ZIONS BANCORPORATION REPORTS 2009 SECOND QUARTER RESULTS WITH STRONG IMPROVEMENT IN CAPITAL LEVELS

Las Vegas, Nev.
July 20, 2009

Nevada State Bank's parent company, Zions Bancorporation (Nasdaq: ZION) ("Zions" or "the Company") today reported a second quarter net loss applicable to common shareholders of $40.7 million or $0.35 per diluted share, compared to a net loss of $852.3 million (which included nonoperating goodwill impairment of $634.0 million) or $7.47 per diluted share for the first quarter of 2009.

Second Quarter 2009 Highlights

"As we continue to progress through this difficult economic period, we are pleased to have been able to significantly increase key capital ratios while at the same time substantially building our reserves for problem credits this quarter," said Harris H. Simmons, chairman and chief executive officer. "We are further encouraged by the particularly strong growth of our highest quality deposits. This, along with the reduction in excessive cash balances which had been carried at a negative spread has strengthened our net interest margin. Finally, we are pleased that a major U.S. consulting firm, based on a survey of business customers, recently reported that Zions ranks as one of the best among leading U.S. banks for customer service, willingness to lend, and treasury management products," Simmons added.

Asset Quality
The provision for loan losses was $762.7 million for the second quarter of 2009 compared to $297.6 million for the first quarter of 2009 and $114.2 million for the second quarter of 2008. The provision for the second quarter of 2009 was 7.44% annualized of average loans excluding FDIC-supported assets and was $415.2 million in excess of net loan and lease charge-offs. The increased provision resulted from continued deterioration in commercial real estate and commercial and industrial loan portfolios, re-estimation of certain of the Company's loss reserve factors based on a newly updated migration analysis reflecting more recent loss experience, and to incorporate the possibility of a more protracted credit cycle.

The allowance for loan losses as a percentage of net loans and leases excluding FDIC-supported assets was 3.08% at June 30, 2009 compared to 2.03% at March 31, 2009 and 1.32% at June 30, 2008. Based on March 31, 2009 (the latest available) industry peer group data, this allowance level would rank in the top quartile. The combined allowance for loan losses and reserve for unfunded lending commitments was $1,308.7 million, or 3.23% of net loans and leases excluding FDIC-supported assets at June 30, 2009, compared to 2.16% at March 31, 2009 and 1.38% at June 30, 2008.

Nonperforming lending related assets were $2,059.3 million at June 30, 2009 ($1,922.6 million excluding FDIC-supported assets) compared to $1,754.8 million at March 31, 2009 and $695.3 million at June 30, 2008. The ratio of nonperforming lending related assets excluding FDIC-supported assets to net loans and leases and other real estate owned was 4.68% at June 30, 2009 compared to 3.96% at March 31, 2009 and 1.66% at June 30, 2008.

Net loan and lease charge-offs for the second quarter of 2009 were $347.5 million or 3.39% annualized of average loans excluding FDIC-supported assets. This compares with $151.7 million or 1.47% annualized of average loans for the first quarter of 2009 and $67.8 million or 0.67% annualized of average loans for the second quarter of 2008. One large credit on which a substantial recovery is expected accounted for 46 bp of the ratio of net loan and lease charge-offs to average loans for the second quarter of 2009. Construction-related credits accounted for another 168 bp.

Capital Management
During June 2009, as previously disclosed, the Company announced several actions to enhance its tangible common equity. The net effect of these actions added $511 million to tangible common equity and 99 bp to the tangible common equity ratio during the quarter as follows:

captial management

  1. Subordinated debt modification – The Company exchanged approximately $0.2 billion of subordinated notes for new notes with the same terms. The remaining $1.2 billion of subordinated notes were modified to permit conversion on a par for par basis into either the Company's Series A or Series C preferred stock. Net of issuance costs and debt discount on the previous debt, the pretax gain recognized in earnings from this debt modification was approximately $305.0 million.
  2. Recognition of deferred gains on terminated swaps – The Company recognized deferred gains of approximately $161.3 million pretax on terminated swaps related to the subordinated debt that was modified. 
  3. Gain recognized in equity for conversion option – The Company recognized directly in equity a $45.3 million after-tax gain for the conversion option of the modified debt.
  4. Tender offer of Series A preferred stock – The Company purchased 4,020,435 depositary shares (each share representing a 1/40th ownership interest in a share of preferred stock) at a price of $11.50 per depositary share, or an aggregate amount of $46.4 million 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 redemption resulted in a $52.4 million increase to retained earnings.
  5. Common equity ongoing issuances – The Company issued approximately $123.7 million of new common stock net of issuance costs, which consisted of 9,177,658 shares at an average price of $13.79 per share. The Company has stated that it expects to issue the balance of the announced $250 million in the next two quarters.

The tangible common equity ratio was 5.66% at June 30, 2009 compared to 5.26% at March 31, 2009 and 5.51% at June 30, 2008. The increase from the first quarter reflects the impact of the capital actions previously discussed, which was partially offset by the effect of operating items, including the provision for loan losses, and the reclassification of securities subsequently discussed.

The estimated Tier 1 common to risk-weighted assets ratio was 6.07% at June 30, 2009 and was 5.73% at March 31, 2009.

Acquisition Related Gains
As previously disclosed, two of the Company's banking subsidiaries acquired failed financial institutions from the FDIC during the first and second quarters of 2009. California Bank & Trust acquired Alliance Bank on February 6, 2009 and Nevada State Bank acquired Great Basin Bank on April 17, 2009. The acquired loans in both acquisitions involved loss sharing agreements with the FDIC. During the second quarter of 2009, these subsidiaries recognized acquisition related gains totaling $23.0 million, after applying the provisions of SFAS No. 141 (revised 2007) that was adopted on January 1, 2009.

Loans
On-balance-sheet net loans and leases of $41.4 billion at June 30, 2009 decreased approximately $0.5 billion or 5.1% annualized from $41.9 billion at March 31, 2009, and decreased approximately $0.3 billion or 0.8% from $41.7 billion at June 30, 2008.

Deposits
Average total deposits for the second quarter of 2009 increased $0.8 billion or 7.9% annualized to $42.9 billion compared to $42.1 billion for the first quarter of 2009, and increased $6.2 billion or 16.8% compared to $36.8 billion for the second quarter of 2008. Average noninterest-bearing demand deposits increased $0.8 billion or 32.0% annualized to $10.7 billion compared to $9.9 billion for the first quarter of 2009, which was used to reduce more expensive sources of funding.

Net Interest Income
The net interest margin was 4.09% for the second quarter of 2009 compared to 3.93% for the first quarter of 2009 and 4.18% for the second quarter of 2008. The improvement in the net interest margin for the second quarter of 2009 was primarily due to lower rates on deposits, a more favorable funding mix, and reduction of short-term lower yielding assets. The Company continues to pursue strategies to reduce higher cost deposits in order to reduce short-term, low-yielding assets.

Investment Securities
During the second quarter of 2009, the Company recognized in earnings impairment and valuation losses on CDOs of $53.7 million, or $0.28 per diluted share, compared to $283.1 million during the first quarter of 2009. The second quarter losses consisted of the following:

The Company recognized OTTI according to new accounting guidance adopted during the first quarter of 2009. Credit-related OTTI is recognized currently in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”).

The primary driver of OTTI in the second quarter of 2009 for bank and insurance trust preferred CDOs was an increased rate of new bank deferrals rather than an increase of actual defaults compared to previously predicted defaults.

During the second quarter of 2009 subsequent to ratings downgrades, the Company reclassified approximately $557 million at fair value of held-to-maturity securities to available-for-sale. No gain or loss was recognized in earnings at the time of reclassification. However, pretax fair value adjustments of $120.8 million on these securities were recorded in OCI, which reduced the tangible common equity ratio by 14 bp.

Noninterest Income
Noninterest income for the second quarter of 2009 was $585.3 million compared to a loss of $145.3 million for the first quarter of 2009 and income of $72.4 million for the second quarter of 2008. Excluding the previously discussed impairment and valuation losses on securities, the gains on debt modification and terminated swaps, and the acquisition related gains, for the first and second quarters of 2009, noninterest income was $149.7 million for the second quarter of 2009 and $137.8 million for the first quarter of 2009.

Capital markets income increased during the second quarter of 2009 as the Company experienced strength in its securities trading and public finance businesses. Dividends and other investment income decreased primarily due to losses of approximately $5.5 million at two investment funds. Fair value and nonhedge derivative income was $20.3 million during the second quarter of 2009 compared to $4.0 million during the first quarter of 2009. The increase primarily reflects the recognition of hedge ineffectiveness and net changes in credit valuation adjustments on derivatives.

Noninterest Expense
Noninterest expense for the second quarter of 2009 was $419.5 million compared to $376.2 million for the first quarter of 2009 and $354.4 million for the second quarter of 2008. Salaries and employee benefits declined compared to the first quarter; approximately $4.3 million and $1.8 million of severance costs were included in the second and first quarters, respectively. FTEs have been reduced by 3.4% from December 31, 2008 even after adding personnel from FDIC-assisted acquisitions. Other real estate expense increased to $23.7 million during the second quarter of 2009 compared to $18.3 million during the first quarter of 2009. FDIC premiums were $42.3 million for the second quarter of 2009 compared to $14.2 million for the first quarter of 2009; the second quarter premiums included a special assessment of $24.2 million. Other noninterest expense included $5.1 million of debt extinguishment costs primarily for certain long-term FHLB debt and $7.9 million for the provision for unfunded lending commitments compared to $1.8 million in the first quarter of 2009.

Subsequent Event
On July 17, 2009, Zions' subsidiary, California Bank & Trust (“CB&T”), entered into a purchase and assumption agreement with the FDIC as receiver of the failed Vineyard Bank in Southern California. CB&T is acquiring most of the assets and liabilities of Vineyard in a “whole bank” transaction, with loss sharing. Vineyard has approximately $1.6 billion of assets, including $1.4 billion of loans, $1.5 billion of deposits and 16 branches that are mostly located in the “Inland Empire” area. CB&T conducted due diligence on the loan portfolio. Under the terms of the bid, CB&T will purchase most of Vineyard's assets at a discount of $242 million to stated value. The FDIC will bear 80% of the first $465 million of loan losses, and 95% of any loan losses above that amount, as provided in the purchase and assumption agreement. The transaction is estimated to be nondilutive to Zions' tangible common equity ratio and approximately 6 to 9 basis points accretive to risk-based capital ratios as a result of a pretax gain on the purchase, which is estimated to be greater than $100 million and will be recognized in the third quarter of 2009. The transaction is expected to be approximately $0.04 to $0.06 per share accretive to earnings on an annualized basis thereafter.

Conference Call
Zions will host a conference call to discuss these second quarter results at 5:30 p.m. ET this afternoon (July 20, 2009). Media representatives, analysts and the public are invited to listen to this discussion by calling 1-800-706-7745 (international: 617-614-3472) and entering the passcode 81536894, or via on-demand webcast. A link to the webcast will be available on the Zions Bancorporation Web site at www.zionsbancorporation.com. A replay of the call will be available from 8:30 p.m. ET on Monday, July 20, 2009, until midnight ET on Monday, July 27, 2009, by dialing 1-888-286-8010 (international: 617-801-6888) and entering the passcode 77926352. The webcast of the conference call will also be archived and available for 30 days.  

About Nevada State Bank
Nevada State Bank, with assets of more than $4.0 billion, is the fourth largest commercial bank in Nevada. Established in 1959, it is the oldest state-chartered bank in Nevada with a total of 59 branches statewide. Nevada State Bank is a full-service bank offering a complete range of consumer and business services. Nevada State Bank is a subsidiary of Salt Lake City-based Zions Bancorporation (Nasdaq: ZION), one of the nation's premier financial services companies. For more information on Nevada State Bank, call 702.383.0009 or access www.nsbank.com.

About Zions Bancorporation
Zions Bancorporation is one of the nation's premier financial services companies, consisting of a collection of great banks in select high growth markets. Zions operates its banking businesses under local management teams and community identities through approximately 500 offices in ten Western and Southwestern states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah and Washington. The Company is a national leader in Small Business Administration lending and public finance advisory services. In addition, Zions is included in the S&P 500 and NASDAQ Financial 100 indices. Investor information and links to subsidiary banks can be accessed at www.zionsbancorporation.com.

Forward-Looking Information
Statements in this earnings release that are based on other than historical data are forward-looking, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of future events. These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management's views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties and actual results may differ materially from those presented, either expressed or implied, in this news release. Factors that might cause such differences include, but are not limited to: the Company's ability to successfully execute its business plans and achieve its objectives; changes in general economic and financial market conditions, either internationally, nationally or locally in areas in which the Company conducts its operations, including changes in securities markets and valuations in structured securities and other assets; changes in governmental policies and programs resulting from general economic and financial market conditions; changes in interest and funding rates; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company's operations or business; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2008 Annual Report on Form 10-K of Zions Bancorporation filed with the Securities and Exchange Commission (“SEC”) and available at the SEC's Internet site (http://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Contact: James Abbott
Tel: (801) 524-4787