On August 27, Zions Bancorp (ZION) successfully completed a $250 million offering of new common stock.

During the third quarter, the bank holding company issued 7.6 million common shares at an average price of $16.13 each, for gross proceeds of $123.5 million. During the second quarter, Zions issued common shares for gross proceeds of $126.5 million. Therefore, the cumulative offering totaled 16.8 common shares at an average price of $14.85 apiece. Net of commissions and fees, total proceeds were $245.7 million.

The registered sales took place through a previously announced common equity distribution program via Goldman Sachs Group Inc. (GS). Given the recent interest in current market prices, the common stock offering was completed earlier than expected.

Zions continues to suffer due to its significant exposure to the residential real estate markets. We are concerned about its commercial real estate exposure. Commercial real estate represents over one-third of the company’s overall loan portfolio. Persistent weakness in residential development and construction activity in the southwest led to deterioration of credit metrics in the past several quarters. Given the sluggish economic conditions, we expect credit to worsen further across the industry in the coming quarters.

Based on our concerns of further credit deterioration in the upcoming quarters, particularly in the construction portfolio, we are maintaining our Underperform recommendation on the shares of Zions.

Zacks Investment Research
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