5 'Noisy' Banks and What They Really Earned

Excluding "the noncash effects of the discount amortization on conversion of subordinated debt and additional accretion (net of expense) on acquired loans ($15.0 million, $0.08 per share), and the accelerated amortization of discount on the $700 million redemption of Troubled Asset Relief Program ("TARP") preferred stock ($19.6 million, $0.11 per share) in the first quarter," Zions said its net operating earnings were $60.1 million or 33 cents a share.

Zions on March 28 repaid the government $700 million in TARP money, and plans to repay the remaining $700 million during the second half of this year.

Mosby says that for Zions, one-time items from the "conversion of conversion of debt to preferred" stock happens "each quarter, which impacts their income statement and their net interest margin," which "we must always work through."

"There are some debt conversion costs that go in the preferred, so they have some impact on margins and some write down and accretion they took on the debt portion. Every quarter it creates some noise. I think everyone would be happy if they didn't have to deal with it any more.

Mosby has a neutral rating on Zions, and said last Tuesday that the lender's "earnings power has been pressured over the last couple of years due to net interest margin compression and inflated asset quality costs," adding that "ZION may not fully recover from this loss of earnings power until short-term interest rates begin to rise."

Interested in more on Zions Bancorporation? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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