Zions Bancorp. reports first quarter net income of $1.83 million or 32 cents per share, down from earnings of $3.22 million or 55 cents per share in the same period last year.

Harris Simmons, president of Zions First National Bank, said the bulk of the earnings drop was due to the corporation's decision to continue strengthening its loan loss reserves and balance sheet."We decided to do this - even though we have seen two consecutive quarters of decreases in non-performing assets - in order to establish a very conservative balance sheet," he said.

To that end, the bank holding company increased reserves for loan losses to $57.39 million or 3.44 percent of net loans and leases on March 31, up from $54.55 million, or 3.32 percent, on Dec. 31, 1988.

Non-performing assets were down at quarter's end, to $93.23 million or 5.49 percent of loans, leases and other real estate owned, from $95.20 million on Dec. 31, said Zions Chairman Roy W. Simmons.

Simmons said Zions' net interest margin strengthened to 4.87 percent in the first quarter, up from 4.61 percent for the first three months last year and 4.56 percent for the year ended Dec. 31.

While Zions' operations in Nevada continued to perform well, Simmons said those in Arizona were negatively affected by "a continuing decline" in that state's economy - primarily real estate.