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Rating Action:

Moody's confirms Zions (deposits at A2), changes outlook to negative

03 Dec 2008
Moody's confirms Zions (deposits at A2), changes outlook to negative

New York, December 03, 2008 -- Moody's Investors Service confirmed the ratings of Zions Bancorporation (senior at A3) and its affiliates, including its lead bank, Zions First National Bank (financial strength at C+ and long term bank deposits at A2). In the same rating action, Moody's changed the outlook to negative. This rating action concludes the review for possible downgrade that began in August 2008.

Moody's said the confirmation of Zions' ratings reflects the sizable increase to the company's capital base stemming from the recent sale of $1.4 billion of preferred stock and related warrants to the U.S. Treasury, as well as a $250 million issuance of common stock in the third quarter. In Moody's opinion, Zions' augmented capital base should be sufficient to absorb expected near term deterioration in asset quality, emanating principally from Zions' exposure to residential construction and land.

The material increase in capital should also allow Zions to manage losses within its CDO portfolio, which includes a significant amount of the more volatile mezzanine tranches of bank trust preferred CDO securities. Moody's believes the company has the ability and intent to hold these CDO securities on its balance sheet. Therefore, the rating agency believes that Zions is most likely to ultimately incur the more moderate economic losses on its CDO portfolio, rather than the far more severe losses implied by current market prices on these securities.

However, Moody's said the negative outlook reflects the possibility that for accounting purposes, Zions remains exposed to other than temporary impairment charges (OTTI) on its CDO portfolio, which could exceed the ultimate loss in economic value. Depending on the magnitude of these OTTI marks, the company could experience a significant capital charge, which may result in headline risk and possible franchise impairment. The negative outlook also reflects the potential that in the intermediate term, Zions could face sizable credit charges given its significant exposure to commercial real estate, particularly given the deteriorating economic outlook. Moody's will continue to carefully monitor these risks and their affect on the company's capital and franchise.

Despite these challenges, the ratings are supported by Zions' geographical diversification and good bank level liquidity.

Zions, headquartered in Salt Lake City, UT, reported total assets of $54 billion at September 30, 2008.

The last rating action was on August 11, 2008 when the ratings were placed under review for possible downgrade.

The principal methodologies used in rating this issuer was "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology" which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.

Outlook Actions:

..Issuer: Amegy Bank National Association

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Amegy Corporation

....Outlook, Changed To Negative From Rating Under Review

..Issuer: California Bank & Trust

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Nevada State Bank

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions Bancorporation

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions Capital Trust B

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions Capital Trust C

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions Capital Trust D

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions First National Bank

....Outlook, Changed To Negative From Rating Under Review

..Issuer: Zions Institutional Capital Trust A

....Outlook, Changed To Negative From Rating Under Review

Confirmations:

..Issuer: Amegy Bank National Association

....Bank Financial Strength Rating, Confirmed at C+

....Issuer Rating, Confirmed at A2

....OSO Rating, Confirmed at P-1

....Deposit Rating, Confirmed at P-1

....OSO Senior Unsecured OSO Rating, Confirmed at A2

....Senior Unsecured Deposit Rating, Confirmed at A2

..Issuer: Amegy Corporation

....Issuer Rating, Confirmed at A3

..Issuer: California Bank & Trust

....Bank Financial Strength Rating, Confirmed at C+

....Issuer Rating, Confirmed at A2

....OSO Rating, Confirmed at P-1

....Deposit Rating, Confirmed at P-1

....OSO Senior Unsecured OSO Rating, Confirmed at A2

....Senior Unsecured Deposit Rating, Confirmed at A2

..Issuer: Nevada State Bank

....Bank Financial Strength Rating, Confirmed at C+

....Issuer Rating, Confirmed at A2

....OSO Rating, Confirmed at P-1

....Deposit Rating, Confirmed at P-1

....OSO Senior Unsecured OSO Rating, Confirmed at A2

....Senior Unsecured Deposit Rating, Confirmed at A2

..Issuer: Zions Bancorporation

....Multiple Seniority Shelf, Confirmed at (P)Baa2,(P)A3

....Preferred Stock Preferred Stock, Confirmed at Baa2

....Subordinate Regular Bond/Debenture, Confirmed at Baa1

....Senior Unsecured Commercial Paper, Confirmed at P-2

....Senior Unsecured Medium-Term Note Program, Confirmed at A3,P-2

....Senior Unsecured Regular Bond/Debenture, Confirmed at A3

..Issuer: Zions Capital Trust B

....Preferred Stock Preferred Stock, Confirmed at Baa1

..Issuer: Zions Capital Trust C

....Preferred Stock Shelf, Confirmed at (P)Baa1

..Issuer: Zions Capital Trust D

....Preferred Stock Shelf, Confirmed at (P)Baa1

..Issuer: Zions First National Bank

....Bank Financial Strength Rating, Confirmed at C+

....Issuer Rating, Confirmed at A2

....OSO Rating, Confirmed at P-1

....Deposit Rating, Confirmed at P-1

....OSO Senior Unsecured OSO Rating, Confirmed at A2

....Senior Unsecured Deposit Rating, Confirmed at A2

..Issuer: Zions Institutional Capital Trust A

....Preferred Stock Preferred Stock, Confirmed at Baa1

New York
Robert Young
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Gregory Frank
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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