Stock of Nevada State Bank’s parent company tumbles

By Steve Green

Published Tuesday, April 21, 2009 | 10:44 a.m.

Updated Tuesday, April 21, 2009 | 3:02 p.m.

The stock of Nevada State Bank's parent company tumbled today after the company reported a loss and its financial outlook was revised downward by Moody's Investors Service because of problem real estate loans.

The stock of Zions Bancorporation of Salt Lake City closed at $10.94, down 15 percent, or $1.99.

The company on Monday reported a first-quarter loss of $806 million, or $7.29 per share vs. a profit in the year-earlier quarter of $105 million or 97 cents per share. The 2009 quarter's results include a noncash charge of $634 million to write down the value of goodwill in a Zions subsidiary, Amegy Bank in Texas.

Moody's downgraded the credit rating of Zions Bancorporation, and the financial strength ratings of its banking subsidiaries, including Zions First National Bank and Nevada State Bank, to D- from C+ with a negative outlook. Banks in the D category may face deficiencies in their financial fundamentals and difficult operating environments, according to Moody's ratings definitions.

"The magnitude of the downgrade and negative outlook reflects Moody's view that Zions' capital position will come under significant pressure in the short-term because of its large commercial real estate lending concentration and CDO (collateralized debt obligation) portfolio," Moody's said.

"Zions enters this challenging period with relatively sound capital ratios," Moody's said. "Nevertheless, Moody's expects that future credit costs in Zions' residential construction book and CDO portfolio cause a significant risk of the firm becoming undercapitalized."

In reporting its results Monday, Zions said it set aside $298 million in the first quarter as a provision for loan loss reserves, up from $285 million set aside in the fourth quarter. Nonperforming assets such as problem loans totaled $1.77 billion on March 31, up from $1.14 billion on Dec. 31 and $434 million one year earlier. The increase was tied mainly to commercial real estate loans primarily in Nevada, Arizona and Texas and to commercial and industrial loans in Utah.

Because of the recession, the ratio of nonperforming assets to total loans and other assets jumped from 1 percent in March 2008 to 2.7 percent in December to 4 percent last month.

But Zions said Monday it remained in sound financial shape.

"In what continues to be perhaps the most difficult economic environment in over half a century, our balance sheet remains strong, with record levels of liquidity," said Zions Chairman and Chief Executive Harris Simmons.

He said the company's banks extended $3.8 billion of credit during the quarter, of which $1.9 billion was for new loans.

In Nevada, Zions' Nevada State Bank has some $4 billion in loans and other assets and a network of about 60 branches.