DEBT AND SHAREHOLDERS’ EQUITY

Debt Issuance and Redemptions

During the three and six months ended June 30, 2013 under our senior medium-term note program, we issued notes totaling $49 million and $69 million that have interest rates from 2.75% to 3.30% and mature through May 2018. During the six months ended June 30, 2013, we redeemed at maturity all of the remaining $5 million of short-term notes and $18 million of long-term notes.

On June 13, 2013, we issued $300 million of 4.5% senior notes due June 13, 2023, with interest payments commencing December 13, 2013. Net proceeds from this issuance were approximately $297.2 million.

On May 3, 2013, Zions Capital Trust B redeemed all of its 8.0% trust preferred securities, or 11.4 million shares, at 100% of their $25 per share liquidation amount for a total of $285 million. Following our tender offer announced on May 31, 2013, we repurchased on June 18, 2013 approximately $258 million of our $500 million outstanding 7.75% senior notes that were due September 23, 2014. In connection with these debt redemptions, we recorded $40.3 million of debt extinguishment cost that consisted of $22.9 million of the early tender premium and $17.4 million in write-offs of unamortized debt discount and issuance costs.

Subordinated Debt Conversions

During the three and six months ended June 30, 2013, approximately $0.2 million and $1.2 million of convertible subordinated debt was converted into depositary shares each representing a 1/40^th interest in a share of the Company’s preferred stock. These conversions added 1,210 shares of Series C to the Company’s preferred stock.

For the six months ended June 30, 2013, in connection with these conversions, the $1.4 million added to preferred stock included the transfer from common stock of $0.2 million of the intrinsic value of the beneficial conversion feature. The amount of this conversion feature was included with common stock at the time of the debt modification. At June 30, 2013, the remaining balance in common stock of this conversion feature was approximately $76.4 million. The balance at par of the convertible subordinated debt was $456.6 million at June 30, 2013. The five largest investor holdings totaled approximately 57% of this amount. The remaining balance of the convertible debt discount was $125.3 million at June 30, 2013.

Preferred Stock Issuances

The following series of noncumulative perpetual preferred stock were issued during the six months ended June 30, 2013 for a total of $599 million. Net of commissions and fees, the proceeds added approximately $588 million to shareholders’ equity. The shares qualify as Tier 1 capital. Except for Series I, the shares were registered with the SEC and issuances were in the form of depositary shares.


1.	Series I, $300.9 million, fixed/floating rate issued May 17, 2013; dividends payable semiannually at 5.80% on the 15th day of June and December commencing December 15, 2013 to the earliest possible redemption date of June 15, 2023, interest rate then resets to an annual floating rate equal to three-month LIBOR plus 3.80% and dividends become payable quarterly.


2.	Series H, $126.2 million, fixed rate issued May 3, 2013; dividends payable quarterly at 5.75% on the 15th day of March, June, September, and December, commencing June 15, 2013; redeemable beginning June 15, 2019.


3.	Series G, $171.8 million, fixed/floating rate issued February 7, 2013; dividends payable quarterly at 6.30% on the 15th day of March, June, September, and December commencing June 15, 2013 to the earliest possible redemption date of March 15, 2023, interest rate then resets to an annual floating rate equal to three-month LIBOR plus 4.24%.

These preferred stock issuances, as with our existing preferred stock, are subject to federal regulations pertaining to the payment of dividends, redemptions, and other items.

Accumulated Other Comprehensive Income

Effective January 1, 2013, we adopted ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This new guidance under ASU 220, Comprehensive Income, follows ASUs 2011-12 and 2011-05 and finalizes the reporting requirements for reclassifications out of AOCI. Companies must present reclassifications by component when reporting changes in AOCI. Items reclassified in their entirety out of AOCI to net income must have the effect of the reclassification disclosed according to the respective income statement line item. Items not reclassified in their entirety must be cross-referenced to other disclosures in the footnotes. The entire reclassification information must be disclosed in one location, either on the face of the financial statements by income statement line item, or in a footnote. We have elected to present the information in a footnote and include the comparable periods for the previous year.

Changes in AOCI by component are as follows:



(In thousands)	Net unrealized gains (losses) on investment securities				Net unrealized gains (losses) on derivative instruments				Pension and post-retirement			Total
Six Months Ended June 30, 2013

Balance at December 31, 2012		$	(397,616	)		$	1,794		$	(50,335	)	$	(446,157	)

Other comprehensive income (loss) before reclassifications, net of tax		64,440				(3		)	—			64,437
Amounts reclassified from AOCI, net of tax		8,590				(1,426		)	—			7,164
Other comprehensive income (loss)		73,030				(1,429		)	—			71,601
Balance at June 30, 2013		$	(324,586	)		$	365		$	(50,335	)	$	(374,556	)

Six Months Ended June 30, 2012

Balance at December 31, 2011		$	(546,763	)		$	9,404		$	(54,725	)	$	(592,084	)

Other comprehensive income before reclassifications, net of tax		13,742				177			—			13,919
Amounts reclassified from AOCI, net of tax		7,151				(5,133		)	—			2,018
Other comprehensive income (loss)		20,893				(4,956		)	—			15,937
Balance at June 30, 2012		$	(525,870	)		$	4,448		$	(54,725	)	$	(576,147	)



	Amounts reclassified from AOCI ¹												Statement of income (SI) Balance sheet (BS)
(In thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Details about AOCI components	2013			2012			2013			2012				Affected line item

Net realized gains (losses) on investment securities	$	(1,153	)	$	5,519		$	2,146		$	6,239		SI	Fixed income securities gains (losses), net
Income tax expense (benefit)	(441		)	2,038			821			2,252
	(712		)	3,481			1,325			3,987

Net unrealized losses on investment securities	(4,217		)	(6,967		)	(13,932		)	(17,176		)	SI	Net impairment losses on investment securities
Income tax benefit	(1,668		)	(2,665		)	(5,384		)	(6,570		)
	(2,549		)	(4,302		)	(8,548		)	(10,606		)
Accretion of securities with noncredit-related impairment losses not expected to be sold	(637		)	(614		)	(981		)	(881		)	BS	Investment securities, held-to-maturity
Deferred income taxes	(521		)	247			(386		)	349			BS	Other assets
	$	(4,419	)	$	(1,188	)	$	(8,590	)	$	(7,151	)

Net unrealized gains on derivative instruments	$	777		$	3,199		$	2,382		$	8,493		SI	Interest and fees on loans
Income tax expense	308			1,267			956			3,360
	$	469		$	1,932		$	1,426		$	5,133

¹ Negative reclassification amounts indicate decreases to earnings in the statement of income and increases to balance sheet assets. The opposite applies to positive reclassification amounts.

Noncontrolling Interests

On June 3, 2013, we removed the entire noncontrolling interest amount of approximately $4.8 million from the Company’s balance sheet following settlement with the remaining owner.

Subsequent Events

New Capital Rules, Basel III

In July 2013, the Federal Reserve published final rules establishing a new capital framework for U.S. banking organizations. These new rules implement the Basel Committee’s December 2010 framework, commonly referred to as Basel III, and will become effective for the Company on January 1, 2015, with the fully phased-in requirements becoming effective in 2018.

Among other things, the new rules revise capital adequacy guidelines and the regulatory framework for prompt corrective action, and they modify specified quantitative measures of our assets, liabilities, and capital. The impact of these new rules will require the Company to maintain capital in excess of current “well-capitalized” regulatory standards, and in excess of historical levels. We believe the Company and its subsidiary banks would meet the capital adequacy requirements under the new rules on a fully phased-in basis if they were required as of June 30, 2013.

Equity Transactions

On July 24, 2013, we announced our intent to redeem on September 16, 2013 $590 million of our 9.50% Series C Non-Cumulative Perpetual Preferred Stock. This redemption represents 590,000 shares, or 23.6 million depositary shares, at a redemption price of $25 per depositary share. The Federal Reserve did not object to the element of our capital plan, as of the latest modification on May 6, 2013, to redeem up to $800 million of our Series C preferred stock subject to issuing an equivalent amount of new preferred shares. At June 30, 2013, the entire outstanding amount of our Series C preferred stock was approximately $799.5 million.

On August 2, 2013, we issued depositary shares representing $5.9 million aggregate liquidation preference of our Series A Non-Cumulative Perpetual Preferred Stock, consisting of 236,279 depositary shares at a price per depositary share of $21.55 for an aggregate purchase price of $5.1 million. Dividends on this preferred stock are payable at the greater of three-month LIBOR plus 0.52% or 4.0%.

On August 5, 2013, we filed a preliminary prospectus with the SEC with respect to and announced our intent to issue up to approximately $195 million (195,152 shares with a liquidation preference of $1,000 per share) of a new Series J Fixed/Floating Rate Non-Cumulative Perpetual Preferred Stock. If this offering is completed, it is expected that dividends will be payable semiannually at a fixed rate on the 15th day of March and September commencing March 15, 2014 to the earliest possible redemption date of September 15, 2023. The interest rate would then reset to a floating rate equal to three-month LIBOR plus a spread to be determined. The fixed dividend rate and the spread associated with the floating dividend rate will be determined by an online auction process expected to be conducted August 7-8, 2013.