"The combination ... continues to impede growth in our largest source of revenue net interest income," Harris said.
Analysts who track the bank had expected Zions to earn 27 cents per share in its latest quarter. Investors who had pushed Zions' shares up 26 cents, or 1.3 percent, to $20.81 Monday, seemed surprised, too. In after-hours trading, Zions dropped 81 cents, or 3.9 percent, to $20.
"It's a miss to my number," said Brian Klock, a Keefe Bruyette and Woods analyst who was looking for 29 cents per share from Zions. "The loan growth was less than I expected.
"They are running off loans, while [other lenders] are starting to see loan growth. It's disappointing, but I don't see that it shows any problem with their business model," Klock said, adding that Zions probably is still concentrating on purging bad loans from its books at the expense of making new loans. Between 2008 and last year, Zions lost close to $1.9 billion when customers couldn't repay their debts.
Although the size of the bank's loan portfolio was smaller than in the fourth quarter and Zions resumed setting aside funds to cover bad loans, Harris said the company was generally pleased with how borrowers were repaying their debts.
He said Zions is seeing some signs that loan demand from small-business clients is poised to improve in the second quarter.
Zions, which received $1.4 billion in Troubled Asset Relief Program funds from the government after the financial crisis in 2008, repaid half the amount last month, and Harris reiterated that the remaining $700 million would be paid back by the end of the year.
"With the targeted redemption of TARP in the second half of this year, we will move meaningfully closer to what we believe to be the long-term earning power of the company," Harris said in a conference call with analysts.
The TARP repayment undercut Zions' first-quarter earnings by 11 cents per share. Excluding the payment, and the conversion of subordinated debt into depositary shares of preferred stock, Zions earned $60.1 million, or 33 cents per share. By that measure, Zions beat analysts' expectations.