Third Quarter 2009 Highlights

Positives:

  * Strong net interest margin of 3.91%, after negative impacts
    related to the prior quarter's modification of subordinated
    debt, and conversion this quarter of some of this modified
    subordinated debt to preferred stock.

  * Build-up of the allowance for loan losses to a ratio to net
    loans of 3.61% compared to 3.08% in second quarter; ratio of
    total allowance and reserve for credit losses to net loans
    increased to 3.86% compared to 3.23% in second quarter.

  * Average noninterest-bearing demand deposits increased
    $0.7 billion or 27.4% annualized to $11.4 billion from second
    quarter.

  * Acquisition of the failed Vineyard Bank with FDIC assistance,
    which resulted in a pretax acquisition related gain of
    $146.2 million.

Continuing challenges:

  * Net loan charge-offs of $381.3 million compared to $347.5 million
    in second quarter.

  * Nonperforming lending related assets of $2.2 billion (excluding
    FDIC-supported assets); ratio to net loans and other real estate
    owned of 5.40% compared to 4.68% in second quarter.

  * Credit-related impairment losses on CDO securities of
    $56.5 million compared to $42.0 million in second quarter.

"Results from the third quarter were mixed. We again augmented our capital, reserves, and liquidity positions, even as we saw some signs of stabilization in some geographies and markets; however, we believe the economy remains fragile and therefore we continue to exercise caution," said Harris H. Simmons, chairman and chief executive officer. Mr. Simmons continued, "We are again encouraged with the continued stability of our core pretax, preprovision earnings of approximately $1 billion, which together with our actions to augment capital, reserves, and liquidity, position the Company to continue weathering an uncertain economic environment."

Asset Quality

The provision for loan losses was $565.9 million for the third quarter of 2009 compared to $762.7 million for the second quarter of 2009 and $156.6 million for the third quarter of 2008. When combined with the provision for unfunded lending commitments, the total provision for credit losses was $221.2 million in excess of net loan and lease charge-offs. The provision exceeded losses as a result of a moderate increase in troubled assets and greater loss severity, and after the Company completed its implementation of loss migration factors that are more weighted toward recent loss experience.

The allowance for loan losses as a percentage of net loans and leases excluding FDIC-supported assets was 3.61% at September 30, 2009 compared to 3.08% at June 30, 2009 and 1.46% at September 30, 2008. The combined allowance for loan losses and reserve for unfunded lending commitments was $1,529.9 million, or 3.86% of net loans and leases excluding FDIC-supported assets at September 30, 2009, compared to 3.23% at June 30, 2009 and 1.52% at September 30, 2008.

Nonperforming lending related assets were $2,171.0 million at September 30, 2009 ($2,770.3 million including FDIC-supported assets) compared to $1,922.6 million at June 30, 2009 and $922.3 million at September 30, 2008. The ratio of nonperforming lending related assets excluding FDIC-supported assets to net loans, leases and other real estate owned was 5.40% at September 30, 2009 compared to 4.68% at June 30, 2009 and 2.19% at September 30, 2008.

Net loan and lease charge-offs for the third quarter of 2009 were $381.3 million or 3.79% annualized of average loans excluding FDIC-supported assets. This compares with $347.5 million or 3.39% annualized of average loans excluding FDIC-supported assets for the second quarter of 2009 and $95.3 million or 0.91% annualized of average loans for the third quarter of 2008. The second quarter charge-offs included one credit for $47.5 million, on which a substantial recovery is expected. The majority of the sequential quarterly increase was due to construction loans.

Capital and Financing Actions

On August 27, 2009, the Company completed the sale of $250 million of common stock that was announced June 1, 2009. For the third quarter of 2009, 7,655,267 shares of this issuance were sold for $123.5 million (average price of $16.13). On September 17, 2009, the Company commenced the sale of another $250 million of common stock. As of September 30, 2009, 3,671,000 shares of this issuance were sold for $67.2 million (average price of $18.31). Net of commissions and fees, these common equity distribution programs added $187.5 million to tangible common equity during the quarter.

On September 23, 2009, the Company issued $450 million of 7.75% unsecured senior notes due September 23, 2014 at a price of 86.888%. Issuance of these notes added approximately $387 million to the Parent's cash balance, which was $859 million at September 30, 2009.

During the third quarter of 2009, and as a result of the subordinated debt modifications previously announced, $27.8 million of subordinated debt was converted into shares of the Company's Series C preferred stock. This conversion accelerated the discount amortization, resulting in a $9.0 million increase to interest expense in the third quarter of 2009.

The tangible common equity ratio was 5.43% at September 30, 2009 compared to 5.66% at June 30, 2009 and 6.05% at September 30, 2008. The change from the second quarter reflects the impact of the common stock issuances and acquisition related gains, offset by the effect of operating items, including the provisions for credit losses and impairment losses on securities. The estimated Tier 1 common to risk-weighted assets ratio was 6.10% at September 30, 2009 and was 6.08% at June 30, 2009.

Acquisition Related Gains

As previously disclosed, on July 17, 2009, the Company's California Bank & Trust subsidiary acquired the failed Vineyard Bank from the FDIC as receiver. Prior to purchase accounting adjustments, Vineyard had 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. The loans were acquired under a loss sharing agreement with the FDIC. During the third quarter of 2009, the Company recognized acquisition related gains of $146.2 million.

Loans

Net loans and leases of $41.7 billion at September 30, 2009 increased approximately $0.3 billion or 2.6% annualized from $41.4 billion at June 30, 2009, and were essentially unchanged from $41.7 billion at September 30, 2008. Excluding FDIC-supported assets, net loans and leases decreased approximately $0.9 billion or 8.7% annualized to $39.6 billion from $40.5 billion at June 30, 2009 and decreased $2.1 billion, or 5.0% from the balance one year ago. The net decrease from June 30, 2009 was primarily in the construction and land development, and commercial and industrial loan portfolios.

Deposits

Average total deposits for the third quarter of 2009, which included the effect of the Vineyard Bank acquisition, increased $0.4 billion or 3.6% annualized to $43.3 billion compared to $42.9 billion for the second quarter of 2009, and increased $6.0 billion or 16.2% compared to $37.3 billion for the third quarter of 2008. Average noninterest-bearing demand deposits increased $0.7 billion or 27.4% annualized to $11.4 billion compared to $10.7 billion for the second quarter of 2009.

Net Interest Income

The net interest margin was 3.91% for the third quarter of 2009 compared to 4.09% for the second quarter of 2009 and 4.13% for the third quarter of 2008. The net interest margin for the second quarter of 2009 was favorably impacted by 0.07% due to the amortization of the gain on the terminated fair value swaps related to the modified subordinated debt, which did not recur in the third quarter. The net interest margin for the third quarter of 2009 was unfavorably impacted by 0.13% for the discount amortization on the modified subordinated debt and an additional 0.07% for the conversion of subordinated debt to Series C preferred stock. During the third quarter of 2009, the net interest margin was helped by strong pricing on new loans, reduced rates on interest-bearing deposit accounts, and the previously mentioned growth of noninterest-bearing demand deposits.

Investment Securities

During the third quarter of 2009, the Company recognized credit-related net impairment losses on CDOs of $56.5 million, or $0.27 per diluted share, compared to $42.0 million during the second quarter of 2009. Both the credit-related net impairment losses and OCI noncredit-related losses reflected a change in the assumptions used to estimate future bank failures, which directly impacted the fair value of the Company's pooled trust preferred securities. As the credit cycle has progressed, more deferral/default data has become available on the underlying collateral, allowing the Company to use a proprietary multivariate prediction analysis in lieu of previous reliance on "LACE" ratings to estimate nonpublic bank failures. Backtesting shows a significantly stronger statistical ability to predict bank failures than the prior analysis.

The primary impairment of the securities portfolio in the third quarter is related to CDOs where the underlying collateral is predominantly from banking institutions. These bank CDOs comprise $2.2 billion of the $2.7 billion par amount of the bank and insurance CDO portfolio. Below is a table showing the Company's current CDO concentration by original rating (e.g. 52% of the current $2.2 billion was originally rated AAA). The impairment charges taken during the third quarter stem primarily from the original single A rated CDOs, which had a carrying value at 37% of par at September 30, 2009, and to a lesser degree the original BBB rated CDOs, which had a carrying value at 25% of par. The original AAA rated CDOs had a carrying value at 69% of par at September 30, 2009.

 (In millions)


                      September 30, 2009
             -------------------------------  % of carrying    Change
                   Par        Carrying value  value to par    9/30/09
 Original    --------------- --------------- ---------------     vs
  ratings     Amount    %     Amount    %    9/30/09 6/30/09  6/30/09
 --------    ------- ------- ------- ------- ------- -------  -------

   AAA       $ 1,153   52%   $   798   68%     69%     70%      -1%
    A            949   43%       353   30%     37%     49%      -12%
   BBB           113    5%        28    2%     25%     39%      -14%
             ------- ------- ------- -------
             $ 2,215  100%   $ 1,179  100%     53%     59%      -6%
             ======= ======= ======= =======

Noninterest Income

Noninterest income for the third quarter of 2009 was $270.7 million compared to $585.3 million for the second quarter of 2009 and $89.6 million for the third quarter of 2008. The decline for the third quarter of 2009 was due to unusual items in both the second and third quarters of 2009, including acquisition related gains of $146.2 million and fair value and nonhedge derivative income of $58.1 million in the third quarter, while the second quarter included $466.3 million of gains on swap termination and debt modification.

Fair value and nonhedge derivative income increased by $37.8 million to $58.1 million during the third quarter of 2009 compared to $20.3 million during the second quarter of 2009 mainly due to the recognition of hedge ineffectiveness primarily on cash flow hedges of floating rate loans. Interest rate swaps became ineffective as loan pools paid down or renewed with wider spreads.

Noninterest Expense

Noninterest expense for the third quarter of 2009 was $434.7 million compared to $419.5 million for the second quarter of 2009 and $372.3 million for the third quarter of 2008. FDIC premiums were $19.8 million for the third quarter of 2009 compared to $42.3 million for the second quarter of 2009; the second quarter premiums included a special assessment of $24.2 million. The provision for unfunded lending commitments increased to $36.5 million during the third quarter of 2009 compared to $7.9 million during the second quarter of 2009, primarily due to the Company's implementation of loss migration factors that are more weighted toward recent loss experience.

Conference Call

Zions will host a conference call to discuss these third quarter results at 5:30 p.m. ET this afternoon (October 19, 2009). Media representatives, analysts and the public are invited to listen to this discussion by calling 1-888-455-2308 (international: 719-457-1036) and entering the passcode 1851542, 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, October 19, 2009, until midnight ET on Monday, October 26, 2009, by dialing 1-888-203-1112 (international: 719-457-0820) and entering the passcode 1851542. The webcast of the conference call will also be archived and available for 30 days.

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.