 100.0 | % | |||||
| December 31, 2011 | December 31, 2010 | |||||||||||||||
| (Amounts in millions) | Amount | Percent | Amount | Percent | ||||||||||||
Real estate, rental and leasing | $ | 2,758 | 14.2 | % | $ | 2,488 | 13.6 | % | ||||||||
Manufacturing | 2,075 | 10.7 | 1,984 | 10.9 | ||||||||||||
Mining, quarrying and oil and gas extraction | 1,780 | 9.2 | 1,346 | 7.4 | ||||||||||||
Retail trade | 1,649 | 8.5 | 1,585 | 8.7 | ||||||||||||
Wholesale trade | 1,605 | 8.2 | 1,500 | 8.2 | ||||||||||||
Healthcare and social assistance | 1,245 | 6.4 | 1,264 | 6.9 | ||||||||||||
Construction | 1,084 | 5.6 | 1,110 | 6.1 | ||||||||||||
Professional, scientific and technical services | 954 | 4.9 | 966 | 5.3 | ||||||||||||
Transportation and warehousing | 953 | 4.9 | 866 | 4.8 | ||||||||||||
Finance and insurance | 867 | 4.5 | 963 | 5.3 | ||||||||||||
Accommodation and food services | 828 | 4.2 | 809 | 4.4 | ||||||||||||
Other1 | 3,626 | 18.7 | 3,353 | 18.4 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 19,424 | 100.0 | % | $ | 18,234 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
|
No other industry group exceeds 5%.
27
(REPRESENTS PERCENTAGES BASED UPON OUTSTANDING COMMERCIAL REAL ESTATE LOANS)
AT DECEMBER
| (Amounts in millions) | Collateral Location | % of total CRE | % of loan type | ||||||||||||||||||||||||||||||||||
| Loan type | Balance 1 | Arizona | Northern California | Southern California | Nevada | Colorado | Texas | Utah/ Idaho | Wash-ington | Other | |||||||||||||||||||||||||||
| Commercial term | |||||||||||||||||||||||||||||||||||||
| Industrial | 1.65 | % | 0.89 | % | 3.27 | % | 0.70 | % | 0.83 | % | 0.96 | % | 0.86 | % | 0.35 | % | 0.88 | % | 10.39 | % | 12.76 | % | |||||||||||||||
| Office | 2.08 | 1.66 | 4.13 | 0.82 | 0.92 | 1.41 | 2.74 | 0.36 | 0.95 | 15.07 | 18.52 | ||||||||||||||||||||||||||
| Retail | 2.31 | 1.28 | 3.80 | 1.73 | 0.96 | 3.21 | 1.39 | 0.36 | 1.74 | 16.78 | 20.60 | ||||||||||||||||||||||||||
| Hotel/motel | 2.20 | 0.95 | 1.49 | 0.79 | 0.91 | 1.21 | 1.42 | 0.20 | 2.74 | 11.91 | 14.62 | ||||||||||||||||||||||||||
| Acquisition/development | 0.05 | 0.06 | 0.52 | 0.06 | 0.01 | — | — | — | — | 0.70 | 0.86 | ||||||||||||||||||||||||||
| Medical | 0.60 | 0.08 | 0.76 | 0.77 | 0.03 | 0.43 | 0.30 | 0.09 | 0.09 | 3.15 | 3.87 | ||||||||||||||||||||||||||
| Recreation/restaurant | 0.41 | 0.09 | 0.72 | 0.19 | 0.09 | 0.33 | 0.20 | 0.09 | 0.63 | 2.75 | 3.37 | ||||||||||||||||||||||||||
| Multifamily | 1.79 | 0.51 | 5.51 | 0.27 | 0.78 | 1.41 | 1.74 | 0.46 | 0.92 | 13.39 | 16.45 | ||||||||||||||||||||||||||
| Other | 0.81 | 0.66 | 1.81 | 0.78 | 0.79 | 0.33 | 1.28 | 0.16 | 0.67 | 7.29 | 8.95 | ||||||||||||||||||||||||||
| Total | $ | 7,909 | 11.90 | 6.18 | 22.01 | 6.11 | 5.32 | 9.29 | 9.93 | 2.07 | 8.62 | 81.43 | 100.00 | ||||||||||||||||||||||||
| Residential construction and land development | |||||||||||||||||||||||||||||||||||||
| Single family housing | 0.18 | 0.30 | 0.66 | — | 0.25 | 0.99 | 0.03 | 0.03 | — | 2.44 | 35.29 | ||||||||||||||||||||||||||
| Acquisition/development | 0.63 | 0.06 | 0.21 | — | 0.06 | 1.07 | 0.61 | — | 0.12 | 2.76 | 40.04 | ||||||||||||||||||||||||||
| Loan lot investor | 0.18 | 0.06 | 0.40 | 0.01 | 0.05 | 0.13 | 0.41 | 0.01 | 0.12 | 1.37 | 19.77 | ||||||||||||||||||||||||||
| Condo | — | — | 0.16 | — | — | 0.04 | 0.05 | — | 0.09 | 0.34 | 4.90 | ||||||||||||||||||||||||||
| Total | 671 | 0.99 | 0.42 | 1.43 | 0.01 | 0.36 | 2.23 | 1.10 | 0.04 | 0.33 | 6.91 | 100.00 | |||||||||||||||||||||||||
| Commercial construction and land development | |||||||||||||||||||||||||||||||||||||
| Industrial | 0.02 | — | 0.06 | — | — | 0.22 | — | 0.02 | 0.03 | 0.35 | 2.96 | ||||||||||||||||||||||||||
| Office | 0.01 | 0.14 | 0.44 | 0.05 | — | 0.62 | 0.17 | — | 0.03 | 1.46 | 12.52 | ||||||||||||||||||||||||||
| Retail | 0.11 | 0.04 | 0.18 | 0.03 | 0.10 | 0.34 | 0.42 | — | 0.03 | 1.25 | 10.71 | ||||||||||||||||||||||||||
| Hotel/motel | 0.06 | — | 0.05 | — | 0.05 | 0.15 | 0.06 | — | 0.02 | 0.39 | 3.37 | ||||||||||||||||||||||||||
| Acquisition/development | 0.33 | 0.23 | 0.29 | 0.34 | 0.47 | 0.96 | 0.81 | 0.07 | 0.05 | 3.55 | 30.53 | ||||||||||||||||||||||||||
| Medical | 0.04 | — | — | — | — | 0.05 | 0.17 | — | — | 0.26 | 2.26 | ||||||||||||||||||||||||||
| Multifamily | 0.25 | 0.06 | 0.94 | 0.06 | 0.17 | 1.32 | 0.67 | 0.03 | 0.05 | 3.55 | 30.36 | ||||||||||||||||||||||||||
| Other | 0.06 | — | 0.03 | 0.17 | 0.06 | 0.27 | 0.26 | — | — | 0.85 | 7.29 | ||||||||||||||||||||||||||
| Total | 1,133 | 0.88 | 0.47 | 1.99 | 0.65 | 0.85 | 3.93 | 2.56 | 0.12 | 0.21 | 11.66 | 100.00 | |||||||||||||||||||||||||
| Total construction and land development | 1,804 | 1.87 | 0.89 | 3.42 | 0.66 | 1.21 | 6.16 | 3.66 | 0.16 | 0.54 | 18.57 | ||||||||||||||||||||||||||
| Total commercial real estate | $ | 9,713 | 13.77 | 7.07 | 25.43 | 6.77 | 6.53 | 15.45 | 13.59 | 2.23 | 9.16 | 100.00 | |||||||||||||||||||||||||
| (Amounts in millions) | Collateral Location | Product as a % of total CRE | Product as a % of loan type | |||||||||||||||||||||||||||||||||||||||||||||
Loan Type | Balance1 | Arizona | Northern California | Southern California | Nevada | Colorado | Texas | Utah / Idaho | Wash- ington | Other | ||||||||||||||||||||||||||||||||||||||
Commercial term | ||||||||||||||||||||||||||||||||||||||||||||||||
Industrial | 0.63 | % | 0.35 | % | 1.47 | % | 0.23 | % | 0.29 | % | 0.47 | % | 0.29 | % | 0.14 | % | 0.37 | % | 4.24 | % | 5.39 | % | ||||||||||||||||||||||||||
Office | 2.64 | 1.12 | 5.14 | 1.44 | 1.75 | 2.00 | 2.62 | 0.53 | 1.34 | 18.58 | 23.71 | |||||||||||||||||||||||||||||||||||||
Retail | 1.95 | 0.93 | 3.86 | 1.90 | 1.32 | 3.52 | 1.28 | 0.46 | 1.57 | 16.79 | 21.41 | |||||||||||||||||||||||||||||||||||||
Hotel/motel | 2.00 | 0.89 | 1.76 | 0.83 | 0.72 | 1.44 | 1.56 | 0.26 | 3.34 | 12.80 | 16.34 | |||||||||||||||||||||||||||||||||||||
Acquisition and development | – | – | – | – | 0.01 | – | – | – | – | 0.01 | 0.01 | |||||||||||||||||||||||||||||||||||||
Medical | 0.76 | 0.06 | 0.39 | 0.76 | 0.03 | 0.31 | 0.13 | 0.09 | 0.06 | 2.59 | 3.30 | |||||||||||||||||||||||||||||||||||||
Recreation/restaurant | 0.58 | 0.06 | 0.63 | 0.25 | 0.09 | 0.31 | 0.25 | 0.02 | 0.50 | 2.69 | 3.41 | |||||||||||||||||||||||||||||||||||||
Multifamily | 0.53 | 0.45 | 5.79 | 1.17 | 0.71 | 2.30 | 0.79 | 0.42 | 1.18 | 13.34 | 17.03 | |||||||||||||||||||||||||||||||||||||
Other | 0.82 | 0.48 | 2.19 | 0.48 | 0.24 | 0.58 | 1.59 | 0.26 | 0.71 | 7.35 | 9.40 | |||||||||||||||||||||||||||||||||||||
Total | $ | 7,767 | 9.91 | 4.34 | 21.23 | 7.06 | 5.16 | 10.93 | 8.51 | 2.18 | 9.07 | 78.39 | 100.00 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Residential construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||
Single family housing | 0.14 | 0.16 | 0.44 | 0.01 | 0.14 | 0.66 | 0.04 | 0.04 | – | 1.63 | 21.78 | |||||||||||||||||||||||||||||||||||||
Acquisition and development | 0.57 | 0.02 | 0.39 | 0.05 | 0.11 | 1.62 | 0.61 | – | 0.19 | 3.56 | 47.57 | |||||||||||||||||||||||||||||||||||||
Loan lot investor | 0.26 | 0.07 | 0.11 | 0.37 | 0.04 | 0.15 | 0.75 | 0.01 | 0.03 | 1.79 | 23.93 | |||||||||||||||||||||||||||||||||||||
Condo | – | – | 0.11 | – | 0.06 | 0.24 | 0.04 | – | 0.04 | 0.49 | 6.72 | |||||||||||||||||||||||||||||||||||||
Total | 740 | 0.97 | 0.25 | 1.05 | 0.43 | 0.35 | 2.67 | 1.44 | 0.05 | 0.26 | 7.47 | 100.00 | ||||||||||||||||||||||||||||||||||||
Commercial construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||
Industrial | 0.06 | – | 0.06 | – | – | 0.03 | 0.02 | 0.02 | – | 0.19 | 1.37 | |||||||||||||||||||||||||||||||||||||
Office | 0.21 | – | 0.27 | 0.06 | 0.41 | 0.74 | 0.94 | – | – | 2.63 | 18.59 | |||||||||||||||||||||||||||||||||||||
Retail | 0.70 | 0.04 | 0.13 | 0.13 | 0.34 | 0.95 | 0.14 | 0.04 | 0.05 | 2.52 | 17.78 | |||||||||||||||||||||||||||||||||||||
Hotel/motel | – | – | – | – | 0.18 | 0.01 | – | – | 0.01 | 0.20 | 1.42 | |||||||||||||||||||||||||||||||||||||
Acquisition and development | 0.53 | 0.28 | 0.41 | 0.53 | 0.56 | 1.61 | 0.98 | 0.03 | 0.07 | 5.00 | 35.34 | |||||||||||||||||||||||||||||||||||||
Medical | 0.05 | – | – | – | – | 0.03 | 0.15 | – | – | 0.23 | 1.68 | |||||||||||||||||||||||||||||||||||||
Multifamily | 0.01 | 0.05 | 0.53 | – | 0.12 | 0.70 | 0.73 | 0.16 | 0.27 | 2.57 | 18.15 | |||||||||||||||||||||||||||||||||||||
Other | 0.02 | 0.02 | 0.08 | 0.18 | 0.06 | 0.31 | 0.13 | – | – | 0.80 | 5.67 | |||||||||||||||||||||||||||||||||||||
Total | 1,402 | 1.58 | 0.39 | 1.48 | 0.90 | 1.67 | 4.38 | 3.09 | 0.25 | 0.40 | 14.14 | 100.00 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total construction and land development | 2,142 | 2.55 | 0.64 | 2.53 | 1.33 | 2.02 | 7.05 | 4.53 | 0.30 | 0.66 | 21.61 | 100.00 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total commercial real estate | $ | 9,909 | 12.46 | 4.98 | 23.76 | 8.39 | 7.18 | 17.98 | 13.04 | 2.48 | 9.73 | 100.00 | ||||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||
|
Excludes approximately $289 million of unsecured loans outstanding, but related to the real estate industry.
28.
28
AT DECEMBER
| (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 | |||||||||||||||||||||||||||||||||
| Commercial term | |||||||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2012 | $ | 1,180 | $ | 604 | $ | 2,155 | $ | 605 | $ | 518 | $ | 934 | $ | 1,013 | $ | 205 | $ | 849 | $ | 8,063 | 80.6 | % | ||||||||||||||||||||||
| % of loan type | 14.7 | % | 7.5 | % | 26.7 | % | 7.5 | % | 6.4 | % | 11.6 | % | 12.6 | % | 2.5 | % | 10.5 | % | 100.0 | % | |||||||||||||||||||||||||
Delinquency rates 2: | |||||||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2012 | 0.2 | % | 0.1 | % | 0.1 | % | 0.2 | % | — | 0.1 | % | 0.2 | % | 1.3 | % | 1.6 | % | 0.3 | % | |||||||||||||||||||||||||
| 12/31/2011 | 0.6 | % | 0.4 | % | 1.2 | % | 0.5 | % | 0.5 | % | 1.6 | % | 0.5 | % | — | 1.1 | % | 0.9 | % | ||||||||||||||||||||||||||
| ≥ 90 days | 12/31/2012 | 0.3 | % | 1.3 | % | 0.5 | % | 0.8 | % | 0.7 | % | 0.5 | % | 0.1 | % | — | 2.1 | % | 0.7 | % | |||||||||||||||||||||||||
| 12/31/2011 | 0.9 | % | 0.3 | % | 0.3 | % | 0.4 | % | — | 1.7 | % | 0.6 | % | — | 2.1 | % | 0.8 | % | |||||||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2012 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
| 12/31/2011 | — | — | — | — | — | 3 | — | — | 1 | 4 | |||||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2012 | 10 | 9 | 19 | 14 | 11 | 8 | 4 | 3 | 47 | 125 | ||||||||||||||||||||||||||||||||||
| 12/31/2011 | 14 | 3 | 27 | 37 | 14 | 23 | 9 | — | 29 | 156 | |||||||||||||||||||||||||||||||||||
| Residential construction and land development | |||||||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2012 | $ | 96 | $ | 42 | $ | 156 | $ | 1 | $ | 35 | $ | 234 | $ | 111 | $ | 4 | $ | 35 | $ | 714 | 7.1 | % | ||||||||||||||||||||||
| % of loan type | 13.4 | % | 5.9 | % | 21.8 | % | 0.1 | % | 5.0 | % | 32.8 | % | 15.5 | % | 0.6 | % | 4.9 | % | 100.0 | % | |||||||||||||||||||||||||
Delinquency rates 2: | |||||||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2012 | 0.6 | % | 1.0 | % | 0.4 | % | 10.7 | % | 4.9 | % | 7.9 | % | 0.2 | % | — | — | 3.1 | % | ||||||||||||||||||||||||||
| 12/31/2011 | 0.6 | % | 14.1 | % | — | 0.8 | % | 13.8 | % | 0.4 | % | 0.2 | % | — | — | 1.3 | % | ||||||||||||||||||||||||||||
| ≥ 90 days | 12/31/2012 | 0.7 | % | — | 0.2 | % | — | 0.5 | % | 6.7 | % | — | — | — | 2.4 | % | |||||||||||||||||||||||||||||
| 12/31/2011 | 2.7 | % | — | 3.9 | % | 6.8 | % | 5.3 | % | 11.6 | % | 4.5 | % | 24.1 | % | — | 6.7 | % | |||||||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2012 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | — | $ | — | $ | 1 | ||||||||||||||||||||||||
| 12/31/2011 | 1 | — | — | — | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2012 | 6 | — | — | — | — | 29 | 4 | — | — | 39 | ||||||||||||||||||||||||||||||||||
| 12/31/2011 | 13 | — | 6 | 5 | 2 | 50 | 15 | — | — | 91 | |||||||||||||||||||||||||||||||||||
| Commercial construction and land development | |||||||||||||||||||||||||||||||||||||||||||||
| Balance outstanding | 12/31/2012 | $ | 86 | $ | 49 | $ | 194 | $ | 68 | $ | 85 | $ | 452 | $ | 254 | $ | 12 | $ | 25 | $ | 1,225 | 12.3 | % | ||||||||||||||||||||||
| % of loan type | 7.0 | % | 4.0 | % | 15.8 | % | 5.6 | % | 6.9 | % | 36.9 | % | 20.7 | % | 1.0 | % | 2.1 | % | 100.0 | % | |||||||||||||||||||||||||
Delinquency rates 2: | |||||||||||||||||||||||||||||||||||||||||||||
| 30-89 days | 12/31/2012 | 2.4 | % | — | — | 27.9 | % | 0.4 | % | 2.0 | % | 2.3 | % | — | 7.3 | % | 3.1 | % | |||||||||||||||||||||||||||
| 12/31/2011 | 1.6 | % | — | — | — | 4.4 | % | 1.7 | % | — | — | — | 1.2 | % | |||||||||||||||||||||||||||||||
| ≥ 90 days | 12/31/2012 | — | 2.6 | % | 0.1 | % | 0.2 | % | — | 4.0 | % | — | — | — | 1.6 | % | |||||||||||||||||||||||||||||
| 12/31/2011 | 2.1 | % | — | 1.1 | % | 5.6 | % | 5.5 | % | 6.0 | % | 1.7 | % | — | — | 3.6 | % | ||||||||||||||||||||||||||||
| Accruing loans past due 90 days or more | 12/31/2012 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||
| 12/31/2011 | — | — | 2 | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||||
| Nonaccrual loans | 12/31/2012 | — | 1 | — | 22 | — | 29 | 14 | 3 | — | 69 | ||||||||||||||||||||||||||||||||||
| 12/31/2011 | 6 | — | — | 12 | 9 | 82 | 20 | — | — | 129 | |||||||||||||||||||||||||||||||||||
| Total construction and land development | 12/31/2012 | $ | 182 | $ | 91 | $ | 350 | $ | 69 | $ | 120 | $ | 686 | $ | 365 | $ | 16 | $ | 60 | $ | 1,939 | ||||||||||||||||||||||||
| Total commercial real estate | 12/31/2012 | $ | 1,362 | $ | 695 | $ | 2,505 | $ | 674 | $ | 638 | $ | 1,620 | $ | 1,378 | $ | 221 | $ | 909 | $ | 10,002 | 100.0 | % | ||||||||||||||||||||||
| (Amounts in millions) | Collateral Location | Total | % of total CRE | |||||||||||||||||||||||||||||||||||||||||||||
Loan Type | As of Date | Arizona | Northern California | Southern California | Nevada | Colorado | Texas | Utah / Idaho | Wash- ington | Other 1 | ||||||||||||||||||||||||||||||||||||||
Commercial term | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance outstanding | 12/31/11 | $ | 982.9 | $ | 430.0 | $ | 2,111.3 | $ | 706.1 | $ | 553.2 | $ | 1,096.4 | $ | 877.6 | $ | 254.5 | $ | 894.2 | $ | 7,906.2 | 77.7 | % | |||||||||||||||||||||||||
% of loan type | 12.4 | % | 5.5 | % | 26.7 | % | 8.9 | % | 7.0 | % | 13.9 | % | 11.1 | % | 3.2 | % | 11.3 | % | 100.0 | % | ||||||||||||||||||||||||||||
Delinquency rates2: | ||||||||||||||||||||||||||||||||||||||||||||||||
30-89 days | 12/31/11 | 0.6 | % | 0.4 | % | 1.2 | % | 0.5 | % | 0.5 | % | 1.6 | % | 0.5 | % | – | 1.1 | % | 0.9 | % | ||||||||||||||||||||||||||||
| 12/31/10 | 1.6 | % | 1.5 | % | 1.7 | % | 3.7 | % | 8.2 | % | 2.7 | % | 2.1 | % | 0.3 | % | 7.3 | % | 3.1 | % | ||||||||||||||||||||||||||||
³ 90 days | 12/31/11 | 0.9 | % | 0.3 | % | 0.3 | % | 0.4 | % | – | 1.7 | % | 0.6 | % | – | 2.1 | % | 0.8 | % | |||||||||||||||||||||||||||||
| 12/31/10 | 1.1 | % | 1.5 | % | 0.9 | % | 2.8 | % | 1.4 | % | 1.6 | % | 1.8 | % | – | 3.9 | % | 1.7 | % | |||||||||||||||||||||||||||||
Accruing loans past due | 12/31/11 | $ | 0.4 | $ | – | $ | – | $ | – | $ | – | $ | 3.2 | $ | – | $ | – | $ | 0.6 | $ | 4.2 | |||||||||||||||||||||||||||
| 12/31/10 | – | – | 0.2 | – | – | 4.3 | – | – | 0.3 | 4.8 | ||||||||||||||||||||||||||||||||||||||
Nonaccrual loans | 12/31/11 | 13.7 | 3.4 | 26.6 | 37.3 | 13.9 | 23.3 | 9.1 | – | 28.9 | 156.2 | |||||||||||||||||||||||||||||||||||||
| 12/31/10 | 23.4 | 6.2 | 36.3 | 70.5 | 19.4 | 32.8 | 20.1 | 1.7 | 53.9 | 264.3 | ||||||||||||||||||||||||||||||||||||||
Residential construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance outstanding | 12/31/11 | $ | 100.5 | $ | 24.5 | $ | 127.2 | $ | 43.0 | $ | 35.5 | $ | 296.1 | $ | 154.2 | $ | 0.7 | $ | 26.2 | $ | 807.9 | 7.9 | % | |||||||||||||||||||||||||
% of loan type | 12.4 | % | 3.0 | % | 15.8 | % | 5.3 | % | 4.4 | % | 36.7 | % | 19.1 | % | 0.1 | % | 3.2 | % | 100.0 | % | ||||||||||||||||||||||||||||
Delinquency rates2: | ||||||||||||||||||||||||||||||||||||||||||||||||
30-89 days | 12/31/11 | 0.6 | % | 14.1 | % | – | 0.8 | % | 13.8 | % | 0.4 | % | 0.2 | % | – | – | 1.3 | % | ||||||||||||||||||||||||||||||
| 12/31/10 | 9.8 | % | 6.0 | % | 5.3 | % | 55.6 | % | 1.4 | % | 19.9 | % | 13.6 | % | – | 9.6 | % | 14.3 | % | |||||||||||||||||||||||||||||
³ 90 days | 12/31/11 | 2.7 | % | – | 3.9 | % | 6.8 | % | 5.3 | % | 11.6 | % | 4.5 | % | 24.1 | % | – | 6.7 | % | |||||||||||||||||||||||||||||
| 12/31/10 | 8.6 | % | 6.0 | % | 3.4 | % | 55.6 | % | 0.4 | % | 19.2 | % | 10.0 | % | – | 5.0 | % | 12.6 | % | |||||||||||||||||||||||||||||
Accruing loans past due | 12/31/11 | $ | 0.5 | $ | – | $ | 0.2 | $ | – | $ | – | $ | 0.1 | $ | – | $ | – | $ | – | $ | 0.8 | |||||||||||||||||||||||||||
| 12/31/10 | 0.8 | – | – | – | – | 0.1 | 0.6 | – | 0.1 | 1.6 | ||||||||||||||||||||||||||||||||||||||
Nonaccrual loans | 12/31/11 | 13.0 | – | 6.4 | 5.0 | 1.9 | 49.6 | 15.0 | 0.2 | – | 91.1 | |||||||||||||||||||||||||||||||||||||
| 12/31/10 | 29.9 | 1.8 | 8.1 | 30.3 | 41.4 | 80.9 | 39.1 | – | 8.3 | 239.8 | ||||||||||||||||||||||||||||||||||||||
Commercial construction and land development | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance outstanding | 12/31/10 | $ | 174.9 | $ | 38.6 | $ | 151.8 | $ | 87.7 | $ | 167.0 | $ | 462.4 | $ | 311.1 | $ | 34.7 | $ | 40.0 | $ | 1,468.2 | 14.4 | % | |||||||||||||||||||||||||
% of loan type | 11.9 | % | 2.6 | % | 10.3 | % | 6.0 | % | 11.4 | % | 31.5 | % | 21.2 | % | 2.4 | % | 2.7 | % | 100.0 | % | ||||||||||||||||||||||||||||
Delinquency rates2: | ||||||||||||||||||||||||||||||||||||||||||||||||
30-89 days | 12/31/11 | 1.6 | % | – | – | – | 4.4 | % | 1.7 | % | – | – | – | 1.2 | % | |||||||||||||||||||||||||||||||||
| 12/31/10 | 5.0 | % | – | 0.5 | % | 23.7 | % | 8.1 | % | 5.7 | % | 6.4 | % | 2.7 | % | 12.4 | % | 7.1 | % | |||||||||||||||||||||||||||||
³ 90 days | 12/31/11 | 2.1 | % | – | 1.1 | % | 5.6 | % | 5.5 | % | 6.0 | % | 1.7 | % | – | – | 3.5 | % | ||||||||||||||||||||||||||||||
| 12/31/10 | 4.2 | % | – | 0.5 | % | 16.4 | % | 8.1 | % | 4.3 | % | 4.2 | % | – | 12.4 | % | 5.5 | % | ||||||||||||||||||||||||||||||
Accruing loans past due | 12/31/11 | $ | – | $ | – | $ | 1.6 | $ | – | $ | – | $ | 0.1 | $ | – | $ | – | $ | – | $ | 1.7 | |||||||||||||||||||||||||||
| 12/31/10 | – | – | – | – | – | – | 0.2 | – | 0.1 | 0.3 | ||||||||||||||||||||||||||||||||||||||
Nonaccrual loans | 12/31/11 | 5.9 | – | – | 12.1 | 9.1 | 81.4 | 20.2 | – | – | 128.7 | |||||||||||||||||||||||||||||||||||||
| 12/31/10 | 18.9 | – | 2.2 | 73.9 | 19.8 | 91.5 | 35.7 | – | 11.6 | 253.6 | ||||||||||||||||||||||||||||||||||||||
Total construction and land | 12/31/11 | $ | 275.4 | $ | 63.1 | $ | 279.0 | $ | 130.7 | $ | 202.5 | $ | 758.5 | $ | 465.3 | $ | 35.4 | $ | 66.2 | $ | 2,276.1 | |||||||||||||||||||||||||||
Total commercial real estate | 12/31/11 | $ | 1,258.3 | $ | 493.1 | $ | 2,390.3 | $ | 836.8 | $ | 755.7 | $ | 1,854.9 | $ | 1,342.9 | $ | 289.9 | $ | 960.4 | $ | 10,182.3 | 100.0 | % | |||||||||||||||||||||||||
|
|
No other geography exceeds $104 million for all three loan types.
annually.
frozen, as appropriate.
Commercial real estate
pursuit of remedies.
underwriting and collateral documentation standards. It has also been the Company’s practice historically to hold variable rate loans in its portfolio. The Company estimates that it does not estimate that it hashave any material financial risk as a result of either its foreclosure practices or loan “put-backs” by Fannie Mae or Freddie Mac, and has not established any reserves related to these items.
NBA.
29:
29
| Year of origination | ||||||||||||||||||||||||||||
| (In millions) | 2006 and prior | 2007 | 2008 | 2009 | 2010 | 2011 | Total | |||||||||||||||||||||
Outstanding balance | $ | 492 | $ | 228 | $ | 184 | $ | 83 | $ | 84 | $ | 109 | $ | 1,180 | ||||||||||||||
Total commitments | 918 | 299 | 262 | 149 | 147 | 206 | 1,981 | |||||||||||||||||||||
| (In millions) | December 31, 2012 | December 31, 2011 | ||||||||||||||||||||||
Year of origination | Outstanding balance | Total commitments | Outstanding balance | Total commitments | ||||||||||||||||||||
| 2012 | $ | 117 | $ | 234 | ||||||||||||||||||||
| 2011 | 97 | 182 | $ | 109 | $ | 206 | ||||||||||||||||||
| 2010 | 68 | 122 | 84 | 147 | ||||||||||||||||||||
| 2009 | 65 | 125 | 83 | 149 | ||||||||||||||||||||
| 2008 | 158 | 250 | 184 | 262 | ||||||||||||||||||||
| 2007 | 189 | 295 | 228 | 299 | ||||||||||||||||||||
| 2006 and prior | 419 | 910 | 492 | 918 | ||||||||||||||||||||
| Total | $ | 1,113 | $ | 2,118 | $ | 1,180 | $ | 1,981 | ||||||||||||||||
30:
30
| ||||
| ||||
| ||||
| ||||
| ||||
| Percentage of HECL portfolio | ||||||
| December 31, | ||||||
| CLTV | 2012 | 2011 | ||||
| >100% | 14 | % | 17 | % | ||
| 90-100% | 9 | 11 | ||||
| 80-89% | 13 | 15 | ||||
| < 80% | 64 | 57 | ||||
| 100 | % | 100 | % | |||
and are used to monitor and manage accounts, including amounts available under the lines of credit. The allowance for loan losses is determined through the use of roll rate models, and first lien HECLs are modeled separateseparately from junior lien HECLs. Refer toSee Note 6 of the Notes to Consolidated Financial Statements for additional information on the allowance.
Total nonperforming lending related assets were $1,063 million at December 31, 2011, compared to $1,828 million at December 31, 2010 and $2,769 million at December 31, 2009.
The Company’s nonperforming
2011.
Vectra.
assets:
31
| (Amounts in millions) | December 31, | |||||||||||||||||||
| 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||
| Nonaccrual loans: | ||||||||||||||||||||
| Loans held for sale | $ | — | $ | 18 | $ | — | $ | — | $ | 30 | ||||||||||
| Commercial: | ||||||||||||||||||||
| Commercial and industrial | 91 | 127 | 224 | 319 | 148 | |||||||||||||||
| Leasing | 1 | 2 | 1 | 11 | 8 | |||||||||||||||
| Owner occupied | 206 | 239 | 342 | 474 | 158 | |||||||||||||||
| Municipal | 9 | — | 2 | — | — | |||||||||||||||
| Commercial real estate: | ||||||||||||||||||||
| Construction and land development | 108 | 220 | 494 | 825 | 457 | |||||||||||||||
| Term | 125 | 156 | 264 | 228 | 44 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Real estate | 89 | 121 | 163 | 162 | 97 | |||||||||||||||
| Other | 2 | 3 | 3 | 4 | 4 | |||||||||||||||
| Nonaccrual loans, excluding FDIC-supported loans | 631 | 886 | 1,493 | 2,023 | 946 | |||||||||||||||
| Other real estate owned: | ||||||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Commercial properties | 45 | 58 | 99 | 85 | 36 | |||||||||||||||
| Developed land | 10 | 4 | 6 | 14 | 7 | |||||||||||||||
| Land | 8 | 17 | 33 | 35 | 2 | |||||||||||||||
| Residential: | ||||||||||||||||||||
| 1-4 family | 8 | 19 | 53 | 50 | 40 | |||||||||||||||
| Developed land | 14 | 21 | 50 | 119 | 71 | |||||||||||||||
| Land | 5 | 10 | 18 | 33 | 36 | |||||||||||||||
| Other real estate owned, excluding FDIC-supported assets | 90 | 129 | 259 | 336 | 192 | |||||||||||||||
| Total nonperforming lending-related assets, excluding FDIC-supported assets | 721 | 1,015 | 1,752 | 2,359 | 1,138 | |||||||||||||||
| FDIC-supported nonaccrual loans | 17 | 25 | 36 | 356 | — | |||||||||||||||
| FDIC-supported other real estate owned | 8 | 24 | 40 | 54 | — | |||||||||||||||
| FDIC supported nonperforming lending-related assets | 25 | 49 | 76 | 410 | — | |||||||||||||||
| Total nonperforming lending-related assets | $ | 746 | $ | 1,064 | $ | 1,828 | $ | 2,769 | $ | 1,138 | ||||||||||
Ratio of nonperforming lending-related assets to loans and leases1 and other real estate owned | 1.96 | % | 2.83 | % | 4.90 | % | 6.78 | % | 2.70 | % | ||||||||||
| Accruing loans past due 90 days or more: | ||||||||||||||||||||
| Commercial | $ | 6 | $ | 8 | $ | 11 | $ | 53 | $ | 50 | ||||||||||
| Commercial real estate | 1 | 7 | 7 | 33 | 48 | |||||||||||||||
| Consumer | 3 | 4 | 5 | 21 | 32 | |||||||||||||||
| Total excluding FDIC-supported loans | 10 | 19 | 23 | 107 | 130 | |||||||||||||||
| FDIC-supported nonaccrual loans | 52 | 75 | 119 | 56 | — | |||||||||||||||
| Total | $ | 62 | $ | 94 | $ | 142 | $ | 163 | $ | 130 | ||||||||||
Ratio of accruing loans past due 90 days or more to loans and leases1 | 0.16 | % | 0.25 | % | 0.38 | % | 0.40 | % | 0.31 | % | ||||||||||
| December 31, | ||||||||||||||||||||
| (Amounts in millions) | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Nonaccrual loans: | ||||||||||||||||||||
Loans held for sale | $ | 18 | $ | – | $ | – | $ | 30 | $ | – | ||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial | 127 | 224 | 319 | 148 | 58 | |||||||||||||||
Leasing | 2 | 1 | 11 | 8 | – | |||||||||||||||
Owner occupied | 239 | 342 | 474 | 158 | 21 | |||||||||||||||
Municipal | – | 2 | – | – | – | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction and land development | 220 | 494 | 825 | 457 | 161 | |||||||||||||||
Term | 156 | 264 | 228 | 44 | 4 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Real estate | 121 | 163 | 162 | 97 | 13 | |||||||||||||||
Other | 3 | 3 | 4 | 4 | 2 | |||||||||||||||
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Nonaccrual loans, excluding FDIC-supported loans | 886 | 1,493 | 2,023 | 946 | 259 | |||||||||||||||
Other real estate owned: | ||||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial properties | 58 | 99 | 85 | 36 | 8 | |||||||||||||||
Developed land | 4 | 6 | 14 | 7 | – | |||||||||||||||
Land | 17 | 33 | 35 | 2 | 2 | |||||||||||||||
Residential: | ||||||||||||||||||||
1-4 family | 19 | 53 | 50 | 40 | 4 | |||||||||||||||
Developed land | 21 | 50 | 119 | 71 | 1 | |||||||||||||||
Land | 10 | 18 | 33 | 36 | – | |||||||||||||||
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Other real estate owned, excluding FDIC-supported assets | 129 | 259 | 336 | 192 | 15 | |||||||||||||||
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Total nonperforming lending-related assets, excluding FDIC-supported assets | 1,015 | 1,752 | 2,359 | 1,138 | 274 | |||||||||||||||
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FDIC-supported nonaccrual loans | 24 | 36 | 356 | – | – | |||||||||||||||
FDIC-supported other real estate owned | 24 | 40 | 54 | – | – | |||||||||||||||
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FDIC supported nonperforming lending-related assets | 48 | 76 | 410 | – | – | |||||||||||||||
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Total nonperforming lending-related assets | $ | 1,063 | $ | 1,828 | $ | 2,769 | $ | 1,138 | $ | 274 | ||||||||||
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Ratio of nonperforming lending-related assets to net loans and leases1 and other real estate owned | 2.83 | % | 4.91 | % | 6.79 | % | 2.71 | % | 0.70 | % | ||||||||||
Accruing loans past due 90 days or more: | ||||||||||||||||||||
Commercial | $ | 8 | $ | 11 | $ | 53 | $ | 50 | $ | 38 | ||||||||||
Commercial real estate | 7 | 7 | 33 | 48 | 28 | |||||||||||||||
Consumer | 4 | 5 | 21 | 32 | 11 | |||||||||||||||
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Total excluding FDIC-supported loans | 19 | 23 | 107 | 130 | 77 | |||||||||||||||
FDIC-supported loans | 75 | 119 | 56 | – | – | |||||||||||||||
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Total | $ | 94 | $ | 142 | $ | 163 | $ | 130 | $ | 77 | ||||||||||
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Ratio of accruing loans past due 90 days or more | 0.25 | % | 0.38 | % | 0.40 | % | 0.31 | % | 0.20 | % | ||||||||||
|
Includes loans held for sale.
2012 and 2011, respectively.
| December 31, | |||||||
| (In millions) | 2012 | 2011 | |||||
| Restructured loans – accruing | $ | 407 | $ | 448 | |||
| Restructured loans – nonaccruing | 216 | 296 | |||||
| Total | $ | 623 | $ | 744 | |||
Statements for additional information regarding TDRs.
ACCRUING AND NONACCRUING 33
| December 31, | |||||||
| (In millions) | 2012 | 2011 | |||||
| Balance at beginning of year | $ | 744 | $ | 755 | |||
| New identified TDRs and principal increases | 321 | 463 | |||||
| Payments and payoffs | (249 | ) | (154 | ) | |||
| Charge-offs | (32 | ) | (74 | ) | |||
| No longer reported as TDRs | (65 | ) | (174 | ) | |||
| Sales and other | (96 | ) | (72 | ) | |||
| Balance at end of year | $ | 623 | $ | 744 | |||
| December 31, | ||||||||
| (In millions) | 2011 | 2010 | ||||||
Restructured loans – accruing | $ | 448 | $ | 388 | ||||
Restructured loans – nonaccruing | 296 | 367 | ||||||
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Total | $ | 744 | $ | 755 | ||||
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December 31, 2012, TDR balances reflected recent changes in regulatory interpretative guidance from the OCC for national banks whose consumer borrowers had not reaffirmed their debt discharged in a Chapter 7 bankruptcy. During the fourth quarter of 2012, we adopted this guidance for all of our subsidiary banks. See Note 6 of the Notes to Consolidated Financial Statements for additional information.
2011, respectively.
34
| (Amounts in millions) | 2011 | 2010 | 2009 | 2008 | 2007 | |||||||||||||||
Loans and leases outstanding on December 31, | $ | 37,145 | $ | 36,747 | $ | 40,189 | $ | 41,659 | $ | 38,880 | ||||||||||
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Average loans and leases outstanding, (net of | $ | 36,798 | $ | 38,250 | $ | 41,513 | $ | 40,795 | $ | 36,575 | ||||||||||
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Allowance for loan losses: | ||||||||||||||||||||
Balance at beginning of year | $ | 1,440 | $ | 1,531 | $ | 687 | $ | 459 | $ | 365 | ||||||||||
Allowance of companies acquired | – | – | – | – | 8 | |||||||||||||||
Allowance associated with purchased securitized loans | – | – | – | 2 | – | |||||||||||||||
Allowance of loans and leases sold | – | – | – | (1 | ) | (2 | ) | |||||||||||||
Provision charged against earnings | 75 | 852 | 2,017 | 648 | 152 | |||||||||||||||
Adjustment for FDIC-supported loans | (9 | ) | 40 | 2 | – | – | ||||||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial | (241 | ) | (417 | ) | (373 | ) | (100 | ) | (39 | ) | ||||||||||
Commercial real estate | (229 | ) | (517 | ) | (713 | ) | (269 | ) | (24 | ) | ||||||||||
Consumer | (90 | ) | (140 | ) | (170 | ) | (45 | ) | (16 | ) | ||||||||||
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Total | (560 | ) | (1,074 | ) | (1,256 | ) | (414 | ) | (79 | ) | ||||||||||
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Recoveries: | ||||||||||||||||||||
Commercial | 55 | 35 | 51 | 9 | 9 | |||||||||||||||
Commercial real estate | 35 | 44 | 21 | 7 | 1 | |||||||||||||||
Consumer | 14 | 12 | 9 | 5 | 5 | |||||||||||||||
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Total | 104 | 91 | 81 | 21 | 15 | |||||||||||||||
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Net loan and lease charge-offs | (456 | ) | (983 | ) | (1,175 | ) | (393 | ) | (64 | ) | ||||||||||
Reclassification to reserve for unfunded lending commitments | – | – | – | (28 | ) | – | ||||||||||||||
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Balance at end of year | $ | 1,050 | $ | 1,440 | $ | 1,531 | $ | 687 | $ | 459 | ||||||||||
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Ratio of net charge-offs to average loans and leases | 1.24 | % | 2.57 | % | 2.83 | % | 0.96 | % | 0.17 | % | ||||||||||
Ratio of allowance for loan losses to net loans and leases, | 2.83 | % | 3.92 | % | 3.81 | % | 1.65 | % | 1.18 | % | ||||||||||
Ratio of allowance for loan losses to nonperforming loans, | 115.40 | % | 94.22 | % | 64.36 | % | 72.58 | % | 177.70 | % | ||||||||||
Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more, on December 31, | 104.62 | % | 86.21 | % | 60.22 | % | 63.84 | % | 136.75 | % | ||||||||||
| (Amounts in millions) | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||
| Loans and leases outstanding on December 31, (net of unearned income) | $ | 37,665 | $ | 37,258 | $ | 36,830 | $ | 40,260 | $ | 41,712 | ||||||||||
| Average loans and leases outstanding, (net of unearned income) | $ | 37,037 | $ | 36,897 | $ | 38,326 | $ | 41,569 | $ | 40,835 | ||||||||||
| Allowance for loan losses: | ||||||||||||||||||||
| Balance at beginning of year | $ | 1,052 | $ | 1,442 | $ | 1,532 | $ | 688 | $ | 460 | ||||||||||
| Allowance associated with purchased securitized loans | — | — | — | — | 2 | |||||||||||||||
| Allowance of loans and leases sold | — | — | — | — | (1 | ) | ||||||||||||||
| Provision charged against earnings | 14 | 75 | 853 | 2,017 | 648 | |||||||||||||||
| Adjustment for FDIC-supported loans | (15 | ) | (9 | ) | 40 | 2 | — | |||||||||||||
| Charge-offs: | ||||||||||||||||||||
| Commercial | (121 | ) | (241 | ) | (417 | ) | (373 | ) | (100 | ) | ||||||||||
| Commercial real estate | (85 | ) | (229 | ) | (517 | ) | (713 | ) | (269 | ) | ||||||||||
| Consumer | (61 | ) | (90 | ) | (140 | ) | (170 | ) | (45 | ) | ||||||||||
| Total | (267 | ) | (560 | ) | (1,074 | ) | (1,256 | ) | (414 | ) | ||||||||||
| Recoveries: | ||||||||||||||||||||
| Commercial | 56 | 55 | 35 | 51 | 9 | |||||||||||||||
| Commercial real estate | 42 | 35 | 44 | 21 | 7 | |||||||||||||||
| Consumer | 14 | 14 | 12 | 9 | 5 | |||||||||||||||
| Total | 112 | 104 | 91 | 81 | 21 | |||||||||||||||
| Net loan and lease charge-offs | (155 | ) | (456 | ) | (983 | ) | (1,175 | ) | (393 | ) | ||||||||||
| Reclassification to reserve for unfunded lending commitments | — | — | — | — | (28 | ) | ||||||||||||||
| Balance at end of year | $ | 896 | $ | 1,052 | $ | 1,442 | $ | 1,532 | $ | 688 | ||||||||||
| Ratio of net charge-offs to average loans and leases | 0.42 | % | 1.24 | % | 2.56 | % | 2.83 | % | 0.96 | % | ||||||||||
| Ratio of allowance for loan losses to net loans and leases, on December 31, | 2.38 | % | 2.82 | % | 3.92 | % | 3.81 | % | 1.65 | % | ||||||||||
| Ratio of allowance for loan losses to nonperforming loans, on December 31, | 138.25 | % | 115.43 | % | 94.32 | % | 64.40 | % | 72.66 | % | ||||||||||
| Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more, on December 31, | 126.22 | % | 104.67 | % | 86.31 | % | 60.27 | % | 63.92 | % | ||||||||||
35
AT DECEMBER
| 2011 | 2010 | 2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||||||||
| (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 | ||||||||||||||||||||||||||||||
Type of Loan | ||||||||||||||||||||||||||||||||||||||||
Commercial | 52.1 | % | $ | 628 | 49.5 | % | $ | 761 | 47.6 | % | $ | 613 | 49.5 | % | $ | 319 | 47.4 | % | $ | 190 | ||||||||||||||||||||
Commercial real estate | 27.3 | 276 | 30.2 | 487 | 31.8 | 753 | 32.8 | 291 | 33.8 | 215 | ||||||||||||||||||||||||||||||
Consumer | 18.6 | 123 | 17.7 | 154 | 17.0 | 165 | 17.7 | 77 | 18.8 | 54 | ||||||||||||||||||||||||||||||
FDIC-supported loans | 2.0 | 23 | 2.6 | 38 | 3.6 | – | ||||||||||||||||||||||||||||||||||
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Total | 100.0 | % | $ | 1,050 | 100.0 | % | $ | 1,440 | 100.0 | % | $ | 1,531 | 100.0 | % | $ | 687 | 100.0 | % | $ | 459 | ||||||||||||||||||||
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| 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||||||||||||||||||
| % 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) | |||||||||||||||||||||||||||||||||||||||||||||
| Loan segment | |||||||||||||||||||||||||||||||||||||||||||||
| Commercial | 52.4 | % | $ | 594 | 52.1 | % | 52.5 | $ | 630 | 49.5 | % | $ | 763 | 47.6 | % | $ | 614 | 49.4 | % | $ | 320 | ||||||||||||||||||||||||
| Commercial real estate | 26.5 | 194 | 27.3 | 26.5 | 276 | 30.2 | 487 | 31.8 | 753 | 32.8 | 291 | ||||||||||||||||||||||||||||||||||
| Consumer | 19.7 | 96 | 18.6 | 19.6 | 123 | 17.7 | 154 | 17.0 | 165 | 17.8 | 77 | ||||||||||||||||||||||||||||||||||
| FDIC-supported loans | 1.4 | 12 | 2.0 | 1.4 | 23 | 2.6 | 38 | 3.6 | — | ||||||||||||||||||||||||||||||||||||
| Total | 100.0 | % | $ | 896 | 100.0 | % | $ | 1,052 | 100.0 | % | $ | 1,442 | 100.0 | % | $ | 1,532 | 100.0 | % | $ | 688 | |||||||||||||||||||||||||
For 2010, the $148 million increase in the allowance for loan losses for commercial lending reflects deterioration of borrower credit quality due to difficult economic conditions, reductions in collateral values, and increases in realized loss rates that increased our quantitative loss factors for commercial real estate and consumer portfolios as well. The $266 million decrease in the allowance for commercial real estate loans in 2010 largely reflects the decrease in loans outstanding for the construction and land development portfolio and improving credit quality measures across the Company.
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
recommending policies to the Board and administering Board-approved policies that govern and limit the Company’s exposure to all interest rate and market risk, including policies that are designed to limit the Company’s adverse exposure to changes in interest rates;
approving the procedures that support the Board-approved policies;
maintaining management’s policies dealing with interest rate and market risk;
approving all material interest rate risk management strategies, including all hedging strategies and actions taken pursuant to managing interest rate risk and monitoring risk positions against approved limits;
approving limits and all financial derivative positions taken at both the Parent and subsidiaries for the purpose of hedging the Company’s interest rate and market risks;
providing the basis for integrated balance sheet, net interest income, and liquidity management;
calculating the duration and dollar durationestimated market value of each class of assets, liabilities, and on net equity, given defined interest rate scenarios;
managing the Company’s exposure to changes in net interest income and durationestimated market value of equity due to interest rate fluctuations; and
quantifying the effects of hedging instruments on the durationmarket value of equity and on net interest income under defined interest rate scenarios.
pressure assuming a stable balance sheet. If interest rates remain stable, this pressure may lead to a reduction in net interest income, unless its impact is offset by sufficient loan growth. higher rate environment. For larger rate shocks, e.g. +500 bps, models reflecting consumer behavior in regards to both loan prepayments and deposit run-off are inherently prone to increased model uncertainty. Duration of equity1: Base case Increase interest rates by 200 bp Income simulation – change in interest sensitive income: Increase interest rates by 200 bp Decrease interest rates by 200 bp2 sensitivity were primarily driven by a 14.6% year-over-year increase in noninterest-bearing demand deposits, with the majority of that increase being invested in short-term money market assets. Other factors which marginally affected the changes in interest rate sensitivity include the redemption of TARP preferred stock from cash reserves, changes in the modeling assumptions for capturing balloon payments, and changes to prepayment assumptions. Statements for additional information regarding derivative instruments. Therefore, the Company Management monitoring and management of liquidity risk. We manage the Company’s liquidity to provide adequate funds to meet its 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. Officer. 2012. 39 Deposits Commitments to extend credit Standby letters of credit: Financial Performance Commercial letters of credit Commitments to make venture and other noninterest-bearing investments2 Securities sold, not yet purchased Federal funds purchased and security repurchase agreements Other short-term borrowings Long-term debt3 Operating leases, net of subleases Unrecognized tax benefits, ASC 740 Indeterminable maturity deposits include noninterest-bearing demand, savings and money market, and non-time foreign. 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. The maturities on long-term borrowings do not include the associated hedges.Interest Rate RiskInterest rate risk is one of the most significant risks to which the Company is regularly exposed. In general, our goal in managing interest rate risk is to have the net interest margin increase slightly in a rising interest rate environment. We refer to this goal as being slightly “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 is more asset sensitive on December 31, 2011 than it was at the end of the previous year.changed minimally during 2012. Due to the low level of rates and the natural lower bound of zero for market indices, there is minimallimited sensitivity to falling rates at the current time. DecreasingOur models indicate that decreasing market index rates by 200bp,200 bps, with a lower bound of 0%, decreases interestwould decrease rate sensitive income by approximately 2% over a one-year period in the income simulation.simulation when compared to a scenario of no change in interest rates. However, if the Federal Reserve continues to implement its announced intent to keep interest rates remain at their current historically low levels, though 2014, given the Company’s asset sensitivity, it expects its net interest margin to be under continuing modest pressure.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 exposures to long-term fixed rate interest-earning assets that have significant negative convexity. Our earning assets are largely tied to the shorter end of the interest rate curve. The prime lending rate and the LIBOR curves are the primary indices used for pricing the Company’s loans. The interest rates paid on deposit accounts are set by individual banks so as to be competitive in each local market.We monitor interest rate risk through the use of two complementary measurement methods: durationMarket Value of equityEquity (“MVE”) and income simulation. In the duration of equityMVE method, we measure the expected changes in the fair values of equity in response to changes in interest rates. In the income simulation method, we analyze the expected changes in income in response to changes in interest rates.Duration of equityMVE is derived by first calculating the dollar duration of all assets, liabilities and derivative instruments. Dollar duration is determined by calculatingcalculated as the fair value of each instrument assuming interest rates sustain immediate and parallel movements up 1% and down 1%. The average of these two changes in fair value is the dollar duration. Subtracting the dollar duration of liabilities from the dollar duration ofall assets and adding the net dollar duration of derivative instruments results in the dollar duration of equity. Duration of equity is computed by dividing the dollar duration of equity byminus the fair value of equity. A positive value implies that an increaseliabilities. We report changes in the dollar amount of MVE for parallel shifts in interest rates decreases the dollar value of equity, whereas a negative value implies that an increase in interest rates increases the dollar value of equity. rates.79The Company’s policy is generally to maintainlimit declines in MVE to 3% per 100 bp movement in interest rates in either direction. Schedule 36 presents the formal limits adopted by the Company’s Board of Directors:Schedule 36MARKET VALUE OF EQUITY DECLINE LIMITSParallel change in interest rates Allowable declinein MVE+/- 100 bps 3% +/- 200 bps 6% +/- 300 bps 9% +/- 400 bps 12% +/- 500 bps 15% These MVE limits, adopted in late 2012, are a change from the previous policy which imposed limits on duration of equity between -3%equity. We had been calculating both measures in parallel for several quarters prior to +7%. However, exceptionsthe adoption of MVE as a primary policy limit, and no significant change in the Company’s interest rate risk position resulted from this policy change. Further, we still calculate and monitor both measures. Duration measures changes in MVE for small changes in interest rates only. The changes to the policy to limit declines in MVE over a wider range of rate movements enhanced the interest rate risk management practice of the Company. Changes to the MVE limits are approvedsubject to notification and approval by the Company’s Board of Directors. In the currentDue to embedded optionality and asymmetric rate risk, changes in MVE can be useful in quantifying risks not apparent for small rate changes. Examples of such risks may include out-of-the-money caps on loans which have little effect for small rate movements but may become important if larger rate shocks were to occur, or substantial prepayment deceleration for low interest rate environment, the Company is operating withmortgages in a duration of equity of slightly less than -3% in some planning scenarios.Income simulation is an estimate of the net interest income and total rate sensitive income that would be recognized under different rate environments. Net interest income and total rate sensitive income are measured under several parallel and nonparallel interest rate environments and deposit repricing assumptions, taking into account an estimate of the possible exercise of options within the portfolio. For income simulation, Company policy requires that interest sensitive 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 basis points.Bothbps.Each of these measurement methods requirerequires that we assess a number of variables and make various assumptions in managing the Company’s exposure to changes in interest rates. The assessments address loan and security prepayments, early deposit withdrawals, and other embedded options and noncontrollable events. As a result of uncertainty about the maturity and repricing characteristics of both deposits and loans, the Company estimates ranges of durationMVE and income simulation 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 a slightlyan 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 duration of equityMVE and the income simulation results are highly sensitive to the assumptions 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 duration of equityMVE and the income simulation results as falling within a wide range of possibilities.As of the dates indicated, Schedule 3337 shows the Company’s estimated duration of equity and percentage change in interest rate sensitive income, based on a static balance sheet, in the first year after the rate change if interest rates were to sustain an immediate parallel change of 200 basis points.changes ranging from -200 bps to +500 bps. The Company estimates interest rate risk with two sets of deposit repricing scenarios.80The 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. Additionally, interest rates cannot decline below zero. At December 31, 2012, interest rates were at such a low level that repricing scenarios assuming -100 bps and -200 bps rate shocks produced similar results.The second scenario assumes that those deposits reprice at a slower speed.Schedule 33DURATION OF EQUITY AND37INCOME SIMULATION-CHANGE IN INTEREST RATE SENSITIVE INCOME December 31,
2011 December 31,
2010 Fast Slow Fast Slow -1.0 % -3.8 % -1.2 % -3.1 % -1.5 -3.5 -1.4 -3.0 Deposit repricing response Fast Slow Fast Slow 7.4 % 10.0 % 3.1 % 6.0 % -2.0 -2.3 -2.5 -2.7 1The duration of equity is the modified duration reported in percentages.2In the event that a 200 basis point rate parallel decrease cannot be achieved, the applicable rate changes are limited to lesser amounts such that interest rates cannot be less than zero.Termination of long positions in Eurodollar futures during 2011 and a reduction of outstanding receive-fixed-rate interest rate swaps due to maturities also contributed to the decrease in the duration of equity. The As of December 31, 2012 Repricing scenario -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps +500 bps Fast (1.8 )% (1.8 )% 3.9 % 9.8 % 16.7 % 23.6 % 30.6 % Slow (2.0 )% (2.0 )% 5.0 % 12.1 % 20.2 % 28.4 % 36.5 % As of December 31, 2011 Repricing scenario -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps +500 bps Fast (1.9 )% (1.8 )% 2.8 % 7.4 % 13.1 % 18.9 % 24.8 % Slow (2.3 )% (2.1 )% 4.1 % 10.0 % 17.0 % 24.1 % 31.3 % Schedule 38 includes changes in the income simulation sensitivity can be attributedMVE from -200 bps to the same factors. See Note 8 of the Notes to Consolidated Financial Statements+500 bps parallel rate moves for more information on theboth “fast” and “slow” scenarios.Schedule 38CHANGES IN MARKET VALUE OF EQUITY As of December 31, 2012 Repricing scenario -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps +500 bps Fast 5.3 % 0.7 % 1.7 % 3.9 % 6.3 % 9.4 % 12.0 % Slow (0.5 )% (2.8 )% 4.9 % 10.6 % 16.0 % 25.0 % 30.8 % As of December 31, 2011 Repricing scenario -200 bps -100 bps +100 bps +200 bps +300 bps +400 bps +500 bps Fast 2.9 % 0.1 % 0.7 % 1.6 % 2.5 % 3.3 % 4.1 % Slow (2.1 )% (2.6 )% 3.1 % 6.7 % 9.9 % 12.9 % 15.6 % During 2012, changes in interest rate derivatives portfolio.Our focus on business banking also plays a significant role in determining the nature of the Company’s asset-liability management posture. At the end of 2012 and 2011, approximately 77% and 2010, approximately 76% and 77%, respectively, of the Company’s commercial lending and commercial real estateCRE portfolios were variable rate and primarily tied to either the prime rate or81LIBOR. In addition, certain of our consumer loans also have variable interest rates.We have traditionally engaged in an ongoing program of swapping prime-based and LIBOR-based loans for “receive-fixed” contracts. However, during 2010, we terminated and did not replace a number of such swaps, both due to the difficulty in finding stable pools of floating rate loans with identical repricing characteristics, and with the objective of positioning the Company’s balance sheet to be more asset sensitive. At the end of 2011 and 2010, the Company held approximately $335 million and $520 million (notional amount), respectively, of such cash flow hedge contracts. These swaps also expose the Company to counterparty risk, which is a type of credit risk. The Company’s approach to managing this risk is discussed in “Credit Risk Management” on page 67. The Company retains basis risk due to changes between the prime rate and LIBOR on nonhedge derivative basis swaps. See “Accounting for Derivatives” on page 31Schedule 21 for further details about our derivative instruments. Also,information on fixed and variable interest rates of the loan portfolio.Largely due largely to competitive pressures, the Company’s subsidiary banks have decreased the use of interest rate floors on new loans. As of December 31, 20112012, and December 31, 2010,2011, approximately 45.8% 37.5%and 48.4%45.8% of all of the Company’s variable rate loan balances contain floors. Of the loans with floors, approximately 74.4% and 77.9% of the balances at December 31, 2012 and 2011, and 75.5% of the December 31, 2010 balancesrespectively, were priced at the floor rates, which were above the “index plus spread” rate by an average of 1.22% 1.07%and 1.22%, respectively.During 2011, the long Eurodollar futures positions which were used to extend the duration of cash deposits were terminated. Although this led to an increase in asset sensitivity, the flattening of the yield curve resulted in minimal upside to holding long Eurodollar futures positions.At December 31, 2011,2012, the Company held $335$150 million (notional amount) of interest rate swap agreements, all of which $185 million and $150 million will mature in 20122013. See Notes 7 and 2013, respectively. For additional information regarding derivative instruments, refer to Notes 1 and 8 20of the Notes to Consolidated Financial Statements.Market Risk – Fixed IncomeThe Company engages in the underwriting and trading of U.S. agency, municipal and corporate securities. This trading activity exposes the Company to a risk of loss arising from adverse changes in the prices of these fixed income securities.At December 31, 2011,2012, the Company had $40$28 million of trading assets and $44$27 million of securities sold, not yet purchased, compared to $49with $40 million and $43$44 million, respectively, at the end of the prior year.During the third quarter of 2012, the Company exited the business of trading corporate debt securities in preparation for the expected implementation of the Volcker Rule of the Dodd-Frank Act. We do not expect this change to have a material impact on the Company’s future earnings.The Company is exposed to market risk through changes in fair value. The Company is 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 OCIAOCI for each financial reporting period. During 2011,2012, the after-tax decreasechange in OCIAOCI attributable to AFS and HTM securities was $93an increase of $149 million compared to an increase of $4a $93 million decrease in 2010.2011. The decrease attributable to cash flow interest rate swaps for 2011was $8 million in 2012 and 2010 was $21 million and $37 million, respectively.in 2011. If any of the AFS or HTM securities become other than temporarilybecomes other-than-temporarily impaired, the credit impairment is charged to operations. See “Investment Securities Portfolio” on page 5249 for additional information on OTTI.Market Risk – Equity InvestmentsThrough its equity investment activities, the Company owns equity securities that are publicly traded. In addition, the Company owns equity securities in companies and governmental entities, e.g., Federal Reserve Bank and Federal Home Loan Banks, that are not publicly traded, thatand which are accounted for under cost, fair value, equity, or full consolidation methods of accounting, depending upon the Company’s ownership position and degree of involvement in influencing the investees’ affairs. In either case,Regardless of the accounting method, the value of the Company’s investment is subject to fluctuation. Since the fair value of these securities may fall below the Company’s investment costs, the Company is exposed to the possibility of loss. These equityEquity investments in private and public companies are approved, monitored and evaluated by the Company’s Equity Investment Committee.The Company holds investments in pre-public companies through various venture capital funds. The Company’s equity exposure to these investments was approximately $56 million and $49 million at December 31, 2012 and 2011, and December 31, 2010 was approximately $49 million and $48 million, respectively.Additionally, Amegy has in place an alternative investments program.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 were generally are not a part of the strategy since the underlying companies arewere typically not creditworthy. The carrying value of theAmegy’s equity investments was $60 million and $71 million at December 31, 2012 and 2011, and $68 million at December 31, 2010. respectively.At December 31, 20112012 and 2010,2011, the Company had a total remaining funding commitment of $44$32 millionand $56 $4482million, respectively, to SBIC, non-SBIC funds, and private equity investments. Of these commitments, approximately $29$22 million and $41$29 million, respectively, were at Amegy.UnderThese private equity investments are subject to the provisions of the Dodd-Frank Act thethat prohibit bank holding company or bank investment in such funds, with limited exceptions. The Company is allowed to fund remaininghonor unfunded portionscommitments made prior to the adoption of existing private equity fund commitments, such as those described above,the Dodd-Frank Act, but is not allowed to make any new commitments to invest in private equity, funds, except for SBIC funds.Liquidity RiskOverviewLiquidity risk is the possibility that the Company’s cash flows may not be adequate to fund its ongoing operations and meet its 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 theOverseeing liquidity management is the responsibility of ALCO, which implements a Board-adopted corporate Liquidity and Funding Policy. This policy addresses 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, the ‘time“time to required funding’funding” and fixed charges coverage ratios, that are used to monitor the liquidity positions of the Parent and bank subsidiaries, as well as various stress test and liquid asset measurements for the Parent and bank liquidity.The management of liquidity and funding is performed centrally by Zions Bank’s Capital Markets/Investment Division under the direction of the Company’s Chief Investment Officer, with oversight by ALCO. The Chief Investment Officer is responsible for recommending changes to existing funding plans, as well as to the policy guidelines. These recommendations must be submitted for approval to ALCO and potentially to the Company’s Board of Directors.ALCO. 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, but are not involved in any other funding decision-making processes.Contractual ObligationsSchedule 3439 summarizes the Company’s contractual obligations at December 31, 2011.83Schedule 34CONTRACTUAL OBLIGATIONS(In millions) One year
or less Over
one year
through
three years Over
three years
through
five years Over five
years Indeterminable
maturity1 Total $ 2,767 $ 534 $ 252 $ 1 $ 39,322 $ 42,876 4,402 3,383 2,488 2,268 12,541 652 125 51 87 915 126 38 1 165 115 19 134 44 44 44 44 608 608 70 70 372 667 422 483 1,944 46 87 72 155 360 1 1 2 4 $ 9,247 $ 4,835 $ 3,305 $ 2,994 $ 39,324 $ 59,705 (In millions) One year or less Over one year through three years Over three years through five years Over five years Indeterminable maturity 1 Total Deposits $ 2,465 $ 502 $ 208 $ 1 $ 42,957 $ 46,133 Commitments to extend credit 4,234 4,618 2,859 2,566 14,277 Standby letters of credit: Financial 471 206 10 87 774 Performance 116 73 1 190 Commercial letters of credit 81 1 10 92 Commitments to make venture and other noninterest-bearing investments232 32 Securities sold, not yet purchased 27 27 Federal funds purchased and security repurchase agreements 320 320 Other short-term borrowings 5 5 Long-term debt 318 1,138 653 520 2,329 Operating leases, net of subleases 46 86 72 141 345 Unrecognized tax benefits, ASC 740 1 1 2 $ 7,816 $ 6,625 $ 3,803 $ 3,325 $ 42,957 $ 64,526 1 2 3
Statements for further information on derivative contracts,.
operating activities.
Earnings onduring 2013. See Note 18 of the Parent’s investment securities portfolio have been reduced. Therefore, cash receipts from subsidiariesNotes to Consolidated Financial Statements for details of dividend capacities and investments currently do not cover the Parent’s interestlimitations.
Company exceeded these policy limits.
Company’s senior debt as Ba3Ba1 or noninvestment grade, Standard & Poor’s, Fitch, Dominion Bond Rating Service (“DBRS”), and DBRSKroll all rate the Company’s senior debt at a low investment grade level. In addition, all fourfive rating agencies rate the Company’s subordinated debt as noninvestment grade.
2012.
40
Rating agency | Outlook | Long-term issuer/ senior debt rating | Subordinated debt | |||||
| ||||||||
S&P | Negative | BBB- | BB+ | |||||
Moody’s | Stable | |||||||
| Fitch | ||||||||
| BBB- | BB+ | ||||||
DBRS | Stable | BBB (low) | BB (high) | |||||
| Kroll | BBB | BBB- | ||||||
| (Amounts in millions) | ||||||||
| Senior notes issued | Coupon interest rate | Yield-to-maturity at issuance date | ||||||
| $ | 300 | 4.50 | % | 5.84 | % | |||
| 100 | 4.50 | 4.44 | ||||||
| 158 | 4.00 | 4.69 | ||||||
| 20 | 4.00 | 3.86 | ||||||
| 20 | 4.00 | 3.75 | ||||||
| $ | 598 | |||||||
medium-term senior notes with coupon interest rates ranging from 2.00% to 5.00%.
2011.
Historically, the Company’s subsidiary banks have also obtained brokered deposits to serve as an additional source of liquidity, which is currently not needed. Given the strong levels of affiliate liquidity, the Company has aggressively lowered its brokered deposit usage. During 2011, total brokered deposits declined $231 million to $204 million at year-end, down from $435 million at December 31, 2010. Brokered deposits are currently 0.5%2012, compared to 86.9% as of total deposits.
December 31, 2011.
On July 21, 2010, the Dodd-Frank Act made permanent the maximum deposit insurance amount of $250,000. On November 9, 2010, thedeposits.
combined total is insured up to $250,000.
2011.
including enhancement of risk-control self assessmentassessments and antifraud measures, reportingwhich are reported to the Enterprise Risk Management Committee and to the Risk Oversight Committee of the Board. We also mitigate operational risk through the
However, the number and sophistication of attempts to disrupt or penetrate the Company’s critical systems, sometimes referred to as hacking, cyberfraud, cyberattacks, cyberterrorism, or other similar names, also continues to grow. On a daily basis, the Company, its customers, and other financial institutions are subject to such attempts. The Company has established systems and procedures to monitor, thwart or mitigate damage from such attempts, and usually these efforts have been successful. However, in some instances we, or our customers, have been victimized by cyberfraud (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.
Setting overall capital targets within the Board-approved capital policy, monitoring performance compared to the firm’s risk appetite/risk capacity, and recommending changes to capital including dividends, common stock repurchases, subordinated debt, or to major strategies to maintain the Company and its bank subsidiaries at well 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 bank subsidiaries and establishing target ratings.
The CMC, in managing the capital of the Company, may set capital standards that are higher than those approved by the Board, but may not set lower limits.
Maintain sufficient capital as defined by federal banking regulators to support current needs (see Note 19 of the Notes to Consolidated Financial Statements) and to ensure that capital is available to support anticipated growth;
Take into account the desirability of receiving an “investment grade” rating from major debt rating agencies on senior and subordinated unsecured debt when setting capital levels;
Develop capabilities to measure and manage capital on a risk-adjusted basisbasis; and to maintain economic capital consistent with an “investment grade” risk level; and
Return excess capital to shareholders through dividends and repurchases of common stock.
Plan
Total controllingJanuary 7, 2013, and does not expect to receive a non-objection/objection decision from the Federal Reserve until mid-March.
statement of income.
Conversions of convertible subordinated debt into preferred stock have augmented the Company’s capital position and reduced future refinancing needs. From the original modification in June 2009 through December 2011, $663 million of debt has been extinguished and $773 million of preferred capital has been added. Schedule 36 shows the effect the conversions had on Tier 1 capital and outstanding convertible subordinated debt.
2012.
IMPACT OF CONVERTIBLE SUBORDINATED DEBT
| Year Ended December 31, | ||||||||||||
| (In millions) | 2011 | 2010 | 2009 | |||||||||
Preferred equity | ||||||||||||
Convertible subordinated debt converted to preferred stock | $ | 256 | $ | 343 | $ | 63 | ||||||
Beneficial conversion feature reclassified from common to preferred stock | 43 | 57 | 11 | |||||||||
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Change in preferred equity | 299 | 400 | 74 | |||||||||
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Common equity | ||||||||||||
Gain on subordinated debt modification, net of tax | 314 | |||||||||||
Accelerated convertible subordinated debt discount amortization, net of tax | (94 | ) | (148 | ) | (22 | ) | ||||||
Beneficial conversion feature added to common stock | 203 | |||||||||||
Beneficial conversion feature reclassified from common to preferred stock | (43 | ) | (57 | ) | (11 | ) | ||||||
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Change in common equity | (137 | ) | (205 | ) | 484 | |||||||
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Net impact on Tier 1 capital | $ | 162 | $ | 195 | $ | 558 | ||||||
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Convertible subordinated debt outstanding | $ | 547 | $ | 803 | $ | 1,146 | ||||||
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The Company’s net income applicable to controlling interest of $323.8 million during 2011 more than offset the $137 million decrease in common equity resulting from subordinated debt conversions. During 2010, the Company’s various issuances of new common stock and warrants to purchase common stock totaling $838 million more than offset the $205 million decrease in common equity resulting from subordinated debt conversions.
On February 16, 2012, the Company filed a Form 8-K disclosing that as of February 15, 2012, holders of subordinated notes elected to convert a combined $29.8 million principal amount of these notes into the Company’s preferred stock. The Company expects an additional 29,404 shares of Series C and 370 shares of
Series A preferred stock will be issued on March 15, 2012, unless the elections are revoked prior to that date. Also, $5.1 million of the original beneficial conversion feature will be reclassified into preferred stock from common stock as a result of this conversion. The expected pretax accelerated discount amortization attributable to the conversions will be approximately $12.2 million in the first quarter of 2012, compared to $5.8 million in the fourth quarter of 2011.
The Company paid $7.4 million in dividends on common stock duringin both 2012 and 2011. The dividends paid per share of $0.01 each quarter in 20112012 were unchanged from the rate paid since the third quarter of 2009. Under the terms of the CPP, the Company may not increase the dividend on its common stock above $0.32 per share per quarter during the period the senior preferred shares are outstanding without adversely impacting the Company’s interest in the program or without permission from the U.S. Department of the Treasury. The Company does not expect to increase its common dividend until sometime after all of its TARP CPP preferred stock has been repaid.
| Year Ended December 31, | ||||||||||||
| (In millions) | 2012 | 2011 | 2010 | |||||||||
| Preferred equity: | ||||||||||||
| Convertible subordinated debt converted to preferred stock | $ | 90 | $ | 256 | $ | 343 | ||||||
| Beneficial conversion feature reclassified from common to preferred stock | 15 | 43 | 57 | |||||||||
| Change in preferred equity | 105 | 299 | 400 | |||||||||
| Common equity: | ||||||||||||
| Accelerated convertible subordinated debt discount amortization, net of tax | (26 | ) | (94 | ) | (148 | ) | ||||||
| Beneficial conversion feature reclassified from common to preferred stock | (15 | ) | (43 | ) | (57 | ) | ||||||
| Change in common equity | (41 | ) | (137 | ) | (205 | ) | ||||||
| Net impact on Tier 1 capital | $ | 64 | $ | 162 | $ | 195 | ||||||
| Convertible subordinated debt outstanding | $ | 458 | $ | 547 | $ | 803 | ||||||
Schedule 37
CAPITAL RATIOS
| December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Tangible common equity ratio | 6.77 | % | 6.99 | % | 6.12 | % | ||||||
Tangible equity ratio | 11.33 | 11.10 | 9.16 | |||||||||
Average equity to average assets | 13.36 | 11.99 | 10.98 | |||||||||
Risk-based capital ratios: | ||||||||||||
Tier 1 common to risk-weighted assets | 9.57 | 8.95 | 6.73 | |||||||||
Tier 1 leverage | 13.40 | 12.56 | 10.38 | |||||||||
Tier 1 risk-based capital | 16.13 | 14.78 | 10.53 | |||||||||
Total risk-based capital | 18.06 | 17.15 | 13.28 | |||||||||
43. The Company expects that it (and the banking industry as a whole) will be required by market forces and/or regulation, including new standards (“Basel III”) promulgatedis in December 2010 and revised in June 2011 by the Basel Committee on Banking Supervision, to operatecompliance with higherall currently applicable capital ratios than in the past. Therefore, during 2011, we continued our efforts to preserve and augment capital in response to these anticipated regulatory changes and in preparation for the eventual repayment of TARP CPP preferred stock, rather than return more capital to shareholders in the form of higher dividends or share repurchases.
requirements.
| December 31, | ||||||||
| 2012 | 2011 | 2010 | ||||||
| Tangible common equity ratio | 7.09 | % | 6.77 | % | 6.99 | % | ||
| Tangible equity ratio | 9.15 | % | 11.33 | % | 11.10 | % | ||
| Average equity to average assets | 12.22 | % | 13.36 | % | 11.99 | % | ||
| Risk-based capital ratios: | ||||||||
| Common equity Tier 1 | 9.80 | % | 9.57 | % | 8.95 | % | ||
| Tier 1 leverage | 10.96 | % | 13.40 | % | 12.56 | % | ||
| Tier 1 risk-based | 13.38 | % | 16.13 | % | 14.78 | % | ||
| Total risk-based | 15.05 | % | 18.06 | % | 17.15 | % | ||
| Return on average common equity | 3.76 | % | 3.32 | % | (9.26 | )% | ||
| Tangible return on average tangible common equity | 5.18 | % | 4.72 | % | (11.89 | )% | ||
2011
.RECONCILIATIONS
capital
begun supplementing their assessment of the capital adequacy of a bank based on a variation of Tier 1 capital, known as common equity Tier 1 capital. The common equity. Theequity Tier 1 common equitycapital ratio is the core capital component of the Basel III standards, and we believe that it increasingly is becoming a key ratio considered by regulators, investors, and analysts. There is a difference between this ratio calculated using Basel I definitions of common equity Tier 1 common equity capital and those definitions using Basel III rules when fully phased in (which have not yet been formalized in regulation). The common equity Tier 1 common risk-based capital ratios in the Capital Ratios schedule presented previouslySchedule 43 use the current Basel I definitions for determining the numerator. Because common equity Tier 1 common equitycapital is not formally defined by GAAP or codified in the federal banking regulations, this measure is considered to be a non-GAAP financial measure and other entities may calculate them differently than the Company’s disclosed calculations. Since banking regulators, investors and analysts may assess the Company’s capital adequacy using common equity Tier 1 common equity,capital, we believe that it is useful to provide them the ability to assess the Company’s capital adequacy on this same basis.
44
| December 31, | ||||||||||||
| (Amounts in millions) | 2011 | 2010 | 2009 | |||||||||
Controlling interest shareholders’ equity (GAAP) | $ | 6,985 | $ | 6,648 | $ | 5,693 | ||||||
Accumulated other comprehensive (income) loss | 592 | 461 | 437 | |||||||||
Non-qualifying goodwill and intangibles | (1,083 | ) | (1,103 | ) | (1,129 | ) | ||||||
Disallowed deferred tax assets | – | (106 | ) | (43 | ) | |||||||
Other regulatory adjustments | 4 | 2 | 1 | |||||||||
Qualifying trust preferred securities | 448 | 448 | 448 | |||||||||
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Tier 1 capital (regulatory) | 6,946 | 6,350 | 5,407 | |||||||||
Qualifying trust preferred securities | (448 | ) | (448 | ) | (448 | ) | ||||||
Preferred stock | (2,377 | ) | (2,057 | ) | (1,503 | ) | ||||||
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Tier 1 common equity (non-GAAP) | $ | 4,121 | $ | 3,845 | $ | 3,456 | ||||||
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Risk-weighted assets (regulatory) | $ | 43,077 | $ | 42,950 | $ | 51,360 | ||||||
Tier 1 common to risk-weighted assets (non-GAAP) | 9.57 | % | 8.95 | % | 6.73 | % | ||||||
| December 31, | |||||||||||
| (Amounts in millions) | 2012 | 2011 | 2010 | ||||||||
| Controlling interest shareholders’ equity (GAAP) | $ | 6,052 | $ | 6,985 | $ | 6,648 | |||||
| Accumulated other comprehensive loss (income) | 446 | 592 | 461 | ||||||||
| Nonqualifying goodwill and intangibles | (1,065 | ) | (1,083 | ) | (1,103 | ) | |||||
| Disallowed deferred tax assets | — | — | (106 | ) | |||||||
| Other regulatory adjustments | 3 | 4 | 2 | ||||||||
| Qualifying trust preferred securities | 448 | 448 | 448 | ||||||||
| Tier 1 capital (regulatory) | 5,884 | 6,946 | 6,350 | ||||||||
| Qualifying trust preferred securities | (448 | ) | (448 | ) | (448 | ) | |||||
| Preferred stock | (1,128 | ) | (2,377 | ) | (2,057 | ) | |||||
| Common equity Tier 1 capital (non-GAAP) | $ | 4,308 | $ | 4,121 | $ | 3,845 | |||||
| Risk-weighted assets (regulatory) | $ | 43,970 | $ | 43,077 | $ | 42,950 | |||||
| Common equity Tier 1 capital to risk-weighted assets (non-GAAP) | 9.80 | % | 9.57 | % | 8.95 | % | |||||
This Annual Report on Form 10-K presents a “core net interest margin” and a “core net interest income” which exclude the effects of the (1) periodic discount amortization on convertible subordinated debt; (2) accelerated discount amortization on convertible subordinated debt which has been converted; and (3) additional accretion of interest income on acquired loans based on increased projected cash flows.
Schedules 39 and 40 provide a reconciliation of net interest margin/income (GAAP) to core net interest margin/income (non-GAAP).
Schedule 39
NET INTEREST MARGIN TO CORE NET INTEREST MARGIN
| Year Ended December 31, | ||||||||||||
| 2011 | 2010 | 2009 | ||||||||||
Net interest margin as reported (GAAP) | 3.81 | % | 3.73 | % | 3.94 | % | ||||||
Adjust for the impact on net interest margin of: | ||||||||||||
Discount amortization on convertible subordinated debt | 0.10 | 0.12 | 0.06 | |||||||||
Accelerated discount amortization on convertible subordinated debt | 0.25 | 0.37 | 0.07 | |||||||||
Additional accretion of interest income on acquired loans | -0.17 | -0.10 | – | |||||||||
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Core net interest margin (non-GAAP) | 3.99 | % | 4.12 | % | 4.07 | % | ||||||
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Schedule 40
NET INTEREST INCOME TO CORE NET INTEREST INCOME
| Year Ended December 31, | ||||||||||||
| (In millions) | 2011 | 2010 | 2009 | |||||||||
Net interest income (GAAP) | $ | 1,772.5 | $ | 1,727.4 | $ | 1,897.6 | ||||||
Adjust for the impact on net interest income of: | ||||||||||||
Discount amortization on convertible subordinated debt | 46.0 | 58.0 | 26.9 | |||||||||
Accelerated discount amortization on convertible subordinated debt | 115.6 | 172.4 | 35.7 | |||||||||
Additional accretion of interest income on acquired loans | (78.4 | ) | (46.8 | ) | – | |||||||
|
|
|
|
|
| |||||||
Core net interest income (non-GAAP) | $ | 1,855.7 | $ | 1,911.0 | $ | 1,960.2 | ||||||
|
|
|
|
|
| |||||||
3. Income (loss) before income taxes and subordinated debt modification and conversions
converted.
| Year Ended December 31, | |||||||||||
| (Amounts in millions) | 2012 | 2011 | 2010 | ||||||||
| Net earnings (loss) applicable to common shareholders (GAAP) | $ | 178.6 | $ | 153.4 | $ | (412.5 | ) | ||||
| Adjustments, net of tax: | |||||||||||
| Impairment loss on goodwill | 0.6 | — | — | ||||||||
| Amortization of core deposit and other intangibles | 10.8 | 12.7 | 16.0 | ||||||||
| Net earnings (loss) applicable to common shareholders, excluding the effects of the adjustments, net of tax (non-GAAP) (a) | $ | 190.0 | $ | 166.1 | $ | (396.5 | ) | ||||
| Average common equity (GAAP) | $ | 4,745 | $ | 4,614 | $ | 4,452 | |||||
| Average goodwill | (1,015 | ) | (1,015 | ) | (1,015 | ) | |||||
| Average core deposit and other intangibles | (59 | ) | (77 | ) | (101 | ) | |||||
| Average tangible common equity (non-GAAP) (b) | $ | 3,671 | $ | 3,522 | $ | 3,336 | |||||
| Tangible return on average tangible common equity (non-GAAP) (a/b) | 5.18 | % | 4.72 | % | (11.89 | )% | |||||
46
TANGIBLE COMMON EQUITY (NON-GAAP)
| December 31, | ||||||||||||
| (Amounts in millions) | 2011 | 2010 | 2009 | |||||||||
Total shareholders’ equity (GAAP) | $ | 6,983 | $ | 6,647 | $ | 5,710 | ||||||
Goodwill | (1,015 | ) | (1,015 | ) | (1,015 | ) | ||||||
Core deposit and other intangibles | (68 | ) | (88 | ) | (114 | ) | ||||||
|
|
|
|
|
| |||||||
Tangible equity (non-GAAP) (a) | 5,900 | 5,544 | 4,581 | |||||||||
Preferred stock | (2,377 | ) | (2,057 | ) | (1,503 | ) | ||||||
Noncontrolling interests | 2 | 1 | (17 | ) | ||||||||
|
|
|
|
|
| |||||||
Tangible common equity (non-GAAP) (b) | $ | 3,525 | $ | 3,488 | $ | 3,061 | ||||||
|
|
|
|
|
| |||||||
Total assets (GAAP) | $ | 53,149 | $ | 51,035 | $ | 51,123 | ||||||
Goodwill | (1,015 | ) | (1,015 | ) | (1,015 | ) | ||||||
Core deposit and other intangibles | (68 | ) | (88 | ) | (114 | ) | ||||||
|
|
|
|
|
| |||||||
Tangible assets (non-GAAP) (c) | $ | 52,066 | $ | 49,932 | $ | 49,994 | ||||||
|
|
|
|
|
| |||||||
Tangible equity ratio (a/c) | 11.33 | % | 11.10 | % | 9.16 | % | ||||||
Tangible common equity ratio (b/c) | 6.77 | % | 6.99 | % | 6.12 | % | ||||||
| (Amounts in millions) | December 31, | ||||||||||
| 2012 | 2011 | 2010 | |||||||||
| Total shareholders’ equity (GAAP) | $ | 6,049 | $ | 6,983 | $ | 6,647 | |||||
| Goodwill | (1,014 | ) | (1,015 | ) | (1,015 | ) | |||||
| Core deposit and other intangibles | (51 | ) | (68 | ) | (88 | ) | |||||
| Tangible equity (non-GAAP) (a) | 4,984 | 5,900 | 5,544 | ||||||||
| Preferred stock | (1,128 | ) | (2,377 | ) | (2,057 | ) | |||||
| Noncontrolling interests | 3 | 2 | 1 | ||||||||
| Tangible common equity (non-GAAP) (b) | $ | 3,859 | $ | 3,525 | $ | 3,488 | |||||
| Total assets (GAAP) | $ | 55,512 | $ | 53,149 | $ | 51,035 | |||||
| Goodwill | (1,014 | ) | (1,015 | ) | (1,015 | ) | |||||
| Core deposit and other intangibles | (51 | ) | (68 | ) | (88 | ) | |||||
| Tangible assets (non-GAAP) (c) | $ | 54,447 | $ | 52,066 | $ | 49,932 | |||||
| Tangible equity ratio (a/c) | 9.15 | % | 11.33 | % | 11.10 | % | |||||
| Tangible common equity ratio (b/c) | 7.09 | % | 6.77 | % | 6.99 | % | |||||
28, 2013
CONSOLIDATED BALANCE SHEETS
ZIONS BANCORPORATION AND SUBSIDIARIES
| December 31, | ||||||||
| (In thousands, except share amounts) | 2011 | 2010 | ||||||
ASSETS | ||||||||
Cash and due from banks | $ | 1,224,350 | $ | 924,126 | ||||
Money market investments: | ||||||||
Interest-bearing deposits | 7,020,895 | 4,576,008 | ||||||
Federal funds sold and security resell agreements | 102,159 | 130,305 | ||||||
Investment securities: | ||||||||
Held-to-maturity, at adjusted cost (approximate fair value $729,974 and $788,354) | 807,804 | 840,642 | ||||||
Available-for-sale, at fair value | 3,230,795 | 4,205,742 | ||||||
Trading account, at fair value | 40,273 | 48,667 | ||||||
|
|
|
| |||||
| 4,078,872 | 5,095,051 | |||||||
Loans held for sale | 201,590 | 206,286 | ||||||
Loans: | ||||||||
Loans and leases excluding FDIC-supported loans | 36,526,661 | 35,896,395 | ||||||
FDIC-supported loans | 751,091 | 971,377 | ||||||
|
|
|
| |||||
| 37,277,752 | 36,867,772 | |||||||
Less: | ||||||||
Unearned income and fees, net of related costs | 133,100 | 120,341 | ||||||
Allowance for loan losses | 1,049,958 | 1,440,341 | ||||||
|
|
|
| |||||
Loans and leases, net of allowance | 36,094,694 | 35,307,090 | ||||||
Other noninterest-bearing investments | 865,231 | 858,367 | ||||||
Premises and equipment, net | 719,276 | 720,985 | ||||||
Goodwill | 1,015,129 | 1,015,161 | ||||||
Core deposit and other intangibles | 67,830 | 87,898 | ||||||
Other real estate owned | 153,178 | 299,577 | ||||||
Other assets | 1,605,905 | 1,814,032 | ||||||
|
|
|
| |||||
| $ | 53,149,109 | $ | 51,034,886 | |||||
|
|
|
| |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 16,110,857 | $ | 13,653,929 | ||||
Interest-bearing: | ||||||||
Savings and NOW | 7,159,101 | 6,362,138 | ||||||
Money market | 14,616,740 | 15,090,833 | ||||||
Time | 3,413,550 | 4,173,449 | ||||||
Foreign | 1,575,361 | 1,654,651 | ||||||
|
|
|
| |||||
| 42,875,609 | 40,935,000 | |||||||
Securities sold, not yet purchased | 44,486 | 42,548 | ||||||
Federal funds purchased and security repurchase agreements | 608,098 | 722,258 | ||||||
Other short-term borrowings | 70,273 | 166,394 | ||||||
Long-term debt | 1,954,462 | 1,942,622 | ||||||
Reserve for unfunded lending commitments | 102,422 | 111,708 | ||||||
Other liabilities | 510,531 | 467,142 | ||||||
|
|
|
| |||||
Total liabilities | 46,165,881 | 44,387,672 | ||||||
|
|
|
| |||||
Shareholders’ equity: | ||||||||
Preferred stock, without par value, authorized 4,400,000 shares | 2,377,560 | 2,056,672 | ||||||
Common stock, without par value; authorized 350,000,000 shares; issued and | 4,163,242 | 4,163,619 | ||||||
Retained earnings | 1,036,590 | 889,284 | ||||||
Accumulated other comprehensive income (loss) | (592,084 | ) | (461,296 | ) | ||||
|
|
|
| |||||
Controlling interest shareholders’ equity | 6,985,308 | 6,648,279 | ||||||
Noncontrolling interests | (2,080 | ) | (1,065 | ) | ||||
|
|
|
| |||||
Total shareholders’ equity | 6,983,228 | 6,647,214 | ||||||
|
|
|
| |||||
| $ | 53,149,109 | $ | 51,034,886 | |||||
|
|
|
| |||||
28, 2013
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS | |||||||
| (In thousands, except share amounts) | December 31, | ||||||
| 2012 | 2011 | ||||||
| ASSETS | |||||||
| Cash and due from banks | $ | 1,841,907 | $ | 1,224,350 | |||
| Money market investments: | |||||||
| Interest-bearing deposits | 5,978,978 | 7,020,895 | |||||
| Federal funds sold and security resell agreements | 2,775,354 | 102,159 | |||||
| Investment securities: | |||||||
| Held-to-maturity, at adjusted cost (approximate fair value $674,741 and $729,974) | 756,909 | 807,804 | |||||
| Available-for-sale, at fair value | 3,091,310 | 3,230,795 | |||||
| Trading account, at fair value | 28,290 | 40,273 | |||||
| 3,876,509 | 4,078,872 | ||||||
| Loans held for sale | 251,651 | 201,590 | |||||
| Loans, net of unearned income and fees: | |||||||
| Loans and leases | 37,137,006 | 36,507,039 | |||||
| FDIC-supported loans | 528,241 | 750,870 | |||||
| 37,665,247 | 37,257,909 | ||||||
| Less allowance for loan losses | 896,087 | 1,051,685 | |||||
| Loans, net of allowance | 36,769,160 | 36,206,224 | |||||
| Other noninterest-bearing investments | 855,462 | 865,231 | |||||
| Premises and equipment, net | 708,882 | 719,276 | |||||
| Goodwill | 1,014,129 | 1,015,129 | |||||
| Core deposit and other intangibles | 50,818 | 67,830 | |||||
| Other real estate owned | 98,151 | 153,178 | |||||
| Other assets | 1,290,917 | 1,494,375 | |||||
| $ | 55,511,918 | $ | 53,149,109 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Deposits: | |||||||
| Noninterest-bearing demand | $ | 18,469,458 | $ | 16,110,857 | |||
| Interest-bearing: | |||||||
| Savings and money market | 22,896,624 | 21,775,841 | |||||
| Time | 2,962,931 | 3,413,550 | |||||
| Foreign | 1,804,060 | 1,575,361 | |||||
| 46,133,073 | 42,875,609 | ||||||
| Securities sold, not yet purchased | 26,735 | 44,486 | |||||
| Federal funds purchased and security repurchase agreements | 320,478 | 608,098 | |||||
| Other short-term borrowings | 5,409 | 70,273 | |||||
| Long-term debt | 2,337,113 | 1,954,462 | |||||
| Reserve for unfunded lending commitments | 106,809 | 102,422 | |||||
| Other liabilities | 533,660 | 510,531 | |||||
| Total liabilities | 49,463,277 | 46,165,881 | |||||
| Shareholders’ equity: | |||||||
| Preferred stock, without par value, authorized 4,400,000 shares | 1,128,302 | 2,377,560 | |||||
Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 184,199,198 and 184,135,388 shares | 4,166,109 | 4,163,242 | |||||
| Retained earnings | 1,203,815 | 1,036,590 | |||||
| Accumulated other comprehensive income (loss) | (446,157 | ) | (592,084 | ) | |||
| Controlling interest shareholders’ equity | 6,052,069 | 6,985,308 | |||||
| Noncontrolling interests | (3,428 | ) | (2,080 | ) | |||
| Total shareholders’ equity | 6,048,641 | 6,983,228 | |||||
| $ | 55,511,918 | $ | 53,149,109 | ||||
CONSOLIDATED STATEMENTS OF INCOME
ZIONS BANCORPORATION AND SUBSIDIARIES
| Year Ended December 31, | ||||||||||||
| (In thousands, except per share amounts) | 2011 | 2010 | 2009 | |||||||||
Interest income: | ||||||||||||
Interest and fees on loans | $ | 2,066,274 | $ | 2,185,239 | $ | 2,350,050 | ||||||
Interest on money market investments | 13,832 | 10,946 | 7,914 | |||||||||
Interest on securities: | ||||||||||||
Held-to-maturity | 35,716 | 33,405 | 54,327 | |||||||||
Available-for-sale | 87,105 | 88,035 | 100,307 | |||||||||
Trading account | 2,000 | 2,220 | 2,728 | |||||||||
|
|
|
|
|
| |||||||
Total interest income | 2,204,927 | 2,319,845 | 2,515,326 | |||||||||
|
|
|
|
|
| |||||||
Interest expense: | ||||||||||||
Interest on deposits | 128,479 | 196,112 | 424,684 | |||||||||
Interest on short-term borrowings | 6,685 | 12,561 | 14,720 | |||||||||
Interest on long-term debt | 297,232 | 383,783 | 178,390 | |||||||||
|
|
|
|
|
| |||||||
Total interest expense | 432,396 | 592,456 | 617,794 | |||||||||
|
|
|
|
|
| |||||||
Net interest income | 1,772,531 | 1,727,389 | 1,897,532 | |||||||||
Provision for loan losses | 74,407 | 852,138 | 2,016,927 | |||||||||
|
|
|
|
|
| |||||||
Net interest income after provision for loan losses | 1,698,124 | 875,251 | (119,395 | ) | ||||||||
|
|
|
|
|
| |||||||
Noninterest income: | ||||||||||||
Service charges and fees on deposit accounts | 174,435 | 199,748 | 212,562 | |||||||||
Other service charges, commissions and fees | 169,490 | 165,341 | 156,539 | |||||||||
Trust and wealth management income | 26,683 | 27,452 | 29,949 | |||||||||
Capital markets and foreign exchange | 31,407 | 37,636 | 50,313 | |||||||||
Dividends and other investment income | 42,428 | 33,074 | 26,631 | |||||||||
Loan sales and servicing income | 28,072 | 29,382 | 22,261 | |||||||||
Fair value and nonhedge derivative income (loss) | (4,980 | ) | (15,827 | ) | 113,779 | |||||||
Equity securities gains (losses), net | 6,511 | (5,993 | ) | (1,825 | ) | |||||||
Fixed income securities gains (losses), net | 11,868 | 11,055 | (3,846 | ) | ||||||||
Impairment losses on investment securities: | ||||||||||||
Impairment losses on investment securities | (77,325 | ) | (156,452 | ) | (569,866 | ) | ||||||
Noncredit-related losses on securities not expected to be sold (recognized in other | 43,642 | 71,097 | 289,403 | |||||||||
|
|
|
|
|
| |||||||
Net impairment losses on investment securities | (33,683 | ) | (85,355 | ) | (280,463 | ) | ||||||
Valuation losses on securities purchased | – | – | (212,092 | ) | ||||||||
Gain on subordinated debt modification | – | – | 508,945 | |||||||||
Gain on subordinated debt exchange | – | 14,471 | – | |||||||||
Acquisition related gains | – | – | 169,186 | |||||||||
Other | 29,607 | 29,478 | 12,162 | |||||||||
|
|
|
|
|
| |||||||
Total noninterest income | 481,838 | 440,462 | 804,101 | |||||||||
|
|
|
|
|
| |||||||
Noninterest expense: | ||||||||||||
Salaries and employee benefits | 874,293 | 825,344 | 818,837 | |||||||||
Occupancy, net | 112,537 | 113,559 | 112,201 | |||||||||
Furniture and equipment | 105,703 | 101,061 | 99,878 | |||||||||
Other real estate expense | 77,570 | 144,815 | 110,800 | |||||||||
Credit related expense | 61,629 | 71,205 | 44,979 | |||||||||
Provision for unfunded lending commitments | (9,286 | ) | (4,737 | ) | 65,511 | |||||||
Legal and professional services | 38,992 | 39,540 | 37,197 | |||||||||
Advertising | 27,164 | 24,820 | 22,982 | |||||||||
FDIC premiums | 63,918 | 101,990 | 100,517 | |||||||||
Amortization of core deposit and other intangibles | 20,070 | 25,517 | 31,674 | |||||||||
Other | 286,099 | 275,767 | 226,934 | |||||||||
|
|
|
|
|
| |||||||
Total noninterest expense | 1,658,689 | 1,718,881 | 1,671,510 | |||||||||
|
|
|
|
|
| |||||||
Impairment loss on goodwill | – | – | 636,216 | |||||||||
|
|
|
|
|
| |||||||
Income (loss) before income taxes | 521,273 | (403,168 | ) | (1,623,020 | ) | |||||||
Income taxes (benefit) | 198,583 | (106,819 | ) | (401,343 | ) | |||||||
|
|
|
|
|
| |||||||
Net income (loss) | 322,690 | (296,349 | ) | (1,221,677 | ) | |||||||
Net income (loss) applicable to noncontrolling interests | (1,114 | ) | (3,621 | ) | (5,566 | ) | ||||||
|
|
|
|
|
| |||||||
Net income (loss) applicable to controlling interest | 323,804 | (292,728 | ) | (1,216,111 | ) | |||||||
Preferred stock dividends | (170,414 | ) | (122,884 | ) | (102,969 | ) | ||||||
Preferred stock redemption | – | 3,107 | 84,633 | |||||||||
|
|
|
|
|
| |||||||
Net earnings (loss) applicable to common shareholders | $ | 153,390 | $ | (412,505 | ) | $ | (1,234,447 | ) | ||||
|
|
|
|
|
| |||||||
Weighted average common shares outstanding during the year: | ||||||||||||
Basic shares | 182,393 | 166,054 | 124,443 | |||||||||
Diluted shares | 182,605 | 166,054 | 124,443 | |||||||||
Net earnings (loss) per common share: | ||||||||||||
Basic | $ | 0.83 | $ | (2.48 | ) | $ | (9.92 | ) | ||||
Diluted | 0.83 | (2.48 | ) | (9.92 | ) | |||||||
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME | |||||||||||
| (In thousands, except per share amounts) | Year Ended December 31, | ||||||||||
| 2012 | 2011 | 2010 | |||||||||
| Interest income: | |||||||||||
| Interest and fees on loans | $ | 1,889,884 | $ | 2,049,928 | $ | 2,172,093 | |||||
| Interest on money market investments | 21,080 | 13,832 | 10,946 | ||||||||
| Interest on securities: | |||||||||||
| Held-to-maturity | 34,751 | 35,716 | 33,405 | ||||||||
| Available-for-sale | 92,261 | 87,105 | 88,035 | ||||||||
| Trading account | 746 | 2,000 | 2,220 | ||||||||
| Total interest income | 2,038,722 | 2,188,581 | 2,306,699 | ||||||||
| Interest expense: | |||||||||||
| Interest on deposits | 80,146 | 128,479 | 196,112 | ||||||||
| Interest on short-term borrowings | 1,406 | 6,685 | 12,561 | ||||||||
| Interest on long-term debt | 225,230 | 297,232 | 383,783 | ||||||||
| Total interest expense | 306,782 | 432,396 | 592,456 | ||||||||
| Net interest income | 1,731,940 | 1,756,185 | 1,714,243 | ||||||||
| Provision for loan losses | 14,227 | 74,532 | 852,693 | ||||||||
| Net interest income after provision for loan losses | 1,717,713 | 1,681,653 | 861,550 | ||||||||
| Noninterest income: | |||||||||||
| Service charges and fees on deposit accounts | 176,401 | 174,435 | 199,748 | ||||||||
| Other service charges, commissions and fees | 174,420 | 185,836 | 178,487 | ||||||||
| Trust and wealth management income | 28,402 | 26,683 | 27,452 | ||||||||
| Capital markets and foreign exchange | 26,810 | 31,407 | 37,636 | ||||||||
| Dividends and other investment income | 55,825 | 42,428 | 33,074 | ||||||||
| Loan sales and servicing income | 39,929 | 28,072 | 29,382 | ||||||||
| Fair value and nonhedge derivative loss | (21,782 | ) | (4,980 | ) | (15,827 | ) | |||||
| Equity securities gains (losses), net | 11,253 | 6,511 | (5,993 | ) | |||||||
| Fixed income securities gains, net | 19,544 | 11,868 | 11,055 | ||||||||
| Impairment losses on investment securities: | |||||||||||
| Impairment losses on investment securities | (166,257 | ) | (77,325 | ) | (156,452 | ) | |||||
| Noncredit-related losses on securities not expected to be sold (recognized in other comprehensive income) | 62,196 | 43,642 | 71,097 | ||||||||
| Net impairment losses on investment securities | (104,061 | ) | (33,683 | ) | (85,355 | ) | |||||
| Gain on subordinated debt exchange | — | — | 14,471 | ||||||||
| Other | 13,129 | 29,607 | 29,478 | ||||||||
| Total noninterest income | 419,870 | 498,184 | 453,608 | ||||||||
| Noninterest expense: | |||||||||||
| Salaries and employee benefits | 885,661 | 874,293 | 825,344 | ||||||||
| Occupancy, net | 112,947 | 112,537 | 113,559 | ||||||||
| Furniture and equipment | 108,990 | 105,703 | 101,061 | ||||||||
| Other real estate expense | 19,723 | 77,570 | 144,815 | ||||||||
| Credit-related expense | 50,518 | 61,629 | 71,205 | ||||||||
| Provision for unfunded lending commitments | 4,387 | (9,286 | ) | (4,737 | ) | ||||||
| Legal and professional services | 52,509 | 38,992 | 39,540 | ||||||||
| Advertising | 25,720 | 27,164 | 24,820 | ||||||||
| FDIC premiums | 43,401 | 63,918 | 101,990 | ||||||||
| Amortization of core deposit and other intangibles | 17,010 | 20,070 | 25,517 | ||||||||
| Other | 275,151 | 285,974 | 275,212 | ||||||||
| Total noninterest expense | 1,596,017 | 1,658,564 | 1,718,326 | ||||||||
| Income (loss) before income taxes | 541,566 | 521,273 | (403,168 | ) | |||||||
| Income taxes (benefit) | 193,416 | 198,583 | (106,819 | ) | |||||||
| Net income (loss) | 348,150 | 322,690 | (296,349 | ) | |||||||
| Net loss applicable to noncontrolling interests | (1,366 | ) | (1,114 | ) | (3,621 | ) | |||||
| Net income (loss) applicable to controlling interest | 349,516 | 323,804 | (292,728 | ) | |||||||
| Preferred stock dividends | (170,885 | ) | (170,414 | ) | (122,884 | ) | |||||
| Preferred stock redemption | — | — | 3,107 | ||||||||
| Net earnings (loss) applicable to common shareholders | $ | 178,631 | $ | 153,390 | $ | (412,505 | ) | ||||
| Weighted average common shares outstanding during the year: | |||||||||||
| Basic shares | 183,081 | 182,393 | 166,054 | ||||||||
| Diluted shares | 183,236 | 182,605 | 166,054 | ||||||||
| Net earnings (loss) per common share: | |||||||||||
| Basic | $ | 0.97 | $ | 0.83 | $ | (2.48 | ) | ||||
| Diluted | 0.97 | 0.83 | (2.48 | ) | |||||||
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
ZIONS BANCORPORATION AND SUBSIDIARIES
| Preferred stock | Common stock | Retained earnings | Accumulated other comprehensive income (loss) | Noncontrolling interests | Total shareholders’ equity | |||||||||||||||||||||||
| (In thousands, except share and per share amounts) | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2008 | $ | 1,581,834 | 115,344,813 | $ | 2,599,916 | $ | 2,418,904 | $ | (98,958 | ) | $ | 27,320 | $ | 6,529,016 | ||||||||||||||
Cumulative effect of change in accounting | 137,462 | (137,462 | ) | – | ||||||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||
Net loss | (1,216,111 | ) | (5,566 | ) | (1,221,677 | ) | ||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||
Net realized and unrealized holding losses on investments and retained interests | (65,037 | ) | ||||||||||||||||||||||||||
Reclassification for net losses on investments included in earnings | 162,206 | |||||||||||||||||||||||||||
Noncredit-related impairment losses on | (174,244 | ) | ||||||||||||||||||||||||||
Accretion of securities with noncredit-related impairment losses not expected to be sold | 996 | |||||||||||||||||||||||||||
Net unrealized losses on derivative | (128,597 | ) | ||||||||||||||||||||||||||
Pension and postretirement | 4,197 | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Other comprehensive loss | (200,479 | ) | (200,479 | ) | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total comprehensive loss | (1,422,156 | ) | ||||||||||||||||||||||||||
Preferred stock redemption | (100,511 | ) | 1,763 | 52,266 | (46,482 | ) | ||||||||||||||||||||||
Preferred stock exchanged for common stock | (71,537 | ) | 2,816,834 | 38,486 | 32,367 | (684 | ) | |||||||||||||||||||||
Subordinated debt converted to preferred stock | 74,438 | (10,998 | ) | 63,440 | ||||||||||||||||||||||||
Issuance of common stock | 31,741,425 | 464,110 | 464,110 | |||||||||||||||||||||||||
Subordinated debt modification | 202,814 | 202,814 | ||||||||||||||||||||||||||
Net activity under employee plans and related tax benefits | 521,998 | 22,326 | 22,326 | |||||||||||||||||||||||||
Dividends on preferred stock | 18,560 | (102,969 | ) | (84,409 | ) | |||||||||||||||||||||||
Dividends on common stock, $0.10 per share | (11,862 | ) | (11,862 | ) | ||||||||||||||||||||||||
Change in deferred compensation | (1,701 | ) | (1,701 | ) | ||||||||||||||||||||||||
Other changes in noncontrolling interests | (4,155 | ) | (4,155 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at December 31, 2009 | 1,502,784 | 150,425,070 | 3,318,417 | 1,308,356 | (436,899 | ) | 17,599 | 5,710,257 | ||||||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||||||
Net loss | (292,728 | ) | (3,621 | ) | (296,349 | ) | ||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||
Net realized and unrealized holding gains on investments | 4,248 | |||||||||||||||||||||||||||
Reclassification for net losses on investments included in earnings | 45,689 | |||||||||||||||||||||||||||
Noncredit-related impairment losses on | (43,920 | ) | ||||||||||||||||||||||||||
Accretion of securities with noncredit-related impairment losses not expected to be sold | 131 | |||||||||||||||||||||||||||
Net unrealized losses on derivative instruments | (37,357 | ) | ||||||||||||||||||||||||||
Pension and postretirement | 6,812 | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Other comprehensive loss | (24,397 | ) | (24,397 | ) | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total comprehensive loss | (320,746 | ) | ||||||||||||||||||||||||||
Subordinated debt converted to preferred stock | 399,785 | (56,834 | ) | 342,951 | ||||||||||||||||||||||||
Issuance of preferred stock | 142,500 | (3,843 | ) | 138,657 | ||||||||||||||||||||||||
Preferred stock exchanged for common stock | (8,615 | ) | 224,903 | 5,508 | 3,107 | – | ||||||||||||||||||||||
Issuance of common stock warrants | 214,563 | 214,563 | ||||||||||||||||||||||||||
Subordinated debt exchanged for common stock | 2,165,391 | 46,902 | 46,902 | |||||||||||||||||||||||||
Issuance of common stock | 29,553,957 | 623,469 | 623,469 | |||||||||||||||||||||||||
Net activity under employee plans and related | 414,765 | 15,437 | 15,437 | |||||||||||||||||||||||||
Dividends on preferred stock | 20,218 | (122,884 | ) | (102,666 | ) | |||||||||||||||||||||||
Dividends on common stock, $0.04 per share | (6,650 | ) | (6,650 | ) | ||||||||||||||||||||||||
Change in deferred compensation | 83 | 83 | ||||||||||||||||||||||||||
Other changes in noncontrolling interests | (15,043 | ) | (15,043 | ) | ||||||||||||||||||||||||
|
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|
|
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| |||||||||||||||
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME(Continued)
ZIONS BANCORPORATION AND SUBSIDIARIES
| Preferred stock | Common stock | Retained earnings | Accumulated other comprehensive income (loss) | Noncontrolling interests | Total shareholders’ equity | |||||||||||||||||||||||
| (In thousands, except share and per share amounts) | Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2010 | 2,056,672 | 182,784,086 | 4,163,619 | 889,284 | (461,296 | ) | (1,065 | ) | 6,647,214 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income (loss) | 323,804 | (1,114 | ) | 322,690 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||||
Net realized and unrealized holding losses on investments | (77,280 | ) | ||||||||||||||||||||||||||
Reclassification for net losses on investments included in earnings | 12,852 | |||||||||||||||||||||||||||
Noncredit-related impairment losses on | (26,481 | ) | ||||||||||||||||||||||||||
Accretion of securities with noncredit-related impairment losses not expected to be sold | 410 | |||||||||||||||||||||||||||
Net unrealized losses on derivative | (21,298 | ) | ||||||||||||||||||||||||||
Pension and postretirement | (18,991 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Other comprehensive loss | (130,788 | ) | (130,788 | ) | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
Total comprehensive income | 191,902 | |||||||||||||||||||||||||||
Subordinated debt converted to preferred stock | 299,248 | (43,139 | ) | 256,109 | ||||||||||||||||||||||||
Issuance of common stock | 1,067,540 | 25,048 | 25,048 | |||||||||||||||||||||||||
Net activity under employee plans and related tax benefits | 283,762 | 17,714 | 17,714 | |||||||||||||||||||||||||
Dividends on preferred stock | 21,640 | (170,414 | ) | (148,774 | ) | |||||||||||||||||||||||
Dividends on common stock, $0.04 per share | (7,361 | ) | (7,361 | ) | ||||||||||||||||||||||||
Change in deferred compensation | 1,277 | 1,277 | ||||||||||||||||||||||||||
Other changes in noncontrolling interests | 99 | 99 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at December 31, 2011 | $ | 2,377,560 | 184,135,388 | $ | 4,163,242 | $ | 1,036,590 | $ | (592,084) | $ | (2,080 | ) | $ | 6,983,228 | ||||||||||||||
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|
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|
|
|
|
| |||||||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||
| (In thousands) | Year Ended December 31, | ||||||||||
| 2012 | 2011 | 2010 | |||||||||
| Net income (loss) | $ | 348,150 | $ | 322,690 | $ | (296,349 | ) | ||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Net realized and unrealized holding gains (losses) on investments | 129,330 | (77,280 | ) | 4,248 | |||||||
| Reclassification for net losses on investments included in earnings | 51,360 | 12,852 | 45,689 | ||||||||
| Noncredit-related impairment losses on securities not expected to be sold | (38,406 | ) | (26,481 | ) | (43,920 | ) | |||||
| Accretion of securities with noncredit-related impairment losses not expected to be sold | 6,863 | 410 | 131 | ||||||||
| Net unrealized losses on derivative instruments | (7,610 | ) | (21,298 | ) | (37,357 | ) | |||||
| Pension and postretirement | 4,390 | (18,991 | ) | 6,812 | |||||||
| Other comprehensive income (loss) | 145,927 | (130,788 | ) | (24,397 | ) | ||||||
| Comprehensive income (loss) | 494,077 | 191,902 | (320,746 | ) | |||||||
| Comprehensive loss applicable to noncontrolling interests | (1,366 | ) | (1,114 | ) | (3,621 | ) | |||||
| Comprehensive income (loss) applicable to controlling interest | $ | 495,443 | $ | 193,016 | $ | (317,125 | ) | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
ZIONS BANCORPORATION AND SUBSIDIARIES
| Year Ended December 31, | ||||||||||||
| (In thousands) | 2011 | 2010 | 2009 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
Net income (loss) | $ | 322,690 | $ | (296,349 | ) | $ | (1,221,677 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Impairment and valuation losses on investment securities, goodwill, and | 35,686 | 87,105 | 1,128,771 | |||||||||
Gains on subordinated debt modification and exchange | – | (14,471 | ) | (508,945 | ) | |||||||
Gains from acquisitions and divestitures | – | (13,703 | ) | (169,186 | ) | |||||||
Provision for credit losses | 65,121 | 847,401 | 2,082,438 | |||||||||
Depreciation and amortization | 299,948 | 372,754 | 213,040 | |||||||||
Deferred income tax expense (benefit) | 115,604 | (28,665 | ) | (15,071 | ) | |||||||
Net decrease (increase) in trading securities | 8,394 | (25,124 | ) | 18,521 | ||||||||
Net decrease (increase) in loans held for sale | 50,696 | (32,953 | ) | (396 | ) | |||||||
Net write-down and gains/losses from sales of other real estate owned | 58,676 | 136,232 | 92,920 | |||||||||
Change in other liabilities | 19,370 | 241,936 | (423,154 | ) | ||||||||
Change in other assets | 122,573 | 220,441 | (146,722 | ) | ||||||||
Other, net | (1,691 | ) | (33,610 | ) | 7,925 | |||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 1,097,067 | 1,460,994 | 1,058,464 | |||||||||
|
|
|
|
|
| |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Net decrease (increase) in money market investments | (2,416,741 | ) | (3,974,808 | ) | 1,975,107 | |||||||
Proceeds from maturities and paydowns of investment securities held-to-maturity | 101,893 | 154,906 | 166,808 | |||||||||
Purchases of investment securities held-to-maturity | (69,171 | ) | (86,568 | ) | (76,322 | ) | ||||||
Proceeds from sales, maturities, and paydowns of investment securities available-for-sale | 2,206,881 | 1,084,074 | 1,261,655 | |||||||||
Purchases of investment securities available-for-sale | (1,423,141 | ) | (1,717,518 | ) | (1,852,711 | ) | ||||||
Proceeds from sales of loans and leases | 17,609 | 154,428 | 104,304 | |||||||||
Net loan and lease collections (originations) | (1,214,007 | ) | 1,753,525 | 1,412,754 | ||||||||
Proceeds from surrender of bank-owned life insurance contracts | – | 210,726 | – | |||||||||
Net decrease (increase) in other noninterest-bearing investments | 19,407 | 29,493 | (19,580 | ) | ||||||||
Net purchases of premises and equipment | (77,669 | ) | (79,071 | ) | (97,135 | ) | ||||||
Proceeds from sales of other real estate owned | 362,495 | 523,967 | 315,229 | |||||||||
Net cash from acquisitions and divestitures | – | 21,149 | 452,192 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) investing activities | (2,492,444 | ) | (1,925,697 | ) | 3,642,301 | |||||||
|
|
|
|
|
| |||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Net increase (decrease) in deposits | 1,940,697 | (903,224 | ) | (2,154,495 | ) | |||||||
Net change in short-term funds borrowed | (208,541 | ) | (19,541 | ) | (3,007,062 | ) | ||||||
Repayments of debt over 90 days and up to one year | – | – | (236,811 | ) | ||||||||
Proceeds from issuance of long-term debt | 106,065 | 150,413 | 704,022 | |||||||||
Repayments of long-term debt | (8,663 | ) | (73,558 | ) | (408,531 | ) | ||||||
Cash paid for preferred stock redemption | – | – | (47,166 | ) | ||||||||
Proceeds from issuance of preferred stock, common stock, and | 25,686 | 977,145 | 464,110 | |||||||||
Dividends paid on common and preferred stock | (156,135 | ) | (109,316 | ) | (96,271 | ) | ||||||
Other, net | (3,508 | ) | (3,279 | ) | (24,348 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) financing activities | 1,695,601 | 18,640 | (4,806,552 | ) | ||||||||
|
|
|
|
|
| |||||||
Net increase (decrease) in cash and due from banks | 300,224 | (446,063 | ) | (105,787 | ) | |||||||
Cash and due from banks at beginning of year | 924,126 | 1,370,189 | 1,475,976 | |||||||||
|
|
|
|
|
| |||||||
Cash and due from banks at end of year | $ | 1,224,350 | $ | 924,126 | $ | 1,370,189 | ||||||
|
|
|
|
|
| |||||||
Cash paid for interest | $ | 263,338 | $ | 358,156 | $ | 577,799 | ||||||
Net cash paid (refund received) for income taxes | 3,743 | (324,804 | ) | (131,187 | ) | |||||||
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | Preferred stock | Common stock | Retained earnings | Accumulated other comprehensive income (loss) | Noncontrolling interests | Total shareholders’ equity | ||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||
| Balance at December 31, 2009 | $ | 1,502,784 | 150,425,070 | $ | 3,318,417 | $ | 1,308,356 | $ | (436,899 | ) | $ | 17,599 | $ | 5,710,257 | ||||||||||||||||
| Net loss | (292,728 | ) | (3,621 | ) | (296,349 | ) | ||||||||||||||||||||||||
| Other comprehensive loss, net of tax | (24,397 | ) | (24,397 | ) | ||||||||||||||||||||||||||
| Subordinated debt converted to preferred stock | 399,785 | (56,834 | ) | 342,951 | ||||||||||||||||||||||||||
| Issuance of preferred stock | 142,500 | (3,843 | ) | 138,657 | ||||||||||||||||||||||||||
| Preferred stock exchanged for common stock | (8,615 | ) | 224,903 | 5,508 | 3,107 | — | ||||||||||||||||||||||||
| Issuance of common stock warrants | 214,563 | 214,563 | ||||||||||||||||||||||||||||
| Subordinated debt exchanged for common stock | 2,165,391 | 46,902 | 46,902 | |||||||||||||||||||||||||||
| Issuance of common stock | 29,553,957 | 623,469 | 623,469 | |||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 414,765 | 15,437 | 15,437 | |||||||||||||||||||||||||||
| Dividends on preferred stock | 20,218 | (122,884 | ) | (102,666 | ) | |||||||||||||||||||||||||
| Dividends on common stock, $0.04 per share | (6,650 | ) | (6,650 | ) | ||||||||||||||||||||||||||
| Change in deferred compensation | 83 | 83 | ||||||||||||||||||||||||||||
| Other changes in noncontrolling interests | (15,043 | ) | (15,043 | ) | ||||||||||||||||||||||||||
| Balance at December 31, 2010 | 2,056,672 | 182,784,086 | 4,163,619 | 889,284 | (461,296 | ) | (1,065 | ) | 6,647,214 | |||||||||||||||||||||
| Net income (loss) | 323,804 | (1,114 | ) | 322,690 | ||||||||||||||||||||||||||
| Other comprehensive loss, net of tax | (130,788 | ) | (130,788 | ) | ||||||||||||||||||||||||||
| Subordinated debt converted to preferred stock | 299,248 | (43,139 | ) | 256,109 | ||||||||||||||||||||||||||
| Issuance of common stock | 1,067,540 | 25,048 | 25,048 | |||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 283,762 | 17,714 | 17,714 | |||||||||||||||||||||||||||
| Dividends on preferred stock | 21,640 | (170,414 | ) | (148,774 | ) | |||||||||||||||||||||||||
| Dividends on common stock, $0.04 per share | (7,361 | ) | (7,361 | ) | ||||||||||||||||||||||||||
| Change in deferred compensation | 1,277 | 1,277 | ||||||||||||||||||||||||||||
| Other changes in noncontrolling interests | 99 | 99 | ||||||||||||||||||||||||||||
| 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) | 349,516 | (1,366 | ) | 348,150 | ||||||||||||||||||||||||||
| Other comprehensive income, net of tax | 145,927 | 145,927 | ||||||||||||||||||||||||||||
| Issuance of preferred stock | 143,750 | (2,408 | ) | 141,342 | ||||||||||||||||||||||||||
| Preferred stock redemption | (1,542,500 | ) | 3,830 | (3,830 | ) | (1,542,500 | ) | |||||||||||||||||||||||
| Subordinated debt converted to preferred stock | 104,796 | (15,232 | ) | 89,564 | ||||||||||||||||||||||||||
| Net activity under employee plans and related tax benefits | 63,810 | 16,677 | 16,677 | |||||||||||||||||||||||||||
| Dividends on preferred stock | 44,696 | (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, 2012 | $ | 1,128,302 | 184,199,198 | $ | 4,166,109 | $ | 1,203,815 | $ | (446,157 | ) | $ | (3,428 | ) | $ | 6,048,641 | |||||||||||||||
ZIONS BANCORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
| (In thousands) | Year Ended December 31, | ||||||||||
| 2012 | 2011 | 2010 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net income (loss) | $ | 348,150 | $ | 322,690 | $ | (296,349 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| Net impairment losses on investment securities, goodwill, and long-lived assets | 106,545 | 35,686 | 87,105 | ||||||||
| Gain on subordinated debt exchanged for common stock | — | — | (14,471 | ) | |||||||
| Gains on divestitures | (2,510 | ) | — | (13,703 | ) | ||||||
| Provision for credit losses | 18,614 | 65,246 | 847,956 | ||||||||
| Depreciation and amortization | 214,617 | 299,948 | 372,754 | ||||||||
| Deferred income tax expense (benefit) | 9,788 | 115,604 | (28,665 | ) | |||||||
| Net write-downs of and gains/losses from sales of other real estate owned | 17,166 | 58,676 | 136,232 | ||||||||
| Net decrease (increase) in trading securities | 11,983 | 8,394 | (25,124 | ) | |||||||
| Net decrease (increase) in loans held for sale | (31,445 | ) | 50,696 | (32,953 | ) | ||||||
| Change in other liabilities | 27,439 | 19,370 | 241,936 | ||||||||
| Change in other assets | 71,772 | 153,592 | 230,522 | ||||||||
| Other, net | (26,492 | ) | (1,691 | ) | (33,610 | ) | |||||
| Net cash provided by operating activities | 765,627 | 1,128,211 | 1,471,630 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Net increase in money market investments | (1,631,278 | ) | (2,416,741 | ) | (3,974,808 | ) | |||||
Proceeds from maturities and paydowns of investment securities held-to-maturity | 128,278 | 101,893 | 154,906 | ||||||||
| Purchases of investment securities held-to-maturity | (86,790 | ) | (69,171 | ) | (86,568 | ) | |||||
Proceeds from sales, maturities, and paydowns of investment securities available-for-sale | 1,212,047 | 2,206,881 | 1,084,074 | ||||||||
| Purchases of investment securities available-for-sale | (932,034 | ) | (1,423,141 | ) | (1,717,518 | ) | |||||
| Proceeds from sales of loans and leases | 66,223 | 17,609 | 154,428 | ||||||||
| Net loan and lease collections (originations) | (821,457 | ) | (1,245,151 | ) | 1,742,889 | ||||||
| Proceeds from surrender of bank-owned life insurance contracts | — | — | 210,726 | ||||||||
| Net decrease in other noninterest-bearing investments | 40,014 | 19,407 | 29,493 | ||||||||
| Net purchases of premises and equipment | (68,894 | ) | (77,669 | ) | (79,071 | ) | |||||
| Proceeds from sales of other real estate owned | 204,818 | 362,495 | 523,967 | ||||||||
| Net cash received from (paid for) divestitures | (19,901 | ) | — | 21,149 | |||||||
| Net cash used in investing activities | (1,908,974 | ) | (2,523,588 | ) | (1,936,333 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Net increase (decrease) in deposits | 3,286,823 | 1,940,697 | (903,224 | ) | |||||||
| Net change in short-term funds borrowed | (370,264 | ) | (208,541 | ) | (19,541 | ) | |||||
| Proceeds from issuance of long-term debt | 757,610 | 106,065 | 150,413 | ||||||||
| Repayments of long-term debt | (372,891 | ) | (8,663 | ) | (73,558 | ) | |||||
| Cash paid for preferred stock redemption | (1,542,500 | ) | — | — | |||||||
Proceeds from the issuance of common stock, preferred stock, and common stock warrants | 143,240 | 25,686 | 977,145 | ||||||||
| Dividends paid on common and preferred stock | (133,581 | ) | (156,135 | ) | (109,316 | ) | |||||
| Other, net | (7,533 | ) | (3,508 | ) | (3,279 | ) | |||||
| Net cash provided by financing activities | 1,760,904 | 1,695,601 | 18,640 | ||||||||
| Net increase (decrease) in cash and due from banks | 617,557 | 300,224 | (446,063 | ) | |||||||
| Cash and due from banks at beginning of year | 1,224,350 | 924,126 | 1,370,189 | ||||||||
| Cash and due from banks at end of year | $ | 1,841,907 | $ | 1,224,350 | $ | 924,126 | |||||
| Cash paid for interest | $ | 214,673 | $ | 263,338 | $ | 358,156 | |||||
| Net cash paid (refunds received) for income taxes | 183,348 | 3,743 | (324,804 | ) | |||||||
ZIONS BANCORPORATION AND SUBSIDIARIES
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Business
Zions Bancorporation (“the Parent”) is a financial holding company headquartered in Salt Lake City, Utah, which provides a full range of banking and related services through its banking subsidiaries in ten Western and Southwestern states as follows: Zions First National Bank (“Zions Bank”), in Utah and Idaho; California Bank & Trust (“CB&T”); Amegy Corporation (“Amegy”) and its subsidiary, Amegy Bank, in Texas; National Bank of Arizona (“NBA”); Nevada State Bank (“NSB”); Vectra Bank Colorado (“Vectra”), in Colorado and New Mexico; The Commerce Bank of Washington (“TCBW”); and The Commerce Bank of Oregon (“TCBO”). The Parent and its subsidiary banks also ownsown and operatesoperate certain nonbank subsidiaries that engage in financial related services. One of these subsidiaries, Welman Holdings, Inc. (“Welman”), provides wealth management services.
ASC 810,Consolidation, requires consolidation of a
on its behalf, take possession of the underlying securities. The fair value of such securities is monitored throughout the 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 a liability and included in the balance sheet as securities sold, not yet purchased. At
December 31,basis.
20.
Investments
Periodic reviews are conducted for impairment by comparing carrying values with estimates of fair value determined according to the previous discussion. See further discussion in Note 20.
7.
16.
14.
2. OTHER RECENT ACCOUNTING PRONOUNCEMENTS
See further discussion in Note 15.
| 2. | CERTAIN RECENT ACCOUNTING PRONOUNCEMENTS |
In June 2011, the FASB issued ASU 2011-05,Presentation of Comprehensive Income. This new accounting guidance under ASC 220,Comprehensive Income, provides convergence to IFRS and no longer allows presentation of OCI in the statement of changes in shareholders’ equity. Companies may present OCI in a continuous statement of comprehensive income or in a separate statement consecutive to the statement of income. For public entities, the new guidance is effective on a retrospective basis for interim and annual periods beginning after December 15, 2011.
In December 2011, the FASB issued ASU 2011-12,Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. This ASU under ASC 220 defers the requirements of ASU 2011-05 to display reclassification adjustments for each component of OCI in both net income and OCI and to present the components of OCI in interim financial statements. During 2012, the FASB will reconsider the reclassification requirements and the timing of their implementation. Management is currently evaluating the impact both of these ASUs will have on the disclosures in the Company’s financial statements.
| 3. | MERGER AND ACQUISITION ACTIVITY |
In August 2011, we recognized a $5.5$5.5 million gain in other noninterest income from the sale of BServ, Inc. (dba BankServ) stock. We acquired the stock of this privately-owned company when we sold substantially all of the assets of our NetDeposit subsidiary in September 2010. Similar to BankServ, NetDeposit specialized in remote deposit capture and electronic payment technologies. We recognized in other noninterest income a pretax gain of approximately $13.7$13.7 million when we sold NetDeposit.
In July 2009, CB&T acquired the banking operations of the failed Vineyard Bank from the Federal Deposit Insurance Corporation (“FDIC”) as receiver. The acquisition consisted of approximately $1.6 billion of assets, including $1.4 billion of loans, $1.5 billion of deposits, and 16 branches mostly located in the Inland Empire area of Southern California. CB&T assumed Vineyard’s deposit obligations other than brokered deposits, and purchased most of Vineyard’s assets, including all loans. CB&T received approximately $87.5 million in cash from the FDIC.
In April 2009, NSB acquired the banking operations of the failed Great Basin Bank of Nevada headquartered in Elko, Nevada, from the FDIC as receiver. The acquisition consisted of approximately $212 million of assets, including the entire loan portfolio, $209 million of deposits, and five branches in Northern Nevada. NSB received approximately $17.8 million in cash from the FDIC.
In February 2009, CB&T acquired the banking operations of the failed Alliance Bank headquartered in Culver City, California from the FDIC as receiver. The acquisition consisted of approximately $1.1 billion of assets, including the entire loan portfolio, $1.0 billion of deposits, and five branches. CB&T received approximately $10 million in cash from the FDIC.
In connection with the 2009 acquisitions, CB&T and NSB entered into loss sharing agreements with the FDIC for the purchased loans, as discussed further in Note 6. Because the fair value of net assets acquired exceeded cost, and taking into consideration the amounts of cash received from the FDIC, we recognized acquisition related gains of $169.2 million.
4. SUPPLEMENTAL CASH FLOW INFORMATION
Noncash activities are summarized as follows:
| Year Ended December 31, | ||||||||||||
| (In thousands) | 2011 | 2010 | 2009 | |||||||||
Amortized cost of investment securities held-to-maturity transferred to investment securities available-for-sale | $ | – | $ | – | $ | 1,058,159 | ||||||
Loans transferred to other real estate owned | 301,454 | 607,886 | 553,415 | |||||||||
Beneficial conversion feature of modified subordinated debt recorded in common stock | – | – | 202,814 | |||||||||
Beneficial conversion feature transferred from common stock to preferred stock as a result of subordinated debt conversions | 43,139 | 56,834 | 10,998 | |||||||||
Subordinated debt exchanged for common stock | – | 46,902 | – | |||||||||
Subordinated debt converted to preferred stock | 256,109 | 342,951 | 63,440 | |||||||||
Preferred stock exchanged for common stock | – | 5,508 | 38,486 | |||||||||
Acquisitions: | ||||||||||||
Assets acquired | – | – | 2,981,335 | |||||||||
Liabilities assumed | – | – | 2,929,448 | |||||||||
5. INVESTMENT SECURITIES
| 4. | SUPPLEMENTAL CASH FLOW INFORMATION |
| Noncash activities are summarized as follows: | ||||||||||||
| (In thousands) | Year Ended December 31, | |||||||||||
| 2012 | 2011 | 2010 | ||||||||||
| Loans transferred to other real estate owned | $ | 172,018 | $ | 301,454 | $ | 607,886 | ||||||
| Beneficial conversion feature transferred from common stock to preferred stock as a result of subordinated debt conversions | 15,232 | 43,139 | 56,834 | |||||||||
| Subordinated debt exchanged for common stock | — | — | 46,902 | |||||||||
| Subordinated debt converted to preferred stock | 89,564 | 256,109 | 342,951 | |||||||||
| Preferred stock exchanged for common stock | — | — | 5,508 | |||||||||
| 5. | INVESTMENT SECURITIES |
| December 31, 2011 | ||||||||||||||||||||||||||||
| Amortized cost | Recognized in OCI1 | Carrying value | Not recognized in OCI | Estimated fair value | ||||||||||||||||||||||||
| (In thousands) | Gross unrealized gains | Gross unrealized losses | Gross unrealized gains | Gross unrealized losses | ||||||||||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||
Municipal securities | $ | 564,468 | $ | – | $ | – | $ | 564,468 | $ | 8,807 | $ | 1,083 | $ | 572,192 | ||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 262,853 | – | 40,546 | 222,307 | 207 | 78,191 | 144,323 | |||||||||||||||||||||
Other | 24,310 | – | 3,381 | 20,929 | 303 | 7,868 | 13,364 | |||||||||||||||||||||
Other debt securities | 100 | – | – | 100 | – | 5 | 95 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| $ | 851,731 | $ | – | $ | 43,927 | $ | 807,804 | $ | 9,317 | $ | 87,147 | $ | 729,974 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 4,330 | $ | 304 | $ | – | $ | 4,634 | $ | 4,634 | ||||||||||||||||||
U.S. Government agencies and corporations: | ||||||||||||||||||||||||||||
Agency securities | 153,179 | 5,423 | 122 | 158,480 | 158,480 | |||||||||||||||||||||||
Agency guaranteed mortgage-backed securities | 535,228 | 18,211 | 102 | 553,337 | 553,337 | |||||||||||||||||||||||
Small Business Administration loan-backed securities | 1,153,039 | 12,119 | 4,496 | 1,160,662 | 1,160,662 | |||||||||||||||||||||||
Municipal securities | 120,677 | 3,191 | 1,700 | 122,168 | 122,168 | |||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 1,794,427 | 15,792 | 880,509 | 929,710 | 929,710 | |||||||||||||||||||||||
Trust preferred securities – real estate investment trusts | 40,259 | – | 21,614 | 18,645 | 18,645 | |||||||||||||||||||||||
Auction rate securities | 71,338 | 164 | 1,482 | 70,020 | 70,020 | |||||||||||||||||||||||
Other | 64,646 | 1,028 | 15,302 | 50,372 | 50,372 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 3,937,123 | 56,232 | 925,327 | 3,068,028 | 3,068,028 | ||||||||||||||||||||||||
Mutual funds and other | 162,606 | 167 | 6 | 162,767 | 162,767 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| $ | 4,099,729 | $ | 56,399 | $ | 925,333 | $ | 3,230,795 | $ | 3,230,795 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| December 31, 2010 | ||||||||||||||||||||||||||||
| Amortized cost | Recognized in OCI1 | Carrying value | Not recognized in OCI | Estimated fair value | ||||||||||||||||||||||||
| (In thousands) | Gross unrealized gains | Gross unrealized losses | Gross unrealized gains | Gross unrealized losses | ||||||||||||||||||||||||
Held-to-maturity: | ||||||||||||||||||||||||||||
Municipal securities | $ | 577,527 | $ | – | $ | – | $ | 577,527 | $ | 8,715 | $ | 3,606 | $ | 582,636 | ||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 263,621 | – | 24,243 | 239,378 | – | 50,434 | 188,944 | |||||||||||||||||||||
Other | 27,671 | – | 4,034 | 23,637 | 897 | 7,860 | 16,674 | |||||||||||||||||||||
Other debt securities | 100 | – | – | 100 | – | – | 100 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| $ | 868,919 | $ | – | $ | 28,277 | $ | 840,642 | $ | 9,612 | $ | 61,900 | $ | 788,354 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Available-for-sale: | ||||||||||||||||||||||||||||
U.S. Treasury securities | $ | 705,321 | $ | 329 | $ | 24 | $ | 705,626 | $ | 705,626 | ||||||||||||||||||
U.S. Government agencies and corporations: | ||||||||||||||||||||||||||||
Agency securities | 201,356 | 7,179 | 137 | 208,398 | 208,398 | |||||||||||||||||||||||
Agency guaranteed mortgage-backed securities | 565,963 | 12,289 | 1,864 | 576,388 | 576,388 | |||||||||||||||||||||||
Small Business Administration loan-backed securities | 867,506 | 6,703 | 6,324 | 867,885 | 867,885 | |||||||||||||||||||||||
Municipal securities | 155,583 | 2,534 | 409 | 157,708 | 157,708 | |||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||
Trust preferred securities – banks and insurance | 1,947,129 | 46,821 | 750,553 | 1,243,397 | 1,243,397 | |||||||||||||||||||||||
Trust preferred securities – real estate investment trusts | 45,687 | – | 26,522 | 19,165 | 19,165 | |||||||||||||||||||||||
Auction rate securities | 110,548 | 649 | 1,588 | 109,609 | 109,609 | |||||||||||||||||||||||
Other | 103,047 | 1,784 | 24,125 | 80,706 | 80,706 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| 4,702,140 | 78,288 | 811,546 | 3,968,882 | 3,968,882 | ||||||||||||||||||||||||
Mutual funds and other | 236,779 | 81 | – | 236,860 | 236,860 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| $ | 4,938,919 | $ | 78,369 | $ | 811,546 | $ | 4,205,742 | $ | 4,205,742 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| December 31, 2012 | |||||||||||||||||||||||||||
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 | ||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||
| Municipal securities | $ | 524,738 | $ | — | $ | — | $ | 524,738 | $ | 12,837 | $ | 709 | $ | 536,866 | |||||||||||||
| Asset-backed securities: | |||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 255,647 | — | 42,964 | 212,683 | 114 | 86,596 | 126,201 | ||||||||||||||||||||
| Other | 21,858 | — | 2,470 | 19,388 | 709 | 8,523 | 11,574 | ||||||||||||||||||||
| Other debt securities | 100 | — | — | 100 | — | — | 100 | ||||||||||||||||||||
| $ | 802,343 | $ | — | $ | 45,434 | $ | 756,909 | $ | 13,660 | $ | 95,828 | $ | 674,741 | ||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 104,313 | $ | 211 | $ | — | $ | 104,524 | $ | 104,524 | |||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||
| Agency securities | 108,814 | 3,959 | 116 | 112,657 | 112,657 | ||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 406,928 | 18,598 | 16 | 425,510 | 425,510 | ||||||||||||||||||||||
| Small Business Administration loan-backed securities | 1,124,322 | 29,245 | 639 | 1,152,928 | 1,152,928 | ||||||||||||||||||||||
| Municipal securities | 75,344 | 2,622 | 1,970 | 75,996 | 75,996 | ||||||||||||||||||||||
| Asset-backed securities: | |||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 1,596,156 | 16,687 | 663,451 | 949,392 | 949,392 | ||||||||||||||||||||||
| Trust preferred securities – real estate investment trusts | 40,485 | — | 24,082 | 16,403 | 16,403 | ||||||||||||||||||||||
| Auction rate securities | 6,504 | 79 | 68 | 6,515 | 6,515 | ||||||||||||||||||||||
| Other | 25,614 | 701 | 6,941 | 19,374 | 19,374 | ||||||||||||||||||||||
| 3,488,480 | 72,102 | 697,283 | 2,863,299 | 2,863,299 | |||||||||||||||||||||||
| Mutual funds and other | 228,469 | 194 | 652 | 228,011 | 228,011 | ||||||||||||||||||||||
| $ | 3,716,949 | $ | 72,296 | $ | 697,935 | $ | 3,091,310 | $ | 3,091,310 | ||||||||||||||||||
| December 31, 2011 | |||||||||||||||||||||||||||
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 | ||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||||||
| Municipal securities | $ | 564,468 | $ | — | $ | — | $ | 564,468 | $ | 8,807 | $ | 1,083 | $ | 572,192 | |||||||||||||
| Asset-backed securities: | |||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 262,853 | — | 40,546 | 222,307 | 207 | 78,191 | 144,323 | ||||||||||||||||||||
| Other | 24,310 | — | 3,381 | 20,929 | 303 | 7,868 | 13,364 | ||||||||||||||||||||
| Other debt securities | 100 | — | — | 100 | — | 5 | 95 | ||||||||||||||||||||
| $ | 851,731 | $ | — | $ | 43,927 | $ | 807,804 | $ | 9,317 | $ | 87,147 | $ | 729,974 | ||||||||||||||
| Available-for-sale | |||||||||||||||||||||||||||
| U.S. Treasury securities | $ | 4,330 | $ | 304 | $ | — | $ | 4,634 | $ | 4,634 | |||||||||||||||||
| U.S. Government agencies and corporations: | |||||||||||||||||||||||||||
| Agency securities | 153,179 | 5,423 | 122 | 158,480 | 158,480 | ||||||||||||||||||||||
| Agency guaranteed mortgage-backed securities | 535,228 | 18,211 | 102 | 553,337 | 553,337 | ||||||||||||||||||||||
| Small Business Administration loan-backed securities | 1,153,039 | 12,119 | 4,496 | 1,160,662 | 1,160,662 | ||||||||||||||||||||||
| Municipal securities | 120,677 | 3,191 | 1,700 | 122,168 | 122,168 | ||||||||||||||||||||||
| Asset-backed securities: | |||||||||||||||||||||||||||
| Trust preferred securities – banks and insurance | 1,794,427 | 15,792 | 880,509 | 929,710 | 929,710 | ||||||||||||||||||||||
| Trust preferred securities – real estate investment trusts | 40,259 | — | 21,614 | 18,645 | 18,645 | ||||||||||||||||||||||
| Auction rate securities | 71,338 | 164 | 1,482 | 70,020 | 70,020 | ||||||||||||||||||||||
| Other | 64,646 | 1,028 | 15,302 | 50,372 | 50,372 | ||||||||||||||||||||||
| 3,937,123 | 56,232 | 925,327 | 3,068,028 | 3,068,028 | |||||||||||||||||||||||
| Mutual funds and other | 162,606 | 167 | 6 | 162,767 | 162,767 | ||||||||||||||||||||||
| $ | 4,099,729 | $ | 56,399 | $ | 925,333 | $ | 3,230,795 | $ | 3,230,795 | ||||||||||||||||||
1 | The gross unrealized losses recognized in OCI on HTM securities |
from OTTI. Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Held-to-maturity: Municipal securities Asset-backed securities: Trust preferred securities – banks and insurance Other Other debt securities Available-for-sale: U.S. Government agencies and corporations: Agency securities Agency guaranteed mortgage-backed securities Small Business Administration loan-backed securities Municipal securities Asset-backed securities: Trust preferred securities – banks and Trust preferred securities – real estate investment trusts Auction rate securities Other Mutual funds and other Held-to-maturity: Municipal securities Asset-backed securities: Trust preferred securities – banks and insurance Other Available-for-sale: U.S. Treasury securities U.S. Government agencies and corporations: Agency securities Agency guaranteed mortgage-backed securities Small Business Administration loan-backed securities Municipal securities Asset-backed securities: Trust preferred securities – banks and insurance Trust preferred securities – real estate investment trusts Auction rate securities Other fixed and variable rates with maturities from no OTTI for these securities was recorded during 2012. market yield required by market participants equaled the effective interest rate of a security, a market participant should be indifferent between receiving current interest and capitalizing and compounding interest for later payment. However, given the difference between current market rates and effective interest rates of the securities, market participants are not indifferent. The delay in payment caused by PIKing results in lower security fair values even if PIKing is projected to be fully cured. This feature is difficult to model and assess. It increases the risk premium the market applies to these securities. 2012 2012. – U.S. Government Corporations Balance of credit-related OTTI at beginning of year Additions: Credit-related OTTI not previously recognized1 Credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis2 Subtotal of amounts recognized in earnings Reductions for securities sold during the year Balance of credit-related OTTI at end of year 2012. Noncredit-related OTTI, pretax: HTM AFS Total Total noncredit-related OTTI, after-tax noninterest income. Investment securities: Held-to-maturity Available-for-sale Other noninterest-bearing investments: Nonmarketable equity securities Net losses Statement of income information: Net impairment losses on investment securities Valuation losses on securities purchased Equity securities gains (losses), net Fixed income securities gains (losses), net Net losses Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer FDIC-supported loans Total loans Purchased Loans. 2010. 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. Asset quality trends Risk management and loan administration practices Risk identification practices Existence and effect of any portfolio concentrations National economic and business conditions Regional and local economic and business conditions Data availability and applicability Allowance for loan losses: Balance at beginning of year Additions: Provision for loan losses Adjustment for FDIC-supported loans Deductions: Gross loan and lease charge-offs Recoveries Net loan and lease charge-offs Balance at end of year Reserve for unfunded lending commitments: Balance at beginning of year Provision charged (credited) to earnings Balance at end of year Total allowance for credit losses: Allowance for loan losses Reserve for unfunded lending commitments Total allowance for credit losses The Allowance for loan losses: Individually evaluated for impairment Collectively evaluated for impairment Purchased loans with evidence of credit deterioration Total Outstanding loan balances: Individually evaluated for impairment Collectively evaluated for impairment Purchased loans with evidence of credit deterioration Total Allowance for loan losses: Individually evaluated for impairment Collectively evaluated for impairment Purchased loans with evidence of credit deterioration Total Outstanding loan balances: Individually evaluated for impairment Collectively evaluated for impairment Purchased loans with evidence of credit deterioration Total FDIC-supported loans. Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans �� Total Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans Total Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans Total interest is still not expected. loans, we assign multiple grades within the Pass classification or one of Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans Total Loans held for sale Commercial: Commercial and industrial Leasing Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans Total under separate accounting guidance. See subsequent discussion under Purchased Loans. basis during the time the loans were impaired within the year was Commercial: Commercial and industrial Owner occupied Municipal Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer Bankcard and other revolving plans Other Total consumer loans FDIC-supported loans Total During the first half of 2009, we reassessed the classification of certain asset-backedto HTM and trust preferred collateralized debt obligation (“CDO”) securities as part of our ongoing review of the investment securities portfolio. We reclassified approximately $596 million at fair value of HTM securities to AFS. Unrealized losses added to OCI at the time of these transfers were $128.9 million. The reclassifications were made subsequent to ratings downgrades, as permitted under ASC 320,Investments – Debt and Equity Securities. No gain or loss was recognized in the statement of income at the time of reclassification.The amortized cost and estimated fair value of investment debt securities are shown subsequently as of December 31, 20112012 by expected maturity distribution for structured asset-backed security collateralized debt obligations (“ABS CDOs”) and by contractual maturity distribution for other debt securities. Actual maturities may differ from expected or contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Held-to-maturity Available-for-sale (In thousands) Amortized
cost Estimated
fair value Amortized
cost Estimated
fair value $ 53,518 $ 53,738 $ 440,723 $ 413,168 210,563 206,840 1,076,777 985,455 179,177 158,329 780,273 660,265 408,473 311,067 1,639,350 1,009,140 $ 851,731 $ 729,974 $ 3,937,123 $ 3,068,028 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, 2011 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 $ 415 $ 10,855 $ 668 $ 22,188 $ 1,083 $ 33,043 – – 118,737 144,053 118,737 144,053 – �� – 11,249 13,364 11,249 13,364 5 95 – – 5 95 $ 420 $ 10,950 $ 130,654 $ 179,605 $ 131,074 $ 190,555 . $ 60 $ 13,308 $ 62 $ 3,880 $ 122 $ 17,188 102 52,267 – – 102 52,267 1,783 260,865 2,713 191,339 4,496 452,204 1,305 15,011 395 4,023 1,700 19,034
insurance – – 880,509 695,365 880,509 695,365 – – 21,614 18,645 21,614 18,645 158 27,998 1,324 34,115 1,482 62,113 – – 15,302 18,585 15,302 18,585 3,408 369,449 921,919 965,952 925,327 1,335,401 6 167 – – 6 167 $ 3,414 $ 369,616 $ 921,919 $ 965,952 $ 925,333 $ 1,335,568 December 31, 2010 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 $ 574 $ 27,600 $ 3,032 $ 23,828 $ 3,606 $ 51,428 – – 74,677 188,944 74,677 188,944 – – 11,894 16,674 11,894 16,674 $ 574 $ 27,600 $ 89,603 $ 229,446 $ 90,177 $ 257,046 $ 24 $ 400,778 $ – $ – $ 24 $ 400,778 111 11,317 26 970 137 12,287 1,864 235,531 – – 1,864 235,531 432 116,101 5,892 400,447 6,324 516,548 405 14,928 4 391 409 15,319 1,969 87,973 748,584 850,437 750,553 938,410 – – 26,522 19,165 26,522 19,165 1,588 68,178 – – 1,588 68,178 – – 24,125 44,628 24,125 44,628 $ 6,393 $ 934,806 $ 805,153 $ 1,316,038 $ 811,546 $ 2,250,844 Held-to-maturity Available-for-sale (In thousands) Amortizedcost Estimatedfairvalue Amortizedcost Estimatedfairvalue Due in one year or less $ 67,669 $ 67,595 $ 515,587 $ 482,780 Due after one year through five years 201,691 200,803 1,047,327 957,269 Due after five years through ten years 181,721 156,202 625,883 554,217 Due after ten years 351,262 250,141 1,299,683 869,033 $ 802,343 $ 674,741 $ 3,488,480 $ 2,863,299 108The 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, 2012 Less than 12 months 12 months or more Total (In thousands) Grossunrealizedlosses Estimatedfairvalue Grossunrealizedlosses Estimatedfairvalue Grossunrealizedlosses EstimatedfairvalueHeld-to-maturity Municipal securities $ 630 $ 42,613 $ 79 $ 5,910 $ 709 $ 48,523 Asset-backed securities: Trust preferred securities – banks and insurance — — 129,560 126,019 129,560 126,019 Other — — 10,993 10,904 10,993 10,904 $ 630 $ 42,613 $ 140,632 $ 142,833 $ 141,262 $ 185,446 Available-for-sale U.S. Government agencies and corporations: Agency securities $ 35 $ 18,633 $ 81 $ 6,916 $ 116 $ 25,549 Agency guaranteed mortgage-backed securities 10 6,032 6 629 16 6,661 Small Business Administration loan-backed securities 91 15,199 548 69,011 639 84,210 Municipal securities 61 4,898 1,909 11,768 1,970 16,666 Asset-backed securities: Trust preferred securities – banks and insurance — — 663,451 765,421 663,451 765,421 Trust preferred securities – real estate investment trusts — — 24,082 16,403 24,082 16,403 Auction rate securities — — 68 2,459 68 2,459 Other — — 6,941 15,234 6,941 15,234 197 44,762 697,086 887,841 697,283 932,603 Mutual funds and other 652 112,324 — — 652 112,324 $ 849 $ 157,086 $ 697,086 $ 887,841 $ 697,935 $ 1,044,927 109 December 31, 2011 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 $ 415 $ 10,855 $ 668 $ 22,188 $ 1,083 $ 33,043 Asset-backed securities: Trust preferred securities – banks and insurance — — 118,737 144,053 118,737 144,053 Other — — 11,249 13,364 11,249 13,364 Other debt securities 5 95 — — 5 95 $ 420 $ 10,950 $ 130,654 $ 179,605 $ 131,074 $ 190,555 Available-for-sale U.S. Government agencies and corporations: Agency securities $ 60 $ 13,308 $ 62 $ 3,880 $ 122 $ 17,188 Agency guaranteed mortgage-backed securities 102 52,267 — — 102 52,267 Small Business Administration loan-backed securities 1,783 260,865 2,713 191,339 4,496 452,204 Municipal securities 1,305 15,011 395 4,023 1,700 19,034 Asset-backed securities: Trust preferred securities – banks and insurance — — 880,509 695,365 880,509 695,365 Trust preferred securities – real estate investment trusts — — 21,614 18,645 21,614 18,645 Auction rate securities 158 27,998 1,324 34,115 1,482 62,113 Other — — 15,302 18,585 15,302 18,585 3,408 369,449 921,919 965,952 925,327 1,335,401 Mutual funds and other 6 167 — — 6 167 $ 3,414 $ 369,616 $ 921,919 $ 965,952 $ 925,333 $ 1,335,568 At December 31, 20112012 and 2010,2011, respectively, 7289 and 9272 HTM and 525302 and 628525 AFS investment securities were in an unrealized loss position.Other-Than-Temporary ImpairmentWe conduct a formal review of investment securities on a quarterly basis for the presence of OTTI. Our review was made under ASC 320, which includes new guidance that we adopted effective January 1, 2009.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.date (the vast majority of the investment portfolio are debt securities). Under these circumstances, OTTI is considered to have occurred if (1) we intend to sell the security; (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 under previous guidance.Credit-related OTTI is recognized in earnings while noncredit-related OTTI on AFS securities not expected to be sold is recognized in OCI. Noncredit-related OTTI is based on other factors, including illiquidity. 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. Noncredit-related OTTI recognized in earnings previous to January 1, 2009 was reclassified from retained earnings to accumulated OCI as a cumulative effect adjustment.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; creditworthiness of the issuer, including external credit ratings, changes, recent downgrades, and trends; volatility of110earnings and trends; current analysts’ evaluations,evaluations; all available information relevant to the collectibility of debt securities; and other key measures. In addition, we determine that we do not intend to sell the securities and it is not more likely than not that we will be required to sell the securities before recovery of their amortized cost basis. 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. This is a change from previous guidance that a holder’s best estimate of cash flows should be based upon those that “a market participant” would use.The following summarizes the conclusions from our OTTI evaluation for those security types that haveincurred significant gross unrealized losses during 2012:OTTI – Municipal SecuritiesThe HTM securities are purchased directly from municipalities and are generally not rated by a credit rating agency. Most of the AFS securities are rated as investment grade by various credit rating agencies. Both the HTM and AFS securities are at December 31, 2011:Asset-backedone to 25 years. Fair value changes of these securities are largely driven by interest rates. We perform credit quality reviews on these securities at each reporting period. Because the decline in fair value is not attributable to credit quality, OTTI – Asset-Backed SecuritiesTrust preferred securities – banks and insurance: These CDO securities are interests in variable rate pools of trust preferred securities issued by trusts related to banksbank 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”). TheyThe more junior securities were purchased generally at par.par, while the senior securities were purchased from Lockhart Funding LLC (“Lockhart”) at their carrying values (generally par) and then adjusted to their lower fair values. The primary drivers that have given rise to the unrealized losses on CDOs with bank and insurance collateral are listed below:i.1) Market yield requirements for bank CDO securities remain very high. The creditfinancial 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 ability of junior CDO bonds to defer the payment of current interest.in kind feature described subsequently. The resulting increase in the rate of return demanded by the market for trust preferred CDOs remains dramatically higher than the effectivecontractual interest rates. AllVirtually all structured productAsset-Backed Security (“ABS”) fair values, including bank CDOs, deteriorated significantly during the credit crisis, generally reaching a low in mid-2009. Prices for some structured products other than bank CDOs, have since rebounded as the crucial unknowns related to value became resolved and as trading increased in these securities. Unlike these other structured products, CDO tranches backed by bank trust preferred securities continue to have unresolved questionsbe characterized by considerable uncertainty surrounding collateral behavior, specifically including, but not limited to, prepayments; the future number, size and timing of bank failures,failures; holding company bankruptcies; and of allowed deferrals and subsequent resumption of payment or default due to nonpayment of contractual interest.ii.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 discussed. Duringnoted. Throughout the credit 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. Our CDO pools include banks whicha bank that first exercised this deferral option inas early as the second quarter of 2008. A significant number ofAt December 31, 2012, 71 banks inunderlying our CDO pools have alreadytranches had come current after a period of deferral, while others are still196 were deferring, but remainremained within the allowed deferral period.A second structural feature that is difficult to model is the payment in kind (“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 interest amount that is unpaid be capitalized or deferred. The cash flow that would otherwise be paid to the junior CDO securities and the income notes is instead used to pay down the principal111balance of the most senior CDO securities. If the currentiii.3) Ratings are generally below-investment-grade for even some of the most senior tranches. Rating agency opinions canRatings on a number of CDO tranches vary significantly on a CDO tranche.among rating agencies. The presence of a below-investment-grade rating by even a single rating agency will severely limit 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.iv.4) There is a lack of consistent disclosure by each CDO’s trustee of the identity of collateral issuers; in addition, complex structures make projecting tranche return profiles difficult for non-specialistsnonspecialists in the product.v.5) At purchase, the expectation of cash flow variability was limited. As a result of the credit crisis, we have seen extreme variability of collateral performance both compared to expectations and between different pools.Our ongoing review of these securities in accordance with the previous discussion determined that OTTI should be recorded at for 2012.Effective December 31, 2011.Trust preferred securities – real estate investment trusts (“REITs”): These CDO securities are variable rate pools of trust preferred securities primarily related to REITs, and are rated by one or more NRSROs. They were purchased generally at par. Unrealized losses were caused mainly by severe deterioration in mortgage REITs and homebuilder credit collateral deterioration, widening of credit spreadsin addition to the same factors previously discussed for ABS securities,banks and general illiquidity in the CDO market.insurance CDOs. Based on our review, no OTTI was recorded for these securities at December 31, 2011.was recorded during Other asset-backed securities: Most of these CDO securities were purchased in 2009 from Lockhart Funding LLC (“Lockhart”) at their carrying values and were then adjusted to fair value. Certain of these CDOs consist of ABS CDOs (also known as diversified structured finance CDOs). Unrealized losses since acquisition were caused mainly by deterioration in collateral quality and widening of credit spreads for asset backed securities, and ratings downgrades of the underlying residential mortgage-backed securities collateral. Our ongoingsecurities. Based on our review, of these securitiesOTTI for one security in accordance with the previous discussion determined that this asset group was recorded for 2012.OTTI should be recorded at December 31, 2011.agenciesAgencies and corporationsSmall Business Administration (“SBA”) loan-backed securitiesLoan-Backed Securities: These securities were generally purchased at premiums with maturities from five to 25 years and have principal cash flows guaranteed by the SBA. Because the decline in fair value is not attributable to credit quality, no OTTI was recorded for these securities at December 31, 2011.was recorded during The following is a tabular rollforward of the total amount of credit-related OTTI, including amounts recognized in earnings. 2011 2010 (In thousands) HTM AFS Total HTM AFS Total $ (5,357 ) $ (335,682 ) $ (341,039 ) $ (5,206 ) $ (269,251 ) $ (274,457 ) (769 ) (3,007 ) (3,776 ) – (3,899 ) (3,899 ) – (29,907 ) (29,907 ) (151 ) (81,305 ) (81,456 ) (769 ) (32,914 ) (33,683 ) (151 ) (85,204 ) (85,355 ) – 53,736 53,736 – 18,773 18,773 $ (6,126 ) $ (314,860 ) $ (320,986 ) $ (5,357 ) $ (335,682 ) $ (341,039 ) 1Relates to securities not previously impaired.2Relates to additional impairment on securities previously impaired.112The following is a tabular rollforward of the total amount of credit-related OTTI, including amounts recognized in earnings: (In thousands) 2012 2011 HTM AFS Total HTM AFS Total Balance of credit-related OTTI at beginning of year $ (6,126 ) $ (314,860 ) $ (320,986 ) $ (5,357 ) $ (335,682 ) $ (341,039 ) Additions recognized in earnings during the year: Credit-related OTTI not previously recognized 1(2,890 ) (5,654 ) (8,544 ) (769 ) (3,007 ) (3,776 ) Credit-related OTTI previously recognized when there is no intent to sell and no requirement to sell before recovery of amortized cost basis 2(4,533 ) (90,984 ) (95,517 ) — (29,907 ) (29,907 ) Subtotal of amounts recognized in earnings (7,423 ) (96,638 ) (104,061 ) (769 ) (32,914 ) (33,683 ) Reductions for securities sold or paid offduring the year 17,004 17,004 53,736 53,736 Balance of credit-related OTTI at end of year $ (13,549 ) $ (394,494 ) $ (408,043 ) $ (6,126 ) $ (314,860 ) $ (320,986 ) 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 as the best estimate of fair value. These cash flows are credit adjusted using, among other things, assumptions for default probability assigned to each portion of performing collateral. The credit adjustedcredit-adjusted cash flows are discounted at a security specific effectivecoupon rate to identify any OTTI, and then at a market rate for valuation purposes.For those securities with credit-related OTTI recognized in the statement of income, the amounts of pretax noncredit-related OTTI recognized in OCI arewere as follows:(In thousands) 2011 2010 2009 $ 20,945 $ – $ 583 22,697 71,097 288,820 $ 43,642 $ 71,097 $ 289,403 $ 26,481 $ 43,920 $ 174,244 As(In thousands) 2012 2011 2010 HTM $ 16,718 $ 20,945 $ — AFS 45,478 22,697 71,097 $ 62,196 $ 43,642 $ 71,097 The following summarizes gains and losses, including OTTI, that were recognized in the statement of income: 2012 2011 2010 (In thousands) Grossgains Gross losses Grossgains Gross losses Grossgains Gross losses Investment securities: Held-to-maturity $ 214 $ 7,423 $ 229 $ 769 $ — $ 151 Available-for-sale 25,120 102,428 21,793 43,068 11,153 85,302 Other noninterest-bearing investments: Nonmarketable equity securities 23,218 11,965 9,449 2,938 5,221 11,214 48,552 121,816 31,471 46,775 16,374 96,667 Net losses $ (73,264 ) $ (15,304 ) $ (80,293 ) Statement of income information: Net impairment losses on investment securities $ (104,061 ) $ (33,683 ) $ (85,355 ) Equity securities gains (losses), net 11,253 6,511 (5,993 ) Fixed income securities gains, net 19,544 11,868 11,055 Net losses $ (73,264 ) $ (15,304 ) $ (80,293 ) Gains and losses on the sale of January 1, 2009, we reclassified to OCI $137.5 million after-tax as a cumulative effect adjustment forsecurities are recognized using the noncredit-related portion of OTTI losses previously recognizedspecific identification method and recorded in earnings.113Nontaxable interest income on securities was $21.3$17.6 million in 2011, $26.72012, $21.3 million in 2010,2011, and $30.4$26.7 million in 2009.The following summarizes gains and losses, including OTTI, that were recognized in the statement of income. 2011 2010 2009 (In thousands) Gross
gains Gross
losses Gross
gains Gross
losses Gross
gains Gross
losses $ 229 $ 769 $ – $ 151 $ – $ 3,301 21,793 43,068 11,153 85,302 9,976 499,970 9,449 2,938 5,221 11,214 4,919 9,850 31,471 46,775 16,374 96,667 14,895 513,121 $ (15,304 ) $ (80,293 ) $ (498,226 ) $ (33,683 ) $ (85,355 ) (280,463 ) – – (212,092 ) (33,683 ) (85,355 ) (492,555 ) 6,511 (5,993 ) (1,825 ) 11,868 11,055 (3,846 ) $ (15,304 ) $ (80,293 ) $ (498,226 ) Valuation losses on securities purchased of $212.1 million in 2009 include $187.9 million that relate to purchases by Zions Bank from Lockhart, which are discussed further in Note 7, and $24.2 million when we voluntarily purchased all of the $255.3 million of auction rate securities previously sold to customers by certain Company subsidiaries.Securities with a carrying value of $1.5$1.5 billion and $1.6 billion at both December 31, 20112012 and 2010, respectively,2011 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.6. LOANS AND ALLOWANCE FOR CREDIT LOSSESASU 2010-20,Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, requires certain additional disclosures under ASC 310,Receivables, which became effective at December 31, 2010. Certain other disclosures were required beginning March 31, 2011 and relate to additional detail for the rollforward of the allowance for credit losses and for impaired loans. The new guidance is incorporated in the following discussion. It relates only to financial statement disclosures and does not affect the Company’s financial condition or results of operations.Additional accounting guidance and disclosures for troubled debt restructurings (“TDRs”) were required for the Company beginning September 30, 2011 in accordance with ASU 2011-02,A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. ASU 2011-02 provides criteria to evaluate if a TDR exists based on whether (1) the restructuring constitutes a concession by the creditor and (2) the debtor is experiencing financial difficulty. The new guidance for TDRs is incorporated in the following discussion and did not affect the Company’s financial condition or results of operations.Loans and Loans Held for SaleLoans are summarized as follows according to major portfolio segment and specific loan class: December 31, (In thousands) 2011 2010 $ 201,590 $ 206,286 $ 10,393,496 $ 9,167,001 422,431 410,174 8,165,993 8,217,363 442,060 438,985 19,423,980 18,233,523 2,276,114 3,499,103 7,906,179 7,649,494 10,182,293 11,148,597 2,184,515 2,141,740 3,915,008 3,499,149 306,764 343,257 290,920 296,936 223,181 233,193 6,920,388 6,514,275 751,091 971,377 $ 37,277,752 $ 36,867,772 December 31, (In thousands) 2012 2011 Loans held for sale $ 251,651 $ 201,590 Commercial: Commercial and industrial $ 11,256,945 $ 10,448,115 Leasing 422,513 379,709 Owner occupied 7,589,082 8,158,556 Municipal 494,183 441,241 Total commercial 19,762,723 19,427,621 Commercial real estate: Construction and land development 1,939,413 2,264,909 Term 8,062,819 7,883,434 Total commercial real estate 10,002,232 10,148,343 Consumer: Home equity credit line 2,177,680 2,187,428 1-4 family residential 4,350,329 3,921,216 Construction and other consumer real estate 321,235 305,873 Bankcard and other revolving plans 306,428 291,018 Other 216,379 225,540 Total consumer 7,372,051 6,931,075 FDIC-supported loans 528,241 750,870 Total loans $ 37,665,247 $ 37,257,909 FDIC-supported loans were acquired during 2009 and are indemnified by the FDICFederal Deposit Insurance Corporation (“FDIC”) under loss sharing agreements. The FDIC-supported loan balances presented in the accompanying schedules include purchased credit-impaired (“PCI”) loans accounted for under ASC 310-30 at their carrying values rather than their outstanding balances. See subsequent discussion under purchased loans.Loan balances are presented net of unearned income and fees, which amounted to $137.5 million at December 31, 2012 and $133.1 million at December 31, 2011.Owner occupied and commercial real estate (“CRE”) loans include unamortized premiums of approximately $73.4$59.3 million at December 31, 2012 and $88.4$73.4 million at December 31, 2011 and 2010, respectively..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.As of December 31, 2011 and 2010, loansLoans with a carrying value of approximately $21.1$21.1 billion at both December 31, 2012 and $20.4 billion, respectively, were2011 have been pledged at the Federal Reserve and various Federal Home Loan Banks (“FHLB”) as collateral for current and potential borrowings.114We sold loans totaling $1.6$1.7 billion in 2012, $1.6 billion in 2011, $1.7and $1.7 billion in 2010, and $1.9 billion in 2009, that were previously classified as loans held for sale. Loans reclassified to loans held for sale primarily consist of conforming residential mortgages. Amounts added to loans held for sale during these same periodsyears were $1.6$1.7 billion $1.8, $1.6 billion, and $2.0$1.8 billion, respectively. Income from loans sold, excluding servicing, was $17.5$30.7 million in 2012, $17.5 million in 2011, $17.8and $17.8 million in 2010, and $11.2 million in 2009.Allowance for Credit LossesThe allowance for credit losses (“ACL”)ACL consists of the allowance for loan and lease losses (“ALLL,” alsoALLL”) (also referred to as the allowance for loan losses) and the reserve for unfunded lending commitments (“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 commercial real estateCRE segments, we use a comprehensive loan grading system to assign probability of default and loss given default (“LGD”) grades to each loan. The credit quality indicators discussed subsequently are based on this grading system. Probability of defaultPD and loss given defaultLGD grades are based on both financial and statistical models and loan officers’ judgment. We create groupings of these grades for each subsidiary bank and loan class and calculate historic loss rates using a loss migration analysis that attributes historic realized losses to historicthese loan gradesgrade groupings over the most recent 60 months.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.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.For FDIC-supported loans purchased with evidence of credit deterioration, we determine the ALLL according to ASC 310-30.separate accounting guidance. The accounting for these loans, including the allowance calculation, is described in the purchased loansPurchased Loans section following.After applying historichistorical loss experience, as described above, we review the quantitatively derived level of ALLL for each segment using qualitative criteria.criteria and use those criteria to determine our estimate within the range. We track various risk factors that influence our judgment regarding the level of the ALLL across the portfolio segments. PrimaryThe current status and historical changes in qualitative and environmental factors that may not be reflected in our quantitative modelsmodels. These factors primarily include:115Effect of changes in the nature and volume of the portfolioWe review changes in these factors to ensure that changes in the level of the ALLL are directionally consistent with changes in these 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: The CompanyWe also estimatesestimate a reserve for potential losses associated with off-balance sheet commitments and 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 ACLAllowance for Credit Losses Assumptions: We regularly evaluate the appropriateness of our loss estimation methods to reduce differences between estimated incurred losses and actual losses. During the fourth quarter of 2011, we changed certain assumptions in our ACL estimation procedures including our loss migration model that we use to quantitatively estimate the ALLL and RULC for the commercial and commercial real estateCRE segments and the procedures that we use to adjust qualitatively the outputs from our quantitative models.Prior to the fourth quarter of 2011, we used loss migration models based on loss experience over several look-back periods ranging from 6 to 60 months to estimate probable losses for the portions of the segments that were collectively evaluated for impairment. During the fourth quarter of 2011 and subsequently, the loss migrations models wereare based on loss experience over just the most recent 60 months. The loss emergence period was also extended from a static 18 months to a loss emergence period that varies by subsidiary bank based on charge-off experience. On average, the loss emergence period for the Company for the commercial lending and commercial real estateCRE segments is estimated to be approximately 25 months. These changes increased the quantitative portion of the ACL by approximately $45 million over what it would have been had the September 30, 2011 assumptions been used. We considered these assumption changes in assessing our qualitative adjustments to determine the appropriate level of ACL.ACL and made corresponding changes to our qualitative factors as described in the following paragraph. We made the change in order minimize the need for future assumption changes when credit quality improves to more normal levels and in order to increase the transparency of our ACL methodology. The above refinements in the quantitative portion of the ACL estimatecalculation did not have a material effect on the overall level of the ACL or the provision for loan losses.Prior to the fourth quarter of 2011, we determined our adjustments for qualitative and environmental factors by estimating a single value for these adjustments. During the fourth quarter of 2011 and subsequently, we determineddetermine our adjustments for qualitative and environmental factors by estimating a point that represents our best estimate within a range of estimated ACL levels.losses. This best estimate is based on our assessment of current qualitative and environmental factor trends and their historical trends and behaviors. We made the change to explicitly recognize that the ACL estimate is inherently imprecise and could have a range of acceptable values and to increase the transparency of our ACL methodology. The above refinement in the qualitative portion of the ACL estimatecalculation did not have a material effect on the overall level of the ACL or the provision for loan losses.During the first half of 2012, for all troubled debt restructurings (“TDRs”) regardless of size, the ALLL was based on an individual impairment evaluation, considering facts and circumstances specific to each borrower, as described subsequently. For loans no longer reported as TDRs, the ALLL was based on the methodology consistent with our nonimpaired loans, as described previously. During the latter half of 2012, for qualifying TDRs (i.e., accruing116TDRs, nonaccruing TDRs less than $1 million, and for loans no longer reported as TDRs since the beginning of 2012), the ALLL was based on a discounted cash flow analysis performed at the individual loan level, where credit losses are estimated based on historical loss statistics, derived from loans with similar risk characteristics (e.g., credit quality indicator and loan type), rather than the previous methodology that considered facts and circumstances specific to each borrower. The change was made in order to improve the efficiency associated with impairment analyses and because impairment for qualifying TDRs is accurately reflected through historical loss statistics, derived from loans with similar risk characteristics. This change in methodology had the effect of increasing the ALLL in the third quarter of 2012 by approximately $19 million.Changes in the allowance for credit lossesACL are summarized as follows: December 31, 2011 December 31, (In thousands) Commercial Commercial
real estate Consumer FDIC-
supported1 Total 2010 2009 $ 761,107 $ 487,235 $ 154,326 $ 37,673 $ 1,440,341 $ 1,531,332 $ 686,999 46,432 (21,940 ) 42,720 7,195 74,407 852,138 2,016,927 – – – (8,851 ) (8,851 ) 39,824 2,303 (228,026 ) (223,974 ) (88,660 ) (19,497 ) (560,157 ) (1,073,813 ) (1,255,652 ) 48,312 34,225 14,729 6,952 104,218 90,860 80,755 (179,714 ) (189,749 ) (73,931 ) (12,545 ) (455,939 ) (982,953 ) (1,174,897 ) $ 627,825 $ 275,546 $ 123,115 $ 23,472 $ 1,049,958 $ 1,440,341 $ 1,531,332 $ 83,352 $ 26,373 $ 1,983 $ – $ 111,708 $ 116,445 $ 50,934 (6,120 ) (2,801 ) (365 ) – (9,286 ) (4,737 ) 65,511 $ 77,232 $ 23,572 $ 1,618 $ – $ 102,422 $ 111,708 $ 116,445 $ 627,825 $ 275,546 $ 123,115 $ 23,472 $ 1,049,958 $ 1,440,341 $ 1,531,332 77,232 23,572 1,618 – 102,422 111,708 116,445 $ 705,057 $ 299,118 $ 124,733 $ 23,472 $ 1,152,380 $ 1,552,049 $ 1,647,777 December 31, 2012 (In thousands) Commercial Commercialreal estate Consumer FDIC-supported 1 Total Allowance for loan losses: �� Balance at beginning of year $ 629,552 $ 275,546 $ 123,115 $ 23,472 $ 1,051,685 Additions: Provision for loan losses 31,812 (33,986 ) 18,389 (1,988 ) 14,227 Adjustment for FDIC-supported loans — — — (14,542 ) (14,542 ) Deductions: Gross loan and lease charge-offs (117,506 ) (82,944 ) (60,273 ) (6,466 ) (267,189 ) Recoveries 50,255 35,155 14,425 12,071 111,906 Net loan and lease charge-offs (67,251 ) (47,789 ) (45,848 ) 5,605 (155,283 ) Balance at end of year $ 594,113 $ 193,771 $ 95,656 $ 12,547 $ 896,087 Reserve for unfunded lending commitments: Balance at beginning of year $ 77,232 $ 23,572 $ 1,618 $ — $ 102,422 Provision charged (credited) to earnings (9,858 ) 14,280 (35 ) — 4,387 Balance at end of year $ 67,374 $ 37,852 $ 1,583 $ — $ 106,809 Total allowance for credit losses: Allowance for loan losses $ 594,113 $ 193,771 $ 95,656 $ 12,547 $ 896,087 Reserve for unfunded lending commitments 67,374 37,852 1,583 — 106,809 Total allowance for credit losses $ 661,487 $ 231,623 $ 97,239 $ 12,547 $ 1,002,896 117 December 31, 2011 (In thousands) Commercial Commercialreal estate Consumer FDIC-supported 1 Total December 31, 2010 Allowance for loan losses: Balance at beginning of year $ 762,709 $ 487,235 $ 154,326 $ 37,673 $ 1,441,943 $ 1,532,379 Additions: Provision for loan losses 46,557 (21,940 ) 42,720 7,195 74,532 852,693 Adjustment for FDIC-supported loans — — — (8,851 ) (8,851 ) 39,824 Deductions: Gross loan and lease charge-offs (228,026 ) (223,974 ) (88,660 ) (19,497 ) (560,157 ) (1,073,813 ) Recoveries 48,312 34,225 14,729 6,952 104,218 90,860 Net loan and lease charge-offs (179,714 ) (189,749 ) (73,931 ) (12,545 ) (455,939 ) (982,953 ) Balance at end of year $ 629,552 $ 275,546 $ 123,115 $ 23,472 $ 1,051,685 $ 1,441,943 Reserve for unfunded lending commitments: Balance at beginning of year $ 83,352 $ 26,373 $ 1,983 $ — $ 111,708 $ 116,445 Provision charged (credited) to earnings (6,120 ) (2,801 ) (365 ) — (9,286 ) (4,737 ) Balance at end of year $ 77,232 $ 23,572 $ 1,618 $ — $ 102,422 $ 111,708 Total allowance for credit losses: Allowance for loan losses $ 629,552 $ 275,546 $ 123,115 $ 23,472 $ 1,051,685 $ 1,441,943 Reserve for unfunded lending commitments 77,232 23,572 1,618 — 102,422 111,708 Total allowance for credit losses $ 706,784 $ 299,118 $ 124,733 $ 23,472 $ 1,154,107 $ 1,553,651 1 1The purchased loans section following contains further discussion related to FDIC-supported loans.ALLL and outstanding loan balances accordingPurchased Loans section following contains further discussion related to the Company’s impairment method are summarized as follows: December 31, 2011 (In thousands) Commercial Commercial
real estate Consumer FDIC-
supported Total $ 11,456 $ 20,971 $ 8,995 $ 623 $ 42,045 616,369 254,575 114,120 16,830 1,001,894 – – – 6,019 6,019 $ 627,825 $ 275,546 $ 123,115 $ 23,472 $ 1,049,958 $ 349,662 $ 668,022 $ 113,798 $ 2,714 $ 1,134,196 19,074,318 9,514,271 6,806,590 638,167 36,033,346 – – – 110,210 110,210 $ 19,423,980 $ 10,182,293 $ 6,920,388 $ 751,091 $ 37,277,752 December 31, 2010 (In thousands) Commercial Commercial
real estate Consumer FDIC-
supported Total $ 53,237 $ 37,545 $ 6,335 $ – $ 97,117 707,870 449,690 147,991 �� 30,684 1,336,235 – – – 6,989 6,989 $ 761,107 $ 487,235 $ 154,326 $ 37,673 $ 1,440,341 $ 544,243 $ 1,003,402 $ 137,928 $ – $ 1,685,573 17,689,280 10,145,195 6,376,347 791,587 35,002,409 – – – 179,790 179,790 $ 18,233,523 $ 11,148,597 $ 6,514,275 $ 971,377 $ 36,867,772 The ALLL and outstanding loan balances according to the Company’s impairment method are summarized as follows: December 31, 2012 (In thousands) Commercial Commercialreal estate Consumer FDIC-supported Total Allowance for loan losses: Individually evaluated for impairment $ 29,303 $ 21,903 $ 13,758 $ — $ 64,964 Collectively evaluated for impairment 564,810 171,868 81,898 422 818,998 Purchased loans with evidence of credit deterioration — — — 12,125 12,125 Total $ 594,113 $ 193,771 $ 95,656 $ 12,547 $ 896,087 Outstanding loan balances: Individually evaluated for impairment $ 332,510 $ 410,926 $ 112,057 $ 1,149 $ 856,642 Collectively evaluated for impairment 19,430,213 9,591,306 7,259,994 57,896 36,339,409 Purchased loans with evidence of credit deterioration — — — 469,196 469,196 Total $ 19,762,723 $ 10,002,232 $ 7,372,051 $ 528,241 $ 37,665,247 118 December 31, 2011 (In thousands) Commercial Commercialreal estate Consumer FDIC-supported Total Allowance for loan losses: Individually evaluated for impairment $ 11,456 $ 20,971 $ 8,995 $ 623 $ 42,045 Collectively evaluated for impairment 618,096 254,575 114,120 1,152 987,943 Purchased loans with evidence of credit deterioration — — — 21,697 21,697 Total $ 629,552 $ 275,546 $ 123,115 $ 23,472 $ 1,051,685 Outstanding loan balances: Individually evaluated for impairment $ 349,662 $ 668,022 $ 113,798 $ 2,701 $ 1,134,183 Collectively evaluated for impairment 19,077,959 9,480,321 6,817,277 80,238 35,455,795 Purchased loans with evidence of credit deterioration — — — 667,931 667,931 Total $ 19,427,621 $ 10,148,343 $ 6,931,075 $ 750,870 $ 37,257,909 Nonaccrual and Past Due LoansLoans 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.Nonaccrual119Nonaccrual loans are summarized as follows: December 31, (In thousands) 2012 2011 Loans held for sale $ — $ 18,216 Commercial: Commercial and industrial $ 90,859 $ 126,468 Leasing 838 1,546 Owner occupied 206,031 239,203 Municipal 9,234 — Total commercial 306,962 367,217 Commercial real estate: Construction and land development 107,658 219,837 Term 124,615 156,165 Total commercial real estate 232,273 376,002 Consumer: Home equity credit line 14,247 18,376 1-4 family residential 70,180 90,857 Construction and other consumer real estate 4,560 12,096 Bankcard and other revolving plans 1,190 346 Other 1,398 2,498 Total consumer loans 91,575 124,173 FDIC-supported loans 17,343 25,531 Total $ 648,153 $ 892,923 120Past due loans (accruing and nonaccruing) are summarized as follows: December 31, 2012 (In thousands) Current 30-89 dayspast due 90+ dayspast due Totalpast due Totalloans Accruingloans90+ dayspast due Nonaccrualloansthat arecurrent1 Loans held for sale $ 251,651 $ — $ — $ — $ 251,651 $ — $ — Commercial: Commercial and industrial $ 11,124,639 $ 73,555 $ 58,751 $ 132,306 $ 11,256,945 $ 4,013 $ 32,389 Leasing 421,590 115 808 923 422,513 — — Owner occupied 7,447,083 56,504 85,495 141,999 7,589,082 1,822 100,835 Municipal 494,183 — — — 494,183 — 9,234 Total commercial 19,487,495 130,174 145,054 275,228 19,762,723 5,835 142,458 Commercial real estate: Construction and land development 1,836,284 66,139 36,990 103,129 1,939,413 853 50,044 Term 7,984,819 24,730 53,270 78,000 8,062,819 107 54,546 Total commercial real estate 9,821,103 90,869 90,260 181,129 10,002,232 960 104,590 Consumer: Home equity credit line 2,169,722 4,036 3,922 7,958 2,177,680 — 8,846 1-4 family residential 4,282,611 24,060 43,658 67,718 4,350,329 1,423 21,945 Construction and other consumer real estate 314,931 4,344 1,960 6,304 321,235 395 2,500 Bankcard and other revolving plans 302,587 2,439 1,402 3,841 306,428 1,010 721 Other 213,930 1,411 1,038 2,449 216,379 107 275 Total consumer loans 7,283,781 36,290 51,980 88,270 7,372,051 2,935 34,287 FDIC-supported loans 454,333 12,407 61,501 73,908 528,241 52,033 7,393 Total $ 37,046,712 $ 269,740 $ 348,795 $ 618,535 $ 37,665,247 $ 61,763 $ 288,728 121 December 31, 2011 (In thousands) Current 30-89 dayspast due 90+ dayspast due Totalpast due Totalloans Accruingloans90+ dayspast due Nonaccrualloansthat arecurrent1 Loans held for sale $ 183,344 $ — $ 18,246 $ 18,246 $ 201,590 $ 30 $ — Commercial: Commercial and industrial $ 10,311,691 $ 62,153 $ 74,271 $ 136,424 $ 10,448,115 $ 4,966 $ 47,939 Leasing 377,914 1,634 161 1,795 379,709 — 1,319 Owner occupied 7,953,280 93,763 111,513 205,276 8,158,556 3,230 85,495 Municipal 441,241 — — — 441,241 — — Total commercial 19,084,126 157,550 185,945 343,495 19,427,621 8,196 134,753 Commercial real estate: Construction and land development 2,137,544 21,562 105,803 127,365 2,264,909 2,471 107,991 Term 7,770,268 51,592 61,574 113,166 7,883,434 4,170 88,451 Total commercial real estate 9,907,812 73,154 167,377 240,531 10,148,343 6,641 196,442 Consumer: Home equity credit line 2,169,190 8,669 9,569 18,238 2,187,428 — 5,542 1-4 family residential 3,846,012 18,985 56,219 75,204 3,921,216 2,833 32,067 Construction and other consumer real estate 294,371 5,008 6,494 11,502 305,873 136 4,773 Bankcard and other revolving plans 287,541 1,984 1,493 3,477 291,018 1,309 122 Other 221,575 1,995 1,970 3,965 225,540 — 372 Total consumer loans 6,818,689 36,641 75,745 112,386 6,931,075 4,278 42,876 FDIC-supported loans 634,114 27,791 88,965 116,756 750,870 74,502 7,848 Total $ 36,444,741 $ 295,136 $ 518,032 $ 813,168 $ 37,257,909 $ 93,617 $ 381,919 1 Represents nonaccrual loans that are summarized as follows: December 31, (In thousands) 2011 2010 $ 18,216 $ – $ 126,468 $ 224,499 1,546 801 239,203 342,467 – 2,002 367,217 569,769 219,837 493,445 156,165 264,305 376,002 757,750 18,376 14,047 90,857 124,470 12,096 23,719 346 958 2,498 2,156 124,173 165,350 24,267 35,837 $ 891,659 $ 1,528,706 Pastnot past due loans (accruingmore than 30 days; however, full payment of principal and nonaccruing) are summarized as follows: December 31, 2011 (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
current 1 $ 183,344 $ – $ 18,246 $ 18,246 $ 201,590 $ 30 $ – $ 10,257,072 $ 62,153 $ 74,271 $ 136,424 $ 10,393,496 $ 4,966 $ 47,939 420,636 1,634 161 1,795 422,431 – 1,319 7,960,717 93,763 111,513 205,276 8,165,993 3,230 85,495 442,060 – – – 442,060 – – 19,080,485 157,550 185,945 343,495 19,423,980 8,196 134,753 2,148,749 21,562 105,803 127,365 2,276,114 2,471 107,991 7,793,013 51,592 61,574 113,166 7,906,179 4,170 88,451 9,941,762 73,154 167,377 240,531 10,182,293 6,641 196,442 2,166,277 8,669 9,569 18,238 2,184,515 – 5,542 3,839,804 18,985 56,219 75,204 3,915,008 2,833 32,067 295,262 5,008 6,494 11,502 306,764 136 4,773 287,443 1,984 1,493 3,477 290,920 1,309 122 219,216 1,995 1,970 3,965 223,181 – 372 6,808,002 36,641 75,745 112,386 6,920,388 4,278 42,876 634,334 27,791 88,966 116,757 751,091 74,611 6,812 $ 36,464,583 $ 295,136 $ 518,033 $ 813,169 $ 37,277,752 $ 93,726 $ 380,883 December 31, 2010 (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
current 1 $ 206,286 $ – $ – $ – $ 206,286 $ – $ – $ 8,938,120 $ 100,119 $ 128,762 $ 228,881 $ 9,167,001 $ 7,533 $ 77,406 408,015 1,352 807 2,159 410,174 66 23 7,905,193 83,658 228,512 312,170 8,217,363 3,876 91,527 438,985 – – – 438,985 – 2,002 17,690,313 185,129 358,081 543,210 18,233,523 11,475 170,958 3,172,537 57,891 268,675 326,566 3,499,103 1,916 200,864 7,436,222 85,595 127,677 213,272 7,649,494 4,757 112,447 10,608,759 143,486 396,352 539,838 11,148,597 6,673 313,311 2,126,505 7,494 7,741 15,235 2,141,740 – 2,224 3,383,420 26,345 89,384 115,729 3,499,149 2,966 34,425 322,341 8,261 12,655 20,916 343,257 532 10,089 290,879 3,912 2,145 6,057 296,936 1,572 311 227,654 4,586 953 5,539 233,193 – 959 6,350,799 50,598 112,878 163,476 6,514,275 5,070 48,008 804,760 27,256 139,361 166,617 971,377 118,760 15,136 $ 35,454,631 $ 406,469 $ 1,006,672 $ 1,413,141 $ 36,867,772 $ 141,978 $ 547,413 1Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.Credit Quality IndicatorsIn addition to the past due and nonaccrual criteria, we also analyze loans using a loan grading system. We generally assign internal grades to loans with commitments less than $500,000$500,000 based on the performance of those loans. Performance-based grades 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: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:Mention: A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.Substandard: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 defined weaknesses and are characterized by the distinct possibility that the bank may sustain some loss if deficiencies are not corrected.Doubtful: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.122We generally assign internal grades to commercial and commercial real estateCRE loans with commitments equal to or greater than $500,000$500,000 based on financial/financial and statistical models, individual credit analysis, and loan officer judgment. For these largerfourteen probability of default grades (in order of declining credit quality) and one of twelve loss-given-default grades. The first ten of the fourteen probability of default grades indicate a Pass grade. The remainingfollowing four grades are:grades: Special Mention, Substandard, Doubtful, and Loss. Loss indicates that the outstanding balance has been charged-off. We evaluate our credit quality information such as risk grades at least quarterly, or as soon as we identify information that might warrant an upgrade or downgrade. Risk grades are then updated as necessary.For consumer loans, we generally assign internal risk grades similar to those described abovepreviously based on payment performance. These are generally assigned with either a Pass or Substandard grade and are reviewed as we identify information that might warrant an upgrade or downgrade.Outstanding loan balances (accruing and nonaccruing) categorized by these credit quality indicators are summarized as follows: December 31, 2011 (In thousands) Pass Special
Mention Substandard Doubtful Total loans Total
allowance $ 182,626 $ – $ 18,964 $ – $ 201,590 $ – $ 9,670,781 $ 271,845 $ 442,139 $ 8,731 $ 10,393,496 405,433 5,878 11,120 – 422,431 7,488,644 184,821 486,584 5,944 8,165,993 426,626 15,434 – – 442,060 17,991,484 477,978 939,843 14,675 19,423,980 $ 627,825 1,658,946 187,323 426,152 3,693 2,276,114 7,266,423 196,377 437,390 5,989 7,906,179 8,925,369 383,700 863,542 9,682 10,182,293 275,546 2,133,277 106 51,089 43 2,184,515 3,782,750 5,736 126,277 245 3,915,008 275,603 12,206 16,967 1,988 306,764 278,669 3,832 8,419 – 290,920 218,755 163 4,256 7 223,181 6,689,054 22,043 207,008 2,283 6,920,388 123,115 500,177 35,877 215,031 6 751,091 23,472 $ 34,106,084 $ 919,598 $ 2,225,424 $ 26,646 $ 37,277,752 $ 1,049,958 December 31, 2010 (In thousands) Pass Special
Mention Substandard Doubtful Total loans Total
allowance $ 206,286 $ – $ – $ – $ 206,286 $ – $ 8,234,515 $ 254,369 $ 658,400 $ 19,717 $ 9,167,001 395,081 1,170 13,923 – 410,174 7,358,189 147,562 705,128 6,484 8,217,363 436,983 – 2,002 – 438,985 16,424,768 403,101 1,379,453 26,201 18,233,523 $ 761,107 1,921,110 470,431 1,093,772 13,790 3,499,103 6,768,022 252,814 624,196 4,462 7,649,494 8,689,132 723,245 1,717,968 18,252 11,148,597 487,235 2,098,365 855 42,349 171 2,141,740 3,313,875 7,274 177,963 37 3,499,149 310,209 3,424 29,176 448 343,257 282,353 4,535 10,040 8 296,936 226,832 111 6,038 212 233,193 6,231,634 16,199 265,566 876 6,514,275 154,326 646,476 45,431 278,044 1,426 971,377 37,673 $ 31,992,010 $ 1,187,976 $ 3,641,031 $ 46,755 $ 36,867,772 $ 1,440,341 December 31, 2012 (In thousands) Pass SpecialMention Sub-standard Doubtful Totalloans Totalallowance Loans held for sale $ 251,651 $ — $ — $ — $ 251,651 $ — Commercial: Commercial and industrial $ 10,717,594 $ 198,645 $ 336,230 $ 4,476 $ 11,256,945 Leasing 419,482 226 2,805 — 422,513 Owner occupied 6,833,923 138,539 612,011 4,609 7,589,082 Municipal 453,193 31,756 9,234 — 494,183 Total commercial 18,424,192 369,166 960,280 9,085 19,762,723 $ 594,113 Commercial real estate: Construction and land development 1,648,215 57,348 233,374 476 1,939,413 Term 7,433,789 237,201 388,914 2,915 8,062,819 Total commercial real estate 9,082,004 294,549 622,288 3,391 10,002,232 193,771 Consumer: Home equity credit line 2,138,693 85 38,897 5 2,177,680 1-4 family residential 4,234,426 4,316 111,063 524 4,350,329 Construction and other consumer real estate 313,499 218 7,518 — 321,235 Bankcard and other revolving plans 298,665 23 7,740 — 306,428 Other 209,293 3,211 3,875 — 216,379 Total consumer loans 7,194,576 7,853 169,093 529 7,372,051 95,656 FDIC-supported loans 327,609 24,980 175,652 — 528,241 12,547 Total $ 35,028,381 $ 696,548 $ 1,927,313 $ 13,005 $ 37,665,247 $ 896,087 123 December 31, 2011 (In thousands) Pass SpecialMention Sub-standard Doubtful Totalloans Totalallowance Loans held for sale $ 182,626 $ — $ 18,964 $ — $ 201,590 $ — Commercial: Commercial and industrial $ 9,725,400 $ 271,845 $ 442,139 $ 8,731 $ 10,448,115 Leasing 362,711 5,878 11,120 — 379,709 Owner occupied 7,481,207 184,821 486,584 5,944 8,158,556 Municipal 425,807 15,434 — — 441,241 Total commercial 17,995,125 477,978 939,843 14,675 19,427,621 $ 629,552 Commercial real estate: Construction and land development 1,647,741 187,323 426,152 3,693 2,264,909 Term 7,243,678 196,377 437,390 5,989 7,883,434 Total commercial real estate 8,891,419 383,700 863,542 9,682 10,148,343 275,546 Consumer: Home equity credit line 2,136,190 106 51,089 43 2,187,428 1-4 family residential 3,788,958 5,736 126,277 245 3,921,216 Construction and other consumer real estate 274,712 12,206 16,967 1,988 305,873 Bankcard and other revolving plans 278,767 3,832 8,419 — 291,018 Other 221,114 163 4,256 7 225,540 Total consumer loans 6,699,741 22,043 207,008 2,283 6,931,075 123,115 FDIC-supported loans 499,955 35,877 215,032 6 750,870 23,472 Total $ 34,086,240 $ 919,598 $ 2,225,425 $ 26,646 $ 37,257,909 $ 1,051,685 Impaired LoansLoans 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. IfFor our non-PCI loans, if a nonaccrual loan has a balance greater than $1$1 million or if a loan is a TDR, (includingincluding TDRs that subsequently default),default, we evaluate the loan for impairment and estimate a specific reserve for the loan according to ASC 310 for all portfolio segments.segments under applicable accounting guidance. Smaller nonaccrual loans are pooled for ALLL estimation purposes.The threshold of $1 million was increased from $500,000 beginning PCI loans in the third quarter of 2011 primarily to achieve operational efficiency through collective evaluation ofour FDIC-supported portfolio segment are included in impaired loans and are accounted for impairment. Recent improvements in credit quality were also considered in making this change. Loans that met the prior threshold will continue to be individually evaluated for impairment. No changes were made to our loan loss model for those loans that are now collectively evaluated for impairment. The impact of increasing the threshold increased the ALLL by an immaterial amount at December 31, 2011, because the collective evaluation resulted in a higher ALLL than the individual evaluation.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 less the cost to sell. 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 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. Payments areThe amount of interest income recognized whenon a cash is received.Information on all impaired loans is summarized as follows, including the average recorded investment and interest income recognized for the yearyears ended December 31, 2011. December 31, 2011 Unpaid
principal
balance Recorded investment Total
recorded
investment Related
allowance Average
recorded
investment Interest
income
recognized (In thousands) with no
allowance with
allowance $ 212,263 $ 69,492 $ 66,438 $ 135,930 $ 6,373 $ 184,280 $ 1,967 258,173 135,555 78,177 213,732 5,083 280,121 2,829 – – – – – 2,937 – 470,436 205,047 144,615 349,662 11,456 467,338 4,796 405,499 178,113 136,634 314,747 8,925 439,803 5,026 414,998 187,345 165,930 353,275 12,046 398,841 9,113 820,497 365,458 302,564 668,022 20,971 838,644 14,139 1,955 384 1,469 1,853 411 1,381 1 116,498 58,392 39,960 98,352 7,555 105,794 1,408
real estate 13,340 4,537 6,188 10,725 1,026 12,327 84 – – – – – 32 – 2,889 2,840 28 2,868 3 3,626 1 134,682 66,153 47,645 113,798 8,995 123,160 1,494 353,195 47,736 65,188 112,924 6,642 144,575 53,954 1 $ 1,778,810 $ 684,394 $ 560,012 $ 1,244,406 $ 48,064 $ 1,573,717 $ 74,383 124 December 31, 2012 Year Ended
December 31, 2012 (In thousands) Unpaidprincipalbalance Recorded investment Totalrecordedinvestment Relatedallowance Averagerecordedinvestment Interest
income
recognized with noallowance withallowance Commercial: Commercial and industrial $ 176,521 $ 27,035 $ 119,780 $ 146,815 $ 12,198 $ 199,238 $ 3,557 Owner occupied 210,319 79,413 106,282 185,695 17,105 262,511 2,512 Municipal — — — — — — — Total commercial 386,840 106,448 226,062 332,510 29,303 461,749 6,069 Commercial real estate: Construction and land development 182,385 67,241 85,855 153,096 5,178 274,226 4,785 Term 310,242 70,718 187,112 257,830 16,725 410,901 7,298 Total commercial real estate 492,627 137,959 272,967 410,926 21,903 685,127 12,083 Consumer: Home equity credit line 14,339 8,055 3,444 11,499 297 2,766 42 1-4 family residential 108,934 42,602 49,867 92,469 12,921 107,118 1,629 Construction and other consumer real estate 7,054 2,710 3,085 5,795 517 9,697 188 Bankcard and other revolving plans 287 — 287 287 1 24 — Other 2,454 1,832 175 2,007 22 1,055 — Total consumer loans 133,068 55,199 56,858 112,057 13,758 120,660 1,859 FDIC-supported loans 895,804 275,187 195,158 470,345 12,125 622,125 89,921 1 Total $ 1,908,339 $ 574,793 $ 751,045 $ 1,325,838 $ 77,089 $ 1,889,661 $ 109,932 December 31, 2011 Year Ended
December 31, 2011 (In thousands) Unpaidprincipalbalance Recorded investment Totalrecordedinvestment Relatedallowance Averagerecordedinvestment Interest
income
recognized with noallowance withallowance Commercial: Commercial and industrial $ 212,263 $ 69,492 $ 66,438 $ 135,930 $ 6,373 $ 184,280 $ 1,967 Owner occupied 258,173 135,555 78,177 213,732 5,083 280,121 2,829 Municipal — — — — — 2,937 — Total commercial 470,436 205,047 144,615 349,662 11,456 467,338 4,796 Commercial real estate: Construction and land development 405,499 178,113 136,634 314,747 8,925 439,803 5,026 Term 414,998 187,345 165,930 353,275 12,046 398,841 9,113 Total commercial real estate 820,497 365,458 302,564 668,022 20,971 838,644 14,139 Consumer: Home equity credit line 1,955 384 1,469 1,853 411 1,381 1 1-4 family residential 116,498 58,392 39,960 98,352 7,555 105,794 1,408 Construction and other consumer real estate 13,340 4,537 6,188 10,725 1,026 12,327 84 Bankcard and other revolving plans — — — — — 32 — Other 2,889 2,840 28 2,868 3 3,626 1 Total consumer loans 134,682 66,153 47,645 113,798 8,995 123,160 1,494 FDIC-supported loans 919,869 296,741 373,891 670,632 22,320 769,646 120,067 1 Total $ 2,345,484 $ 933,399 $ 868,715 $ 1,802,114 $ 63,742 $ 2,198,788 $ 140,496 1 InterestThe balance of interest income recognized results primarily from discount accretion of interest income on impaired FDIC-supported loans.
| December 31, 2010 | ||||||||||||||||||||
| Unpaid principal balance | Recorded investment | Total recorded investment | Related allowance | |||||||||||||||||
| (In thousands) | with no allowance | with allowance | ||||||||||||||||||
Commercial: | ||||||||||||||||||||
Commercial and industrial | $ | 322,674 | $ | 95,316 | $ | 114,959 | $ | 210,275 | $ | 38,021 | ||||||||||
Owner occupied | 430,997 | 233,418 | 98,548 | 331,966 | 14,743 | |||||||||||||||
Municipal | 2,002 | – | 2,002 | 2,002 | 473 | |||||||||||||||
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Total commercial | 755,673 | 328,734 | 215,509 | 544,243 | 53,237 | |||||||||||||||
Commercial real estate: | ||||||||||||||||||||
Construction and land development | 862,433 | 478,181 | 118,663 | 596,844 | 16,964 | |||||||||||||||
Term | 500,956 | 251,745 | 154,813 | 406,558 | 20,581 | |||||||||||||||
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Total commercial real estate | 1,363,389 | 729,926 | 273,476 | 1,003,402 | 37,545 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity credit line | 5,160 | 3,152 | 630 | 3,782 | 180 | |||||||||||||||
1-4 family residential | 138,965 | 91,721 | 23,811 | 115,532 | 5,456 | |||||||||||||||
Construction and other consumer real estate | 27,308 | 16,682 | 1,369 | 18,051 | 465 | |||||||||||||||
Bankcard and other revolving plans | 60 | – | 30 | 30 | 30 | |||||||||||||||
Other | 629 | – | 533 | 533 | 204 | |||||||||||||||
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Total consumer loans | 172,122 | 111,555 | 26,373 | 137,928 | 6,335 | |||||||||||||||
FDIC-supported loans | 547,566 | 131,680 | 48,110 | 179,790 | 6,989 | |||||||||||||||
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Total | $ | 2,838,750 | $ | 1,301,895 | $ | 563,468 | $ | 1,865,363 | $ | 104,106 | ||||||||||
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Amounts at December 31, 2010 in the preceding schedule presenting the unpaid principal balance have been adjusted from balances previously reported as of this same date, for which the total was $2.7 billion. This change to our previous reporting was made to correct a reporting error in the accumulation of our impaired loan charge-offs to arrive at the unpaid principal balances. The change did not have an impact on the Company’s balance sheet or results of operations.
TDRs. for a minimum of Accruing Commercial: Commercial and industrial Owner occupied Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Other Total consumer loans Total accruing Nonaccruing Commercial: Commercial and industrial Owner occupied Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: Home equity credit line 1-4 family residential Construction and other consumer real estate Total consumer loans Total nonaccruing Total Unused commitments to extend credit on Commercial: Commercial and industrial Owner occupied Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: 1-4 family residential Construction and other consumer real estate Total consumer loans Total decrease to interest income Calculated based on the difference between the modified rate and the Commercial: Commercial and industrial Owner occupied Total commercial Commercial real estate: Construction and land development Term Total commercial real estate Consumer: 1-4 family residential Total consumer loans Total $174.0 million and $327.3 million, respectively. accounted for in loan pools. Commercial Commercial real estate Consumer Outstanding balance Carrying amount ALLL Carrying amount, net Balance at beginning of year Accretion Reclassification from nonaccretable difference Disposals and other Balance at end of year other assets in the balance sheet and is discussed subsequently. The ALLL is included in the overall ALLL in the balance sheet. The provision for loan losses is reported net of changes in the amounts recoverable under the loss sharing agreements. yield, as discussed under changes in cash flow estimates. 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) stronger efforts by our credit officers and loan workout professionals to resolve problem loans. expense due to the reduction of the FDIC IA. Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution, a consensus of the FASB Emerging Issues Task Force. This new guidance under ASC 805, Business Combinations, provides that a change in measurement of the IA due to a change in expected cash flows would be accounted for on the same basis as the change in the indemnified loans. Any amortization period for the changes in value would be limited to the lesser of the term of the indemnification agreement or the remaining life of the indemnified loans. The new guidance is effective for interim or annual periods beginning on or after December 15, 2012 and permits early adoption. Management is currently evaluating the impact this new guidance may have on its method of accounting for the FDIC IA. Balance at beginning of year Amounts filed with the FDIC and collected or in process Net change in asset balance due to reestimation of projected cash flows2 Other Balance at end of year Negative amounts result from the accretion of loan balances based on increases in cash flow estimates on the underlying indemnified loans. swap and estimation of its fair value. Derivatives designated as hedging instruments under ASC 815 Asset derivatives Cash flow hedges1: Interest rate swaps Interest rate floors Terminated swaps and floors Liability derivatives Fair value hedges: Terminated swaps on long-term debt Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments under ASC 815 Interest rate swaps Interest rate swaps for customers2 Energy commodity swaps for customers2 Basis swaps Futures contracts Options contracts Total return swap Total derivatives not designated as hedging instruments Total derivatives Derivatives designated as hedging instruments under ASC 815 Asset derivatives Cash flow hedges1: Interest rate swaps Interest rate floors Terminated swaps and floors Liability derivatives Fair value hedges: Terminated swaps on long-term debt Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments under ASC 815 Interest rate swaps Interest rate swaps for customers2 Energy commodity swaps for customers2 Basis swaps Futures contracts Options contracts Total return swap Total derivatives not designated as hedging instruments Total derivatives At December 31, the fair values of derivative assets and liabilities were reduced (increased) by net credit valuation adjustments of liabilities. Land Buildings Furniture and equipment Leasehold improvements Total Less accumulated depreciation and amortization Net book value Core deposit intangibles Customer relationships and other intangibles 31 2012 2013 2014 2015 2016 2012 Balance as of December 31, 2009 Impairment losses Balance as of December 31, 2010 Impairment losses Adjustment1 Balance as of December 31, 2011 Adjustment to goodwill consists of the tax benefit derived from the exercise of certain employee stock options that existed at the time of the acquisition of Amegy. At December 31, 2012 2013 2014 2015 2016 Thereafter Federal funds purchased: Average amount outstanding Weighted average rate Highest month-end balance Year-end balance Weighted average rate on outstandings at year-end Security repurchase agreements: Average amount outstanding Weighted average rate Highest month-end balance Year-end balance Weighted average rate on outstandings at year-end Federal funds purchased and security repurchase agreements at year-end overnight. Senior medium-term notes Commercial paper Other 12. . Junior subordinated debentures related to trust preferred securities Convertible subordinated notes Subordinated notes Senior medium-term notes FHLB advances Capital lease obligations and other ZCTB Amegy Trust I (3.41 %) Amegy Trust II (2.30 %) Amegy Trust III (2.33 %) Stockmen’s Trust II (3.72 %) Stockmen’s Trust III (3.45 %) Intercontinental Statutory Trust I (3.41 %) Interest rate 5.65% 6.00% 5.50% 3mL+1.25% (1.88%)1 In connection with 13. Balance at beginning of year Convertible debt discount from debt modifications Discount amortization on convertible subordinated debt Accelerated discount amortization Total amortization Balance at end of year Interest rate 3mL+0.37% (0.78%)1 7.75% 2.00% – 5.50% These notes are unsecured and The 2012 2013 2014 2015 2016 Thereafter 2012 and subject to certain regulatory provisions. Earliest redemption date Series A Series C Series D, TARP Capital Purchase Program Series E debt. Balance at December 31, 2008 Cumulative effect of change in accounting principle, adoption of new OTTI guidance in ASC 320 Other comprehensive income (loss), net of tax: Net realized and unrealized holding losses net of income tax benefit of $40,454 Reclassification for net losses included in earnings, net of income tax benefit of $102,284 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $115,159 Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $673 Net unrealized losses, net of reclassification to earnings of $223,103 and income tax benefit of $80,033 Pension and postretirement, net of income tax expense of $2,694 Other comprehensive income (loss) Balance at December 31, 2009 Other comprehensive income (loss), net of tax: Net realized and unrealized holding gains, net of income tax expense of $2,230 Reclassification for net losses included in earnings, net of income tax benefit of $28,611 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $27,177 Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $81 Net unrealized losses, net of reclassification to earnings of $74,936 and income tax benefit of $23,405 Pension and postretirement, net of income tax expense of $4,440 Other comprehensive income (loss) Balance at December 31, 2010 Other comprehensive income (loss), net of tax: Net realized and unrealized holding losses, net of income tax benefit of $47,986 Reclassification for net losses included in earnings, net of income tax benefit of $8,194 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $17,161 Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $255 Net unrealized losses, net of reclassification to earnings of $37,273 and income tax benefit of $13,649 Pension and postretirement, net of income tax benefit of $12,353 Other comprehensive income (loss) Balance at December 31, 2011 Federal: Current Deferred State: Current Deferred Income tax expense (benefit) at statutory federal rate State income taxes, net Nondeductible goodwill impairment Other nondeductible expenses Nontaxable income Surrender of bank-owned life insurance Tax credits and other taxes Valuation allowance for federal tax purposes on acquired Other Gross deferred tax assets: Book loan loss deduction in excess of tax Pension and postretirement Deferred compensation Other real estate owned Accrued severance costs Security investments and derivative fair value adjustments Net operating losses, capital losses and tax credits Other Valuation allowance Total deferred tax assets Gross deferred tax liabilities: Core deposits and purchase accounting Premises and equipment, due to differences in depreciation FHLB stock dividends Leasing operations Prepaid expenses Prepaid pension reserves Subordinated debt modification Deferred loan fees FDIC-supported transactions Other Total deferred tax liabilities Net deferred tax assets below: 2012 Balance at beginning of year Tax positions related to current year: Additions Reductions Tax positions related to prior years: Additions Reductions Settlements with taxing authorities Lapses in statutes of limitations Balance at end of year Basic: Net income (loss) applicable to controlling interest Less common and preferred dividends Undistributed earnings (loss) Less undistributed earnings applicable to nonvested shares Undistributed earnings (loss) applicable to common shares Distributed earnings applicable to common shares Total earnings (loss) applicable to common shares Weighted average common shares outstanding Net earnings (loss) per common share Diluted: Total earnings (loss) applicable to common shares Additional undistributed earnings allocated to incremental shares Diluted earnings (loss) applicable to common shares Weighted average common shares outstanding Additional weighted average dilutive shares Weighted average diluted common shares outstanding Net earnings (loss) per common share Compensation expense Reduction of income tax expense For all stock options granted in Weighted average of fair value for options granted Weighted average assumptions used: Expected dividend yield Expected volatility Risk-free interest rate Expected life (in years) granted: Balance at December 31, 2008 Granted Exercised Expired Forfeited Balance at December 31, 2009 Granted Exercised Voluntarily surrendered Expired Forfeited Balance at December 31, 2010 Granted Exercised Expired Forfeited Balance at December 31, 2011 Outstanding stock options exercisable as of: December 31, 2011 December 31, 2010 December 31, 2009 2012 Exercise price range $0.32 to $19.99 $20.00 to $24.99 $25.00 to $29.99 $30.00 to $39.99 $40.00 to $44.99 $45.00 to $49.99 $50.00 to $59.99 $60.00 to $79.99 $80.00 to $81.99 $82.00 to $83.38 and Restricted Stock Units Nonvested restricted shares at December 31, 2008 Issued Vested Forfeited Nonvested restricted shares at December 31, 2009 Issued Vested Forfeited Nonvested restricted shares at December 31, 2010 Issued Vested Forfeited Nonvested restricted shares at December 31, 2011 2012 20. Commitments to extend credit Standby letters of credit: Financial Performance Commercial letters of credit 12. We have commitments for leasing premises and equipment under the terms of noncancelable capital and operating leases expiring from 2012 2013 2014 2015 2016 Thereafter Current putative class actions and similar claims include the following: Starr, us (conducted by the staff of the Salt Lake City office of the SEC); and 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. regulators. repurchases. As of December 31, 2011: Total capital (to risk-weighted assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. Tier 1 capital (to risk-weighted assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. Tier 1 capital (to average assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. As of December 31, 2010: Total capital (to risk-weighted assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. Tier 1 capital (to risk-weighted assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. Tier 1 capital (to average assets) The Company Zions First National Bank California Bank & Trust Amegy Bank N.A. the portion of the premiums that are the Company’s responsibility. Change in benefit obligation: Benefit obligation at beginning of year Service cost Interest cost Actuarial (gain) loss Settlements Benefits paid Benefit obligation at end of year Change in fair value of plan assets: Fair value of plan assets at beginning of year Actual return on plan assets Employer contributions Benefits paid Fair value of plan assets at end of year Funded status Amounts recognized in balance sheet: Liability for pension/postretirement benefits Accumulated other comprehensive income (loss) Accumulated other comprehensive income (loss) consists of: Net gain (loss) Prior service credit (cost) Net gain (loss) Prior service credit (cost) Service cost Interest cost Expected return on plan assets Amortization of net actuarial (gain) loss Amortization of prior service (credit) cost Settlement loss Net periodic benefit cost (credit) plans: Used to determine benefit obligation at year-end: Discount rate Rate of compensation increase Used to determine net periodic benefit cost for the years ended December 31: Discount rate Expected long-term return on plan assets Rate of compensation increase 2012 2013 2014 2015 2016 Years 2017–2021 2012 (In thousands) Company common stock Mutual funds: Equity Debt Insurance company pooled separate accounts: Equity investments Debt investments Real estate Guaranteed deposit account Limited partnerships value: year in the active market where individual securities are traded. restrictions for these funds. The underlying investments generally include investment grade public and privately traded debt securities and mortgage loans and, to a lesser extent, real estate and other equity investments. Fair values are estimated under an income approach by discounting expected future cash flows from both investment income and repayment of principal. Market value adjustments are applied at the time of redemption if certain withdrawal limits are exceeded. A variety of methodologies under Level 3 are used to estimate the fair value of underlying investments. These include best estimates of fair value by the general partner, results of any meaningful third party market transactions, consideration of financial condition and operating results of the issuer, estimates of amounts expected to be realized upon sale, Balance at beginning of year Net increases (decreases) included in plan statement of changes in net assets available for benefits: Net appreciation (depreciation) in fair value of investments: Realized Unrealized Interest and dividends Purchases Balance at end of year inputs: 2010. TRS. Level 3 securities were determined utilizing a licensed internal third party model. See Trading Corporations Securities securities. Preferred Collateralized Debt Obligations CDOs. We utilize a statistical regression of quarterly regulatory ratios that we have identified as predictive of future bank failures to create a credit-specific rate for the CDOs. The differences average approximately including investment officers, controllers, etc., review quarterly the financial statements and other information for each investment. The Other Equity Investments TRS is discussed in Note 7. Sold, Not Yet Purchased ASSETS Investment securities: Available-for-sale: U.S. Treasury, agencies and corporations Municipal securities Asset-backed securities: Trust preferred – banks and insurance Trust preferred – real estate investment trusts Auction rate Other (including ABS CDOs) Mutual funds and other Trading account Other noninterest-bearing investments: Private equity Other assets: Derivatives: Interest rate related and other Interest rate swaps for customers Foreign currency exchange contracts LIABILITIES Securities sold, not yet purchased Other liabilities: Derivatives: Interest rate related and other Interest rate swaps for customers Foreign currency exchange contracts Total return swap Other ASSETS Investment securities: Available-for-sale: U.S. Treasury, agencies and corporations Municipal securities Asset-backed securities: Trust preferred – banks and insurance Trust preferred – real estate investment trusts Auction rate Other (including ABS CDOs) Mutual funds and other Trading account Other noninterest-bearing investments: Private equity Other assets: Derivatives: Interest rate related and other Interest rate swaps for customers Foreign currency exchange contracts LIABILITIES Securities sold, not yet purchased Other liabilities: Derivatives: Interest rate related and other Interest rate swaps for customers Foreign currency exchange contracts Total return swap Other Constant default rate Prepayment rate Asset-backed securities: Trust preferred – predominantly banks Trust preferred – predominantly insurance Trust preferred – individual banks Trust preferred – real estate investment trusts Other (including ABS CDOs) These are predominantly ABS CDOs whose collateral is rated. CDR and loss severities are built up from 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. Vintage year 2001 2002 2003 2004 2005 2006 2007 rating: Balance at January 1, 2011 Total net gains (losses) included in: Statement of income: Accretion of purchase discount included in interest on securities available-for-sale Dividends and other investment income Equity securities losses, net Fixed income securities gains (losses), net Net impairment losses on investment securities Other noninterest expense Other comprehensive Purchases Sales Redemptions and paydowns Balance at December 31, 2011 Balance at January 1, 2010 Total net gains (losses) included in: Statement of income: Dividends and other investment income Fair value and non hedge derivative loss Equity securities losses, net Fixed income securities Net impairment losses on investment securities Other noninterest expense Other comprehensive Purchases, sales, issuances, and settlements, net Balance at December 31, 2010 inputs: Dividends and other investment income Equity securities losses, net Fixed income securities gains, net : ASSETS HTM securities adjusted for OTTI Impaired loans Other real estate owned ASSETS HTM securities adjusted for OTTI Impaired loans Other real estate owned We recognized net gains of 2011. applicable accounting guidance. Financial assets: HTM investment securities Loans and leases (including loans held for sale), net of allowance for carrying value Financial liabilities: Time deposits Foreign deposits Other short-term borrowings Long-term debt (less fair value hedges) instruments: Accordingly, our estimates of fair value for loans are categorized as Level 3. We manage our operations and prepare management reports and other information with a primary focus on geographical area. As of December 31, As a result, the impact of ZMSC’s operations on a net basis has not been significant to the operating amounts in the Other segment. Net interest income Provision for loan losses Net interest income after provision for loan losses Net impairment losses on investment securities Loss on sale of investment securities to Parent Valuation losses on securities purchased Gain on subordinated debt modification Acquisition related gains Other noninterest income Noninterest expense Impairment loss on goodwill Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Net income (loss) applicable to noncontrolling interests Net income (loss) applicable to controlling interest Preferred stock dividends Preferred stock redemption Net earnings (loss) applicable to common shareholders Total assets Net loans and leases1 Total deposits Shareholder’s equity: Preferred equity Common equity Noncontrolling interests Total shareholder’s equity Net interest income Provision for loan losses Net interest income after provision for loan losses Net impairment losses on investment securities Loss on sale of investment securities to Parent Valuation losses on securities purchased Gain on subordinated debt modification Acquisition related gains Other noninterest income Noninterest expense Impairment loss on goodwill Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Net income (loss) applicable to noncontrolling interests Net income (loss) applicable to controlling interest Preferred stock dividends Preferred stock redemption Net earnings (loss) applicable to common shareholders Total assets Net loans and leases1 Total deposits Shareholder’s equity: Preferred equity Common equity Noncontrolling interests Total shareholder’s equity Net interest income Provision for loan losses Net interest income after provision for loan losses Net impairment losses on investment securities Loss on sale of investment securities to Parent Valuation losses on securities purchased Gain on subordinated debt modification Acquisition related gains Other noninterest income Noninterest expense Impairment loss on goodwill Income (loss) before income taxes Income tax expense (benefit) Net income (loss) Net income (loss) applicable to noncontrolling interests Net income (loss) applicable to controlling interest Preferred stock dividends Preferred stock redemption Net earnings (loss) applicable to common shareholders Total assets Net loans and leases1 Total deposits Shareholder’s equity: Preferred equity Common equity Noncontrolling interests Total shareholder’s equity 2011: Gross interest income Net interest income Provision for loan losses Noninterest income: Net impairment losses on investment securities Investment securities gains (losses), net Other noninterest income Noninterest expense Income before income taxes Net income Net income applicable to controlling interest Preferred stock dividends Net earnings applicable to common shareholders Net earnings per common share: Basic Diluted 2010: Gross interest income Net interest income Provision for loan losses Noninterest income: Net impairment losses on investment securities Investment securities gains (losses), net Other noninterest income Noninterest expense Loss before income taxes Net loss Net loss applicable to controlling interest Preferred stock dividends Preferred stock redemption Net loss applicable to common shareholders Net loss per common share: Basic Diluted ASSETS Cash and due from banks Interest-bearing deposits Investment securities: Held-to-maturity, at adjusted cost (approximate fair value $13,019 and $4,056) Available-for-sale, at fair value Loans, net of unearned fees of $0 and $0 and allowance Other noninterest-bearing investments Investments in subsidiaries: Commercial banks and bank holding company Other operating companies Nonoperating – ZMFU II, Inc.1 Receivables from subsidiaries: Other Other assets LIABILITIES AND SHAREHOLDERS’ EQUITY Other liabilities Commercial paper: Due to affiliates Due to others Other short-term borrowings: Due to affiliates Due to others Subordinated debt to affiliated trusts Long-term debt: Due to affiliates Due to others Total liabilities Shareholders’ equity: Preferred stock Common stock Retained earnings Accumulated other comprehensive loss Total shareholders’ equity ZMFU II, Inc. is a wholly-owned nonoperating subsidiary whose sole purpose is to hold a portfolio of municipal bonds, loans and leases. Interest income: Commercial bank subsidiaries Other subsidiaries and affiliates Other loans and securities Total interest income Interest expense: Affiliated trusts Other borrowed funds Total interest expense Net interest loss Provision for loan losses Net interest loss after provision for loan losses Other income: Dividends from consolidated subsidiaries: Commercial banks and bank holding company Other operating companies Equity and fixed income securities gains (losses), net Net impairment losses on investment securities Gain on subordinated debt modification Other income (loss) Expenses: Salaries and employee benefits Other operating expenses Income (loss) before income taxes and undistributed income Income taxes (benefit) Income before equity in undistributed income (loss) of Equity in undistributed income (loss) of consolidated subsidiaries: Commercial banks and bank holding company Other operating companies Nonoperating – ZMFU II, Inc. Net income (loss) Preferred stock dividends Preferred stock redemption Net earnings (loss) applicable to common shareholders CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash used in operating activities: Undistributed net losses (income) of consolidated subsidiaries Unrealized equity securities losses, net Net impairment losses on investment securities Gain on subordinated debt modification Other, net Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in interest-bearing deposits Collection of advances to subsidiaries Advances to subsidiaries Proceeds from sales and maturities investment securities Purchases of investment securities Decrease (increase) of investment in subsidiaries Other, net Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term funds borrowed Proceeds from issuance of long-term debt Repayments of long-term debt Proceeds from issuance of preferred stock Proceeds from issuance of common stock and warrants Cash paid for preferred stock redemption Dividends paid on preferred stock Dividends paid on common stock Other, net Net cash provided by (used in) financing activities Net increase (decrease) in cash and due from banks Cash and due from banks at beginning of year Cash and due from banks at end of year The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Incorporated by reference from the Incorporated by reference from the Plan Category1 Equity Compensation Plans Zions Bancorporation 2005 Stock Option and Incentive Plan Zions Bancorporation 1996 Non-Employee Directors Stock Option Plan Zions Bancorporation Key Employee Incentive Stock Option Plan Total Incorporated by reference from the (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: Exhibit Description Exhibit Description 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. /s/ / Chairman, President and Chief Executive Officer / / / / / / / / / /125Modified and Restructured LoansLoans 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 a TDR.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 structureAs of December 31, 2012, TDR balances reflected recent changes in regulatory interpretative guidance from the Office of the Comptroller of the Currency (“OCC”) for national banks whose consumer borrowers had not reaffirmed their debt discharged in a Chapter 7 bankruptcy. The guidance states that national banks should write down affected loans to their collateral values and reclassify them as TDRs, even if the borrower is current as to principal and interest payments. Similar guidance has not been promulgated for banks with state charters by either the FDIC or the Federal Reserve. During the fourth quarter of 2012, we adopted this guidance for all of our subsidiary banks, which increased the total nonaccruing TDR balance by approximately $6.7 million and charge-offs by approximately $5.0 million. The impact on the ALLL was insignificant.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 table. This information reflects allschedules:126 December 31, 2012 Recorded investment resulting from the following modification types: (In thousands) Interestrate belowmarket Maturityor termextension Principalforgiveness Paymentdeferral Other1 Multiplemodificationtypes2 Total Accruing Commercial: Commercial and industrial $ 5,388 $ 6,139 $ — $ 3,585 $ 17,647 $ 44,684 $ 77,443 Owner occupied 20,963 12,104 — 4,013 9,305 13,598 59,983 Total commercial 26,351 18,243 — 7,598 26,952 58,282 137,426 Commercial real estate: Construction and land development 1,718 9,868 2 59 8,432 30,248 50,327 Term 30,118 1,854 8,433 3,807 32,302 82,809 159,323 Total commercial real estate 31,836 11,722 8,435 3,866 40,734 113,057 209,650 Consumer: Home equity credit line 744 — 5,965 — 300 218 7,227 1-4 family residential 2,665 1,324 5,923 147 3,319 36,199 49,577 Construction and other consumer real estate 147 — — — 641 2,354 3,142 Other — 3 — — 1 — 4 Total consumer loans 3,556 1,327 11,888 147 4,261 38,771 59,950 Total accruing 61,743 31,292 20,323 11,611 71,947 210,110 407,026 Nonaccruing Commercial: Commercial and industrial 318 5,667 — 480 2,035 17,379 25,879 Owner occupied 3,822 4,816 654 4,701 7,643 7,803 29,439 Total commercial 4,140 10,483 654 5,181 9,678 25,182 55,318 Commercial real estate: Construction and land development 18,255 1,308 — — 1,807 68,481 89,851 Term 3,042 536 — 2,645 9,389 17,718 33,330 Total commercial real estate 21,297 1,844 — 2,645 11,196 86,199 123,181 Consumer: Home equity credit line — — 4,008 — 131 143 4,282 1-4 family residential 4,697 5,637 4,048 — 1,693 14,240 30,315 Construction and other consumer real estate 7 1,671 — — — 243 1,921 Bankcard and other revolving plans — 287 — — — — 287 Other — — — 172 — — 172 Total consumer loans 4,704 7,595 8,056 172 1,824 14,626 36,977 Total nonaccruing 30,141 19,922 8,710 7,998 22,698 126,007 215,476 Total $ 91,884 $ 51,214 $ 29,033 $ 19,609 $ 94,645 $ 336,117 $ 622,502 127 December 31, 2011 Recorded investment resulting from the following modification types: (In thousands) Interestrate belowmarket Maturityor termextension Principalforgiveness Paymentdeferral Other1 Multiplemodificationtypes2 Total Accruing Commercial: Commercial and industrial $ 302 $ 7,727 $ — $ 1,955 $ 27,370 $ 4,517 $ 41,871 Owner occupied 1,875 15,224 37 1,008 5,504 20,449 44,097 Total commercial 2,177 22,951 37 2,963 32,874 24,966 85,968 Commercial real estate: Construction and land development 644 33,284 565 — 28,911 34,862 98,266 Term 2,738 33,885 3,027 23,640 54,031 95,868 213,189 Total commercial real estate 3,382 67,169 3,592 23,640 82,942 130,730 311,455 Consumer: Home equity credit line — — — — 32 — 32 1-4 family residential 3,270 1,663 525 — 6,103 34,839 46,400 Construction and other consumer real estate 166 1,444 — — 635 1,981 4,226 Other — 28 — — — — 28 Total consumer loans 3,436 3,135 525 — 6,770 36,820 50,686 Total accruing 8,995 93,255 4,154 26,603 122,586 192,516 448,109 Nonaccruing Commercial: Commercial and industrial 3,526 6,094 — 1,429 8,384 10,202 29,635 Owner occupied 4,464 1,101 715 6,575 17,070 10,300 40,225 Total commercial 7,990 7,195 715 8,004 25,454 20,502 69,860 Commercial real estate: Construction and land development 15,088 3,348 19 2,060 7,441 94,502 122,458 Term 3,445 50 — 4,250 4,724 65,316 77,785 Total commercial real estate 18,533 3,398 19 6,310 12,165 159,818 200,243 Consumer: Home equity credit line 195 — — — 253 69 517 1-4 family residential 1,386 85 939 718 1,391 18,476 22,995 Construction and other consumer real estate 18 1,837 — — — 355 2,210 Total consumer loans 1,599 1,922 939 718 1,644 18,900 25,722 Total nonaccruing 28,122 12,515 1,673 15,032 39,263 199,220 295,825 Total $ 37,117 $ 105,770 $ 5,827 $ 41,635 $ 161,849 $ 391,736 $ 743,934 1 Includes TDRs at December 31, 2011: December 31, 2011 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 $ 302 $ 7,727 $ – $ 1,955 $ 27,370 $ 4,517 $ 41,871 1,875 15,224 37 1,008 5,504 20,449 44,097 2,177 22,951 37 2,963 32,874 24,966 85,968 644 33,284 565 – 28,911 34,862 98,266 2,738 33,885 3,027 23,640 54,031 95,868 213,189 3,382 67,169 3,592 23,640 82,942 130,730 311,455 – – – – 32 – 32 3,270 1,663 525 – 6,103 34,839 46,400 166 1,444 – – 635 1,981 4,226 – 28 – – – – 28 3,436 3,135 525 – 6,770 36,820 50,686 8,995 93,255 4,154 26,603 122,586 192,516 448,109 3,526 6,094 – 1,429 8,384 10,202 29,635 4,464 1,101 715 6,575 17,070 10,300 40,225 7,990 7,195 715 8,004 25,454 20,502 69,860 15,088 3,348 19 2,060 7,441 94,502 122,458 3,445 50 – 4,250 4,724 65,316 77,785 18,533 3,398 19 6,310 12,165 159,818 200,243 195 – – – 253 69 517 1,386 85 939 718 1,391 18,476 22,995 18 1,837 – – – 355 2,210 1,599 1,922 939 718 1,644 18,900 25,722 28,122 12,515 1,673 15,032 39,263 199,220 295,825 $ 37,117 $ 105,770 $ 5,827 $ 41,635 $ 161,849 $ 391,736 $ 743,934 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.1Includes 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.2Includes TDRs that resulted from a combination of any of the previous modification types.TDR loansTDRs amounted to approximately $92011.At 2012 the.The total recorded investment of all TDR loansTDRs in which interest rates were modified below market was $269.9 million.$225.6 million at December 31, 2012 and $269.9 million at December 31, 2011. These loans are included in the previous tableschedule in the columns for interest rate below market and multiple modification types.128The net financial impact on interest income due to interest rate modifications below market for accruing TDR loansTDRs is summarized in the following schedule.(In thousands) December 31,
2011 $ (46 ) (1,650 ) (1,696 ) (244 ) (7,096 ) (7,340 ) (10,188 ) (406 ) (10,594 ) $ (19,630 )1 (In thousands) Year EndedDecember 31, 2012 2011 Commercial: Commercial and industrial $ (287 ) $ (46 ) Owner occupied (1,612 ) (1,650 ) Total commercial (1,899 ) (1,696 ) Commercial real estate: Construction and land development (1,069 ) (244 ) Term (6,664 ) (7,096 ) Total commercial real estate (7,733 ) (7,340 ) Consumer: Home equity credit line (86 ) — 1-4 family residential (16,164 ) (10,188 ) Construction and other consumer real estate (674 ) (406 ) Total consumer loans (16,924 ) (10,594 ) Total decrease to interest income $ (26,556 ) 1 $ (19,630 ) 1 1 pre-modifiedpremodified rate applied to the recorded investment.On an ongoing basis, we monitor the performance of all TDR loansTDRs 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.TheAs of December 31, 2012, the recorded investment of accruing and nonaccruing TDR loansTDRs that had a payment default during the year listed below (and are still in default at year-end) and are within 12 months or less of being modified as TDRs is as follows: December 31, 2011 (In thousands) Accruing Nonaccruing Total $ 35 $ 1,700 $ 1,735 – 441 441 35 2,141 2,176 – 11,667 11,667 – 5,971 5,971 – 17,638 17,638 – 2,745 2,745 – 2,745 2,745 $ 35 $ 22,524 $ 22,559 (In thousands) December 31, 2012 December 31, 2011 Accruing Nonaccruing Total Accruing Nonaccruing Total Commercial: Commercial and industrial $ — $ 1,816 $ 1,816 $ 35 $ 1,700 $ 1,735 Owner occupied 159 679 838 — 441 441 Total commercial 159 2,495 2,654 35 2,141 2,176 Commercial real estate: Construction and land development — — — — 11,667 11,667 Term — — — — 5,971 5,971 Total commercial real estate — — — — 17,638 17,638 Consumer: Home equity credit line — 336 336 — — — 1-4 family residential — 8,085 8,085 — 2,745 2,745 Total consumer loans — 8,421 8,421 — 2,745 2,745 Total $ 159 $ 10,916 $ 11,075 $ 35 $ 22,524 $ 22,559 Note: Total loans modified as TDRs during the 12 months previous to December 31, 2012 and December 31, 2011 with outstanding balances at year-end were $327.3 million.129Concentrations of Credit RiskWe perform an ongoing analysis of our loan portfolio to evaluate whether there is any significant exposure to an individual borrower or group(s) of borrowers as a result of any concentrations of credit risk. These potential concentrations include, but are not limited to, individual borrowers, groups of borrowers, industries, geographies, collateral types, sponsors, etc. Such credit risks (whether on- or off-balance sheet) may occur when groups of borrowers or counterparties have similar economic characteristics 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. Our analysis as of December 31, 2011 has2012 concluded that no significant exposure exists from such credit risks.risk concentrations. See Note 87 for a discussion of counterparty risk associated with the Company’s derivative transactions.Purchased LoansBackground and AccountingWe purchase loans in the ordinary course of business and account for them and the related interest income in accordance with ASC 310-20,Nonrefundable Feesbased 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 Other Costs, or ASC 310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, as appropriate.it is probable that not all contractual payments will be collected. Interest income for PCI loans is recognized basedaccounted 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 flows under ASC 310-20flow basis. Certain acquired loans with similar characteristics such as risk exposure, type, size, etc., are grouped and on expected cash flows under ASC 310-30.During 2009, CB&T and NSB acquired failed banks from the FDIC as receiver and entered into loss sharing agreements with the FDIC for the acquired loans and foreclosed assets. TheAccording to the agreements, the FDIC assumes 80% of credit losses up to a threshold specified for each acquisition and 95% above thethat threshold for a period of up to five years, or in 2014. The covered portfolio primarily consists of commercial loans. The agreements expire after ten years. years, or in 2019, for single family residential loans. The loans acquired from the FDIC are presented separately in the Company’s balance sheet as “FDIC-supported loans” and include both PCI and certain other acquired loans.”During the first quarter of 2011, certain FDIC-supported loans charged off at the time of acquisition were determined by the FDIC to be covered underby the FDIC loss sharing agreement. The FDIC remitted $18.9$18.9 million to the Company, which was recognized in other noninterest income.Upon acquisition, in accordance with applicable accounting guidance, the acquired loans were recorded at their fair value without a corresponding ALLL. The acquired foreclosed propertiesassets and subsequent real estate foreclosures were included with other real estate ownedOREO in the balance sheet and amounted to $24.3$7.9 million at December 31, 2012 and $40.0$24.3 million at December 31, 2011 and 2010, respectively.Acquired loans which have evidence of credit deterioration at the time of acquisition, and for which it is probable that not all contractual payments will be collected, are accounted for as loans under ASC 310-30. Certain acquired loans (including loans with revolving privileges) without evidence of credit deterioration are accounted for under ASC 310-20 and are excluded from the following tables for outstanding balances and accretable yield. Acquired loans with similar characteristics such as risk exposure, type, size, etc., are grouped and accounted for in loan pools.Outstanding Balances and Accretable YieldThe outstanding balances of all contractually required payments and the related carrying amounts for PCI loans under ASC 310-30 are as follows: December 31, (In thousands) 2011 2010 $ 321,515 $ 413,783 556,197 746,206 57,391 79,393 $ 935,103 $ 1,239,382 $ 672,159 $ 877,857 21,604 35,123 $ 650,555 $ 842,734 December 31, (In thousands) 2012 2011 Commercial $ 227,414 $ 321,515 Commercial real estate 382,068 556,197 Consumer 41,398 57,391 Outstanding balance $ 650,880 $ 935,103 Carrying amount $ 472,040 $ 672,159 ALLL 12,077 21,604 Carrying amount, net $ 459,963 $ 650,555 130At 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 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 loan pool.pool of loans. The effects of estimated prepayments are considered in estimating the expected cash flows.Certain acquiredPCI loans within the scope of ASC 310-30 are not accounted for as previously described because the estimation of cash flows to be collected involves a high degree of uncertainty. As allowed under ASC 310-30 inUnder these circumstances, the accounting guidance provides that interest income is recognized on a cash basis similar to the cost recovery methodology used for nonaccrual loans. The net carrying amounts in the preceding schedule also include the amounts for these loans, which were approximately $42.6$12.2 million at December 31, 2012 and $78.3$19.1 million at December 31, 2011 and 2010, respectively..Changes in the accretable yield for ASC 310-30PCI loans arewere as follows:(In thousands) 2011 2010 $ 277,005 $ 161,977 (119,752 ) (99,225 ) 28,511 183,912 (1,085 ) 30,341 $ 184,679 $ 277,005 (In thousands) 2012 2011 Balance at beginning of year $ 184,679 $ 277,005 Accretion (89,849 ) (119,752 ) Reclassification from nonaccretable difference 30,632 28,511 Disposals and other 8,999 (1,085 ) Balance at end of year $ 134,461 $ 184,679 Note: Amounts have been adjusted based on refinements to the original estimates of the accretable yield. Because of the estimation process required, we expect that additional adjustments to these amounts may be necessary in future periods.The primary driverdrivers of reclassificationsreclassification to accretable yield from nonaccretable difference and increases in disposals and others resulted primarily from increases(1) changes in estimated cash flows, for the acquired(2) unexpected payments on nonaccrual loans, and loan(3) recoveries on zero balance loans pools. The increasedSee subsequent discussion under changes in cash flows were due to the enhanced economic status of borrowers whose financial stresses were diminishing or were not as severe as originally evaluated. When these loans were originally acquired, the expected cash flows estimated from the valuations were based on a lower economic outlookflow estimates.Allowance for Loan and a lower performance expectation.The majority of acquired loans relate to the Southern California market. At the time of acquisition of these loans, market prices for commercial real estate in this market were falling, many local banks that provided commercial real estate lending were failing, and the economic outlook was uncertain. Although the current economy and commercial real estate prices in this market have not returned to pre-crisis levels, the improvements in the economy have begun to manifest themselves in the borrowers’ ability to repay their loans.Additionally, our credit officers and loan workout professionals assigned to these loans have been effective in resolving problem loans so that the maximum amounts possible, up to the full contractual amounts, are repaid. The efforts of these professionals and the aforementioned economic improvements have resulted in higher than initially expected cash flows and fair values for the acquired loans. These improvements resulted in the balance reclassification from nonaccretable difference to accretable yield.ALLLLease Losses DeterminationFor 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 determined without giving consideration to the amounts recoverable from the FDIC through loss sharing agreements. These amounts recoverable are separately accounted for in the FDIC indemnification asset (“IA”) and are thus presented “gross” in the balance sheet. The FDIC IA is included inDuring 2012, 2011 and 2010, we adjusted the ALLL for acquired loans by recording a (decrease) increase on an adjusted gross basis to the provision for loan losses of $(1.7)$(16.5) million in 2012, $(1.7) million in 2011, and $55.8$55.8 million in 2010. These amounts are net of the ALLL reversals due to increases in estimated cash flows which are discussed subsequently. There was no provision for loan losses for acquired loans in 2009. As separately discussed and in accordance with the loss sharing agreements, portions of the increases to the provision are recoverable from the FDIC and comprise part of the FDIC IA. Charge-offs, net of recoveries andThese adjustments, before FDIC indemnification, were $7.1resulted in net recoveries of $8.6 million for 2012, and net charge-offs of $7.1 million in 2011 and $18.1$18.1 million in 2010. No charge-offs were made in 2009.Changes in the provision for loan losses and related ALLL are driven in large part by the same factors discussed previously forthat affect the changes in reclassification from nonaccretable difference to accretable yield.131Changes in Cash Flow EstimatesOver 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 valuevalues of these loans using the effective interest rates hashave decreased below their carrying value, and ifvalues. If so, we record a provision for loan losses. The present value of any subsequent increaseFor increases in these loans’ actual or expectedcarrying values that resulted from better-than-expected cash flows, is usedwe use such increases first to reverse any existing ALLL. During 2012 and 2011, total reversals to the ALLL, including the impact of increases in estimated cash flows, were $16.1 million. $20.4 million in 2012, and $16.1 million in 2011. No such reversals were made in 2010 or 2009.For loans or loan pools with2010. When there is no remainingcurrent ALLL, or where an ALLL was never established, that have increases in cash flows expected to be collected, 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. Any related decrease to the FDIC IA is recorded through a charge to other noninterest expense.The impact of increased cash flowsflow estimates recognized in the statement of income for acquired loans with no ALLL was approximately $78.4$58.5 million in 2012, $78.4 million in 2011, and $46.8$46.8 million in 2010, of additional interest income, and $56.6$46.2 million in 2012, $56.6 million in 2011, and $39.2$39.2 million in 2010, of additional other noninterest expense.FDIC Indemnification AssetIn October 2012, the FASB issued ASU 2012-6, The amount of the FDIC IA was initially recorded at fair value using estimated cash flows based on credit adjustments for each loan or loan pool and the loss sharing reimbursement of 80% or 95%, as appropriate. The timing of the cash flows was adjusted to reflect our expectations to receive the FDIC reimbursements within the estimated loss period. Discount rates were based on U.S. Treasury rates or the AAA composite yield on investment grade bonds of similar maturity. As previously discussed, the amount is adjusted as actual loss experience is developed and estimated losses covered under the loss sharing agreements are updated. Estimated loan losses, if any, in excess of the amounts recoverable are reflected as period expenses through the provision for loan losses.Changes in the FDIC IA arewere as follows:(In thousands) 2011 2010 $ 195,516 $ 293,308 2,874 1 (95,664 ) (64,580 ) (439 ) – (1,689 )3 $ 133,810 $ 195,516 (In thousands) 2012 2011 Balance at beginning of year $ 133,810 $ 195,516 Amounts filed with the FDIC and collected or in process 117,004 2,874 Net change in asset balance due to reestimation of projected cash flows 2(59,885 ) (64,580 ) Balance at end of year $ 90,929 $ 133,810 1 The positive amount for December 31,Beginning in the latter half of 2011, results from a change by the FDIC in the indemnification submission process. Submittedchanged its reimbursement process to require that submitted expenses must be paid, not just incurred, to qualify for reimbursement.2 3Amount did not qualify for FDIC reimbursement under the loss sharing agreement.132Any changes to the amortization rate of the FDIC IA are recognized immediately in the quarterly period the change in estimated cash flows is determined. All claims submitted to the FDIC have been reimbursed in a timely manner.7. ASSET SECURITIZATIONS AND OFF-BALANCE SHEET ARRANGEMENTIn June 2009, Zions Bank fully consolidated Lockhart, which previously functioned as an off-balance sheet qualifying special-purpose entity (“QSPE”) securities conduit. As of September 30, 2009, Lockhart was legally terminated. Prior to this consolidation, Zions Bank purchased $678 million of securities at book value from Lockhart in 2009. Valuation losses resulting from these purchases were $187.9 million. The purchases of securities from Lockhart were made due to investment downgrades as required under a liquidity agreement between Zions Bank and Lockhart, and due to the inability of Lockhart to issue a sufficient amount of commercial paper.Effective January 1, 2010, we adopted ASU No. 2009-16,Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This new accounting guidance under ASC 860 modifies the accounting for transfers of financial assets and removes the concept of a QSPE. Because we dissolved Lockhart and our remaining activities related to transfers of financial assets have not been material, adoption of this new guidance was not significant to the Company’s financial statements.8. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES We record all derivatives on the balance sheet at fair value in accordance with ASC 815,Derivatives and Hedging.value. Note 2120 discusses the determination ofprocess to estimate fair value for derivatives, except for the Company’s total return swap which is discussed subsequently.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 future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives used to manage the exposure to credit 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 that followsfollowing regarding the total return swap.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 periods,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 being amortized into earnings, as discussed subsequently.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.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 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. To accomplish these objectives, 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.Exposure to credit risk arises from the possibility of nonperformance by counterparties. These counterparties primarily consist of financial institutions that are well established and well capitalized. We control this credit risk through credit approvals, limits, pledges of collateral, and monitoring procedures. No 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.Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position 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, 2012, the fair value of our derivative liabilities was $89.1 million, for which we were required to pledge cash collateral of approximately $99.1 million in the normal course of business. If our credit rating were downgraded by one notch at December 31, 2012, the additional amount of collateral we could be required to pledge is $3.3 million.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.133Derivatives 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.Selected information with respect to notional amounts and recorded gross fair values at December 31, 20112012 and 2010,2011, and the related gain (loss) of derivative instruments for 2011 and 2010the years then ended is summarized as follows: Year Ended December 31, 2011 December 31, 2011 Amount of derivative gain (loss)
recognized/reclassified Fair value OCI Reclassified
from AOCI
to interest
income Noninterest
income
(expense) Offset to
interest
expense (In thousands) Notional
amount Other
assets Other
liabilities $ 335,000 $ 7,341 $ – $ 2,104 $ 35,323 $ – – – – 221 1,950 – 335,000 7,341 – 2,325 37,273 – 3 $ 2,950 335,000 7,341 – 2,325 37,273 – 2,950 145,388 1,952 1,977 123 2,638,601 82,648 87,363 3,730 56 85,000 3 11 170 – – – 6,493 1,700,000 11 – (27 ) 1,159,686 – 5,422 (10,699 ) 5,728,675 84,614 94,773 (154 ) $ 6,063,675 $ 91,955 $ 94,773 $ 2,325 $ 37,273 $ (154 ) $ 2,950 Year Ended December 31, 2010 December 31, 2010 Amount of derivative gain (loss)
recognized/reclassified Fair value OCI Reclassified
from AOCI
to interest
income Noninterest
income
(expense) Offset to
interest
expense (In thousands) Notional
amount Other
assets Other
liabilities $ 520,000 $ 24,266 $ 310 $ 13,286 $ 63,030 $ – 95,000 1,229 – 888 2,944 – 8,962 615,000 25,495 310 14,174 65,974 8,962 3 $ 3,141 615,000 25,495 310 14,174 65,974 8,962 3,141 169,982 2,978 3,016 (418 ) 3,006,723 64,509 68,141 745 (289 ) 175,000 29 – 308 9,529,000 – – (219 ) 3,015,000 3,576 – 1,934 1,159,686 – 15,925 (22,795 ) 17,055,391 71,092 87,082 (20,734 ) $ 17,670,391 $ 96,587 $ 87,392 $ 14,174 $ 65,974 $ (11,772 ) $ 3,141 December 31, 2012 December 31, 2011 Notionalamount Fair value Notionalamount Fair value (In thousands) Otherassets Otherliabilities Otherassets OtherliabilitiesDerivatives designated as hedging instruments Asset derivatives Cash flow hedges 1: Interest rate swaps $ 150,000 $ 1,188 $ — $ 335,000 $ 7,341 $ — Total derivatives designated as hedging instruments 150,000 1,188 — 335,000 7,341 — Derivatives not designated as hedging instruments Interest rate swaps 98,524 1,043 1,047 145,388 1,952 1,977 Interest rate swaps for customers 22,607,603 79,579 82,926 2,638,601 82,648 87,363 Basis swaps — — — 85,000 3 11 Options contracts — — — 1,700,000 11 — Total return swap 1,159,686 — 5,127 1,159,686 — 5,422 Total derivatives not designated as hedging instruments 3,865,813 80,622 89,100 5,728,675 84,614 94,773 Total derivatives $ 4,015,813 $ 81,810 $ 89,100 $ 6,063,675 $ 91,955 $ 94,773 134 Year Ended December 31, 2012 Year Ended December 31, 2011 Amount of derivative gain (loss) recognized/reclassified (In thousands) OCI Reclassifiedfrom AOCIto interestincome Noninterestincome(expense) Offset tointerestexpense OCI Reclassifiedfrom AOCIto interestincome Noninterestincome(expense) Offset tointerestexpenseDerivatives designated as hedging instruments Asset derivatives Cash flow hedges 1: Interest rate swaps $ 390 $ 13,062 $ 2,104 $ 35,323 Interest rate floors — — 221 1,950 390 13,062 2,325 37,273 3 Liability derivatives Fair value hedges: Terminated swaps on long-term debt $ 3,054 $ 2,950 Total derivatives designated as hedging instruments 390 13,062 3,054 2,325 37,273 2,950 Derivatives not designated as hedging instruments Interest rate swaps $ (1,467 ) $ 123 Interest rate swaps for customers 2 7,858 3,730 Energy commodity swaps for customers 2 — 56 Basis swaps 18 170 Futures contracts (13 ) 6,493 Options contracts — (27 ) Total return swap (21,707 ) (10,699 ) Total derivatives not designated as hedging instruments (15,311 ) (154 ) Total derivatives $ 390 $ 13,062 $ (15,311 ) $ 3,054 $ 2,325 $ 37,273 $ (154 ) $ 2,950 Note: These tablesschedules 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 $13.1 million for 2012 and $37.3 million for 2011 are the amounts of reclassification to earnings presented in the tabular changes of AOCI in Note 13.1Amounts recognized in OCI and reclassified from accumulated OCI (“AOCI”) represent the effective portion of the derivative gain (loss).2Amounts include both the customer swaps and the offsetting derivative contracts.3Amounts for 2011 and 2010 of $0 and $8,962, respectively, which reflect the acceleration of OCI amounts reclassified to income that related to previously terminated hedges, together with the reclassification amounts of $37,273 and $65,974, or a total of $37,273 and $74,936, respectively, are the amounts of reclassification included in the changes in OCI presented in Note 14.$4.7$3.1 million and $(0.1)$(0.2) million in 2011,2012, and $3.5$4.7 million and $(0.3)$(0.1) million in 2010,2011, respectively. These adjustments are required to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk.FairUnder 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) have been offset against recognized fair value amounts of derivatives executed with the same counterparty under a master netting arrangement. In the balance sheet,counterparty. At December 31, 2012, no cash collateral was used for such offsets. At December 31, 2011, $1.5 million of cash collateral was used to reduce recorded amounts of derivative assets and liabilities by $0 and $1.5 million at December 31, 2011, and $0 and $0.8 million at December 31, 2010, respectively.We offer to our customers interest rate swaps and, through the third quarter of 2010, energy commodity swaps to assist them in managing their exposure to fluctuating interest rates andrates. Previously, we also offered energy prices.commodity swaps. 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.Futures and options contracts primarily consisted of Eurodollar futures contracts that allowed us to extend the duration of certain overnight cash account balances. These contracts referenced the 90-day London Interbank Offered Rate (“LIBOR”). 135Options contracts were used to economically hedge certain interest rate exposures of the underlyingpreviously used Eurodollar futures contracts. FuturesDuring 2012, all of the remaining options contracts also included federal funds futures contracts that were traded to manage interest rate risk on certain CDO securities. During 2011,expired after we terminated during 2011 all of the Eurodollar and federal funds futures contracts, or a net amount of approximately $9.5$9.5 billion and another $1.3 million of the options contracts..The remaining balances of any derivative instruments terminated prior to maturity, including amounts in AOCI for swap hedges, are accreted or amortized to interest income or expense over the period to their previously stated maturity dates.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, 2011,2012, we estimate that an additional $13$2 million will be reclassified.Total Return SwapOn July 28, 2010, we entered into a total return swap (“TRS”) and related interest rate swaps (“TRS”) with Deutsche Bank AG (“DB”) relating to a portfolio of $1.16$1.16 billion notional amount of our bank and insurance trust preferred CDOs. As a result of the TRS, DB assumed all of the credit risk of this CDO portfolio, providing timely payment of all scheduled payments of interest and principal when contractually due to the Company (without regard to acceleration or deferral events). The transaction reduced regulatory risk-weighted assets and improved the Company’s risk-based capital ratios.The transaction did not qualify for hedge accounting and did not change the accounting for the underlying securities, including the quarterly analysis of OTTI and OCI. As a result, future potential OTTI, if any, associated with the underlying securities may not be offset by any valuation adjustment on the swap in the quarter in which OTTI is recognized, and OTTI changes could result in reductions in our regulatory capital ratios, which could be material.The fair value of the TRS derivative liability was $5.4$5.1 million and $15.9$5.4 million at December 31, 20112012 and 2010,2011, respectively.Both the fair values of the securities and the fair value of the TRS are dependent upon the projected credit-adjusted cash flows of the securities. The period that we are unable to cancel the transaction has shortened to and will remain at one calendar quarter. Accordingly, absent major changes in these projected cash flows, we expect the value of the TRS liability to continue to approximate its December 31, 20112012 fair value. We expect to incur subsequent net quarterly costs of approximately $5.3$5.4 million under the TRS, including related interest rate swaps and scheduled payments of interest on the underlying CDOs, as long as the TRS remains in place for this CDO portfolio. Our estimated quarterly expense amount would be impacted by, among other things, changes in the composition of the CDO portfolio included in the transaction and changes over time in the forward LIBORLondon Interbank Offered Rate (“LIBOR”) rate curve. The Company’s costs are also subject to adjustment in the event of future changes in regulatory requirements applicable to DB if we do not then elect to terminate the transaction. Termination by the Company for such regulatory changes applicable to DB will result in no payment by the Company.At December 31, 2011,2012, we completed a valuation process which resulted in an estimated fair value for the TRS under Level 3. The process utilized valuation inputs from two sources:1) The Company built on its fair valuation process for the underlying CDO portfolio and utilized those same projected cash flows to quantify the extent and timing of payments to be received from the Trustee related to each CDO and in the aggregate. For valuation purposes, we assumed that a market participant would cancel the TRS at the first opportunity if the TRS did not have a positive value based on the best estimates of cash flows through maturity. Consequently, the fair value approximated the amount of required payments up to the earliest termination date. 2) A valuation from a market participant in possession of all relevant terms and costs of the TRS structure. 136We considered the observable input or inputs from the market participant, who is the counterparty to this transaction, as well as the results of our internal modeling in estimating the fair value of the TRS. We expect to continue the use of this methodology in subsequent periods.9.8. PREMISES AND EQUIPMENTPremises and equipment are summarized as follows: December 31, (In thousands) 2011 2010 $ 187,187 $ 191,612 488,985 475,830 593,046 581,464 120,015 119,030 1,389,233 1,367,936 669,957 646,951 $ 719,276 $ 720,985 10.(In thousands) December 31, 2012 2011 Land $ 184,762 $ 187,187 Buildings 497,449 488,985 Furniture and equipment 622,170 593,046 Leasehold improvements 121,953 120,015 Total 1,426,334 1,389,233 Less accumulated depreciation and amortization 717,452 669,957 Net book value $ 708,882 $ 719,276 9. GOODWILL AND OTHER INTANGIBLE ASSETSCore deposit and other intangible assets and related accumulated amortization are as follows at December 31. Gross carrying amount Accumulated amortization Net carrying amount (In thousands) 2011 2010 2011 2010 2011 2010 $ 213,555 $ 215,138 $ (151,790 ) $ (135,632 ) $ 61,765 $ 79,506 29,064 33,974 (22,999 ) (25,582 ) 6,065 8,392 $ 242,619 $ 249,112 $ (174,789 ) $ (161,214 ) $ 67,830 $ 87,898 Gross carrying amount Accumulated amortization Net carrying amount (In thousands) 2012 2011 2012 2011 2012 2011 Core deposit intangibles $ 180,290 $ 213,555 $ (133,628 ) $ (151,790 ) $ 46,662 $ 61,765 Customer relationships and other intangibles 29,064 29,064 (24,908 ) (22,999 ) 4,156 6,065 $ 209,354 $ 242,619 $ (158,536 ) $ (174,789 ) $ 50,818 $ 67,830 The amount of amortization expense of core deposit and other intangible assets is separately reflected in the statement of income. In 2009, this amortization expense included approximately $2.6 million for the impairment of certain amounts for customer relationships and other intangibles.Estimated amortization expense for core deposit and other intangible assets is as follows for the five years succeeding December 31, 2011.(In thousands) $ 17,010 14,500 11,054 9,380 8,025 (In thousands) 2013 $ 14,500 2014 11,054 2015 9,380 2016 8,025 2017 6,381 137Changes in the carrying amount of goodwill byfor operating segmentsegments with goodwill are as follows:(In thousands) Zions
Bank CB&T Amegy NBA NSB Vectra Other Consolidated
Company $ 19,514 $ 379,024 $ 615,623 $ – $ – $ – $ 1,000 $ 1,015,161 – – – – – – – – 19,514 379,024 615,623 – – – 1,000 1,015,161 – – – – – – – – – – (32 ) – – – – (32 ) $ 19,514 $ 379,024 $ 615,591 $ – $ – $ – $ 1,000 $ 1,015,129 (In thousands) Zions Bank CB&T Amegy Other Consolidated Company Balance at December 31, 2010 $ 19,514 $ 379,024 $ 615,623 $ 1,000 $ 1,015,161 Adjustment 1 — — (32 ) — (32 ) Balance at December 31, 2011 19,514 379,024 615,591 1,000 1,015,129 Impairment losses — — — (1,000 ) (1,000 ) Balance at December 31, 2012 $ 19,514 $ 379,024 $ 615,591 $ — $ 1,014,129 1 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.Goodwill impairment of $636.2 million in 2009 related primarily to Amegy and resulted from an evaluation performed for Amegy and CB&T that was completed in February 2009 as a result Results of the Company’s performance deterioration and declinestesting concluded that bank market values fromany of the previous year-end. The amountoperating segments, except for TCBO included in the Other segment. A comparison of this impairment loss was determined based on the calculation process specified in ASC 350, which comparesfair value to carrying value todetermined that the estimated fair values entire remaining $1 millionof assets and liabilities. These fair values were estimated with the assistance of independent valuation consultants utilizing the provisions of ASC 820.TCBO’s goodwill should be impaired. The estimationdetermination process took into account both market valuevalues of comparable bank and bank holding companies in our operating footprint, transaction value approaches including managementvalues of comparable bank acquisitions, and estimates of projected discounted cash flows. Where applicable,flows using a discount rate estimated from the Company’s cost of capital.Effective January 1, 2012, we used recent market valuations and transactions from banks similar in size, operations and geography to our subsidiary banks. The analysis considered the continued market deterioration and weaker economic outlook for the applicable states.In September 2011, the FASB issued ASU 2011-08,Testing Goodwill for Impairment. Thisadopted new accounting guidance amends ASC 350 andthat simplifies the process to test goodwill for impairment by allowing for greater emphasis to be placed on the assessment of qualitative factors. If after considering the totality of events and circumstances, the likelihood is not more than 50% that the fair value of a reporting unit is less than carrying value, companies need not perform the two-step impairment test need not be performed.In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, under ASC 350, Intangibles – Goodwill and Other. Companies have the option to first perform a qualitative assessment to determine if the likelihood is more than 50% that an indefinite-lived intangible asset is impaired. If it is, a company must perform the annual quantitative impairment test. This amendmentIf it is not, a company need not calculate the fair value of the asset in that year. The guidance is effective for annualinterim and interim goodwillannual impairment tests performed for fiscal years beginning after DecemberSeptember 15, 2011. Management is currently evaluating the effect2012, with early adoption permitted. The Company has adopted this new guidance will have on the Company’s financial statements.effective January 1, 2013.10. DEPOSITS 11. DEPOSITS2011,2012, the scheduled maturities of all time deposits were as follows:(In thousands) $ 2,767,242 347,444 186,986 131,112 120,566 794 $ 3,554,144 (In thousands) 2013 $ 2,465,659 2014 337,816 2015 164,136 2016 119,398 2017 88,339 Thereafter 978 $ 3,176,326 At December 31, 2011,2012, the contractual maturities of domestic time deposits with a denomination of $100,000 and over were as follows: $506$422 million in 3 months or less, $377$312 million over 3 months through 6 months, $502$438 million over 6 months through 12 months, and $395$352 million over 12 months.138Domestic time deposits under $100,000 were $1.6$1.5 billion and $2.0$1.6 billion at December 31, 20112012 and 2010,2011, respectively. Domestic time deposits $100,000 and over were $1.8$1.5 billion and $2.2$1.8 billion at December 31, 20112012 and 2010,2011, respectively. Foreign time deposits $100,000 and over were $141$213 million and $297$141 million at December 31, 20112012 and 2010,2011, respectively.Deposit overdrafts reclassified as loan balances were $53$78 million and $39$53 million at December 31, 20112012 and 2010,2011, respectively.12.11. SHORT-TERM BORROWINGSSelected information for certain short-term borrowings is as follows:(Dollars in thousands) 2011 2010 2009 $ 312,730 $ 465,661 $ 1,290,140 0.20 % 0.22 % 0.30 % $ 361,217 $ 814,264 $ 1,659,303 214,224 310,727 208,669 0.20 % 0.15 % 0.21 % $ 340,015 $ 454,288 $ 632,756 0.05 % 0.08 % 0.30 % $ 393,874 $ 615,170 $ 784,182 393,874 411,531 577,346 0.06 % 0.07 % 0.16 % $ 608,098 $ 722,258 $ 786,015 (Dollars in thousands) 2012 2011 2010 Federal funds purchased: Average amount outstanding $ 280,859 $ 312,730 $ 465,661 Weighted average rate 0.19 % 0.20 % 0.22 % Highest month-end balance $ 560,674 $ 361,217 $ 814,264 Year-end balance 175,468 214,224 310,727 Weighted average rate on outstandings at year-end 0.43 % 0.20 % 0.15 % Security repurchase agreements: Average amount outstanding $ 190,365 $ 340,015 $ 454,288 Weighted average rate 0.04 % 0.05 % 0.08 % Highest month-end balance $ 264,187 $ 393,874 $ 615,170 Year-end balance 145,010 393,874 411,531 Weighted average rate on outstandings at year-end 0.04 % 0.06 % 0.07 % Federal funds purchased and security repurchase agreements at year-end $ 320,478 $ 608,098 $ 722,258 These short-term borrowings generally mature in less than 30 days. Our participation in security repurchase agreements is on an overnight or term basis (i.e.(e.g., 30 or 60 days). Certain overnight repurchase agreements are performed with sweep accounts in conjunction with a master repurchase agreement. In this case, securities under our control are pledged for 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. As of At December 31, 2011, overnight2012, all security repurchase agreements were $382 million and term security repurchase agreements were $12 million.Other short-term borrowings are summarized as follows: December 31, (In thousands) 2011 2010 $ 66,883 $ 160,636 3,063 2,647 327 3,111 $ 70,273 $ 166,394 December 31, (In thousands) 2012 2011 Senior medium-term notes $ 4,951 $ 66,883 Commercial paper — 3,063 Other 458 327 $ 5,409 $ 70,273 The unsecured senior medium-term notes are at an interest rate of 2.00% and mature at various dates through May 2012 at interest rates ranging from 2.00% to 2.75% at December 31, 2011.in March 2013. See also Note 13.139Our subsidiary banks may borrow from the Federal Home Loan Bank (“FHLB”)FHLB under their lines of credit that are secured under blanket pledge arrangements. The subsidiary banks maintain unencumbered collateral with carrying amounts adjusted for the types of collateral pledged, equal to at least 100% of the outstanding advances. At December 31, 2011,2012, the amount available for FHLB advances was approximately $9.4 billion.$10.4 billion. At December 31, 2011, 2012, no short-term FHLB advances were outstanding.Our subsidiary banks also borrow from the Federal Reserve through the Term Auction Facility. Amounts that can be borrowed are based uponon the amount of collateral pledged to a Federal Reserve Bank. At December 31, 2011,2012, the amount available for additional Federal Reserve borrowings was approximately $3.9 billion.13. LONG-TERM DEBT$4.0 billion12. LONG-TERM DEBT Long-term debt is summarized as follows: December 31, (In thousands) 2011 2010 $ 461,858 $ 461,858 323,159 417,643 220,168 223,057 924,716 819,174 23,840 20,132 721 758 $ 1,954,462 $ 1,942,622 (In thousands) December 31, 2012 2011 Junior subordinated debentures related to trust preferred securities $ 461,858 $ 461,858 Convertible subordinated notes 308,468 323,159 Subordinated notes 217,175 220,168 Senior medium-term notes 1,325,630 924,716 FHLB advances 23,300 23,840 Capital lease obligations and other 682 721 $ 2,337,113 $ 1,954,462 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.Trust Preferred SecuritiesJunior subordinated debentures related to trust preferred securities primarily include debentures issued to Zions Capital Trust B (“ZCTB”), Amegy Statutory Trusts I, II and III (“Amegy Trust I, II or III”), and Stockmen’s Statutory Trusts II and III (“Stockmen’s Trust II or III”) as follows at December 31, 2011. (Dollars in thousands) Balance Interest
rate1 Maturity $ 293,815 8.00 % Sep 2032 51,547 3mL+2.85 % Dec 2033 36,083 3mL+1.90 % Oct 2034 61,856 3mL+1.78 % Dec 2034 7,732 3mL+3.15 % Mar 2033 7,732 3mL+2.89 % Mar 2034 3,093 3mL+2.85 % Mar 2034 $ 461,858 (Dollars in thousands) Balance Interest rate 1 Maturity ZCTB $ 293,815 8.00% Sep 2032 Amegy Trust I 51,547 3mL+2.85% (3.16%) Dec 2033 Amegy Trust II 36,083 3mL+1.90% (2.24%) Oct 2034 Amegy Trust III 61,856 3mL+1.78% (2.09%) Dec 2034 Stockmen’s Trust II 7,732 3mL+3.15% (3.46%) Mar 2033 Stockmen’s Trust III 7,732 3mL+2.89% (3.20%) Mar 2034 Intercontinental Statutory Trust I 3,093 3mL+2.85% (3.16%) Mar 2034 $ 461,858 1 Designation of “3mL” is three-month LIBOR; effective interest rate at the beginning of the accrual period commencing on or before December 31, 20112012 is shown in parenthesis.The junior subordinated debentures are issued or have been assumed by the Parent or Amegy. Each series of junior subordinated debentures was issued to and is held by a trust, which 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. The sole assets of the trusts are the junior subordinated debentures.140Interest 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 ZCTB are direct and unsecured obligations of the Parent and are subordinate to other indebtedness and general creditors. The debentures for Amegy Trust I, II and III are direct and unsecured obligations of Amegy and are subordinate to other indebtedness and general creditors. The debentures for Stockmen’s Trust II and III are unsecured obligations of Stockmen’s assumed by the Parent in connection with the acquisition of Stockmen’s by NBA. The Parent has unconditionally guaranteed the obligations of ZCTB with respect to its trust preferred securities to the extent set forth in the applicable guarantee agreement. Amegy has unconditionally guaranteed the obligations of Amegy Trust I, II and III 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 Stockmen’s Trust II and III with respect to their respective series of trust preferred securities to the extent set forth in the applicable guarantee agreements.Subordinated Notes and Subordinated Debt ModificationSubordinated notes consist of the following at December 31, 2011.(Dollars in thousands) Convertible
subordinated notes Subordinated notes Balance Par
amount Balance Par
amount Maturity $ 80,980 $ 126,858 $ 32,178 $ 30,173 May 2014 132,506 230,443 45,964 42,303 Sep 2015 109,673 190,064 67,026 62,078 Nov 2015 75,000 75,000 2 Sep 2014 $ 323,159 $ 547,365 $ 220,168 $ 209,554 (Dollars in thousands) Convertiblesubordinated notes Subordinated notes Interest rate Balance Par amount Balance Par amount Maturity 5.65% $ 57,983 $ 75,867 $ 31,346 $ 30,173 May 2014 6.00% 128,223 195,283 45,021 42,303 Sep 2015 5.50% 122,262 186,651 65,808 62,078 Nov 2015 3mL+1.25% (1.63%) 1,000 75,000 75,000 2,000 Sep 2014 $ 308,468 $ 457,801 $ 217,175 $ 209,554 1 Designation of “3mL” is three-month LIBOR; effective interest rate at the beginning of the accrual period commencing on or before December 31, 20112012 is shown in parenthesis.2 Issued by Amegy.Amegy.These notes are unsecured and are not redeemable prior to maturity. Interest is payable semiannually.In 2009, we exchanged a At December 31, 2012, the five largest investor holdings amounted to approximately approximately $190.1 millionconvertible subordinated notes.The convertible subordinated notes resulted from the modification of $1.2 billion par value of thesubordinated notes. The convertible subordinated notes for new notes with the same terms. The remaining $1,210.0 million par value of the subordinated notes was modified to 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 debtnotes are allowed to convert on the interest payment dates of the debt. Net of issuance costs and debt discount on the previous debt, the total pretax gain recognized in the statement of income from these subordinated debt modifications was $508.9 million. The gain was calculated as the difference between the fair value of the modified convertible subordinated notes and the carrying value of the extinguished debt on the transaction dates.thesethe modification of the subordinated debt modifications,notes, we also recorded the intrinsic value of the beneficial conversion feature directly in common stock, as discussed in Note 14.Subordinated notes converted to preferred stock amounted to $256.1$89.6 million in 2011, $343.02012, $256.1 million in 2010,2011, and $63.4$343.0 million in 2009.2010.The convertible debt discount recorded in connection with the subordinated debt modificationsmodification 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 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) 2011 2010 2009 $ 385,831 $ 616,240 $ – 678,924 (46,021 ) (57,963 ) (26,955 )
on convertible subordinated debt (115,604 ) (172,446 ) (35,729 ) (161,625 ) (230,409 ) (62,684 ) $ 224,206 $ 385,831 $ 616,240 141(In thousands) 2012 2011 2010 Balance at beginning of year $ 224,206 $ 385,831 $ 616,240 Discount amortization on convertible subordinated debt (43,341 ) (46,021 ) (57,963 ) Accelerated discount amortization on convertible subordinated debt (31,532 ) (115,604 ) (172,446 ) Total amortization (74,873 ) (161,625 ) (230,409 ) Balance at end of year $ 149,333 $ 224,206 $ 385,831 As discussed in Note 8,7, we terminated all fair value hedges that had been used for the subordinated notes. The remaining value of $10.8$7.8 million and $13.8$10.8 million at December 31, 20112012 and 2010,2011, respectively, is amortized as a reduction of interest expense over the periods to the previously stated maturity dates of the notes.In 2010, we exchanged $55.6$55.6 million of nonconvertible subordinated debt into shares of the Company’s common stock, as discussed further in Note 14.13. The net pretax gain on subordinated debt exchange included in the statement of income was approximately $14.5$14.5 million and represented the difference between the carrying value of the debt exchanged and the fair value of the common stock issued, net of commissions and fees.Senior Medium-termMedium-Term NotesSenior medium-term notes consist of the following at December 31, 2011.(Dollars in thousands) Balance Par amount Interest
payments Maturity $ 254,771 $ 254,893 Quarterly Jun 2012 462,178 499,900 Semiannually Sep 2014 207,767 207,969 Semiannually Sep 2012 – Nov 2016 $ 924,716 2012: (Dollars in thousands) Interest rate Balance Par amount Maturity 7.75% 474,722 499,900 Sep 2014 4.0% 195,225 198,448 Jun 2016 4.5% 385,299 400,000 Mar 2017 2.55% - 5.50% 270,384 270,796 Feb 2013 - Nov 2019 $ 1,325,630 1Designation of “3mL” is three-month LIBOR; effective interest rate at the beginning of the accrual period commencing on or before December 31, 2011 is shown in parenthesis.are not redeemable prior to maturity.interest is payable semiannually. The variable rate notes are guaranteed under the FDIC’s Temporary Liquidity Guarantee Program. The remaining notes were issued under a shelf registration filed with the SEC. The $207.8 million notesSEC and were sold via the Company’s online auction process and direct sales.FHLB4.0% and 4.5% notes were issued in connection with our 2012 Capital Plan, as discussed in Note 13. The notes are not redeemable prior to maturity except for the $270.4 million notes, of which $182.2 million have optional early redemptions as follows: $52.0 million as of December 31, 2012, $95.2 million in 2013, $27.0 million in 2014, and $8.0 million in 2015.On the maturity date of June 21, 2012, we redeemed all $254.9 million of variable rate senior medium-term notes that were guaranteed under the FDIC’s Temporary Liquidity Guarantee Program. We have no other notes outstanding under this program.Federal Home Loan Bank AdvancesThe FHLB advances were issued to Amegy with maturities from June 2014 to September 2041 at interest rates from 2.81% to 6.98%. The weighted average interest rate on advances outstanding was 4.5% and 4.6% at both December 31, 20112012 and 2010, respectively.Interest Expense and 2011.MaturitiesInterest expense on long-term debt included in the statement of income was reduced by $3.0 million in 2011, $3.1 million in 2010, and $26.2 million in 2009 as a resultLong-term DebtMaturities of the associated hedges.Maturities on long-term debt are as follows for the years succeeding 2011.(In thousands) Consolidated Parent only $ 372,150 $ 372,111 18,222 18,179 648,412 573,322 346,401 346,339 75,366 72,249 483,067 309,278 $ 1,943,618 $ 1,691,478 142(In thousands) Consolidated Parent only 2013 $ 18,286 $ 18,246 2014 699,842 624,773 2015 437,923 437,868 2016 267,548 267,498 2017 385,352 385,299 Thereafter 520,372 344,078 $ 2,329,323 $ 2,077,762 These maturities do not include the associated hedges. The $309.3$344.1 million of Parent only maturities at December 31, 2011 are for thepayable after 2017 consist of $309.3 million of junior subordinated debentures payable to ZCTB and Stockmen’s Trust II and III, after 2016.Subsequent Event$34.8 millionAs of February 15, 2012, holders of approximately $29.8 million of subordinated convertible notes elected to convert their debt into depositary shares of the Company’s preferred stock. This anticipated conversion will add 370 shares of Series A and 29,404 shares of Series C to the Company’s preferred stock.14. SHAREHOLDERS’ EQUITYsenior medium-term notes.13. SHAREHOLDERS’ EQUITY Preferred StockPreferred stock is without par value and has a liquidation preference of $1,000$1,000 per share. In May 2010, Company shareholders approved an increase in the number of authorized preferred shares from 3,000,000 to 4,400,000.4,400,000.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. Dividends are approved by the Board of Directors and are subject to regulatory approval. 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. Additional redemption provisions for the Series D preferred stockRedemptions are discussed subsequently.The Series A, C, F, and EG 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. Dividend payments are made on the 15th day of March, June, September, and December. The shares are registered with the SEC. All of these series of preferred stock, except for Series A, were sold primarily by Zions Direct, Inc., the Company’s broker/dealer subsidiary, via an online auction process and by direct sales.Preferred stock is summarized as follows: Rate Shares at
December 31, 2011 Carrying value at
December 31, (Dollar amounts in thousands) Authorized Outstanding 2011 2010 Floating December 15, 2011 140,000 59,683 $ 59,740 $ 59,457 9.5% September 15, 2013 1,400,000 709,103 820,016 521,051 5.0% November 15, 2011 1,400,000 1,400,000 1,355,304 1,333,664 11.0% June 15, 2012 250,000 142,500 142,500 142,500 $ 2,377,560 $ 2,056,672 Shares atDecember 31, 2012 Carrying value atDecember 31,(Dollar amounts in thousands) Rate Earliestredemption date Authorized Outstanding 2012 2011 Series A Floating December 15, 2011 140,000 60,093 $ 60,220 $ 59,740 Series C 9.5% September 15, 2013 1,400,000 798,257 924,332 820,016 Series D, TARP Capital Purchase Program — 1,355,304 Series E — 142,500 Series F 7.9% June 15, 2017 250,000 143,750 143,750 — $ 1,128,302 $ 2,377,560 The Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock was sold through underwriters. Dividends are computed at an annual rate equal to the greater of three-month LIBOR plus 0.52%, or 4.0%. Increases in the amount of this preferred stock for the periodsyears presented herein resulted from conversions of convertible subordinated debt, as discussed subsequently.The143Similar to the Series A, increases in the amount of the Series C 9.50%9.5% Non-Cumulative Perpetual Preferred Stock offering was sold primarily by Zions Direct, Inc., the Company’s broker/dealer subsidiary, via an online auction process and by direct sales. Increases in the amount of this preferred stock for the periodsyears presented herein resulted from conversions of convertible subordinated debt, as discussed subsequently.The Series D Fixed-Rate Cumulative Perpetual Preferred Stock was redeemed in two installments of $700 million each on March 28, 2012 and September 26, 2012. The total of $1.4 billion had been issued in November 2008 toby the U.S. Department of the Treasury for $1.4 billion. The Emergency Economic Stabilization Act of 2008 authorized the U.S. Treasury to appropriate funds to eligible financial institutions participating inunder the Troubled Asset Relief Program (“TARP”) Capital Purchase Program. TheProgram (“CPP”). This capital investment includesin the Company included the issuance of preferred shares of the Company and a warrantwarrants to purchase common shares pursuantshares.The TARP preferred stock redemption was made following notification from the Federal Reserve Board (“FRB”) on March 13, 2012 that it did not object to the capital actions proposed in our Capital Plan submitted under the FRB’s 2012 Capital Plan Review. Among other things, our 2012 Capital Plan included the following provisions: (1) completing the entire redemption in 2012 of our TARP preferred stock with the second $700 million redemption meeting specified conditions requiring regulatory approval, including Parent liquidity and other requirements; (2) issuing a Letter Agreementtotal of approximately $600 million in senior debt and redeeming on a Securities Purchase agreement (collectively “the Agreement”). timely basis the Company’s $254.9 million variable rate senior medium-term notes (see Senior Medium-Term Notes in Note 12); and (3) maintaining for 2012 the current common stock dividend of $0.01 per share per quarter.The dividend rateTARP redemption accelerated the amortization to preferred stock dividends in 2012 of 5% increases to 9% after the first five years. Dividend payments are madeentire remaining unamortized discount. The original amount of the discount was based on the 15fair value estimated for the common stock warrants. The amortization amounted to th$44.7 million day of February, May, August,in 2012, $21.6 million in 2011, and November. The warrant allows$20.2 million in 2010.On December 5, 2012, the U.S. Treasury auctioned the 5,789,909 warrants associated with the TARP CPP at a price of $1.35 per warrant. Each warrant represents the right to purchase up to 5,789,909 sharesone share of the Company’s common stock exercisable over a 10-year period at astock. The Company did not receive any proceeds from the warrant offering. The warrants have an exercise price of $36.27 per share, of $36.27. The preferred shares and the warrant qualify for Tier 1 regulatorycapital. The Agreement subjects the Company to certain restrictions and conditions including those related to common dividends, share repurchases, executive compensation, and corporate governance. In addition, the Series D TARP preferred stock must be redeemed in full before any other preferred stock may be redeemed. Further, redemption of the Series D TARP preferred stock is subject to regulatory approval.We recorded the total $1.4 billion of the Series D preferred sharesreduction due to antidilution provisions, and the warrant at their relative fair values of $1,292.2 million and $107.8 million, respectively. expire on November 14, 2018.The difference from the par amount of the preferred shares is accreted to preferred stock over five years using the interest method with a corresponding adjustment to preferred dividends. This accretion amounted to $21.6 million in 2011, $20.2 million in 2010, and $18.6 million in 2009.Theentire Series E Fixed-Rate Resettable Non-Cumulative Perpetual Preferred Stock was redeemed on its call date of June 15, 2012. Commissions and fees of was sold for $142.5 million in June 2010 through underwriters, including Zions Direct, Inc. Associatednet of commissions and fees amountedof $2.4 million, were used to $3.8 million. The initial dividendredeem the Series E preferred stock.On January 31, 2013 subsequent to year-end, we sold $171.8 million of Series G Fixed/Floating Rate Non-Cumulative Perpetual Preferred Stock. Dividends will be payable during the fixed rate period (issuance date to March 14, 2023) at an annual rate of 11%6.30%. Thereafter during the floating rate period, dividends will be payable at three-month LIBOR plus 4.24%. The earliest redemption date is resettable beginning JuneMarch 15, 2012 and every two years thereafter at the then current two-year U.S. Treasury rate, plus 10.22%.In2023.In connection with the subordinated debt modifications discussed in Note 13,12, we recorded $202.8$202.8 million after-tax directly in common stock for the intrinsic value of the beneficial conversion feature of the modified subordinated debt. The Company has “no par” common stock and all additional paid-in capital transactions are recorded in common stock. The intrinsic value of the beneficial conversion feature was calculated as the difference between the fair value of the preferred stock into which the debt is convertible (multiplied by the number of related shares) and the fair value of the modified convertible debt on the commitment dates. The commitment date is defined as the date when both parties are bound to the terms of the transaction, which was the expiration of the exchange offer and corresponded with the transaction date. At the time of each conversion of the convertible debt to preferred stock, a proportional amount of the intrinsic value of the beneficial conversion feature is transferred from common stock to preferred stock.As discussed in Note 13,12, approximately $256.1$89.6 million in 2011, $343.02012, $256.1 million in 2010,2011, and $63.4$343.0 million in 20092010 of convertible subordinated notes were converted into preferred stock. As a result, approximately $43.1$15.2 million in 2011, $56.82012, $43.1 million in 2010,2011, and $11.0$56.8 million in 20092010 of the intrinsic value of the beneficial conversion feature144was transferred from common stock to preferred stock. The remaining balance of the beneficial conversion feature included in common stock was approximately $91.9$76.6 million and $135.0$91.8 million at December 31, 2012 and 2011, respectively.Common StockWe issued $25.5 million in 2011 and 2010, respectively.In June 2009, through a tender offer, we purchased 4,020,435 depositary shares of Series A preferred stock at a price of $11.50 per depositary share, or an aggregate amount of $46.4 including accrued dividends. At a $25 per depositary share liquidation preference, the purchase reduced the $240 million carrying value of the Series A preferred stock by approximately $100.5 million. Net of related costs, the preferred stock redemption resulted in a $54.0 million increase to common shareholders’ equity. The purchase price of $11.50 per depositary share was determined based on a modified “Dutch auction” pricing mechanism.Common StockWe issued $25.5 million in 2011, $633.3 million in 2010 and $472.7 million in 2009 of new common stock under common equity distribution agreements. The latest program announced onin February 10, 2011, under which the 2011 sales were made, provided for the sale of up to $200$23.89$23.89 per share and 29.6 million shares in 2010 at an average price of $21.43 per share, and 31.7 million shares in 2009 at an average price of $14.89$21.43 per share. Net of commissions and fees, these issuances added $25.0$25.0 million in 2011 $623.5and $623.5 million in 2010 and $464.1 million in 2009 to common stock.During 2010, we sold a total of 29.3 million common stock warrants for $221.8 million.$221.8 million. The sales consisted of 7.0 million warrants for $36.8$36.8 million, or $5.25$5.25 per warrant, in September 2010, and 22.3 million warrants for$185.0 million, or $8.3028$8.3028 per warrant, in June 2010. Each of the warrants can be exercised for a share of common stock at an initial price of $36.63$36.63, subject to reduction due to antidilution provisions, through May 22, 2020. Net of commissions and fees, the total issuance added $214.6$214.6 million to common stock.In June 2010, $8.6$8.6 million of Series A preferred stock was exchanged for 224,903 shares of the Company’s common stock at the then fair value of $23.82$23.82 per share. The result of the $5.5$5.5 million of common stock issued in this preferred stock redemption increased retained earnings by approximately $3.1 million.$3.1 million.In March 2010, we issued approximately 2.2 million shares of common stock, or $46.9$46.9 million net of commissions and fees, in exchange for $55.6$55.6 million of nonconvertible subordinated debt. The number of shares issued was determined using an exchange ratio based on a common stock price of $22.5433$22.5433 per share. This per share amount was calculated based on the defined weighted average price of our common stock for each of the five consecutive days ending on the March 24, 2010 expiration date of our exchange offer.In December 2009, we completed the exchange of approximately $71.5 million of Series A preferred stock into approximately 2.8 million shares of common stock. The number of shares was determined based on an exchange ratio calculation specified in the exchange offer. Among other things, the calculation of the exchange ratio included a defined weighted average price of our common shares for each of the five consecutive days ending on the December 17, 2009 expiration date, or $13.2056 per share. Approximately $32.4 million, which is net of $0.7 million of issuance costs, was included in retained earnings as the difference between the $37.2 million fair value of the common shares on the date of exchange plus the $1.2 million original issuance costs of the preferred stock and the carrying value of the preferred stock exchanged.145Accumulated Other Comprehensive IncomeChanges in accumulated other comprehensive income (loss) are summarized as follows:(In thousands) Net unrealized
gains (losses)
on investments
and retained
interests Net
unrealized
gains
(losses) on
derivative
instruments Pension
and post-
retirement Total $ (248,871 ) $ 196,656 $ (46,743 ) $ (98,958 ) (137,462 ) (137,462 ) (65,037 ) (65,037 ) 162,206 162,206 (174,244 ) (174,244 ) 996 996 (128,597 ) (128,597 ) 4,197 4,197 (76,079 ) (128,597 ) 4,197 (200,479 ) (462,412 ) 68,059 (42,546 ) (436,899 ) 4,248 4,248 45,689 45,689 (43,920 ) (43,920 ) 131 131 (37,357 ) (37,357 ) 6,812 6,812 6,148 (37,357 ) 6,812 (24,397 ) (456,264 ) 30,702 (35,734 ) (461,296 ) (77,280 ) (77,280 ) 12,852 12,852 (26,481 ) (26,481 ) 410 410 (21,298 ) (21,298 ) (18,991 ) (18,991 ) (90,499 ) (21,298 ) (18,991 ) (130,788 ) $ (546,763) $ 9,404 $ (54,725 ) $ (592,084 ) As discussed in Note 5, we adopted new guidance under ASC 320 as of January 1, 2009 related to the accounting for noncredit-related impairment losses on investment securities not expected to be sold. In addition to the ongoing effect on AOCI, the cumulative effect of adopting this new guidance increased retained earnings and decreased AOCI by $137.5 million.(In thousands) Net unrealizedgains (losses)on investments Net unrealizedgains (losses)on derivativeinstruments Pensionand post-retirement Total Balance at December 31, 2009 $ (462,412 ) $ 68,059 $ (42,546 ) $ (436,899 ) Other comprehensive income (loss), net of tax: Net realized and unrealized holding gains, net of income tax expense of $2,230 4,248 4,248 Reclassification for net losses included in earnings, net of income tax benefit of $28,611 45,689 45,689 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $27,177 (43,920 ) (43,920 ) Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $81 131 131 Net unrealized losses, net of reclassification to earnings of $74,936 and income tax benefit of $23,405 (37,357 ) (37,357 ) Pension and postretirement, net of income tax expense of $4,440 6,812 6,812 Other comprehensive income (loss) 6,148 (37,357 ) 6,812 (24,397 ) Balance at December 31, 2010 (456,264 ) 30,702 (35,734 ) (461,296 ) Other comprehensive income (loss), net of tax: Net realized and unrealized holding losses, net of income tax benefit of $47,986 (77,280 ) (77,280 ) Reclassification for net losses included in earnings, net of income tax benefit of $8,194 12,852 12,852 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $17,161 (26,481 ) (26,481 ) Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $255 410 410 Net unrealized losses, net of reclassification to earnings of $37,273 and income tax benefit of $13,649 (21,298 ) (21,298 ) Pension and postretirement, net of income tax benefit of $12,353 (18,991 ) (18,991 ) Other comprehensive loss (90,499 ) (21,298 ) (18,991 ) (130,788 ) Balance at December 31, 2011 (546,763 ) 9,404 (54,725 ) (592,084 ) Other comprehensive income (loss), net of tax: Net realized and unrealized holding gains, net of income tax expense of $79,704 129,330 129,330 Reclassification for net losses included in earnings, net of income tax benefit of $32,816 51,360 51,360 Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $23,790 (38,406 ) (38,406 ) Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $4,488 6,863 6,863 Net unrealized losses, net of reclassification to earnings of $13,062 and income tax benefit of $5,063 (7,610 ) (7,610 ) Pension and postretirement, net of income tax expense of $2,870 4,390 4,390 Other comprehensive income (loss) 149,147 (7,610 ) 4,390 145,927 Balance at December 31, 2012 $ (397,616 ) $ 1,794 $ (50,335 ) $ (446,157 ) 146Deferred CompensationDeferred compensation at year-end consists of the cost of the Company’s common stock held in rabbi trusts established for certain employees and directors. At December 31, 20112012 and 2010,2011, the cost of the common stock was approximately $14.8$15.0 million and $16.1$14.8 million, respectively, and was included in retained earnings. 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, 20112012 and 2010,2011, total invested assets were approximately $64.5$72.2 million and $70.5$64.5 million and total obligations were approximately $79.3$87.2 million and $86.6$79.3 million, respectively.Noncontrolling InterestsIn June 2010, we liquidated our ownership of certain consolidated venture funds. We also changed the ownership structure of another venture fund such that we are no longer required to consolidate it under thecurrent accounting guidance in ASC 810.guidance. The effect of these transactions decreased the amount of noncontrolling interests by approximately $15 million.$15 million. The consolidated financial statements were not otherwise significantly affected.15. 14. INCOME TAXESIncome taxes (benefit) are summarized as follows:(In thousands) 2011 2010 2009 $ 62,810 $ (80,914 ) $ (375,610 ) 106,902 (15,210 ) 24,171 169,712 (96,124 ) (351,439 ) 20,169 2,760 (10,662 ) 8,702 (13,455 ) (39,242 ) 28,871 (10,695 ) (49,904 ) $ 198,583 $ (106,819 ) $ (401,343 ) (In thousands) 2012 2011 2010 Federal: Current $ 185,404 $ 62,810 $ (80,914 ) Deferred (20,086 ) 106,902 (15,210 ) 165,318 169,712 (96,124 ) State: Current (1,775 ) 20,169 2,760 Deferred 29,873 8,702 (13,455 ) 28,098 28,871 (10,695 ) $ 193,416 $ 198,583 $ (106,819 ) Income tax expense (benefit) computed at the statutory federal income tax rate of 35% reconciles to actual income tax expense (benefit) as follows:(In thousands) 2011 2010 2009 $ 182,446 $ (141,109 ) $ (568,057 ) 18,766 (6,952 ) (32,437 ) – – 220,852 24,361 52,004 4,380 (19,691 ) (21,662 ) (24,863 ) – 28,923 2,772 (5,977 ) (9,007 ) (7,946 )
net operating losses – – 3,899 (1,322 ) (9,016 ) 57 $ 198,583 $ (106,819 ) $ (401,343 ) (In thousands) 2012 2011 2010 Income tax expense (benefit) at statutory federal rate $ 189,548 $ 182,446 $ (141,109 ) State income taxes, net 18,264 18,766 (6,952 ) Other nondeductible expenses 11,291 24,361 52,004 Nontaxable income (20,137 ) (19,691 ) (21,662 ) Surrender of bank-owned life insurance — — 28,923 Tax credits and other taxes (3,172 ) (5,977 ) (9,007 ) Other (2,378 ) (1,322 ) (9,016 ) $ 193,416 $ 198,583 $ (106,819 ) 147The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below.(In thousands) 2011 2010 $ 425,281 $ 563,880 46,958 25,426 58,505 60,854 27,796 35,237 2,577 2,617 283,410 247,952 57,914 56,381 56,789 50,700 959,230 1,043,047 (4,261 ) (4,261 ) 954,969 1,038,786 (28,356 ) (33,139 ) (19,810 ) (9,363 ) (14,861 ) (17,746 ) (120,990 ) (110,054 ) (6,285 ) (6,462 ) (20,441 ) (20,869 ) (208,206 ) (247,272 ) (20,856 ) (19,864 ) (3,469 ) (30,669 ) (2,561 ) (3,285 ) (445,835 ) (498,723 ) $ 509,134 $ 540,063 December 31, (In thousands) 2012 2011 Gross deferred tax assets: Book loan loss deduction in excess of tax $ 372,206 $ 425,281 Pension and postretirement 46,198 46,958 Deferred compensation 58,312 58,505 Other real estate owned 16,306 27,796 Accrued severance costs 2,515 2,577 Security investments and derivative fair value adjustments 236,286 283,410 Net operating losses, capital losses and tax credits 36,600 57,914 Other 59,809 56,789 828,232 959,230 Valuation allowance (4,261 ) (4,261 ) Total deferred tax assets 823,971 954,969 Gross deferred tax liabilities: Core deposits and purchase accounting (24,185 ) (28,356 ) Premises and equipment, due to differences in depreciation (16,258 ) (19,810 ) FHLB stock dividends (13,423 ) (14,861 ) Leasing operations (111,265 ) (120,990 ) Prepaid expenses (7,057 ) (6,285 ) Prepaid pension reserves (18,350 ) (20,441 ) Subordinated debt modification (185,733 ) (208,206 ) Deferred loan fees (21,209 ) (20,856 ) FDIC-supported transactions (17,957 ) (3,469 ) Other (2,929 ) (2,561 ) Total deferred tax liabilities (418,366 ) (445,835 ) Net deferred tax assets $ 405,605 $ 509,134 The amount of net deferred tax assetsDTAs is included with other assets in the balance sheet. The $4.3$4.3 million valuation allowance at December 31, 20112012 and 20102011 was for certain acquired net operating loss carryforwards included in our acquisition of the remaining interests in a less significant subsidiary. At December 31, 2011,2012, excluding the $4.3$4.3 million, the tax effect of remaining net operating loss and tax credit carryforwards was approximately $47.3$26.1 million expiring through 2030.2030. In addition, the Company generatedhas a capital loss during the year that will be carried forward to future taxable years. The tax effect of this capital loss wasis approximately $6.3$6.2 million expiring through 2016.2016.We evaluate the net deferred tax assetsDTAs 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 deferred tax assets;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, 2011.We have an agreement that awarded us a $100$100 million allocation of tax credit authority under the Community Development Financial Institutions Fund established by the U.S. Government. We have invested the $100$100 million in a wholly-owned subsidiary which makes qualifying loans and investments. In return, we receive federal income tax credits that are recognized over seven years, including the year in which the funds were invested in the subsidiary.148We recognize these tax credits for financial reporting purposes in the same year the tax benefit is recognized in our tax return. The resulting tax credits which reduced income tax expense were approximately $2.4$1.2 million in 2011, $6.02012, $2.4 million in 2010,2011, and $5.9$6.0 million in 2009.2010.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:(In thousands) 2011 2010 2009 $ 15,366 $ 16,677 $ 17,077 – – – – – – – – – – – – – – – (1,644 ) (1,311 ) (400 ) $ 13,722 $ 15,366 $ 16,677 (In thousands) 2012 2011 2010 Balance at beginning of year $ 13,722 $ 15,366 $ 16,677 Tax positions related to current year: Additions — — — Reductions — — — Tax positions related to prior years: Additions — — — Reductions (11,337 ) — — Settlements with taxing authorities — — — Lapses in statutes of limitations — (1,644 ) (1,311 ) Balance at end of year $ 2,385 $ 13,722 $ 15,366 At December 31, 20112012 and 2010,2011, the liability for unrecognized tax benefits included approximately $8.9$1.6 million and $10.0$8.9 million, respectively, (net of the federal tax benefit on state issues) that, if recognized, would affect the effective tax rate. GrossThere are no gross unrecognized tax benefits that may decrease during the 12 months subsequent to December 31, 2011 could range up2012.The $11.3 million reduction to approximately $11.3 million as a result of the resolution of various state tax positions.We reduced this liability netin 2012 was made following closure of any federal and/oran audit by a state tax benefits, andtaxing authority. We reduced income tax expense by a net amount including interest of $1.22011, $949 thousand2012 due to the audit closure, and $1.2 million in 2010,2011 and $366 thousand$0.9 million in 20092010 due to lapses in statutes of limitations.Interest and penalties related to unrecognized tax benefits are included in income tax expense in the statement of income. At December 31, 20112012 and 2010,2011, accrued interest and penalties recognized in the balance sheet, net of any federal and/or state tax benefits, were approximately $2.5$0.3 million and $2.7$2.5 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 2007 for federal and state returns.16.14915. NET EARNINGS PER COMMON SHAREBasic and diluted net earnings per common share based on the weighted average outstanding shares are summarized as follows: Year Ended December 31, (In thousands, except per share amounts) 2011 2010 2009 $ 323,804 $ (292,728 ) $ (1,216,111 ) 177,775 126,427 30,198 146,029 (419,155 ) (1,246,309 ) 1,300 – – 144,729 (419,155 ) (1,246,309 ) 7,292 6,565 11,773 $ 152,021 $ (412,590 ) $ (1,234,536 ) 182,393 166,054 124,443 $ 0.83 $ (2.48 ) $ (9.92 ) $ 152,021 $ (412,590 ) $ (1,234,536 ) 41 – – $ 152,062 $ (412,590 ) $ (1,234,536 ) 182,393 166,054 124,443 212 – – 182,605 166,054 124,443 $ 0.83 $ (2.48 ) $ (9.92 ) 17.(In thousands, except per share amounts) Year Ended December 31, 2012 2011 2010 Basic: Net income (loss) applicable to controlling interest $ 349,516 $ 323,804 $ (292,728 ) Less common and preferred dividends 178,277 177,775 126,427 Undistributed earnings (loss) 171,239 146,029 (419,155 ) Less undistributed earnings applicable to nonvested shares 1,600 1,300 — Undistributed earnings (loss) applicable to common shares 169,639 144,729 (419,155 ) Distributed earnings applicable to common shares 7,321 7,292 6,565 Total earnings (loss) applicable to common shares $ 176,960 $ 152,021 $ (412,590 ) Weighted average common shares outstanding 183,081 182,393 166,054 Net earnings (loss) per common share $ 0.97 $ 0.83 $ (2.48 ) Diluted: Total earnings (loss) applicable to common shares $ 176,960 $ 152,021 $ (412,590 ) Additional undistributed earnings allocated to incremental shares — 41 — Diluted earnings (loss) applicable to common shares $ 176,960 $ 152,062 $ (412,590 ) Weighted average common shares outstanding 183,081 182,393 166,054 Additional weighted average dilutive shares 155 212 — Weighted average diluted common shares outstanding 183,236 182,605 166,054 Net earnings (loss) per common share $ 0.97 $ 0.83 $ (2.48 ) 16. SHARE-BASED COMPENSATIONWe 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 13,200,00019,500,000 at December 31, 2011,2012, of which 2,167,5517,547,209 were available for future grants. Our agreement with the U.S. Treasury under the TARP Capital Purchase Program includes conditions related to the issuance of share-based awards. See further discussion in Note 14.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 for all share-based awards were as follows:(In thousands) 2011 2010 2009 $ 29,019 $ 26,834 $ 29,789 9,768 9,315 10,433 (In thousands) 2012 2011 2010 Compensation expense $ 31,533 $ 29,019 $ 26,834 Reduction of income tax expense 10,724 9,768 9,315 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 2011 and 2012, which is settled in cash. See subsequent discussion.150We classify all share-based awards as equity instruments. However, we elected to settleinstruments except for the 2012 and 2011 salary stock units in cash and have accordinglySSUs, which are classified them as liabilities. Substantially all awards of stock options, restricted stock, and restricted stock unitsRSUs have graded vesting, which is recognized on a straight-line basis over the vesting period.As of December 31, 2011,2012, compensation expense not yet recognized for nonvested share-based awards was approximately $26.9$22.8 million, which is expected to be recognized over a weighted average period of 1.1 years.The tax shortfall recognized from the exercise of stock options and the vesting of restricted stock and RSUs was approximately $2.8$2.8 million in both 2012 and 2011 $8.4, and $8.4 million in 2010 and $6.1 million in 2009.. These amounts are included in the net activity under employee plans and related tax benefits in the statement of changes in shareholders’ equity.Stock OptionsStock options granted to employees generally vest at the rate of one third each year and expire seven years after the date of grant. Stock options granted to nonemployee directors vest in increments from six months to three and a half years and expire ten years after the date of grant. Beginning in 2009, restricted stock was issued to nonemployee directors in place of stock options. 2010 and 2009,2010, 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. 2011 2010 2009 $ 5.78 $ 6.59 $ 4.09 1.0 % 1.0 % 1.0 % 30.0 % 33.0 % 33.0 % 1.46 % 1.89 % 2.24 % 4.5 4.5 4.5 2012 2011 2010 Weighted average of fair value for options granted $ 4.88 $ 5.78 $ 6.59 Weighted average assumptions used: Expected dividend yield 1.5 % 1.0 % 1.0 % Expected volatility 35.0 % 30.0 % 33.0 % Risk-free interest rate 0.67 % 1.46 % 1.89 % Expected life (in years) 4.5 4.5 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 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.151The following summarizes our stock option activity for the three years ended December 31, 2011. Number of
shares Weighted
average
exercise
price 7,674,598 $ 57.53 714,085 14.64 (316 ) 5.82 (599,405 ) 56.35 (59,932 ) 62.99 7,729,030 53.61 846,013 23.90 (32,645 ) 13.18 (1,051,174 ) 78.60 (841,529 ) 48.73 (280,456 ) 31.45 6,369,239 47.37 800,057 23.46 (46,749 ) 13.60 (1,080,867 ) 57.27 (107,810 ) 22.74 5,933,870 43.06 4,211,216 $ 51.26 4,230,690 57.21 4,911,239 62.72 Number of shares Weighted average exercise price Balance at December 31, 2009 7,729,030 $ 53.61 Granted 846,013 23.90 Exercised (32,645 ) 13.18 Voluntarily surrendered (1,051,174 ) 78.60 Expired (841,529 ) 48.73 Forfeited (280,456 ) 31.45 Balance at December 31, 2010 6,369,239 47.37 Granted 800,057 23.46 Exercised (46,749 ) 13.60 Expired (1,080,867 ) 57.27 Forfeited (107,810 ) 22.74 Balance at December 31, 2011 5,933,870 43.06 Granted 867,968 18.87 Exercised (129,616 ) 14.64 Expired (568,546 ) 61.90 Forfeited (141,351 ) 21.36 Balance at December 31, 2012 5,962,325 38.87 Outstanding stock options exercisable as of: December 31, 2012 4,379,630 $ 45.26 December 31, 2011 4,211,216 51.26 December 31, 2010 4,230,690 57.21 During 2010, certain option holders voluntarily surrendered stock options that were fully vested. All of the associated compensation expense had been previously recognized. These options were granted between May 2005 and September 2007, with exercise prices between $70.79$70.79 and $83.25$83.25 and expiration dates between May 2012 and September 2014. No replacement options or other replacement equity-based compensation was granted to these option holders.We issue new authorized shares for the exercise of stock options. The total intrinsic value of stock options exercised was approximately $0.4$0.7 million in 2011, $0.32012, $0.4 million in 2010,2011, and $3 thousand$0.3 million in 2009.2010. Cash received from the exercise of stock options was $0.6$1.9 million in 2011, $0.42012, $0.6 million in 2010,2011, and $2 thousand$0.4 million in 2009.2010.152Additional selected information on stock options at December 31, 20112012 follows: 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 604,850 $ 14.27 4.5 1 370,743 $ 14.00 1,556,323 23.83 5.9 257,193 23.95 640,375 27.96 3.6 450,958 27.96 10,000 32.45 3.5 10,000 32.45 34,931 42.78 1.6 34,931 42.78 1,520,224 47.39 3.2 1,520,224 47.39 212,373 56.52 2.3 212,373 56.52 459,232 70.50 1.1 459,232 70.50 419,699 81.11 1.6 419,699 81.11 475,863 83.24 2.5 475,863 83.24 5,933,870 43.06 3.7 1 4,211,216 51.26 Outstanding stock options Number of shares Weighted average exercise price Weighted average remaining contractual life (years) Exercisable stock options Exercise price range Number of shares Weighted average exercise price $0.32 to $19.99 1,279,665 $ 17.20 5.4 1 434,693 $ 14.08 $20.00 to $24.99 1,430,519 23.82 4.8 722,546 23.86 $25.00 to $29.99 637,000 27.96 2.6 607,250 27.96 $30.00 to $39.99 10,000 32.45 2.5 10,000 32.45 $40.00 to $44.99 14,000 41.69 2.8 14,000 41.69 $45.00 to $49.99 1,451,967 47.38 2.2 1,451,967 47.38 $50.00 to $59.99 147,837 57.81 2.0 147,837 57.81 $60.00 to $79.99 138,885 68.51 1.7 138,885 68.51 $80.00 to $81.99 397,139 81.10 0.6 397,139 81.10 $82.00 to $83.38 455,313 83.24 1.5 455,313 83.24 5,962,325 38.87 3.4 1 4,379,630 45.26 1 The weighted average remaining contractual life excludes 21,252 stock options without a fixed expiration date that were acquired with the Amegy acquisition by the Company in 2005. They expire between the date of termination and one year from the date of termination, depending upon certain circumstances.The aggregate intrinsic value of outstanding stock options at December 31, 20112012 and 20102011 was $1.2$5.4 million and $6.9$1.2 million, respectively, while the aggregate intrinsic value of exercisable options was $0.8$3.2 million and $2.3$0.8 million for the same respective periods. For exercisable options, the weighted average remaining contractual life was 2.6 years and 2.9 years at both December 31, 20112012 and 2010,2011, respectively, excluding the stock options previously noted without a fixed expiration date.The previous schedules do not include stock options for employees of our TCBO subsidiary to purchase common stock of TCBO. At December 31, 2011,2012, there were options to purchase 50,05045,150 TCBO shares at exercise prices from $17.85$17.85 to $20.58.$20.58. At December 31, 2011,2012, there were 1,038,000 issued and outstanding shares of TCBO common stock.Restricted StockRestricted stock issued vestsand RSUs granted generally vest over four years. Nonemployee directors were granted restricted stockEach RSU represents a right to one share of 26,433 shares in 2011, 27,216 shares in 2010, and 43,002 in 2009, which vested over six months.our common stock. During the vesting period, the holder hasholders of restricted stock and RSUs receive dividend equivalents. In addition, holders of restricted stock have full voting rights and receives dividend equivalents.rights. Compensation expense is determined based on the number of restricted shares issuedor RSUs granted and the market price of our common stock at the issue date.Nonemployee directors were granted 25,536 shares of restricted stock and 7,296 RSUs in 2012; and 26,433 and 27,216 shares of restricted stock in 2011 and 2010, respectively, which vested over six months.153The following summarizes our restricted stock activity for the three years ended December 31, 2011. Number of
shares Weighted
average
issue
price 1,249,281 $ 49.61 698,311 14.64 (349,186 ) 56.13 (73,756 ) 42.64 1,524,650 32.44 644,504 23.85 (428,593 ) 43.88 (128,918 ) 28.19 1,611,643 26.30 616,234 23.43 (569,794 ) 30.43 (258,229 ) 24.23 1,399,854 23.74 Number of shares Weighted average issue price Nonvested restricted shares at December 31, 2009 1,524,650 $ 32.44 Issued 644,504 23.85 Vested (428,593 ) 43.88 Forfeited (128,918 ) 28.19 Nonvested restricted shares at December 31, 2010 1,611,643 26.30 Issued 616,234 23.43 Vested (569,794 ) 30.43 Forfeited (258,229 ) 24.23 Nonvested restricted shares at December 31, 2011 1,399,854 23.74 Issued 87,480 17.57 Vested (582,361 ) 25.34 Forfeited (53,737 ) 22.83 Nonvested restricted shares at December 31, 2012 851,236 22.07 The following summarizes our RSU activity for the three years ended December 31, 2012: Number of restricted stock units Weighted average grant price Restricted stock units at December 31, 2010 — — Granted 146,165 $ 23.69 Restricted stock units at December 31, 2011 146,165 23.69 Granted 726,779 18.29 Vested (34,885 ) 22.46 Forfeited (15,306 ) 20.22 Restricted stock units at December 31, 2012 822,753 19.04 The total fair value at grant date of restricted stock and RSUs vested during the year was $12.9$15.5 million in 2011, $10.42012, $17.6 million in 2010,2011, and $4.7$18.6 million in 2009.Restricted Stock Units and 2010.Salary Stock UnitsDuring 2011, we issued 146,165 restricted stock units (“RSUs”) with a weighted average issue price of $23.69. Each RSU represents a right to one share of our common stock. These RSUs vest over four years and the holder does not have voting rights or receive dividends. Compensation expense is determined based on the number of RSUs granted and the market price of our common stock at the grant date. At December 31, 2011, all RSUs granted were outstanding.We also granted salary stock units (“SSUs”)SSUs of 297,620456,275 in 2012, 297,620 in 2011, and 109,748 in 2010 which vested and were expensed immediately upon grant. Each SSU represents a right to one share of our common stock.The 2012 and 2011 SSUs are classified as liabilities and are settled in cash. The amount of cash paid is 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 for the 2012 SSUs, and the Company’s closing common stock price on the date of settlement for the 2011 SSUs. Compensation expense is determined by the actual cash paid to settle the SSUs.In January 2012, 172,550 of the 2011 SSUs were settled with a cash payment of $3.2 million. The balance of 125,070 2011 SSUs were settled in December 2012 with a cash payment of $2.7 million. In September 2012, 225,214 of the 2012 SSUs were settled with a cash payment of $4.5 million. The balance of 231,061 2012 SSUs will be settled in March 2013.154The 2010 SSUs are classified as equity and were settled in our common stock. The total fair value of SSUs granted in 2010 was $2.3 million. In January 2011, 60,372 of these SSUs were settled and the remaining balance of 49,376 SSUs were settled in January 2012. Compensation expense is determined based on the number of SSUs granted and the market price of our common stock at the grant date. The total fair value of SSUs granted was $4.8 million in 2011 and $2.3 million in 2010.The 2011 SSUs are classified as liabilities and are settled in cash. The amount of cash is determined by our closing common stock price on the date of settlement and the number of SSUs being settled. In January 2012, 172,550 of the 2011 SSUs were settled with a cash payment of $3.2 million. The balance of 125,070 SSUs will be settled in December 2012.The 2010 SSUs are classified as equity and are settled in our common stock. In January 2011, 60,372 of these SSUs were settled and the remaining balance of 49,376 SSUs was settled in January 2012.18.17. COMMITMENTS, GUARANTEES, CONTINGENT LIABILITIES, AND RELATED PARTIESCommitments and GuaranteesWe use certain derivative instruments and other financial 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 amount recognized in the balance sheet. Derivative instruments are discussed in Notes 87 and 21.Contractual amounts of the off-balance sheet financial instruments used to meet the financing needs of our customers are as follows: December 31, (In thousands) 2011 2010 $ 12,541,278 $ 11,509,212 914,986 921,257 165,298 185,854 134,462 46,627 December 31, (In thousands) 2012 2011 Commitments to extend credit $ 14,277,347 $ 12,541,278 Standby letters of credit: Financial 774,427 914,986 Performance 190,029 165,298 Commercial letters of credit 91,978 134,462 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 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, 2011, $4.42012, $4.2 billion of commitments expire in 2012.2013. 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 $778$587 million expiring in 20122013 and $302$377 million expiring thereafter through 2027.2027. 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 deemed necessary. At December 31, 2011,2012, the Company had recorded approximately $12.9$10.4 million as a liability for these guarantees, which consisted of $7.7$5.9 million attributable to the reserve for unfunded lending commitments and $5.2$4.5 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.155At December 31, 2011,2012, we had commitments to make venturefor private equity and other noninterest-bearing investments of $43.8 million.$31.8 million. These obligations have no stated maturity.The contractual or notional amount of financial instruments indicates a level of activity associated with a particular class of financial instrument and is not a reflection of the actual level of risk. As of December 31, 20112012 and 2010,2011, the regulatory risk-weighted values assigned to all off-balance sheet financial instruments and derivative instruments described herein were $4.5$5.0 billion and $3.9$4.5 billion, respectively.At December 31, 2011,2012, we were required to maintain cash balances of $27.3$61.4 million with the Federal Reserve Banks to meet minimum balance requirements in accordance with Federal Reserve BoardFRB regulations.As of December 31, 2011,2012, the Parent has guaranteed approximately $300$300 million of debt of affiliated trusts issuing trust preferred securities, as discussed in Note 13.LeasesLeases20122013 to 2052.2052. Premises leased under capital leases at December 31, 20112012 were $1.7$1.7 million and accumulated amortization was $1.1 million.$1.2 million. Amortization applicable to premises leased under capital leases is included in depreciation expense.Future aggregate minimum rental payments under existing noncancelable operating leases at December 31, 20112012 are as follows:(In thousands) $ 46,423 46,097 40,829 37,147 34,934 154,680 $ 360,110 (in thousands) 2013 $ 46,272 2014 44,517 2015 40,960 2016 38,348 2017 33,180 Thereafter 141,284 $ 344,561 Future aggregate minimum rental payments have been reduced by noncancelable subleases as follows: $1.9$2.2 million in 2012, $2.12013, $1.6 million in 2013, $1.52014, $1.2 million in 2014, $1.22015, $1.3 million in 2015, $1.32016, $0.9 million in 2016,2017, and $2.7$2.0 million thereafter. Aggregate rental expense on operating leases amounted to $57.9$58.7 million in 2011, $59.72012, $57.9 million in 2010,2011, and $59.2$59.7 million in 2009.2010.Legal MattersWe 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, such legal matterslitigation 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. MostWhile most matters relate to individual claims, but we are also subject to putative class action claims and similar broader claims.threetwo complaints relating to allegedly wrongful acts in our processing of overdraft fees on debit card transactions◦ Barlow, et. al. v. Zions First National Bank and Zions Bancorporation, pending in the United States District Court for the District of Utah, and156◦ Sadlier, et. al. v. National Bank of Arizona, pending in the Superior Court for the State of Arizona, County of Maricopa;Barlow, et al.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, and Zions Bancorporationet. al., pending in the United States District Court for the Eastern District of Utah,Pennsylvania; andSadlier, eta 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 liability, 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. v. Nationalvs. Zions Bancorporation and The Commerce Bank of ArizonaWashington, N.A., pending in the SuperiorUnited States Bankruptcy Court for the StateWestern District of Arizona, County of Maricopa,Washington.Discovery has commenced in the Barlow and Reyes cases, but not in the Sadlier or Meridian Funds cases. Motions for and against class certification have been made in the Reyes case. A third overdraft case, etet. al. v. California Bank & Trust, pending in thewas dismissed by a Superior Court for the State of California at San Diego;•a complaint relating to our banking relationships with customers that allegedly engaged in wrongful telemarketing practices,Reyes v. Zions First National Bank, et al., pending in the United States District Court for the Eastern District of Pennsylvania; and•a complaint relating to allegedly wrongful practices relating to our recording of customer and employee phone calls,Hernandez v. California Bank & Trust and Zions Bancorporation, et al., pending in the Superior Court for the State of California at Los Angeles.Eachin the fourth quarter of these class-action2012.At any given time, 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 other products and services; our customers’ involvement in 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 isand engaging in discussions to resolve the matters. Significant investigations and similar inquiries to which we are currently subject relate to:possible money laundering activities of a relatively early stage,customer of one of our banking subsidiaries and the anti-money laundering practices of that bank (conducted by the United States Attorneys Office for the Southern District of New York);the practices of our subsidiary, Contango Capital Advisors, Inc., relative to certain investment products acquired by Contango clients from sponsors and issuers unaffiliated with discovery not yet having been commenced.the practices of our subsidiary, Zions Bank, relating primarily to payment processing for allegedly fraudulent telemarketers connected with the Reyes case noted previously (conducted by the United States Attorneys Office for the Eastern District of Pennsylvania).At least quarterly, we review outstanding and new legal matters, utilizing then available information. IfIn 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.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 estimate such a range only for a limited number of matters. We currently estimate the aggregate range of reasonably possible losses for those matters to be from $3$0 million to $75not more than $80 million including the accrued liability, if any, related to those matters. in excess of amounts accrued. This estimated range of reasonably possible losses is based on information currently available as of December 31, 2011.2012. 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 an estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.157Based 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 ASC 450-20,Loss Contingencies,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 at play.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.Related Party TransactionsWe have no material related party transactions requiring disclosure. In the ordinary course of business, the Company and its subsidiary banks extend credit to related parties, including executive officers, directors, principal 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.19. REGULATORY MATTERS18. 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 –OurRequired capital amounts and classificationlevels are also subject to qualitative judgmentsjudgmental review by regulators about components, risk weightings, and other factors.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, 2011,2012, we exceeded all capital adequacy requirements to which we are subject.As discussed further in Note 14,13, the Company completed its redemption of TARP preferred shares and warrant to purchase common stock, issued towhich had the U.S. Treasury under the TARP Capital Purchase Program qualify foreffect of reducing Tier 1 capital.As of December 31, 2011,2012, all capital ratios of the Company and each of its subsidiary banks exceeded the “well capitalized” levels under the regulatory framework for prompt corrective action. In response to the recent severe economic crisis, the determination of appropriate capital levels, particularly for the Company and other “systemically important” financial institutions (“SIFIs”) as determined pursuant to the Dodd-Frank Wall Street158Reform and Consumer Protection Act ("Dodd-Frank Act"), is being driven increasingly by the results of comprehensive “stress tests” performed by each financial institution and its various regulators. SuchThese stress tests are part of the Capital Plan Review program overseen by the FRB, which requires SIFIs to submit their Capital Plans annually.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. The results of these institution-specific tests as well as the Basel III capital framework being implemented are driving the Company and most other systemically important financial institutionsSIFIs to hold capital considerably in excess of “well capitalized” regulatory standards, and in excess of historical levels. Regulators have indicated that these stress test results will also be an important factor in determiningapproving the amounts and timing of capital issuances, dividends and distributions, and stock and securities repurchases, as well as repayment of preferred stock issued under the TARP Capital Purchase Program.159The actual capital amounts and ratios for the Company and its three largest subsidiary banks are as follows: Actual To be well capitalized (Dollar amounts in thousands) Amount Ratio Amount Ratio $ 7,780,107 18.06 % $ 4,307,688 10.00 % 2,131,963 14.61 1,459,248 10.00 1,266,587 15.08 840,036 10.00 1,720,124 17.26 996,468 10.00 6,946,290 16.13 2,584,613 �� 6.00 1,951,598 13.37 875,549 6.00 1,160,310 13.81 504,021 6.00 1,593,667 15.99 597,881 6.00 6,946,290 13.40 na na 1 1,951,598 11.59 841,812 5.00 1,160,310 10.96 529,209 5.00 1,593,667 14.41 552,911 5.00 $ 7,363,984 17.15 % $ 4,295,020 10.00 % 1,962,050 12.88 1,523,237 10.00 1,171,253 13.68 856,252 10.00 1,565,707 16.89 926,936 10.00 6,349,789 14.78 2,577,012 6.00 1,775,857 11.66 913,942 6.00 1,062,085 12.40 513,751 6.00 1,446,462 15.60 556,161 6.00 6,349,789 12.56 na na 1 1,775,857 10.43 851,233 5.00 1,062,085 9.94 534,114 5.00 1,446,462 13.84 522,708 5.00 (Dollar amounts in thousands) Actual To be well capitalized Amount Ratio Amount Ratio As of December 31, 2012: Total capital (to risk-weighted assets) The Company $ 6,616,521 15.05 % $ 4,396,983 10.00 % Zions First National Bank 2,034,662 14.17 1,435,690 10.00 California Bank & Trust 1,222,822 14.18 862,218 10.00 Amegy Bank N.A. 1,598,708 15.17 1,054,110 10.00 Tier 1 capital (to risk-weighted assets) The Company 5,883,669 13.38 2,638,190 6.00 Zions First National Bank 1,861,218 12.96 861,414 6.00 California Bank & Trust 1,114,315 12.92 517,331 6.00 Amegy Bank N.A. 1,466,001 13.91 632,466 6.00 Tier 1 capital (to average assets) The Company 5,883,669 10.96 na na 1 Zions First National Bank 1,861,218 10.58 879,719 5.00 California Bank & Trust 1,114,315 10.37 537,534 5.00 Amegy Bank N.A. 1,466,001 12.03 609,319 5.00 As of December 31, 2011: Total capital (to risk-weighted assets) The Company $ 7,780,107 18.06 % $ 4,307,688 10.00 % Zions First National Bank 2,131,963 14.61 1,459,248 10.00 California Bank & Trust 1,266,587 15.08 840,036 10.00 Amegy Bank N.A. 1,720,124 17.26 996,468 10.00 Tier 1 capital (to risk-weighted assets) The Company 6,946,290 16.13 2,584,613 6.00 Zions First National Bank 1,951,598 13.37 875,549 6.00 California Bank & Trust 1,160,310 13.81 504,021 6.00 Amegy Bank N.A. 1,593,667 15.99 597,881 6.00 Tier 1 capital (to average assets) The Company 6,946,290 13.40 na na 1 Zions First National Bank 1,951,598 11.59 841,812 5.00 California Bank & Trust 1,160,310 10.96 529,209 5.00 Amegy Bank N.A. 1,593,667 14.41 552,911 5.00 1 There is no Tier 1 leverage ratio component in the definition of a well capitalized bank holding company.company.20.16019. RETIREMENT PLANSDefined Benefit PlansPensionPension –: This qualified noncontributory defined benefit plan has been frozen to new participation. No service-related benefits accrue for existing participants except for those with certain grandfathering provisions. Benefits vest under the plan upon completion of five years of vesting service. Plan assets consist principally of corporate equity securities, mutual fund investments, real estate, and cashfixed 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. The funded status of the plan declined during 2011 due to a decreaseCurrently, it is expected that no minimum regulatory contributions will be required in the discount rate used to estimate the projected benefit obligation at year-end and to decreases in the value of plan assets.2013 or 2014.Supplement 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 defined benefit health care and life insurance plan provides postretirement medical benefits to certain full-time employees who metmeet 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 organizationsorganization options. Our contribution towards the retiree medical premium has been permanently frozen. 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 benefit payments to plan participants.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. Pension Supplemental
Retirement Postretirement (In thousands) 2011 2010 2011 2010 2011 2010 $ 165,736 $ 160,039 $ 11,230 $ 11,453 $ 1,095 $ 1,140 100 180 – – 32 35 8,336 8,597 558 613 54 61 18,773 5,470 584 648 65 (31 ) – – – (286 ) – – (8,804 ) (8,550 ) (1,015 ) (1,198 ) (97 ) (110 ) 184,141 165,736 11,357 11,230 1,149 1,095 160,756 98,739 – – – – (4,508 ) 19,773 – – – – – 50,794 1,015 1,198 97 110 (8,804 ) (8,550 ) (1,015 ) (1,198 ) (97 ) (110 ) 147,444 160,756 – – – – $ (36,697 ) $ (4,980 ) $ (11,357 ) $ (11,230 ) $ (1,149 ) $ (1,095 ) $ (36,697 ) $ (4,980 ) $ (11,357 ) $ (11,230 ) $ (1,149 ) $ (1,095 ) (88,778 ) (58,344 ) (2,117 ) (1,641 ) 830 1,264 $ (88,778 ) $ (58,344 ) $ (1,817 ) $ (1,217 ) $ 436 $ 626 – – (300 ) (424 ) 394 638 $ (88,778 ) $ (58,344 ) $ (2,117 ) $ (1,641 ) $ 830 $ 1,264 161(In thousands) Pension SupplementalRetirement Postretirement 2012 2011 2012 2011 2012 2011 Change in benefit obligation: Benefit obligation at beginning of year $ 184,141 $ 165,736 $ 11,357 $ 11,230 $ 1,149 $ 1,095 Service cost 29 100 — — 36 32 Interest cost 7,558 8,336 460 558 47 54 Actuarial (gain) loss 9,693 18,773 481 584 (27 ) 65 Benefits paid (10,213 ) (8,804 ) (1,064 ) (1,015 ) (76 ) (97 ) Benefit obligation at end of year 191,208 184,141 11,234 11,357 1,129 1,149 Change in fair value of plan assets: Fair value of plan assets at beginning of year 147,444 160,756 — — — — Actual return on plan assets 19,851 (4,508 ) — — — — Employer contributions — — 1,064 1,015 76 97 Benefits paid (10,213 ) (8,804 ) (1,064 ) (1,015 ) (76 ) (97 ) Fair value of plan assets at end of year 157,082 147,444 — — — — Funded status $ (34,126 ) $ (36,697 ) $ (11,234 ) $ (11,357 ) $ (1,129 ) $ (1,149 ) Amounts recognized in balance sheet: Liability for pension/postretirement benefits $ (34,126 ) $ (36,697 ) $ (11,234 ) $ (11,357 ) $ (1,129 ) $ (1,149 ) Accumulated other comprehensive income (loss) (80,743 ) (88,778 ) (2,587 ) (2,117 ) 526 830 Accumulated other comprehensive income (loss) consists of: Net gain (loss) $ (80,743 ) $ (88,778 ) $ (2,412 ) $ (1,817 ) $ 376 $ 436 Prior service credit (cost) — — (175 ) (300 ) 150 394 $ (80,743 ) $ (88,778 ) $ (2,587 ) $ (2,117 ) $ 526 $ 830 The liability for pension/postretirement benefits is included in other liabilities in the balance sheet. The accumulated benefit obligation for the pension plan was $184.1$191.2 million and $165.7$184.1 million at December 31, 20112012 and 2010,2011, respectively.The amounts in accumulated other comprehensive income (loss) at December 31, 20112012 expected to be recognized as an expense component of net periodic benefit cost in 20122013 for the plans are estimated as follows:(In thousands) Pension Supplemental
Retirement Postretirement $ (9,382 ) $ 112 $ 87 – (125 ) 244 $ (9,382 ) $ (13 ) $ 331 (In thousands) Pension Supplemental Retirement Postretirement Net gain (loss) $ (8,631 ) $ 1 $ 75 Prior service credit (cost) — (125 ) 150 $ (8,631 ) $ (124 ) $ 225 The following presents the components of net periodic benefit cost (credit) for the plans.(In thousands) Pension Supplemental
Retirement Postretirement 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 100 $ 180 $ 229 $ – $ – $ – $ 32 $ 35 $ 34 8,336 8,597 8,889 558 613 661 54 61 63 (12,443 ) (8,211 ) (7,074 ) 5,290 5,735 6,635 (16 ) (19 ) (29 ) (125 ) (149 ) (196 ) 124 124 124 (244 ) (243 ) (243 ) – 42 – $ 1,283 $ 6,301 $ 8,679 $ 666 $ 760 $ 756 $ (283 ) $ (296 ) $ (342 ) (In thousands) Pension SupplementalRetirement Postretirement 2012 2011 2010 2012 2011 2010 2012 2011 2010 Service cost $ 29 $ 100 $ 180 $ — $ — $ — $ 36 $ 32 $ 35 Interest cost 7,558 8,336 8,597 460 558 613 47 54 61 Expected return on plan assets (11,308 ) (12,443 ) (8,211 ) Amortization of net actuarial (gain) loss 9,184 5,290 5,735 (114 ) (16 ) (19 ) (87 ) (125 ) (149 ) Amortization of prior service (credit) cost 124 124 124 (244 ) (244 ) (243 ) Settlement loss — — 42 Net periodic benefit cost (credit) $ 5,463 $ 1,283 $ 6,301 $ 470 $ 666 $ 760 $ (248 ) $ (283 ) $ (296 ) 162Weighted average assumptions based on the pension plan are the same where applicable for each of the plans and are as follows: 2011 2010 2009 4.25 % 5.20 % 5.60 % 3.50 3.50 4.25 5.20 5.60 6.00 8.00 8.00 8.30 3.50 3.50 4.25 2012 2011 2010 Used to determine benefit obligation at year-end: Discount rate 3.75 % 4.25 % 5.20 % Rate of compensation increase 3.50 3.50 3.50 Used to determine net periodic benefit cost for the years ended December 31: Discount rate 4.25 5.20 5.60 Expected long-term return on plan assets 8.00 8.00 8.00 Rate of compensation increase 3.50 3.50 3.50 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, 2011.(In thousands) Pension Supplemental
Retirement Postretirement $ 11,244 $ 2,126 $ 103 10,224 972 103 9,711 861 105 9,655 771 103 9,550 1,055 104 53,678 3,808 469 (In thousands) Pension Supplemental Retirement Postretirement 2013 $ 10,546 $ 2,079 $ 87 2014 10,044 878 97 2015 9,726 822 101 2016 9,557 1,068 106 2017 10,160 788 111 Years 2018 - 2022 54,347 3,726 525 We are also obligated under other supplemental retirement plans for certain current and former employees. Our liability for these plans was $6.2$6.3 million and $5.4$6.2 million at December 31, 20112012 and 2010,2011, 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, 20112012 are 64.5% in equity, 30.5% in fixed income and cash, and 5.0% in real estate assets.The following presents the fair values of pension plan investments according to the fair value hierarchy described in Note 21,20, and the weighted average allocations. December 31, 2011 December 31, 2010 Level 1 Level 2 Level 3 Total % Level 1 Level 2 Level 3 Total % $ 8,091 $ 8,091 6 $ 5,268 $ 5,268 3 4,803 4,803 3 4,348 4,348 3 5,899 5,899 4 3,716 3,716 2 $ 79,797 79,797 54 $ 103,802 103,802 64 25,979 25,979 18 24,931 24,931 16 6,250 6,250 4 5,138 5,138 3 $ 12,476 12,476 8 $ 10,918 10,918 7 4,149 4,149 3 2,635 2,635 2 $ 18,793 $ 112,026 $ 16,625 $ 147,444 100 $ 13,332 $ 133,871 $ 13,553 $ 160,756 100 Valuationallocations:163(In thousands) December 31, 2012 December 31, 2011 Level 1 Level 2 Level 3 Total % Level 1 Level 2 Level 3 Total % Company common stock $ 6,890 $ 6,890 4 $ 8,091 $ 8,091 6 Mutual funds: Equity 4,407 4,407 3 4,803 4,803 3 Debt 6,848 6,848 4 5,899 5,899 4 Insurance company pooled separate accounts: Equity investments $ 85,938 85,938 55 $ 79,797 79,797 54 Debt investments 27,566 27,566 18 25,979 25,979 18 Real estate 6,875 6,875 4 6,250 6,250 4 Guaranteed deposit account $ 13,869 13,869 9 $ 12,476 12,476 8 Limited partnerships 4,689 4,689 3 4,149 4,149 3 $ 18,145 $ 120,379 $ 18,558 $ 157,082 100 $ 18,793 $ 112,026 $ 16,625 $ 147,444 100 No transfers of assets occurred among Levels 1, 2 or 3 during 2012 or 2011.The following describes the pension plan investments and the valuation methodologies used to measure pension plan investments attheir fair value are as follows: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.Mutual funds – These funds are valued at quoted market prices which represent the net asset values 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 quotedthe net asset value as the practical expedient for fair value as determined by the insurance company. Generally, there are no redemption values on the last business day of the plan year.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 is stated at book value as determined by the trustee, which approximates fair value. The account is credited with earnings from the underlying investments and charged for participants’ withdrawals and administrative expenses.Limited partnerships – These partnerships invest in limited partnerships, limited liability companies, or similar investment vehicles that consist of private equity investments 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 statedestimated at book value, which approximates fair value and is determined from the partnership’spartnerships’ capital account balancebalances for the plan’s proportional interest.interests. The capital account isaccounts are credited with realized and unrealized earnings from the underlying investments and charged for operating expenses and distributions.164and any other factors considered relevant by the general partner. Generally, investments in these partnerships are illiquid and voluntary withdrawal is prohibited.Shares of Company common stock were 438,617321,964 and 217,398438,617 at December 31, 20112012 and 2010,2011, respectively. Dividends received by the plan were approximately $11$15 thousand in 20112012 and $12$11 thousand in 2010.2011.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 Year Ended December 31, 2011 2010 (In thousands) Guaranteed
deposit
account Limited
partnerships Guaranteed
deposit
account Limited
partnerships $ 10,918 $ 2,635 $ 7,595 $ 1,499 – 245 – – – (161 ) – 311 635 130 463 – 923 1,300 2,860 825 $ 12,476 $ 4,149 $ 10,918 $ 2,635 Level 3 Instruments Year Ended December 31, 2012 2011 (In thousands) Guaranteed deposit account Limited partnerships Guaranteed deposit account Limited partnerships Balance at beginning of year $ 12,476 $ 4,149 $ 10,918 $ 2,635 Net increases (decreases) included in plan statement of change in net assets available for benefits: Net appreciation (depreciation) in fair value of investments: Realized — 317 — 245 Unrealized — (1,264 ) — (161 ) Interest and dividends 525 383 635 130 Purchases 868 1,104 923 1,300 Balance at end of year $ 13,869 $ 4,689 $ 12,476 $ 4,149 Defined Contribution PlanPayshelterPayshelter –: This is 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 are invested into participants, which were purchased shares of the Company’s common stock andin the open market, amounted to $21.0$21.6 million in 2011, $19.32012, $21.0 million in 2010,2011, and $19.8$19.3 million in 2009.The Payshelter 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 2012 and 2011, the profit sharing expense was $11.7$11.8 million and $11.7 million, respectively, computed at a contribution rate of 2.0%2%. For 2010, and 2009, no profit sharing expense was accrued. The profit sharing contribution is invested into participants consisted of purchased shares of the Company’s common stock.21. FAIR VALUEFair Value MeasurementsASU 2010-06,Improving Disclosures about Fair Value Measurements, requires certain additional fair value disclosures under ASC 820 which began January 1, 2010. One ofstock in the new requirements did not become effective until January 1, 2011 and requires the gross, rather than net, basis for certain Level 3 rollforward information. The following information incorporates this new disclosure requirement.open market.In May 2011, the FASB issued ASU 2011-04,Amendments to Achieve Common 20. FAIR VALUE Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This new accounting guidance under ASC 820 provides convergence to IFRS and amends fair value measurement and disclosure guidance. Among other things, newdisclosures will be required for qualitative information and sensitivity analysis regarding Level 3 measurements. For public entities, the new guidance is effective for interim and annual periods beginning after December 15, 2011. Management is currently evaluating the impact this new guidance will have on the disclosures in the Company’s financial statements.Fair value is defined under ASC 820 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 for the Company as follows:Level 1 – Quoted prices in active markets for identical assets or liabilities; includes U.S. Treasury and other U.S. Government and agency securities actively traded in over-the-counter (“OTC”) markets; mutual funds and stock; securities sold, not yet purchased; and certain derivatives.165Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data; also includes derivative contracts whose value is determined using a pricing model with observable market inputs or can be derived principally from or corroborated by observable market data. This category generally includes U.S. Government and agency securities; municipal securities; CDO securities; mutual funds and stock; certain private equity investments; securities sold, not yet purchased; and derivatives.Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using 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; also includes observable inputs for nonbinding single dealer quotes not corroborated by observable market data. This category generally includes municipal securities; certain private equity investments,investments; most CDO securities,securities; and the total return swap.We use fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for AFS and trading investment securities; private equity investments;investments under the equity method of accounting; securities sold, not yet purchased; and derivatives. Fair value is used on a nonrecurring basis to measure certain assets when applying lower of cost or marketfair value accounting or when adjusting carrying values such asof certain assets or liabilities, including recognition of impairment on assets. This is done primarily for HTM securities; loans held for sale,sale; impaired loans, and other real estate owned (“OREO”). Fair value is also used when evaluating impairment on certain assets, including HTM securities, goodwill,loans; OREO; private equity investments carried at cost; goodwill; core deposit and other intangibles,intangibles; other long-lived assets,assets; and for disclosures of certain financial instruments.Level 3 Valuation Policies and ProceduresOur valuation policies and procedures for Level 3 securities are under the direction of the Securities Valuation and Securitization Oversight Committee (“SOC”) comprised of senior and executive members of management in our investment, financial and accounting operations. The SOC is chaired by our chief financial officer and reports to the Audit Committee of the Board of Directors. The major function of the SOC is to develop, review, and approve for use on a quarterly basis the key model inputs, critical valuation assumptions and proposed discount rates utilized for the valuation of Level 3 securities. The sources of fair value changes are presented to the SOC and attribution analyses are completed when significant changes occur between quarters. SOC procedures require that back testing of certain significant assumptions be provided quarterly. Observers from Risk Management, Internal Audit and other areas attend SOC meetings.The Model Control Committee (“MCC”) is responsible for model validation and related policies. The MCC is separate from the SOC and is part of the Corporate Risk Management department. MCC members are drawn from quantitative experts throughout the Company. The MCC conducts model validations, including the trust preferred CDO internal model discussed subsequently, and sets policies and procedures for revalidation timing.Utilization of Third Party Service ProvidersWe use third party service providers and a licensed internal third party model to estimate fair value for certain of our AFS securities as follows:For AFS Level 2 securities, we use a third party pricing service to provide pricing, if available, for securities in the following reporting categories: U.S. Treasury, agencies and corporations (except Federal Agricultural Mortgage Corporation (“FAMC”) securities); municipal securities; trust preferred – banks and insurance; and other (including ABS CDOs). At December 31, 2011,2012, the fair value of AFS Level 2 securities for which we obtained pricing from the third party pricing service in these reporting categories amounted to approximately $1.8$1.6 billion of the $2.0$1.8 billion total of AFS Level 2 securities.For AFS Level 3 securities, we use other third party service providers to provide pricing, if available, for securities in the following reporting categories: trust preferred – banks and insurance, trust preferred – real estate investment trusts, auction rate, and other (including ABS CDOs). At December 31, 2011,2012, the fair value of166AFS Level 3 securities for which we obtained pricing from these third party service providers in these reporting categories amounted to approximately $152$59 million of the $1.1$1.0 billion total of AFS Level 3 securities. In addition, the fair values for approximately $910$925 million at December 31, 20112012 of our AFS“trust“Trust preferred CDO internal model” discussed subsequently.Fair values of the remaining AFS Level 2 and Level 3 securities not valued by pricing from third party services or the licensed internal third party model were determined by us using market corroborative data. At December 31, 2011,2012, the Level 2 securities consisted of approximately $157$113 million of FAMC securities and $6$9 million of mutual funds and stock, and the Level 3 securities consisted of $17$17 million of municipal securities.securities and $4 million of ABS CDOs. Estimation of the fair values of the FAMC securities included the use of a standard mortgage pass-through calculator that incorporates discounted cash flows, while the municipal securities included the use of a standard form discounted cash flow model with certain inputs adjusted for market conditions.For AFS Level 2 securities, the third party pricing service provides documentation on an ongoing basis that includes, among other things, pricing information with respect to reference data, methodology, inputs summarized by asset class, pricing application, corroborative information, etc. The documentation includes benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Also included are data from the vendor trading platform. We review, test and validate this information as appropriate.For AFS Level 3 securities, we compareSOC procedures call for quarterly comparisons of relevant data assumptions withused in the models of the other third party service providersproviders. We evaluate these assumptions for reasonableness and compare them with those used in our internal models. These assumptions include, but are not limited to, discount rates, PDs, loss-given-default rates, over-collateralization levels, and rating transition probability matrices from rating agencies. We also compare the model results and valuations with our internal models and the information we have about market trends and trading data. This includes information regarding trading prices, implied discounts, outlier information, valuation assumptions, etc. We consider this information to determine whether the comparability of the security and the orderliness of the trades make such reported prices suitable to consider in our estimates of fair value.Because of the timeliness of our involvement, the ongoing exchange of market information, and our agreement on input assumptions, we do not adjust prices from our third party service providers. The procedures discussed previously help ensure that the fair value information received was determined in accordance with ASC 820.Available-for-saleapplicable accounting guidance.Available-for-Sale and tradingAFS and trading investment securities are fair valued under Level 1 using quoted market prices when available for identical securities. When quoted prices are not available, fair values are determined under Level 2 using quoted prices for similar securities or valuations from third party service providersindependent pricing services that incorporate observable market data as discussed previously.data. The largest portion of AFS securities include certain CDOs backed by trust preferred securities issued by banks and insurance companies and, to a lesser extent, by REITs. These securities are fair valued primarily under Level 3.U.S. Treasury, agenciesAgencies and corporationsValuation inputs under Level 2 utilized by the third party service provider are discussed previously.Municipal securitiesValuation inputs under Level 2 utilized by the third party service provider are discussed previously. Also included areWe may also include reported trades and material event notices from the Municipal Securities Rulemaking Board, plus new issue data. Municipal securities under Level 3 are fair valued similar to the auction rate securities discussed subsequently.Trust preferred collateralized debt obligationsSubstantially all of the CDO portfolio is fair valued under Level 3 using an income-based cash flow modeling approach incorporating several methodologies that primarily include internal and third party models.167Trust preferred CDO internal model: A licensed third party cash flow model, which requires the Company to input its own defaultkey valuation assumptions, is used to estimate fair values of bank and insurance trust preferredprobability of default (“PD”)PD for each bank issuer. The inputs are updated quarterly to include the most recent available financial ratios and the regression formula is updated periodically to utilize those financial ratios that have best predicted bank failures during this credit cycle (“ratio-based approach”). Our ratio-based approach, while generally referencing trailing quarter regulatory data and ratios, seeks to incorporate the most recent available information.Approximately 30% of the bank issuers are public companies included in a third party proprietary reduced form model. The model generates PDs using equity valuation-related inputs along with other macro and issuer-specific inputs.Effective We use the higher of the PD from the third quarter of 2011,party proprietary reduced form model and the ratio-based approach.For performing collateral, we setuse a floor PD of 30 basis points (“bps”) for yearsyear one through five for collateral where the higher of the one-year PDs from our ratio based approach and those from the third party proprietary reduced form model would have beenbe lower. The short-term 30 bps PD is similar to the PD we would apply if we had direct lending exposures to CDO pool collateral. Effective the fourth quarter of 2011, we increased theWe use a floor PD of 3048 bps each year from years two to five to 48 bps smoothing the step-up to reach a 65 bps minimum PD for year six. Effective the third and fourth quarters of 2011, we utilizedWe utilize a minimum PD for years six to maturity of 65 bps for bank collateral.For deferring collateral, effective December 31, 2012 we added to our ratio-based approach a PD overlay model for deferrals. The deferral PD overlay model sorts all deferrals observed within our CDO pools into four “buckets” based on four factors indicative of bank holding company strength at the start of their deferral period. We then assume that the historical failure rate we have observed within our CDO pool for collateral in each bucket will be the future default rate of current deferrals in each bucket. Where the overlay PD of a deferral is higher than the PD identified by our traditional ratio-based PD model, we use the higher overlay PD.The resulting five-year PDs at December 31, 20112012, after adding the PD overlay model, ranged from 100% for the “worst” deferring banks to 2.18%12.03% for the “best” deferring banks. At September 30, 2011, prior to the adoption of a higher medium-term floor, the best deferring banks had five-year PDs of 1.49%. The weighted average assumed loss rate on deferring collateral was 26% at 49%. At December 31, 2011 27% at September 30, 2011, 35% at both June 30, 2011, we exclusively used the ratio-based PD model and March 31, 2011, and 30% and 44% at December 31, 2010 and 2009, respectively.the weighted average assumed loss rate on deferring collateral was 26%. This loss rate is calculated as a percentage of the par amount of deferring collateral within a pool that is expected to default prior to the end of a five-year deferral period.Prior to March 31, 2011, we had little evidence with which to assess the likelihood of previously deferring collateral returning to a current status prior to or at the end of the allowable five-year deferral period. Accordingly, our third party cash flow The model assumed that the par amount of deferring collateral within each pool that did not default would be paid off at par after five years of deferral. No receipt of back interest or return to current status was assumed.During the first quarter of 2011, we observed improvement in the performance of certain deferring collateral such that payment of interest resumed and interest payments that had been deferred for one or more quarters were paid in full. By the end of the first quarter of 2011, this pattern was seen in 7% of all surviving bank deferrals within our CDO pools, although none had reached the end of the allowable deferral period. Accordingly, expectations were revised regarding the extent of deferring collateral ultimately repaying contractually due interest. Effective March 31, 2011, the third party cash flow model was enhanced and incorporated these revised expectations.The third party cash flow model now 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 expected loss for the individual pieces of underlying collateral are aggregated to arrive at a pool-level expected 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 both to identify both the OTTI present in the CDO tranches and to estimate fair value. For purposes of determiningTo determine the credit-related portion of the difference between fair value and amortized cost that is due to credit,OTTI in accordance with applicable accounting guidance, we follow ASC 310, which includes paragraphs 12-16 of the former FASB Statement No. 114. The standard specifies that a cash flow projection can be present valued atuse the security specific effective interest rate andwhen estimating the resulting present value compared toof cash flows. To estimate fair value, we discount the amortized cost in order to quantify the credit component of impairment. Since our early adoption of the new guidance under ASC 320 on January 1, 2009, we have followed this methodology to identify the credit component of impairment to be recognized in earnings each quarter.We discount this expected and already credit adjustedcredit-adjusted cash flow of each CDO tranche at a tranche-specific discount rate which reflects the risk that the actual cash flow may vary from the expected credit adjustedcredit-adjusted cash flow for that CDO tranche. This rate is consistent with market participants’ assumptions, which include market illiquidity, and is applied to credit adjusted cash flows, as outlined in ASC 820.flows. We follow theapplicable guidance on illiquid markets such that risk premiums should be reflective of an orderly transaction between market participants under current market conditions. Because these securities are not traded on exchanges and trading prices are not posted on the TRACE® system (Trade Reporting and Compliance Engine®), we also seek information from market participants to obtain trade price information.Prior to March 31, 2011, theThe discount rate assumption used for valuation purposes for each CDO tranche wasis derived from trading yields on publicly traded trust preferred securities and projected PDs on the underlying issuers.issuers as well as observed trades in our CDO tranches in accordance with applicable accounting guidance. The data set generally included includes168one or more publicly-traded trust preferred securities in deferral with regard to the payment of current interest.interest and observed trades in our CDO tranches which appeared to be either orderly (that is, not distressed or forced); or whose orderliness could not be definitively refuted. Trading data is generally limited to a single transaction in each of several of our original AAA-rated tranches and several of our original A-rated tranches. The effective yields on the traded securities including the deferring securities, wereare then used to determine a relationship between the effective yield and expected loss. Expected loss for this purpose is a measure of the variability of cash flows from the mean estimate of cash flow across all Monte Carlo simulations.flow. This relationship wasis then considered along with other third party or market data in order to identify appropriate discount rates to be applied to the CDOs.During each quarter of 2011, we observed trades in our CDO tranches which appeared to be either orderly (that is, not distressed or forced); or whose orderliness could not be definitively refuted. Trading data was generally limited to a single transaction in each of several of our original AAA-rated tranches and several of our original A-rated tranches. In accordance with ASU 2010-06, this market price information was incorporated into our valuation process. The trading levels and effective yields of each tranche were included along with the trading yields of publicly traded trust preferred securities in order to identify the relationship between effective yield and expected loss as described above. This relationship was then used to identify appropriate discount rates to be applied to our CDO tranches.Our December 31, 20112012, valuations for bank and insurance tranches utilized a discount rate range of LIBOR + 3.75% for the highest quality/most over-collateralized insurance-only tranches and LIBOR + 39.8%13.4% for the lowest credit quality tranche, which included bank collateral, in order to reflect market level assumptions for structured finance securities. For tranches that include bank collateral, the discount rate was at least LIBOR + 6.23%7.7% for the highest quality/most over-collateralized tranches. These discount rates are applied to already credit-adjusted cash flows for each tranche. The range of the projected cumulative credit loss of the CDO pools varies extensively across pools, and at December 31, 2011, ranged between 11.0% and 66.2%.CDO tranches with greater uncertainty in their cash flows are discounted at rates higher rates than those that market participants would use for tranches with more stable expected cash flows (e.g., as a result of more subordination and/or better credit quality in the underlying collateral). The high end of the discount rate spectrum was applied to tranches in which minor changes in default assumption timing produced substantial deterioration in tranche cash flows. These discount rates are applied to credit-stressedcredit-adjusted cash flows, which constitute each tranche’s expected cash flows; discount rates are not applied to a hypothetical contractual cash flow.At December 31, 2011,2012, the discount rates utilized for fair value purposes for tranches that include bank collateral were:1)LIBOR + 6.2% to 7.6% and averaged LIBOR + 6.5% for first priority original AAA-rated bonds;2)LIBOR + 6.3% to 8.8% and averaged LIBOR + 6.8% for lower priority original AAA-rated bonds;3)LIBOR + 6.7% to 31.7% and averaged LIBOR + 17.6% for original A-rated bonds; and4)LIBOR + 14.5% to 39.8% and averaged LIBOR + 33.3% for original BBB-rated bonds.1)LIBOR + 7.7% to 7.8% and averaged LIBOR + 7.7% for first priority original AAA-rated bonds;2)LIBOR + 7.7% to 8.0% and averaged LIBOR + 7.7% for lower priority original AAA-rated bonds;3)LIBOR + 7.8% to 10.8% and averaged LIBOR + 9.2% for original A-rated bonds; and4)LIBOR + 11.5% to 13.4% and averaged LIBOR + 12.0% for original BBB-rated bonds.Accordingly, the wide difference between the effective interest rate used in the determination of the credit component of OTTI and the discount rate on the CDOs used in the determination of fair value results in the unrealized losses. The discount rate used for fair value purposes significantly exceeds the effective interest6%16%750 bps for the original A-rated CDO tranches, and 31%920 bps for the original BBB-rated CDO tranches. With the exception of certain of the most senior CDOs, most of the principal payments are not expected prior to the final maturity date, which is generally 2029 or later. High market discount rates and the long maturities of the CDO tranches result in full principal repayment contributing little to CDO tranche fair values.Certain REIT and ABS CDOs – third party models: Certain of these CDOs are fair valued by third party services using their proprietary models. These models utilize relevant data assumptions, whichSee the previous discussion that describes the procedures we employ to evaluate the fair values from third party services for reasonableness. These assumptions include, but are not limited to, discount rates, PDs, loss-given-default rates, over-collateralization levels, and rating transition probability matrices from rating agencies. SeeAFS Level 3 securities. Also see the subsequent discussion regarding key model inputs and assumptions. The model prices obtained from third party services are evaluated for reasonableness including quarter to quarter changes in assumptions and comparison to other available data, which included third party and internal model results and valuations.Auction rate securitiesValuation inputs under Level 3 utilized by the third party service providers are discussed previously. Also included in theRate SecuritiesOur market approach methodology areincludes various market data inputs, including AAA municipal and corporate bond yield curves, credit ratings and leverage of each closed-end fund, and market yields for municipal bonds and commercial paper.Private Equity InvestmentsManagement who are familiar with our private equity investments,169Committee, consisting of the chief executive officer, the chief financial officer, and the chief investment officer, review periodically for reasonableness the financial information for these investments. This includes oversight of the review of audited financial statements that are available for nearly all of the underlying investments. The amount of unfunded commitments to these partnerships is disclosed in Note 17. Generally, redemption is available annually.Private equity investments valued under Level 2 on a recurring basis are investments in partnerships that invest in certain financial services and real estate companies, some of which are publicly traded. Fair values are determined from net asset values, 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. We have no unfunded commitments to these partnerships and redemption is available annually.Private equity investments valued under Level 3 on a recurring basis are recorded initially at acquisition cost, which is considered the best indication of fair value unless there have been material subsequent positive or negative developments that justify an adjustment in the fair value estimate. Subsequent adjustments to recorded fair values are based as necessary on current and projected financial performance, recent financing activities, economic and market conditions, market comparables, market liquidity, sales restrictions, and other factors.DerivativesDerivatives are fair valued according to their classification as either exchange-traded or over-the-counter (“OTC”).OTC. Exchange-traded derivatives consist of forward currency exchange contracts that have been fair valued 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 fair valued under Level 2 using third party service providers.services. Observable market inputs include yield curves (the LIBOR swap curve and applicable basis swap curves), foreign exchange rates, commodity prices, option volatilities, counterparty credit risk, and other related data. Credit valuation adjustments are required to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk. These adjustments are determined generally by applying a credit spread for the counterparty or the Company as appropriate to the total expected exposure of the derivative. Amounts disclosed in the following schedules differ from the presentation in Note 7 in that they include the foreign currency exchange contracts thatand are not included in Note 8 in accordance with ASC 815. The amounts are also presented net of the cash collateral offsets discussed in Note 8. Also see the discussion in Note 8 for the determinationoffsets. The estimation of fair value of the total return swap.Securities sold, not yet purchasedSecurities sold, not yet purchased are fair valued under Level 1 when quoted prices are available for the securities involved. Those under Level 2 are fair valued similar to trading account investment securities.Quantitative Disclosure of Fair Value MeasurementsAssets and liabilities measured at fair value by class on a recurring basis are summarized as follows:(In thousands) December 31, 2011 Level 1 Level 2 Level 3 Total $ 3,103 $ 1,874,010 $ 1,877,113 104,787 $ 17,381 122,168 354 929,356 929,710 18,645 18,645 70,020 70,020 6,826 43,546 50,372 156,829 5,938 162,767 159,932 1,991,915 1,078,948 3,230,795 40,273 40,273 5,339 128,348 133,687 9,560 9,560 82,648 82,648 6,498 6,498 6,498 92,208 98,706 $ 166,430 $ 2,129,735 $ 1,207,296 $ 3,503,461 $ 13,098 $ 31,388 $ 44,486 734 734 87,363 87,363 6,046 6,046 $ 5,422 5,422 6,046 88,097 5,422 99,565 86 86 $ 19,144 $ 119,485 $ 5,508 $ 144,137 December 31, 2010 (In thousands) Level 1 Level 2 Level 3 Total $ 704,170 $ 1,654,127 $ 2,358,297 135,419 $ 22,289 157,708 1,703 1,241,694 1,243,397 19,165 19,165 109,609 109,609 11,076 69,630 80,706 230,264 6,596 236,860 934,434 1,808,921 1,462,387 4,205,742 48,667 48,667 4,916 141,690 146,606 32,087 32,087 64,509 64,509 3,796 3,796 3,796 96,596 100,392 $ 938,230 $ 1,959,100 $ 1,604,077 $ 4,501,407 $ 9,719 $ 32,829 $ 42,548 2,577 2,577 68,141 68,141 3,385 3,385 $ 15,925 15,925 3,385 70,718 15,925 90,028 561 561 $ 13,104 $ 103,547 $ 16,486 $ 133,137 Selected additional information regarding key170(In thousands) December 31, 2012 Level 1 Level 2 Level 3 Total ASSETS Investment securities: Available-for-sale: U.S. Treasury, agencies and corporations $ 102,982 $ 1,692,637 $ 1,795,619 Municipal securities 59,445 $ 16,551 75,996 Asset-backed securities: Trust preferred – banks and insurance 121 949,271 949,392 Trust preferred – real estate investment trusts 16,403 16,403 Auction rate 6,515 6,515 Other (including ABS CDOs) 4,214 15,160 19,374 Mutual funds and other 219,214 8,797 228,011 322,196 1,765,214 1,003,900 3,091,310 Trading account 28,290 28,290 Other noninterest-bearing investments: Private equity 5,132 64,223 69,355 Other assets: Derivatives: Interest rate related and other 2,850 2,850 Interest rate swaps for customers 79,579 79,579 Foreign currency exchange contracts 4,404 4,404 4,404 82,429 86,833 $ 326,600 $ 1,881,065 $ 1,068,123 $ 3,275,788 LIABILITIES Securities sold, not yet purchased $ 26,735 $ 26,735 Other liabilities: Derivatives: Interest rate related and other $ 1,142 1,142 Interest rate swaps for customers 82,926 82,926 Foreign currency exchange contracts 3,159 3,159 Total return swap $ 5,127 5,127 3,159 84,068 5,127 92,354 Other 124 124 $ 29,894 $ 84,068 $ 5,251 $ 119,213 171(In thousands) December 31, 2011 Level 1 Level 2 Level 3 Total ASSETS Investment securities: Available-for-sale: U.S. Treasury, agencies and corporations $ 3,103 $ 1,874,010 $ 1,877,113 Municipal securities 104,787 $ 17,381 122,168 Asset-backed securities: Trust preferred – banks and insurance 354 929,356 929,710 Trust preferred – real estate investment trusts 18,645 18,645 Auction rate 70,020 70,020 Other (including ABS CDOs) 6,826 43,546 50,372 Mutual funds and other 156,829 5,938 162,767 159,932 1,991,915 1,078,948 3,230,795 Trading account 40,273 40,273 Other noninterest-bearing investments: Private equity 5,339 62,327 67,666 Other assets: Derivatives: Interest rate related and other 9,560 9,560 Interest rate swaps for customers 82,648 82,648 Foreign currency exchange contracts 6,498 6,498 6,498 92,208 98,706 $ 166,430 $ 2,129,735 $ 1,141,275 $ 3,437,440 LIABILITIES Securities sold, not yet purchased $ 13,098 $ 31,388 $ 44,486 Other liabilities: Derivatives: Interest rate related and other 734 734 Interest rate swaps for customers 87,363 87,363 Foreign currency exchange contracts 6,046 6,046 Total return swap $ 5,422 5,422 6,046 88,097 5,422 99,565 Other 86 86 $ 19,144 $ 119,485 $ 5,508 $ 144,137 No transfers of assets or liabilities occurred among Levels 1, 2 or 3 during 2012 or 2011.Key Model Inputs and AssumptionsKey model inputs andunobservable input assumptions used to fair value certain asset-backed securities by class under Level 3 include the following at December 31, 2011.(Dollars in thousands) Fair value at
December 31,
2011 Valuation
approach
(“CDR”) Loss
severity $ 739,315 Income Pool specific3 100 % Pool specific7 318,788 Income Pool specific4 100 % 4.5% per year 15,577 Market 1,073,680 1 18,645 Income Pool specific5 60-100 % 0% per year 56,910 2 Income Collateral specific6 70-100 % Collateral weighted average life 2012: 172(Dollars in thousands) Fair value at December 31, 2012 Valuationapproach Constant defaultrate (“CDR”) Lossseverity Prepayment rate Asset-backed securities: Trust preferred – predominantly banks $ 798,458 Income Pool specific 3 100% Pool specific 7Trust preferred – predominantly insurance 256,104 Income Pool specific 4 100% 4.5% per year Trust preferred – individual banks 20,910 Market 1,075,472 1 Trust preferred – real estate investment trusts 16,403 Income Pool specific 5 60-100% 0% per year Other (including ABS CDOs) 26,735 2 Income Collateral specific 6 57-100% Collateral weightedaverage life1 Includes $949.3 million of AFS securities and $126.2 million of HTM securities.2 Includes $15.2 million of AFS securities and $11.6 million of HTM securities.3 CDR ranges: yr 1 – 0.30% to 1.97%; yrs 2-5 – 0.47% to 0.67%; yrs 6 to maturity – 0.58% to 0.68%.4 CDR ranges: yr 1 – 0.30% to 0.32%; yrs 2-5 – 0.47% to 0.50%; yrs 6 to maturity – 0.50% to 0.54%.5 CDR ranges: yr 1 – 5.1% to 8.6%; yrs 2-3 – 4.2% to 7.1%; yrs 4-6 – 1.0%; yrs 6 to maturity – 0.50%.6 1Includes $929.4 million of AFS securities and $144.3 million of HTM securities.2Includes $43.5 million of AFS securities and $13.4 million of HTM securities.3CDR ranges: yr 1 – 0.30% to 6.79%; yrs 2-5 – 0.44% to 0.64%; yrs 6 to maturity – 0.58% to 0.68%.4CDR ranges: yr 1 – 0.30% to 0.32%; yrs 2-5 – 0.47% to 0.48%; yrs 6 to maturity – 0.50% to 0.54%.5CDR ranges: yr 1 – 5.4% to 8.7%; yrs 2-3 – 3.9% to 5.7%; yrs 4-6 – 1.0%; yrs 6 to maturity – 0.50%.6 the loan level and vary by collateral ratings, asset class, and vintage.7Constant Prepayment Rate (“CPR”) ranges: 3.00% to 19.55% annually until 2016; 2016 to maturity – 3.00% annually.In the following discussion of our investment portfolio, we have included certain credit rating information because the information is one indicationloan level and vary by collateral ratings, asset class, and vintage.7 Constant Prepayment Rate (“CPR”) ranges: 10.0% to 21.24% annually until 2016; 2016 to maturity – 3.0% annually.The fair value of the degreeLevel 3 bank and insurance CDO portfolio would generally be adversely affected by significant increases in the CDR for performing collateral, the loss percentage expected from deferring collateral, and the discount rate used. The fair value of credit risk to which we are exposed,the portfolio would generally be positively affected by increases in interest rates and significant changes in ratings classificationsprepayment rates. For a specific tranche within a CDO, the directionality of the fair value change for our investment portfolio could indicate an increaseda given assumption change may differ depending on the seniority level of risk for us.The following presents the percentage of total fair value of predominantly bank trust preferred CDOs by vintage year (origination date) according to original rating.(Dollars in thousands) Fair value
at
December
31, 2011 Percentage of total fair
value Percentage of
total fair value
by vintage AAA A BBB $ 67,252 7.9 % 1.1 % 0.1 % 9.1 % 226,421 28.4 2.3 0.0 30.7 252,677 25.6 8.6 0.0 34.2 111,611 7.8 7.3 0.0 15.1 9,909 1.0 0.3 0.0 1.3 37,272 2.8 2.0 0.2 5.0 34,173 4.6 0.0 0.0 4.6 $ 739,315 78.1 % 21.6 % 0.3 % 100.0 % (Dollars in thousands) Fair value at December 31, 2012 Percentage of total fair value according to original rating Percentage of total fair value by vintage Vintageyear AAA A BBB 2001 $ 49,334 5.0 % 1.1 % 0.1 % 6.2 % 2002 198,347 22.1 2.7 — 24.8 2003 299,376 23.9 13.6 — 37.5 2004 152,626 7.2 12.0 — 19.2 2005 13,758 0.8 0.9 — 1.7 2006 50,611 2.4 3.6 0.3 6.3 2007 34,406 4.3 — — 4.3 $ 798,458 65.7 % 33.9 % 0.4 % 100.0 % Reconciliation of Level 3 Fair Value MeasurementsThe 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 Instruments Year Ended December 31, 2011 (In thousands) Municipal
securities Trust preferred –
banks and
insurance Trust
preferred –
REIT Auction
rate Other
asset-
backed Private
equity
investments Derivatives Other
liabilities $ 22,289 $ 1,241,694 $ 19,165 $ 109,609 $ 69,630 $ 141,690 $ (15,925 ) $ (561 ) 237 5,057 11 196 9,630 (3,085 ) 37 19,972 (3,605 ) 1,941 (6,918 ) (27,480 ) (1,285 ) (4,150 ) 475
income (loss) (1,762 ) (161,012 ) 4,908 (381 ) 8,799 21,172 (895 ) (72,881 ) (538 ) (135 ) (19,310 ) (22,397 ) (2,525 ) (75,994 ) (41,025 ) (4,701 ) (18,662 ) 10,503 $ 17,381 $ 929,356 $ 18,645 $ 70,020 $ 43,546 $ 128,348 $ (5,422 ) $ (86 ) Level 3 Instruments Year Ended December 31, 2010 (In thousands) Municipal
securities Trust preferred –
banks and
insurance Trust
preferred –
REIT Auction
rate Other
asset-
backed Private
equity
investments Derivatives Other
liabilities $ 64,314 $ 1,359,444 $ 24,018 $ 159,440 $ 62,430 $ 158,941 $ – $ (522 ) 6,856 (22,795 ) (6,388 )
gains, net 4,157 2,369 3,815 358 (68,002 ) (10,628 ) (6,773 ) (39 )
income (loss) (1,157 ) (41,933 ) 5,725 (603 ) 27,501 (45,025 ) (10,184 ) 50 (53,043 ) (13,886 ) (17,719 ) 6,870 $ 22,289 $ 1,241,694 $ 19,165 $ 109,609 $ 69,630 $ 141,690 $ (15,925 ) $ (561 ) 173 Level 3 Instruments Year Ended December 31, 2012 (In thousands) Municipalsecurities Trust preferred – banks and insurance Trustpreferred –REIT Auctionrate Otherasset-backed Privateequityinvestments Derivatives OtherliabilitiesBalance at December 31, 2011 $ 17,381 $ 929,356 $ 18,645 $ 70,020 $ 43,546 $ 62,327 $ (5,422 ) $ (86 ) Total net gains (losses) included in: Statement of income: Accretion of purchase discount on securities
available-for-sale102 7,126 224 4 232 Dividends and other investment income 10,399 Equity securities gains, net 11,478 Fixed income securities gains (losses), net 9 20,906 4,161 (5,762 ) Net impairment losses on investment securities (96,707 ) Other noninterest expense (38 ) Other comprehensiveincome (loss)(291 ) 218,001 (2,466 ) 1,330 8,343 Purchases 9,043 Sales (15,872 ) Redemptions and paydowns (650 ) (129,411 ) (69,000 ) (31,199 ) (13,152 ) 295 Balance at December 31, 2012 $ 16,551 $ 949,271 $ 16,403 $ 6,515 $ 15,160 $ 64,223 $ (5,127 ) $ (124 ) Level 3 Instruments Year Ended December 31, 2011 (In thousands) Municipalsecurities Trust preferred – banks and insurance Trustpreferred –REIT Auctionrate Otherasset-backed Privateequityinvestments Derivatives OtherliabilitiesBalance at December 31, 2010 $ 22,289 $ 1,241,694 $ 19,165 $ 109,609 $ 69,630 $ 60,654 $ (15,925 ) $ (561 ) Total net gains (losses) included in: Statement of income: Accretion of purchase discount on securities
available-for-sale237 5,057 11 196 Dividends and other investment income 2,061 Equity securities gains, net 1,393 Fixed income securities gains (losses), net 37 19,972 (3,605 ) 1,941 (6,918 ) Net impairment losses on investment securities (27,480 ) (1,285 ) (4,150 ) Other noninterest expense 475 Other comprehensiveincome (loss)(1,762 ) (161,012 ) 4,908 (381 ) 8,799 Purchases 10,133 Sales (895 ) (72,881 ) (538 ) (135 ) (19,310 ) (10,903 ) Redemptions and paydowns (2,525 ) (75,994 ) (41,025 ) (4,701 ) (1,011 ) 10,503 Balance at December 31, 2011 $ 17,381 $ 929,356 $ 18,645 $ 70,020 $ 43,546 $ 62,327 $ (5,422 ) $ (86 ) 174The preceding reconciling amounts using Level 3 inputs include the following realized gains (losses).(In thousands) Year Ended
December 31, 2011 2010 $ 8,391 $ 8,215 – (1,366 ) 11,427 10,699 (In thousands) Year EndedDecember 31, 2012 2011 Dividends and other investment income $ 1,635 $ 704 Equity securities gains (losses), net 10,359 (2,595 ) Fixed income securities gains, net 19,314 11,427 Nonrecurring Fair Value MeasurementsIncluded in the balance sheet amounts are the following amounts of assets that had fair value changes measured on a nonrecurring basis. Gains (losses) from
fair value changes
Year Ended
December 31, 2011 (In thousands) Fair value at December 31, 2011 Level 1 Level 2 Level 3 Total $ 8,308 $ 8,308 $ (769 )1 $ 3,615 3,615 (10,358 ) 55,957 – 55,957 (48,177 ) $ – $ 59,572 $ 8,308 $ 67,880 $ (59,304 ) Gains (losses) from
fair value changes
Year Ended
December 31, 2010 (In thousands) Fair value at December 31, 2010 Level 1 Level 2 Level 3 Total $ 3,502 $ 3,502 $ (151 ) 97,352 97,352 (128,072 ) $ 132,350 – 132,350 (111,270 ) $ – $ 132,350 $ 100,854 $ 233,204 $ (239,493 ) basis: (In thousands) Fair value at December 31, 2012 Gains (losses) fromfair value changesYear EndedDecember 31, 2012 Level 1 Level 2 Level 3 Total ASSETS HTM securities adjusted for OTTI $ — $ — $ 23,524 $ 23,524 $ (7,423 ) Impaired loans — 3,789 — 3,789 (4,300 ) Private equity investments, carried at cost — — 13,520 13,520 (2,176 ) Other real estate owned — 58,954 — 58,954 (20,641 ) $ — $ 62,743 $ 37,044 $ 99,787 $ (34,540 ) (In thousands) Fair value at December 31, 2011 Gains (losses) fromfair value changesYear Ended December 31, 2011 Level 1 Level 2 Level 3 Total ASSETS HTM securities adjusted for OTTI $ — $ — $ 8,308 $ 8,308 $ (769 ) Impaired loans — 3,615 — 3,615 (10,358 ) Private equity investments, carried at cost — — 10,054 10,054 (1,923 ) Other real estate owned — 74,511 — 74,511 (48,177 ) $ — $ 78,126 $ 18,362 $ 96,488 $ (61,227 ) HTM securities adjusted for OTTI were fair valued according to the methodology discussed elsewhere herein. Private equity investments carried at cost were fair valued according to the methodology discussed previously under Private Equity Investments. In previous reporting periods, the disclosure of private equity investments carried at cost was included with the private equity investments under the equity method of accounting. This revised disclosure had no effect on the Company’s financial statements or results of operations in the prior year. The amounts of other noninterest-bearing investments, including private equity investments, carried at cost were $786.1 million and $797.6 million at December 31, 2012 and 2011, respectively.1An additional $20.9 million of OTTI was recognized in OCI.$20.2$15.3 million in 20112012 and $15.5$17.9 million in 20102011 from the sale of OREO properties that had a carrying value at the time of sale of approximately $275.9$163.3 million in 20112012 and $344.9$276 million in 2010.2011. Previous to their sale in these years, we recognized impairment on these properties of $34.8$2.7 million in 20112012 and $51.9$30.5 million in 2010.Impaired (or nonperforming) loans that are collateral-dependent are fair valued under Level 2 based on the fair value of the collateral. Performing loans are not generally considered to be collateral-dependent because the primary source of loan repayment is not the liquidation of the collateral by the bank. Land loans require the selling of parcels to meet loan repayments. OREO is fair valued under Level 2 at the lower of cost or fair value based on property appraisals at the time the property is recorded in OREO and as appropriate thereafter.175Measurement of impairment for collateral-dependent loans and OREO is based on third party appraisals that utilize one or more valuation techniques (income, market and/or cost approaches). The valuation method used for impaired construction loans is “as is.” Any adjustments to calculated fair value are made based on recently completed and validated third party appraisals, third party appraisal services, automated valuation services, or our informed judgment. Evaluations are made to determine that the appraisal process meets the relevant concepts and requirements of ASC 820.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 not collateral-dependent are 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 under ASC 820 and have been excluded from the nonrecurring fair value balance in the preceding schedules. Impaired loans were reported as being fair valued under Level 3 in 2010; however, upon reconsideration, the fair value process for impaired loans that are collateral dependent is considered to be substantially the same as for OREO, and accordingly, has been included under Level 2.Fair Value OptionAt December 31, 2011, no financial assets or liabilities were recorded at fair value under the fair value option allowed in ASC 825,Financial Instruments.Fair Value of Certain Financial InstrumentsFollowing is a summary of the carrying values and estimated fair values of certain financial instruments. December 31, 2011 December 31, 2010 (In thousands) Carrying
value Estimated
fair value Carrying
value Estimated
fair value $ 807,804 $ 729,974 $ 840,642 $ 788,354 36,296,284 36,006,619 35,513,376 35,203,799 3,413,550 3,444,189 4,173,449 4,216,371 1,575,361 1,574,271 1,654,651 1,655,852 70,273 70,387 166,394 168,221 1,943,618 2,225,078 1,928,827 2,367,542 December 31, 2012 December 31, 2011 (In thousands) Carryingvalue Estimatedfair value Carryingvalue Estimatedfair valueFinancial assets: HTM investment securities $ 756,909 $ 674,741 $ 807,804 $ 729,974 Loans and leases (including loans held for sale), net of allowance 37,020,811 37,024,198 36,407,814 36,120,552 Financial liabilities: Time deposits 2,962,931 2,988,714 3,413,550 3,444,189 Foreign deposits 1,804,060 1,803,625 1,575,361 1,574,271 Other short-term borrowings 5,409 5,421 70,273 70,387 Long-term debt (less fair value hedges) 2,329,323 2,636,422 1,943,618 2,225,078 This summary excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and due from banks and money market investments. For financial liabilities, these include 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. HTM municipal securities are fair valued under Level 3 using a standard form discounted cash flow model as discussed previously and the valuation inputs described under auction rate securities. HTM bank and insurance trust preferred CDOs are fair valued using the licensed internal third party model described previously.The fair value of loans is estimated according to their status as nonimpaired or impaired. For nonimpaired loans, the fair value is estimated by discounting future cash flows on Pass grade loans 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 highly judgmental becausederived from the Company does not have a validated modelmethods used to estimate lifetime credit losses on large portions of itsthe ALLL for our loan portfolio. The estimate of lifetime credit losses isportfolio and are adjusted quarterly as necessary to reflect the most recent loss experience during the current prolonged cycle of economic weakness.experience. Impaired loans are not included in this credit adjustment as they are already considered to be held at fair value.value, except those whose fair value is determined by discounting cash flows, as discussed previously. See Impaired Loans in Note 6 for details on the impairment measurement method for impaired loans. Loans, other than those held for176sale, are not normally purchased and sold by the Company, and there are no active trading markets for most of this portfolio.The fair valuevalues of time and foreign deposits, other short-term borrowings, and long-term debt are estimated under Level 2. Time and foreign deposits, and other short-term borrowings, is estimatedare fair valued by discounting future cash flows using the LIBOR yield curve. The estimatedcurve to the given maturity dates. Long-term debt is fair value of long-term debt isvalued 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 future expected loss experience, current economic conditions, risk characteristics of the various instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in the above methodologies and assumptions could significantly affect the estimates.Further, certain financial instruments and all nonfinancial instruments are excluded from the applicable disclosure requirements. Therefore, the fair value amounts shown in the schedule do not, by themselves, represent the underlying value of the Company as a whole.21. OPERATING SEGMENT INFORMATION 22. OPERATING SEGMENT INFORMATION2011,2012, we operate eight community/regional banks in distinct geographical areas. Performance assessment and resource allocation are based upon this geographical structure. The operating segment identified as “Other” includes the Parent, Zions Management Services Company (“ZMSC”), certain nonbank and financial service subsidiaries, TCBO, and eliminations of transactions between segments.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 provides 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 as described in Note 1.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.During 2011, 2010 and 2009, certain subsidiary banks sold investment securities to the Parent at their current fair value, which was less than carrying value. The “Loss on sale of investment securities to Parent” is shown separately in the following schedules as a component of other noninterest income. The amounts are eliminated in consolidation in the Other segment.177The following is a summary of selected operating segment information. Zions Bank CB&T Amegy (In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 703.0 $ 724.7 $ 690.4 $ 509.3 $ 495.6 $ 465.3 $ 384.5 $ 392.3 $ 385.7 128.3 350.6 400.4 (9.5 ) 149.9 251.5 (37.5 ) 118.7 406.1 574.7 374.1 290.0 518.8 345.7 213.8 422.0 273.6 (20.4 ) (0.3 ) – (35.2 ) (0.5 ) – (31.8 ) – – – – (54.8 ) (75.8 ) (43.9 ) – (288.1 ) – – – – – (203.0 ) – – – – – (7.5 ) – – – – – – – – – – – – – – 152.7 – – – 199.5 193.9 199.3 103.0 100.3 152.8 145.1 143.0 136.1 547.4 576.8 522.5 355.0 346.9 295.2 325.0 334.9 345.6 – – – – – – – – 633.3 226.5 (63.6 ) (347.2 ) 222.4 99.1 (95.8 ) 242.1 81.7 (870.7 ) 76.0 (15.3 ) (144.4 ) 88.0 40.3 (45.6 ) 80.5 23.1 (90.3 ) 150.5 (48.3 ) (202.8 ) 134.4 58.8 (50.2 ) 161.6 58.6 (780.4 ) – 0.1 0.1 – – – – – – 150.5 (48.4 ) (202.9 ) 134.4 58.8 (50.2 ) 161.6 58.6 (780.4 ) – – – (6.6 ) – (0.9 ) (12.2 ) – (1.5 ) – – – – – – – – – $ 150.5 $ (48.4 ) $ (202.9 ) $ 127.8 $ 58.8 $ (51.1 ) $ 149.4 $ 58.6 $ (781.9 ) $ 17,531 $ 16,157 $ 17,652 $ 10,894 $ 10,766 $ 11,097 $ 12,282 $ 11,406 $ 11,145 12,751 12,898 13,990 8,392 8,444 8,951 7,918 7,466 8,262 14,905 13,631 13,823 9,192 9,219 9,760 9,731 8,906 8,880 480 480 460 262 262 262 488 488 376 1,379 1,269 1,282 1,270 1,174 1,120 1,630 1,493 1,435 – – – – – – – – – 1,859 1,749 1,742 1,532 1,436 1,382 2,118 1,981 1,811 NBA NSB Vectra (In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 172.3 $ 177.4 $ 179.1 $ 135.0 $ 138.4 $ 140.0 $ 104.3 $ 108.5 $ 105.3 9.6 53.4 291.7 (38.3 ) 133.3 563.7 14.0 28.2 78.5 162.7 124.0 (112.6 ) 173.3 5.1 (423.7 ) 90.3 80.3 26.8 – – – – – (3.3 ) (0.8 ) (1.3 ) (5.3 ) – – – – – (11.8 ) (28.9 ) – – – – – – – – – – – – – – – – – – – – – – – – – 16.5 – – – 34.2 32.9 44.0 37.4 38.4 60.8 21.7 29.5 31.4 154.7 169.9 170.0 139.3 152.0 180.6 100.7 92.5 96.4 – – – – – – – – – 42.2 (13.0 ) (238.6 ) 71.4 (108.5 ) (542.1 ) (18.4 ) 16.0 (43.5 ) 16.7 (5.1 ) (94.4 ) 24.8 (38.2 ) (190.1 ) (8.3 ) 9.4 (17.9 ) 25.5 (7.9 ) (144.2 ) 46.6 (70.3 ) (352.0 ) (10.1 ) 6.6 (25.6 ) – – – – – – – – – 25.5 (7.9 ) (144.2 ) 46.6 (70.3 ) (352.0 ) (10.1 ) 6.6 (25.6 ) – – – – – – – – (0.2 ) – – – – – – – – – $ 25.5 $ (7.9 ) $ (144.2 ) $ 46.6 $ (70.3 ) $ (352.0 ) $ (10.1 ) $ 6.6 $ (25.8 ) $ 4,485 $ 4,397 $ 4,524 $ 4,100 $ 4,017 $ 4,187 $ 2,341 $ 2,299 $ 2,440 3,304 3,277 3,609 2,235 2,399 2,752 1,914 1,812 1,981 3,731 3,696 3,784 3,546 3,424 3,526 2,004 1,923 2,005 305 305 405 260 360 360 70 70 65 350 322 228 273 225 296 200 200 199 – – – – – – – – – 655 627 633 533 585 656 270 270 264 TCBW Other Consolidated Company (In millions) 2011 2010 2009 2011 2010 2009 2011 2010 2009 $ 30.3 $ 30.0 $ 32.1 $ (266.2 ) $ (339.5 ) $ (100.4 ) $ 1,772.5 $ 1,727.4 $ 1,897.5 7.8 17.4 22.5 – 0.6 2.5 74.4 852.1 2,016.9 22.5 12.6 9.6 (266.2 ) (340.1 ) (102.9 ) 1,698.1 875.3 (119.4 ) – (0.7 ) (1.1 ) (32.1 ) (83.4 ) (203.8 ) (33.7 ) (85.4 ) (280.5 ) (4.8 ) – – 77.6 54.8 375.7 – – – – – – – – (1.6 ) – – (212.1 ) – – – – – 508.9 – – 508.9 – – – – – – – – 169.2 2.8 2.6 9.4 (28.2 ) (14.7 ) (15.2 ) 515.5 525.9 618.6 16.7 15.6 15.9 19.9 30.3 45.3 1,658.7 1,718.9 1,671.5 – – – – – 2.9 – – 636.2 3.8 (1.1 ) 2.0 (268.8 ) (413.7 ) 512.9 521.2 (403.1 ) (1,623.0 ) 1.1 (0.6 ) 0.4 (80.3 ) (120.4 ) 181.0 198.5 (106.8 ) (401.3 ) 2.7 (0.5 ) 1.6 (188.5 ) (293.3 ) 331.9 322.7 (296.3 ) (1,221.7 ) – – – (1.1 ) (3.7 ) (5.7 ) (1.1 ) (3.6 ) (5.6 ) 2.7 (0.5 ) 1.6 (187.4 ) (289.6 ) 337.6 323.8 (292.7 ) (1,216.1 ) – – – (151.6 ) (122.9 ) (100.3 ) (170.4 ) (122.9 ) (102.9 ) – – – – 3.1 84.6 – 3.1 84.6 $ 2.7 $ (0.5 ) $ 1.6 $ (339.0 ) $ (409.4 ) $ 321.9 $ 153.4 $ (412.5 ) $ (1,234.4 ) $ 874 $ 850 $ 835 $ 642 $ 1,143 $ (757 ) $ 53,149 $ 51,035 $ 51,123 562 572 578 69 (121 ) 66 37,145 36,747 40,189 693 662 632 (926 ) (526 ) (569 ) 42,876 40,935 41,841 15 15 15 497 77 (440 ) 2,377 2,057 1,503 75 69 69 (569 ) (161 ) (439 ) 4,608 4,591 4,190 – – – (2 ) (1 ) 17 (2 ) (1 ) 17 90 84 84 (74 ) (85 ) (862 ) 6,983 6,647 5,710 1Net of unearned income and fees, net of related costs23.(In millions) Zions Bank CB&T Amegy 2012 2011 2010 2012 2011 2010 2012 2011 2010 CONDENSED INCOME STATEMENT Net interest income $ 657.1 $ 683.3 $ 707.1 $ 466.7 — $ 506.9 $ 493.2 — $ 371.5 — $ 391.2 — $ 399.9 Provision for loan losses 88.3 128.3 350.6 (7.9 ) — (9.5 ) 149.9 — (63.9 ) — (37.4 ) — 119.3 Net interest income after provision for loan losses 568.8 555.0 356.5 474.6 516.4 343.3 435.4 428.6 280.6 Net impairment losses on investment securities (3.2 ) (0.3 ) — — — (0.5 ) — — — — — — — Loss on sale of investment securities to Parent — — (54.8 ) (9.2 ) — (43.9 ) — — — — — — — Other noninterest income 221.4 219.2 211.5 75.3 — 105.4 102.7 — 156.1 — 138.4 — 135.4 Noninterest expense 493.1 547.4 576.8 330.2 — 355.0 346.9 — 340.2 — 324.9 — 334.3 Income (loss) before income taxes 293.9 226.5 (63.6 ) 210.5 — 222.4 99.1 — 251.3 — 242.1 — 81.7 Income tax expense (benefit) 104.6 76.0 (15.3 ) 83.4 — 88.0 40.3 — 84.6 — 80.5 — 23.1 Net income (loss) $ 189.3 $ 150.5 $ (48.3 ) $ 127.1 $ 134.4 $ 58.8 $ 166.7 $ 161.6 $ 58.6 YEAR-END BALANCE SHEET DATA Total assets $ 17,930 $ 17,531 $ 16,157 $ 11,069 — $ 10,894 $ 10,766 — $ 13,119 — $ 12,282 — $ 11,406 Cash and due from banks 650 416 313 205 175 129 754 406 379 Money market investments 2,855 2,198 551 1,449 1,090 842 2,308 2,222 1,725 Total securities 1,273 1,460 1,695 350 335 402 439 475 603 Total loans 12,490 12,751 12,898 8,259 — 8,392 8,444 — 8,450 — 8,031 — 7,549 Total deposits 15,575 14,905 13,631 9,483 — 9,192 9,219 — 10,706 — 9,731 — 8,906 Shareholder’s equity: Preferred equity 280 480 480 162 — 262 262 — 251 — 488 — 488 Common equity 1,519 1,379 1,269 1,322 — 1,270 1,174 — 1,725 — 1,630 — 1,493 Noncontrolling interests — — — — — — — — — — — — — Total shareholder’s equity 1,799 1,859 1,749 1,484 — 1,532 1,436 — 1,976 — 2,118 — 1,981 (In millions) NBA NSB Vectra 2012 2011 2010 2012 2011 2010 2012 2011 2010 CONDENSED INCOME STATEMENT Net interest income $ 167.7 — $ 172.1 $ 177.3 — $ 123.4 — $ 135.0 $ 138.4 $ 108.7 $ 104.3 $ 108.5 Provision for loan losses (0.6 ) — 9.6 53.4 — (9.6 ) — (38.3 ) 133.3 7.0 14.0 28.2 Net interest income after provision for loan losses 168.3 162.5 123.9 133.0 173.3 5.1 101.7 90.3 80.3 Net impairment losses on investment securities — — — — — — — — — (0.6 ) (0.8 ) (1.3 ) Loss on sale of investment securities to Parent — — — — — — — — — — (28.9 ) — Other noninterest income 32.1 — 34.4 33.0 — 33.7 — 37.4 38.4 25.3 21.7 29.5 Noninterest expense 152.5 — 154.7 169.9 — 133.6 — 139.3 152.0 98.3 100.7 92.5 Income (loss) before income taxes 47.9 — 42.2 (13.0 ) — 33.1 — 71.4 (108.5 ) 28.1 (18.4 ) 16.0 Income tax expense (benefit) 17.0 — 16.7 (5.1 ) — 11.3 — 24.8 (38.2 ) 9.2 (8.3 ) 9.4 Net income (loss) $ 30.9 $ 25.5 $ (7.9 ) $ 21.8 $ 46.6 $ (70.3 ) $ 18.9 $ (10.1 ) $ 6.6 YEAR-END BALANCE SHEET DATA Total assets $ 4,575 — $ 4,485 $ 4,397 — $ 4,061 — $ 4,100 $ 4,017 $ 2,511 $ 2,341 $ 2,299 Cash and due from banks 86 71 48 59 73 34 58 55 37 Money market investments 385 604 548 1,031 905 929 31 52 104 Total securities 263 271 243 742 748 559 187 227 267 Total loans 3,604 — 3,304 3,277 — 2,100 — 2,235 2,399 2,128 1,914 1,812 Total deposits 3,874 — 3,731 3,696 — 3,604 — 3,546 3,424 2,164 2,004 1,923 Shareholder’s equity: Preferred equity 180 — 305 305 — 140 — 260 360 70 70 70 Common equity 399 — 350 322 — 298 — 273 225 224 200 200 Noncontrolling interests — — — — — — — — — — — — Total shareholder’s equity 579 — 655 627 — 438 — 533 585 294 270 270 178(In millions) TCBW Other Consolidated Company 2012 2011 2010 2012 2011 2010 2012 2011 2010 CONDENSED INCOME STATEMENT Net interest income $ 27.4 $ 29.6 $ 29.4 — $ (190.6 ) $ (266.2 ) $ (339.5 ) $ 1,731.9 $ 1,756.2 $ 1,714.3 Provision for loan losses 0.4 7.8 17.4 — 0.5 — 0.6 14.2 74.5 852.7 Net interest income after provision for loan losses 27.0 21.8 12.0 (191.1 ) (266.2 ) (340.1 ) 1,717.7 1,681.7 861.6 Net impairment losses on investment securities — — (0.7 ) — (100.3 ) (32.1 ) (83.4 ) (104.1 ) (33.7 ) (85.4 ) Loss on sale of investment securities to Parent — (4.8 ) — — 9.2 77.6 54.8 — — — Other noninterest income 3.8 3.5 3.2 — (23.7 ) (28.1 ) (14.7 ) 524.0 531.9 539.0 Noninterest expense 18.9 16.7 15.6 — 29.2 19.9 30.3 1,596.0 1,658.6 1,718.3 Income (loss) before income taxes 11.9 3.8 (1.1 ) — (335.1 ) (268.7 ) (413.7 ) 541.6 521.3 (403.1 ) Income tax expense (benefit) 4.0 1.1 (0.6 ) — (120.7 ) (80.2 ) (120.4 ) 193.4 198.6 (106.8 ) Net income (loss) $ 7.9 $ 2.7 $ (0.5 ) — $ (214.4 ) $ (188.5 ) $ (293.3 ) $ 348.2 $ 322.7 $ (296.3 ) YEAR-END BALANCE SHEET DATA Total assets $ 961 $ 874 $ 850 — $ 1,286 $ 642 $ 1,143 $ 55,512 $ 53,149 $ 51,035 Cash and due from banks 22 28 11 8 — (27 ) 1,842 1,224 924 Money market investments 251 143 110 444 (91 ) (103 ) 8,754 7,123 4,706 Total securities 104 126 144 519 437 1,182 3,877 4,079 5,095 Total loans 571 562 572 — 63 69 (121 ) 37,665 37,258 36,830 Total deposits 791 693 662 — (64 ) (926 ) (526 ) 46,133 42,876 40,935 Shareholder’s equity: Preferred equity 3 15 15 — 42 497 77 1,128 2,377 2,057 Common equity 82 75 69 — (645 ) (569 ) (161 ) 4,924 4,608 4,591 Noncontrolling interests — — — — (3 ) (2 ) (1 ) (3 ) (2 ) (1 ) Total shareholder’s equity 85 90 84 — (606 ) (74 ) (85 ) 6,049 6,983 6,647 17922. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)Financial information by quarter for 20112012 and 20102011 is as follows: Quarters Year (In thousands, except per share amounts) First Second Third Fourth $ 552,392 $ 558,666 $ 554,396 $ 539,473 $ 2,204,927 423,856 416,172 470,595 461,908 1,772,531 60,000 1,330 14,553 (1,476 ) 74,407 (3,105 ) (5,158 ) (13,334 ) (12,086 ) (33,683 ) 838 (4,032 ) 18,324 3,249 18,379 136,410 137,539 116,052 107,141 497,142 408,375 416,256 409,018 425,040 1,658,689 89,624 126,935 168,066 136,648 521,273 52,591 72,610 108,718 88,771 322,690 52,817 72,875 109,093 89,019 323,804 (38,050 ) (43,837 ) (43,928 ) (44,599 ) (170,414 ) 14,767 29,038 65,165 44,420 153,390 $ 0.08 $ 0.16 $ 0.35 $ 0.24 $ 0.83 0.08 0.16 0.35 0.24 0.83 $ 580,135 $ 583,738 $ 581,934 $ 574,038 $ 2,319,845 455,300 413,346 451,875 406,868 1,727,389 265,565 228,663 184,668 173,242 852,138 (31,263 ) (18,060 ) (23,712 ) (12,320 ) (85,355 ) (1,909 ) (970 ) 7,346 595 5,062 140,782 128,443 126,566 124,964 520,755 389,126 430,355 456,044 443,356 1,718,881 (91,781 ) (136,259 ) (78,637 ) (96,491 ) (403,168 ) (63,137 ) (113,361 ) (47,457 ) (72,394 ) (296,349 ) (60,210 ) (112,993 ) (47,325 ) (72,200 ) (292,728 ) (26,311 ) (25,342 ) (33,144 ) (38,087 ) (122,884 ) – 3,107 – – 3,107 (86,521 ) (135,228 ) (80,469 ) (110,287 ) (412,505 ) $ (0.57 ) $ (0.84 ) $ (0.47 ) $ (0.62 ) $ (2.48 ) (0.57 ) (0.84 ) (0.47 ) (0.62 ) (2.48 ) (In thousands, except per share amounts) Quarters First Second Third Fourth Year 2012: Gross interest income $ 518,877 $ 512,588 $ 509,000 $ 498,257 $ 2,038,722 Net interest income 437,478 426,344 438,161 429,957 1,731,940 Provision (credit) for loan losses 15,664 10,853 (1,889 ) (10,401 ) 14,227 Noninterest income: Net impairment losses on investment securities (10,209 ) (7,308 ) (2,736 ) (83,808 ) (104,061 ) Investment securities gains, net 9,865 5,626 5,729 9,577 30,797 Other noninterest income 112,164 130,347 122,233 128,390 493,134 Noninterest expense 392,372 401,656 394,975 407,014 1,596,017 Income before income taxes 141,262 142,500 170,301 87,503 541,566 Net income 89,403 91,464 109,597 57,686 348,150 Net income applicable to controlling interest 89,676 91,737 109,851 58,252 349,516 Preferred stock dividends (64,187 ) (36,522 ) (47,529 ) (22,647 ) (170,885 ) Net earnings applicable to common shareholders 25,489 55,215 62,322 35,605 178,631 Net earnings per common share: Basic $ 0.14 $ 0.30 $ 0.34 $ 0.19 $ 0.97 Diluted 0.14 0.30 0.34 0.19 0.97 2011: Gross interest income $ 548,854 $ 554,434 $ 550,062 $ 535,231 $ 2,188,581 Net interest income 420,318 411,940 466,261 457,666 1,756,185 Provision for loan losses 60,045 1,345 14,568 (1,426 ) 74,532 Noninterest income: Net impairment losses on investment securities (3,105 ) (5,158 ) (13,334 ) (12,086 ) (33,683 ) Investment securities gains (losses), net 838 (4,032 ) 18,324 3,249 18,379 Other noninterest income 139,948 141,771 120,386 111,383 513,488 Noninterest expense 408,330 416,241 409,003 424,990 1,658,564 Income before income taxes 89,624 126,935 168,066 136,648 521,273 Net income 52,591 72,610 108,718 88,771 322,690 Net income applicable to controlling interest 52,817 72,875 109,093 89,019 323,804 Preferred stock dividends (38,050 ) (43,837 ) (43,928 ) (44,599 ) (170,414 ) Net earnings applicable to common shareholders 14,767 29,038 65,165 44,420 153,390 Net earnings per common share: Basic $ 0.08 $ 0.16 $ 0.35 $ 0.24 $ 0.83 Diluted 0.08 0.16 0.35 0.24 0.83 24. PARENT COMPANY FINANCIAL INFORMATIONCertain amounts have been changed from previously filed Form 10-Qs for 2012 and 2011 and the Form 10-K for 2011, which related primarily to gross and net interest income and noninterest income. The changes were due to reclassifications between interest and fees on loans and other service charges, commission and fees. See discussion in Note 1. 18023. PARENT COMPANY FINANCIAL INFORMATION CONDENSED BALANCE SHEETS December 31, (In thousands) 2011 2010 $ 11 $ 1,848 956,476 547,665 20,118 3,593 382,880 1,146,797
for loan losses of $33 and $71 1,495 2,852 52,903 55,560 7,070,620 6,739,699 45,043 70,272 92,751 93,003 190 1,150 285,971 253,773 $ 8,908,458 $ 8,916,212 $ 104,829 $ 182,094 45,995 45,991 3,063 2,647 5 72,204 66,883 160,604 309,278 309,278 53 110,208 1,393,044 1,384,907 1,923,150 2,267,933 2,377,560 2,056,672 4,163,242 4,163,619 1,036,590 889,284 (592,084 ) (461,296 ) 6,985,308 6,648,279 $ 8,908,458 $ 8,916,212 (In thousands) December 31, 2012 2011 ASSETS Cash and due from banks $ 2,001 $ 11 Interest-bearing deposits 75,808 956,476 Security resell agreements 575,000 — Investment securities: Held-to-maturity, at adjusted cost (approximate fair value $22,112 and $13,019) 22,679 20,118 Available-for-sale, at fair value 461,665 382,880 Loans, net of unearned fees of $0 and $0 and allowance for loan losses of $23 and $33 1,277 1,495 Other noninterest-bearing investments 50,799 52,903 Investments in subsidiaries: Commercial banks and bank holding company 6,668,881 7,070,620 Other operating companies 36,516 45,043 Nonoperating – ZMFU II, Inc.1 43,012 92,751 Receivables from subsidiaries: Other — 190 Other assets 311,093 285,971 $ 8,248,731 $ 8,908,458 LIABILITIES AND SHAREHOLDERS’ EQUITY Other liabilities $ 106,159 $ 104,829 Commercial paper: Due to affiliates — 45,995 Due to others — 3,063 Other short-term borrowings: Due to affiliates — 5 Due to others 4,951 66,883 Subordinated debt to affiliated trusts 309,278 309,278 Long-term debt: Due to affiliates — 53 Due to others 1,776,274 1,393,044 Total liabilities 2,196,662 1,923,150 Shareholders’ equity: Preferred stock 1,128,302 2,377,560 Common stock 4,166,109 4,163,242 Retained earnings 1,203,815 1,036,590 Accumulated other comprehensive loss (446,157 ) (592,084 ) Total shareholders’ equity 6,052,069 6,985,308 $ 8,248,731 $ 8,908,458 1 181CONDENSED STATEMENTS OF INCOME(In thousands) Year Ended December 31, 2011 2010 2009 $ 2,519 $ 5,665 $ 18,939 63 69 326 13,640 14,450 15,735 16,222 20,184 35,000 24,027 24,032 24,094 274,843 363,981 150,695 298,870 388,013 174,789 (282,648 ) (367,829 ) (139,789 ) (38 ) (41 ) (531 ) (282,610 ) (367,788 ) (139,258 ) 71,350 – 4,603 14,151 450 425 426 386 (11,042 ) (26,810 ) (70,306 ) (191,351 ) – – 508,945 4,203 (3,802 ) 2,737 63,320 (73,272 ) 314,317 19,033 14,720 21,663 4,176 11,465 2,882 23,209 26,185 24,545
(loss) of consolidated subsidiaries (242,499 ) (467,245 ) 150,514 (104,395 ) (141,983 ) 27,939
consolidated subsidiaries (138,104 ) (325,262 ) 122,575 488,806 34,820 (1,325,678 ) (27,687 ) (3,271 ) (21,995 ) 789 985 8,987 323,804 (292,728 ) (1,216,111 ) (170,414 ) (122,884 ) (102,969 ) – 3,107 84,633 $ 153,390 $ (412,505 ) $ (1,234,447 ) (In thousands) Year Ended December 31, 2012 2011 2010 Interest income: Commercial bank subsidiaries $ 836 $ 2,519 $ 5,665 Other subsidiaries and affiliates 386 63 69 Other loans and securities 18,993 13,640 14,450 Total interest income 20,215 16,222 20,184 Interest expense: Affiliated trusts 24,053 24,027 24,032 Other borrowed funds 195,195 274,843 363,981 Total interest expense 219,248 298,870 388,013 Net interest loss (199,033 ) (282,648 ) (367,829 ) Provision for loan losses (10 ) (38 ) (41 ) Net interest loss after provision for loan losses (199,023 ) (282,610 ) (367,788 ) Other income: Dividends from consolidated subsidiaries: Commercial banks and bank holding company 246,606 71,350 — Other operating companies 5,440 14,151 450 Nonoperating – ZMFU II, Inc. 50,000 — — Equity and fixed income securities gains, net 86 426 386 Net impairment losses on investment securities (74,153 ) (26,810 ) (70,306 ) Other income (loss) (6,562 ) 4,203 (3,802 ) 221,417 63,320 (73,272 ) Expenses: Salaries and employee benefits 20,507 19,033 14,720 Other operating expenses 395 4,176 11,465 20,902 23,209 26,185 Income (loss) before income taxes and undistributedincome/loss of consolidated subsidiaries 1,492 (242,499 ) (467,245 ) Income taxes (benefit) (108,541 ) (104,395 ) (141,983 ) Income (loss) before equity in undistributed income/loss of consolidated subsidiaries 110,033 (138,104 ) (325,262 ) Equity in undistributed income (loss) of consolidated subsidiaries: Commercial banks and bank holding company 304,559 488,806 34,820 Other operating companies (15,561 ) (27,687 ) (3,271 ) Nonoperating – ZMFU II, Inc. (49,515 ) 789 985 Net income (loss) 349,516 323,804 (292,728 ) Preferred stock dividends (170,885 ) (170,414 ) (122,884 ) Preferred stock redemption — — 3,107 Net earnings (loss) applicable to common shareholders $ 178,631 $ 153,390 $ (412,505 ) 182CONDENSED STATEMENTS OF CASH FLOWS Year Ended December 31, (In thousands) 2011 2010 2009 $ 323,804 $ (292,728 ) $ (1,216,111 ) (461,908 ) (32,534 ) 1,338,686 – – 3,530 26,810 70,306 191,351 – – (508,945 ) 27,505 (2,699 ) 171,172 (83,789 ) (257,655 ) (20,317 ) (408,811 ) (7,791 ) 440,654 6,425 2,900 779,550 (6,250 ) (2,000 ) (6,970 ) 1,259,262 23,218 9,895 (575,887 ) (807,441 ) (297,877 ) 113,834 (141,550 ) (1,509,150 ) 9,642 29,549 15,392 398,215 (903,115 ) (568,506 ) (165,500 ) 113,108 (138,659 ) 101,821 255,845 703,932 (117,975 ) (72,923 ) (295,630 ) – 138,657 – 25,686 838,488 464,110 – – (47,166 ) (148,774 ) (102,666 ) (84,408 ) (7,361 ) (6,650 ) (11,863 ) (4,160 ) (3,495 ) (1,374 ) (316,263 ) 1,160,364 588,942 (1,837 ) (406 ) 119 1,848 2,254 2,135 $ 11 $ 1,848 $ 2,254 (In thousands) Year Ended December 31, 2012 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 349,516 $ 323,804 $ (292,728 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Undistributed net income of consolidated subsidiaries (239,483 ) (461,908 ) (32,534 ) Net impairment losses on investment securities 74,153 26,810 70,306 Other, net 4,376 27,505 (2,699 ) Net cash provided by (used in) operating activities 188,562 (83,789 ) (257,655 ) CASH FLOWS FROM INVESTING ACTIVITIES Net decrease (increase) in interest-bearing deposits 305,668 (408,811 ) (7,791 ) Collection of advances to subsidiaries 23,190 6,425 2,900 Advances to subsidiaries (23,000 ) (6,250 ) (2,000 ) Proceeds from sales and maturities investment securities 5,433 1,259,262 23,218 Purchases of investment securities (3,980 ) (575,887 ) (807,441 ) Decrease (increase) of investment in subsidiaries 764,290 113,834 (141,550 ) Other, net 3,814 9,642 29,549 Net cash provided by (used in) investing activities 1,075,415 398,215 (903,115 ) CASH FLOWS FROM FINANCING ACTIVITIES Net change in short-term funds borrowed (110,995 ) (165,500 ) 113,108 Proceeds from issuance of long-term debt 757,610 101,821 255,845 Repayments of long-term debt (372,312 ) (117,975 ) (72,923 ) Proceeds from issuance of preferred stock 141,342 — 138,657 Proceeds from issuance of common stock and warrants 1,898 25,686 838,488 Cash paid for preferred stock redemption (1,542,500 ) — — Dividends paid on preferred stock (126,189 ) (148,774 ) (102,666 ) Dividends paid on common stock (7,392 ) (7,361 ) (6,650 ) Other, net (3,449 ) (4,160 ) (3,495 ) Net cash provided by (used in) financing activities (1,261,987 ) (316,263 ) 1,160,364 Net increase (decrease) in cash and due from banks 1,990 (1,837 ) (406 ) Cash and due from banks at beginning of year 11 1,848 2,254 Cash and due from banks at end of year $ 2,001 $ 11 $ 1,848 The Parent paid interest of $126.7$124.1 million in 2011, $147.22012, $126.7 million in 2010,2011, and $122.8$147.2 million in 2009.None.ITEM 9A.CONTROLS AND PROCEDURESOffer,Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of 2011.2012. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial OfferOfficer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2011.2012. There were no material changes in the Company’s internal control over financial reporting during the fourth quarter of 2011.2012 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 94 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 95.ITEM 9B.OTHER INFORMATIONITEM 9B. OTHER INFORMATIONNone.PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEDIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCECompany’sCompany’s Proxy Statement to be subsequently filed.ITEM 11. EXECUTIVE COMPENSATIONEXECUTIVE COMPENSATIONCompany’sCompany’s Proxy Statement to be subsequently filed.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS EQUITY COMPENSATION PLAN INFORMATIONThe following schedule provides information as of December 31, 20112012 with respect to the shares of the Company’s common stock that may be issued under existing equity compensation plans. (a)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights (b)
Weighted average
exercise price of
outstanding options,
warrants and rights (c)
Number of securities
remaining available
for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
Approved by Security Holders: 5,434,245 $ 42.07 2,167,551 84,000 53.53 – 7,138 63.01 – 5,525,383 2,167,551 (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)) Equity compensation plan approved by security holders Zions Bancorporation 2005 Stock Option and Incentive Plan 5,579,578 $ 37.81 7,547,209 Zions Bancorporation 1996 Non-Employee Directors Stock Option Plan 60,000 53.18 — Zions Bancorporation Key Employee Incentive Stock Option Plan 2,638 56.59 — Total 5,642,216 7,547,209 1841 The schedule does not include information for equity compensation plans assumed by the Company in mergers. A total of 408,487320,109 shares of common stock with a weighted average exercise price of $53.71$54.62 were issuable upon exercise of options granted under plans assumed in mergers and outstanding at as of December 31, 2011.2012. The Company cannot grant additional awards under these assumed plans. Column (a) also excludes 1,399,854851,236 shares of unvested restricted stock 146,165and 822,753 restricted stock units, and 49,376 salary stock units (each unit representing the right to one share of common stock).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’sCompany’s Proxy Statement to be subsequently filed.ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESPRINCIPAL ACCOUNTING FEES AND SERVICESCompany’sCompanyPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULESConsolidated balance sheets – December 31, 2012 and 2011Consolidated statements of income – Years ended December 31, 2012, 2011 and 2010Consolidated statements of comprehensive income – Years ended December 31, 2012, 2011 and 2010Consolidated statements of changes in shareholders’ equity – Years ended December 31, 2012, 2011 and 2010Consolidated statements of cash flows – Years ended December 31, 2012, 2011 and 2010Notes to consolidated financial statements – December 31, 2012(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: Consolidated balance sheets – December 31, 2011 and 2010 Consolidated statements of income – Years ended December 31, 2011, 2010 and 2009 Consolidated statements of changes in shareholders’ equity and comprehensive income – Years ended December 31, 2011, 2010 and 2009 Consolidated statements of cash flows – Years ended December 31, 2011, 2010 and 2009 Notes to consolidated financial statements – December 31, 2011(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:
Number 3.1 Restated Articles of Incorporation of Zions Bancorporation dated November 8, 1993, incorporated by reference to Exhibit 3.1 of Form S-4 filed on November 22, 1993. * * 3.2 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated April 30, 1997, incorporated by reference to Exhibit 3.2 of Form 10-Q for the quarter ended March 31, 2008. * * 185Exhibit Number Description 3.3 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated April 24, 1998, incorporated by reference to Exhibit 3.3 of Form 10-Q for the quarter ended March 31, 2009. * * 3.4 Articles of Amendment to Restated Articles of Incorporation of Zions Bancorporation dated April 25, 2001, incorporated by reference to Exhibit 3.6 of Form S-4 filed July 13, 2001. * * 3.5 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation, dated December 5, 2006, (filed herewith).incorporated by reference to Exhibit 3.5 of Form 10-K for the year ended December 31, 2011.* 3.6 Articles of Merger of The Stockmen’s Bancorp, Inc. with and into Zions Bancorporation, effective January 17, 2007, incorporated by reference to Exhibit 3.6 of Form 10-K10-Q for the yearquarter ended DecemberMarch 31, 2006.2012.* *3.7 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation, dated July 7, 2008, incorporated by reference to Exhibit 3.1 of Form 8-K filed July 8, 2008. * * 3.8 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation, dated November 12, 2008, incorporated by reference to Exhibit 3.1 of Form 8-K filed November 17, 2008. * * 3.9 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation, dated June 30, 2009, incorporated by reference to Exhibit 3.1 of Form 8-K filed July 2, 2009. * ExhibitNumberDescription 3.10 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated June 30, 2009, incorporated by reference to Exhibit 3.10 of Form 10-Q for the quarter ended
June 30, 2009.* *3.11 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated June 1, 2010, incorporated by reference to Exhibit 3.1 of Form 8-K filed June 3, 2010. * * 3.12 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated June 14, 2010, incorporated by reference to Exhibit 3.1 of Form 8-K filed June 15, 2010. * * 3.13 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation with respect to the Series F Fixed-Rate Non-Cumulative Perpetual Preferred Stock, dated May 4, 2012, incorporated by reference to Exhibit 3.1 of Form 8-K filed May 5, 2012. * 3.133.14 Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation with respect to the Series G Fixed/Floating-Rate Non-Cumulative Perpetual Preferred Stock, dated February 5, 2013, incorporated by reference to Exhibit 3.1 of Form 8-K filed February 7, 2013. * 3.15 Restated Bylaws of Zions Bancorporation dated November 8, 2011, incorporated by reference to Exhibit 3.13 of Form 10-Q for the quarter ended September 30, 2011. * * 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, (filed herewith).incorporated by reference to Exhibit 4.1 of Form 10-K for the year ended December 31, 2011.* 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, (filed herewith).incorporated by reference to Exhibit 4.2 of Form 10-K for the year ended December 31, 2011.* 186Exhibit Number Description 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, (filed herewith).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 4.2 of Form 8-K filed November 17, 2008. * * 4.5 Warrant Agreement, between Zions Bancorporation and Zions First National Bank, 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 2009-2011 Value Sharing Plan, incorporated by reference to Exhibit 10.5 of Form 10-K for the year ended December 31, 2009. * * 10.2 Zions Bancorporation 2011-2013 Value Sharing Plan, (filed herewith).incorporated by reference to Exhibit 10.2 of Form 10-K for the year ended December 31, 2011.* 10.3 2005Zions Bancorporation 2012-2014 Value Sharing Plan (filed herewith).10.4 2012 Management Incentive Compensation Plan, incorporated by reference to Exhibit 10.610.1 of Form 10-K10-Q for the yearquarter ended December 31, 2010.June 30, 2012.* * 10.410.5 Zions Bancorporation Second Restated and Revised Deferred Compensation Plan, incorporated by reference to Exhibit 10.6 of Form 10-K for the year ended December 31, 2008. * * 10.510.6 Zions Bancorporation Third Restated Deferred Compensation Plan for Directors, incorporated by reference to Exhibit 10.7 of Form 10-K for the year ended December 31, 2008. * * 10.610.7 Fifth Amended and Restated Amegy Bancorporation, Inc. Non-Employee Directors Deferred Fee Plan, incorporated by reference to Exhibit 10.8 of Form 10-K for the year ended December 31, 2008. * * 10.710.8 Zions Bancorporation First Restated Excess Benefit Plan, incorporated by reference to
Exhibit 10.9 of Form 10-K for the year ended December 31, 2008.* * 10.810.9 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 10.10 of Form 10-K for the year ended December 31, 2006.*(filed herewith). ExhibitNumberDescription 10.910.10 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. * * 10.1010.11 Amendment to Trust Agreement Establishing the Zions Bancorporation Deferred Compensation Plans Trust, effective September 1, 2006 incorporated by reference to Exhibit 10.12 of(filed herewith).Form 10-K for the year ended December 31, 2006. * 10.1110.12 Zions Bancorporation Deferred Compensation Plans Master Trust between Zions Bancorporation and Fidelity Management Trust Company, effective September 1, 2006 incorporated by reference to Exhibit 10.13 of Form 10-K for the year ended December 31, 2006.(filed herewith). * 10.1210.13 Revised schedule C to Zions Bancorporation Deferred Compensation Plans Master Trust between Zions Bancorporation and Fidelity Management Trust Company, effective September 13, 2006 (filed herewith). 187Exhibit Number Description 10.14 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 10.1410.6 of Form 10-K10-Q for the yearquarter ended December 31, 2006.June 30, 2012.* * 10.1310.15 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. * * 10.1410.16 Zions Bancorporation Executive Management Pension Plan, incorporated by reference to
Exhibit 10.20 of Form 10-K for the year ended December 31, 2008.* * 10.1510.17 Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, Restated and Amended effective January 1, 2002, including amendments adopted thru December 31, 2010, incorporated by reference to Exhibit 10.18 of Form 10-K for the year ended December 31, 2010. * * 10.18 First Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan, dated November 14, 2012 (filed herewith). 10.1610.19 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 10.1 of Form 10-Q for the quarter ended March 31, 2007.(filed herewith). * 10.1710.20 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, incorporated by reference to Exhibit 10.2 of Form 10-Q for the quarter ended June 30, 2010. * * 10.1810.21 Second 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. * * 10.1910.22 Third 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. * * 10.2010.23 Amended and Restated Zions Bancorporation Key Employee Incentive Stock Option Plan, incorporated by reference to Exhibit 10.38 of Form 10-K for the year ended December 31, 2009. * * 10.2110.24 Amended and Restated Zions Bancorporation 1996 Non-Employee Directors Stock Option Plan, incorporated by reference to Exhibit 10.38 of Form 10-K for the year ended December 31, 2007. * * 10.2210.25 Amended and Restated Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.110.2 of Form 10-Q for the quarter ended June 30, 2009.2012.* * 10.2310.26 Standard Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, (filed herewith).incorporated by reference to Exhibit 10.3 of Form 10-Q for the quarter ended June 30, 2012.* 10.2410.27 Standard Restricted Stock Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, (filed herewith).incorporated by reference to Exhibit 10.4 of Form 10-Q for the quarter ended June 30, 2012.* 188
Number 10.2510.28 Standard Restricted Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, (filed herewith).incorporated by reference to Exhibit 10.5 of Form 10-Q for the quarter ended June 30, 2012.* 10.2610.29 Standard Directors Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.29 of Form 10-K for the year ended December 31, 2010. * * 10.2710.30 Standard Directors 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, 2009. * * 10.2810.31 Standard Directors Restricted Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, (filed herewith).incorporated by reference to Exhibit 10.28 of Form 10-K for the year ended December 31, 2011.* 10.2910.32 Standard Salary Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.1 of Form 8-K filed December 28, 2009. * * 10.3010.33 Standard Deferred Salary Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, incorporated by reference to Exhibit 10.31 of Form 10-K for the year ended December 31, 2010. * * 10.3110.34 Standard 2012 Deferred Salary Stock Unit Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan, (filed herewith).incorporated by reference to Exhibit 10.31 of Form 10-K for the year ended December 31, 2011.* 10.3210.35 Amegy Bancorporation (formerly Southwest Bancorporation of Texas, Inc.) 1996 Stock Option Plan, as amended and restated as of June 4, 2002, incorporated by reference to Exhibit 10.45 of Form 10-K for the year ended December 31, 2007. * * 10.3310.36 Amegy Bancorporation 2004 (formerly Southwest Bancorporation of Texas, Inc.) Omnibus Incentive Plan, incorporated by reference to Exhibit 10.47 of Form 10-K for the year ended December 31, 2009. * * 10.3410.37 Form of Change in Control Agreement between the Company and Certain Executive Officers incorporated by reference to Exhibit 10.39 of Form 10-K for the year ended December 31, 2006.(filed herewith). * 10.3510.38 Form of Change in Control Agreement between the Company and Scott J. McLean, incorporated by reference to Exhibit 10.48 of Form 10-K for the year ended December 31, 2007. * * 10.3610.39 Addendum to Change in Control Agreement, incorporated by reference to Exhibit 10.43 of Form 10-K for the year ended December 31, 2008. * * 10.3710.40 Form of Change in Control Agreement between the Company and Kenneth E. Peterson, incorporated by reference to Exhibit 10.37 of Form 10-K for the year ended December 31, 2010. * * 10.41 Form of Change in Control Agreement between the Company and Dallas E. Haun, dated May 23, 2008, incorporated by reference to Exhibit 10.52 of Form 10-K filed December 31, 2008. * 10.3810.42 Stock Purchase and Shareholder Agreement dated June 1, 2004 among Welman Holdings, Inc., the Company, Zions First National Bank and PSC Wealth Management, LLC, incorporated by reference to Exhibit 10.38 of Form 10-K for the year ended December 31, 2010. * * 18910.39Exhibit NumberDescription 10.43 Employment Agreement between the Company and Dallas Haun, incorporated by reference to Exhibit 10.53 of Form 10-K for the year ended December 31, 2007. * * 10.4010.44 Employment agreement between the Company and Kenneth E. Peterson, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended March 31, 2010. * * 10.45 Form of TARP agreement signed by all Named Executive Officers for 2008, 2009, 2010, 2011, and 2012, other then Kenneth E. Peterson, incorporated by reference to Exhibit 10.1 of Form 10-Q for the quarter ended September 30, 2012. * 10.4110.46 Performance stock agreement between Zions Bancorporation and Scott McLean, dated August 15, 2008, incorporated by reference to Exhibit 10.51 of Form 10-K filed December 31, 2008. * 10.42Form of Change in Control Agreement between the Company and Dallas E. Haun, dated May 23, 2008, incorporated by reference to Exhibit 10.52 of Form 10-K filed December 31, 2008. *12 Ratio of Earnings to Fixed Charges (filed herewith). 21 List of Subsidiaries of Zions Bancorporation (filed herewith). 23 Consent of Independent Registered Public Accounting Firm (filed herewith). ExhibitNumberDescription 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). 99.1 Certification by Chief Executive Officer required by 111(b)(4) of the Emergency Economic Stabilization Act (filed herewith). 99.2 Certification by Chief Financial Officer required by 111(b)(4) of the Emergency Economic Stabilization Act (filed herewith). 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 20112012 and December 31, 2010,2011, (ii) the Consolidated Statements of Income for the years ended December 31, 2012, December 31, 2011, and December 31, 2010, (iii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, December 31, 2011, and December 31, 2009, (iii)2010, (iv) the Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2012, December 31, 2011, and December 31, 2010, and December 31, 2009, (iv)(v) the Consolidated Statements of Cash Flows for the years ended December 31, 2012, December 31, 2011, and December 31, 2010 and December 31, 2009 and (v)(vi) the Notes to Consolidated Financial Statements (furnished herewith). ** Incorporated by referenceIncorporated by reference190SIGNATURESPursuant 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 28, 2013 ZIONS BANCORPORATIONFebruary 29, 2012By/s/ Harris H. Simmons ZIONS BANCORPORATIONBy/s/ HARRIS H. SIMMONSHARRIS H. SIMMONS, Chairman,President and Chief Executive OfficerPursuant 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 29, 201228, 2013HARRISHarris H. SIMMONS S/ DOYLEs/ Doyle L. ARNOLDHARRIS H. SIMMONS, Director, (Principal(Principal Executive Officer) DOYLE L. ARNOLD, Vice Chairman andChief Financial Officer (Principal(Principal Financial Officer)S/ ALEXANDERs/ Alexander J. HUME S/ JERRYs/ Jerry C. ATKINALEXANDER J. HUME, Controller(Principal Accounting Officer) JERRY C. ATKIN, Director S/s/ R. D. CASH S/ PATRICIA FROBESR. D. CASH, Director PATRICIA FROBES, Director S/s/ J. DAVID HEANEY S/ ROGERs/ Roger B. PORTERJ. DAVID HEANEY, Director ROGER B. PORTER, Director S/ STEPHENs/ Stephen D. QUINN S/s/ L. E. SIMMONSSTEPHEN D. QUINN, Director L. E. SIMMONS, Director S/ STEVENs/ Steven C. WHEELWRIGHT S/ SHELLEY THOMAS WILLIAMSSTEVEN C. WHEELWRIGHT, Director SHELLEY THOMAS WILLIAMS, Director 192191