DEBT AND SHAREHOLDERS’ EQUITY

Series C Preferred Stock Redemption

On September 15, 2013, we redeemed all of the outstanding $800 million par amount (799,467 shares) of our 9.5% Series C preferred stock at 100% of the $25 per depositary share redemption amount. Amounts raised from the preferred stock issuances listed subsequently were used to fund this redemption. The Federal Reserve did not object to the element of our capital plan, as of the latest modification on May 6, 2013, to redeem the entire $800 million of our Series C preferred stock subject to issuing an equivalent amount of new preferred shares.

The redemption reduced preferred stock by the $926 million carrying value of the Series C preferred stock, with the difference from the par amount, or $126 million, relating to the intrinsic value of the beneficial conversion feature (“BCF”) associated with the convertible subordinated debt. The BCF represented the difference on the original commitment date of the fair values of the convertible subordinated debt and the preferred stock into which the debt was convertible. The total BCF of $203 million was included in common stock when the subordinated debt was modified in June 2009 to convertible subordinated debt. The Company has “no par” common stock and all additional paid-in capital transactions such as this are recorded in common stock. Portions of the BCF had been transferred since July 2009 from common stock to preferred stock as holders of convertible subordinated debt exercised rights to convert to the Series C preferred stock. Amounts transferred became part of the carrying value of the preferred stock. The $126 million portion of the redemption was recorded as a preferred stock redemption in the statement of income for the three and nine months ended September 30, 2013.

At September 30, 2013, the remaining balance in common stock of the BCF was approximately $77 million. Although the legal right to convert continues to exist, if no further conversions occur or the convertible debt matures, the current amount of the BCF will remain in common stock. At September 30, 2013, the balance at par of the convertible subordinated debt was $457 million. The associated debt discount was $113 million at September 30, 2013.

Preferred Stock Issuances

The following series of noncumulative perpetual preferred stock were issued during the nine months ended September 30, 2013 for a total of $800 million. Net of commissions and fees, the proceeds added approximately $784 million to shareholders’ equity. The shares qualify as Tier 1 capital and liquidation preference is at $1,000 per share. The shares were registered with the SEC and issuances were in the form of depositary shares.


1.	Series J, $195 million (195,152 shares), fixed/floating rate issued August 11, 2013; dividends payable semiannually at 7.20% on the 15th day of March and September commencing March 15, 2014 to the earliest possible redemption date of September 15, 2023, interest rate then resets to an annual floating rate equal to three-month LIBOR plus 4.44%.


2.	Series A, $6 million (5,907 shares), floating rate reopened August 2, 2013; dividends payable quarterly at the greater of three-month LIBOR plus 0.52%, or 4.0%.


3.	Series I, $301 million (300,893 shares), 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.


4.	Series H, $126 million (126,221 shares), 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.


5.	Series G, $172 million (171,827 shares), 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.

Debt Issuances and Redemptions

During the three and nine months ended September 30, 2013 under our senior medium-term note program, we issued notes totaling $29 million and $97 million, respectively, and during the nine months ended September 30, 2013, we redeemed at maturity all of the remaining $5 million of short-term notes and $18 million of long-term notes. At September 30, 2013, the outstanding notes in this program had interest rates from 2.55% to 5.50% and maturities through November 2019.

On September 12, 2013, we issued $88 million of fixed/floating rate subordinated notes due September 15, 2028. Quarterly interest payments commence December 15, 2013 at 6.95% to the earliest possible redemption date of September 15, 2023, after which the interest rate changes to an annual floating rate equal to three-month LIBOR plus 3.89%. Net proceeds were approximately $86 million.

On June 13, 2013, we issued $300 million of 4.5% senior notes due June 13, 2023, with semiannual interest payments commencing December 13, 2013. Net proceeds were approximately $297 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 during the nine months ended September 30, 2013 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

Prior to the third quarter of 2013, approximately $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.

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
Nine Months Ended September 30, 2013

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

Other comprehensive income before reclassifications, net of tax		48,992				236			—			49,228
Amounts reclassified from AOCI, net of tax		13,909				(1,483		)	—			12,426
Other comprehensive income (loss)		62,901				(1,247		)	—			61,654
Balance at September 30, 2013		$	(334,715	)		$	547		$	(50,335	)	$	(384,503	)

Nine Months Ended September 30, 2012

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

Other comprehensive income before reclassifications, net of tax		56,523				225			—			56,748
Amounts reclassified from AOCI, net of tax		7,152				(6,554		)	—			598
Other comprehensive income (loss)		63,675				(6,329		)	—			57,346
Balance at September 30, 2012		$	(483,088	)		$	3,075		$	(54,725	)	$	(534,738	)



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

Net realized gains on investment securities	$	1,580		$	3,046		$	3,726		$	9,285		SI	Fixed income securities gains, net
Income tax expense	604			1,165			1,425			3,417
	976			1,881			2,301			5,868

Net unrealized losses on investment securities	(9,067		)	(2,736		)	(22,999		)	(19,912		)	SI	Net impairment losses on investment securities
Income tax benefit	(3,479		)	(1,046		)	(8,863		)	(7,616		)
	(5,588		)	(1,690		)	(14,136		)	(12,296		)
Accretion of securities with noncredit-related impairment losses not expected to be sold	(496		)	(315		)	(1,477		)	(1,196		)	BS	Investment securities, held-to-maturity
Deferred income taxes	(211		)	123			(597		)	472			BS	Other assets
	$	(5,319	)	$	(1	)	$	(13,909	)	$	(7,152	)

Net unrealized gains on derivative instruments	$	97		$	2,378		$	2,479		$	10,871		SI	Interest and fees on loans
Income tax expense	40			957			996			4,317
	$	57		$	1,421		$	1,483		$	6,554

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.

Basel III Capital Framework

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.

Subsequent Events

On October 31, 2013, we issued $162 million of fixed/floating rate subordinated notes due November 15, 2023. Semiannual interest payments commence May 15, 2014 at 5.65% to the earliest possible redemption date of November 15, 2018, after which they are payable quarterly at an annual floating rate equal to three-month LIBOR plus 4.19%. Net proceeds were approximately $160 million.

On November 6, 2013 we announced the commencement of separate cash tender offers to purchase up to an aggregate of $250 million par amount of our 5.5% and 6.0% convertible and nonconvertible subordinated notes. Purchase amounts for each debt instrument are according to a previously announced schedule. The offers expire at midnight ET on December 5, 2013.