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, 2005

¨	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 ¨

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

Yes x No ¨

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 April 26, 2005		89,688,887 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	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	32

ITEM 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	33

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

ITEM 6.	Exhibits	33

SIGNATURES		35

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(In thousands, except share amounts)	March 31, 2005		December 31, 2004		March 31, 2004
	(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	1,085,482	$	850,998	$	1,058,735
Money market investments:
Interest-bearing deposits		16,821		1,251		1,388
Federal funds sold		35,070		130,086		62,817
Security resell agreements		548,173		461,750		770,109
Investment securities:
Held to maturity, at cost (approximate market value $629,684, $641,783 and $607,119)		635,774		641,659		605,292
Available for sale, at market		4,001,244		4,189,486		3,867,883
Trading account, at market (includes $114,302, $163,248 and $160,122 transferred as collateral under repurchase agreements)		303,469		290,070		383,850

		4,940,487		5,121,215		4,857,025
Loans:
Loans held for sale		196,994		196,736		185,126
Loans and leases		22,872,786		22,535,344		20,528,993

		23,069,780		22,732,080		20,714,119
Less:
Unearned income and fees, net of related costs		102,511		104,959		93,401
Allowance for loan losses		273,906		271,117		271,226

Loans and leases, net of allowance		22,693,363		22,356,004		20,349,492

Other noninterest-bearing investments		690,922		665,198		605,642
Premises and equipment, net		407,262		409,210		404,247
Goodwill		638,933		642,645		649,354
Core deposit and other intangibles		52,007		55,440		65,245
Other real estate owned		10,266		11,877		17,217
Other assets		764,700		764,160		948,432

	$	31,883,486	$	31,469,834	$	29,789,703

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing demand	$	7,189,420	$	6,821,528	$	6,117,345
Interest-bearing:
Savings and money market		13,312,525		13,349,347		12,443,178
Time under $100,000		1,422,582		1,387,784		1,453,064
Time $100,000 and over		1,457,914		1,294,109		1,202,159
Foreign		496,647		439,493		270,134

		23,879,088		23,292,261		21,485,880

Securities sold, not yet purchased		297,591		309,893		355,978
Federal funds purchased		1,314,927		1,841,092		1,324,972
Security repurchase agreements		714,154		683,984		930,425
Other liabilities		624,593		429,129		701,321
Commercial paper		142,190		165,447		190,525
Federal Home Loan Bank advances and other borrowings:
One year or less		161,270		15,949		315,976
Over one year		227,595		228,152		230,772
Long-term debt		1,673,974		1,690,589		1,608,042

Total liabilities		29,035,382		28,656,496		27,143,891

Minority interest		26,338		23,359		23,847
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 89,891,146, 89,829,947 and 89,693,704 shares		969,739		972,065		973,506
Retained earnings		1,907,727		1,830,064		1,610,176
Accumulated other comprehensive income (loss)		(50,724)		(7,932)		42,226
Shares held in trust for deferred compensation, at cost		(4,976)		(4,218)		(3,943)

Total shareholders’ equity		2,821,766		2,789,979		2,621,965

	$	31,883,486	$	31,469,834	$	29,789,703

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


(In thousands, except per share amounts)	Three Months Ended March 31,
(In thousands, except per share amounts)	2005		2004
Interest income:
Interest and fees on loans	$	350,935	$	288,376
Interest on loans held for sale		1,603		1,280
Lease financing		4,066		4,209
Interest on money market investments		4,638		3,458
Interest on securities:
Held to maturity – taxable		1,805		228
Held to maturity – nontaxable		5,983		898
Available for sale – taxable		46,920		37,869
Available for sale – nontaxable		856		6,092
Trading account		6,035		6,212

Total interest income		422,841		348,622

Interest expense:
Interest on savings and money market deposits		40,736		25,470
Interest on time and foreign deposits		19,887		14,042
Interest on borrowed funds		47,267		29,688

Total interest expense		107,890		69,200

Net interest income		314,951		279,422
Provision for loan losses		9,383		11,244

Net interest income after provision for loan losses		305,568		268,178

Noninterest income:
Service charges and fees on deposit accounts		30,782		32,755
Loan sales and servicing income		18,068		18,412
Other service charges, commissions and fees		26,427		25,120
Trust and investment management income		3,405		4,075
Income from securities conduit		8,819		8,698
Dividends and other investment income		8,008		8,095
Market making, trading and nonhedge derivative income		3,784		6,124
Equity securities losses, net		(1,387)		(4,031)
Fixed income securities gains (losses), net		1,333		(83)
Other		3,757		9,646

Total noninterest income		102,996		108,811

Noninterest expense:
Salaries and employee benefits		138,126		130,278
Occupancy, net		18,649		17,813
Furniture and equipment		15,919		15,948
Legal and professional services		8,250		7,214
Postage and supplies		6,488		6,648
Advertising		4,093		4,842
Impairment losses on long-lived assets		633		184
Restructuring charges		92		–
Amortization of core deposit and other intangibles		3,433		3,503
Provision for unfunded lending commitments		1,671		(1,739)
Other		41,981		37,647

Total noninterest expense		239,335		222,338

Income before income taxes and minority interest		169,229		154,651
Income taxes		59,749		54,714
Minority interest		(754)		268

Net income	$	110,234	$	99,669

Weighted average shares outstanding during the period:
Basic shares		89,877		89,724
Diluted shares		91,494		90,905

Net income per common share:
Basic	$	1.23	$	1.11
Diluted		1.20		1.10

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended March 31, 2005
					Accumulated Other Comprehensive Income (Loss)
(In thousands)	Common Stock		Retained Earnings		Net Unrealized Gains (Losses) on Investments, Retained Interests and Other		Net Unrealized Gains (Losses) on Derivative Instruments		Minimum Pension Liability		Subtotal		Shares Held in Trust for Deferred Compensation		Total Shareholders’ Equity
Balance, December 31, 2004	$	972,065	$	1,830,064	$	19,774	$	(9,493)	$	(18,213)	$	(7,932)	$	(4,218)	$	2,789,979
Comprehensive income:
Net income for the period				110,234												110,234
Other comprehensive income, net of tax:
Net realized and unrealized holding losses during the period, net of income tax benefit of $6,539						(10,557)						(10,557)
Foreign currency translation						(413)						(413)
Reclassification for net realized gains recorded in operations, net of income tax expense of $549						(885)						(885)
Net unrealized losses on derivative instruments, net of reclassification to operations of $7,175 and income tax benefit of $19,477								(30,937)				(30,937)

Other comprehensive loss						(11,855)		(30,937)		–		(42,792)				(42,792)

Total comprehensive income																67,442
Stock redeemed and retired		(30,070)														(30,070)
Stock options exercised, net of shares tendered and retired		27,744														27,744
Cash dividends – common, $.36 per share				(32,571)												(32,571)
Cost of shares held in trust for deferred compensation														(758)		(758)

Balance, March 31, 2005	$	969,739	$	1,907,727	$	7,919	$	(40,430)	$	(18,213)	$	(50,724)	$	(4,976)	$	2,821,766


	Three Months Ended March 31, 2004
					Accumulated Other Comprehensive Income (Loss)
(In thousands)	Common Stock		Retained Earnings		Net Unrealized Gains on Investments, Retained Interests and Other		Net Unrealized Gains on Derivative Instruments		Minimum Pension Liability		Subtotal		Shares Held in Trust for Deferred Compensation		Total Shareholders’ Equity
Balance, December 31, 2003	$	985,904	$	1,538,677	$	24,015	$	10,716	$	(15,690)	$	19,041	$	(3,599)	$	2,540,023
Comprehensive income:
Net income for the period				99,669												99,669
Other comprehensive income, net of tax:
Net realized and unrealized holding gains during the period, net of income tax expense of $7,604						12,275						12,275
Reclassification for net realized losses recorded in operations, net of income tax benefit of $25						41						41
Net unrealized gains on derivative instruments, net of reclassification to operations of $12,276 and income tax expense of $7,026								10,869				10,869

Other comprehensive income						12,316		10,869		–		23,185				23,185

Total comprehensive income																122,854
Stock redeemed and retired		(29,874)														(29,874)
Stock options exercised, net of shares tendered and retired		17,476														17,476
Cash dividends – common, $.30 per share				(28,170)												(28,170)
Cost of shares held in trust for deferred compensation														(344)		(344)

Balance, March 31, 2004	$	973,506	$	1,610,176	$	36,331	$	21,585	$	(15,690)	$	42,226	$	(3,943)	$	2,621,965

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)	Three Months Ended March 31,
(In thousands)	2005		2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	110,234	$	99,669
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment losses on goodwill, other intangibles and long lived assets		633		184
Provision for loan losses		9,383		11,244
Depreciation of premises and equipment		14,687		14,914
Amortization		7,860		9,423
Deferred income tax benefit		(9,150)		(4,879)
Income (loss) allocated to minority interest		(754)		268
Equity securities losses, net		1,387		4,031
Fixed income securities losses (gains), net		(1,333)		83
Net increase in trading securities		(13,399)		(3,626)
Proceeds from sales of loans held for sale		211,291		92,629
Additions to loans held for sale		(200,285)		(98,796)
Net gains on sales of loans, leases and other assets		(11,524)		(15,044)
Net increase in cash surrender value of bank owned life insurance		(4,838)		(4,573)
Undistributed earnings of affiliates		(2,252)		(2,966)
Change in accrued income taxes		63,846		64,691
Change in accrued interest receivable		8,291		6,272
Change in other assets		(57,773)		(235,017)
Change in other liabilities		128,244		179,033
Change in accrued interest payable		6,131		1,827
Other, net		643		1,196

Net cash provided by operating activities		261,322		120,563

CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in money market investments		(6,977)		(265,620)
Proceeds from maturities of investment securities held to maturity		37,249		739
Purchases of investment securities held to maturity		(31,296)		(5,650)
Proceeds from sales of investment securities available for sale		433,757		1,315,001
Proceeds from maturities of investment securities available for sale		453,140		167,690
Purchases of investment securities available for sale		(715,727)		(1,500,014)
Proceeds from sales of loans and leases		98,772		99,798
Net increase in loans and leases		(449,459)		(822,773)
Proceeds from sales of other noninterest-bearing investments		1,958		–
Net decrease (increase) in other noninterest-bearing investments		(1,491)		2,362
Proceeds from sales of premises and equipment		1,470		6,356
Purchases of premises and equipment		(14,883)		(15,360)
Proceeds from sales of other assets		5,043		5,052
Net cash paid for net liabilities on branches sold		–		(16,748)

Net cash used in investing activities		(188,444)		(1,029,167)

ZIONS BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)


(In thousands)	Three Months Ended March 31,
(In thousands)	2005		2004
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	$	586,827	$	640,037
Net change in short-term funds borrowed		(386,233)		301,210
Payments on FHLB advances and other borrowings over one year		(557)		(668)
Payments on long-term debt		–		(50,001)
Proceeds from issuance of common stock		24,210		15,454
Payments to redeem common stock		(30,070)		(29,874)
Dividends paid		(32,571)		(28,170)

Net cash provided by financing activities		161,606		847,988

Net increase (decrease) in cash and due from banks		234,484		(60,616)
Cash and due from banks at beginning of period		850,998		1,119,351

Cash and due from banks at end of period	$	1,085,482	$	1,058,735

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	98,549	$	64,249
Income taxes		358		37
Loans transferred to other real estate owned		4,244		4,182
Investment securities available for sale transferred to investment securities held to maturity		–		600,379

ZIONS BANCORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

March 31, 2005

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Zions Bancorporation (“the Parent”) and its majority-owned subsidiaries (collectively “the Company,” “we,” “our,” “us”) have been prepared in accordance with U.S. generally accepted accounting principles 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 period presentation. This includes a reclassification of certain fees previously classified as interest and fees on loans in interest income to other service charges, commissions and fees in noninterest income. For the three months ended March 31, 2004, the amount reclassified was $2.8 million, which had the effect of reducing the net interest margin from 4.32% to 4.28%. There was no impact on net income.

Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected in future periods. The balance sheet at December 31, 2004 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, 2004.

2. SHARE-BASED COMPENSATION

The following disclosures are required for interim financial statements by Statement of Financial Accounting Standards (“SFAS”) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, issued by the Financial Accounting Standards Board (“FASB”). SFAS 148 provides guidance to transition from the intrinsic value method of accounting for share-based compensation under Accounting Principles Board Opinion No. 25 (“APB 25”), Accounting for Stock Issued to Employees, to the fair value method under SFAS No. 123, Accounting for Stock-Based Compensation.

ZIONS BANCORPORATION AND SUBSIDIARIES

The impact on net income and net income per common share if we had applied the provisions of SFAS 123 to share-based payments was as follows (in thousands, except per share amounts):


	Three Months Ended
	March 31,
	2005		2004
Net income, as reported	$	110,234	$	99,669
Deduct: Total share-based compensation expense determined under fair value based method for all awards, net of related tax effects		(2,463)		(3,123)

Pro forma net income	$	107,771	$	96,546

Net income per common share:
Basic – as reported	$	1.23	$	1.11
Basic – pro forma		1.20		1.08

Diluted – as reported		1.20		1.10
Diluted – pro forma		1.18		1.06

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which is a revision of SFAS 123. SFAS 123R supersedes APB 25 and amends SFAS No. 95, Statement of Cash Flows. SFAS 123R is effective for public companies for interim or annual periods beginning after June 15, 2005. On April 15, 2005, the Securities and Exchange Commission announced that it was amending Regulation S-X to provide up to a six-month delay for the adoption of SFAS 123R, or January 1, 2006 for calendar year public companies. The Company has not yet decided whether it will avail itself of this delay.

SFAS 123R utilizes a “modified grant-date” approach in which the fair value of an equity award is estimated on the grant date without regard to service or performance vesting conditions. Generally, this approach is similar to that of SFAS 123. However, SFAS 123R would require all share-based awards to employees, including grants of employee stock options, to be recognized in the statement of income based on their fair values. The pro forma disclosure previously shown that is permitted by SFAS 123 will no longer be an alternative.

Our adoption of SFAS 123R will utilize the “modified prospective” method. Under this method, compensation cost is recognized beginning with the effective date based on the requirements of SFAS 123R for all share-based awards granted after the effective date, and based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date.

As permitted by SFAS 123, we currently account for share-based awards to employees using APB 25’s intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R’s fair value method will have a significant impact on our results of operations, although it will have no impact on our overall financial position. The impact of adopting SFAS 123R cannot be predicted at this time because it will depend on levels of share-based awards granted in the future. However, had we adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as previously described in the disclosure of pro forma net income and net income per common share.

SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current accounting

ZIONS BANCORPORATION AND SUBSIDIARIES

literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after adoption. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options), the amount of operating cash flows recognized in prior years for such excess tax deductions has not been significant.

3. GUARANTEES

The following are guarantees issued by the Company (in thousands):


	March 31,		December 31,
	2005		2004
Standby letters of credit:
Financial	$	684,540	$	646,489
Performance		172,759		136,660

	$	857,299	$	783,149

The Company’s Annual Report on Form 10-K for the year ended December 31, 2004 contains further information on the nature of these letters of credit along with their terms and collateral requirements. At March 31, 2005, the carrying value recorded by the Company as a liability for these guarantees was $4.3 million.

As of March 31, 2005, the Parent has guaranteed approximately $580.3 million of debt issued by a subsidiary and by affiliated trusts issuing trust preferred securities. The trusts and related trust preferred securities are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Zions First National Bank (“ZFNB”) provides a liquidity facility (“Liquidity Facility”) for a fee to Lockhart Funding, LLC (“Lockhart”), a qualifying special-purpose entity securities conduit. Lockhart purchases floating rate U.S. Government and AAA-rated securities with funds from the issuance of commercial paper. ZFNB also provides interest rate hedging support and administrative and investment advisory services for a fee. Pursuant to the Liquidity Facility contract, ZFNB is required to purchase securities from Lockhart to provide funds for Lockhart to repay maturing commercial paper upon Lockhart’s inability to access the commercial paper market, or upon a commercial paper market disruption as specified in governing documents for Lockhart. Pursuant to the governing documents, including the liquidity agreement, if any security in Lockhart is downgraded below AA-, ZFNB may 1) place its letter of credit on the security, or 2) obtain credit enhancement from a third party, or 3) purchase the security from Lockhart at book value. At any given time, the maximum commitment of ZFNB is the book value of Lockhart’s securities portfolio, which is not allowed to exceed the size of the Liquidity Facility commitment. At March 31, 2005, the book value of Lockhart’s securities portfolio was $5.0 billion, which approximated market value, and the size of the Liquidity Facility commitment was $6.12 billion. No amounts were outstanding under the Liquidity Facility at March 31, 2005.

The FASB has issued an Exposure Draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, which would amend SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This new guidance proposes to change the requirements that an entity must meet to be considered a qualifying special-purpose entity. It is possible that Lockhart may need to be restructured to preserve its off-balance sheet status as a qualifying special-purpose entity.

ZIONS BANCORPORATION AND SUBSIDIARIES

4. RETIREMENT PLANS

The following disclosures are required for interim financial statements by SFAS No. 132R, Employers’ Disclosures about Pensions and Other Postretirement Benefits (in thousands):


					Postretirement
	Pension Benefits				Benefits
	Three Months Ended March 31,
	2005		2004		2005		2004
Service cost	$	153	$	216	$	31	$	25
Interest cost		2,279		2,617		89		125
Expected return on plan assets		(2,781)		(2,987)		–		–
Amortization of prior service cost		–		–		–		25
Amortization of net actuarial (gain) loss		384		400		(89)		(75)

Net periodic benefit cost	$	35	$	246	$	31	$	100

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, we expected to contribute $654 thousand in 2005 to meet estimated benefit payments to participants in our postretirement medical plan. As of March 31, 2005, we have contributed $164 thousand of this amount and expect to contribute the remaining portion during the rest of 2005. We did not expect to make any contributions to the pension plan in 2005 and have not done so as of March 31, 2005.

5. GOODWILL

During the three months ended March 31, 2005, goodwill relating to the California Bank & Trust banking subsidiary was reduced by $3.7 million. This reduction in goodwill resulted from the recognition of a portion of acquired state net operating loss carryforward benefits. A state examination of certain years in which some of the net operating loss carryforwards were claimed closed during the first quarter of 2005, allowing for the reduction in goodwill. This accounting follows the guidance of SFAS No. 109, Accounting for Income Taxes. There was no impact on net income.

6. OPERATING SEGMENT INFORMATION

We manage our operations and prepare management reports and other information with a primary focus on geographical area. We operate six community/regional banks in distinct geographical areas. Performance assessment and resource allocation are based upon this geographical structure. Zions First National Bank (“ZFNB”) operates 110 branches in Utah and 24 in Idaho. California Bank & Trust (“CB&T”) operates 91 branches in California. Nevada State Bank (“NSB”) operates 67 branches in Nevada. National Bank of Arizona (“NBA”) operates 53 branches in Arizona. Vectra Bank Colorado (“Vectra”) operates 39 branches in Colorado and one branch in New Mexico. The Commerce Bank of Washington (“Commerce”) operates one branch in the state of Washington. The operating segment identified as “Other” includes the parent company, other smaller nonbank operating units, and eliminations of transactions between segments.

The accounting policies of the individual operating segments are the same as those of the Company. Transactions between operating segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. Operating segments pay for centrally provided services based upon estimated or actual usage of those services. We also allocate income among participating banking subsidiaries to better match revenues from hedging strategies to the operating units that gave rise to the exposures being hedged.

ZIONS BANCORPORATION AND SUBSIDIARIES

The following table presents selected operating segment information for the three months ended March 31, 2005 and 2004:


(In millions)	Zions First National Bank and Subsidiaries				California Bank & Trust				Nevada State Bank				National Bank of Arizona
(In millions)	2005		2004		2005		2004		2005		2004		2005		2004
CONDENSED INCOME STATEMENT
Net interest income excluding hedge income	$	94.3	$	81.4	$	107.3	$	94.7	$	38.9	$	32.3	$	41.6	$	31.4
Hedge income recorded directly at subsidiary		2.1		6.6		2.0		3.4		0.5		0.3		0.4		0.2
Allocated hedge income		(1.1)		(5.8)		–		–		0.1		0.6		0.3		1.5

Net interest income		95.3		82.2		109.3		98.1		39.5		33.2		42.3		33.1
Provision for loan losses		6.8		5.5		1.5		1.5		–		1.6		0.8		1.3

Net interest income after provision for loan losses		88.5		76.7		107.8		96.6		39.5		31.6		41.5		31.8
Noninterest income		63.3		67.7		18.8		19.5		7.9		7.9		5.6		6.5
Noninterest expense		92.7		81.3		62.5		57.5		24.7		22.9		22.9		20.3

Income before income taxes and minority interest		59.1		63.1		64.1		58.6		22.7		16.6		24.2		18.0
Income tax expense (benefit)		18.7		21.1		25.8		23.6		7.9		5.7		9.8		7.2
Minority interest		(0.1)		(0.3)		–		–		–		–		–		–

Net income (loss)	$	40.5	$	42.3	$	38.3	$	35.0	$	14.8	$	10.9	$	14.4	$	10.8

AVERAGE BALANCE SHEET DATA
Assets	$	12,183	$	11,989	$	10,150	$	9,341	$	3,378	$	2,976	$	3,647	$	2,988
Net loans and leases		7,972		6,915		7,091		6,511		2,565		2,168		3,130		2,421
Deposits		8,070		7,236		8,301		7,623		2,956		2,603		3,118		2,551
Shareholder’s equity		750		744		1,046		979		226		200		270		241

(In millions)	Vectra Bank Colorado				The Commerce Bank of Washington				Other				Consolidated Company
(In millions)	2005		2004		2005		2004		2005		2004		2005		2004
CONDENSED INCOME STATEMENT
Net interest income excluding hedge income	$	20.3	$	19.9	$	6.6	$	5.3	$	(1.2)	$	2.1	$	307.8	$	267.1
Hedge income recorded directly at subsidiary		1.1		1.4		0.2		0.4		0.9		–		7.2		12.3
Allocated hedge income		0.5		2.7		0.2		1.0		–		–		–		–

Net interest income		21.9		24.0		7.0		6.7		(0.3)		2.1		315.0		279.4
Provision for loan losses		–		1.0		0.3		0.3		–		–		9.4		11.2

Net interest income after provision for loan losses		21.9		23.0		6.7		6.4		(0.3)		2.1		305.6		268.2
Noninterest income		6.7		7.1		0.4		0.6		0.3		(0.5)		103.0		108.8
Noninterest expense		21.8		23.2		3.1		2.8		11.6		14.3		239.3		222.3

Income before income taxes and minority interest		6.8		6.9		4.0		4.2		(11.6)		(12.7)		169.3		154.7
Income tax expense (benefit)		2.4		2.4		1.3		1.5		(6.1)		(6.8)		59.8		54.7
Minority interest		–		–		–		–		(0.6)		0.6		(0.7)		0.3

Net income (loss)	$	4.4	$	4.5	$	2.7	$	2.7	$	(4.9)	$	(6.5)	$	110.2	$	99.7

AVERAGE BALANCE SHEET DATA
Assets	$	2,286	$	2,472	$	725	$	704	$	(518)	$	(647)	$	31,851	$	29,823
Net loans and leases		1,448		1,655		375		330		95		118		22,676		20,118
Deposits		1,565		1,704		422		443		(1,208)		(1,276)		23,224		20,884
Shareholder’s equity		322		378		50		51		161		(14)		2,825		2,579

ZIONS BANCORPORATION AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL HIGHLIGHTS

(Unaudited)


(In thousands, except per share and ratio data)	Three Months Ended March 31,
(In thousands, except per share and ratio data)	2005		2004		% Change
EARNINGS
Taxable-equivalent net interest income	$	320,120	$	284,853	12.38 %
Taxable-equivalent revenue		423,116		393,664	7.48 %
Net interest income		314,951		279,422	12.72 %
Noninterest income		102,996		108,811	(5.34)%
Provision for loan losses		9,383		11,244	(16.55)%
Noninterest expense		239,335		222,338	7.64 %
Income before income taxes and minority interest		169,229		154,651	9.43 %
Income taxes		59,749		54,714	9.20 %
Minority interest		(754)		268	(381.34)%
Net income		110,234		99,669	10.60 %

PER COMMON SHARE
Net income (diluted)		1.20		1.10	9.09 %
Dividends		0.36		0.30	20.00 %
Book value		31.39		29.23	7.39 %

SELECTED RATIOS
Return on average assets		1.40 %		1.34 %
Return on average common equity		15.83 %		15.54 %
Efficiency ratio		56.56 %		56.48 %
Net interest margin		4.53 %		4.28 %

ZIONS BANCORPORATION AND SUBSIDIARIES

FINANCIAL HIGHLIGHTS (Continued)

(Unaudited)


(In thousands, except share and ratio data)	Three Months Ended March 31,
(In thousands, except share and ratio data)	2005		2004		% Change
AVERAGE BALANCES
Total assets	$	31,850,979	$	29,822,933	6.80 %
Securities		5,191,995		5,087,878	2.05 %
Net loans and leases		22,675,601		20,117,675	12.71 %
Goodwill		642,604		653,678	(1.69)%
Core deposit and other intangibles		56,653		69,953	(19.01)%
Total deposits		23,223,512		20,883,922	11.20 %
Core deposits (1)		21,838,213		19,680,319	10.96 %
Minority interest		24,849		21,812	13.92 %
Shareholders’ equity		2,824,874		2,578,879	9.54 %

Weighted average common and common-equivalent shares outstanding		91,493,962		90,905,218	0.65 %

AT PERIOD END
Total assets	$	31,883,486	$	29,789,703	7.03 %
Securities		4,940,487		4,857,025	1.72 %
Net loans and leases		22,967,269		20,620,718	11.38 %
Sold loans being serviced (2)		2,995,630		2,707,128	10.66 %
Allowance for loan losses		273,906		271,226	0.99 %
Allowance for unfunded lending commitments		14,353		10,476	37.01 %
Goodwill		638,933		649,354	(1.60)%
Core deposit and other intangibles		52,007		65,245	(20.29)%
Total deposits		23,879,088		21,485,880	11.14 %
Core deposits (1)		22,421,174		20,283,721	10.54 %
Minority interest		26,338		23,847	10.45 %
Shareholders’ equity		2,821,766		2,621,965	7.62 %

Common shares outstanding		89,891,146		89,693,704	0.22 %

Average equity to average assets		8.87%		8.65%
Common dividend payout		29.55%		28.26%
Tangible common equity ratio		6.83%		6.56%
Nonperforming assets		76,089		109,487	(30.50)%
Accruing loans past due 90 days or more		20,160		26,307	(23.37)%
Nonperforming assets to net loans and leases and other real estate owned at period end		0.33%		0.53%

(1)	Amount consists of total deposits excluding time deposits $100,000 and over.

(2)	Amount represents the outstanding balance of loans sold and being serviced by the Company, excluding conforming first mortgage residential real estate loans.

ZIONS BANCORPORATION AND SUBSIDIARIES

FORWARD-LOOKING INFORMATION

Statements in Management’s Discussion and Analysis 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 and include, among others:

•

statements with respect to the Company’s beliefs, plans, objectives, goals, guidelines, expectations, anticipations, and future financial condition, results of operations and performance;

•

statements preceded by, followed by or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” or similar expressions.

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 Management’s Discussion and Analysis. Factors that might cause such differences include, but are not limited to:

•

the Company’s ability to successfully execute its business plans and achieve its objectives;

•

changes in political and economic conditions, including the economic effects of terrorist attacks against the United States and related events;

•

changes in financial market conditions, either nationally or locally in areas in which the Company conducts its operations, including without limitation, reduced rates of business formation and growth and commercial real estate development;

•

fluctuations in the equity and fixed-income markets;

•

changes in interest rates;

•

acquisitions and integration of acquired businesses;

•

increases in the levels of losses, customer bankruptcies, claims and assessments;

•

changes in fiscal, monetary, regulatory, trade and tax policies and laws;

•

continuing consolidation in the financial services industry;

•

new litigation or changes in existing litigation;

•

success in gaining regulatory approvals, when required;

•

changes in consumer spending and savings habits;

•

increased competitive challenges and expanding product and pricing pressures among financial institutions;

•

inflation and deflation;

•

technological changes;

•

legislation or regulatory changes which adversely affect the Company’s operations or business;

•

the Company’s ability to comply with applicable laws and regulations; and

•

changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or regulatory agencies.

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

ZIONS BANCORPORATION AND SUBSIDIARIES

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

The Company has made no significant changes in its critical accounting policies and significant estimates from those as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2004.

RESULTS OF OPERATIONS

Zions Bancorporation (“the Parent”) and subsidiaries (collectively “Zions,” “the Company,” “we,” “our,” “us”) reported net income for the first quarter of 2005 of $110.2 million or $1.20 per diluted share compared with $99.7 million or $1.10 per diluted share for the same period of 2004. The increase in earnings for the first quarter of 2005 compared to the first quarter of 2004 reflects the results of strong loan and deposit growth, a higher net interest margin and continued improving credit quality.

The annualized return on average assets was 1.40% compared to 1.34% in the first quarter of 2004. For the same comparative periods, the annualized return on average common equity was 15.83% compared to 15.54%. The efficiency ratio, which is defined as the percentage of noninterest expenses to taxable-equivalent revenue, was 56.6% compared to 56.5% for the first quarter of 2004.

Net Interest Income, Margin and Interest Rate Spreads

Taxable-equivalent net interest income for the first quarter of 2005 was $320.1 million, an increase of 12.4% compared with $284.9 million for the comparable period of 2004. The increase reflects growth in both loans and deposits coupled with the effect of an increase in the net interest margin. The incremental tax rate used for calculating all taxable-equivalent adjustments is 35% for all periods presented.

The Company’s net interest margin was 4.53% for the first quarter of 2005 compared to 4.43% for the fourth quarter of 2004 and 4.28% for the first quarter of 2004. During the first half of 2004, the margin declined primarily as a result of a challenging interest rate environment that had impacted most of the financial services industry. However, the margin experienced positive improvements in the last half of 2004 reflecting the benefits of increases in noninterest bearing demand deposits and increased spreads earned on those deposits due to rises in short-term interest rates and as lower-yielding short-term investments were used to fund higher-yielding loans. The increase in the margin for the first quarter of 2005 continued to be influenced by reducing lower-yielding assets to fund loan growth, as well as by the Company’s slightly asset-sensitive position in managing its assets and liabilities and the impact this position has in an increasing interest rate environment. During the quarter the Company reclassified certain fees from interest income to “Other service charges, commissions and fees” in noninterest income. This had the effect of reducing the net interest margin by four to six basis points in this and prior quarters. Prior quarters have also been reclassified for comparability. We currently expect that the net interest margin will be relatively stable through the remainder of 2005.

The yield on average earning assets during the first quarter of 2005 increased by 73 basis points compared to the same period in 2004. The average rate paid this quarter on interest-bearing funds increased 69 basis points from the first quarter of 2004. The spread on average interest-bearing funds for the first quarter of 2005 was 4.04%, up from 4.00% for the first quarter of 2004.

The Federal Reserve continued to monitor the interest rate environment, raising interest rates twice during the quarter by a combined 0.50%. These increases were followed by corresponding increases in the prime rate charged by most major banks, including Zions’ subsidiary banks. The Federal Reserve has indicated that it will continue its monitoring process and implement additional rate changes as appropriate. However, the

ZIONS BANCORPORATION AND SUBSIDIARIES

size and timing of any such changes are uncertain at this time. The Company expects to continue its efforts to maintain a slightly “asset sensitive” position with regard to interest rate risk. However, its actual position is highly dependent upon changes in both short-term and long-term interest rates, as well as the actual actions of competitors and customers in response to those changes.

CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES

(Unaudited)


	Three Months Ended March 31, 2005					Three Months Ended March 31, 2004
(In thousands)	Average Balance		Amount of Interest (1)		Average Rate	Average Balance		Amount of Interest (1)		Average Rate
ASSETS
Money market investments	$	816,141	$	4,638	2.30%	$	1,579,080	$	3,458	0.88%
Securities:
Held to maturity		637,316		11,010	7.01%		96,933		1,610	6.68%
Available for sale		3,950,159		48,237	4.95%		4,289,578		47,241	4.43%
Trading account		604,520		6,035	4.05%		701,367		6,212	3.56%

Total securities		5,191,995		65,282	5.10%		5,087,878		55,063	4.35%

Loans:
Loans held for sale		185,549		1,603	3.50%		174,044		1,280	2.96%
Net loans and leases (2)		22,490,052		356,487	6.43%		19,943,631		294,252	5.93%

Total loans and leases		22,675,601		358,090	6.40%		20,117,675		295,532	5.91%

Total interest-earning assets		28,683,737		428,010	6.05%		26,784,633		354,053	5.32%

Cash and due from banks		1,018,123					972,001
Allowance for loan losses		(273,317)					(271,243)
Goodwill		642,604					653,678
Core deposit and other intangibles		56,653					69,953
Other assets		1,723,179					1,613,911

Total assets	$	31,850,979				$	29,822,933

LIABILITIES
Interest-bearing deposits:
Savings and NOW	$	3,387,729		6,085	0.73%	$	3,268,670		4,956	0.61%
Money market super NOW		9,820,883		34,651	1.43%		8,937,344		20,514	0.92%
Time under $100,000		1,415,888		8,037	2.30%		1,493,380		6,883	1.85%
Time $100,000 and over		1,385,299		9,298	2.72%		1,203,603		6,628	2.21%
Foreign		449,002		2,552	2.31%		257,521		531	0.83%

Total interest-bearing deposits		16,458,801		60,623	1.49%		15,160,518		39,512	1.05%

Borrowed funds:
Securities sold, not yet purchased		507,917		4,510	3.60%		578,368		5,481	3.81%
Federal funds purchased and security repurchase agreements		2,413,062		13,152	2.21%		2,868,401		6,382	0.89%
Commercial paper		145,083		931	2.60%		235,508		723	1.23%
FHLB advances and other borrowings:
One year or less		325,708		2,036	2.54%		426,569		1,163	1.10%
Over one year		227,865		2,839	5.05%		230,894		2,920	5.09%
Long-term debt		1,690,725		23,799	5.71%		1,596,120		13,019	3.28%

Total borrowed funds		5,310,360		47,267	3.61%		5,935,860		29,688	2.01%

Total interest-bearing liabilities		21,769,161		107,890	2.01%		21,096,378		69,200	1.32%

Noninterest-bearing deposits		6,764,711					5,723,404
Other liabilities		467,384					402,460

Total liabilities		29,001,256					27,222,242
Minority interest		24,849					21,812
Total shareholders’ equity		2,824,874					2,578,879

Total liabilities and shareholders’ equity	$	31,850,979				$	29,822,933

Spread on average interest-bearing funds					4.04%					4.00%
Taxable-equivalent net interest income and
net yield on interest-earning assets			$	320,120	4.53%			$	284,853	4.28%

(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

Provisions for Credit Losses

The provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the allowance for loan losses at an adequate level. The provision for unfunded lending commitments is used to maintain the allowance for unfunded lending commitments at an adequate level. See “Credit Risk Management” for more information on how we determine the appropriate level for the allowances for loan and lease losses and unfunded lending commitments.

The provision for loan losses for the first quarter was $9.4 million compared to $11.2 million for the same period in 2004. On an annualized basis, the provision was 0.17% and 0.22% of average loans for the first quarters of 2005 and 2004, respectively. The provision for unfunded lending commitments was $1.7 million for the first quarter of 2005 compared to $(1.7) million for the first quarter of 2004. From period to period, the amounts of unfunded lending commitments may be subject to sizeable fluctuation due to changes in the timing and volume of loan originations and fundings. The related provision will generally reflect these fluctuations. When combined, the provisions for credit losses for the first quarter of 2005 were $11.1 million compared to $9.5 million for the first quarter of 2004.

Noninterest Income

For the first quarter of 2005, noninterest income was $103.0 million, a decrease of 5.3% compared to $108.8 million for the first quarter of 2004. However, noninterest income for the first quarter of 2004 included $3.7 million from a cash litigation settlement, $1.5 million from the sale of certain personal trust accounts in Arizona, and a $1 million gain on the sale of a building in California, all of which are included in other noninterest income.

Deposit service charges for the first quarter of 2005 declined when compared to the first quarter of 2004. The decline was primarily the result of higher earnings credit rates on commercial transaction accounts as market interest rates continued to rise, and to a lesser extent lower “NSF” and other fees on consumer accounts.

Income from securities conduit represents fees that we receive from Lockhart Funding, a “qualifying special-purpose entity” securities conduit, in return for back-up liquidity, an interest rate agreement and administrative services that Zions First National Bank provides to the entity in accordance with a servicing agreement. The increase in income for the first quarter of 2005 when compared to the same period in 2004 resulted from increased investment holdings in Lockhart’s securities portfolio, which created higher servicing fees.

Market making, trading and nonhedge derivative income was $3.8 million in the first quarter of 2005 compared to $6.1 million in the same quarter of 2004. Trading income for 2005 was $4.2 million compared to $5.6 million for 2004, reflecting a lower volume of trading activity and lower average spreads per trade. However, trading income for the first quarter of 2005 improved when compared to the fourth quarter of 2004 as the trading volume began to increase and the average profit per trade improved. Nonhedge derivative losses for the first quarter of 2005 were $0.5 million compared to gains of $0.5 million for the comparable period of 2004, and included fair value decreases of $1.2 million in 2005 and fair value increases of $0.2 million in 2004.

Noninterest Expense

Noninterest expense for the first quarter of 2005 was $239.3 million, compared to $222.3 million for the first quarter of 2004. The Company’s efficiency ratio was 56.6% for the first quarter of 2005, compared with 56.5% for the first quarter of 2004.

ZIONS BANCORPORATION AND SUBSIDIARIES

Salaries and employee benefits increased $7.8 million or 6.0%, compared to the first quarter of 2004. However, salaries and employee benefits were essentially unchanged when compared to the fourth quarter of 2004. The increase from the prior year was due principally to higher staff levels resulting from business expansion coupled with increases in incentive plan costs. Over the past year, the Company has specifically increased staffing related to its new Private Client Services business, the activities related to NetDeposit, and also the hiring of a number of commercial lending staff formerly with Washington Mutual.

Legal and professional services increased 14.4% over the first quarter of 2004 but were down 5.3% from the fourth quarter of 2004. The increase from the first quarter was primarily related to various special projects and certain litigation-related costs. Other noninterest expense increased 11.5% from the first quarter of 2004. The increased expense was principally the result of higher bankcard fees, increased data processing costs, various operating losses and growth in fidelity insurance premiums.

As a result of our plans for focused business expansion and special projects, including systems conversions, we expect that noninterest expense will increase in 2005, but at a pace that will be less than revenue growth. In addition, as discussed in Note 2 of the Notes to Consolidated Financial Statements, in December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS 123R requires that all share-based payments to employees, including grants of employee stock options, be recognized in the statement of income for all awards that vest based on their fair values.

On April 15, 2005, the Securities and Exchange Commission (“SEC”) announced that it was amending Regulation S-X to provide up to a six-month delay for the adoption of SFAS No. 123R, or January 1, 2006 for calendar year public companies. The Company has not yet decided whether it will avail itself of this delay. Upon adoption of this Statement, salaries and employee benefits expense will increase.

At March 31, 2005, the Company had 7,958 full-time equivalent employees, 386 domestic branches, and 472 ATMs, compared to 7,943 full-time equivalent employees, 391 domestic branches, and 511 ATMs at March 31, 2004.

Income Taxes

The Company’s income tax expense increased to $59.7 million for the first quarter of 2005 compared to $54.7 million for the same period in 2004. The Company’s effective income tax rates were 35.3% and 35.4% for the first quarters of 2005 and 2004, respectively. As discussed in earnings filings, the Company has received Federal income tax credits under the Community Development Financial Institutions Fund set up by the U.S. Government that will be recognized over the next seven years. The effect of these tax credits on the first quarter of 2005 was to reduce income tax expense by approximately $0.8 million. No such credits were available for the first quarter of 2004.

BALANCE SHEET ANALYSIS

Interest-Earning Assets

Interest-earning assets have interest rates or yields associated with them and consist of money market investments, securities and loans.

Average interest-earning assets increased 7.1% to $28.7 billion for the three months ended March 31, 2005 compared to $26.8 billion for the comparable period in 2004. Interest-earning assets comprised 90.1% of total average assets for the first three months of 2005, compared with 89.8% for the comparable period of

ZIONS BANCORPORATION AND SUBSIDIARIES

2004. Loans increased at a faster rate than securities and money market investments declined significantly compared to the first quarter of 2004, as the Company funded its higher-yielding loan growth in part by managing down lower-yielding non-loan assets.

Average money market investments, consisting of interest-bearing deposits, federal funds sold and security resell agreements, decreased 48.3% to $0.8 billion for the first quarter of 2005 compared to $1.6 billion for the same period of 2004. This decrease resulted primarily from the Company’s use of these instruments to partially fund the increases in the loan portfolio.

Average net loans and leases for the first quarter of 2005 increased by 12.7% when compared to the same period in 2004. Average net loans and leases also grew by 14.8%, annualized from the fourth quarter of 2004. This change is substantially larger than the annualized change in the outstanding balances between December 31, 2004 and March 31, 2005 of 6.0%. This difference is primarily the result of a substantial amount of loan growth that took place in December that only partially impacted the fourth quarter’s average balance but was included in the December 31, 2004 outstanding balance.

Average total deposits for the first three months of 2005 increased 11.2% compared to the same period in 2004. Compared to the fourth quarter of 2004, average total deposits grew at an annualized rate of 1.4%. Deposit growth in the first two months of the first quarter of 2005 was sluggish but it improved noticeably in March. As a result, the annualized growth in average balances between the first quarter 2005 and the fourth quarter of 2004 was substantially lower that the growth between the period-end balances at December 31, 2004 and March 31, 2005.

Investment Securities Portfolio

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


	March 31, 2005				December 31, 2004				March 31, 2004
(In millions)	Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value		Amortized Cost		Estimated Market Value
HELD TO MATURITY:
Municipal securities	$	636	$	630	$	642	$	642	$	605	$	607

AVAILABLE FOR SALE:
U.S. Treasury securities		35		36		36		36		36		37
U.S. government agencies and corporations:
Small Business Administration loan-backed securities		711		711		712		711		733		738
Other agency securities		268		266		275		277		285		289
Municipal securities		94		95		95		96		101		104
Mortgage/asset-backed and other debt securities		2,591		2,596		2,743		2,760		2,440		2,465

		3,699		3,704		3,861		3,880		3,595		3,633

Other securities:
Mutual funds		292		291		301		301		226		227
Stock		6		6		6		8		7		8

		298		297		307		309		233		235

		3,997		4,001		4,168		4,189		3,828		3,868

Total	$	4,633	$	4,631	$	4,810	$	4,831	$	4,433	$	4,475

The amortized cost of investment securities at March 31, 2005 decreased 3.7% from the balance at December 31, 2004 but increased 4.5% from the balance at March 31, 2004. The Company’s securities portfolio

ZIONS BANCORPORATION AND SUBSIDIARIES

increased during 2004 as it took advantage of the availability of core deposits and favorable opportunities to issue debt. However, the Company has experienced an increase in the demand for loans and we reduced the securities portfolio in the first quarter of 2005 to fund a portion of the loan growth.

The investment securities portfolio at March 31, 2005 includes $1.0 billion of nonrated, fixed income securities, which is essentially unchanged from the amounts at December 31, 2004 and March 31, 2004. These securities include nonrated municipal securities acquired in conjunction with its municipal finance advisory services as well as nonrated, asset-backed subordinated tranches.

Loan Portfolio

Net loans and leases at March 31, 2005 were $23.0 billion, an annualized increase of 6.0% from December 31, 2004. Net loans and leases also increased by 11.4% over the balance at March 31, 2004. The strong loan growth that the Company experienced in the fourth quarter of 2004 moderated somewhat in the first quarter of 2005. The annualized growth rate in average loans that we achieved in the fourth quarter of 12.2% may not be sustainable going forward. However, we still expect to see significant loan growth going forward. Compared to year-end 2004, loans in Zions First National Bank (“ZFNB”) grew at an annualized rate of 13.7%. In Nevada State Bank (“NSB”) loans grew at an annualized rate of 8.6% for the same period and loans in National Bank of Arizona (“NBA”) grew at an annualized rate of 3.9%.

The following table sets forth the loan portfolio by type of loan:


(In millions)	March 31, 2005		December 31, 2004		March 31, 2004
Loans held for sale	$	197	$	197	$	185

Commercial lending:
Commercial and industrial		4,604		4,643		4,204
Leasing		359		370		363
Owner occupied		4,036		3,790		3,497

Total commercial lending		8,999		8,803		8,064

Commercial real estate:
Construction		3,779		3,536		2,916
Term		4,032		3,998		3,614

Total commercial real estate		7,811		7,534		6,530

Consumer:
Home equity credit line		1,099		1,104		892
1-4 family residential		4,155		4,234		4,057
Bankcard and other revolving plans		211		225		183
Other		490		532		697

Total consumer		5,955		6,095		5,829

Foreign loans		5		5		15

Other receivables		103		98		91

Total loans	$	23,070	$	22,732	$	20,714

ZIONS BANCORPORATION AND SUBSIDIARIES

Sold Loans Being Serviced

Zions performs loan servicing on both loans that it holds in its portfolios as well as loans that are owned by third party investor-owned trusts. In addition, Zions has a practice of securitizing and selling a portion of the loans that it originates, and in many instances provides the servicing on these loans as a condition of the sale.

As of March 31, 2005, conforming long-term first mortgage real estate loans being serviced for others were $462 million, compared with $404 million at December 31, 2004 and $340 million at March 31, 2004. Consumer and other loan securitizations being serviced for others totaled $3.0 billion at the end of the first quarter of 2005, $3.1 billion at December 31, 2004 and $2.7 billion at March 31, 2004.


	Sold loans being serviced				Residual interests on the balance sheet at March 31, 2005
(In millions)	Sales for three months ended March 31, 2005		Outstanding balance at March 31, 2005		Subordinated retained interests		Capitalized residual cash flows		Total
Home equity credit lines	$	74	$	448	$	12	$	7	$	19
Small business loans		–		1,930		173		85		258
SBA 7(a) loans		16		235		–		6		6
Farmer Mac		9		383		–		8		8

Total	$	99	$	2,996	$	185	$	106	$	291

As of March 31, 2005, the Company had recorded assets, comprised of subordinated retained interests and capitalized residual cash flows, in the amount of $291 million in connection with the $3.0 billion of sold loans being serviced. As is a common practice with securitized transactions, the Company had retained subordinated interests in the securitized assets that totaled $185 million at March 31, 2005, and represented junior positions to the other investors in the trust securities. The capitalized residual cash flows, which are sometimes referred to as “excess servicing,” of $106 million primarily represent the present value of the excess cash flows that have been projected over the lives of the sold loans.

Other Noninterest-Bearing Investments

As of March 31, 2005, the Company had $691 million of other noninterest-bearing investments compared with $665 million at December 31, 2004 and $606 million at March 31, 2004.


(In millions)	March 31, 2005		December 31, 2004		March 31, 2004
Bank-owned life insurance	$	409	$	385	$	371
Federal Home Loan Bank and Federal Reserve stock		124		124		95
SBIC investments		71		70		63
Other public companies		39		40		28
Other nonpublic companies		32		30		33
Trust preferred securities		16		16		16

	$	691	$	665	$	606

ZIONS BANCORPORATION AND SUBSIDIARIES

Deposits

Total deposits at the end of the first quarter of 2005 increased at an annualized rate of 10.1% from the balances reported at December 31, 2004, and increased 11.1% over the March 31, 2004 amounts. Core deposits at March 31, 2005 increased 7.7%, annualized, compared to the December 31, 2004 balance and 10.5% compared to the balance at March 31, 2004.

The mix of deposits remained favorable during the first three months of 2005 as demand, savings and money market deposits comprised 85.9% of total deposits at the end of the first quarter, compared with 86.6% and 86.4% as of December 31, 2004 and March 31, 2004, respectively. NBA experienced the largest deposit growth for the quarter with an annualized increase of 25.2% when compared with the balance at December 31, 2004, while California Bank & Trust (“CB&T”), ZFNB and NSB experienced annualized deposit growth of 9.7%, 8.7% and 7.5%, respectively, for the same period. The deposit growth at NBA was due in part to increases in both the number of deposit accounts and the average balance per account. We expect to see deposit growth throughout 2005; however, we expect that the pace of such growth will be less than the growth we expect in the loan portfolio. As a result, we will continue to use alternative funding sources such as investments and other lower-yielding assets to fund the additional loan growth.

RISK ELEMENTS

Since risk is inherent in most of the Company’s operations, management of risk is an integral part of its operations and is also a key determinant of its overall performance. We apply various strategies to reduce the risks to which the Company’s operations are exposed, namely credit, operational, interest rate and market, and liquidity risks.

Credit Risk Management

Effective management of credit risk is essential in maintaining a safe and sound financial institution. We have structured the organization to separate the lending function from the credit administration function, which has added strength to the control over and the independent evaluation of credit activities. Formal 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 a well-defined set of standards for evaluating its loan portfolio, and management utilizes a comprehensive loan grading system to determine the risk potential in the portfolio. Further, an independent, internal credit examination department periodically conducts examinations of the Company’s lending departments. These examinations are designed to review credit quality, adequacy of documentation, appropriate loan grading administration and compliance with lending policies, and reports thereon are submitted to the Audit Committee of the Board of Directors.

Both the credit policy and the credit examination functions are managed centrally. Each affiliate bank is permitted to modify corporate credit policy to be more conservative; however, approval at the corporate level must be obtained if a bank wishes to create a more liberal exception to policy. Historically, only a limited number of such exceptions have been approved. This entire process has been designed to place an emphasis on early detection of potential problem credits so that any required action plans can be developed and implemented on a timely basis to mitigate any potential losses.

Another aspect of the Company’s credit risk management strategy is to diversify its loan portfolio. The Company maintains a diversified loan portfolio with some emphasis in real estate. As set forth in the following table, at March 31, 2005 no single loan type exceeded 20.0% of the Company’s total loan portfolio.

ZIONS BANCORPORATION AND SUBSIDIARIES


	March 31, 2005			December 31, 2004			March 31, 2004
(In millions)	Amount		% of total loans	Amount		% of total loans	Amount		% of total loans
Commercial lending:
Commercial and industrial	$	4,604	20.0%	$	4,643	20.4%	$	4,204	20.3%
Leasing		359	1.5%		370	1.6%		363	1.7%
Owner occupied		4,036	17.5%		3,790	16.7%		3,497	16.9%

Commercial real estate:
Construction		3,779	16.4%		3,536	15.6%		2,916	14.1%
Term		4,032	17.5%		3,998	17.6%		3,614	17.4%

Consumer:
Home equity credit line		1,099	4.8%		1,104	4.9%		892	4.3%
1-4 family residential		4,155	18.0%		4,234	18.6%		4,057	19.6%
Bankcard and other revolving plans		211	0.9%		225	1.0%		183	0.9%
Other		490	2.1%		532	2.3%		697	3.4%

Other		305	1.3%		300	1.3%		291	1.4%

Total loans	$	23,070	100.0%	$	22,732	100.0%	$	20,714	100.0%

The Company’s potential risk from concentration in owner occupied commercial loans is substantially reduced by the emphasis we place on lending programs sponsored by the Small Business Administration. On these types of loans, the Small Business Administration bears a major portion of the credit risk. In addition, the Company attempts to avoid the risk of an undue concentration of credits in a particular industry, trade group or property type. The Company also has no significant exposure to highly-leveraged transactions and the majority of the Company’s business activity is with customers located within the states of Utah, Idaho, California, Nevada, Arizona, Colorado, and Washington. Finally, the Company has no significant exposure to any individual customer or counterparty.

A more comprehensive discussion of our credit risk management is contained in Zions’ Annual Report on Form 10-K for the year ended December 31, 2004. In addition, as discussed in the following sections, the Company’s credit quality has improved to levels that have not been seen for the past eight years. We believe that the improvements cannot continue indefinitely and expect the credit quality indicators to respond accordingly.

Nonperforming Assets

Nonperforming assets include nonaccrual loans, restructured loans and other real estate owned. Loans are generally placed on nonaccrual status when the loan is 90 days or more past due as to principal or interest, unless the loan is both well secured and in the process of collection. Consumer loans, however, are not normally placed on a nonaccrual status, inasmuch as they are generally charged off when they become 120 days past due. Loans occasionally may be restructured to provide a reduction or deferral of interest or principal payments. This generally occurs when the financial condition of a borrower deteriorates to the point that the borrower needs to be given temporary or permanent relief from the original contractual terms of the loan. Other real estate owned is acquired primarily through or in lieu of foreclosure on loans secured by real estate.

ZIONS BANCORPORATION AND SUBSIDIARIES

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


(In millions)	March 31, 2005		December 31, 2004		March 31, 2004
Nonaccrual loans	$	65	$	72	$	92
Restructured loans		1		–		–
Other real estate owned		10		12		17

Total	$	76	$	84	$	109

% of net loans and leases* and other real estate owned		0.33%		0.37%		0.53%

Accruing loans past due 90 days or more	$	20	$	16	$	26

% of net loans and leases*		0.09%		0.07%		0.13%

*	Includes loans held for sale.

Total nonperforming assets decreased 9.5% as of March 31, 2005 compared with the balance at December 31, 2004.

Included in nonaccrual loans are loans that we have determined to be impaired. Loans, other than those included in large groups of smaller-balance homogeneous loans, are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due in accordance with the contractual terms of the loan agreement, including scheduled interest payments. The amount of the impairment is measured based on either the present value of expected cash flows, the observable market price of the loan, or the fair value of the collateral securing the loan.

The Company’s total recorded investment in impaired loans was $39 million at March 31, 2005, compared with $41 million at December 31, 2004 and $40 million at March 31, 2004. Estimated losses on impaired loans are included in the allowance for loan losses. At March 31, 2005, the allowance for loan losses included $5 million for impaired loans with a recorded investment of $22 million. At December 31, 2004, the allowance included $9 million for impaired loans with a $27 million recorded investment, and at March 31, 2004 the allowance included $9 million for impaired loans with a $31 million recorded investment.

Allowances for Credit Losses

Allowance for Loan Losses – In analyzing the adequacy of the allowance for loan losses, we utilize a comprehensive loan grading system to determine the risk potential in the portfolio and also consider the results of independent internal credit reviews. To determine the adequacy of the allowance, the Company’s loan and lease portfolio is broken into segments based on loan type.

For commercial loans, we use historical loss experience factors by loan segment, adjusted for changes in trends and conditions, to help determine an indicated allowance for each portfolio segment. These factors are evaluated and updated using migration analysis techniques and other considerations based on the makeup of the specific segment. These other considerations include:

•

volumes and trends of delinquencies;

•

levels of nonaccruals, repossessions and bankruptcies;

•

trends in criticized and classified loans;

ZIONS BANCORPORATION AND SUBSIDIARIES

•

expected losses on real estate secured loans;

•

new credit products and policies;

•

economic conditions;

•

concentrations of credit risk; and

•

experience and abilities of the Company’s lending personnel.

The allowance for consumer loans is determined using historically developed experience rates at which loans migrate from one delinquency level to the next higher level. Using average roll rates for the most recent twelve-month period and comparing projected losses to actual loss experience, the model estimates expected losses in dollars for the forecasted period. By refreshing the model with updated data, it is able to project losses for a new twelve-month period each month, segmenting the portfolio into nine product groupings with similar risk profiles. This new methodology is an accepted industry practice, and the Company believes it has a sufficient volume of information to produce reliable projections.

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, 2005		Twelve Months Ended December 31, 2004		Three Months Ended March 31, 2004
Loans* and leases outstanding (net of unearned income) at end of period	$	22,967	$	22,627	$	20,621

Average loans* and leases outstanding (net of unearned income)	$	22,676	$	21,046	$	20,118

Allowance for loan losses:
Balance at beginning of period	$	271	$	269	$	269
Allowance of branches sold		–		(2)		(1)
Provision charged against earnings		9		44		11
Loans and leases charged-off:
Commercial lending		(5)		(35)		(5)
Commercial real estate		–		(1)		–
Consumer		(6)		(23)		(6)
Other receivables		–		(1)		–

Total		(11)		(60)		(11)

Recoveries:
Commercial lending		3		15		2
Consumer		2		5		1

Total		5		20		3

Net loan and lease charge-offs		(6)		(40)		(8)

Balance at end of period	$	274	$	271	$	271

Ratio of annualized net charge-offs to average loans and leases		0.12 %		0.19 %		0.16 %
Ratio of allowance for loan losses to net loans and leases at end of period		1.19 %		1.20 %		1.32 %
Ratio of allowance for loan losses to nonperforming loans		416.13 %		374.42 %		293.95 %
Ratio of allowance for loan losses to nonaccrual loans and accruing loans past due 90 days or more		320.89 %		307.61 %		229.84 %

*	Includes loans held for sale.

ZIONS BANCORPORATION AND SUBSIDIARIES

Net loan and lease charge-offs, along with their annualized ratios to average loans and leases, are shown in the preceding table for the periods presented. The same respective amounts for the fourth quarter of 2004 were $11.5 million and 0.21%.

The allowance for loan losses at the end of the first quarter of 2005 increased $2.8 million from the level at year-end 2004. However, the allowance attributable to the commercial loan portfolio increased $5.8 million compared with 2004. During the first quarter of 2005, the Company experienced a slight increase in the levels of its criticized and classified loans. As a result, the amount of the allowance for loan losses indicated for criticized and classified loans increased when compared to year-end 2004 by approximately $4.7 million. Both commercial real estate loans and the commercial lending portfolio contributed to this increase. In addition, we had a $1.9 million increase in the level of the allowance indicated for non criticized and classified loans as a result of $473 million of commercial and commercial real estate loan growth since year-end 2004. Approximately 59% of this growth was in the commercial real estate portfolio with about 41% in the commercial lending portfolio. The allowance for consumer loans at March 31, 2005 decreased by $3.9 million when compared to the allowance at the end of 2004 principally as a result of a $140 million reduction in the consumer portfolio.

Allowance for Unfunded Lending Commitments – The Company also estimates an allowance for potential losses associated with off-balance sheet commitments and standby letters of credit. We determine the allowance for unfunded lending commitments using a process that is similar to the one we use for commercial loans. Based on historical experience, we have developed experience-based loss factors that we apply to the Company’s unfunded lending commitments to estimate the potential for loss in that portfolio. These factors are generated from tracking commitments that become funded and develop into problem loans.

The following table sets forth the allowance for unfunded lending commitments:


(In millions)	Three Months Ended March 31, 2005		Twelve Months Ended December 31, 2004		Three Months Ended March 31, 2004
Balance at beginning of period	$	12.7	$	12.2	$	12.2
Provision charged (credited) against earnings		1.7		0.5		(1.7	)

Balance at end of period	$	14.4	$	12.7	$	10.5

Commitments to extend credit on loans and standby letters of credit upon which the above allowances were calculated were $4.3 billion, $3.8 billion and $3.1 billion on March 31, 2005, December 31, 2004, and March 31, 2004, respectively.

The following table sets forth the combined allowances for credit losses.


(In millions)	March 31, 2005		December 31, 2004		March 31, 2004
Allowance for loan losses	$	274	$	271	$	271
Allowance for unfunded lending commitments		14		13		11

Total allowances for credit losses	$	288	$	284	$	282

ZIONS BANCORPORATION AND SUBSIDIARIES

Operational Risk Management

Operational risk is the potential for unexpected losses attributable to human error, systems failures, fraud, or inadequate internal controls and procedures. In its ongoing efforts to identify and manage operational risk, the Company has created an Operating Risk Management Group, whose responsibility is to help Company management identify and monitor the key internal controls and processes that the Company has in place to mitigate operational risk. The Company has enhanced this Group by installing RiskResolve^™ software, developed and marketed by Providus Software Solutions, Inc., a wholly-owned subsidiary. RiskResolve^™ provides us with a tool by which processes and procedures that we have in place to manage operational risk can be documented in an on-line environment. With RiskResolve^™ we have documented controls and the Control Self Assessment related to financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). We expect to continue enhancing the Company’s oversight of operational risk in 2005.

To manage and minimize its operating risk, the Company has in place transactional documentation requirements, systems and procedures to monitor transactions and positions, regulatory compliance reviews, and periodic reviews by internal audit and credit examination. In addition, reconciliation procedures have been established to ensure that data processing systems consistently and accurately capture critical data. Further, we maintain contingency plans and systems for operations support in the event of natural or other disasters.

Interest Rate and Market Risk Management

Interest rate risk is the potential for loss resulting from adverse changes in the level of interest rates on the Company’s net interest income. Market risk is the potential for loss arising from adverse changes in the prices of fixed income securities, equity securities, other earning assets and derivative financial instruments as a result of changes in interest rates or other factors. As a financial institution that engages in transactions involving an array of financial products, Zions is exposed to both interest rate risk and market risk.

Interest Rate Risk – Interest rate risk is one of the most significant risks to which the Company is regularly exposed. In general, our goal in managing interest rate risk is to have net interest income tend to increase in a rising interest rate environment, which tends to mitigate any declines in the market value of equity due to higher discount rates. This approach is based on our belief that in a rising interest rate environment, the market cost of equity, or implied rate at which future earnings are discounted, would also tend to rise. We refer to this goal as being slightly “asset sensitive,” which we believe is the current situation.

We attempt to control the effects that changes in interest rates will have on net interest income through the management of maturities and repricing of the Company’s assets and liabilities and also with the use of interest rate swaps. The prime lending rate and the London Interbank Offer Rate (“LIBOR”) curves 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/Treasury Bill spread risk through the use of derivative instruments.

We monitor interest rate risk through the use of two complementary measurement methods: duration of equity and income simulation. In the duration of equity method, we measure the changes in the market values of equity in response to changes in interest rates. In the income simulation method, we analyze the changes in income in response to changes in interest rates. For income simulation, Company policy requires that net interest income be expected to decline by no more than 10% during one year if rates were to immediately rise or fall in parallel by 200 basis points. As of March 31, 2005, the results of the duration of equity and income simulation computations were not significantly different from those set forth in Zions’ Annual Report on Form 10-K for the year ended December 31, 2004.

ZIONS BANCORPORATION AND SUBSIDIARIES

Market Risk – Fixed Income – The Company engages in trading and market making of U.S. Treasury, U.S. Government Agency, municipal and corporate securities. This trading and market making exposes the Company to a risk of loss arising from adverse changes in the prices of these fixed income securities held by the Company.

The Company monitors its risk in fixed income trading and market making through Value-at-Risk (“VAR”). VAR is the worst-case loss expected within a specified confidence level, based on statistical models using historical data. The models used by Zions to calculate its VAR are provided by Bloomberg. The confidence level used by Zions in this analysis is 99%, which means that losses larger than the VAR would only be expected on 1% of trading days (or approximately 2.5 trading days per year), assuming that the Company maintained the same VAR on a daily basis. Reports of trading income and losses and VAR measurements are reviewed with the Executive Committee of ZFNB on a monthly basis. For the three months ended March 31, 2005 and year ended December 31, 2004, the results of the VAR computations were as follows:


(In thousands)	Three months ended March 31, 2005		Year ended December 31, 2004
Value at Risk: (1)
Average daily VAR	$	856	$	730
Largest daily VAR during the period		1,292		1,348
Smallest daily VAR during the period		385		373

(1)	Does not include nonhedge derivative portfolios

The Company does not use VAR measurements to control risk for other than its market making, fixed income trading and nonhedge derivative portfolios.

Market Risk – Equity Investments – Through its equity investment activities, the Company owns equity securities that are publicly traded and subject to fluctuations in their market prices or values. In addition, the Company owns equity securities in companies that are not publicly traded and that are accounted for under either the fair value or equity methods of accounting, depending upon the Company’s ownership position and degree of involvement in influencing the investees’ affairs. In either case, the value of the Company’s investment is subject to fluctuation. Since the market prices or values associated with these securities may fall below the Company’s investment in them, the Company is exposed to the possibility of loss.

The Company conducts minority investing in pre-public venture capital companies in which it does not have strategic involvement, through four funds collectively referred to by us as Wasatch Venture Funds (“Wasatch”). Wasatch screens investment opportunities and makes investment decisions based on its assessment of business prospects and potential returns. After an investment is made, Wasatch actively monitors the performance of each company in which it has invested, and often has representation on the board of directors of the company.

The Company also, from time to time, either starts and funds businesses or makes significant investments in companies of strategic interest. These investments may result in either minority or majority ownership positions, and usually give board representation to Zions or its subsidiaries. These strategic investments generally are in companies that are financial services or financial technologies providers.

ZIONS BANCORPORATION AND SUBSIDIARIES

A more comprehensive discussion of the Company’s interest rate and market risk management is contained in Zions’ Annual Report on Form 10-K for the year ended December 31, 2004.

Liquidity Risk Management

Liquidity is managed centrally for both the Parent and the bank subsidiaries. The Parent’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 its subsidiaries, investment income, subsidiaries’ proportionate share of current income taxes, management and other fees, bank lines, equity contributed through the exercise of stock options and debt issuances. The subsidiaries’ primary source of funding is their core deposits.

Operational cash flows, while constituting a funding source for the Company, are not large enough to provide funding in the amounts that fulfill the needs of the Parent and the bank subsidiaries. For the first three months of 2005, operations contributed $261.3 million toward these needs. As a result, the Company utilizes other sources at its disposal to manage its liquidity needs.

During the first three months of 2005, the Parent received $79.0 million in dividends from its subsidiaries. At March 31, 2005, $354.5 million of dividend capacity was available for the subsidiaries to pay to the Parent without having to obtain regulatory approval.

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, the Company filed a registration statement with the Securities and Exchange Commission during the fourth quarter of 2004 for the issuance of up to $1.1 billion of debt securities of Zions Bancorporation, capital securities of Zions Capital Trust C and Zions Capital Trust D and junior subordinated debentures and guarantees related to the capital securities. As of March 31, 2005, the Company had all of the issuance capacity remaining under this registration statement.

The Parent also has a program to issue short-term commercial paper. At March 31, 2005, outstanding commercial paper was $142.2 million. In addition, the Parent has a $40 million secured revolving credit facility with a subsidiary bank. No amount was outstanding on this facility at March 31, 2005.

The subsidiaries’ primary source of funding is their core deposits, consisting of demand, savings and money market deposits, time deposits under $100,000 and foreign deposits. At March 31, 2005, these core deposits, in aggregate, constituted 93.9% of consolidated deposits, compared with 94.4% of consolidated deposits at December 31, 2004. For the first three months of 2005, increases in deposits resulted in net cash inflows of $586.8 million.

The Federal Home Loan Bank (“FHLB”) system is a significant source of liquidity for each of the Company’s subsidiary banks. ZFNB and Commerce are members of the FHLB of Seattle. CB&T, NSB, and NBA are members of the FHLB of San Francisco. Vectra is a member of the FHLB of Topeka. The FHLB allows member banks to borrow against their eligible loans to satisfy liquidity requirements. For the first three months of 2005, the activity in short-term FHLB borrowings resulted in a net cash outflow of $145.3 million.

The Company uses asset securitizations to sell loans, which also provide an alternative source of funding for the subsidiaries and enhances their flexibility in meeting their funding needs. During the first quarter of 2005, loan sales (other than loans held for sale) provided $98.8 million in cash inflows and we expect that securitizations will continue to be a tool that we will use for liquidity management purposes.

ZIONS BANCORPORATION AND SUBSIDIARIES

While not considered a primary source of funding, the Company’s investment activities can also provide or use cash, depending on the asset-liability management posture that is being observed. For the first three months of 2005, investment securities activities resulted in a decrease in investment securities holdings and a net increase of cash in the amount of $177.1 million.

Maturing balances in the various loan portfolios also provide additional flexibility in managing cash flows. In most cases, however, loan growth has resulted in net cash outflows from a funding standpoint. For the first quarter of 2005, loan growth resulted in a net cash outflow of $449.5 million.

At March 31, 2005, the Company managed approximately $3.0 billion of securitized assets that were originated or purchased by its subsidiary banks. Of these, approximately $1.7 billion were insured by a third party and held in Lockhart Funding, LLC, which is a qualifying special-purpose entity securities conduit and an important source of funding for the Company’s loans. ZFNB provides a Liquidity Facility for a fee to Lockhart, which purchases floating-rate U.S. Government and AAA-rated securities with funds from the issuance of commercial paper. ZFNB also provides interest rate hedging support and administrative and investment advisory services for a fee. Pursuant to the Liquidity Facility, ZFNB is required to purchase securities from Lockhart to provide funds for it to repay maturing commercial paper upon Lockhart’s inability to access the commercial paper market, or upon a commercial paper market disruption, as specified in the governing documents of Lockhart. In addition, pursuant to the governing documents, including the Liquidity Facility, if any security in Lockhart is downgraded below AA-, ZFNB must either 1) issue a letter of credit on the security, 2) obtain a credit enhancement on the security from a third party, or 3) purchase the security from Lockhart at book value. At any given time, the maximum commitment of ZFNB is the book value of Lockhart’s securities portfolio, which is not allowed to exceed the size of the Liquidity Facility.

At March 31, 2005, the book value of Lockhart’s securities portfolio was $5.0 billion, which approximated market value and the size of the Liquidity Facility commitment was $6.12 billion. No amounts were outstanding under this Liquidity Facility at March 31, 2005, December 31, 2004 or March 31, 2004. Lockhart is limited in size by program agreements, agreements with rating agencies and by the size of the Liquidity Facility.

The FASB has issued an Exposure Draft, Qualifying Special-Purpose Entities and Isolation of Transferred Assets, which would amend SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This new guidance proposes to change the requirements that an entity must meet to be considered a QSPE. It is possible that Lockhart may need to be restructured to preserve its off-balance-sheet status as a QSPE.

A more comprehensive discussion of our liquidity management is contained in Zions’ Annual Report on Form 10-K for the year ended December 31, 2004.

CAPITAL MANAGEMENT

Zions has a fundamental financial objective to consistently produce superior risk-adjusted returns on its shareholders’ capital. We believe that a strong capital position is vital to continued profitability and to promoting depositor and investor confidence.

Total shareholders’ equity on March 31, 2005 and December 31, 2004 was $2.8 billion, up 7.6% from the $2.6 billion at March 31, 2004. The Company’s capital ratios were as follows as of the dates indicated:

ZIONS BANCORPORATION AND SUBSIDIARIES


	March 31, 2005	December 31, 2004	March 31, 2004
Tangible common equity ratio	6.83%	6.80%	6.56%
Average common equity to average assets (three months ended)	8.87%	8.76%	8.65%

Risk-based capital ratios:
Tier 1 leverage	8.47%	8.31%	7.99%
Tier 1 risk-based capital	9.53%	9.35%	9.36%
Total risk-based capital	14.18%	14.05%	13.33%

During the first quarter of 2005, the Company repurchased 436,521 shares of common stock under repurchase programs approved by the Board of Directors at a cost of $30.1 million and an average price of $68.89 per share. As of March 31, 2005, the Company had $29.9 million remaining in its currently authorized share repurchase program.

Dividends paid of $0.36 per common share in the first quarter of 2005 represent a 20% increase over the dividends paid in the first quarter of 2004. For the first three months of 2005, the Company paid $32.6 million in common stock dividends compared to $28.2 million in the same period of 2004. This, coupled with the stock repurchases for the three months, resulted in our returning $62.6 million to shareholders in the first three months of 2005 out of total net income of $110.2 million, or 56.8%.

We continue to believe that the Company has adequate levels of capital in relation to its balance sheet size, business mix and levels of risk. As a result, we do not presently plan that the capital ratios will materially increase from their present levels. It is our belief that capital not considered necessary to support current and anticipated business should be returned to the Company’s shareholders through dividends and repurchases of its shares.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate and market risks are among the most significant risks regularly undertaken by the Company, and they are closely monitored. A discussion regarding the Company’s monitoring and management of interest rate and market risks is included in the section entitled “Interest Rate and Market Risk Management” in this Form 10-Q.

ITEM 4.

CONTROLS AND PROCEDURES

An evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, these disclosure controls and procedures were effective. There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

ZIONS BANCORPORATION AND SUBSIDIARIES

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 effect on its consolidated financial position, operations or liquidity.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

The following table summarizes the Company’s share repurchases for the first quarter of 2005.


Period	Total number of shares repurchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plan
January	67,553	$	67.47	63,622	$	55,708,278
February	310,145		69.02	305,295		34,638,687
March	68,972		69.65	67,604		29,930,252

Quarter	446,670		68.88	436,521


(1) Includes 10,149 mature shares tendered for exercise of stock options.

ITEM 6.

EXHIBITS

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 3.3 of Form 10-K for the year ended December 31, 2003.	*

ZIONS BANCORPORATION AND SUBSIDIARIES


Exhibit Number	Description

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.	*

3.5	Restated Bylaws of Zions Bancorporation dated July 19, 2004, incorporated by reference to Exhibit 3.5 of Form 10-K dated December 31, 2004.	*

10.1	Second Amendment to the Restated and Amended Zions Bancorporation Pension Plan dated September 4, 2003 (filed herewith).

10.2	Third Amendment to the Zions Bancorporation Pension Plan dated September 4, 2003 (filed herewith).

10.3	Fourth Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan dated March 18, 2005 (filed herewith).

10.4	Fourth Amendment to the Restated and Amended Zions Bancorporation Pension Plan dated March 28, 2005 (filed herewith).

10.5	Standard Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan (filed herewith).

10.6	Standard Directors Stock Option Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan (filed herewith).

10.7	Standard Restricted Stock Award Agreement, Zions Bancorporation 2005 Stock Option and Incentive Plan (filed herewith).

31.1	Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

31.2	Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

32	Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith).

	* Incorporated by reference

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, Vice Chairman

and Chief Financial Officer

Date: May 5, 2005

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