ZIONS BANCORPORATION /UT/ - 10-Q Quarterly Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

o	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 0-2610

ZIONS BANCORPORATION
(Exact name of registrant as specified in its charter)

UTAH		87-0227400

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

ONE SOUTH MAIN, SUITE 1134
SALT LAKE CITY, UTAH		84111

(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (801) 524-4787

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 x

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x

No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, without par value, outstanding at May 2, 2003

90,141,139 shares

ZIONS BANCORPORATION AND SUBSIDIARIES

INDEX

				Page

PART I.		FINANCIAL INFORMATION

	ITEM 1.		Financial Statements (Unaudited)

			Consolidated Balance Sheets	3
			Consolidated Statements of Income	4
			Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income (Loss)	6
			Consolidated Statements of Cash Flows	7
			Notes to Consolidated Financial Statements	9

	ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

	ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk	27

	ITEM 4.		Controls and Procedures	27

PART II.		OTHER INFORMATION

	ITEM 1.		Legal Proceedings	27

	ITEM 6.		Exhibits and Reports on Form 8-K	27

SIGNATURES				29

CERTIFICATIONS				30

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)	March 31, 2003		December 31, 2002		March 31, 2002

	(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	1,087,910	$	1,087,296	$	906,611
Money market investments:
Interest-bearing deposits		1,189		1,690		5,238
Federal funds sold		454,168		96,077		38,752
Security resell agreements		693,623		444,995		287,101
Investment securities:
Held to maturity, at cost (approximate market value $0, $0, and $79,651)		—		—		78,584
Available for sale, at market		3,328,412		3,304,341		3,140,897
Trading account, at market (includes $197,257, $110,886, and $95,870 transferred as collateral under repurchase agreements)		336,005		331,610		284,308

		3,664,417		3,635,951		3,503,789
Loans:
Loans held for sale		227,101		289,499		206,758
Loans, leases and other receivables		18,994,438		18,843,006		17,750,667

		19,221,539		19,132,505		17,957,425
Less:
Unearned income and fees, net of related costs		90,621		92,662		103,257
Allowance for loan losses		280,533		279,593		264,107

Net loans		18,850,385		18,760,250		17,590,061
Other noninterest bearing investments		595,238		601,641		651,771
Premises and equipment, net		401,827		393,630		370,472
Goodwill		730,069		730,031		734,334
Core deposit and other intangibles		79,368		82,920		104,576
Other real estate owned		18,231		31,608		13,490
Other assets		632,309		699,600		598,383

	$	27,208,734	$	26,565,689	$	24,804,578

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	5,296,261	$	5,117,458	$	4,418,020
Interest-bearing:
Savings and money market		12,303,049		11,654,258		10,007,607
Time under $100,000		1,693,752		1,766,844		1,926,131
Time $100,000 and over		1,314,220		1,402,189		1,540,183
Foreign		193,723		191,231		108,401

		20,801,005		20,131,980		18,000,342
Securities sold, not yet purchased		221,936		203,838		188,894
Federal funds purchased		841,237		819,807		1,297,094
Security repurchase agreements		791,360		861,177		788,908
Accrued liabilities		479,778		535,044		450,323
Commercial paper		276,640		291,566		315,389
Federal Home Loan Bank advances and other borrowings:
One year or less		6,602		15,554		437,467
Over one year		239,958		240,698		241,219
Long-term debt		1,114,429		1,069,505		781,173

Total liabilities		24,772,945		24,169,169		22,500,809

Minority interest		23,285		22,677		20,769
Shareholders’ equity:
Capital stock:
Preferred stock, without par value; authorized 3,000,000 shares; issued and outstanding, none		—		—		—
Common stock, without par value; authorized 350,000,000 shares; issued and outstanding 90,215,449, 90,717,692, and 91,986,436 shares		1,012,532		1,034,888		1,092,735
Accumulated other comprehensive income		38,558		46,214		51,700
Retained earnings		1,361,414		1,292,741		1,138,565

Total shareholders’ equity		2,412,504		2,373,843		2,283,000

	$	27,208,734	$	26,565,689	$	24,804,578

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended March 31,

(In thousands, except per share amounts)	2003			2002

Interest income:
Interest and fees on loans	$	297,349		$	305,705
Interest on loans held for sale		2,505			2,736
Lease financing		4,534			5,668
Interest on money market investments		3,937			3,679
Interest on securities:
Held to maturity – taxable		—			798
Available for sale – taxable		28,220			34,628
Available for sale – nontaxable		7,293			6,342
Trading account		5,561			5,434

Total interest income		349,399			364,990

Interest expense:
Interest on savings and money market deposits		32,629			38,455
Interest on time and foreign deposits		20,988			33,390
Interest on borrowed funds		29,574			36,935

Total interest expense		83,191			108,780

Net interest income		266,208			256,210
Provision for loan losses		17,550			18,090

Net interest income after provision for loan losses		248,658			238,120

Noninterest income:
Service charges on deposit accounts		31,412			28,420
Loan sales and servicing income		18,467			6,926
Other service charges, commissions and fees		20,589			19,637
Trust income		5,128			4,413
Income from securities conduit		6,866			4,139
Dividends and other investment income		5,997			8,207
Market making, trading and nonhedge derivative income		9,872			15,435
Equity securities gains (losses), net		(5,904	)		621
Fixed income securities gains, net		135			43
Other		3,777			5,985

Total noninterest income		96,339			93,826

Noninterest expense:
Salaries and employee benefits		123,586			113,885
Occupancy, net		16,847			16,649
Furniture and equipment		15,783			16,228
Legal and professional services		4,922			5,602
Postage and supplies		6,665			7,164
Advertising		3,980			5,663
Amortization of core deposit and other intangibles		3,551			3,335
Other		38,630			36,728

Total noninterest expense		213,964			205,254

Income from continuing operations before income taxes and minority interest		131,033			126,692
Income taxes		46,394			44,025
Minority interest		(2,737	)		(150	)

Income from continuing operations		87,376			82,817

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Continued)
(Unaudited)

	Three Months Ended March 31,

(In thousands, except per share amounts)	2003		2002

Discontinued operations:
Income (loss) from operations of discontinued subsidiaries	$	552	$	(5,176	)
Income taxes (benefit)		224		(1,990	)

Income (loss) on discontinued operations		328		(3,186	)

Income before cumulative effect of change in accounting principle		87,704		79,631
Cumulative effect of change in accounting principle, net of tax (1)		—		(32,369	)

Net income	$	87,704	$	47,262

Weighted average shares outstanding during the period:
Basic shares		90,529		92,055
Diluted shares		90,648		92,814

Net income per common share:
Basic:
Income from continuing operations	$	0.96	$	0.90
Income (loss) on discontinued operations		0.01		(0.03	)
Cumulative effect of change in accounting principle		—		(0.35	)

Net income	$	0.97	$	0.52

Diluted:
Income from continuing operations	$	0.96	$	0.89
Income (loss) on discontinued operations		0.01		(0.03	)
Cumulative effect of change in accounting principle		—		(0.35	)

Net income	$	0.97	$	0.51

(1)	For the three months ended March 31, 2002, the cumulative effect adjustment relates to an impairment charge from the adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, net of income tax benefit of $2,676.

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	Three Months Ended March 31, 2003

			Accumulated Other Comprehensive Income (Loss)

(In thousands)	Common Stock			Net Unrealized Gains (Losses) on Investments and Retained Interests			Net Unrealized Gains on Derivative Instruments		Minimum Pension Liability			Subtotal			Retained Earnings			Total Shareholders’ Equity

Balance, January 1, 2003	$	1,034,888		$	44,151		$	25,420	$	(23,357	)	$	46,214		$	1,292,741		$	2,373,843
Comprehensive income:
Net income for the period																87,704			87,704
Other comprehensive income, net of tax:
Net realized and unrealized holding losses during the period, net of income tax benefit of $5,516					(8,905	)							(8,905	)
Reclassification for net realized gains recorded in operations, net of income tax expense of $350					(565	)							(565	)
Net unrealized gains on derivative instruments, net of reclassification to operations of $9,575 and income tax expense of $1,090								1,814					1,814

Other comprehensive income (loss)					(9,470	)		1,814					(7,656	)					(7,656	)

Total comprehensive income																			80,048
Cash dividends--common, $.21 per share																(19,031	)		(19,031	)
Stock redeemed and retired		(24,227	)																(24,227	)
Stock options exercised, net of shares tendered and retired		1,871																	1,871

Balance, March 31, 2003	$	1,012,532		$	34,681		$	27,234	$	(23,357	)	$	38,558		$	1,361,414		$	2,412,504

	Three Months Ended March 31, 2002

				Accumulated Other Comprehensive Income (Loss)

(In thousands)	Common Stock			Net Unrealized Gains (Losses) on Investments and Retained Interests			Net Unrealized Gains (Losses) on Derivative Instruments			Minimum Pension Liability	Subtotal			Retained Earnings			Total Shareholders’ Equity

Balance, January 1, 2002	$	1,111,214		$	31,774		$	28,177			$	59,951		$	1,109,704		$	2,280,869
Comprehensive income:
Net income for the period															47,262			47,262
Other comprehensive income, net of tax:
Net realized and unrealized holding gains during the period, net of income tax expense of $640					1,033							1,033
Reclassification for net realized gains recorded in operations, net of income tax expense of $16					(27	)						(27	)
Net unrealized losses on derivative instruments, net of reclassification to operations of $13,285 and income tax benefit of $5,734								(9,257	)			(9,257	)

Other comprehensive income (loss)					1,006			(9,257	)			(8,251	)					(8,251	)

Total comprehensive income																		39,011
Cash dividends--common, $.20 per share															(18,401	)		(18,401	)
Stock redeemed and retired		(25,302	)															(25,302	)
Stock options exercised, net of shares tendered and retired		6,823																6,823

Balance, March 31, 2002	$	1,092,735		$	32,780		$	18,920			$	51,700		$	1,138,565		$	2,283,000

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended March 31,

(In thousands)	2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	87,704		$	47,262
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of change in accounting principle, net of tax		—			32,369
Provision for loan losses		17,550			18,090
Depreciation of premises and equipment		14,105			15,133
Amortization		6,990			4,609
Accretion of unearned income and fees, net of related costs		(2,041	)		651
Loss to minority interest		(2,737	)		(150	)
Equity securities losses (gains), net		5,904			(621	)
Fixed income securities gains, net		(135	)		(43	)
Proceeds from sales of trading account securities		74,535,530			64,820,193
Increase in trading account securities		(74,539,925	)		(65,001,605	)
Proceeds from sales of loans held for sale		159,994			116,990
Increase in loans held for sale		(97,596	)		(25,789	)
Net losses (gains) on sales of loans, leases and other assets		(10,821	)		696
Change in accrued income taxes		14,772			36,917
Change in accrued interest receivable		2,146			26,062
Change in other assets		64,931			(16,133	)
Change in other liabilities		(67,343	)		(79,743	)
Change in accrued interest payable		2,369			12,501
Other, net		4,016			1,867

Net cash provided by operating activities		195,413			9,256

CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in money market investments		(606,218	)		(48,511	)
Proceeds from maturities of investment securities held to maturity		—			948
Proceeds from sales of investment securities available for sale		2,241,245			5,124,533
Proceeds from maturities of investment securities available for sale		290,674			203,233
Purchases of investment securities available for sale		(2,549,627	)		(5,176,740	)
Proceeds from sales of loans and leases		107,996			177,860
Net increase in loans and leases		(272,418	)		(845,825	)
Payments on leveraged leases		(5,438	)		(5,585	)
Principal collections on leveraged leases		5,438			5,585
Proceeds from sales of premises and equipment		1,129			814
Purchases of premises and equipment		(23,557	)		(18,672	)
Proceeds from sales of other assets		19,119			4,167
Net cash paid for net liabilities on branches sold		—			(19,674	)

Net cash used in investing activities		(791,657	)		(597,867	)

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)

	Three Months Ended March 31,

(In thousands)	2003			2002

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	$	650,553		$	241,491
Net change in short-term funds borrowed		(54,167	)		312,494
Proceeds from FHLB advances over one year		—			1,500
Payments on FHLB advances over one year		(740	)		(739	)
Proceeds from issuance of long-term debt		49,902			—
Payments on long-term debt		(6,981	)		(169	)
Proceeds from issuance of common stock		1,549			5,739
Payments to redeem common stock		(24,227	)		(25,302	)
Dividends paid		(19,031	)		(18,401	)

Net cash provided by financing activities		596,858			516,613

Net increase (decrease) in cash and due from banks		614			(71,998	)
Cash and due from banks at beginning of period		1,087,296			978,609

Cash and due from banks at end of period	$	1,087,910		$	906,611

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	82,733		$	81,636
Income taxes		26,071			1,785
Loans transferred to other real estate owned		6,285			7,693

ZIONS BANCORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

March 31, 2003

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior period amounts have been reclassified to conform to the current financial statement presentation.

Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that may be expected for the year ended December 31, 2003. The balance sheet at December 31, 2002 is from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in Zions Bancorporation’s Annual Report on Form 10-K for the year ended December 31, 2002.

2. STOCK-BASED COMPENSATION

In December 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. This Statement provides guidance to transition from the intrinsic value method of accounting for stock-based compensation under Accounting Principles Board Opinion 25 (“APB 25”), Accounting for Stock Issued to Employees, to the fair value method of accounting, if a company so elects, under SFAS 123, Accounting for Stock-Based Compensation. SFAS 148 also contains new requirements for disclosing the impact of applying the fair value method of SFAS 123.

The Company continues to account for its stock-based compensation plans based on the intrinsic value method under APB 25. Accordingly, no compensation expense has been recorded, as the exercise price of the stock was equal to its quoted market price on the date of grant.

ZIONS BANCORPORATION AND SUBSIDIARIES

The following disclosure required by SFAS 148 illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation (in thousands, except per share amounts):

	Three Months Ended March 31,

	2003			2002

Net income, as reported	$	87,704		$	47,262
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(5,383	)		(4,403	)

Pro forma net income	$	82,321		$	42,859

Earnings per share:
Basic - as reported	$	0.97		$	0.52
Basic - pro forma		0.91			0.47

Diluted - as reported		0.97			0.51
Diluted - pro forma		0.91			0.46

3. GUARANTEES

In November 2002, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The disclosure requirements of FIN 45 were effective for the Company as of December 31, 2002 and required disclosure of the nature of the guarantee, the maximum potential amount of future payments that the guarantor could be required to make under the guarantee, and the current amount of the liability, if any, for the guarantor’s obligations under the guarantee. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The adoption of FIN 45 did not have any significant effect on the financial position or operations of the Company.

Financial and performance standby letters of credit are guarantees issued by the Company that come under the provisions of FIN 45. Total amounts of these guarantees are as follows (in thousands):

	March 31,

	2003		2002

Standby letters of credit:
Performance	$	90,414	$	80,613
Financial		287,017		203,196

	$	377,431	$	283,809

ZIONS BANCORPORATION AND SUBSIDIARIES

These letters of credit are conditional commitments issued by the Company 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. Terms of the guarantees can be as short as 30 days or as long as generally 5 years. The credit risk involved in issuing these guarantees is essentially the same as that involved in extending loan facilities to customers. The Company generally holds marketable securities and cash equivalents as collateral supporting those commitments for which collateral is deemed necessary. At March 31, 2003, the carrying value recorded by the Company as a liability for these guarantees was $2.5 million.

At March 31, 2003, the Company has guaranteed approximately $706 million of debt issued by various subsidiaries.

Zions First National Bank provides a liquidity facility for a fee to a qualified special purpose entity securities conduit (“conduit”). At March 31, 2003, the size of this liquidity facility was $5.1 billion. The conduit purchases U.S. Government and AAA rated securities. These assets are funded through the issuance of commercial paper. Pursuant to the liquidity contract, ZFNB is required to purchase securities from the conduit to provide funds for the conduit to repay maturing commercial paper upon the conduit’s inability to access the commercial paper market or upon a commercial paper market disruption as specified in governing documents to the conduit. At March 31, 2003, no amounts were outstanding under this liquidity facility and the market value of the conduit’s securities portfolio was approximately $3.9 billion.

4. ACCOUNTING FOR VARIABLE INTEREST ENTITIES

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 provides guidance on identifying a variable interest entity (“VIE”) and determining when the assets, liabilities, noncontrolling interests, and results of operations of a VIE are to be included in a company’s consolidated financial statements. FIN 46 also requires additional disclosures by primary beneficiaries and other significant variable interest holders. The provisions of FIN 46 are required immediately for companies with an interest in a VIE created after January 31, 2003. A public company with an interest in a VIE created before February 1, 2003 must apply the provisions of FIN 46 as of the beginning of the first interim or annual reporting period beginning after June 15, 2003.

Zions First National Bank holds variable interests in securitization structures as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. All such structures are qualified special purpose entities, which are exempt from the consolidation requirements of FIN 46. The Company is currently assessing the impact that FIN 46 may have on one VIE. The impact, if any, is not expected to be significant.

ZIONS BANCORPORATION AND SUBSIDIARIES

5. OPERATING SEGMENT INFORMATION

The Company manages its operations and prepares management reports with a primary focus on geographical area. All segments presented, except for the segment defined as “Other,” are based on commercial banking operations. Zions First National Bank operates 124 branches in Utah and 22 in Idaho. California Bank & Trust operates 90 branches in Northern and Southern California. Nevada State Bank operates 63 branches in Nevada. National Bank of Arizona operates 52 branches in Arizona. Vectra Bank Colorado operates 54 branches in Colorado and one branch in New Mexico. The Commerce Bank of Washington operates one branch in the state of Washington. The operating segment identified as “Other” includes the parent company, certain e-commerce subsidiaries, other smaller nonbank operating units, and eliminations of transactions between segments.

The accounting policies of the individual segments are the same as those of the Company. The Company allocates centrally provided services to the business segments based upon estimated usage of those services. The Company initiated a program in 2002 to allocate income between certain of its banking subsidiaries to better match revenues from hedging strategies to the operating units which gave rise to the exposures being hedged. Allocated income (expense) from this program included in net interest income of the banking subsidiaries for the three months ended March 31, 2003 and 2002, respectively, is as follows: Zions First National Bank – $(7.4) million and $(11.3) million, Nevada State Bank – $0.8 million and $3.4 million, National Bank of Arizona – $1.9 million and $1.8 million, Vectra Bank Colorado – $3.5 million and $5.2 million, and The Commerce Bank of Washington – $1.2 million and $0.9 million. The Company changed the method by which it allocates this hedge program income (expense) effective January 1, 2003; therefore, the amounts allocated to each segment in the quarters ended March 31, 2003 and March 31, 2002 are not directly comparable. Further, the amount of allocated hedge income is expected to decrease in subsequent quarters as the underlying hedges mature and new hedges are being recorded directly at the banking subsidiaries.

ZIONS BANCORPORATION AND SUBSIDIARIES

The following table presents selected operating segment information for the three months ended March 31, 2003 and 2002:

	Zions First National Bank and Subsidiaries					California Bank & Trust				Nevada State Bank				National Bank of Arizona

(In millions)	2003			2002		2003		2002		2003		2002		2003		2002

CONDENSED INCOME STATEMENT
Net interest income	$	84.1		$	75.9	$	94.8	$	92.6	$	29.6	$	31.9	$	30.2	$	27.2
Provision for loan losses		12.0			11.3		2.2		4.0		2.0		1.0		—		0.6

Net interest income after provision for loan losses		72.1			64.6		92.6		88.6		27.6		30.9		30.2		26.6
Noninterest income		56.7			50.2		18.2		20.9		7.1		6.8		5.5		4.8
Noninterest expense		75.0			72.6		57.9		59.4		21.2		20.1		19.8		16.0

Income from continuing operations before income taxes and minority interest		53.8			42.2		52.9		50.1		13.5		17.6		15.9		15.4
Income tax expense (benefit)		17.1			14.1		21.2		20.5		4.6		6.0		6.4		6.1
Minority interest		(0.1	)		—		—		—		—		—		—		—

Income from continuing operations		36.8			28.1		31.7		29.6		8.9		11.6		9.5		9.3
Income (loss) on discontinued operations		—			—		—		—		—		—		—		—

Income before cumulative effect adjustment		36.8			28.1		31.7		29.6		8.9		11.6		9.5		9.3
Cumulative effect adjustment		—			—		—		—		—		—		—		—

Net income (loss)	$	36.8		$	28.1	$	31.7	$	29.6	$	8.9	$	11.6	$	9.5	$	9.3

AVERAGE BALANCE SHEET DATA
Assets	$	11,453		$	10,010	$	8,716	$	8,346	$	2,726	$	2,489	$	2,783	$	2,600
Net loans and leases		6,706			6,263		6,117		5,717		1,850		1,556		1,973		1,804
Deposits		7,087			5,289		6,936		6,734		2,388		2,140		2,346		2,180
Shareholder’s equity		679			646		998		1,007		172		162		232		215

	Vectra Bank Colorado				The Commerce Bank of Washington				Other						Consolidated Company

(In millions)	2003		2002		2003		2002		2003			2002			2003			2002

CONDENSED INCOME STATEMENT
Net interest income	$	24.0	$	27.2	$	5.7	$	5.5	$	(2.2	)	$	(4.1	)	$	266.2		$	256.2
Provision for loan losses		1.4		0.9		—		0.3		—			—			17.6			18.1

Net interest income after provision for loan losses		22.6		26.3		5.7		5.2		(2.2	)		(4.1	)		248.6			238.1
Noninterest income		9.3		7.4		0.4		0.4		(0.9	)		3.3			96.3			93.8
Noninterest expense		25.3		25.2		3.0		2.5		11.7			9.4			213.9			205.2

Income from continuing operations before income taxes and minority interest		6.6		8.5		3.1		3.1		(14.8	)		(10.2	)		131.0			126.7
Income tax expense (benefit)		2.3		2.9		1.1		1.1		(6.4	)		(6.7	)		46.3			44.0
Minority interest		—		—		—		—		(2.6	)		(0.1	)		(2.7	)		(0.1	)

Income from continuing operations		4.3		5.6		2.0		2.0		(5.8	)		(3.4	)		87.4			82.8
Income (loss) on discontinued operations		—		—		—		—		0.3			(3.1	)		0.3			(3.1	)

Income before cumulative effect adjustment		4.3		5.6		2.0		2.0		(5.5	)		(6.5	)		87.7			79.7
Cumulative effect adjustment		—		—		—		—		—			(32.4	)		—			(32.4	)

Net income (loss)	$	4.3	$	5.6	$	2.0	$	2.0	$	(5.5	)	$	(38.9	)	$	87.7		$	47.3

AVERAGE BALANCE SHEET DATA
Assets	$	2,753	$	2,588	$	626	$	523	$	(1,743	)	$	(877	)	$	27,314		$	25,679
Net loans and leases		1,868		1,822		312		288		139			89			18,965			17,539
Deposits		1,903		1,718		434		370		(1,175	)		(756	)		19,919			17,675
Shareholder’s equity		441		439		46		39		(166	)		(237	)		2,402			2,271

ZIONS BANCORPORATION AND SUBSIDIARIES

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL HIGHLIGHTS
(Unaudited)

	Three Months Ended March 31,

(In thousands, except per share and ratio data)	2003			2002			%Change

EARNINGS
Taxable-equivalent net interest income	$	271,980		$	261,305			4.09	%
Net interest income		266,208			256,210			3.90	%
Noninterest income		96,339			93,826			2.68	%
Provision for loan losses		17,550			18,090			(2.99	)%
Noninterest expense		213,964			205,254			4.24	%
Income before income taxes and minority interest		131,033			126,692			3.43	%
Income taxes		46,394			44,025			5.38	%
Minority interest		(2,737	)		(150	)		1,724.67	%
Income from continuing operations		87,376			82,817			5.50	%
Income (loss) on discontinued operations		328			(3,186	)		110.30	%
Cumulative effect of change in accounting principle		—			(32,369	)		100.00	%
Net income		87,704			47,262			85.57	%

PER COMMON SHARE
Net income (diluted)		0.97			0.51			90.20	%
Income from continuing operations (diluted)		0.96			0.89			7.87	%
Income (loss) on discontinued operations (diluted)		0.01			(0.03	)		133.33	%
Dividends		0.21			0.20			5.00	%
Book value		26.74			24.82			7.74	%

SELECTED RATIOS
Return on average assets		1.30	%		0.75	%
Return on average common equity		14.81	%		8.44	%
Efficiency ratio		58.11	%		59.48	%
Net interest margin		4.54	%		4.70	%

ZIONS BANCORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (Continued)
(Unaudited)

	Three Months Ended March 31,

(In thousands, except share and ratio data)	2003			2002			% Change

AVERAGE BALANCES
Total assets	$	27,313,646		$	25,679,029		6.37	%
Securities		3,911,833			4,079,827		(4.12	)%
Net loans and leases		18,964,880			17,538,937		8.13	%
Goodwill		730,101			735,194		(0.69	)%
Core deposit and other intangibles		81,731			107,202		(23.76	)%
Total deposits		19,918,741			17,675,111		12.69	%
Minority interest		22,981			18,546		23.91	%
Shareholders’ equity		2,402,132			2,270,697		5.79	%

Weighted average common and common-equivalent shares outstanding		90,647,613			92,813,828		(2.33	)%

AT PERIOD END
Total assets	$	27,208,734		$	24,804,578		9.69	%
Securities		3,664,417			3,503,789		4.58	%
Net loans and leases		19,130,918			17,854,168		7.15	%
Sold loans being serviced		2,401,930			2,526,076		(4.91	)%
Allowance for loan losses		280,533			264,107		6.22	%
Goodwill		730,069			734,334		(0.58	)%
Core deposit and other intangibles		79,368			104,576		(24.10	)%
Total deposits		20,801,005			18,000,342		15.56	%
Minority interest		23,285			20,769		12.11	%
Shareholders’ equity		2,412,504			2,283,000		5.67	%

Common shares outstanding		90,215,449			91,986,436		(1.93	)%

Average equity to average assets		8.79	%		8.84	%
Common dividend payout		21.70	%		38.93	%
Nonperforming assets		107,381			131,154		(18.13	)%
Loans past due 90 days or more		49,806			37,371		33.27	%
Nonperforming assets to net loans and leases, other real estate owned and other nonperforming assets at period end		0.56	%		0.73	%

ZIONS BANCORPORATION AND SUBSIDIARIES

OPERATING RESULTS

Zions Bancorporation and subsidiaries (“the Company”) achieved net income of $87.7 million, or $0.97 per diluted share for the first quarter of 2003, an increase of 85.6% and 90.2%, respectively, over the $47.3 million, or $0.51 per diluted share, in the first quarter of 2002. Net income for the first quarter of 2002 included an impairment charge of $32.4 million, or $0.35 per diluted share, recognized as a cumulative effect adjustment, from the required adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142. This impairment charge resulted from an adjustment to the carrying value of the Company’s investments in certain e-commerce subsidiaries. Also included in net income for the first quarter of 2002 was a loss from discontinued operations of $3.2 million, or $0.03 per diluted share. For the same comparative periods, income from continuing operations was $87.4 million, or $0.96 per diluted share, an increase of 5.5% and 7.9 %, respectively, over $82.8 million or $0.89 per diluted share.

The improved earnings for the first quarter of 2003 compared to the first quarter of 2002 reflect the results of several actions commenced by Company management during 2002. As discussed in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, the Company exited and restructured several e-commerce activities during 2002 in light of disappointing results and the difficult e-commerce market environment. The first quarter of 2002 included after-tax losses of approximately $5.6 million, or $0.06 per diluted share, from these e-commerce activities, excluding the impairment charges previously discussed, compared to after-tax losses of approximately $0.4 million for the first quarter of 2003. The Company also increased efforts during 2002 to control expenses and announced its intent to reduce by $50 million the annual run-rate of expenses by mid-2003. Actions taken by management to control expenses include the e-commerce restructuring activities, branch closures, operations consolidation and efforts to improve procurement processes.

The annualized return on average assets was 1.30% in the first quarter of 2003 compared to 0.75% in the first quarter of 2002. For the same comparative periods, the annualized return on average common equity was 14.81% compared to 8.44%. These comparisons reflect the 2002 cumulative effect adjustment and discontinued operations previously discussed. In addition, the efficiency ratio, defined as the percentage of noninterest expenses to the sum of taxable-equivalent net interest income and noninterest income, improved to 58.11% compared to 59.48%.

NET INTEREST INCOME AND INTEREST RATE SPREADS

Net interest income for the first quarter of 2003, adjusted to a fully taxable-equivalent basis, increased 4.1% to $272.0 million compared to $261.3 million for the first quarter of 2002. Net interest margin decreased to 4.54% for the first quarter of 2003, compared to 4.70% for the first quarter of 2002. However, it increased from 4.41% for the fourth quarter of 2002 due to increased interest rate swap income, reductions in deposit rates, a reduction in the average balances of low yielding money market investments, and the effect of the auto loan and credit card securitizations repurchased in December 2002.

The yield on average earning assets decreased 73 basis points during the first quarter of 2003 compared to the first quarter of 2002. The average rate paid this quarter on interest-bearing funds decreased 64 basis points from the first quarter of 2002. The spread on average interest-bearing funds for the first quarter of 2003 was 4.21%, down from 4.30% for the first quarter of 2002, and up from 4.01% for the fourth quarter of 2002.

ZIONS BANCORPORATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES
(Unaudited)

	Three Months Ended March 31, 2003							Three Months Ended March 31, 2002
(In thousands)	Average Balance			Amount of Interest (1)		Average Rate		Average Balance			Amount of Interest (1)		Average Rate
ASSETS
Money market investments	$	1,402,979		$	3,937	1.14	%	$	930,734		$	3,686	1.61	%
Securities:
Held to maturity		—			—				79,143			798	4.09	%
Available for sale		3,259,889			39,440	4.91	%		3,349,833			44,385	5.37	%
Trading account		651,944			5,561	3.46	%		650,851			5,434	3.39	%

Total securities		3,911,833			45,001	4.67	%		4,079,827			50,617	5.03	%

Loans:
Loans held for sale		250,388			2,505	4.06	%		214,328			2,736	5.18	%
Net loans and leases (2)		18,714,492			303,728	6.58	%		17,324,609			313,048	7.33	%

Total loans and leases		18,964,880			306,233	6.55	%		17,538,937			315,784	7.30	%

Total interest-earning assets		24,279,692			355,171	5.93	%		22,549,498			370,087	6.66	%

Cash and due from banks		910,849							976,923
Allowance for loan losses		(281,264	)						(264,053	)
Goodwill		730,101							735,194
Core deposit and other intangibles		81,731							107,202
Other assets		1,592,537							1,574,265

Total assets	$	27,313,646						$	25,679,029

LIABILITIES
Interest-bearing deposits:
Savings and NOW	$	2,768,128			5,015	0.73	%	$	2,351,800			6,074	1.05	%
Money market super NOW		9,044,349			27,614	1.24	%		7,348,527			32,381	1.79	%
Time under $100,000		1,741,121			11,225	2.61	%		2,024,253			18,484	3.70	%
Time $100,000 and over		1,321,938			9,265	2.84	%		1,592,229			14,518	3.70	%
Foreign		189,535			498	1.07	%		101,258			388	1.55	%

Total interest-bearing deposits		15,065,071			53,617	1.44	%		13,418,067			71,845	2.17	%

Borrowed funds:
Securities sold, not yet purchased		481,990			4,654	3.92	%		392,271			3,702	3.83	%
Federal funds purchased and security repurchase agreements		2,422,087			6,447	1.08	%		3,127,698			12,893	1.67	%
Commercial paper		293,259			1,120	1.55	%		357,147			1,886	2.14	%
FHLB advances and other borrowings:
One year or less		7,178			34	1.92	%		394,901			1,809	1.86	%
Over one year		240,245			3,151	5.32	%		227,508			2,832	5.05	%
Long-term debt		1,099,333			14,168	5.23	%		793,828			13,815	7.06	%

Total borrowed funds		4,544,092			29,574	2.64	%		5,293,353			36,937	2.83	%

Total interest-bearing liabilities		19,609,163			83,191	1.72	%		18,711,420			108,782	2.36	%

Noninterest-bearing deposits		4,853,670							4,257,044
Other liabilities		425,700							421,322

Total liabilities		24,888,533							23,389,786
Minority interest		22,981							18,546
Total shareholders’ equity		2,402,132							2,270,697

Total liabilities and shareholders’ equity	$	27,313,646						$	25,679,029

Spread on average interest-bearing funds						4.21	%						4.30	%
Taxable-equivalent net interest income and net yield on interest-earning assets				$	271,980	4.54	%				$	261,305	4.70	%

(1) Taxable-equivalent rates used where applicable.

(2) Net of unearned income and fees, net of related costs. Loans include nonaccrual and restructured loans.

ZIONS BANCORPORATION AND SUBSIDIARIES

PROVISION FOR LOAN LOSSES

The provision for loan losses was $17.6 million for the first quarter of 2003, compared to $15.8 million for the fourth quarter of 2002, and $18.1 million for the first quarter of 2002. Annualized, the provision is 0.38% of average loans for the first quarter of 2003, 0.34% for the fourth quarter of 2002, and 0.42% for the first quarter of 2002. The increased provision for the first quarter of 2003 compared to the fourth quarter of 2002 reflects management’s evaluation of its various portfolios, higher net loan losses, statistical trends and other economic factors, and its desire to maintain a strong coverage of nonperforming assets in a continued uncertain economic environment in the markets in which the Company operates. Further discussion is included in the Risk Elements and Allowance for Loan Losses sections following.

NONINTEREST INCOME

Noninterest income for the first quarter of 2003 of $96.3 million increased 2.7% from $93.8 million for the first quarter of 2002. Comparing the significant segments of the change, service charges on deposit accounts increased 10.5%, loan sales and servicing income increased 166.6%, other service charges, commissions and fees increased 4.8%, income from securities conduit increased 65.9%, dividends and other investment income decreased 26.9%, market making, trading and nonhedge derivative income decreased 36.0%, equity securities gains (losses) decreased 1,050.7%, and other noninterest income decreased 36.9%.

The increase in service charges on deposit accounts resulted mainly from increased internal core deposit growth. During the first quarter of 2002, the Company restructured certain derivatives related to loans. The restructuring resulted in a $13.6 million decrease in loan sales and servicing income and a corresponding increase in nonhedge derivative income. Without this transaction, loan sales and servicing income would have been approximately $20.5 million in the first quarter of 2002, compared to $18.5 million in the first quarter of 2003. In December 2002, the Company repurchased revolving auto loan and credit card securitizations resulting in a reclassification of income from loan sales and servicing income to interest income. Market making, trading and nonhedge derivative income was $9.9 million in the first quarter of 2003 compared to $1.8 million in the first quarter of 2002, excluding the $13.6 million adjustment. Trading income for 2003 was $6.2 million compared to $4.0 million for 2002 and nonhedge derivative income was $3.7 million compared to a loss of $2.2 million for 2002, excluding the $13.6 million adjustment. The increase in trading income reflects increased revenues from the Company’s electronic corporate bond trading business. Nonhedge derivative income for 2003 included fair value increases of $2.1 million compared to a decrease in the fair value of nonhedge derivatives of $6.7 million in 2002.

The increase in income from securities conduit resulted from the increased amount of securities in the conduit’s portfolio, which resulted in increased fees from providing liquidity, an interest rate agreement, and administrative services for the conduit. Dividends and other investment income consist of income from the Company’s bank-owned life insurance and dividends and equity in earnings from investments in unconsolidated companies. The decrease in dividends and other investment income results mainly from a $1.4 million decrease in dividend income from Federal Home Loan Bank (“FHLB”) investments resulting from decreased investments in FHLB stock and a $1.4 million decrease in equity in earning of unconsolidated companies. The decrease in equity securities gains (losses) results from $6.7 million of losses from investments made by venture capital funds (partially offset by $0.8 million of gains realized on the sale of marketable equity securities) compared to venture capital gains of $0.6 million in 2002. Net of minority interest and income taxes, the results of the venture capital funds reduced net income by approximately $3.0 million or $.03 per share in the first quarter of 2003.

The decrease in other income is explained principally by a pretax gain in 2002 from the sales of three

ZIONS BANCORPORATION AND SUBSIDIARIES

California branches for approximately $3.2 million, net of nondeductible goodwill write downs allocated to the branches sold. The after-tax gain from the sales was approximately $1.4 million.

NONINTEREST EXPENSE

Noninterest expense for the first quarter of 2003 of $214.0 million increased $8.7 million or 4.2% over $205.3 million for the first quarter of 2002. Comparing significant components of this change, salaries and employee benefits increased $9.7 million or 8.5%, legal and professional fees decreased 12.1%, postage and supplies decreased 7.0%, advertising decreased 29.7%, amortization of core deposit and other intangibles increased 6.5%, and the total of all other noninterest expenses increased 2.4%.

The increase in salaries and employee benefits includes an increase in the first quarter of 2003 of $3.6 million in employee health insurance costs and an increase of $3.0 million in retirement plan expenses. The decrease in legal and professional fees, postage and supplies, advertising, and the modest increase in other expense categories reflect the Company’s cost containment measures previously discussed.

At March 31, 2003, the Company had 7,914 full-time equivalent employees, 407 branches, and 579 ATMs, compared to 8,255 full-time equivalent employees, 408 branches, and 587 ATMs at March 31, 2002.

INCOME TAXES

The Company’s income taxes on continuing operations increased 5.4% to $46.4 million for the first quarter of 2003 compared to $44.0 million for the first quarter of 2002. The Company’s effective income tax rate was 35.4% for the first quarter of 2003 compared to 34.7% for the first quarter of 2002.

DISCONTINUED OPERATIONS

During the third quarter of 2002, the Company decided to discontinue the operations of certain e-commerce subsidiaries. The Company determined that its plan to offer all or part of these subsidiaries for sale met the held for sale and discontinued operations criteria of SFAS 144. The results of operations for the first quarter of 2002 were reclassified to reflect the discontinued operations of these subsidiaries.

The improvement in income (loss) on discontinued operations for the first quarter of 2003 compared to 2002 results mainly from the sale of one of the subsidiaries in December 2002 and significantly curtailed operations of the remaining subsidiary.

ANALYSIS OF FINANCIAL CONDITION

EARNING ASSETS

Average earning assets increased 7.7% to $24,280 million for the three months ended March 31, 2003 compared to $22,549 million for the three months ended March 31, 2002. Earning assets comprised 88.9% of total average assets for the first three months of 2003, compared with 87.8% for the first three months of 2002.

Average money market investments, consisting of interest-bearing deposits, federal funds sold and security resell agreements, increased 50.7% to $1,403 million for the first three months of 2003 compared to $931 million for the first three months of 2002. This increase resulted from a significant acceleration in the rate of deposit growth, particularly in the second half of 2002, relative to loan growth.

ZIONS BANCORPORATION AND SUBSIDIARIES

Average securities decreased 4.1% to $3,912 million for the first three months of 2003 compared to $4,080 million for the first three months of 2002. Average investment portfolio securities decreased 4.9% and average trading securities increased 0.2%.

Average net loans and leases increased 8.1% to $18,965 million for the first three months of 2003 compared to $17,539 million for the first three months of 2002, representing 78.1% of earning assets in the first three months of 2003 compared to 77.8% in the first three months of 2002. Average net loans and leases were 95.2% of average total deposits for the first three months of 2003 compared to 99.2% for the first three months of 2002.

INVESTMENT SECURITIES

The following table presents the Company’s held-to-maturity and available-for-sale investment securities:

	March 31, 2003				December 31, 2002				March 31, 2002

(In millions)	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value

HELD TO MATURITY
Mortgage-backed securities	$	—	$	—	$	—	$	—	$	79	$	80

AVAILABLE FOR SALE
U.S. Treasury securities		36		38		44		47		56		57
U.S. government agencies and corporations:
Small Business Administration loan-backed securities		757		760		752		756		706		707
Other agency securities		341		342		299		302		709		713
States and political subdivisions		666		670		640		645		530		537
Mortgage/asset-backed and other debt securities		1,306		1,326		1,187		1,208		851		856

		3,106		3,136		2,922		2,958		2,852		2,870

Equity securities:
Mutual funds		168		172		317		321		234		238
Stock		15		20		15		25		16		33

		183		192		332		346		250		271

		3,289		3,328		3,254		3,304		3,102		3,141

Total	$	3,289	$	3,328	$	3,254	$	3,304	$	3,181	$	3,221

LOANS

The Company has structured its organization to separate the lending function from the credit administration function to strengthen the control and independent evaluation of credit activities. Loan policies and procedures provide the Company with a framework for consistent underwriting and a basis for sound credit decisions. In addition, the Company has well-defined standards for grading its loan portfolio, and management utilizes the comprehensive loan grading system to determine risk potential in the portfolio. Another aspect of the Company’s credit risk management strategy is the diversification of the loan portfolio. The Company has a diversified loan portfolio with some emphasis in real estate (as set forth in the following table), but has no significant exposure to highly leveraged transactions. The commercial real estate loan portfolio is also well diversified by property type and collateral location.

ZIONS BANCORPORATION AND SUBSIDIARIES

The table below sets forth the amount of loans outstanding by type:

(In millions)	March 31, 2003		December 31, 2002		March 31, 2002

Loans held for sale	$	227	$	289	$	207
Commercial lending:
Commercial and industrial		4,052		4,124		3,893
Leasing		372		384		408
Owner occupied		3,182		3,018		2,520

Total commercial lending		7,606		7,526		6,821
Commercial real estate:
Construction		2,991		2,947		2,939
Term		3,293		3,175		3,227

Total commercial real estate		6,284		6,122		6,166
Consumer:
Home equity credit line		703		651		454
1-4 family residential		3,191		3,209		3,374
Bankcard and other revolving plans (1)		182		205		116
Other (2)		934		1,000		726

Total consumer		5,010		5,065		4,670
Foreign loans		20		5		24
Other receivables		75		126		69

Total loans	$	19,222	$	19,133	$	17,957

(1)	The increase in Bankcard and other revolving plans from 03/31/02 to 12/31/02 includes $68.5 million in credit card receivables repurchased from securitizations in December 2002.
(2)	The increase in Other consumer loans from 03/31/02 to 12/31/02 includes $361.7 million in auto loans repurchased from securitizations in December 2002.

Loan growth for the quarter was modest reflecting the soft economy and the Company’s caution regarding aggressive loan growth in the current economic environment. On-balance-sheet net loans and leases at March 31, 2003 were $19,131 million, an increase of 7.2% from March 31, 2002 and an annualized increase of 1.9% from December 31, 2002. On balance sheet and sold loans being serviced were $21,533 million at March 31, 2003, an increase of 5.7% from March 31, 2002 and an annualized increase of 0.3% from balances reported at December 31, 2002.

On March 31, 2003, long-term conforming first mortgage real estate loans serviced for others totaled $375 million, and consumer and other loan securitizations, which include loans sold under revolving securitization structures, totaled $2,402 million. During the first three months of 2003, the Company sold $160 million of loans classified in held for sale, and securitized and sold home equity credit line and other loans totaling $98 million. During the first three months of 2003, total loans sold were $258 million compared to total loans sold of $296 million during the first three months of 2002.

As of March 31, 2003, the following table shows that the Company had residual interests of $242 million recorded on its balance sheet related to the $2,402 million of loans sold to securitized trusts. The Company does not control or have any equity interest in the trusts. However, as is common with securitized transactions, the Company has retained subordinated interests of $144 million representing the Company’s junior position to other investors in the securities. The capitalized residual cash flows (sometimes called

ZIONS BANCORPORATION AND SUBSIDIARIES

“excess servicing”) of $98 million principally represent the present value of estimated excess cash flows over the life of the sold loans. These excess cash flows are subject to prepayment and credit risk.

	Sold loans being serviced				Residual interests on balance sheet at March 31, 2003

(In millions)	Sales for three months ended March 31, 2003		Outstanding balance at March 31, 2003		Subordinated retained interests		Capitalized residual cash flows		Total

Home equity credit lines	$	78	$	447	$	11	$	9	$	20
Nonconforming residential real estate loans		—		55		3		1		4
Small business loans		—		1,304		130		82		212
SBA 7(a) loans		—		187		—		1		1
Farmer Mac		20		409		—		5		5

Total	$	98	$	2,402	$	144	$	98	$	242

RISK ELEMENTS

The following table sets forth the Company’s nonperforming assets:

(In millions)	March 31, 2003			December 31, 2002			March 31, 2002

Nonaccrual loans	$	87		$	82		$	116
Restructured loans		2			2			1
Other real estate owned and other nonperforming assets		18			32			14

Total	$	107		$	116		$	131

% of net loans and leases*, other real estate owned and other nonperforming assets		0.56	%		0.61	%		0.73	%

Accruing loans past due 90 days or more	$	50		$	37		$	37

% of net loans and leases*		0.26	%		0.20	%		0.21	%

*Includes loans held for sale

For the first quarter of 2003, the Company experienced improving credit quality performance in a weak economic environment in certain of the Company’s markets. Other real estate owned and other nonperforming assets decreased from December 31, 2002 due primarily to the sale of an office building in Seattle and a retail location in Arizona. The increase in accruing loans past due 90 days or more was due primarily to two credits; subsequent to March 31, 2003, one credit has been repaid and the other has been placed on nonaccrual status.

The Company’s total recorded investment in impaired loans included in nonaccrual loans and leases amounted to $46 million on March 31, 2003 compared to $44 million on December 31, 2002 and $69 million on March 31, 2002. Loans are considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. The amount of the impairment is measured based on the present value of expected cash flows, the observable market price of the loan, or the fair value of the collateral. Impairment losses are recognized by creating or adjusting an existing allocation of the allowance for loan losses. Included in the allowance for

ZIONS BANCORPORATION AND SUBSIDIARIES

loan losses on March 31, 2003, December 31, 2002, and March 31, 2002, is a required allowance of $4 million, $7 million and $9 million, respectively, on $14 million, $20 million and $28 million, respectively, of the recorded investment in impaired loans.

ALLOWANCE FOR LOAN LOSSES

The following table shows the changes in the allowance for loan losses and a summary of loan loss experience:

(In millions)	Three Months Ended March 31, 2003			Twelve Months Ended December 31, 2002			Three Months Ended March 31, 2002

Loans* and leases outstanding (net of unearned income) at end of period	$	19,131		$	19,040		$	17,854

Average loans* and leases outstanding (net of unearned income)	$	18,965		$	18,114		$	17,539

Allowance for loan losses:
Balance at beginning of year	$	280		$	260		$	260
Allowance of companies acquired		—			1			—
Allowance associated with repurchased revolving securitized loans		—			10			—
Provision charged against earnings		18			72			18
Loans and leases charged-off:
Commercial lending		(12	)		(54	)		(13	)
Commercial real estate		—			(10	)		(2	)
Consumer		(8	)		(20	)		(4	)

Total		(20	)		(84	)		(19	)

Recoveries:
Commercial lending		2			14			4
Commercial real estate		—			3			—
Consumer		1			4			1

Total		3			21			5

Net loan and lease charge-offs		(17	)		(63	)		(14	)

Balance at end of period	$	281		$	280		$	264

Ratio of annualized net charge-offs to average loans and leases		0.35	%		0.35	%		0.33	%
Ratio of allowance for loan losses to net loans and leases at end of period		1.47	%		1.47	%		1.48	%
Ratio of allowance for loan losses to nonperforming loans		314.7	%		332.4	%		224.5	%
Ratio of allowance for loans losses to nonaccrual loans and accruing loans past due 90 days or more		205.0	%		234.1	%		171.9	%

*Includes loans held for sale

Net loan and lease charge-offs, along with their annualized ratios to average loans and leases, are shown in the above table for the periods presented. The same respective amounts for the fourth quarter of 2002 were $12 million and 0.27%. Included in charge-offs for the first quarter of 2003 were approximately $2.4 million related to the auto loan and credit card securitizations repurchased in December 2002.

ZIONS BANCORPORATION AND SUBSIDIARIES

At March 31, 2003, the allowance for loan losses included an allocation of $10 million related to commitments to extend credit for which the Company could separate the credit risk from that of any related loans on the balance sheet and for standby letters of credit. Commitments to extend credit on loans and standby letters of credit on March 31, 2003, December 31, 2002, and March 31, 2002 totaled $7,922 million, $7,915 million, and $7,317 million, respectively.

In analyzing the adequacy of the allowance for loan and lease losses, management utilizes a comprehensive loan grading system to determine risk potential in the portfolio, and considers the results of independent internal and external credit reviews, historical charge-off experience, and changes in the composition and volume of the portfolio. Other factors, such as general economic conditions and collateral values, are also considered. Larger problem credits are individually evaluated to determine appropriate reserve allocations. Additions to the allowance are based upon the resulting risk profile of the portfolio developed through the evaluation of the above factors.

DEPOSITS

Deposit growth for the first quarter of 2003 continued to be very strong. Management continues to believe that part of the growth reflects an increase in market share; however, part of this growth may be a result of investors reducing their exposure to volatile market investments. Deposits increased 15.6% over balances reported one year ago to $20,801 million, and increased 13.3% annualized from balances reported at December 31, 2002. Core deposits, which exclude time deposits $100,000 and over, increased 18.4% from March 31, 2002 and at an annualized rate of 16.2% for the quarter. Subsequent to March 31, 2003, one large governmental deposit of approximately $350 million matured and was withdrawn, as expected, partially reversing some recent deposit growth.

Average total deposits of $19,919 million for the first three months of 2003 increased 12.7% compared to $17,675 million for the first three months of 2002, with average demand deposits increasing 14.0%. Average savings and NOW deposits increased 17.7% and average money market and super NOW deposits increased 23.1% during the first three months of 2003 compared to the same period in 2002. Average time deposits under $100,000 decreased 14.0% and time deposits $100,000 and over decreased 17.0% for the first three months of 2003 compared to the same period in 2002. Average foreign deposits increased 87.2% for these same periods.

LIQUIDITY AND INTEREST RATE SENSITIVITY

The Company manages its liquidity to provide adequate funds to meet its anticipated financial obligations, including withdrawals by depositors and debt service requirements, as well as to fund customers’ demand for credit. Liquidity is provided primarily by the regularly scheduled maturities of the Company’s investment and loan portfolios.

The Federal Home Loan Bank (“FHLB”) system is a major source of liquidity for each of the Company’s subsidiary banks. Zions First National Bank and The Commerce Bank of Washington are members of the FHLB of Seattle. California Bank & Trust, Nevada State Bank, and National Bank of Arizona are members of the FHLB of San Francisco. Vectra Bank Colorado is a member of the FHLB of Topeka. The FHLB allows member banks to borrow against their eligible loans to satisfy liquidity requirements.

As another source of liquidity, the Company’s core deposits, consisting of demand, savings and money market deposits and time deposits under $100,000, constituted 92.8% of total deposits on March 31, 2003, as compared to 92.1% on December 31, 2002 and 90.8% on March 31, 2002.

ZIONS BANCORPORATION AND SUBSIDIARIES

Maturing balances in loan portfolios provide flexibility in managing cash flows. Maturity management of those funds is an important source of medium to long-term liquidity. The Company’s ability to raise funds in the capital markets through the securitization process and by debt issuance provides the Company additional flexibility in meeting funding needs.

The parent company’s cash requirements consist primarily of debt service, operating expenses, income taxes, dividends to shareholders, and share repurchases. The parent’s cash needs are routinely met through dividends from subsidiaries, investment income, proportionate shares of current income taxes, management and other fees, unaffiliated bank lines, and debt issuance.

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, the Company filed a prospectus supplement with the Securities and Exchange Commission during the third quarter of 2002 for the issuance of up to $340 million of Senior Medium-Term Notes, Series A and Subordinated Medium-Term Notes, Series B. As of March 31, 2003, the Company had issued $96 million of Senior Medium-Term Notes, compared to $46 million outstanding at December 31, 2002.

At March 31, 2003, $203.4 million of dividend capacity was available from subsidiaries to pay to the parent without having to obtain regulatory approval. During the three months ended March 31, 2003, dividends from subsidiaries were $55.5 million. The parent also has a program to issue short-term commercial paper. At March 31, 2003, outstanding commercial paper was $276.6 million. Also at March 31, 2003, the parent had a revolving credit facility with a bank totaling $40 million and a margin borrowing facility totaling $11 million. No amounts were outstanding on either of these facilities at March 31, 2003.

During the first quarter of 2003, the Company repurchased 578,480 shares of common stock at a cost of $24.2 million, or an average price of $41.88 per share. On April 25, 2003, the board of directors authorized the Company to repurchase $50 million of Company common stock, which superseded all previous buyback authorizations. During the first quarter of 2002, the Company repurchased 486,488 shares of common stock at a cost of $25.3 million.

Interest rate sensitivity measures the Company’s financial exposure to changes in interest rates. Interest rate sensitivity is, like liquidity, affected by maturities of assets and liabilities. The Company assesses its interest rate sensitivity using duration and simulation analysis. Duration is a measure of the weighted-average expected lives of the discounted cash flows from assets and liabilities. Simulation is used to estimate net interest income over time using alternative interest rate scenarios.

The Company, through the management of maturities and repricing of its assets and liabilities and the use of interest rate swap agreements, attempts to manage the effect on net interest income of changes in interest rates. The prime lending and the LIBOR (London Interbank Offer Rate) curve are the primary indices used for pricing the Company’s loans, and the 91-day Treasury bill rate is the index used for pricing many of the Company’s deposits. The Company does not hedge the prime/LIBOR/T-bill spread risk through the use of

ZIONS BANCORPORATION AND SUBSIDIARIES

derivative instruments.

CAPITAL RESOURCES AND DIVIDENDS

Total shareholders’ equity on March 31, 2003 was $2,413 million, an increase of 1.6% over the $2,374 million on December 31, 2002, and an increase of 5.7% over the $2,283 million on March 31, 2002. The Company’s capital ratios are as follows as of the dates indicated:

	March 31, 2003			December 31, 2002			March 31, 2002

Tangible common equity ratio		6.07	%		6.06	%		6.03	%
Average common equity to average assets (three months ended)		8.79	%		8.80	%		8.84	%

Risk-based capital ratios:
Tier 1 leverage		7.61	%		7.56	%		6.56	%
Tier 1 risk-based capital		9.33	%		9.26	%		8.31	%
Total risk-based capital		12.96	%		12.94	%		12.22	%

Dividends declared of $.21 per common share for the first quarter of 2003 were increased from $.20 per common share declared for each quarter during 2002. The common cash dividend payout of net income for the first quarter of 2003 was 21.7% compared to 28.6% for the year 2002 and 38.9% for the first quarter of 2002.

CRITICAL ACCOUNTING POLICIES

The Company has reviewed and made no significant changes in critical accounting policies and assumptions compared to the disclosures made in Zions Bancorporation’s Annual Report on Form 10-K for the year ended December 31, 2002.

FORWARD-LOOKING INFORMATION

Statements in Management’s Discussion and Analysis that are not based on historical data are forward- looking, including, for example, the projected performance of the Company and its operations. These statements constitute forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the projections discussed in Management’s Discussion and Analysis since such projections involve significant risks and uncertainties. Factors that might cause such differences include, but are not limited to: the timing of closing proposed acquisitions being delayed or such acquisitions being prohibited; competitive pressures among financial institutions increasing significantly; economic conditions, either nationally or locally in areas in which the Company conducts its operations, being less favorable than expected; and legislation or regulatory changes which adversely affect the Company’s operations or business. The Company disclaims any obligation to update any factors or to publicly announce the results of revisions to any of the forward-looking statements included herein to reflect future events or developments.

ZIONS BANCORPORATION AND SUBSIDIARIES

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the most significant market risk regularly undertaken by the Company, and is closely monitored as previously discussed. The Company believes there have been no significant changes in market risk compared to the disclosures in Zions Bancorporation’s Annual Report on Form 10-K for the year ended December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a defendant in various legal proceedings arising in the normal course of business. The Company does not believe that the outcome of any such proceedings will have a material adverse effect on its consolidated financial position, operations, or liquidity.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a)	Exhibits

	Exhibit Number	Description


	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-K for the year ended December 31, 2002	*

	3.3	Articles of Amendment to the Restated Articles of Incorporation of Zions Bancorporation dated April 24, 1998, incorporated by reference to Exhibit 3 of Form 10-Q for the quarter ended June 30, 1998	*

	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	*

ZIONS BANCORPORATION AND SUBSIDIARIES

	Exhibit Number			Description

	3.5			Restated Bylaws of Zions Bancorporation dated January 19, 2001, incorporated by reference to Exhibit 3.4 of Form S-4 filed February 5, 2001	*

	10.1			Zions Bancorporation PAYSHELTER 401(k) and Employee Stock Ownership Plan, Established and Restated Effective January 1, 2003 (filed herewith)

	10.2			Zions Bancorporation 2003 - 2005 Value Sharing Plan (filed herewith)

	10.3			Form of Zions Bancorporation 2003 - 2005 Value Sharing Plan, Subsidiary Banks (filed herewith)

	10.4			Zions Bancorporation 1998 Non-Qualified Stock Option and Incentive Plan (as amended April 25, 2003) (filed herewith)

			*	Incorporated by reference

b)	Reports on Form 8-K

	Zions Bancorporation filed the following reports on Form 8-K during the quarter ended March 31, 2003:

		Form 8-K filed on January 23, 2003 (Items 7 and 9) – Copy of Press Release issued January 23, 2003 announcing 2002 fourth quarter earnings.

		Form 8-K filed on March 20, 2003 (Items 7 and 9) – Copies of certifications by the Chief Executive Officer, Harris H. Simmons, and Chief Financial Officer, Doyle L. Arnold, to the Securities and Exchange Commission as required by 18 U.S.C. Section 1350 and adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

ZIONS BANCORPORATION AND SUBSIDIARIES

S I G N A T U R E S

Pursuant to the requirements 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.

	ZIONS BANCORPORATION

	/s/ HARRIS H. SIMMONS

	Harris H. Simmons, Chairman, President and Chief Executive Officer

	/s/ DOYLE L. ARNOLD

	Doyle L. Arnold, Executive Vice President and Chief Financial Officer

Dated May 14, 2003

ZIONS BANCORPORATION AND SUBSIDIARIES

C E R T I F I C A T I O N
Principal Executive Officer

I, Harris H. Simmons, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Zions Bancorporation;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

	a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003		/s/ HARRIS H. SIMMONS

		Harris H. Simmons, Chairman, President and Chief Executive Officer

ZIONS BANCORPORATION AND SUBSIDIARIES

C E R T I F I C A T I O N
Principal Financial Officer

I, Doyle L. Arnold, certify that:

1.			I have reviewed this quarterly report on Form 10-Q of Zions Bancorporation;

2.			Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.			Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.			The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)		designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b)		evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c)		presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.			The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

	a)			all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)			any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.			The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003		/s/ DOYLE L. ARNOLD

		Doyle L. Arnold, Executive Vice President and Chief Financial Officer

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