With the Great Contraction of 2010 firmly under way the FDIC has announced its latest bank failures, Nevada Security Bank of Reno and Washington First International Bank of Seattle. That brings the 2010 bank failure total tally to 83 with a high probability of more on the horizon. Shareholders of Zions Bancorporation may be biting their nails. The 1st Quarter Financial Statement is out and it isn't pretty.
Salt Lake City based Zions is the Holding Company for such west coast banks as California Bank & Trust, National Bank of Arizona, Commerce Bank of Oregon and Commerce Bank of Washington. While its stock remains relatively stable the 1st Quarter Report for 2010 shows significant losses and liabilities(1).
The first page of the report highlights not profits, but losses. The report boasts that 1st Quarter losses of $86.5 million are significantly better than the 4th Quarter 2009 losses of $176.5 million. As of March 31, 2010 Zions Bancorporation shows assets of about $52 billion, but this highlight is conflicted with $37 billion in loans that are not insured by FDIC. In a climate of record low new home buying and massive mortgage defaults this could spell doom for the Utah based company. A recent profile on the Wall Street Journal website had this to say about Zions:
"Once regarded as one of the best-run banks in the U.S., Zions has been hit with troubled loans, and worries have grown about its securities investments and deferred tax assets, which can be eroded by steady losses, and a need for capital. Some of the states in which it operates, such as Arizona, California and Nevada, have endured worst of the U.S. real-estate crash. As a result, the bank has suffered rising home-related loan losses.
The company was founded by Brigham Young, the Church of Jesus Christ of Latter-day Saints leader who founded Salt Lake City. The church divested itself of the bank in 1960."(2)
Atlanta based SunTrust Inc. is not faring much better. Their 1st Quarter report shows a hefty asset total of $172 billion and outstanding loans of $111 billion. However, the banking company's total liabilities for the 1st Quarter exceed $149 billion with a net loss available to shareholders of $229 million(3).
Sitting on the backs of these already troubled banks is their relationship to hedge funds that are on the verge of imploding. With his recent pronouncements of impending austerity President Obama is all but admitting that the stimulus bubble has burst. Indeed, even the UN is acknowledging that the world is in a "global financial crisis" as it calls for a new world reserve currency to replace the US dollar.
1. Zions Bancorporation 2010 1st Quarter report
2. Wall Street Journal website, FINS section
3. SunTrust.com, 'SunTrust Reports First Quarter Results