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Zions Utah Bancorp.'s losses continue to subside as the first half of 1988 ended with a net income of $2.85 million, or .48 cents a share, compared to a net loss of $11.65 million, or $2.04 per share, suffered the year before, the regional banking concern said.

For the second quarter of 1988, Zions had a net loss of $382,00, or .06 cents a share, improving from the $16.26 million loss, or $2.84 per share, posted for the same period last year.Utah's economy, although showing signs of recovery, has hurt loan demand and earnings through Zions' loan-loss provision, the bank holding company's chairman and chief executive Roy W. Simmons said.

Zions' allowance for loan losses increased from 2.25 percent at the end of 1987 to 2.43 percent of loans and leases on June 30, as nonperforming assets grew from 4.56 percent of net loans, leases and other real estate owned to 5.13 percent during the same period.

Net interest margin for the first half of 1988 strengthened to 4.59 percent compared to 3.89 percent last year, Simmons said.

During the second quarter Zions First National Bank opened five retail banking outlets in the Smith's supermarket chain. Zions has signed an agreement to establish the small banking centers in several Smith's superstores. In another expansion during the second period, Zions acquired the deposits and some assets of Sandy State Bank.

Zions Bancorp. owns Zions First National Bank with 71 branches in Utah, Nevada State Bank, Zions First National Bank of Arizona, Colorado 1st Industrial Bank group, Zions Credit Corp., Zions Data Service Co., Zions Discount Brokerage Inc., Zions Insurance Agency and Zions Mortgage Co.