In the previous three quarters, earnings failed to meet the expectations of securities analysts mainly because loan demand was weak and interest rates were near record lows.
Subtracting several expenses, including a final dividend payment on Troubled Asset Relief Program funds that Zions received from the government in 2008, the banking company earned $85.2 million, or 46 cents per share.
Behind the improvement was a slowdown in the erosion of net interest income the difference between what Zions charges on loans and what it pays on deposits. Core net interest income slipped by $5 million from the second quarter, but total net interest income increased to $444 million from $432 million.
Even so, total net interest income was down 6 percent from the second quarter of 2011.
The company also made more loans to borrowers. Lending was up almost $300 million from the second quarter, to $37.2 billion, and 1 percent higher than a year ago.
"We saw further strengthening of loan growth during the [third] quarter," Chairman Harris Simmons said in a conference call with analysts. "Geographically, Utah showed the strongest growth, with solid performances from Texas, Arizona and Colorado."
Commercial and industrial loan growth showed the most strength. There was also good growth in owner-occupied loans and moderate improvement in commercial real estate loan demand.
Small-business loan demand has been soft but signs suggest that category may pick up, Simmons said.
Also helping were lower loan charge-offs. Bad loans held by the bank fell 11 percent.
Simmons said rising loan demand should offset downward pressures on profits from still weak net interest income in coming quarters.
Brian Klock, a bank analyst with Keefe Bruyette and Woods in San Francisco, said Zions' quarter was "decent."
"The company showed good loan growth and continued performance in asset quality. The only disappointment was the ... core net interest margin compression," which slipped to 3.6 percent in the third quarter from 3.62 percent three months earlier, Klock said.
Results were reported Monday after the closing bell on Wall Street. Shares ended the day unchanged at $21.45, but in after-hours trading were up 16 cents, to $21.61, or 27.5 percent.