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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 20222023 OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________
COMMISSION FILE NUMBER 001-12307
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
(Exact name of registrant as specified in its charter)
| | | | | |
United States of America | 87-0189025 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
One South Main | |
Salt Lake City, Utah | 84133-1109 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (801) 844-7637
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered |
Common Stock, par value $0.001 | ZION | The NASDAQ Stock Market LLC |
Depositary Shares each representing a 1/40th ownership interest in a share of: | | |
Series A Floating-Rate Non-Cumulative Perpetual Preferred Stock | ZIONP | The NASDAQ Stock Market LLC |
Series G Fixed/Floating-Rate Non-Cumulative Perpetual Preferred Stock | ZIONO | The NASDAQ Stock Market LLC |
6.95% Fixed-to-Floating Rate Subordinated Notes due September 15, 2028 | ZIONL | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Number of common shares outstanding at April 29, 2022 151,358,74828, 2023 148,100,701 shares
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
GLOSSARY OF ACRONYMS AND ABBREVIATIONS
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ACL | Allowance for Credit Losses | IMGHECL | International Manufacturing GroupHome Equity Credit Line |
AFS | Available-for-Sale | IPOHTM | Initial Public OfferingHeld-to-Maturity |
ALLL | Allowance for Loan and Lease Losses | IRSIPO | Internal Revenue ServiceInitial Public Offering |
Amegy | Amegy Bank, a division of Zions Bancorporation, National Association | LIBORLIHTC | London Interbank Offered RateLow-income Housing Tax Credit |
AMERIBOR | American Interbank Offered Rate | LIBOR | London Interbank Offered Rate |
AOCI | Accumulated Other Comprehensive Income or Loss | Municipalities | State and Local Governments |
AOCIASC | Accumulated Other Comprehensive IncomeAccounting Standards Codification | NAICS | North American Industry Classification System |
ASCASU | Accounting Standards CodificationUpdate | NASDAQ | National Association of Securities Dealers Automated Quotations |
ASUBOLI | Accounting Standards UpdateBank-Owned Life Insurance | NBAZ | National Bank of Arizona, a division of Zions Bancorporation, National Association |
BOLIbps | Bank-Owned Life InsuranceBasis Points | NIM | Net Interest Margin |
bpsBSBY | Basis PointsBloomberg Short-Term Bank Yield | NM | Not Meaningful |
BSBYBTFP | Bloomberg Short-Term Bank YieldTerm Funding Program | NSB | Nevada State Bank, a division of Zions Bancorporation, National Association |
CB&T | California Bank & Trust, a division of Zions Bancorporation, National Association | OCC | Office of the Comptroller of the Currency |
CCPACECL | California Consumer Privacy Act of 2018Current Expected Credit Loss | OCI | Other Comprehensive Income or Loss |
CECLCLTV | Current Expected Credit LossCombined Loan-to-Value Ratio | OREO | Other Real Estate Owned |
CLTVCMT | Constant Maturity Treasury | PAM | Combined Loan-to-Value RatioProportional Amortization Method |
CRE | Commercial Real Estate | PEI | Private Equity Investment |
CMTCVA | Constant Maturity TreasuryCredit Valuation Adjustment | PPNR | Pre-provision Net Revenue |
CREDTA | Commercial Real EstateDeferred Tax Asset | PPP | Paycheck Protection Program |
CVADTL | Credit Valuation AdjustmentDeferred Tax Liability | ROU | Right-of-Use |
DTAEaR | Deferred Tax AssetEarnings at Risk | RULC | Reserve for Unfunded Lending Commitments |
EaREPS | Earnings at Riskper Share | S&P | Standard and& Poor's |
EPSEVE | Earnings per ShareEconomic Value of Equity | SBA | U.S. Small Business Administration |
EVEFASB | Economic Value of EquityFinancial Accounting Standards Board | SBIC | Small Business Investment Company |
FASBFDIC | Financial Accounting Standards BoardFederal Deposit Insurance Corporation | SEC | Securities and Exchange Commission |
FDICFHLB | Federal Deposit Insurance CorporationHome Loan Bank | SOFR | Secured Overnight Financing Rate |
FHLBFICO | Federal Home Loan BankFair Isaac Corporation | TCBW | The Commerce Bank of Washington, a division of Zions Bancorporation, National Association |
FRB | Federal Reserve Board | TDR | Troubled Debt Restructuring |
FTP | Funds Transfer Pricing | U.K.U.S. | United KingdomStates |
GAAP | Generally Accepted Accounting Principles | U.S. | United States |
HECL | Home Equity Credit Line | Vectra | Vectra Bank Colorado, a division of Zions Bancorporation, National Association |
HTMGCF | Held-to-MaturityGeneral Collateral Funding | Zions Bank | Zions Bank, a division of Zions Bancorporation, National Association |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:
•statementsStatements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation, National Association and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
•statementsStatements preceded or followed by, or that include the words “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecasts,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” “will,” and the negative thereof and similar words and expressions.
These forward-lookingForward-looking statements are not guarantees, nor should they be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those presented. Although thisthe following list is not comprehensive, important factors that may cause material differences include changes in general industry and economic conditions, including inflation; changes and uncertainties in legislation and fiscal, monetary, regulatory, trade, and tax policies; changes in interest and reference rates; theinclude:
•The quality and composition of our loan and securities portfolios;portfolios and the quality and composition of our deposits;
•Changes in general industry, political and economic conditions, including continued high inflation, economic slowdown or recession, or other economic disruptions; changes in interest and reference rates which could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; deterioration in economic conditions that may result in increased loan and leases losses;
•Securities and capital markets behavior, including volatility and changes in market liquidity and our ability to raise capital;
•The impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
•The possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings;
•Our ability to recruit and retain talent, including increased competition for qualified candidates as a result of expanded remote-work opportunities and increased compensation expenses; competitive
•Competitive pressures and other factors that may affect aspects of our business, such as pricing and demand for our products and services; our
•Our ability to complete projects and initiatives and execute on our strategic plans, manage our risks, and achieve our business objectives;
•Our ability to provide adequate oversight of our suppliers or prevent inadequate performance by third parties upon whom we rely for the delivery of various products and services;
•Our ability to develop and maintain technology, information security systems and controls designed to guard against fraud, cyber,cybersecurity, and privacy risks;
•Changes and uncertainties in applicable laws, and fiscal, monetary, regulatory, trade, and tax policies, and actions taken by governments, agencies, central banks and similar organizations; adverse media and other expressions of negative public opinion whether directed at us, other banks, the banking industry generally or otherwise that may adversely affect our reputation and that of the banking industry generally;
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
•The effects of pandemics and other health emergencies, including the lingering effects of the COVID-19 pandemic (including variants) and associated actions that may affect our business, employees, customers, and communities;communities, such as ongoing effects on availability and cost of labor;
•The effects of wars and geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
•Natural disasters that may impact our and governmentalour customer's operations and business; and
•Governmental and social responses to environmental, social, and governance issues, andincluding those with respect to climate change. These factors, risks, and uncertainties, among others, are discussed in our 2021 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”).
We caution against the undue reliance on forward-looking statements, which reflect our views only as of the date they are made. Except to the extent required by law, we specifically disclaim any obligation to update any factors or to publicly announce the revisions to any of the forward-looking statements included herein to reflect future events or developments.
GAAPRECENT DEVELOPMENTS
As this quarterly report is filed, the Nasdaq Regional Banking Index is down about 30% year-to-date in 2023, reflecting broad weakness in bank valuations due in large part to NON-GAAP RECONCILIATIONSseveral regional banks being closed and placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”). The root causes of these closures appear to be centered on weaknesses in liquidity risk, interest rate risk, and capital management. Investor sentiment has also been adversely impacted by concerns about future losses in commercial real estate.
This Form 10-Q presents non-GAAPIn light of the current banking environment, below we have summarized key strategic actions that we employ (and have employed since the 2008 global financial measures, in additioncrisis) to generally accepted accounting principles (“GAAP”) financial measures,prudently manage the associated risks.
Liquidity Risk
We manage liquidity to provide investors with additional information. The adjustments to reconcile fromnecessary funds in varying circumstances. As a result, we have readily available sources of liquidity, including cash, interest-bearing funds held at the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. We consider these adjustments to be relevant to ongoing operating resultsFederal Reserve, and to provide a meaningful base for period-to-periodadvances and company-to-company comparisons. We use these non-GAAP financial measures to assessother borrowings against loans and highly-liquid investment securities, which all together exceed our performance, financial position, and for presentationslevel of uninsured deposits. An important source of our performanceliquidity is an approximately $22 billion investment securities portfolio, comprised primarily of United States (“U.S.”) government mortgage-backed securities that can be readily pledged for future borrowings without effecting a sale.
Interest Rate Risk
We actively manage the volatility of net interest income and economic value of equity associated with changes in interest rates. Our investment securities portfolio, which has an estimated duration of 4.1 years, facilitates the balancing of the mismatch between our loan and deposit durations.
Capital Management
We maintain strong regulatory capital ratios, exceeding all capital adequacy and regulatory requirements for well-capitalized banks, and have current and projected earnings capacity to investors. augment capital going forward. We regularly utilize stress testing as an important mechanism to inform our decisions on the appropriate level of capital and funding.
Credit Risk
We believe that presentingwe have strong credit discipline, solid underwriting standards, and a well-diversified loan portfolio, all of which has resulted in very good credit quality for more than a decade. Specifically, we have actively managed the credit risk in our commercial real estate loan portfolio, reducing these non-GAAP financial measures permits investorsloans to assess our performance on the same basis as that applied by our management and the financial services industry.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
Non-GAAP financial measures have inherent limitations and are not necessarily comparable to similar financial measures that may be presented by other financial services companies. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be consideredtotal loans, compared with 33% in isolation or as a substitute for analysis of results reported under GAAP.
Tangible Common Equity and Related Measures
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization. We believe these non-GAAP measures provide useful information about our use of shareholders’ equity and provide a basis for evaluating the performance of a business more consistently, whether acquired or developed internally.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP) | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
(Dollar amounts in millions) | | March 31, 2022 | | December 31, 2021 | | | | March 31, 2021 |
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Net earnings applicable to common shareholders, net of tax | (a) | $ | 195 | | | $ | 207 | | | | | $ | 314 | |
Average common equity (GAAP) | | $ | 6,700 | | | $ | 7,146 | | | | | $ | 7,333 | |
Average goodwill and intangibles | | (1,015) | | | (1,015) | | | | | (1,016) | |
Average tangible common equity (non-GAAP) | (b) | $ | 5,685 | | | $ | 6,131 | | | | | $ | 6,317 | |
Number of days in quarter | (c) | 90 | | | 92 | | | | | 90 | |
Number of days in year | (d) | 365 | | | 365 | | | | | 365 | |
Return on average tangible common equity (non-GAAP) | (a/b/c)*d | 13.9 | % | | 13.4 | % | | | | 20.2 | % |
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES) | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions, except per share amounts) | | March 31, 2022 | | December 31, 2021 | | | | March 31, 2021 |
| | | | | | | | |
Total shareholders’ equity (GAAP) | | $ | 6,294 | | | $ | 7,463 | | | | | $ | 7,933 | |
Goodwill and intangibles | | (1,015) | | | (1,015) | | | | | (1,016) | |
Tangible equity (non-GAAP) | (a) | 5,279 | | | 6,448 | | | | | 6,917 | |
Preferred stock | | (440) | | | (440) | | | | | (566) | |
Tangible common equity (non-GAAP) | (b) | $ | 4,839 | | | $ | 6,008 | | | | | $ | 6,351 | |
Total assets (GAAP) | | $ | 91,126 | | | $ | 93,200 | | | | | $ | 85,121 | |
Goodwill and intangibles | | (1,015) | | | (1,015) | | | | | (1,016) | |
Tangible assets (non-GAAP) | (c) | $ | 90,111 | | | $ | 92,185 | | | | | $ | 84,105 | |
Common shares outstanding (thousands) | (d) | 151,348 | | | 151,625 | | | | | 163,800 | |
Tangible equity ratio (non-GAAP) | (a/c) | 5.9 | % | | 7.0 | % | | | | 8.2 | % |
Tangible common equity ratio (non-GAAP) | (b/c) | 5.4 | % | | 6.5 | % | | | | 7.6 | % |
Tangible book value per common share (non-GAAP) | (b/d) | $ | 31.97 | | | $ | 39.62 | | | | | $ | 38.77 | |
late 2008.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
Efficiency Ratio and Adjusted Pre-Provision Net Revenue
The efficiency ratio is a measure of operating expense relative to revenue. We believe the efficiency ratio provides useful information regarding the cost of generating revenue. The methodology of determining the efficiency ratio may differ among companies. We make adjustments to exclude certain items that are not generally expected to recur frequently, as identified in the subsequent schedule, which we believe allow for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how well we are managing our expenses; adjusted pre-provision net revenue (“PPNR”) enables management and others to assess our ability to generate capital. Taxable-equivalent net interest income allows us to assess the comparability of revenue arising from both taxable and tax-exempt sources.
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | Year Ended |
(Dollar amounts in millions) | | March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | | | | | December 31, 2021 |
| | | | | | | | | | | | |
Noninterest expense (GAAP) | (a) | $ | 464 | | | $ | 449 | | | $ | 435 | | | | | | | $ | 1,741 | |
Adjustments: | | | | | | | | | | | | |
Severance costs | | — | | | — | | | — | | | | | | | 1 | |
Other real estate expense, net | | 1 | | | — | | | — | | | | | | | — | |
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Amortization of core deposit and other intangibles | | — | | | 1 | | | — | | | | | | | 1 | |
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Pension termination-related (income) expense 1 | | — | | | — | | | (5) | | | | | | | (5) | |
SBIC investment success fee accrual 2 | | (1) | | | 2 | | | — | | | | | | | 7 | |
Total adjustments | (b) | — | | | 3 | | | (5) | | | | | | | 4 | |
Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 464 | | | $ | 446 | | | $ | 440 | | | | | | | $ | 1,737 | |
Net interest income (GAAP) | (d) | $ | 544 | | | $ | 553 | | | $ | 545 | | | | | | | $ | 2,208 | |
Fully taxable-equivalent adjustments | (e) | 8 | | | 10 | | | 8 | | | | | | | 32 | |
Taxable-equivalent net interest income (non-GAAP) | (d+e)=f | 552 | | | 563 | | | 553 | | | | | | | 2,240 | |
Noninterest income (GAAP) | g | 142 | | | 190 | | | 169 | | | | | | | 703 | |
Combined income (non-GAAP) | (f+g)=(h) | 694 | | | 753 | | | 722 | | | | | | | 2,943 | |
Adjustments: | | | | | | | | | | | | |
Fair value and nonhedge derivative gain (loss) | | 6 | | | (1) | | | 18 | | | | | | | 14 | |
Securities gains (losses), net 2 | | (17) | | | 20 | | | 11 | | | | | | | 71 | |
Total adjustments | (i) | (11) | | | 19 | | | 29 | | | | | | | 85 | |
Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 705 | | | $ | 734 | | | $ | 693 | | | | | | | $ | 2,858 | |
Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 230 | | | $ | 304 | | | $ | 287 | | | | | | | $ | 1,202 | |
Adjusted PPNR (non-GAAP) | (j)-(c) | 241 | | | 288 | | | 253 | | | | | | | 1,121 | |
Efficiency ratio (non-GAAP) 3 | (c/j) | 65.8 | % | | 60.8 | % | | 63.5 | % | | | | | | 60.8 | % |
1 Represents a valuation adjustment related to the termination of our defined benefit pension plan.
2 The success fee accrual is associated with the gains/(losses) from our SBIC investments. The gains/(losses) related to these investments are excluded from the efficiency ratio through securities gains, net.
3 Results for the first quarter of 2022 benefited from a one-time adjustment of approximately $6 million in commercial account fees. Excluding the $6 million adjustment, the efficiency ratio for the first quarter of 2022 would have been 66.4%.
ZIONS BANCORPORATION, NATIONAL ASSOCIATIONSUBSIDIARIES
Comparisons noted below are calculated for the current quarter versuscompared with the same prior-year period unless otherwise specified. Growth rates of 100% or more are considered not meaningful (“NM”) as they generally reflect a low starting point.
RESULTS OF OPERATIONS
Executive Summary
Our financial results in the first quarter of 20222023 reflected strong non-PPP loancredit quality and revenue growth, solidwhich was partially offset by increases in the provision for credit performance,losses and improving customer-related noninterest income.expense. Diluted earnings per share (“EPS”) decreased to $1.27,was $1.33, compared with $1.90$1.27 in the first quarter of 2021.2022.
Net interest income remained relatively stable at $544increased $135 million, as significant growthor 25%, to $679 million, primarily due to a higher interest rate environment and a favorable change in the mix of $7.8 billion in average interest-earning assets was partially offset byassets. The net interest margin (“NIM”) compression arising from an increased concentration in cash and securities and the low interest rate environment. The NIM was 2.60% in the first quarter of 2022,3.33%, compared with 2.86%2.60%.
Our results benefited from a negative $33Nonperforming assets decreased $79 million, provision for credit losses, reflecting improvements in economic forecastsor 31%, and strong credit quality. This compares with a negative $132classified loans decreased $236 million, provision for credit losses in the first quarter of 2021. Netor 21%. We had zero net loan and lease charge-offs, were $6 million, or 0.05% of average loans (ex-PPP), compared with net charge-offs of $8$6 million, or 0.07% of average loans (ex-PPP), in the prior year quarter. Despite improvements in most of our credit quality metrics, the provision for credit losses was $45 million, compared with a $(33) million provision in the prior year period, reflecting deterioration in economic forecasts and growth in the loan portfolio.
Total customer-related noninterest income remained stable at $151 million, compared with the prior year period, driven by increases in commercial treasury management, foreign exchange, and capital markets syndication fees, offset by a decrease in retail and business banking fees. Total noninterest income increased $18 million, or 14%13%, primarily due to improved card, retail and business banking, and wealth management activity. Total noninterest income decreased $27 million, or 16%, largely due to $17 million of negative mark-to-market adjustments recorded during the quarter primarily relatingprior year period related to our Small Business Investment Company (“SBIC”) investment in Recursion Pharmaceuticals, Inc.portfolio.
Total noninterest expense increased $29$48 million, or 7%10%. The increase was driven largely driven by a $24$27 million increase in salaries and benefits expense, which was impacted by (1)ongoing inflationary and competitive labor market pressures on wages and (2) increases in incentive compensation accruals arising from improvements in anticipated full-year profitability.benefits, increased headcount, and an additional business day during the current quarter. Our efficiency ratio was 65.8%59.9%, compared with 63.5% for the first quarter of 2021.
The65.8%, as growth in averageadjusted taxable-equivalent revenue significantly outpaced growth in adjusted noninterest expense.
Average interest-earning assets wasdecreased $2.3 billion, or 3%, from the prior year quarter, driven by a $9.4declines of $4.2 billion increase in average available-for-sale (“AFS”) investment securities and a $1.2$3.2 billion increase in average money market investments. Over the past year, we actively deployed excess liquidity into medium-duration assets, as we sought to balance competing objectivesinvestments and average securities, respectively, and partially offset by an increase of increasing current income, maintaining asset sensitivity to benefit from rising rates,$5.2 billion in average loans and maintaining sufficient liquidity for loan growth and changes in deposit trends.leases.
Excluding Paycheck Protection Program (“PPP”) loans, totalTotal loans and leases increased $3.2$5.1 billion, or 7%10%, to $50.2$56.3 billion. The increases were primarily in the consumer 1-4 family residential mortgage, commercial real estate term, commercial and industrial, commercial owner-occupied, municipal, and home equity credit lineconsumer construction loan portfolios.
Total loans and leasesdeposits decreased $2.2$13.1 billion, or 4%16%, to $69.2 billion, from the prior year quarter, primarilymainly due to declines in larger-balance and more rate-sensitive, nonoperating deposits during the forgivenessprior year, which continued into the first quarter of PPP loans2023 due to market uncertainty and a declineheightened sensitivity of large depositors in 1-4 family residential mortgage loans.
Total depositsthe wake of prominent bank failures. Our loan-to-deposit ratio was 81%, compared with 62% in the prior year quarter. Borrowed funds, consisting primarily of secured borrowings, increased $8.5$11.5 billion or 12%, from the prior year quarter primarily duein response to a $6.1 billion increasedeclines in noninterest-bearing deposits.total deposits and loan growth.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
First Quarter 20222023 Financial Performance
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Net Earnings Applicable to Common Shareholders (in millions) | | Diluted EPS | | Adjusted PPNR (in millions) | | Efficiency Ratio |
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Net earnings applicable to common shareholders decreasedincreased from the first quarter of 2021. The prior year quarter benefited from a negative $132 million2022, primarily due to an increase in net revenue, driven largely by the higher interest rate environment and change in the mix of interest-earning assets, partially offset by increases in the provision for credit losses compared with negative $33 million in the first quarter of 2022.and noninterest expense, as well as a higher effective tax rate. | | Diluted earnings per share declinedimproved from the first quarter of 20212022 as a result of decreasedincreased net earnings the effect of which was partially offset byand a 12.23.6 million decrease in weighted average diluted shares, primarily due to share repurchases. | | Adjusted PPNR decreased $12pre-provision net revenue (“PPNR”) increased $100 million from the first quarter of 2021,2022, primarily due to thegrowth in net interest income. This increase in adjusted noninterest expense, driven by increases in salaries and benefits expense,was partially offset by increases in customer-related fee income.higher adjusted noninterest expense. | | The efficiency ratio increasedimproved from the prior year quarter, primarily as growth in adjusted taxable-equivalent revenue significantly outpaced growth in adjusted noninterest expense, due to the increaseresulting in salaries and benefits expense exceeded growth in adjusted revenue.positive operating leverage. |
Net Interest Income and Net Interest Margin
Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing liabilities, and was approximately 79% of our net revenue (net interest income plus noninterest income) for the quarter. The net interest margin is derived from both the amount of interest-earning assets and interest-bearing liabilities and their respective yields and rates.
NET INTEREST INCOME AND NET INTEREST MARGIN
| | | Three Months Ended March 31, | | Amount change | | Percent change | | Three Months Ended March 31, | | Amount change | | Percent change |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2022 | | 2021 | | (Dollar amounts in millions) | 2023 | | 2022 | |
| Interest and fees on loans | $ | 437 | | $ | 488 | | $ | (51) | | | (10) | % | |
Interest and fees on loans 1 | | Interest and fees on loans 1 | $ | 726 | | $ | 437 | | $ | 289 | | | 66 | % |
Interest on money market investments | Interest on money market investments | 6 | | 3 | | 3 | | | NM | Interest on money market investments | 57 | | 6 | | 51 | | | NM |
Interest on securities | Interest on securities | 112 | | 71 | | 41 | | | 58 | | Interest on securities | 137 | | 112 | | 25 | | | 22 | |
Total interest income | Total interest income | 555 | | 562 | | (7) | | | (1) | | Total interest income | 920 | | 555 | | 365 | | | 66 | |
Interest on deposits | Interest on deposits | 6 | | 9 | | (3) | | | (33) | | Interest on deposits | 82 | | 6 | | 76 | | | NM |
Interest on short- and long-term borrowings | Interest on short- and long-term borrowings | 5 | | 8 | | (3) | | | (38) | | Interest on short- and long-term borrowings | 159 | | 5 | | 154 | | | NM |
Total interest expense | Total interest expense | 11 | | 17 | | (6) | | | (35) | | Total interest expense | 241 | | 11 | | 230 | | | NM |
Net interest income | Net interest income | $ | 544 | | $ | 545 | | $ | (1) | | | — | % | Net interest income | $ | 679 | | $ | 544 | | $ | 135 | | | 25 | % |
| Average interest-earning assets | Average interest-earning assets | $ | 86,093 | | $ | 78,294 | | $ | 7,799 | | | 10 | % | Average interest-earning assets | $ | 83,832 | | $ | 86,093 | | $ | (2,261) | | | (3) | % |
Average interest-bearing liabilities | Average interest-bearing liabilities | $ | 42,136 | | $ | 40,157 | | $ | 1,979 | | | 5 | % | Average interest-bearing liabilities | $ | 49,012 | | $ | 42,136 | | $ | 6,876 | | | 16 | % |
| | bps | | | bps | |
Yield on interest-earning assets 1 | 2.65 | % | | 2.95 | % | | (30) | | | |
Rate paid on total deposits and interest-bearing liabilities1 | 0.06 | % | | 0.09 | % | | (3) | | | |
Cost of total deposits 1 | 0.03 | % | | 0.05 | % | | (2) | | | |
Net interest margin 1 | 2.60 | % | | 2.86 | % | | (26) | | | |
Yield on interest-earning assets 2 | | Yield on interest-earning assets 2 | 4.49 | % | | 2.65 | % | | 184 | | |
Rate paid on total deposits and interest-bearing liabilities 2 | | Rate paid on total deposits and interest-bearing liabilities 2 | 1.17 | % | | 0.06 | % | | 111 | | |
Cost of total deposits 2 | | Cost of total deposits 2 | 0.47 | % | | 0.03 | % | | 44 | | |
Net interest margin 2 | | Net interest margin 2 | 3.33 | % | | 2.60 | % | | 73 | | |
1Includes interest income recoveries of $2 million for both the three months ended March 31, 2023, and 2022.
2 Rates are calculated using amounts in thousands; taxable-equivalent rates are used where applicable.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Net interest income accounted for approximately 81% of our net revenue (net interest income plus noninterest income) for the quarter and increased $135 million, or 25%, relative to the prior year quarter. The increase was primarily due to the higher interest rate environment and a favorable change in the mix of interest-earning assets.
Average interest-earning assets decreased $2.3 billion, or 3%, from the prior year quarter, driven by declines of $4.2 billion and $3.2 billion in average money market investments and average securities, respectively. A majority of the decrease in average securities was due to payments and maturities. These decreases were partially offset by an increase of $5.2 billion in average loans and leases.
The NIM was 3.33%, compared with 2.60%. The yield on average interest-earning assets was 4.49% in the first quarter of 2023, an increase of 184 basis points (“bps”), reflecting higher interest rates and a favorable mix change from money market investments to loans. The yield also benefited from a decrease in the market value of available-for-sale (“AFS”) securities due to rising interest rates. The rate paid on average interest-bearing liabilities increased to 1.99%, compared with 0.11%, reflecting the higher interest rate environment and increased borrowings. We expect that the funding mix change toward the end of the first quarter of 2023, combined with the continued improvement in earning asset yields, will result in an estimated NIM of approximately 3.0% in the near term.
Average loans and leases increased $5.2 billion, or 10%, to $56.1 billion, mainly due to growth in average consumer and commercial loans. The yield on total loans increased 178 basis points to 5.30%, reflecting the higher interest rate environment.
Average deposits decreased $11.4 billion, or 14%, to $70.2 billion at an average cost of 0.47%, from $81.6 billion at an average cost of 0.03% in the first quarter of 2022. The rate paid on total deposits and interest-bearing liabilities was 1.17%, compared with 0.06%, reflecting the higher interest rate environment and increased short-term borrowings. Average noninterest-bearing deposits as a percentage of total deposits were 49%, compared with 50% during the same prior year period.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Net interest income remained relatively stable at $544 million during the first quarter of 2022, as significant growth in average interest-earning assets was partially offset by NIM compression arising from an increased concentration in cash and securities and the low interest rate environment.
Average interest-earning assets increased $7.8 billion, or 10%, driven by growth of $9.4 billion in AFS securities, $2.3 billion in commercial loans (ex-PPP), and $1.2 billion in money market investments. These increases were partially offset by a $4.7 billion decline in average PPP loans. Average securities increased to 30% of average interest-earning assets, compared with 21%, as we actively deployed excess liquidity into medium duration assets.
The NIM was 2.60%, compared with 2.86%. The yield on average interest-earning assets was 2.65% in the first quarter of 2022, a decrease of 30 basis points (“bps”), primarily due to a decrease in the yield on loans. The average rate paid on interest-bearing liabilities decreased 6 bps to 0.11%.
Average loans and leases (ex-PPP) increased $1.9 billion, or 4%, primarily in the commercial and industrial loan portfolio. Total average loans and leases decreased $2.8 billion, or 5%, from $53.7 billion in the first quarter of 2021, primarily due to the forgiveness of PPP loans and a decrease in 1-4 family residential mortgage loans. The decline in our mortgage loan portfolio is partly due to refinancing activity. We generally originate residential mortgage loans and sell them to government-sponsored entities as part of our interest rate risk management efforts to limit our balance sheet exposure to long-term assets.
The yield on total loans decreased 21 basis points to 3.52%. The yield on non-PPP loans decreased 26 basis points, primarily driven by (1) lower yields on loans originated during the past year, compared with yields on loans maturing and amortizing during the same period, and (2) promotional rates on commercial owner-occupied loans and home equity credit lines.
During the first quarter of 2022 and 2021, PPP loans totaling $0.8 billion and $1.6 billion, respectively, were forgiven by the Small Business Administration (“SBA”). PPP loans contributed $24 million and $60 million in interest income during the same time periods. The yield on these loans was 6.64% and 3.98% for the first quarter of 2022 and 2021, respectively, and was positively impacted by accelerated amortization of deferred fees on paid off or forgiven PPP loans. At March 31, 2022 and 2021, the remaining unamortized net deferred fees on these loans totaled $24 million and $168 million, respectively.
Average total deposits increased $10.2 billion to $81.6 billion at an average cost of 0.03%, from $71.4 billion at an average cost of 0.05% in the first quarter of 2021. Average interest-bearing liabilities increased $2.0 billion, or 5%.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
The rate paid on total deposits and interest-bearing liabilities was 0.06%, a decrease from 0.09% during the first quarter of 2021, which was primarily due to low interest-bearing deposit rates and strong noninterest-bearing deposit growth.
Average AFS securities balances increased $9.3decreased $13.3 billion, or 59%53%, from $15.9to $11.9 billion. During the fourth quarter of 2022, we transferred approximately $10.7 billion mainly duefair value ($13.1 billion amortized cost) of mortgage-backed AFS securities to an increase inthe held-to-maturity (“HTM”) category to reflect our mortgage-backed securities portfolio. The yield on securities remained relatively stable at 1.78%.intent for these securities.
Average borrowed funds, decreased $1.0consisting primarily of secured borrowings, increased $11.8 billion or 42%, from $2.4 billion, with both average short-term borrowings and average long-term borrowings decreasing $0.5 billion. The average rate paid on short-term borrowings remained stable at 0.08%, while the rate paid on long-term debt increased 36 bps from the prior year quarter primarily duein response to lower-yielding senior debt that was redeemed or matured over the past few quarters. The decreasedeclines in overalltotal deposits and loan growth.
For more information on our investments securities portfolio and borrowed funds continuesand how we manage liquidity risk, refer to reflect strong deposit growth.
the “Investment Securities Portfolio” section on page 15 and the “Liquidity Risk Management” section on page 31. For further discussion of the effects of market rates on net interest income and how we manage interest rate risk, refer to the “Interest Rate and Market Risk Management” section on page 27. For more information on how we manage liquidity risk, refer to the “Liquidity Risk Management” section on page 31.28.
The following schedule summarizes the average balances, the amount of interest earned or paid, and the applicable yields for interest-earning assets and the costs of interest-bearing liabilities.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES | (Unaudited) | (Unaudited) | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | (Unaudited) | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Average balance | | Amount of interest | | Average yield/rate 1 | | Average balance | | Amount of interest 1 | | Average yield/rate 1 | (Dollar amounts in millions) | Average balance | | Amount of interest | | Average yield/rate 1 | | Average balance | | Amount of interest 1 | | Average yield/rate 1 |
ASSETS | ASSETS | | | | | | | | | | | | ASSETS | | | | | | | | | | | |
Money market investments: | Money market investments: | | Money market investments: | |
Interest-bearing deposits | Interest-bearing deposits | $ | 6,735 | | | $ | 3 | | | 0.19 | % | | $ | 4,592 | | | $ | 1 | | | 0.11 | % | Interest-bearing deposits | $ | 2,724 | | | $ | 31 | | | 4.72 | % | | $ | 6,735 | | | $ | 3 | | | 0.19 | % |
Federal funds sold and security resell agreements | 2,300 | | | 3 | | | 0.52 | | | 3,199 | | | 2 | | | 0.24 | | |
Federal funds sold and securities purchased under agreements to resell | | Federal funds sold and securities purchased under agreements to resell | 2,081 | | | 26 | | | 5.02 | | | 2,300 | | | 3 | | | 0.52 | |
Total money market investments | Total money market investments | 9,035 | | | 6 | | | 0.27 | | | 7,791 | | | 3 | | | 0.16 | | Total money market investments | 4,805 | | | 57 | | | 4.85 | | | 9,035 | | | 6 | | | 0.27 | |
Securities: | Securities: | | | | | | | | | Securities: | | | | | | | | |
Held-to-maturity | Held-to-maturity | 438 | | | 3 | | | 3.12 | | | 663 | | | 5 | | | 2.98 | | Held-to-maturity | 11,024 | | | 62 | | | 2.28 | | | 438 | | | 3 | | | 3.12 | |
Available-for-sale | 25,246 | | | 106 | | | 1.71 | | | 15,876 | | | 66 | | | 1.69 | | |
Trading account | 384 | | | 5 | | | 4.76 | | | 231 | | | 2 | | | 3.96 | | |
Total securities 2 | 26,068 | | | 114 | | | 1.78 | | | 16,770 | | | 73 | | | 1.77 | | |
Available-for-sale 2 | | Available-for-sale 2 | 11,824 | | | 76 | | | 2.62 | | | 25,246 | | | 106 | | | 1.71 | |
Trading | | Trading | 21 | | | — | | | 4.01 | | | 384 | | | 5 | | | 4.76 | |
Total securities 3 | | Total securities 3 | 22,869 | | | 138 | | | 2.46 | | | 26,068 | | | 114 | | | 1.78 | |
Loans held for sale | Loans held for sale | 57 | | | — | | | 1.92 | | | 68 | | | — | | | 2.81 | | Loans held for sale | 5 | | | — | | | 0.26 | | | 57 | | | — | | | 1.92 | |
Loans and leases 3 | | |
Commercial - excluding PPP loans | 27,037 | | | 236 | | | 3.54 | | | 24,732 | | | 234 | | | 3.83 | | |
Commercial - PPP loans | 1,459 | | | 24 | | | 6.64 | | | 6,135 | | | 60 | | | 3.98 | | |
Loans and leases 4 | | Loans and leases 4 | |
Commercial | | Commercial | 30,678 | | | 381 | | | 5.03 | | | 28,496 | | | 260 | | | 3.70 | |
Commercial real estate | Commercial real estate | 12,171 | | | 101 | | | 3.37 | | | 12,133 | | | 105 | | | 3.50 | | Commercial real estate | 12,876 | | | 209 | | | 6.59 | | | 12,171 | | | 101 | | | 3.37 | |
Consumer | Consumer | 10,266 | | | 82 | | | 3.23 | | | 10,665 | | | 95 | | | 3.59 | | Consumer | 12,599 | | | 144 | | | 4.62 | | | 10,266 | | | 82 | | | 3.23 | |
Total loans and leases | Total loans and leases | 50,933 | | | 443 | | | 3.52 | | | 53,665 | | | 494 | | | 3.73 | | Total loans and leases | 56,153 | | | 734 | | | 5.30 | | | 50,933 | | | 443 | | | 3.52 | |
Total interest-earning assets | Total interest-earning assets | 86,093 | | | 563 | | | 2.65 | | | 78,294 | | | 570 | | | 2.95 | | Total interest-earning assets | 83,832 | | | 929 | | | 4.49 | | | 86,093 | | | 563 | | | 2.65 | |
Cash and due from banks | Cash and due from banks | 625 | | | | | 614 | | | | | Cash and due from banks | 543 | | | | | 625 | | | | |
Allowance for credit losses on loans and debt securities | Allowance for credit losses on loans and debt securities | (515) | | | (774) | | | Allowance for credit losses on loans and debt securities | (576) | | | (515) | | |
Goodwill and intangibles | Goodwill and intangibles | 1,015 | | | 1,016 | | | Goodwill and intangibles | 1,064 | | | 1,015 | | |
Other assets | Other assets | 4,211 | | | 3,930 | | | Other assets | 5,624 | | | 4,211 | | |
Total assets | Total assets | $ | 91,429 | | | $ | 83,080 | | | Total assets | $ | 90,487 | | | $ | 91,429 | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Interest-bearing deposits: | Interest-bearing deposits: | | Interest-bearing deposits: | |
Savings and money market | Savings and money market | $ | 39,132 | | | $ | 5 | | | 0.05 | % | | $ | 35,232 | | | $ | 6 | | | 0.07 | % | Savings and money market | $ | 32,859 | | | $ | 62 | | | 0.77 | % | | $ | 39,132 | | | $ | 5 | | | 0.05 | % |
Time | Time | 1,587 | | | 1 | | | 0.26 | | | 2,491 | | | 3 | | | 0.55 | | Time | 2,934 | | | 20 | | | 2.68 | | | 1,587 | | | 1 | | | 0.26 | |
| Total interest-bearing deposits | Total interest-bearing deposits | 40,719 | | | 6 | | | 0.06 | | | 37,723 | | | 9 | | | 0.10 | | Total interest-bearing deposits | 35,793 | | | 82 | | | 0.92 | | | 40,719 | | | 6 | | | 0.06 | |
Borrowed funds: | Borrowed funds: | | | | | | | | | Borrowed funds: | | | | | | | | |
Federal funds purchased and other short-term borrowings | 594 | | | — | | | 0.08 | | | 1,110 | | | — | | | 0.07 | | |
Federal funds and security repurchase agreements | | Federal funds and security repurchase agreements | 5,614 | | | 64 | | | 4.65 | | | 585 | | | — | | | 0.08 | |
Other short-term borrowings | | Other short-term borrowings | 6,952 | | | 84 | | | 4.89 | | | 9 | | | — | | | — | |
Long-term debt | Long-term debt | 823 | | | 5 | | | 2.66 | | | 1,324 | | | 8 | | | 2.30 | | Long-term debt | 653 | | | 11 | | | 6.85 | | | 823 | | | 5 | | | 2.66 | |
Total borrowed funds | Total borrowed funds | 1,417 | | | 5 | | | 1.58 | | | 2,434 | | | 8 | | | 1.28 | | Total borrowed funds | 13,219 | | | 159 | | | 4.88 | | | 1,417 | | | 5 | | | 1.58 | |
Total interest-bearing liabilities | Total interest-bearing liabilities | 42,136 | | | 11 | | | 0.11 | | | 40,157 | | | 17 | | | 0.17 | | Total interest-bearing liabilities | 49,012 | | | 241 | | | 1.99 | | | 42,136 | | | 11 | | | 0.11 | |
Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | 40,886 | | | | | 33,723 | | | | | Noninterest-bearing demand deposits | 34,363 | | | | | 40,886 | | | | |
Other liabilities | Other liabilities | 1,267 | | | 1,301 | | | Other liabilities | 2,058 | | | 1,267 | | |
Total liabilities | Total liabilities | 84,289 | | | 75,181 | | | Total liabilities | 85,433 | | | 84,289 | | |
Shareholders’ equity: | Shareholders’ equity: | | Shareholders’ equity: | |
Preferred equity | Preferred equity | 440 | | | 566 | | | Preferred equity | 440 | | | 440 | | |
Common equity | Common equity | 6,700 | | | 7,333 | | | Common equity | 4,614 | | | 6,700 | | |
Total shareholders’ equity | Total shareholders’ equity | 7,140 | | | 7,899 | | | Total shareholders’ equity | 5,054 | | | 7,140 | | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 91,429 | | | $ | 83,080 | | | Total liabilities and shareholders’ equity | $ | 90,487 | | | $ | 91,429 | | |
Spread on average interest-bearing funds | Spread on average interest-bearing funds | | | 2.54 | % | | | | 2.78 | % | Spread on average interest-bearing funds | | | 2.50 | % | | | | 2.54 | % |
Net impact of noninterest-bearing sources of funds | Net impact of noninterest-bearing sources of funds | | 0.06 | % | | 0.08 | % | Net impact of noninterest-bearing sources of funds | | 0.83 | % | | 0.06 | % |
Net interest margin | Net interest margin | | $ | 552 | | | 2.60 | % | | $ | 553 | | | 2.86 | % | Net interest margin | | $ | 688 | | | 3.33 | % | | $ | 552 | | | 2.60 | % |
Memo: total loans and leases, excluding PPP loans | $ | 49,474 | | | 419 | | 3.43 | % | | $ | 47,530 | | | 434 | | 3.69 | % | |
| Memo: total cost of deposits | Memo: total cost of deposits | | 0.03 | % | | 0.05 | % | Memo: total cost of deposits | | 0.47 | % | | 0.03 | % |
Memo: total deposits and interest-bearing liabilities | Memo: total deposits and interest-bearing liabilities | 83,022 | | | 11 | | | 0.06 | % | | 73,880 | | | 17 | | | 0.09 | % | Memo: total deposits and interest-bearing liabilities | 83,375 | | | 241 | | | 1.17 | % | | 83,022 | | | 11 | | | 0.06 | % |
1 Rates are calculated using amounts in thousands and a tax rate of 21% for the periods presented. The taxable-equivalent rates used are the rates that were applicable at the time of each respective reporting period.
2Interest on total securities includes $28 million and $30 million of taxable-equivalent premium amortization for the first quarters of 2022 and 2021, respectively.
3 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Provision for Credit Losses
The allowance for credit losses (“ACL”) is the combination of both the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents the estimated current expected credit losses related to the loan and lease portfolio as of the balance sheet date. The RULC represents the estimated reserve for current expected credit losses associated with off-balance sheet commitments. Changes in the ALLL and RULC, net of charge-offs and recoveries, are recorded as the provision for loan and lease losses and the provision for unfunded lending commitments, respectively, in the income statement. The ACL for debt securities is estimated separately from loans.loans and is recorded in investment securities on the consolidated balance sheet.
The provision for credit losses, which is the combination of both the provision for loan and lease losses and the provision for unfunded lending commitments, was negative $33$45 million, compared with negative $132$(33) million in the first quarter of 2021.2022. The ACL was $678 million at March 31, 2023, compared with $514 million at March 31, 2022, compared with $695 million at March 31, 2021.2022. The increase in the ACL was primarily due to deterioration in economic forecasts and growth in the loan portfolio. The ratio of ACL to net loans and leases (ex-PPP) was 1.02%1.20% and 1.48%1.00% at March 31, 20222023 and 2021,2022, respectively. The provision for securities losses was less than $1 million during the first quarter of 20222023 and 2021.2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The total ACL was $514 million at March 31, 2022, compared with $695 million at March 31, 2021. The bar chart above illustrates the broad categories of change in the ACL from the prior year period. The second bar represents changes in economic forecasts and current economic conditions, which decreasedincreased the ACL by $141$114 million from the prior year quarter due to improvements in both realized economic results and forecasts, partially offset by economic uncertainty caused by inflation, supply chain disruptions, and the conflict in Eastern Europe.quarter.
The third bar represents changes in credit quality factors and includes risk-grade migration and specific reserves against loans, which, when combined, decreasedincreased the ACL by $16$6 million, indicating improvements inreflecting relatively stable credit quality. NetNonperforming assets decreased $79 million, or 31%, and classified loans decreased $236 million, or 21%. We had zero net loan and lease charge-offs, wereor 0.00% annualized of average loans, compared with net charge-offs of $6 million, or 0.05% annualized of average loans (ex-PPP), in the first quarter of 2022, compared with net charge-offs of $8 million, or 0.07% annualized of average loans (ex-PPP), in the prior year quarter.
The fourth bar represents loan portfolio changes, driven primarily by loan growth, as well as changes in portfolio mix, the aging of the portfolio, and other risk factors; all of which resulted in a $24$44 million reductionincrease in the ACL.
See “Credit Risk Management” on page 20 and Note 6 of the Notes to Consolidated Financial Statements in our 20212022 Form 10-K for more information on how we determine the appropriate level of the ALLL and the RULC.
Noninterest Income
Noninterest income represents revenue we earn from products and services that generally have no associated interest rate or yield and is classified as either customer-related or noncustomer-related. Customer-related noninterest income excludes items such as securities gains and losses, dividends, insurance-related income, and mark-to-market adjustments on certain derivatives.
Total noninterest income decreased $27increased $18 million, or 16%13%, from $169 million duringrelative to the prior year quarter.year. Noninterest income accounted for approximately 19% and 21% and 24% of our net revenue during the first quarter of 20222023 and 2021,2022, respectively. The following schedule presents a comparison of the major components of noninterest income.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NONINTEREST INCOME
| | | Three Months Ended March 31, | | Amount change | | Percent change | | | Three Months Ended March 31, | | Amount change | | Percent change | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2022 | | 2021 | | | (Dollar amounts in millions) | 2023 | | 2022 | | Amount change | |
| Commercial account fees | Commercial account fees | $ | 41 | | | $ | 32 | | | $ | 9 | | | 28 | % | | Commercial account fees | $ | 43 | | | $ | 41 | | | $ | 2 | | | 5 | % | |
Card fees | Card fees | 25 | | | 21 | | | 4 | | | 19 | | | Card fees | 24 | | | 25 | | | (1) | | | (4) | | |
Retail and business banking fees | Retail and business banking fees | 20 | | | 17 | | | 3 | | | 18 | | | Retail and business banking fees | 16 | | | 20 | | | (4) | | | (20) | | |
Loan-related fees and income | Loan-related fees and income | 22 | | | 25 | | | (3) | | | (12) | | | Loan-related fees and income | 21 | | | 22 | | | (1) | | | (5) | | |
Capital markets and foreign exchange fees | 15 | | | 15 | | | — | | | — | | | |
Capital markets fees | | Capital markets fees | 17 | | | 15 | | | 2 | | | 13 | | |
Wealth management fees | Wealth management fees | 14 | | | 12 | | | 2 | | | 17 | | | Wealth management fees | 15 | | | 14 | | | 1 | | | 7 | | |
Other customer-related fees | Other customer-related fees | 14 | | | 11 | | | 3 | | | 27 | | | Other customer-related fees | 15 | | | 14 | | | 1 | | | 7 | | |
Customer-related noninterest income | Customer-related noninterest income | 151 | | | 133 | | | 18 | | | 14 | | | Customer-related noninterest income | 151 | | | 151 | | | — | | | — | | |
| Fair value and nonhedge derivative income | Fair value and nonhedge derivative income | 6 | | | 18 | | | (12) | | | (67) | | | Fair value and nonhedge derivative income | (3) | | | 6 | | | (9) | | | NM | |
Dividends and other income | 2 | | | 7 | | | (5) | | | (71) | | | |
Dividends and other income (loss) | | Dividends and other income (loss) | 11 | | | 2 | | | 9 | | | NM | |
Securities gains (losses), net | Securities gains (losses), net | (17) | | | 11 | | | (28) | | | NM | | Securities gains (losses), net | 1 | | | (17) | | | 18 | | | NM | |
Noncustomer-related noninterest income | Noncustomer-related noninterest income | (9) | | | 36 | | | (45) | | | NM | | Noncustomer-related noninterest income | 9 | | | (9) | | | 18 | | | NM | |
Total noninterest income | Total noninterest income | $ | 142 | | | $ | 169 | | | $ | (27) | | | (16) | % | | Total noninterest income | $ | 160 | | | $ | 142 | | | $ | 18 | | | 13 | % | |
Customer-related Noninterest Income
Total customer-related noninterest income increased $18remained stable at $151 million, or 14%, mainly due to increased card, retailcompared with the prior year period. Increases in commercial treasury management, foreign exchange, and business banking, and wealth management activity, partiallycapital markets syndication fees were offset by a decrease in loan-related fees and income. Results for the first quarter of 2022 benefited from a one-time adjustment of approximately $6 million in commercial account fees.
Retailretail and business banking fees includelargely as a result of a change in our overdraft and non-sufficient funds fees. Beginning inpractices effected during the third quarter of 2022, we expect to reduce the rate and frequency with which such fees are assessed, specifically to consumer accounts. Relative to current activity levels, we expect this will reduce our customer-related noninterest income by approximately $5 million per quarter.2022.
Noncustomer-related Noninterest Income
Total noncustomer-related noninterest income decreased $45increased $18 million relative tofrom the prior year quarter. Net securities gains and losses decreased $28increased $18 million, due largely to $17 million of negative mark-to-market adjustments primarilyrecorded during the prior year period related to our SBIC investment portfolio. Dividends and other income increased $9 million, primarily due to an increase in Recursion Pharmaceuticals, Inc., and an $11dividends on Federal Home Loan Bank (“FHLB”) stock. These increases were offset by a $9 million gain on the sale of Farmer Mac Class C stock recognized during the prior year period.
Fairdecrease in fair value and nonhedge derivative income, decreased $12primarily due to a $3 million from the prior year period. We recognized a $6 million gainloss during the quarter related to a credit valuation adjustment (“CVA”) on client-related interest rate swaps, compared with an $18a $6 million CVA gain in the prior year period. The CVA may fluctuate from period-to-period based on the credit quality of our clients and changes in interest rates, which impacts the value of, and our credit exposure to, the client-related interest rate swaps.
Noninterest Expense
During the first quarter of 2022, we made certain financial reporting reclassifications to noninterest expense in our Consolidated Statements of Income, primarily to improve the presentation and disclosure of certain expenses related to our ongoing technology initiatives and investments and to provide a more relevant presentation of our business and operations. Other expense line items were also impacted by these reclassifications, which were adopted retrospectively to January 1, 2020.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
The following schedule presents a comparison of the major components of noninterest expense.
NONINTEREST EXPENSE
| | | Three Months Ended March 31, | | Amount change | | Percent change | | | Three Months Ended March 31, | | Amount change | | Percent change | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2022 | | 2021 | | | (Dollar amounts in millions) | 2023 | | 2022 | | Amount change | |
| Salaries and employee benefits | Salaries and employee benefits | $ | 312 | | | $ | 288 | | | $ | 24 | | | 8 | % | | Salaries and employee benefits | $ | 339 | | | $ | 312 | | | $ | 27 | | | 9 | % | |
Technology, telecom, and information processing | Technology, telecom, and information processing | 52 | | | 49 | | | 3 | | | 6 | | | Technology, telecom, and information processing | 55 | | | 52 | | | 3 | | | 6 | | |
Occupancy and equipment, net | Occupancy and equipment, net | 38 | | | 39 | | | (1) | | | (3) | | | Occupancy and equipment, net | 40 | | | 38 | | | 2 | | | 5 | | |
Professional and legal services | Professional and legal services | 14 | | | 21 | | | (7) | | | (33) | | | Professional and legal services | 13 | | | 14 | | | (1) | | | (7) | | |
Marketing and business development | Marketing and business development | 8 | | | 7 | | | 1 | | | 14 | | | Marketing and business development | 12 | | | 8 | | | 4 | | | 50 | | |
Deposit insurance and regulatory expense | Deposit insurance and regulatory expense | 10 | | | 10 | | | — | | | — | | | Deposit insurance and regulatory expense | 18 | | | 10 | | | 8 | | | 80 | | |
Credit-related expense | Credit-related expense | 7 | | | 6 | | | 1 | | | 17 | | | Credit-related expense | 6 | | | 7 | | | (1) | | | (14) | | |
Other real estate expense, net | Other real estate expense, net | 1 | | | — | | | 1 | | | NM | | Other real estate expense, net | — | | | 1 | | | (1) | | | NM | |
Other | Other | 22 | | | 15 | | | 7 | | | 47 | | | Other | 29 | | | 22 | | | 7 | | | 32 | | |
Total noninterest expense | Total noninterest expense | $ | 464 | | | $ | 435 | | | $ | 29 | | | 7 | % | | Total noninterest expense | $ | 512 | | | $ | 464 | | | $ | 48 | | | 10 | % | |
Adjusted noninterest expense 1 | Adjusted noninterest expense 1 | $ | 464 | | | $ | 440 | | | $ | 24 | | | 5 | % | | Adjusted noninterest expense 1 | $ | 509 | | | $ | 464 | | | $ | 45 | | | 10 | % | |
1 For information on non-GAAP financial measures, see “GAAP to Non-GAAP Reconciliations”“Non-GAAP Financial Measures” on page 4.36.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Total noninterest expense increased $29$48 million, or 7%10%, relative to the prior year quarter. Salaries and benefits expense increased $24$27 million, or 8%9%, due to (1) the ongoing impact of inflationary and competitive labor market pressures on wages (2) increases in commissions, (3) increases in incentive compensation accruals arising from improvements in anticipated full-year profitability, and (4) declinesbenefits, increased headcount, a decline in deferred salaries, primarily associated with PPP loans originatedand an additional business day during the current quarter.
Deposit insurance and regulatory expense increased $8 million, driven largely by an increased base rate beginning in the prior year period.
2023 and a higher FDIC insurance assessment resulting from changes in balance sheet composition. Other noninterest expense increased $7 million, or 47%, primarily due to lower expenses in the prior year period, which benefited from a $5 million valuation adjustment related to the termination of our defined benefit pension plan. Professional and legal services expense decreased $7 million, or 33%, due to third-party assistance associated with PPP loan forgiveness as well as various technology-relatedincreased travel, intangible amortization, and other outsourced servicesexpenses incurred induring the prior year period.current quarter.
Adjusted noninterest expense increased $24 million, or 5%, to $464 million, compared with $440 million for the prior year period, driven primarily by the increase in salaries and benefits expense described previously. The efficiency ratio was 65.8%59.9%, compared with 63.5%. Given the seasonality associated with employee benefits, the efficiency ratio is generally elevated65.8%, as growth in the first quarter of the year. This effect was more pronouncedadjusted taxable-equivalent revenue significantly outpaced growth in the first quarter of 2022 due to the aforementioned increases in incentive compensation accruals arising from improvements in anticipated full-year profitability.adjusted noninterest expense. For information on non-GAAP financial measures, including differences between noninterest expense and adjusted noninterest expense, see page 4.36.
Technology Spend
Technology spend represents expenditures associated with technology-related investments, operations, systems, and infrastructure, and includes current period expenses reported on our consolidated statement of income, and capitalized investments, net of related amortization and depreciation, reported on our consolidated balance sheet. Technology spend is reported as a combination of the following:
•Technology, telecom, and information processing expense — includes expenses related to application software licensing and maintenance, related amortization, telecommunications, and data processing;
•Other technology-related expense — includes related noncapitalized salaries and employee benefits, occupancy and equipment, and professional and legal services; and
•Technology investments — includes capitalized technology infrastructure equipment, hardware, and purchased or internally developed software, less related amortization or depreciation.
The following schedule provides information related to our technology spend:
TECHNOLOGY SPEND
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | | | |
(In millions) | 2023 | | 2022 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Technology, telecom, and information processing expense | $ | 55 | | | $ | 52 | | | | | | | | | | | | | | | | | |
Other technology-related expense | 54 | | | 49 | | | | | | | | | | | | | | | | | |
Technology investments | 26 | | | 22 | | | | | | | | | | | | | | | | | |
Less: related amortization and depreciation | (14) | | | (14) | | | | | | | | | | | | | | | | | |
Total technology spend | $ | 121 | | | $ | 109 | | | | | | | | | | | | | | | | | |
Total technology spend increased $12 million relative to the prior year quarter, largely due to technology-related compensation and investments in application resiliency.
Income Taxes
The following schedule summarizes the income tax expense and effective tax rates for the periods presented:
INCOME TAXES
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
(Dollar amounts in millions) | (Dollar amounts in millions) | 2022 | | 2021 | | (Dollar amounts in millions) | 2023 | | 2022 | |
| Income before income taxes | Income before income taxes | $ | 255 | | | $ | 411 | | | Income before income taxes | $ | 282 | | | $ | 255 | | |
Income tax expense | Income tax expense | 52 | | | 89 | | | Income tax expense | 78 | | | 52 | | |
Effective tax rate | Effective tax rate | 20.4 | % | | 21.7 | % | | Effective tax rate | 27.7 | % | | 20.4 | % | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The effective tax rate was 27.7% at March 31, 2023, compared with 20.4% at March 31, 2022, primarily as a result of a discrete item that affected the reserve for uncertain tax positions during the current quarter. See Note 12 of the Notes to Consolidated Financial Statements for more information about the factors that influenced the income tax rates as well as information about deferred income tax assets and liabilities.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
liabilities, and valuation allowances.Preferred Stock Dividends
Preferred stock dividends totaled $6 million and $8 million for both the first quarter of 2023 and 2022, and 2021.
Technology Spend
As the banking industry continues to move toward information technology-based products and services, we recognize there are disparate ways of discussing expenditures associated with technology-related investments and operations. We generally describe these expenditures as total technology spend, which includes current period expenses reported on our consolidated statement of income, and capitalized investments, net of related amortization and depreciation, reported on our consolidated balance sheet. We believe these disclosures provide more relevant presentation and discussion regarding our technology-related investments and operations.
The following schedule provides information related to our technology spend:
TECHNOLOGY SPEND
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | | | | | | | | |
(In millions) | 2022 | | 2021 | | | | | | |
| | | | | | | | | | | | | | | |
Technology, telecom, and information processing expense | $ | 52 | | | $ | 49 | | | | | | | | | | | | | |
Other technology-related expenses | 49 | | | 44 | | | | | | | | | | | | | |
Technology investments | 22 | | | 28 | | | | | | | | | | | | | |
Less: related amortization and depreciation | (14) | | | (13) | | | | | | | | | | | | | |
Total technology spend | $ | 109 | | | $ | 108 | | | | | | | | | | | | | |
Total technology spend represents expenditures for technology systems and infrastructure and is reported as a combination of the following:
•Technology, telecom, and information processing expense — includes expenses related to application software licensing and maintenance, related amortization, telecommunications, and data processing;
•Other technology-related expenses — includes related noncapitalized salaries and employee benefits, occupancy and equipment, and professional and legal services; and
•Technology investments — includes capitalized technology infrastructure equipment, hardware, and purchased or internally developed software, less related amortization or depreciation.respectively.
BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets are assets that have associated interest rates or yields, and generally consist of money market investments, securities, loans, and leases. We strive to maintain a high level of interest-earning assets relative to total assets. For more information regarding the average balances, associated revenue generated, and the respective yields of our interest-earning assets, see the Consolidated Average Balance Sheet on page 11.10.
Investment Securities Portfolio
We invest in securities to generate interest income and to actively manage liquidity and interest rate risk and credit risk. Referto generate interest income. We primarily own securities that can readily provide us cash and liquidity through secured borrowing agreements without the need to sell the securities. We also manage the duration extension risk of our investment securities portfolio. At March 31, 2023, the estimated duration of our securities portfolio remained unchanged at 4.1 years, compared with December 31, 2022. This duration helps to manage the inherent interest rate mismatch between loans and deposits, as fixed-rate term investments facilitate the balancing of asset and liability durations, as well as protect the expected economic value of shareholders' equity.
For information about our borrowing capacity associated with the investment securities portfolio and how we manage our liquidity risk, refer to the “Liquidity Risk Management” section on page 31 for additional information about how we manage our liquidity risk.31. See also Note 3 and Note 5of the Notes to Consolidated Financial Statements for more information on fair value measurements and the accounting for our investment securities portfolio.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the components of our investment securities portfolio.
INVESTMENT SECURITIES PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
(In millions) | Par Value | | Amortized cost | | Fair value | | Par Value | | Amortized cost | | Fair value |
Held-to-maturity | | | | | | | | | | | |
U.S. Government agencies and corporations: | | | | | | | | | | | |
Agency securities | $ | 98 | | | $ | 98 | | | $ | 92 | | | $ | 100 | | | $ | 100 | | | $ | 93 | |
Agency guaranteed mortgage-backed securities 1 | 12,707 | | | 10,471 | | | 10,750 | | | 12,921 | | | 10,621 | | | 10,772 | |
Municipal securities | 392 | | | 392 | | | 368 | | | 404 | | | 405 | | | 374 | |
Total held-to-maturity | 13,197 | | | 10,961 | | | 11,210 | | | 13,425 | | | 11,126 | | | 11,239 | |
Available-for-sale | | | | | | | | | | | |
U.S. Treasury securities | 655 | | | 656 | | | 511 | | | 555 | | | 557 | | | 393 | |
U.S. Government agencies and corporations: | | | | | | | | | | | |
Agency securities | 760 | | | 753 | | | 716 | | | 790 | | | 782 | | | 736 | |
Agency guaranteed mortgage-backed securities | 9,341 | | | 9,423 | | | 8,220 | | | 9,566 | | | 9,652 | | | 8,367 | |
Small Business Administration loan-backed securities | 655 | | | 701 | | | 676 | | | 691 | | | 740 | | | 712 | |
Municipal securities | 1,379 | | | 1,517 | | | 1,447 | | | 1,571 | | | 1,732 | | | 1,634 | |
Other debt securities | 25 | | | 25 | | | 24 | | | 75 | | | 75 | | | 73 | |
Total available-for-sale | 12,815 | | | 13,075 | | | 11,594 | | | 13,248 | | | 13,538 | | | 11,915 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total HTM and AFS investment securities | $ | 26,012 | | | $ | 24,036 | | | $ | 22,804 | | | $ | 26,673 | | | $ | 24,664 | | | $ | 23,154 | |
1 During the fourth quarter of 2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of mortgage-backed AFS securities to the HTM category to reflect our intent for these securities. The transfer of these securities from AFS to HTM at fair value resulted in a discount to the amortized cost basis of the HTM securities equivalent to the $2.4 billion ($1.8 billion after-tax) of unrealized losses in AOCI. The amortization of the unrealized losses will offset the effect of the accretion of the discount created by the transfer.
The amortized cost of total HTM and AFS investment securities decreased $0.6 billion, or 3%, from December 31, 2022, primarily due to payments and maturities. Approximately 8% of the total HTM and AFS investment securities portfolio were floating rate at both March 31, 2023 and December 31, 2022, respectively. Additionally, we have $1.2 billion of pay-fixed swaps held as fair value hedges against fixed-rate AFS securities that effectively convert the fixed interest income to a floating rate on the hedged portion of the securities.
At March 31, 2023, the AFS investment securities portfolio included approximately $260 million of net premium that was distributed across the various security categories. Total taxable-equivalent premium amortization for these investment securities was $26 million for the first quarter of 2023, compared with $28 million for the same prior year period.
In addition to HTM and AFS securities, we also have a trading securities portfolio comprised of municipal securities that totaled $12 million at March 31, 2023, compared with $465 million at December 31, 2022. The prior quarter also included $395 million of money market mutual sweep accounts.
Refer to the “Capital Management” section on page 34 and Note 5 of the Notes to Consolidated Financial Statements for more discussion regarding our investment securities portfolio and related unrealized gains and losses.
Municipal Investments and Extensions of Credit
We support our communities by providing products and services to state and local governments (“municipalities”), including deposit services, loans, and investment banking services. We also invest in securities issued by municipalities. Our municipal lending products generally include loans in which the debt service is repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the components of our investment securities portfolio.
INVESTMENT SECURITIES PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
(In millions) | Par value | | Amortized cost | | | | Estimated fair value | | Par value | | Amortized cost | | | | Estimated fair value |
Held-to-maturity | | | | | | | | | | | | | | | |
Municipal securities | $ | 438 | | | $ | 439 | | | | | $ | 414 | | | $ | 441 | | | $ | 441 | | | | | $ | 443 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Available-for-sale | | | | | | | | | | | | | | | |
U.S. Treasury securities | 555 | | | 557 | | | | | 503 | | | 155 | | | 155 | | | | | 134 | |
U.S. Government agencies and corporations: | | | | | | | | | | | | | | | |
Agency securities | 802 | | | 802 | | | | | 792 | | | 833 | | | 833 | | | | | 845 | |
Agency guaranteed mortgage-backed securities | 23,441 | | | 23,626 | | | | | 22,082 | | | 20,340 | | | 20,549 | | | | | 20,387 | |
Small Business Administration loan-backed securities | 884 | | | 950 | | | | | 925 | | | 867 | | | 938 | | | | | 912 | |
Municipal securities | 1,645 | | | 1,828 | | | | | 1,768 | | | 1,489 | | | 1,652 | | | | | 1,694 | |
Other debt securities | 75 | | | 75 | | | | | 75 | | | 75 | | | 75 | | | | | 76 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Total available-for-sale | 27,402 | | | 27,838 | | | | | 26,145 | | | 23,759 | | | 24,202 | | | | | 24,048 | |
Total HTM and AFS investment securities | $ | 27,840 | | | $ | 28,277 | | | | | $ | 26,559 | | | $ | 24,200 | | | $ | 24,643 | | | | | $ | 24,491 | |
The amortized cost of total held-to-maturity (“HTM”) and AFS investment securities increased $3.6 billion, or 15%, from December 31, 2021. Approximately 9% and 11% of the total HTM and AFS investment securities portfolio were floating rate at March 31, 2022 and December 31, 2021, respectively.
The investment securities portfolio includes $437 million of net premium that is distributed across various asset classes. Total premium amortization for our investment securities was $26 million for the first quarter of 2022, compared with $28 million for the same prior year period. Refer to the “Capital Management” section on page 32 and Note 5 of the Notes to Consolidated Financial Statements for more discussion on our investment securities portfolio and related unrealized gains/losses.
At March 31, 2022, based on the GAAP fair value hierarchy, 1.9% and 98.1% of the $26.1 billion AFS securities portfolio was valued at Level 1 and Level 2, respectively, compared with 0.6% and 99.4% at December 31, 2021. None of the AFS securities portfolio was valued at Level 3 for either period. See Note 3 of the Notes to Consolidated Financial Statements for further discussion of fair value accounting.
Municipalities
We provide products and services to state and local governments (referred to collectively as “municipalities”), including deposit services, loans, and investment banking services. We also invest in securities issued by municipalities. The following schedule summarizes our exposuretotal investments and extensions of credit to statemunicipalities:
MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT
| | | | | | | | | | | |
(In millions) | March 31, 2023 | | December 31, 2022 |
| | | |
Loans and leases | $ | 4,374 | | | $ | 4,361 | |
Held-to-maturity securities | 392 | | | 405 | |
Available-for-sale securities | 1,447 | | | 1,634 | |
| | | |
Trading securities | 12 | | | 71 | |
Unfunded lending commitments | 374 | | | 406 | |
Total | $ | 6,599 | | | $ | 6,877 | |
Our municipal loans and local municipalities:
EXPOSURE TO MUNICIPALITIES
| | | | | | | | | | | |
(In millions) | March 31, 2022 | | December 31, 2021 |
| | | |
Loans and leases | $ | 3,944 | | | $ | 3,658 | |
Held-to-maturity – municipal securities | 439 | | | 441 | |
Available-for-sale – municipal securities | 1,768 | | | 1,694 | |
| | | |
Trading account – municipal securities | 364 | | | 355 | |
Unfunded lending commitments | 341 | | | 280 | |
Total direct exposure to municipalities | $ | 6,856 | | | $ | 6,428 | |
securities are primarily associated with municipalities located within our geographic footprint. The municipal loan and lease portfolio is primarily secured by general obligations of municipal entities. Other types of collateral also include real estate, revenue pledges, or equipment. Our municipal loans and securities primarily relate to municipalities located within our geographic footprint.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
At March 31, 2022,2023, no municipal loans were on nonaccrual.
Municipal securities are internally graded, similar to loans, using risk-grading systems which vary based on the size and type of credit risk exposure. The internal risk grades assigned to our municipal securities follow our definitions of Pass, Special Mention, and Substandard, which are consistent with published definitions of regulatory risk classifications. At March 31, 2022,2023, all municipal securities were graded as Pass. See Notes 5 and 6 of the Notes to Consolidated Financial Statements for additional information about the credit quality of these municipal loans and securities.
Loan and Lease Portfolio
At March 31, 2022We provide a wide range of lending products to commercial customers, generally small- and December 31, 2021, the ratio of loansmedium-sized businesses. We also provide various retail lending products and leasesservices to total assets was 56%consumers and 55%, respectively. The largest loan category was commercial and industrial loans, which constituted 28% and 27% of our total loan portfolio for the same periods.small businesses. The following schedule presents the composition of our loansloan and leases according to major portfolio segment, specific loan class, and percentage of total loans:lease portfolio.
LOAN AND LEASE PORTFOLIO
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
(Dollar amounts in millions) | Amount | | % of total loans | | Amount | | % of total loans |
Commercial: | | | | | | | |
Commercial and industrial | $ | 14,356 | | | 28.0 | % | | $ | 13,867 | | | 27.3 | % |
PPP | 1,081 | | | 2.1 | | | 1,855 | | | 3.6 | |
Leasing | 318 | | | 0.6 | | | 327 | | | 0.6 | |
Owner-occupied | 9,026 | | | 17.6 | | | 8,733 | | | 17.2 | |
Municipal | 3,944 | | | 7.7 | | | 3,658 | | | 7.2 | |
Total commercial | 28,725 | | | 56.0 | | | 28,440 | | | 55.9 | |
Commercial real estate: | | | | | | | |
Construction and land development | 2,769 | | | 5.4 | | | 2,757 | | | 5.4 | |
Term | 9,325 | | | 18.2 | | | 9,441 | | | 18.6 | |
Total commercial real estate | 12,094 | | | 23.6 | | | 12,198 | | | 24.0 | |
Consumer: | | | | | | | |
Home equity credit line | 3,089 | | | 6.0 | | | 3,016 | | | 5.9 | |
1-4 family residential | 6,122 | | | 12.0 | | | 6,050 | | | 11.9 | |
Construction and other consumer real estate | 692 | | | 1.4 | | | 638 | | | 1.3 | |
Bankcard and other revolving plans | 410 | | | 0.8 | | | 396 | | | 0.8 | |
Other | 110 | | | 0.2 | | | 113 | | | 0.2 | |
Total consumer | 10,423 | | | 20.4 | | | 10,213 | | | 20.1 | |
Total net loans and leases | $ | 51,242 | | | 100.0 | % | | $ | 50,851 | | | 100.0 | % |
The loan and lease portfolio increased $391 million from December 31, 2021. Excluding PPP loans, commercial loans increased $1.1 billion, or 4%, driven largely by increases in commercial and industrial loans, owner-occupied loans, and municipal loans of $489 million, $293 million, and $286 million, respectively. Consumer loans increased $210 million, primarily due to increases in home equity credit lines, 1-4 family residential loans, and construction and other consumer real estate loans. | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
(Dollar amounts in millions) | Amount | | % of total loans | | Amount | | % of total loans |
Commercial: | | | | | | | |
Commercial and industrial | $ | 16,500 | | | 29.3 | % | | $ | 16,377 | | | 29.4 | % |
Leasing | 385 | | | 0.7 | | | 386 | | | 0.7 | |
Owner-occupied | 9,317 | | | 16.5 | | | 9,371 | | | 16.8 | |
Municipal | 4,374 | | | 7.8 | | | 4,361 | | | 7.8 | |
Total commercial | 30,576 | | | 54.3 | | | 30,495 | | | 54.8 | |
Commercial real estate: | | | | | | | |
Construction and land development | 2,313 | | | 4.1 | | | 2,513 | | | 4.5 | |
Term | 10,585 | | | 18.8 | | | 10,226 | | | 18.4 | |
Total commercial real estate | 12,898 | | | 22.9 | | | 12,739 | | | 22.9 | |
Consumer: | | | | | | | |
Home equity credit line | 3,276 | | | 5.8 | | | 3,377 | | | 6.1 | |
1-4 family residential | 7,692 | | | 13.7 | | | 7,286 | | | 13.1 | |
Construction and other consumer real estate | 1,299 | | | 2.3 | | | 1,161 | | | 2.1 | |
Bankcard and other revolving plans | 459 | | | 0.8 | | | 471 | | | 0.8 | |
Other | 131 | | | 0.2 | | | 124 | | | 0.2 | |
Total consumer | 12,857 | | | 22.8 | | | 12,419 | | | 22.3 | |
Total loans and leases | $ | 56,331 | | | 100.0 | % | | $ | 55,653 | | | 100.0 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
At March 31, 2023 and December 31, 2022, the ratio of loans and leases to total assets was 64% and 62%, respectively. The largest loan category was commercial and industrial loans, which constituted 29% of our total loan portfolio at both time periods.
The loan and lease portfolio increased $0.7 billion, or 1%, to $56.3 billion at March 31, 2023. Loan growth was driven largely by increases of $0.4 billion in consumer 1-4 family residential mortgage loans and $0.4 billion in commercial real estate term loans.
Other Noninterest-Bearing Investments
Other noninterest-bearing investments are equity investments that are held primarily for capital appreciation, dividends, or for certain regulatory requirements. The following schedule summarizes our related investments:investments.
OTHER NONINTEREST-BEARING INVESTMENTS
| (Dollar amounts in millions) | (Dollar amounts in millions) | March 31, 2022 | | December 31, 2021 | | Amount change | | Percent change | (Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 | | Amount change | | Percent change |
| Bank-owned life insurance | Bank-owned life insurance | $ | 538 | | | $ | 537 | | | $ | 1 | | | — | % | Bank-owned life insurance | $ | 547 | | | $ | 546 | | | $ | 1 | | | — | % |
Federal Home Loan Bank stock | Federal Home Loan Bank stock | 11 | | | 11 | | | — | | | — | | Federal Home Loan Bank stock | 330 | | | 294 | | | 36 | | | 12 | |
Federal Reserve stock | Federal Reserve stock | 71 | | | 81 | | | (10) | | | (12) | | Federal Reserve stock | 66 | | | 68 | | | (2) | | | (3) | |
Farmer Mac stock | Farmer Mac stock | 19 | | | 19 | | | — | | | — | | Farmer Mac stock | 21 | | | 19 | | | 2 | | | 11 | |
SBIC investments | SBIC investments | 165 | | | 179 | | | (14) | | | (8) | | SBIC investments | 174 | | | 172 | | | 2 | | | 1 | |
Other | Other | 25 | | | 24 | | | 1 | | | 4 | | Other | 31 | | | 31 | | | — | | | — | |
Total other noninterest-bearing investments | Total other noninterest-bearing investments | $ | 829 | | | $ | 851 | | | $ | (22) | | | (3) | % | Total other noninterest-bearing investments | $ | 1,169 | | | $ | 1,130 | | | $ | 39 | | | 3 | % |
Total other noninterest-bearing investments decreased $22increased $39 million, or 3%, during the first three months of 2022,2023, primarily due to a $14$36 million decreaseincrease in the valueFHLB stock. We are required to invest approximately 4% of our SBIC investments. This decreaseFHLB borrowings in FHLB stock to maintain our borrowing capacity. The increase was driven largely by $17 millionincreases in FHLB borrowings during the first quarter of negative mark-to-market adjustments primarily related2023 in response to our investmentdeclines in Recursion Pharmaceuticals, Inc.total deposits and loan growth.
Premises, Equipment, and Software
Net premises, equipment, and software increased $27 million, or 2%, from December 31, 2021, primarily due to capitalized costs related to the construction of a new corporate technology center in Midvale, Utah and a new corporate center for Vectra in Denver, Colorado. Both facilities are expected to be completed in mid- to late-2022.
We are also in the final phase of a three-phase project to replace our core loan and deposit banking systems, and are on trackexpect to convert our deposit servicing system in 2023. CapitalizedThe following schedule summarizes the capitalized costs associated with theour core system replacement project, generally carrywhich are depreciated using a useful life of ten years, and are summarized in the following schedule.years.
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| | | March 31, 2022 | | March 31, 2023 |
(In millions) | (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total | (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total |
| Total amount of capitalized costs, less accumulated depreciation | Total amount of capitalized costs, less accumulated depreciation | $ | 36 | | | $ | 62 | | | $ | 166 | | | $ | 264 | | Total amount of capitalized costs, less accumulated depreciation | $ | 28 | | | $ | 52 | | | $ | 212 | | | $ | 292 | |
Deposits
Deposits are aour primary funding source. In recent years, particularly during the COVID-19 pandemic, we benefited from a significant influx of deposits, which was impacted by considerable fiscal and monetary policy decisions. During 2022, with the withdrawal of stimulus by the federal government, our deposits began to decline to more normalized levels. During the first quarter of 2023, with the failure of two prominent banks, this trend continued in response to market uncertainty, though total deposits remained above pre-pandemic (12/31/2019) levels.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the composition of our deposit portfolio.
DEPOSIT PORTFOLIO
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | | December 31, 2019 |
(Dollar amounts in millions) | Amount | | % of total deposits | | Amount | | % of total deposits | | | Amount | | % of total deposits |
Deposits by type | | | | | | | | | | | | |
Noninterest-bearing demand | $ | 30,974 | | | 44.8 | % | | $ | 35,777 | | | 49.9 | % | | | $ | 23,576 | | | 41.3 | % |
Interest-bearing: | | | | | | | | | | | | |
Savings and money market | 30,826 | | | 44.5 | | | 33,474 | | | 46.7 | | | | 28,249 | | | 49.5 | |
Time | 2,024 | | | 2.9 | | | 1,484 | | | 2.1 | | | | 2,451 | | | 4.3 | |
Brokered | 5,384 | | | 7.8 | | | 917 | | | 1.3 | | | | 2,809 | | | 4.9 | |
Total deposits | $ | 69,208 | | | 100.0 | % | | $ | 71,652 | | | 100.0 | % | | | $ | 57,085 | | | 100.0 | % |
Deposit-related metrics | | | | | | | | | | | | |
Estimated amount of insured deposits | $ | 37,846 | | | 55 | % | | $ | 34,018 | | | 47 | % | | | $ | 28,802 | | | 50 | % |
Estimated amount of uninsured deposits | $ | 31,362 | | | 45 | % | | $ | 37,634 | | | 53 | % | | | $ | 28,283 | | | 50 | % |
Estimated amount of collateralized deposits | $ | 2,708 | | | 3.9 | % | | $ | 2,861 | | | 4.0 | % | | | $ | 1,928 | | | 3.4 | % |
Loan-to-deposit ratio | 81 | % | | | | 78 | % | | | | | 85 | % | | |
Total deposits decreased $2.4 billion, or 3% to $69.2 billion at March 31, 2023 from December 31, 2022, primarily due to a $4.8 billion decrease in noninterest-bearing deposits and a $2.1 billion decrease in savings, money market, and time deposits (excluding brokered deposits).
At March 31, 2023, the estimated total amount of uninsured deposits was $31.4 billion, or 45%, of total deposits, compared with $37.6 billion, or 53%, of total deposits at December 31, 2022. Our loan-to-deposit ratio was 81%, compared with 78% for the same time periods, reflecting a return to more normalized, pre-pandemic levels.
The following schedule presents our deposits by categorycustomer segment.
DEPOSITS BY CUSTOMER SEGMENT
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Amount (in millions) | | % of total deposits | | % insured | | % uninsured | | Average account size |
| | | | | | | | | |
Commercial and CRE | $ | 36,577 | | | 52.9 | % | | 33 | % | | 67 | % | | $ | 187,000 | |
Consumer | 23,616 | | | 34.1 | | | 82 | | | 18 | | | $ | 32,000 | |
Other 1 | 9,015 | | | 13.0 | | | 72 | | | 28 | | | N/A |
Total deposits | $ | 69,208 | | | 100.0 | % | | 45 | | | 55 | | | |
1 Includes primarily brokered, trust, estate, and percentagecertain internal operational accounts.
At March 31, 2023, we had no single depositor with uncollateralized deposits exceed 0.22% of total deposits:
DEPOSITS
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
(Dollar amounts in millions) | Amount | | % of total deposits | | Amount | | % of total deposits |
| | | | | | | |
Noninterest-bearing demand | $ | 41,937 | | | 50.9 | % | | $ | 41,053 | | | 49.6 | % |
Interest-bearing: | | | | | | | |
Savings and money market | 38,864 | | | 47.2 | | | 40,114 | | | 48.4 | |
Time | 1,550 | | | 1.9 | | | 1,622 | | | 2.0 | |
Total deposits | $ | 82,351 | | | 100.0 | % | | $ | 82,789 | | | 100.0 | % |
Total deposits, decreased $0.4 billion, or 1%, from December 31, 2021, primarily due to a $1.3 billion decrease in interest-bearing deposits, partially offset by a $0.9 billion increase in noninterest-bearingand the top 25 largest uncollateralized deposit accounts totaled 3.1% of total deposits. Total deposits included $377 million and $381 million of brokered deposits for March 31, 2022 and December 31, 2021,
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
respectively. The following schedule presents our deposit balances by size.
DEPOSITS BY SIZE
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | | | |
(Dollar amounts in millions) | Amount | | % of total deposits | | Amount | | % of total deposits | | Amount change | | Percent change |
Deposit balance, at period end | | | | | | | | | | | |
< $250,000 | $ | 24,258 | | | 35.0 | % | | $ | 23,911 | | | 33.4 | % | | $ | 347 | | | 1 | % |
$250,000 < $500,000 | 8,067 | | | 11.6 | | | 8,339 | | | 11.6 | | | (272) | | | (3) | |
$500,000 < $1 million | 6,467 | | | 9.3 | | | 7,522 | | | 10.5 | | | (1,055) | | | (14) | |
$1 million < $5 million | 12,365 | | | 17.9 | | | 14,753 | | | 20.6 | | | (2,388) | | | (16) | |
$5 million < $10 million | 4,007 | | | 5.8 | | | 5,247 | | | 7.3 | | | (1,240) | | | (24) | |
$10 million < $25 million | 4,075 | | | 5.9 | | | 5,508 | | | 7.7 | | | (1,433) | | | (26) | |
≥ $25 million | 3,428 | | | 5.0 | | | 4,401 | | | 6.1 | | | (973) | | | (22) | |
Other 1 | 1,157 | | | 1.7 | | | 1,054 | | | 1.5 | | | 103 | | | 10 | |
Total nonbrokered deposits | 63,824 | | | 92.2 | | | 70,735 | | | 98.7 | | | (6,911) | | | (10) | |
Brokered deposits | 5,384 | | | 7.8 | | | 917 | | | 1.3 | | | 4,467 | | | NM |
Total deposits | $ | 69,208 | | | 100.0 | % | | $ | 71,652 | | | 100.0 | % | | $ | (2,444) | | | (3) | % |
1 Includes primarily certain internal operational accounts.
Total nonbrokered deposits decreased $6.9 billion, or 10%, from December 31, 2022. A majority of the decrease related to larger balance accounts with relatively low transaction volume. This decrease was partially offset by a $4.5 billion increase in brokered deposits.
See “Liquidity Risk Management” on page 31 for additional information on fundingliquidity and borrowed funds.
Total U.S. time deposits that exceed the current Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000 were $526 million and $563 million at March 31, 2022 and December 31, 2021, respectively. The estimated total amount of uninsured deposits, including related interest accrued and unpaid, was $48 billion and $49 billion at March 31, 2022 and December 31, 2021, respectively.
RISK MANAGEMENT
Risk management is an integral part of our operations and is a key determinant of our overall performance. We employ various strategies to reduceprudently manage the risks to which our operations are exposed, including credit risk, market and interest rate risk, liquidity risk, strategic and business risk, operational risk, technology risk, cybercybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by the various management committees of whichincluding the Enterprise Risk Management Committee is the focal point.Committee. For a more comprehensive discussion of these risks, see “Risk Factors” in our 20212022 Form 10-K.
Credit Risk Management
Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risk arises primarily from our lending activities, as well as from off-balance sheet credit instruments. Credit policies, credit risk management, and credit examination functions inform and support the oversight of credit risk. Our credit policies emphasize strong underwriting standards and early detection of potential problem credits in order to develop and implement action plans on a timely basis to mitigate potential losses. These formal credit policies and procedures provide us with a framework for consistent underwriting and a basis for sound credit decisions at the local banking affiliate level.
Our overall credit risk management strategy includes diversification of our loan portfolio. Our business activity is conducted primarily within the geographic footprint of our banking affiliates. We strive to avoid the risk of undue concentrations of credit in any particular industry, collateral type, location, or with any individual customer or counterparty. We have actively managed the credit risk in our commercial real estate (“CRE”) portfolio for more than a decade, having reduced CRE loans to 23% of total loans, compared with 33% in late 2008. For a more comprehensive discussion of our credit risk management, see “Credit Risk Management” in our 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
U.S. Government Agency Guaranteed Loans
We participate in various guaranteed lending programs sponsored by U.S. government agencies, such as the SBA,Small Business Administration (“SBA”), Federal Housing Authority, U.S. Department of Veterans Affairs, Export-Import Bank of the U.S., and the U.S. Department of Agriculture. At March 31, 2022, $1.5 billion2023, $622 million of related loans were guaranteed, primarily by the SBA, and include $1.1 billionincluded $157 million of PPPPaycheck Protection Program (“PPP”) loans. The following schedule presents the composition of U.S. government agency guaranteed loans.
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
| | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2022 | | Percent guaranteed | | December 31, 2021 | | Percent guaranteed |
| | | | | | | |
Commercial | $ | 1,630 | | | 92 | % | | $ | 2,410 | | | 95 | % |
Commercial real estate | 22 | | | 73 | | | 22 | | | 73 | |
Consumer | 4 | | | 100 | | | 5 | | | 100 | |
Total loans | $ | 1,656 | | | 92 | % | | $ | 2,437 | | | 94 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
| | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2023 | | Percent guaranteed | | December 31, 2022 | | Percent guaranteed |
| | | | | | | |
Commercial | $ | 730 | | | 82 | % | | $ | 753 | | | 83 | % |
Commercial real estate | 24 | | | 79 | | | 21 | | | 76 | |
Consumer | 4 | | | 100 | | | 5 | | | 100 | |
Total loans | $ | 758 | | | 82 | % | | $ | 779 | | | 83 | % |
Commercial Lending
The following schedule provides information regarding lending exposures to certain industries in our commercial lending portfolio.
COMMERCIAL LENDING BY INDUSTRY GROUP 1
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent | (Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent |
| Retail trade | $ | 2,604 | | | 9.1 | % | | $ | 2,412 | | | 8.5 | % | |
Real estate, rental and leasing | Real estate, rental and leasing | 2,550 | | | 8.9 | | | 2,536 | | | 8.9 | | Real estate, rental and leasing | $ | 2,924 | | | 9.6 | % | | $ | 2,802 | | | 9.2 | % |
Finance and insurance | Finance and insurance | 2,407 | | | 8.4 | | | 2,303 | | | 8.1 | | Finance and insurance | 2,837 | | | 9.3 | | | 2,992 | | | 9.8 | |
Retail trade | | Retail trade | 2,801 | | | 9.2 | | | 2,751 | | | 9.0 | |
Public Administration | | Public Administration | 2,389 | | | 7.8 | | | 2,366 | | | 7.8 | |
Manufacturing | Manufacturing | 2,369 | | | 8.2 | | | 2,374 | | | 8.3 | | Manufacturing | 2,355 | | | 7.7 | | | 2,387 | | | 7.8 | |
Healthcare and social assistance | Healthcare and social assistance | 2,362 | | | 8.2 | | | 2,349 | | | 8.2 | | Healthcare and social assistance | 2,337 | | | 7.6 | | | 2,373 | | | 7.8 | |
Public Administration | 2,203 | | | 7.7 | | | 1,959 | | | 6.9 | | |
Wholesale trade | Wholesale trade | 1,777 | | | 6.2 | | | 1,701 | | | 6.0 | | Wholesale trade | 1,871 | | | 6.1 | | | 1,880 | | | 6.2 | |
Utilities 2 | Utilities 2 | 1,462 | | | 5.1 | | | 1,446 | | | 5.1 | | Utilities 2 | 1,545 | | | 5.0 | | | 1,418 | | | 4.6 | |
Transportation and warehousing | | Transportation and warehousing | 1,447 | | | 4.7 | | | 1,464 | | | 4.8 | |
Mining, quarrying, and oil and gas extraction | | Mining, quarrying, and oil and gas extraction | 1,362 | | | 4.5 | | | 1,349 | | | 4.4 | |
Construction | Construction | 1,404 | | | 4.9 | | | 1,456 | | | 5.1 | | Construction | 1,322 | | | 4.3 | | | 1,355 | | | 4.4 | |
Educational services | | Educational services | 1,270 | | | 4.2 | | | 1,302 | | | 4.3 | |
Hospitality and food services | Hospitality and food services | 1,262 | | | 4.4 | | | 1,353 | | | 4.8 | | Hospitality and food services | 1,197 | | | 3.9 | | | 1,238 | | | 4.1 | |
Transportation and warehousing | 1,229 | | | 4.3 | | | 1,273 | | | 4.5 | | |
Professional, scientific, and technical services | | Professional, scientific, and technical services | 1,046 | | | 3.4 | | | 995 | | | 3.3 | |
Other Services (except Public Administration) | Other Services (except Public Administration) | 1,190 | | | 4.1 | | | 1,213 | | | 4.2 | | Other Services (except Public Administration) | 1,039 | | | 3.4 | | | 1,041 | | | 3.4 | |
Educational services | 1,155 | | | 4.0 | | | 1,163 | | | 4.1 | | |
Mining, quarrying, and oil and gas extraction | 1,141 | | | 4.0 | | | 1,185 | | | 4.2 | | |
Professional, scientific, and technical services | 1,059 | | | 3.7 | | | 1,084 | | | 3.8 | | |
Other 3 | Other 3 | 2,551 | | | 8.8 | | | 2,633 | | | 9.3 | | Other 3 | 2,834 | | | 9.3 | | | 2,782 | | | 9.1 | |
Total | Total | $ | 28,725 | | | 100.0 | % | | $ | 28,440 | | | 100.0 | % | Total | $ | 30,576 | | | 100.0 | % | | $ | 30,495 | | | 100.0 | % |
1 Industry groups are determined by North American Industry Classification System (NAICS)(“NAICS”) codes.
2 Includes primarily utilities, power, and renewable energy.
3 No other industry group exceeds 2.6%3.1%.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
Commercial Real Estate Loans
The following schedule presents credit quality information for our commercial real estate (“CRE”) loan portfolio segmented by real estate category and collateral location.
COMMERCIAL REAL ESTATE PORTFOLIO BY LOAN TYPE AND COLLATERAL LOCATION | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | | Collateral Location | | | | |
Loan type | | As of date | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total | | % of total CRE |
Commercial term | | | | | | | | | | | | | | | | | | | | | | |
Balance outstanding | | 3/31/2022 | | $ | 1,109 | | $ | 3,069 | | $ | 479 | | $ | 675 | | $ | 1,601 | | $ | 1,544 | | $ | 492 | | $ | 356 | | $ | 9,325 | | 77.1 | % |
% of loan type | | | | 11.9 | % | | 32.9 | % | | 5.1 | % | | 7.2 | % | | 17.2 | % | | 16.6 | % | | 5.3 | % | | 3.8 | % | | 100.0 | % | | |
Delinquency rates 2: | | | | | | | | | | | | | | | | | | | | | | |
30-89 days | | 3/31/2022 | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | |
| | 12/31/2021 | | — | % | | 0.2 | % | | 0.2 | % | | — | % | | — | % | | 0.1 | % | | — | % | | — | % | | 0.1 | % | | |
≥ 90 days | | 3/31/2022 | | — | % | | — | % | | — | % | | — | % | | 0.2 | % | | — | % | | — | % | | 0.3 | % | | — | % | | |
| | 12/31/2021 | | — | % | | 0.1 | % | | — | % | | — | % | | 0.2 | % | | — | % | | — | % | | — | % | | 0.1 | % | | |
Accruing loans past due 90 days or more | | 3/31/2022 | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 1 | | | |
| | 12/31/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | |
Nonaccrual loans | | 3/31/2022 | | $ | — | | | $ | 4 | | | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | — | | | $ | 20 | | | |
| | 12/31/2021 | | — | | | 3 | | | — | | | — | | | 17 | | | — | | | — | | | — | | | 20 | | | |
Commercial construction and land development | | | | | | | | | | | | | | | | |
Balance outstanding | | 3/31/2022 | | $ | 224 | | $ | 456 | | $ | 108 | | $ | 119 | | $ | 463 | | $ | 518 | | $ | 174 | | $ | 42 | | $ | 2,104 | | 17.4 | % |
% of loan type | | | | 10.7 | % | | 21.7 | % | | 5.2 | % | | 5.7 | % | | 21.9 | % | | 24.6 | % | | 8.3 | % | | 1.9 | % | | 100.0 | % | | |
Delinquency rates 2: | | | | | | | | | | | | | | | | | | | | | | |
30-89 days | | 3/31/2022 | | — | % | | 0.2 | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | |
| | 12/31/2021 | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | 13.2 | % | | — | % | | 0.9 | % | | |
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Residential construction and land development 3 | | | | | | | | | | | | | | | | |
Balance outstanding | | 3/31/2022 | | $ | 55 | | $ | 146 | | $ | 34 | | $ | 3 | | $ | 199 | | $ | 181 | | $ | 9 | | $ | 38 | | $ | 665 | | 5.5 | % |
% of loan type | | | | 8.3 | % | | 21.9 | % | | 5.2 | % | | 0.4 | % | | 30.0 | % | | 27.2 | % | | 1.3 | % | | 5.7 | % | | 100.0 | % | | |
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Total construction and land development | | 3/31/2022 | | $ | 279 | | $ | 602 | | $ | 142 | | $ | 122 | | $ | 662 | | $ | 699 | | $ | 183 | | $ | 80 | | $ | 2,769 | | |
Total commercial real estate | | 3/31/2022 | | $ | 1,388 | | $ | 3,671 | | $ | 621 | | $ | 797 | | $ | 2,263 | | $ | 2,243 | | $ | 675 | | $ | 436 | | $ | 12,094 | | 100.0 | % |
1 No other geography exceeds $62 million for all three loan types.
2 Delinquency rates include nonaccrual loans.
3At March 31, 20222023 and December 31, 2021, there was no meaningful delinquency or nonaccrual activity for residential construction and land development loans.
At March 31, 2022, our CRE constructionloan portfolio totaled $12.9 billion and land development and term loan portfolios represented$12.7 billion, respectively, representing approximately 24%23% of the total loan portfolio.portfolio for both periods. The majority of our CRE loans are secured by real estate which is primarily located within our geographic footprint. Approximately 21%The following schedule presents the geographic distribution of theour CRE loan portfolio matures inbased on the next 12 months. Construction and land development loans generally mature in 18 to 36 months and contain full or partial recourse guarantee structures with one- to five-year extension options or roll-to-perm options that often result in term debt. location of the primary collateral.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL LOCATION
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
(Dollar amounts in millions) | | Amount | | Percent | | Amount | | Percent |
| | | | | | | | |
Arizona | | $ | 1,588 | | | 12 | % | | $ | 1,521 | | | 12 | % |
California | | 3,814 | | | 30 | % | | 3,805 | | | 30 | % |
Colorado | | 656 | | | 5 | % | | 637 | | | 5 | % |
Nevada | | 968 | | | 7 | % | | 910 | | | 7 | % |
Texas | | 2,157 | | | 17 | % | | 2,139 | | | 17 | % |
Utah/Idaho | | 2,309 | | | 18 | % | | 2,397 | | | 19 | % |
Washington/Oregon | | 914 | | | 7 | % | | 899 | | | 7 | % |
Other | | 492 | | | 4 | % | | 431 | | | 3 | % |
Total CRE | | $ | 12,898 | | | 100 | % | | $ | 12,739 | | | 100 | % |
Term CRE loans generally mature within a three- to seven-year period and consist of full, partial, and non-recourse guarantee structures. Typical term CRE loan structures include annually tested operating covenants that require loan rebalancing based on minimum debt service coverage, debt yield, or loan-to-value tests.
Approximately $176 million, or 6%, of the commercial construction Construction and land development portfolio atloans generally mature in 18 to 36 months and contain full or partial recourse guarantee structures with one- to five-year extension options or roll-to-perm options that often result in term debt. At March 31, 2022 consists2023, approximately 85% of acquisitionour CRE loan portfolio was variable-rate, and development loans. Mostapproximately 23% of these land acquisitionvariable-rate loans were swapped to a fixed rate.
Underwriting on commercial properties is primarily based on the economic viability of the project with significant consideration given to the creditworthiness and development loansexperience of the sponsor. We generally require that the owner’s equity be injected prior to any advances. Re-margining requirements (required equity infusions upon a decline in value or cash flow of the collateral) are secured by specific retail, apartment, office, or other projects.often included in the loan agreement along with guarantees of the sponsor. For a more comprehensive discussion of CRE loans and our underwriting, see the “Commercial Real Estate Loans” section in our 20212022 Form 10-K.
The following schedule provides information regarding lending exposures to certain collateral types in our CRE loan portfolio.
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
(Dollar amounts in millions) | Amount | | Percent | | Amount | | Percent |
Commercial property | | | | | | | |
Multi-family | $ | 3,197 | | | 24.8 | % | | $ | 3,068 | | | 24.1 | % |
Industrial | 2,720 | | | 21.1 | | | 2,509 | | | 19.7 | |
Office | 2,245 | | | 17.4 | | | 2,281 | | | 17.9 | |
Retail | 1,483 | | | 11.5 | | | 1,529 | | | 12.0 | |
Hospitality | 693 | | | 5.4 | | | 695 | | | 5.4 | |
Land | 202 | | | 1.6 | | | 276 | | | 2.2 | |
Other 1 | 1,754 | | | 13.6 | | | 1,728 | | | 13.5 | |
Residential property 2 | | | | | | | |
Single family | 328 | | | 2.5 | | | 340 | | | 2.7 | |
Land | 76 | | | 0.6 | | | 75 | | | 0.6 | |
Condo/Townhome | 12 | | | 0.1 | | | 13 | | | 0.1 | |
Other 1 | 188 | | | 1.4 | | | 225 | | | 1.8 | |
Total | $ | 12,898 | | | 100.0 | % | | $ | 12,739 | | | 100.0 | % |
1 Included in the total amount of the “Other” category was approximately $270 million and $301 million of unsecured loans at March 31, 2023 and December 31, 2022, respectively.
2 Residential property collateral type consists primarily of loans provided to commercial homebuilders for land, lot, and single-family housing developments.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Our CRE portfolio is diversified across geography and collateral type, with the largest concentration in multi-family. We provide additional analysis of our office CRE portfolio below in view of increased investor interest in that collateral type in recent periods.
Office CRE loan portfolio
At March 31, 2023 and December 31, 2022, our office CRE loan portfolio totaled $2.2 billion and $2.3 billion, representing 17% and 18% of the total CRE loan portfolio, respectively. The following schedule presents the composition of our office CRE loan portfolio and other related credit quality metrics.
OFFICE CRE LOAN PORTFOLIO
| | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 |
Office CRE | | | |
Construction and land development | $ | 172 | | | $ | 208 | |
Term | 2,073 | | | 2,073 | |
Total office CRE | $ | 2,245 | | | $ | 2,281 | |
| | | |
Classified loans | $ | 112 | | | $ | 133 | |
Allowance for credit losses | 37 | | | 31 | |
Ratio of allowance for credit losses to office CRE loans, at period end | 1.65 | % | | 1.36 | % |
The following schedules present credit quality information for our office CRE loan portfolio by collateral location.
OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | | March 31, 2023 |
| Collateral Location | | |
Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Office CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | | $ | — | | | $ | 83 | | | $ | — | | | $ | 2 | | | $ | — | | | $ | 27 | | | $ | 60 | | | $ | — | | | $ | 172 | |
Term | | 293 | | | 524 | | | 96 | | | 96 | | | 216 | | | 575 | | | 242 | | | 31 | | | 2,073 | |
Total Office CRE | | $ | 293 | | | $ | 607 | | | $ | 96 | | | $ | 98 | | | $ | 216 | | | $ | 602 | | | $ | 302 | | | $ | 31 | | | $ | 2,245 | |
% of total | | 13.1 | % | | 27.0 | % | | 4.3 | % | | 4.3 | % | | 9.6 | % | | 26.8 | % | | 13.5 | % | | 1.4 | % | | 100.0 | % |
Credit quality metrics: | | | | | | | | | | | | | | | | | | |
Delinquency rates: | | | | | | | | | | | | | | | | | | |
30-89 days | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % |
≥ 90 days | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % |
Accruing loans past due 90 days or more | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Nonaccrual loans | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Net charge-offs | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | | December 31, 2022 |
| Collateral Location | | |
Loan type | | Arizona | | California | | Colorado | | Nevada | | Texas | | Utah/ Idaho | | Wash-ington | | Other 1 | | Total |
Office CRE | | | | | | | | | | | | | | | | | | |
Construction and land development | | $ | 8 | | | $ | 79 | | | $ | — | | | $ | 2 | | | $ | — | | | $ | 18 | | | $ | 101 | | | $ | — | | | $ | 208 | |
Term | | 295 | | | 525 | | | 97 | | | 99 | | | 217 | | | 613 | | | 195 | | | 32 | | | 2,073 | |
Total Office CRE | | $ | 303 | | | $ | 604 | | | $ | 97 | | | $ | 101 | | | $ | 217 | | | $ | 631 | | | $ | 296 | | | $ | 32 | | | $ | 2,281 | |
% of total | | 13.1 | % | | 27.0 | % | | 4.3 | % | | 4.3 | % | | 9.6 | % | | 26.8 | % | | 13.5 | % | | 1.4 | % | | 100.0 | % |
Credit quality metrics: | | | | | | | | | | | | | | | | | | |
Delinquency rates: | | | | | | | | | | | | | | | | | | |
30-89 days | | — | % | | 5.8 | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | 1.5 | % |
≥ 90 days | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % |
Accruing loans past due 90 days or more | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Nonaccrual loans | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Net charge-offs | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
1 No other geography exceeds $18 million at both March 31, 2023 and December 31, 2022.
2 Delinquency rates include nonaccrual loans.
Consumer Loans
We generally originate first-lien residential home mortgages considered to be of prime quality. We generally hold variable-rate loans in our portfolio and sell “conforming” fixed-rate loans to third parties, including Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, for which we make representations and warranties that the loans meet certain underwriting and collateral documentation standards.
Our 1-4 family residential mortgage loan portfolio increased $406 million, or 6%, to $7.7 billion at March 31, 2023, compared with $7.3 billion at December 31, 2022, primarily due to an increased demand for adjustable-rate mortgages, which we have retained as part of our overall interest rate risk management strategy.
We also originate home equity credit lines (“HECL”HECLs”). At March 31, 20222023 and December 31, 2021,2022, our HECL portfolio totaled $3.1$3.3 billion and $3.0$3.4 billion, respectively. The following schedule presents the composition of our HECL portfolio by lien status.
HECL PORTFOLIO BY LIEN STATUS
| (In millions) | (In millions) | March 31, 2022 | | December 31, 2021 | (In millions) | March 31, 2023 | | December 31, 2022 |
| Secured by first liens | Secured by first liens | $ | 1,497 | | | $ | 1,503 | | Secured by first liens | $ | 1,375 | | | $ | 1,474 | |
Secured by second (or junior) liens | Secured by second (or junior) liens | 1,592 | | | 1,513 | | Secured by second (or junior) liens | 1,901 | | | 1,903 | |
Total | Total | $ | 3,089 | | | $ | 3,016 | | Total | $ | 3,276 | | | $ | 3,377 | |
At March 31, 2022,2023, loans representing less than 1% of the outstanding balance in the HECL portfolio were estimated to have combined loan-to-value (“CLTV”) ratios above 100%. An estimated CLTV ratio is the ratio of our loan plus any prior lien amounts divided by the estimated current collateral value. At origination, underwriting standards for the HECL portfolio generally include a maximum 80% CLTV with high Fair Isaac Corporation (“FICO”) credit scores.
Approximately 91%90% of our HECL portfolio is still in the draw period, and approximately 18%about 19% of those loans are scheduled to begin amortizing within the next five years. We believe the risk of loss and borrower default in the event of a loan becoming fully amortizing and the effect of significant interest rate changes is minimal. The ratio of HECL net charge-offs (recoveries) for the trailing twelve months to average balances at March 31, 20222023 and December 31, 20212022 was 0.00% and (0.01)(0.03)%, respectively. for both periods. See Note 6 of the Notes to Consolidated Financial Statements for additional information on the credit quality of the HECL portfolio.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Nonperforming Assets
Nonperforming assets include nonaccrual loans and other real estate owned (“OREO”) or foreclosed properties. Nonperforming assets as a percentage of loans and leases and other real estate owned (“OREO”) decreasedOREO increased to 0.49%0.31% at March 31, 2022,2023, compared with 0.53%0.27% at December 31, 2021.2022.
Total nonaccrual loans at March 31, 2022 decreased2023 increased to $252$171 million from $271$149 million at December 31, 2021, reflecting credit quality improvements across most of our2022, primarily in the commercial and industrial and owner-occupied loan portfolios.
The balance of nonaccrual loans can decrease due to paydowns, charge-offs, and the return of loans to accrual status under certain conditions. If a nonaccrual loan is refinanced or restructured, the new note is immediately placed on nonaccrual. If a restructured loan performs under the new terms for at least a period of six months, the loan can be considered for return to accrual status. See “Restructured Loans” and Note 6 of the Notes to Consolidated Financial Statements for more information on nonaccrual loans.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
The following schedule presents our nonperforming assets:
NONPERFORMING ASSETS
| (Dollar amounts in millions) | (Dollar amounts in millions) | March 31, 2022 | | December 31, 2021 | (Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 |
| Nonaccrual loans 1 | Nonaccrual loans 1 | $ | 252 | | | $ | 271 | | Nonaccrual loans 1 | $ | 171 | | | $ | 149 | |
Other real estate owned 2 | Other real estate owned 2 | — | | | 1 | | Other real estate owned 2 | 2 | | | — | |
Total nonperforming assets | Total nonperforming assets | $ | 252 | | | $ | 272 | | Total nonperforming assets | $ | 173 | | | $ | 149 | |
Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2 | Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2 | 0.49 | % | | 0.53 | % | Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2 | 0.31 | % | | 0.27 | % |
Accruing loans past due 90 days or more | Accruing loans past due 90 days or more | $ | 3 | | | $ | 8 | | Accruing loans past due 90 days or more | $ | 2 | | | $ | 6 | |
Ratio of accruing loans past due 90 days or more to loans and leases 1 | Ratio of accruing loans past due 90 days or more to loans and leases 1 | 0.01 | % | | 0.02 | % | Ratio of accruing loans past due 90 days or more to loans and leases 1 | — | % | | 0.01 | % |
Nonaccrual loans and accruing loans past due 90 days or more | $ | 255 | | | $ | 279 | | |
Nonaccrual loans1 and accruing loans past due 90 days or more | | Nonaccrual loans1 and accruing loans past due 90 days or more | $ | 173 | | | $ | 155 | |
Ratio of nonperforming assets1 and accruing loans past due 90 days or more to loans and leases1 and other real estate owned 2 | Ratio of nonperforming assets1 and accruing loans past due 90 days or more to loans and leases1 and other real estate owned 2 | 0.50 | % | | 0.55 | % | Ratio of nonperforming assets1 and accruing loans past due 90 days or more to loans and leases1 and other real estate owned 2 | 0.31 | % | | 0.28 | % |
Accruing loans past due 30-89 days 3 | $ | 93 | | | $ | 70 | | |
Accruing loans past due 30-89 days | | Accruing loans past due 30-89 days | $ | 79 | | | $ | 93 | |
Nonaccrual loans1 current as to principal and interest payments | Nonaccrual loans1 current as to principal and interest payments | 70.2 | % | | 67.2 | % | Nonaccrual loans1 current as to principal and interest payments | 73.7 | % | | 57.7 | % |
1 Includes loans held for sale.
2 Does not include banking premises held for sale.sale
3 Includes $26 million and $35 million of PPP loans at March 31, 2022 and December 31, 2021, respectively, which we expect will be paid in full by either the borrower or the SBA.
Troubled Debt Restructured LoansLoan Modifications
Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. Loans
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) and their related disclosures. ASU 2022-02 requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. At March 31, 2023, loans that have been modified to accommodate a borrower who is experiencing financial difficulties and for which we have granted a concession that we would not otherwise consider, are classified as troubled debt restructurings (“TDRs”). TDRs totaled $316 million at March 31, 2022, compared with $326 million at December 31, 2021. Modifications that qualified for applicable accounting and regulatory exemption for borrowers experiencing financial difficulties exclusively related to the COVID-19 pandemic were not classified and reported as TDRs.$97 million.
If the restructuredmodified loan performs for at least six months according to the modified terms, and an analysis of the customer’s financial condition indicates that we are reasonably assured of repayment of the modified principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the restructuringmodification is taken into account to determine whether a loan should be returned to accrual status.
ACCRUING AND NONACCRUING TROUBLED DEBT RESTRUCTUREDMODIFIED LOANS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
| | | | | | | | | | | |
(In millions) | March 31, 2022 | | December 31, 2021 |
| | | |
Restructured loans – accruing | $ | 216 | | | $ | 221 | |
Restructured loans – nonaccruing | 100 | | | 105 | |
Total | $ | 316 | | | $ | 326 | |
In the periods following the calendar year in which a loan was restructured, a loan may no longer be reported as a TDR if it is on accrual, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the modification or restructure). See Note 6 of the Notes to Consolidated Financial Statements for additional information regarding TDRs. | | | | | | | |
(In millions) | March 31, 2023 | | |
| | | |
Modified loans – accruing | $ | 96 | | | |
Modified loans – nonaccruing | 1 | | | |
Total | $ | 97 | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
TROUBLED DEBT RESTRUCTURED LOANS ROLLFORWARD
| | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | | |
(In millions) | 2022 | | 2021 | | | | | |
| | | | | | | | |
Balance at beginning of period | $ | 326 | | | $ | 311 | | | | | | |
New identified TDRs and principal increases | 12 | | | 120 | | | | | | |
Payments and payoffs | (20) | | | (14) | | | | | | |
Charge-offs | (1) | | | (2) | | | | | | |
No longer reported as TDRs | — | | | — | | | | | | |
Sales and other | (1) | | | (1) | | | | | | |
Balance at end of period | $ | 316 | | | $ | 414 | | | | | | |
For additional information regarding loan modifications to borrowers experiencing financial difficulty, including information related to TDRs prior to our adoption of ASU 2022-02, see Note 6 of the Notes to Consolidated Financial Statements.Allowance for Credit Losses
The ACL includes the ALLL and the RULC. The ACL represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. To determine the adequacy of the allowance, our loan and lease portfolio is segmented based on loan type.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
The following schedule shows the changes in the ACL and a summary of credit loss experience:
SUMMARY OF CREDIT LOSS EXPERIENCE | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | Three Months Ended March 31, 2022 | | Twelve Months Ended December 31, 2021 | | Three Months Ended March 31, 2021 |
| | | | | |
Loans and leases outstanding | $ | 51,242 | | | $ | 50,851 | | | $ | 53,472 | |
Average loans and leases outstanding: | | | | | |
Commercial - excluding PPP loans | 27,037 | | | 25,014 | | | 24,732 | |
Commercial - PPP loans | 1,459 | | | 4,566 | | | 6,135 | |
Commercial real estate | 12,171 | | | 12,136 | | | 12,133 | |
Consumer | 10,266 | | | 10,267 | | | 10,665 | |
Total average loans and leases outstanding | $ | 50,933 | | | $ | 51,983 | | | $ | 53,665 | |
Allowance for loan and lease losses: | | | | | |
Balance at beginning of period | $ | 513 | | | $ | 777 | | | $ | 777 | |
Provision for loan losses | (29) | | | (258) | | | (123) | |
Charge-offs: | | | | | |
Commercial | 13 | | | 35 | | | 18 | |
Commercial real estate | — | | | — | | | — | |
Consumer | 4 | | | 13 | | | 3 | |
Total | 17 | | | 48 | | | 21 | |
Recoveries: | | | | | |
Commercial | 8 | | | 29 | | | 10 | |
Commercial real estate | — | | | 3 | | | — | |
Consumer | 3 | | | 10 | | | 3 | |
Total | 11 | | | 42 | | | 13 | |
Net loan and lease charge-offs | 6 | | | 6 | | | 8 | |
Balance at end of period | $ | 478 | | | $ | 513 | | | $ | 646 | |
Reserve for unfunded lending commitments: | | | | | |
Balance at beginning of period | $ | 40 | | | $ | 58 | | | $ | 58 | |
Provision for unfunded lending commitments | (4) | | | (18) | | | (9) | |
Balance at end of period | $ | 36 | | | $ | 40 | | | $ | 49 | |
Total allowance for credit losses: | | | | | |
Allowance for loan and lease losses | $ | 478 | | | $ | 513 | | | $ | 646 | |
Reserve for unfunded lending commitments | 36 | | | 40 | | | 49 | |
Total allowance for credit losses | $ | 514 | | | $ | 553 | | | $ | 695 | |
| | | | | |
Ratio of allowance for credit losses to net loans and leases, at period end 1 | 1.00 | % | | 1.09 | % | | 1.30 | % |
Ratio of allowance for credit losses to nonaccrual loans, at period end | 204 | % | | 204 | % | | 215 | % |
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 202 | % | | 198 | % | | 209 | % |
Ratio of total net charge-offs to average loans and leases 2, 3 | 0.05 | % | | 0.01 | % | | 0.06 | % |
Ratio of commercial net charge-offs to average commercial loans 3 | 0.07 | % | | 0.02 | % | | 0.10 | % |
Ratio of commercial real estate net charge-offs to average commercial real estate loans 3 | — | % | | (0.02) | % | | — | % |
Ratio of consumer net charge-offs to average consumer loans 3 | 0.04 | % | | 0.03 | % | | — | % |
1 The ratio of allowance for credit losses to net loans and leases (excluding PPP loans) was 1.02% at March 31, 2022, 1.13% at December 31, 2021, and 1.48% at March 31, 2021.
2The annualized ratio of net charge-offs to average loans and leases (excluding PPP loans) was 0.05% at March 31, 2022, 0.01% at December 31, 2021, and 0.07% at March 31, 2021.
3 Ratios are annualized for the periods presented except for the period representing the full twelve months.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
The total ACL decreased to $514 million during the first three months of 2022, primarily due to improvements in economic forecasts and overall credit quality, partially offset by economic uncertainty caused by inflation, supply chain disruptions, and the conflict in Eastern Europe.
The RULC, represents a reserve for potential losses associated with off-balance sheet commitments, and standby letters of credit, and decreased $4$1 million during the first quarterthree months of 2022.2023. The reserve is separately recorded on the consolidated balance sheet in “Other liabilities,” and any related increases or decreases in the reserve are recorded on the consolidated income statement in “Provision for unfunded lending commitments.”
The following schedule presents the changes in and allocation of the ACL.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SUMMARY OF CREDIT LOSS EXPERIENCE | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | Three Months Ended March 31, 2023 | | Twelve Months Ended December 31, 2022 | | Three Months Ended March 31, 2022 |
| | | | | |
Loans and leases outstanding | $ | 56,331 | | | $ | 55,653 | | | $ | 51,242 | |
Average loans and leases outstanding: | | | | | |
Commercial | 30,678 | | | 29,225 | | | 28,496 | |
Commercial real estate | 12,876 | | | 12,251 | | | 12,171 | |
Consumer | 12,599 | | | 11,122 | | | 10,266 | |
Total average loans and leases outstanding | $ | 56,153 | | | $ | 52,598 | | | $ | 50,933 | |
Allowance for loan and lease losses: | | | | | |
Balance at beginning of period 1 | $ | 572 | | | $ | 513 | | | $ | 513 | |
Provision for loan losses | 46 | | | 101 | | | (29) | |
Charge-offs: | | | | | |
Commercial | 3 | | | 72 | | | 13 | |
Commercial real estate | — | | | — | | | — | |
Consumer | 4 | | | 10 | | | 4 | |
Total | 7 | | | 82 | | | 17 | |
Recoveries: | | | | | |
Commercial | 6 | | | 32 | | | 8 | |
Commercial real estate | — | | | — | | | — | |
Consumer | 1 | | | 11 | | | 3 | |
Total | 7 | | | 43 | | | 11 | |
Net loan and lease charge-offs | — | | | 39 | | | 6 | |
Balance at end of period | $ | 618 | | | $ | 575 | | | $ | 478 | |
Reserve for unfunded lending commitments: | | | | | |
Balance at beginning of period | $ | 61 | | | $ | 40 | | | $ | 40 | |
Provision for unfunded lending commitments | (1) | | | 21 | | | (4) | |
Balance at end of period | $ | 60 | | | $ | 61 | | | $ | 36 | |
Total allowance for credit losses: | | | | | |
Allowance for loan and lease losses | $ | 618 | | | $ | 575 | | | $ | 478 | |
Reserve for unfunded lending commitments | 60 | | | 61 | | | 36 | |
Total allowance for credit losses | $ | 678 | | | $ | 636 | | | $ | 514 | |
| | | | | |
Ratio of allowance for credit losses to net loans and leases, at period end | 1.20 | % | | 1.14 | % | | 1.00 | % |
Ratio of allowance for credit losses to nonaccrual loans, at period end | 396 | % | | 427 | % | | 204 | % |
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 392 | % | | 410 | % | | 202 | % |
Ratio of total net charge-offs to average loans and leases 2 | — | % | | 0.07 | % | | 0.05 | % |
Ratio of commercial net charge-offs to average commercial loans 2 | (0.04) | % | | 0.14 | % | | 0.07 | % |
Ratio of commercial real estate net charge-offs to average commercial real estate loans 2 | — | % | | — | % | | — | % |
Ratio of consumer net charge-offs to average consumer loans 2 | 0.10 | % | | (0.01) | % | | 0.04 | % |
1 The beginning balance at March 31, 2023 for the allowance for loan losses does not agree to its respective ending balance at December 31, 2022 because of the adoption of the new accounting standard related to loan modifications to borrowers experiencing financial difficulties.
2 Ratios are annualized for the periods presented except for the period representing the full twelve months.
The total ACL increased to $678 million, from $636 million, during the first three months of 2023, primarily due to deterioration in economic forecasts and growth in the loan portfolio. See Note 6 of the Notes to Consolidated Financial Statements for additional information related to the ACL and credit trends experienced in each portfolio segment.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Interest Rate and Market Risk Management
Interest rate risk is the potential for reduced net interest income and other rate-sensitive income resulting from adverse changes in the level of interest rates. Market risk is the potential for loss arising from adverse changes in the fair value of fixed-income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. As a financial institution that engagesBecause we engage in transactions involving various financial products, we are exposed to both interest rate risk and market risk. For a more comprehensive discussion of our interest rate and market risk management, see the “Interest Rate and Market Risk Management” section in our 20212022 Form 10-K.
Interest Rate Risk
Average totalWe strive to position the Bank for interest rate changes and manage the balance sheet sensitivity to reduce the volatility of both net interest income and economic value of equity. We generally have granular deposit funding. Much of this funding has an indeterminate life with no maturity and can be withdrawn at any time. Because most deposits increased $10.2 billion,come from household and business accounts, their duration is generally longer than the duration of our loan portfolio. As such, we are naturally “asset-sensitive” — meaning that our assets are expected to reprice faster or 14%, from March 31, 2021, and a significant portionmore significantly than our liabilities. In previous interest rate environments, we have added (1) interest rate swaps to synthetically increase the duration of the deposits were invested in fixed-rate AFSloan portfolio, (2) longer-duration securities, resulting in decreasedand (3) longer-duration loans to reduce the asset sensitivity to rising rates. The lower asseta level where an increase in interest rates of 100 bps would result in a positive change in net interest income.
Asset sensitivity to rising rates is dependentmeasures depend upon the assumptions we useduse for deposit runoff and repricing behavior, which is more uncertain given the higher level of new deposits. We are less asset-sensitive to decliningbehavior. As interest rates than rising rates due to the limited amount that the spread between the cost of deposits and the yield on money market investments could compress.
The following schedule presents derivatives utilized in our asset-liability management activities that are designated in qualifying hedging relationships at March 31, 2022. Included are the average outstanding derivative notional amounts for each period presented and the weighted average fixed-rate paid or received for each category of cash flow and fair value hedge. See Note 7 of the Notes to Consolidated Financial Statements for additional information regarding the impact of these hedging relationships on interest income and expense.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2023 | | 2024 | | 2Q24 - 1Q25 | | 2Q25 - 1Q26 | | | | | | | | |
(Dollar amounts in millions) | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | | | | | | | | | |
Cash flow hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow asset hedges 1 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 3,378 | | $ | 4,183 | | $ | 4,916 | | $ | 4,850 | | $ | 4,683 | | $ | 4,383 | | $ | 4,383 | | $ | 4,250 | | $ | 3,604 | | $ | 2,150 | | | | | | | | |
Weighted-average fixed-rate received | 1.33 | % | | 1.30 | % | | 1.31 | % | | 1.31 | % | | 1.29 | % | | 1.18 | % | | 1.18 | % | | 1.14 | % | | 1.08 | % | | 1.14 | % | | | | | | | | |
| 2022 4 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 | | | | | | | | |
Fair value hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value debt hedges 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | — | | | $ | — | | | | | | | | | |
Weighted-average fixed-rate received | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | — | % | | — | % | | | | | | | | |
Fair value asset hedges 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 590 | | | $ | 589 | | | $ | 863 | | | $ | 978 | | | $ | 985 | | | $ | 983 | | | $ | 981 | | | $ | 978 | | | $ | 976 | | | $ | 972 | | | | | | | | | |
Weighted-average fixed-rate paid | 1.32 | % | | 1.32 | % | | 1.50 | % | | 1.56 | % | | 1.57 | % | | 1.57 | % | | 1.57 | % | | 1.57 | % | | 1.57 | % | | 1.57 | % | | | | | | | | |
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1 Cash flow hedges consist of receive-fixed swaps hedging pools of floating-rate loans. Increases in the average outstanding notional are due to forward-starting interest rate swaps.
2 Fair value debt hedges consist of receive-fixed swaps hedging fixed-rate debt. The $500 million fair value debt hedge matures at the end of July 2029.
3 Fair value assets hedges consist of pay-fixed swaps hedging AFS fixed-rate securities. Increases in average outstanding notional are due to forward-starting interest rate swaps.
4 Represents the remaining three quarters of 2022.
Under most rising interest rate environments,rise, we expect some customers to move balances from demand deposits to interest-bearing accounts such as money market, savings, or certificates of deposit. Our models are particularly sensitive to the assumption about the rate of such migration.
In addition, weWe also assume a correlation, often referred to as a “deposit beta,” with respect to interest-bearing deposits, wherein the rates paid to customers change at a different pace when compared with changes in average benchmark interest rates. Generally, certificates of deposit are assumed to have a high correlation, while interest-on-checkinginterest-bearing checking accounts are assumed to have a lower correlation. We anticipate that changes in deposit rates will lag changes in reference rates. Our modeled cost of total deposits for March 2024 is approximately 1.31%without the effect of any additional Federal Reserve (“FRB”) rate hikes. Additional rate hikes would be expected to result in further increases to the cost of total deposits.
Actual results may differ materially due to various factors, including the shape of the yield curve, competitive pricing, money supply, our credit worthiness, and so forth; however, weetc. We use our historical experience as well as industry data to inform our assumptions.
The migration and correlation assumptions previously discussed result in deposit durations presented in the following schedule:
DEPOSIT ASSUMPTIONS
| | | March 31, 2022 | | March 31, 2023 | | December 31, 2022 |
Product | Product | | Effective duration (unchanged) | | Effective duration (+200 bps) | Product | | Effective duration (unchanged) | | Effective duration (+200 bps) | | Effective duration (unchanged) | | Effective duration (+200 bps) |
| Demand deposits | Demand deposits | | 2.8 | % | | 2.9 | % | Demand deposits | | 3.5 | % | | 3.6 | % | | 3.6 | % | | 3.5 | % |
Money market | Money market | | 1.8 | % | | 1.8 | % | Money market | | 2.5 | % | | 2.2 | % | | 2.3 | % | | 2.0 | % |
Savings and interest-on-checking | | 2.6 | % | | 2.4 | % | |
Savings and interest-bearing checking | | Savings and interest-bearing checking | | 3.2 | % | | 2.7 | % | | 3.1 | % | | 2.8 | % |
With interest rates forecast to riseAs the more rate-sensitive deposits have runoff, the effective duration of deposits has shortenedlengthened due to higher expected runoff and/or migrationthe remaining deposits that are assumed to more rate-sensitive deposit products.be less rate sensitive.
Incorporating the assumptionsAs noted previously, discussed, thewe utilize derivatives to manage interest rate risk. The following schedule presents earningsderivatives that are designated in qualifying hedging relationships at risk (“EaR”),March 31, 2023. Included are the average outstanding derivative notional amounts for each period presented and the weighted average fixed-rate paid or percentage change in net interest income, and our estimated percentage change in economic value of equityreceived for each
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
category of cash flow and fair value hedge. See Note 7 of the Notes to Consolidated Financial Statements for additional information regarding the impact of these hedging relationships on interest income and expense.
DERIVATIVES DESIGNATED IN QUALIFYING HEDGING RELATIONSHIPS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | 2024 | | 2025 | | 2Q25 - 1Q26 | | 2Q26 - 1Q27 | | | | | | | | |
(Dollar amounts in millions) | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | | | | | | | | | |
Cash flow hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow asset hedges 1, 4 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 4,433 | | $ | 4,133 | | $ | 3,833 | | $ | 3,400 | | $ | 3,066 | | $ | 2,633 | | $ | 2,133 | | $ | 1,450 | | $ | 558 | | $ | 108 | | | | | | | | |
Weighted-average fixed-rate received | 1.92 | % | | 1.87 | % | | 1.75 | % | | 1.59 | % | | 1.50 | % | | 1.36 | % | | 1.27 | % | | 1.39 | % | | 1.73 | % | | 1.65 | % | | | | | | | | |
| 2023 4 | | 2024 | | 2025 | | 2026 | | 2027 | | 2028 | | 2029 | | 2030 | | 2031 | | 2032 | | | | | | | | |
Fair value hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value debt hedges 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | 500 | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | |
Weighted-average fixed-rate received | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | 1.70 | % | | — | % | | — | % | | — | % | | | | | | | | |
Fair value asset hedges 3 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Average outstanding notional | $ | 827 | | | $ | 1,099 | | | $ | 1,212 | | | $ | 1,217 | | | $ | 1,213 | | | $ | 1,208 | | | $ | 1,203 | | | $ | 1,198 | | | $ | 1,192 | | | $ | 1,156 | | | | | | | | | |
Weighted-average fixed-rate paid | 1.65 | % | | 1.71 | % | | 1.74 | % | | 1.74 | % | | 1.74 | % | | 1.73 | % | | 1.73 | % | | 1.73 | % | | 1.73 | % | | 1.72 | % | | | | | | | | |
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1 Cash flow hedges consist of receive-fixed swaps hedging pools of floating-rate loans.
2 Fair value debt hedges consist of receive-fixed swaps hedging fixed-rate debt. The $500 million fair value debt hedge matures at the end of July 2029. Amounts for 2029 have not been prorated to reflect this hedge maturing during the year.
3 Fair value assets hedges consist of pay-fixed swaps hedging AFS fixed-rate securities. Increases in average outstanding notional amounts are due to forward-starting interest rate swaps.
4 The cash flow portfolio fully matures in February 2027. Amounts for 2027 have not been prorated to reflect this hedge maturing during the period.
Incorporating the deposit assumptions and the impact of derivatives in qualifying hedging relationships previously discussed, the following schedule presents earnings at risk (“EaR”), or the percentage change in 12-month forward-looking net interest income, and our estimated percentage change in economic value of equity (“EVE”); both. Both EaR and EVE are based on a static balance sheet size under parallel interest rate changes ranging from -100 bps to +300 bps.
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Parallel shift in rates (in bps)1 | | Parallel shift in rates (in bps)1 | | Parallel shift in rates (in bps)1 | | Parallel shift in rates (in bps)1 |
Repricing scenario | Repricing scenario | | -100 | | 0 | | +100 | | +200 | | +300 | | -100 | | 0 | | +100 | | +200 | | +300 | Repricing scenario | | -100 | | 0 | | +100 | | +200 | | +300 | | -100 | | 0 | | +100 | | +200 | | +300 |
| Earnings at Risk (EaR) | Earnings at Risk (EaR) | | (4.8) | % | | — | % | | 7.9 | % | | 15.9 | % | | 23.7 | % | | (5.2) | % | | — | % | | 11.2 | % | | 22.7 | % | | 33.6 | % | Earnings at Risk (EaR) | | (3.4) | % | | — | % | | 3.3 | % | | 6.5 | % | | 9.7 | % | | (2.4) | % | | — | % | | 2.4 | % | | 4.8 | % | | 7.1 | % |
Economic Value of Equity (EVE) | Economic Value of Equity (EVE) | | 8.7 | % | | — | % | | (3.4) | % | | (5.5) | % | | (7.0) | % | | 20.9 | % | | — | % | | 0.8 | % | | (0.5) | % | | (1.2) | % | Economic Value of Equity (EVE) | | 1.8 | % | | — | % | | (1.2) | % | | (2.4) | % | | (3.8) | % | | 2.0 | % | | — | % | | (1.1) | % | | (2.3) | % | | (3.7) | % |
1 Assumes rates cannot go below zero in the negative rate shift.
The asset sensitivity, as measured by EaR, increased during the first quarter of 2023, primarily due to a decrease in receive-fixed-rate swap notional, partially offset by deposit runoff.
For interest-bearing deposits with indeterminate maturity,maturities, the weighted average modeled beta is 26%27%. If the weighted average deposit beta were to increase to 37%38%, the EaR in the +100 bps rate shock would change from 7.9%3.3% to 6.0%2.0%.
The asset sensitivity, as measured by EaR, decreased during the first quarter
Our base-case net interest income simulation for the first quarter of 2023 indicates a 15% increase in net interest income, compared with the results for the first quarter of 2022 (ex-PPP). This base-case simulation assumes a static balance sheet and an unchanged interest rate curve at March 31, 2022. The modeled increase is notably larger than it was at December 31, 2021, primarily due to active balance sheet management during the first quarter of 2022, as well as a steeper yield curve at March 31, 2022, when compared with December 31, 2021.ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
We disclose asset sensitivity to parallel rate shocks, but interest rates rarely change in a parallel fashion. During the first quarter of 2022, medium- to long-term rates moved significantly, whereas short-term rate movements were muted. Net interest income in the base-case simulation benefited from longer-term rate increases, and if short-term rates increase as implied by forward rates, we anticipate corresponding increases in net interest income from the base case.
As described previously, theThe EaR analysis focuses on parallel rate shocks across the term structure of benchmark interest rates. In a non-parallel rate scenario where the overnight rate increases 200 bps, but the ten-year rate increases only 30 bps, the increase in EaR is modeled to be approximately two-thirds of the change associated with the parallel +200 bps rate change.
InEaR has inherent limitations in describing expected changes in net interest income in rapidly changing interest rate environments due to a lag in asset and liability repricing behavior. As such, we expect net interest income to change due to “latent” and “emergent” interest rate sensitivity. Unlike EaR, which measures net interest income over 12 months, latent and emergent interest rate sensitivity explains changes in current quarter net interest income, compared with expected net interest income in the -100 bpssame quarter one year forward.
Latent interest rate shock, our models indicatesensitivity refers to future changes in net interest income based upon past rate movements that EVE would increase becausehave yet to be fully recognized in revenue but will be recognized over the near term. We expect latent sensitivity to reduce net interest income by approximately 7% in the first quarter of 2024, compared with the first quarter of 2023.
Emergent interest rate sensitivity refers to future changes in net interest income based upon future interest rate movements and is measured from the latent level of net interest income. If interest rates rise consistent with the forward curve at March 31, 2023, we capexpect emergent sensitivity to reduce net interest income by approximately 1% from the value of our indeterminate deposits at their par value, or equivalently, we assume no premium would be required to dispose of these liabilities because depositors could be repaid at par. Since our assets increaselatent sensitivity level, for a cumulative 8% reduction in value as rates fall, and the majority of our liabilities are indeterminate deposits, EVE would increase disproportionately.net interest income.
Our focus on business banking also plays a significant role in determining the nature of our asset-liability management posture. At March 31, 2022, $232023, $25.6 billion of our commercial lending and CRE loan balances were scheduled to reprice in the next six months. Of these variable-rate loans, approximately 99%96% are tied to either the prime rate, London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), or American Interbank Offered Rate (“AMERIBOR”), or Bloomberg Short-term Bank Yield (“BSBY”). For these variable-rate loans, we have executed $3.3$4.4 billion of cash flow hedges by receiving fixed rates on interest rate swaps. Additionally, asset sensitivity is reduced due to $5 billion of variable-rate commercial and CRE loans being priced at floored rates at March 31, 2022, which were above the “index plus spread” rate by an average of 42 bps. At March 31, 2022,2023, we also had $3$3.6 billion of variable-rate consumer loans scheduled to reprice in the next six months, and approximately $1 billion were priced at floored
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
months. The impact on asset sensitivity from commercial or consumer loans with floors has become insignificant as rates which were above the “index plus spread” rate by an average of 29 bps.have risen. See Notes 3 and 7 of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.
LIBOR ExposureTransition
LIBOR is being phased out globally, and U.S. banking regulators instructed banks are required to cease entering into new lending arrangements using LIBOR no later than December 31, 2021, and migrate to alternative reference rates no later than June 2023. To facilitate the transition process, we instituted an orderly enterprise-wide program to identify, assess, and monitor risks associated with the expected discontinuance or unavailability of LIBOR, which includesLIBOR. This program included active engagement with industry working groups and regulators. This program also includes activeor involvement of senior management, with regular engagement from the Enterprise Risk Management Committee, industry working groups, and seeks to minimize client and internal business operational impacts, while providing reporting transparency, consistency, and a central governance model that aligns with accounting and regulatory guidance.our regulators.
We have implemented processes, procedures, and systems to ensure contract risk is sufficiently mitigated. New originations, and any modifications or renewals of LIBOR-based contracts, contain fallback language to facilitate transition to an alternative reference rate. For our contracts that referenced LIBOR and had a duration beyond December 31, 2021,June 2023, all fallback provisions and variations were identified and classified based upon those provisions. By the end of 2021, we had discontinued substantially all new originations referencing LIBOR.
We have a significant number of assets and liabilities that reference LIBOR. At March 31, 2022,2023, we had approximately $30$10.5 billion in loans (mainly commercial loans), unfunded lending commitments, and securities referencing LIBOR. The amount of borrowed funds referencing LIBOR at March 31, 20222023 was less than $1 billion. These amounts exclude derivative assets and liabilities on the consolidated balance sheet. At March 31, 2022,2023, the notional amount of our LIBOR-referenced interest rate derivative contracts was more than $13$6.5 billion, of which more than $12 billionnearly all related to contracts with central counterparty clearinghouses. We expect the swap central counterparty clearinghouses, LCH.Clearnet Limited and CME Clearing House, to transition all of our USD LIBOR swaps to SOFR during the second quarter of 2023.
The adoption of alternative reference rates continues to evolve in the marketplace. We are positioned to support our customers’ needs by accommodating multiplevarious alternative reference rates, including primarily the Constant Maturity Treasury rate (“CMT”), the Federal Home Loan Bank (“FHLB”) rate, AMERIBOR,the FHLB rate, SOFR, BSBY, and the Bloomberg Short Term Bank Yield Index (“BSBY”). During the first quarterprime rate. At March 31, 2023, as a result of 2022, we beganour efforts, more than 70% of our loans referencing LIBOR have moved to prompt ouran alternative rate index, and
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
a significant number of customers had voluntarily migrated to either voluntarily modify their contracts and migrate to a referencean alternative rate other than LIBOR no later than June 2023, or be subject to the fallback provisions in their contracts. Voluntary modifications are expected to qualify for the available Tax Safe-Harbor provisions as allowed by Internal Revenue Service (“IRS”) guidance.
index. We expect that customers who voluntarily migrate to an alternative reference rate will do so by the endmost of this year, and we expect the remaining customers towill move to an alternative rate index in accordance with the relevant fallback provisions in their contracts prior to June 2023. A limited number of customers will be notified of the activation of their fallback language prior to June 2023, with transition to an alternative rate index occurring upon their next scheduled rate reset subsequent to June 2023.
Under the Adjustable Interest Rate (LIBOR) Act of 2022, the FRB identified benchmark replacement rates for LIBOR contracts lacking fallback provisions with a clearly defined or practical replacement benchmark rate. Where applicable, these replacement rates will be used. For more information on the transition from LIBOR, see Risk Factors in our 20212022 Form 10-K.
Market Risk – Fixed Income
We underwrite municipal and corporate securities. We also trade municipal, agency, and treasury securities. This underwriting and trading activity exposes us to a risk of loss arising from adverse changes in the prices of these fixed-income securities.
At March 31, 2023 and December 31, 2022, we had $382$12 million and $465 million of trading assets, and $101$281 million and $187 million of securities sold, not yet purchased, compared with $372 million and $254 million at December 31, 2021, respectively.
We are exposed to market risk through changes in fair value. This includes market risk for interest rate swaps used to hedge interest rate risk.
Changes in the fair value of AFS securities and in interest rate swaps that qualify as cash flow hedges are included in accumulated other comprehensive income (“AOCI”) for each financial reporting period. During the first quarter of 2022, theThe after-tax change in AOCI attributable to AFS securities decreased by $1.1 billion,increased $126 million for the three months ended March 31, 2023, due largely to changesincreases in benchmark interest rates. See Note 5 of the Notes to Consolidated Financial Statements for further information regarding the accounting for investment securities.
We believe our funding advantage is more pronounced in a rising interest rate environment, compared with a $164 million decrease in the prior year period.
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creating meaningful economic value that is not fully reflected on our balance sheet since deposits and related intangible assets are not recorded at fair value for accounting purposes.Market Risk – Equity Investments
Through our equity investment activities, we own equity securities that are publicly traded. In addition, we own equity securities in governmental entities and companies, e.g., FRB and the FHLB, that are not publicly traded. Equity investments may be accounted for at cost less impairment and adjusted for observable price changes, fair value, the equity method, or full consolidation methods of accounting, depending on our ownership position and degree of influence over the investees’ business. Regardless of the accounting method, the values of our investments are subject to fluctuation. Because the fair value of these securities may fall below the cost at which we acquired them, we are exposed to the possibility of loss. Equity investments in private and public companies are evaluated, monitored, and approved by members of management in our Equity Investments Committee and Securities Valuation Committee.
We hold both direct and indirect investments in predominantly pre-public companies, primarily through various SBIC venture capital funds as a strategy to provide beneficial financing, growth, and expansion opportunities to diverse businesses generally in communities within our geographic footprint. Our equity exposure to these investments was $165approximately $174 million and $179$172 million at March 31, 20222023 and December 31, 2021,2022, respectively. On occasion, some of the companies within our SBIC investment may issue an initial public offering (“IPO”). In this case, the fund is generally subject to a lockout period before liquidating the investment, which can introduce additional market risk. See Note 3 of our 2021 Form 10-Kthe Notes to Consolidated Financial Statements for additional information regarding the valuation of our SBIC investments.
Liquidity Risk Management
Overview
Liquidity refers to our ability to meet our cash, contractual, and collateral obligations, and to manage both expected and unexpected cash flows without adversely impacting our operations or financial strength. Sources of liquidity include deposits, borrowings, equity, and unencumbered assets, such as marketable loans and investment securities. For a more comprehensive discussion ofWe manage our liquidity risk management, see “Liquidity Risk Management” in our 2021 Form 10-K.
Strong deposit growth over the past year has contributed to a solid overall liquidity position. At March 31, 2022, our investment securities portfolio of $27.0 billion and cash and money market investments of $8.1 billion, collectively comprised 39% of total assets, compared with $24.9 billion of investment securities, and $13.0 billion of cash and money market investments, collectively comprising 41% of total assets at December 31, 2021. Given our investment securities portfolio is predominantly comprised of securities for which a strong repurchase market exists, we believe we can readily convert securities to cash to support loan growth through repurchase agreements rather than sales.
Liquidity Management Actions
During the first quarter of 2022, the primary sources of cash came from a significant decrease in money market investments, and net cash provided by operating activities. Uses of cash during the quarter included primarily an increase in investment securities, redemption of long-term debt, and a decrease in short-term borrowings. Cash payments for interest, reflected in operating expenses, were $11 million and $22 million for the first three months of 2022 and 2021, respectively.
Total deposits were $82.4 billion at March 31, 2022, compared with $82.8 billion at December 31, 2021. The decrease in deposits was primarily due to a $1.3 billion decrease in savings and money market deposits, partially offset by a $0.9 billion increase in noninterest-bearing demand deposits. Our core deposits, consisting of noninterest-bearing demand deposits, savings and money market deposits, and time deposits under $250,000, were $81.5 billion at March 31, 2022, compared with $81.9 billion at December 31, 2021. At March 31, 2022, our loan to total deposit ratio remained relatively stable at 62%, compared with 61% at December 31, 2021.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
liquidity to provide funds for our customers’ credit needs, our anticipated financial and contractual obligations, and other corporate activities. Sources of liquidity include deposits, borrowings, equity, and unencumbered assets, such as loans and investment securities. Our investment securities are primarily held as a source of contingent liquidity. We primarily own securities that can readily provide us cash and liquidity through secured borrowing agreements with securities pledged as collateral.
We maintain and regularly test a contingency funding plan to identify sources and uses of liquidity. Additionally, we have a Board-approved liquidity policy that requires us to monitor and maintain adequate liquidity, diversify funding positions, and anticipate future funding needs. In accordance with this policy, we monitor our liquidity positions by conducting various stress tests and evaluating certain liquid asset measurements, such as a 30-day liquidity coverage ratio.
We perform regular liquidity stress tests and assess our portfolio of highly liquid assets (sufficient to cover 30-day funding needs under stress scenarios). These stress tests include projections of funding maturities, uses of funds, and assumptions of deposit runoff. These assumptions consider the size of deposit account, operational nature of deposits, type of depositor, and concentrations of funding sources including large depositors and aggregate levels of uncollateralized deposits exceeding insured levels. Concentrated funding sources are given large runoff factors up to 100% in projecting stressed funding needs. Our liquidity stress testing considers multiple timeframes ranging from overnight to 12 months. Our liquidity policy requires us to maintain sufficient on-balance sheet liquidity in the form of FRB reserve balance and other highly liquid assets to meet stressed outflow assumptions.
We have a dedicated funding desk that monitors real-time inflows and outflows of our FRB account, and we have tools, including ready access to repo markets and FHLB advances, to manage intraday liquidity. FHLB borrowings are “open-term,” allowing us the ability to retain or return funds based on our liquidity needs. We pledge a large portion of our highly liquid investment securities portfolio through the General Collateral Funding (“GCF”) repo program. Through this program, high-quality collateral is pledged and program participants exchange funds anonymously, which allows for near instant access to funding during market hours.
Additionally, we have pledged collateral to the FRB’s primary credit facility (or discount window) and the Bank Term Funding Program (“BTFP”), which provide additional contingent funding sources outside the normal operating hours of the FHLB and the GCF program. The BTFP offers loans of up to one year in length to eligible depository institutions pledging U.S. Treasuries, agency debt and government mortgage-backed securities, and other qualifying assets as collateral. Unlike other funding sources, borrowing capacity under the BTFP is based on the par value, not the fair value, of collateral. During the first quarter of 2023, we did not access the discount window or BTFP, except for an operational test of the BTFP consisting of a $1 million overnight advance. For more information on our liquidity risk management practices, see “Liquidity Risk Management” in our 2022 Form 10-K.
For the first three months of 2023, the primary sources of cash came from an increase in short-term borrowings, a decrease in money market investments, a decrease in investment securities, and net cash provided by operating activities. Uses of cash during the same period included primarily an increase in loans and leases, dividends paid on common and preferred stock, and the repurchase of bank common stock. Cash payments for interest reflected in operating expenses were $224 million and $11 million for the first three months of 2023 and 2022, respectively.
The FHLB and FRB have been, and continue to be, a significant source of back-up liquidity and funding. We are a member of the FHLB of Des Moines, which allows member banks to borrow against eligible loans and securities to satisfy liquidity and funding requirements. We are required to invest in FHLB and FRB stock to maintain our borrowing capacity. At March 31, 2023, our total investment in FHLB and FRB stock was $330 million and $66 million, respectively, compared with $294 million and $68 million at December 31, 2022.
At March 31, 2023, loans with a carrying value of $24.2 billion and $6.0 billion, compared with $23.7 billion and $3.9 billion at December 31, 2022, were pledged at the FHLB and FRB, respectively, as collateral for current and potential borrowings. In April 2023, an additional $9.4 billion of loans were pledged at the FRB as collateral for potential borrowings, resulting in additional borrowing capacity of approximately $7.8 billion.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
At March 31, 2023 and December 31, 2022, investment securities with a carrying value of $22.0 billion and $13.5 billion, respectively, were pledged as collateral for potential borrowings. For the same time periods, these pledges included $10.4 billion and $8.3 billion for available use through the GCF repo program, $7.6 billion and $1.0 billion to the FRB, and $4.0 billion and $4.2 billion to secure collateralized public and trust deposits, advances, and for other purposes.
A large portion of these pledged assets are unencumbered, but are pledged to provide immediate access to contingency sources of funds. The following schedule presents our total available liquidity including unused collateralized borrowing capacity.
AVAILABLE LIQUIDITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
(In billions) | FHLB | | FRB | | GCF | | BTFP | | Total | | FHLB | | FRB | | GCF | | BTFP | | Total |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Total borrowing capacity | $ | 16.4 | | | $ | 6.1 | | | $ | 10.6 | | | $ | 7.3 | | | $ | 40.4 | | | $ | 16.6 | | | $ | 4.0 | | | $ | 8.4 | | | $ | — | | | $ | 29.0 | |
Borrowings outstanding | 8.1 | | | — | | | 3.3 | | | — | | | 11.4 | | | 7.2 | | | — | | | 2.7 | | | — | | | 9.9 | |
Remaining capacity, at period end | $ | 8.3 | | | $ | 6.1 | | | $ | 7.3 | | | $ | 7.3 | | | $ | 29.0 | | | $ | 9.4 | | | $ | 4.0 | | | $ | 5.7 | | | $ | — | | | $ | 19.1 | |
| | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | | | | | | 0.6 | | | | | | | | | | | 0.7 | |
Interest-bearing deposits 1 | | | | | | | | 2.7 | | | | | | | | | | | 1.3 | |
Total available liquidity | | | | $ | 32.3 | | | | | | | | | | | $ | 21.1 | |
1 Represents funds deposited by the Bank primarily at the Federal Reserve Bank.
At March 31, 2023 and December 31, 2022, our total available liquidity was $32.3 billion, compared with $21.1 billion, respectively. At March 31, 2023, we had sources of liquidity which exceeded our uninsured deposits without the need to sell any investment securities.
General financial market and economic conditions also impact our access to, and cost of, external financing. Access to funding markets is also directly affected by the credit ratings are presentedwe receive from various rating agencies. The ratings not only influence the costs associated with borrowings, but can also influence the sources of the borrowings. All of the credit rating agencies rate our debt at an investment-grade level. In April 2023, as a result of broader uncertainty in the banking industry, Moody's downgraded our long-term issuer rating to Baa2 from Baa1, our short-term debt rating to P2 from P1, and changed their outlook on our long-term deposit and issuer ratings to “stable” from “ratings under review.”
The following schedule:schedule presents our current credit ratings.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
CREDIT RATINGS | | | | | | |
as of April 30, 2022:2023: |
Rating agency | | Outlook | | Long-term issuer/senior debt rating | | Subordinated debt rating | | Short-term debt rating |
| | | | | | | | |
Kroll | | Positive | | A- | | BBB+ | | K2 |
S&P | | Stable | | BBB+ | | BBB | | NR |
Fitch | | Stable | | BBB+ | | BBB | | F1 |
Moody's | | Stable | | Baa1Baa2 | | NR | | NRP2 |
The FHLB system and Federal Reserve Banks have been, and continue to be, a significant source of back-up liquidity and funding. We are a member of the FHLB of Des Moines, which allows member banks to borrow against their eligible loans and securities to satisfy liquidity and funding requirements. We are required to invest in FHLB and Federal Reserve stock to maintain our borrowing capacity. At March 31, 2022, our total investment in FHLB and Federal Reserve stock was $11 million and $71 million, respectively, compared with $11 million and $81 million at December 31, 2021.
The amount available for additional FHLB and Federal Reserve borrowings was $18.6 billion at March 31, 2022, compared with $18.3 billion at December 31, 2021. Loans with a carrying value of approximately $26.8 billion at both March 31, 2022 and December 31, 2021, were pledged at the FHLB and the Federal Reserve as collateral for potential borrowings. At both March 31, 2022 and December 31, 2021, we had no FHLB or Federal Reserve borrowings outstanding.
Our AFS investment securities are primarily held as a source of contingent liquidity. We target securities that can be easily turned into cash through repurchase agreements or sales, and whose liquidity value remains relatively stable during market disruptions. We manage our short-term funding needs through secured borrowing with the securities pledged as collateral. During the first quarter of 2022, our AFS securities balances increased $2.1 billion.
Total borrowed funds decreased $588 million during the first quarter of 2022, primarily due to the redemption of $290 million of the 4-year, 3.35% senior notes. The decrease in overall borrowed funds continues to reflect strong deposit growth.
We may, from time to time, issue additional preferred stock, senior or subordinated notes, or other forms of capital or debt instruments, depending on our capital, funding, asset-liability management, or other needs as market conditions warrant. These additional issuances may be subject to required regulatory approvals. We believe that our sources of available liquidity are adequate to meet all reasonably foreseeable short- and intermediate-term demands.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Capital Management
Overview
A strong capital position is vital to the achievement of our key corporate objectives, our continued profitability, and to promoting depositor and investor confidence. Our capital managementWe have fundamental financial objectives include: (1)and policies to consistently improvingimprove risk-adjusted returns on our shareholders'shareholders’ capital, and appropriately managing capital distributions, (2)including (1) maintaining sufficient capital to support the current needs and growth of our businesses, and (3)(2) fulfilling responsibilities to depositors and bondholders.bondholders while managing capital distributions to shareholders through dividends and repurchases of common stock.
We continue to utilize stress testing as an important mechanism to inform our decisions on the appropriate level of capital, based upon actual and hypothetically stressed economic conditions, which are comparable in severity to the scenarios published by the Federal Reserve Board (“FRB”).FRB. The timing and amount of capital actions are subject to various factors, including our financial performance, business needs, prevailing and anticipated economic conditions, and the results of our internal stress testing, as well as Board and Office of the Comptroller of the Currency (“OCC”) approval. Shares may be repurchased occasionally in the open market or through privately
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
negotiated transactions. For a more comprehensive discussion of our capital risk management, see “Capital Management” in our 20212022 Form 10-K.
SHAREHOLDERS' EQUITY
| (In millions, except share data) | March 31, 2022 | | December 31, 2021 | | Amount change | | Percent change | |
(Dollar amounts in millions) | | (Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 | | Amount change | | Percent change |
Shareholders’ equity: | Shareholders’ equity: | | | | | | | | Shareholders’ equity: | | | | | | | |
Preferred stock | Preferred stock | $ | 440 | | $ | 440 | | $ | — | | | — | % | Preferred stock | $ | 440 | | | $ | 440 | | | $ | — | | | — | % |
Common stock and additional paid-in capital | Common stock and additional paid-in capital | 1,889 | | 1,928 | | (39) | | | (2) | | Common stock and additional paid-in capital | 1,715 | | | 1,754 | | | (39) | | | (2) | |
Retained earnings | Retained earnings | 5,311 | | 5,175 | | 136 | | | 3 | | Retained earnings | 5,949 | | | 5,811 | | | 138 | | | 2 | |
Accumulated other comprehensive income (loss) | (1,346) | | (80) | | (1,266) | | | NM | |
Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (2,920) | | | (3,112) | | | 192 | | | 6 | |
Total shareholders' equity | Total shareholders' equity | $ | 6,294 | | $ | 7,463 | | $ | (1,169) | | | (16) | % | Total shareholders' equity | $ | 5,184 | | | $ | 4,893 | | | $ | 291 | | | 6 | % |
Total shareholders’ equity decreased $1.2 billion,increased $291 million, or 16%6%, to $6.3$5.2 billion at March 31, 2022,2023, compared with $7.5$4.9 billion at December 31, 2021.2022. Common stock and additional paid-in capital decreased $39 million, primarily due to common stock repurchases.
AOCI decreased to a loss of $1.3was $2.9 billion primarily due to decreasesat March 31, 2023, and reflects the decline in the fair value of fixed-rate AFSavailable-for-sale securities as a result of changes in interest rates. TheseAbsent any sales or credit impairment of these securities, the unrealized losses will not be recognized unless we sell the securities.in earnings. We havedo not initiated any sales of AFS securities, nor do we currently intend to sell any identified securities with unrealized losses. Additionally,Although changes in AOCI are reflected in shareholders’ equity, they are excluded from regulatory capital, and therefore do not impact our regulatory capital ratios. ReferWe excluded the effect of AOCI to align with its impact on certain incentive compensation plans that utilize return on tangible common equity as a performance metric. See “Non-GAAP Financial Measures” on page 36 for further information. For more discussion on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements for more discussion on our investment securities portfolio and their unrealized gains/losses.Statements.
Weighted average dilutedCommon shares outstanding decreased 12.20.6 million fromduring the same prior year period,first three months of 2023, primarily due to common stock repurchases. During the first quarter of 2022,2023, we repurchased 0.80.9 million common shares outstanding for $50 million. In April 2022,As the Board approved a planmacroeconomic environment has become more uncertain, we do not expect to repurchase up to $50 million of common shares outstanding during the second quarter of 2022.2023.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CAPITAL DISTRIBUTIONS
| | | | | | | | | | | | | | Three Months Ended March 31, | |
(In millions, except share data) | (In millions, except share data) | March 31, 2022 | | March 31, 2021 | | (In millions, except share data) | 2023 | | 2022 | |
Capital distributions: | Capital distributions: | | | | | Capital distributions: | | | | |
Preferred dividends paid | Preferred dividends paid | $ | 8 | | $ | 8 | | Preferred dividends paid | $ | 6 | | $ | 8 | |
Bank preferred stock redeemed | — | | — | | |
| Total capital distributed to preferred shareholders | Total capital distributed to preferred shareholders | 8 | | 8 | | Total capital distributed to preferred shareholders | 6 | | 8 | |
Common dividends paid | Common dividends paid | 58 | | 56 | | Common dividends paid | 61 | | 58 | |
Bank common stock repurchased 1 | Bank common stock repurchased 1 | 51 | | 50 | | Bank common stock repurchased 1 | 50 | | 51 | |
Total capital distributed to common shareholders | Total capital distributed to common shareholders | 109 | | 106 | | Total capital distributed to common shareholders | 111 | | 109 | |
Total capital distributed to preferred and common shareholders | Total capital distributed to preferred and common shareholders | $ | 117 | | $ | 114 | | Total capital distributed to preferred and common shareholders | $ | 117 | | $ | 117 | |
Weighted average diluted common shares outstanding (in thousands) | Weighted average diluted common shares outstanding (in thousands) | 151,687 | | 163,887 | | Weighted average diluted common shares outstanding (in thousands) | 148,038 | | | 151,687 | | |
Common shares outstanding, at period end (in thousands) | Common shares outstanding, at period end (in thousands) | 151,348 | | 163,800 | | Common shares outstanding, at period end (in thousands) | 148,100 | | | 151,348 | | |
1 Includes amounts related to the common shares acquired from our publicly announced plans and those acquired in connection with our stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the exercise of stock options.
Under the OCC’s “Earnings Limitation Rule,” our dividend payments are restricted to an amount equal to the sum of the total of (1) our net income for that year, and (2) retained earnings for the preceding two years, unless the OCC approves the declaration and payment of dividends in excess of such amount. At March 31, 2022,2023, we had $1.3$1.6 billion of retained net profits available for distribution.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
We paid common dividends of $58 million, or $0.38 per share, duringDuring the first quarter of 2022.2023, we paid dividends on preferred stock of $6 million and dividends on common stock of $61 million, or $0.41 per share. In April 2022,May 2023, the Board declared a regular quarterly dividend of $0.38$0.41 per common share, payable on May 26, 2022,25, 2023 to shareholders of record on May 19, 2022. We also paid dividends on preferred stock of $8 million during the first quarter of 2022.18, 2023. See Note 9 of the Notes to Consolidated Financial Statements for additional information about our capital management actions.
Basel III
We are subject to Basel III capital requirements to maintain adequate levels of capital as measured by severalthat include certain minimum regulatory capital ratios. At March 31, 2022,2023, we metexceeded all capital adequacy requirements under the Basel III capital rules. Based on our internal stress testing and other assessments of capital adequacy, we believe we hold capital sufficiently in excess of internal and regulatory requirements for well-capitalized banks. The following schedule presents our capital and other performance ratios.
CAPITAL RATIOS
| | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 | | March 31, 2021 |
| | | | | |
Tangible common equity ratio 1 | 5.4 | % | | 6.5 | % | | 7.6 | % |
Tangible equity ratio 1 | 5.9 | | | 7.0 | | | 8.2 | |
Average equity to average assets (three months ended) | 7.8 | | | 8.3 | | | 9.5 | |
Basel III risk-based capital ratios: | | | | | |
Common equity tier 1 capital | 10.0 | | | 10.2 | | | 11.2 | |
Tier 1 leverage | 7.3 | | | 7.2 | | | 8.3 | |
Tier 1 risk-based | 10.8 | | | 10.9 | | | 12.2 | |
Total risk-based | 12.5 | | | 12.8 | | | 14.5 | |
Return on average common equity (three months ended) | 11.8 | | | 11.5 | | | 17.4 | |
Return on average tangible common equity (three months ended) 1 | 13.9 | | | 13.4 | | | 20.2 | |
1 See “GAAP to Non-GAAP Reconciliations” on page 4 for more information regarding these ratios.
Our regulatory tier 1 risk-based capital and total risk-based capital was $6.6 billion and $7.7 billion at March 31, 2022, compared with $6.5 billion and $7.7 billion, respectively, at December 31, 2021. See the “Supervision and Regulation” section and Note 15 of the Notes to Consolidated Financial Statements of our 20212022 Form 10-K for more information about our compliance with the Basel III capital requirements.
Deposit-driven balance sheet growth over the past year has resulted in a modest reduction in The following schedule presents our risk-weighted regulatorycapital amounts, capital ratios, and a larger reduction in our Tier 1 leverage ratio, as the denominator for this ratio is not adjusted for risk. As a result, our Tier 1 leverage ratio declined to 7.3% at March 31, 2022, from 8.3% at March 31, 2021.other selected performance ratios.
CAPITAL AMOUNTS AND RATIOS
34
| | | | | | | | | | | | | | | | | |
(Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 | | March 31, 2022 |
Basel III risk-based capital amounts: | | | | | |
Common equity tier 1 capital | $ | 6,582 | | | $ | 6,481 | | | $ | 6,166 | |
Tier 1 risk-based | 7,022 | | | 6,921 | | | 6,605 | |
Total risk-based | 8,232 | | | 8,077 | | | 7,677 | |
Risk-weighted assets | 66,274 | | | 66,111 | | | 61,427 | |
Basel III risk-based capital ratios: | | | | | |
Common equity tier 1 capital ratio | 9.9 | % | | 9.8 | % | | 10.0 | % |
Tier 1 risk-based ratio | 10.6 | | | 10.5 | | | 10.8 | |
Total risk-based ratio | 12.4 | | | 12.2 | | | 12.5 | |
Tier 1 leverage ratio | 7.8 | | | 7.7 | | | 7.3 | |
Other ratios: | | | | | |
Average equity to average assets (three months ended) | 5.6 | % | | 5.4 | % | | 7.8 | % |
Return on average common equity (three months ended) | 17.4 | | | 25.4 | | | 11.8 | |
Return on average tangible common equity (three months ended) 1 | 12.3 | | | 16.9 | | | 12.9 | |
Tangible equity ratio 1 | 7.8 | | | 7.6 | | | 7.2 | |
Tangible common equity ratio 1 | 7.3 | | | 7.1 | | | 6.8 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
ITEM 1. FINANCIAL STATEMENTS1 (Unaudited)
CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
(In millions, shares in thousands) | March 31, 2022 | | December 31, 2021 |
(Unaudited) | | |
ASSETS | | | |
Cash and due from banks | $ | 700 | | | $ | 595 | |
Money market investments: | | | |
Interest-bearing deposits | 5,093 | | | 10,283 | |
Federal funds sold and security resell agreements | 2,345 | | | 2,133 | |
Investment securities: | | | |
Held-to-maturity, at amortized cost (included $414 and $443 at fair value ) | 439 | | | 441 | |
Available-for-sale, at fair value | 26,145 | | | 24,048 | |
Trading account, at fair value | 382 | | | 372 | |
| | | |
Total securities | 26,966 | | | 24,861 | |
Loans held for sale | 43 | | | 83 | |
Loans and leases, net of unearned income and fees | 51,242 | | | 50,851 | |
Less allowance for loan and lease losses | 478 | | | 513 | |
Loans held for investment, net of allowance | 50,764 | | | 50,338 | |
Other noninterest-bearing investments | 829 | | | 851 | |
Premises, equipment and software, net | 1,346 | | | 1,319 | |
Goodwill and intangibles | 1,015 | | | 1,015 | |
Other real estate owned | 4 | | | 8 | |
Other assets | 2,021 | | | 1,714 | |
Total assets | $ | 91,126 | | | $ | 93,200 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Deposits: | | | |
Noninterest-bearing demand | $ | 41,937 | | | $ | 41,053 | |
Interest-bearing: | | | |
Savings and money market | 38,864 | | | 40,114 | |
Time | 1,550 | | | 1,622 | |
| | | |
Total deposits | 82,351 | | | 82,789 | |
Federal funds purchased and other short-term borrowings | 638 | | | 903 | |
Long-term debt | 689 | | | 1,012 | |
Reserve for unfunded lending commitments | 36 | | | 40 | |
Other liabilities | 1,118 | | | 993 | |
Total liabilities | 84,832 | | | 85,737 | |
Shareholders’ equity: | | | |
Preferred stock, without par value; authorized 4,400 shares | 440 | | | 440 | |
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 151,348 and 151,625 shares) and additional paid-in capital | 1,889 | | | 1,928 | |
Retained earnings | 5,311 | | | 5,175 | |
Accumulated other comprehensive income (loss) | (1,346) | | | (80) | |
| | | |
| | | |
Total shareholders’ equity | 6,294 | | | 7,463 | |
Total liabilities and shareholders’ equity | $ | 91,126 | | | $ | 93,200 | |
See accompanying notes to consolidated financial statements.“Non-GAAP Financial Measures” on page 36 for more information regarding these ratios.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
This Form 10-Q presents non-GAAP financial measures, in addition to GAAP financial measures. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. We consider these adjustments to be relevant to ongoing operating results and provide a meaningful basis for period-to-period comparisons. We use these non-GAAP financial measures to assess our performance and financial position. We believe that presenting these non-GAAP financial measures permits investors to assess our performance on the same basis as that applied by our management and the financial services industry.
Non-GAAP financial measures have inherent limitations and are not necessarily comparable to similar financial measures that may be presented by other financial services companies. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
Tangible Common Equity and Related Measures
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization and AOCI. We excluded the effect of AOCI to align with its impact on certain incentive compensation plans that utilize return on tangible common equity as a performance metric. We believe these non-GAAP measures provide useful information about our use of shareholders’ equity and provide a basis for evaluating the performance of a business more consistently, whether acquired or developed internally.
RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP) | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
(Dollar amounts in millions) | | March 31, 2023 | | December 31, 2022 | | | | March 31, 2022 |
| | | | | | | | |
Net earnings applicable to common shareholders (GAAP) | (a) | $ | 198 | | | $ | 277 | | | | | $ | 195 | |
Adjustment, net of tax: | | | | | | | | |
Amortization of core deposit and other intangibles | | 1 | | | — | | | | | — | |
Net earnings applicable to common shareholders, net of tax | (a) | $ | 199 | | | $ | 277 | | | | | $ | 195 | |
Average common equity (GAAP) | | $ | 4,614 | | | $ | 4,330 | | | | | $ | 6,700 | |
Average goodwill and intangibles | | (1,064) | | | (1,036) | | | | | (1,015) | |
Average accumulated other comprehensive loss (income) | | 3,030 | | | 3,192 | | | | | 452 | |
Average tangible common equity (non-GAAP) | (b) | $ | 6,580 | | | $ | 6,486 | | | | | $ | 6,137 | |
Number of days in quarter | (c) | 90 | | | 92 | | | | | 90 | |
Number of days in year | (d) | 365 | | | 365 | | | | | 365 | |
Return on average tangible common equity (non-GAAP) | (a/b/c)*d | 12.3 | % | | 16.9 | % | | | | 12.9 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
TANGIBLE EQUITY RATIO, TANGIBLE COMMON EQUITY RATIO, AND TANGIBLE BOOK VALUE PER COMMON SHARE (ALL NON-GAAP MEASURES) | | | | | | | | | | | | | | | | | | | | | | |
(Dollar amounts in millions, except per share amounts) | | March 31, 2023 | | December 31, 2022 | | | | March 31, 2022 |
| | | | | | | | |
Total shareholders’ equity (GAAP) | | $ | 5,184 | | | $ | 4,893 | | | | | $ | 6,294 | |
Goodwill and intangibles | | (1,063) | | | (1,065) | | | | | (1,015) | |
Accumulated other comprehensive loss (income) | | 2,920 | | | 3,112 | | | | | 1,346 | |
Tangible equity (non-GAAP) | (a) | 7,041 | | | 6,940 | | | | | 6,625 | |
Preferred stock | | (440) | | | (440) | | | | | (440) | |
Tangible common equity (non-GAAP) | (b) | $ | 6,601 | | | $ | 6,500 | | | | | $ | 6,185 | |
Total assets (GAAP) | | $ | 88,573 | | | $ | 89,545 | | | | | $ | 91,126 | |
Goodwill and intangibles | | (1,063) | | | (1,065) | | | | | (1,015) | |
Accumulated other comprehensive loss (income) | | 2,920 | | | 3,112 | | | | | 1,346 | |
Tangible assets (non-GAAP) | (c) | $ | 90,430 | | | $ | 91,592 | | | | | $ | 91,457 | |
Common shares outstanding (in thousands) | (d) | 148,100 | | | 148,664 | | | | | 151,348 | |
Tangible equity ratio (non-GAAP) | (a/c) | 7.8 | % | | 7.6 | % | | | | 7.2 | % |
Tangible common equity ratio (non-GAAP) | (b/c) | 7.3 | % | | 7.1 | % | | | | 6.8 | % |
Tangible book value per common share (non-GAAP) | (b/d) | $ | 44.57 | | | $ | 43.72 | | | | | $ | 40.87 | |
Efficiency Ratio and Adjusted Pre-Provision Net Revenue
The efficiency ratio is a measure of operating expense relative to revenue. We believe the efficiency ratio provides useful information regarding the cost of generating revenue. We make adjustments to exclude certain items that are not generally expected to recur frequently, as identified in the subsequent schedule, which we believe allow for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how we are managing our expenses. Adjusted pre-provision net revenue enables management and others to assess our ability to generate capital. Taxable-equivalent net interest income allows us to assess the comparability of revenue arising from both taxable and tax-exempt sources.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | Year Ended |
(Dollar amounts in millions) | | March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | | | | | December 31, 2022 |
| | | | | | | | | | | | |
Noninterest expense (GAAP) | (a) | $ | 512 | | | $ | 471 | | | $ | 464 | | | | | | | $ | 1,878 | |
Adjustments: | | | | | | | | | | | | |
Severance costs | | 1 | | | — | | | — | | | | | | | 1 | |
Other real estate expense, net | | — | | | — | | | 1 | | | | | | | 1 | |
| | | | | | | | | | | | |
Amortization of core deposit and other intangibles | | 2 | | | — | | | — | | | | | | | 1 | |
| | | | | | | | | | | | |
Pension termination-related (income) expense 1 | | — | | | — | | | — | | | | | | | — | |
SBIC investment success fee accrual 2 | | — | | | (1) | | | (1) | | | | | | | (1) | |
Total adjustments | (b) | 3 | | | (1) | | | — | | | | | | | 2 | |
Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 509 | | | $ | 472 | | | $ | 464 | | | | | | | $ | 1,876 | |
Net interest income (GAAP) | (d) | $ | 679 | | | $ | 720 | | | $ | 544 | | | | | | | $ | 2,520 | |
Fully taxable-equivalent adjustments | (e) | 9 | | | 10 | | | 8 | | | | | | | 37 | |
Taxable-equivalent net interest income (non-GAAP) | (d+e)=f | 688 | | | 730 | | | 552 | | | | | | | 2,557 | |
Noninterest income (GAAP) | g | 160 | | | 153 | | | 142 | | | | | | | 632 | |
Combined income (non-GAAP) | (f+g)=(h) | 848 | | | 883 | | | 694 | | | | | | | 3,189 | |
Adjustments: | | | | | | | | | | | | |
Fair value and nonhedge derivative gains | | (3) | | | (4) | | | 6 | | | | | | | 16 | |
Securities gains (losses), net 2 | | 1 | | | (5) | | | (17) | | | | | | | (15) | |
Total adjustments | (i) | (2) | | | (9) | | | (11) | | | | | | | 1 | |
Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 850 | | | $ | 892 | | | $ | 705 | | | | | | | $ | 3,188 | |
Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 336 | | | $ | 412 | | | $ | 230 | | | | | | | $ | 1,311 | |
Adjusted PPNR (non-GAAP) | (j)-(c) | 341 | | | 420 | | | 241 | | | | | | | 1,312 | |
Efficiency ratio (non-GAAP) | (c/j) | 59.9 | % | | 52.9 | % | | 65.8 | % | | | | | | 58.8 | % |
1 Represents a valuation adjustment related to the termination of our defined benefit pension plan.
2 The success fee accrual is associated with the gains and losses from our SBIC investments, which are excluded from the efficiency ratio through securities gains (losses), net.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | |
(In millions, shares in thousands) | March 31, 2023 | | December 31, 2022 |
(Unaudited) | | |
ASSETS | | | |
Cash and due from banks | $ | 607 | | | $ | 657 | |
Money market investments: | | | |
Interest-bearing deposits | 2,727 | | | 1,340 | |
Federal funds sold and securities purchased under agreements to resell | 688 | | | 2,426 | |
Investment securities: | | | |
Held-to-maturity, at amortized cost ($11,210 and $11,239 at fair value ) | 10,961 | | | 11,126 | |
Available-for-sale, at fair value | 11,594 | | | 11,915 | |
Trading, at fair value | 12 | | | 465 | |
| | | |
Total investment securities | 22,567 | | | 23,506 | |
Loans held for sale | 5 | | | 8 | |
Loans and leases, net of unearned income and fees | 56,331 | | | 55,653 | |
Less allowance for loan and lease losses | 618 | | | 575 | |
Loans held for investment, net of allowance | 55,713 | | | 55,078 | |
Other noninterest-bearing investments | 1,169 | | | 1,130 | |
Premises, equipment and software, net | 1,411 | | | 1,408 | |
Goodwill and intangibles | 1,063 | | | 1,065 | |
Other real estate owned | 6 | | | 3 | |
Other assets | 2,617 | | | 2,924 | |
Total assets | $ | 88,573 | | | $ | 89,545 | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | |
Deposits: | | | |
Noninterest-bearing demand | $ | 30,974 | | | $ | 35,777 | |
Interest-bearing: | | | |
Savings and money market | 30,897 | | | 33,566 | |
Time | 7,337 | | | 2,309 | |
| | | |
Total deposits | 69,208 | | | 71,652 | |
Federal funds and other short-term borrowings | 12,124 | | | 10,417 | |
Long-term debt | 663 | | | 651 | |
Reserve for unfunded lending commitments | 60 | | | 61 | |
Other liabilities | 1,334 | | | 1,871 | |
Total liabilities | 83,389 | | | 84,652 | |
Shareholders’ equity: | | | |
Preferred stock, without par value; authorized 4,400 shares | 440 | | | 440 | |
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 148,100 and 148,664 shares) and additional paid-in capital | 1,715 | | | 1,754 | |
Retained earnings | 5,949 | | | 5,811 | |
Accumulated other comprehensive income (loss) | (2,920) | | | (3,112) | |
| | | |
| | | |
Total shareholders’ equity | 5,184 | | | 4,893 | |
Total liabilities and shareholders’ equity | $ | 88,573 | | | $ | 89,545 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| (Unaudited) | (Unaudited) | Three Months Ended March 31, | | (Unaudited) | Three Months Ended March 31, | |
(In millions, except shares and per share amounts) | (In millions, except shares and per share amounts) | 2022 | | 2021 | | (In millions, except shares and per share amounts) | 2023 | | 2022 | |
Interest income: | Interest income: | | | | | Interest income: | | | | |
Interest and fees on loans | Interest and fees on loans | $ | 437 | | | $ | 488 | | | Interest and fees on loans | $ | 726 | | | $ | 437 | | |
Interest on money market investments | Interest on money market investments | 6 | | | 3 | | | Interest on money market investments | 57 | | | 6 | | |
Interest on securities | Interest on securities | 112 | | | 71 | | | Interest on securities | 137 | | | 112 | | |
Total interest income | Total interest income | 555 | | | 562 | | | Total interest income | 920 | | | 555 | | |
Interest expense: | Interest expense: | | | | | Interest expense: | | | | |
Interest on deposits | Interest on deposits | 6 | | | 9 | | | Interest on deposits | 82 | | | 6 | | |
Interest on short- and long-term borrowings | Interest on short- and long-term borrowings | 5 | | | 8 | | | Interest on short- and long-term borrowings | 159 | | | 5 | | |
Total interest expense | Total interest expense | 11 | | | 17 | | | Total interest expense | 241 | | | 11 | | |
Net interest income | Net interest income | 544 | | | 545 | | | Net interest income | 679 | | | 544 | | |
Provision for credit losses: | Provision for credit losses: | | | Provision for credit losses: | | |
Provision for loan and lease losses | Provision for loan and lease losses | (29) | | | (123) | | | Provision for loan and lease losses | 46 | | | (29) | | |
Provision for unfunded lending commitments | Provision for unfunded lending commitments | (4) | | | (9) | | | Provision for unfunded lending commitments | (1) | | | (4) | | |
| Total provision for credit losses | Total provision for credit losses | (33) | | | (132) | | | Total provision for credit losses | 45 | | | (33) | | |
Net interest income after provision for credit losses | Net interest income after provision for credit losses | 577 | | | 677 | | | Net interest income after provision for credit losses | 634 | | | 577 | | |
Noninterest income: | Noninterest income: | | | | | Noninterest income: | | | | |
Commercial account fees | Commercial account fees | 41 | | | 32 | | | Commercial account fees | 43 | | | 41 | | |
Card fees | Card fees | 25 | | | 21 | | | Card fees | 24 | | | 25 | | |
Retail and business banking fees | Retail and business banking fees | 20 | | | 17 | | | Retail and business banking fees | 16 | | | 20 | | |
Loan-related fees and income | Loan-related fees and income | 22 | | | 25 | | | Loan-related fees and income | 21 | | | 22 | | |
Capital markets and foreign exchange fees | 15 | | | 15 | | | |
Capital markets fees | | Capital markets fees | 17 | | | 15 | | |
Wealth management fees | Wealth management fees | 14 | | | 12 | | | Wealth management fees | 15 | | | 14 | | |
Other customer-related fees | Other customer-related fees | 14 | | | 11 | | | Other customer-related fees | 15 | | | 14 | | |
Customer-related noninterest income | Customer-related noninterest income | 151 | | | 133 | | | Customer-related noninterest income | 151 | | | 151 | | |
Fair value and nonhedge derivative gain | 6 | | | 18 | | | |
Dividends and other investment income | 2 | | | 7 | | | |
Fair value and nonhedge derivative income | | Fair value and nonhedge derivative income | (3) | | | 6 | | |
Dividends and other income (loss) | | Dividends and other income (loss) | 11 | | | 2 | | |
Securities gains (losses), net | Securities gains (losses), net | (17) | | | 11 | | | Securities gains (losses), net | 1 | | | (17) | | |
Total noninterest income | Total noninterest income | 142 | | | 169 | | | Total noninterest income | 160 | | | 142 | | |
Noninterest expense: | Noninterest expense: | | | | | Noninterest expense: | | | | |
Salaries and employee benefits | Salaries and employee benefits | 312 | | | 288 | | | Salaries and employee benefits | 339 | | | 312 | | |
Technology, telecom, and information processing | Technology, telecom, and information processing | 52 | | | 49 | | | Technology, telecom, and information processing | 55 | | | 52 | | |
Occupancy and equipment, net | Occupancy and equipment, net | 38 | | | 39 | | | Occupancy and equipment, net | 40 | | | 38 | | |
Professional and legal services | Professional and legal services | 14 | | | 21 | | | Professional and legal services | 13 | | | 14 | | |
Marketing and business development | Marketing and business development | 8 | | | 7 | | | Marketing and business development | 12 | | | 8 | | |
Deposit insurance and regulatory expense | Deposit insurance and regulatory expense | 10 | | | 10 | | | Deposit insurance and regulatory expense | 18 | | | 10 | | |
Credit-related expense | Credit-related expense | 7 | | | 6 | | | Credit-related expense | 6 | | | 7 | | |
Other real estate expense, net | Other real estate expense, net | 1 | | | — | | | Other real estate expense, net | — | | | 1 | | |
Other | Other | 22 | | | 15 | | | Other | 29 | | | 22 | | |
Total noninterest expense | Total noninterest expense | 464 | | | 435 | | | Total noninterest expense | 512 | | | 464 | | |
Income before income taxes | Income before income taxes | 255 | | | 411 | | | Income before income taxes | 282 | | | 255 | | |
Income taxes | Income taxes | 52 | | | 89 | | | Income taxes | 78 | | | 52 | | |
Net income | Net income | 203 | | | 322 | | | Net income | 204 | | | 203 | | |
| Preferred stock dividends | Preferred stock dividends | (8) | | | (8) | | | Preferred stock dividends | (6) | | | (8) | | |
| Net earnings applicable to common shareholders | Net earnings applicable to common shareholders | $ | 195 | | | $ | 314 | | | Net earnings applicable to common shareholders | $ | 198 | | | $ | 195 | | |
Weighted average common shares outstanding during the period: | Weighted average common shares outstanding during the period: | | | | | Weighted average common shares outstanding during the period: | | | | |
Basic shares (in thousands) | Basic shares (in thousands) | 151,285 | | | 163,551 | | | Basic shares (in thousands) | 148,015 | | | 151,285 | | |
Diluted shares (in thousands) | Diluted shares (in thousands) | 151,687 | | | 163,887 | | | Diluted shares (in thousands) | 148,038 | | | 151,687 | | |
Net earnings per common share: | Net earnings per common share: | | | Net earnings per common share: | | |
Basic | Basic | $ | 1.27 | | | $ | 1.90 | | | Basic | $ | 1.33 | | | $ | 1.27 | | |
Diluted | Diluted | 1.27 | | | 1.90 | | | Diluted | 1.33 | | | 1.27 | | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2022 | | 2021 | | | | |
| | | | | | | |
Net income for the period | $ | 203 | | | $ | 322 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Net unrealized holding losses on investment securities | (1,121) | | | (164) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net unrealized gains on other noninterest-bearing investments | — | | | 2 | | | | | |
Net unrealized holding losses on derivative instruments | (135) | | | (4) | | | | | |
Reclassification adjustment for increase in interest income recognized in earnings on derivative instruments | (10) | | | (11) | | | | | |
| | | | | | | |
Other comprehensive loss | (1,266) | | | (177) | | | | | |
Comprehensive income (loss) | $ | (1,063) | | | $ | 145 | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In millions) | 2023 | | 2022 | | | | |
| | | | | | | |
Net income for the period | $ | 204 | | | $ | 203 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Net unrealized holding gains (losses) on investment securities | 126 | | | (1,121) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net unrealized holding gains (losses) on derivative instruments | 29 | | | (135) | | | | | |
Reclassification adjustment for decrease (increase) in interest income recognized in earnings on derivative instruments | 37 | | | (10) | | | | | |
| | | | | | | |
Total other comprehensive income (loss), net of tax | 192 | | | (1,266) | | | | | |
Comprehensive income (loss) | $ | 396 | | | $ | (1,063) | | | | | |
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions, except shares and per share amounts) | Preferred stock | | Common stock | | Accumulated paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total shareholders’ equity |
Shares (in thousands) | | Amount | | | | |
| | | | | | | | | | | | | | | |
Balance at December 31, 2021 | $ | 440 | | | 151,625 | | | $ | — | | | $ | 1,928 | | | $ | 5,175 | | | | $ | (80) | | | | $ | 7,463 | |
Net income for the period | | | | | | | | | 203 | | | | | | | 203 | |
Other comprehensive loss, net of tax | | | | | | | | | | | | (1,266) | | | | (1,266) | |
| | | | | | | | | | | | | | | |
Bank common stock repurchased | | | (778) | | | | | (51) | | | | | | | | | (51) | |
| | | | | | | | | | | | | | | |
Net activity under employee plans and related tax benefits | | | 501 | | | | | 12 | | | | | | | | | 12 | |
Dividends on preferred stock | | | | | | | | | (8) | | | | | | | (8) | |
Dividends on common stock, $0.38 per share | | | | | | | | | (58) | | | | | | | (58) | |
Change in deferred compensation | | | | | | | | | (1) | | | | | | | (1) | |
Balance at March 31, 2022 | $ | 440 | | | 151,348 | | | $ | — | | | $ | 1,889 | | | $ | 5,311 | | | | $ | (1,346) | | | | $ | 6,294 | |
| | | | | | | | | | | | | | | |
Balance at December 31, 2020 | $ | 566 | | | 164,090 | | | $ | — | | | $ | 2,686 | | | $ | 4,309 | | | | $ | 325 | | | | $ | 7,886 | |
Net income for the period | | | | | | | | | 322 | | | | | | | 322 | |
Other comprehensive loss, net of tax | | | | | | | | | | | | (177) | | | | (177) | |
| | | | | | | | | | | | | | | |
Bank common stock repurchased | | | (1,012) | | | | | (50) | | | | | | | | | (50) | |
| | | | | | | | | | | | | | | |
Net activity under employee plans and related tax benefits | | | 722 | | | | | 17 | | | | | | | | | 17 | |
Dividends on preferred stock | | | | | | | | | (8) | | | | | | | (8) | |
Dividends on common stock, $0.34 per share | | | | | | | | | (57) | | | | | | | (57) | |
| | | | | | | | | | | | | | | |
Balance at March 31, 2021 | $ | 566 | | | 163,800 | | | $ | — | | | $ | 2,653 | | | $ | 4,566 | | | | $ | 148 | | | | $ | 7,933 | |
See accompanying notes to consolidated financial statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In millions, except shares and per share amounts) | Preferred stock | | Common stock | | Accumulated paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total shareholders’ equity |
Shares (in thousands) | | Amount | | | | |
| | | | | | | | | | | | | | | |
Balance at December 31, 2022 | $ | 440 | | | 148,664 | | | $ | — | | | $ | 1,754 | | | $ | 5,811 | | | | $ | (3,112) | | | | $ | 4,893 | |
Net income for the period | | | | | | | | | 204 | | | | | | | 204 | |
Other comprehensive income, net of tax | | | | | | | | | | | | 192 | | | | 192 | |
Cumulative effect adjustment, due to adoption of ASU 2022-02, net of tax | | | | | | | | | 2 | | | | | | | 2 | |
Bank common stock repurchased | | | (953) | | | | | (50) | | | | | | | | | (50) | |
| | | | | | | | | | | | | | | |
Net activity under employee plans and related tax benefits | | | 389 | | | | | 11 | | | | | | | | | 11 | |
Dividends on preferred stock | | | | | | | | | (6) | | | | | | | (6) | |
Dividends on common stock, $0.41 per share | | | | | | | | | (61) | | | | | | | (61) | |
Change in deferred compensation | | | | | | | | | (1) | | | | | | | (1) | |
Balance at March 31, 2023 | $ | 440 | | | 148,100 | | | $ | — | | | $ | 1,715 | | | $ | 5,949 | | | | $ | (2,920) | | | | $ | 5,184 | |
| | | | | | | | | | | | | | | |
Balance at December 31, 2021 | $ | 440 | | | 151,625 | | | $ | — | | | $ | 1,928 | | | $ | 5,175 | | | | $ | (80) | | | | $ | 7,463 | |
Net income for the period | | | | | | | | | 203 | | | | | | | 203 | |
Other comprehensive loss, net of tax | | | | | | | | | | | | (1,266) | | | | (1,266) | |
| | | | | | | | | | | | | | | |
Bank common stock repurchased | | | (778) | | | | | (51) | | | | | | | | | (51) | |
| | | | | | | | | | | | | | | |
Net activity under employee plans and related tax benefits | | | 501 | | | | | 12 | | | | | | | | | 12 | |
Dividends on preferred stock | | | | | | | | | (8) | | | | | | | (8) | |
Dividends on common stock, $0.38 per share | | | | | | | | | (58) | | | | | | | (58) | |
Change in deferred compensation | | | | | | | | | (1) | | | | | | | (1) | |
Balance at March 31, 2022 | $ | 440 | | | 151,348 | | | $ | — | | | $ | 1,889 | | | $ | 5,311 | | | | $ | (1,346) | | | | $ | 6,294 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | |
(In millions) | | Three Months Ended March 31, |
| | | 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income for the period | | | | $ | 203 | | | $ | 322 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| | | | | | |
Provision for credit losses | | | | (33) | | | (132) | |
Depreciation and amortization | | | | 19 | | | (3) | |
Share-based compensation | | | | 17 | | | 14 | |
Deferred income tax expense | | | | 39 | | | 70 | |
Net decrease (increase) in trading securities | | | | (10) | | | 76 | |
Net decrease (increase) in loans held for sale | | | | 29 | | | (3) | |
Change in other liabilities | | | | 127 | | | (54) | |
Change in other assets | | | | (116) | | | 212 | |
Other, net | | | | 13 | | | (18) | |
Net cash provided by operating activities | | | | 288 | | | 484 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Net decrease (increase) in money market investments | | | | 4,979 | | | (2,903) | |
Proceeds from maturities and paydowns of investment securities held-to-maturity | | | | 20 | | | 167 | |
Purchases of investment securities held-to-maturity | | | | (17) | | | (114) | |
Proceeds from sales, maturities and paydowns of investment securities available-for-sale | | | | 1,018 | | | 1,370 | |
Purchases of investment securities available-for-sale | | | | (4,673) | | | (2,546) | |
Net change in loans and leases | | | | (355) | | | 56 | |
Purchases and sales of other noninterest-bearing investments | | | | 8 | | | 12 | |
Purchases of premises and equipment | | | | (53) | | | (53) | |
| | | | | | |
Other, net | | | | 4 | | | 13 | |
Net cash provided by (used in) investing activities | | | | 931 | | | (3,998) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Net increase (decrease) in deposits | | | | (439) | | | 4,200 | |
Net change in short-term funds borrowed | | | | (264) | | | (540) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Redemption of long-term debt | | | | (290) | | | — | |
| | | | | | |
Proceeds from the issuance of common stock | | | | 6 | | | 11 | |
Dividends paid on common and preferred stock | | | | (66) | | | (66) | |
Bank common stock repurchased | | | | (51) | | | (50) | |
Other, net | | | | (10) | | | (8) | |
Net cash provided by (used in) financing activities | | | | (1,114) | | | 3,547 | |
Net increase in cash and due from banks | | | | 105 | | | 33 | |
Cash and due from banks at beginning of period | | | | 595 | | | 543 | |
Cash and due from banks at end of period | | | | $ | 700 | | | $ | 576 | |
Cash paid for interest | | | | $ | 11 | | | $ | 22 | |
Net refunds received for income taxes | | | | (1) | | | — | |
Noncash activities are summarized as follows: | | | | | | |
Loans held for investment transferred to other real estate owned | | | | — | | | 1 | |
Loans held for investment reclassified to loans held for sale, net | | | | 34 | | | (7) | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | |
(In millions) | | Three Months Ended March 31, |
| | | 2023 | | 2022 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income for the period | | | | $ | 204 | | | $ | 203 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
| | | | | | |
Provision for credit losses | | | | 45 | | | (33) | |
Depreciation and amortization | | | | 36 | | | 19 | |
Share-based compensation | | | | 17 | | | 17 | |
Deferred income tax expense | | | | 6 | | | 39 | |
Net decrease (increase) in trading securities | | | | 77 | | | (10) | |
Net decrease in loans held for sale | | | | 7 | | | 29 | |
Change in other liabilities | | | | (529) | | | 127 | |
Change in other assets | | | | 362 | | | (116) | |
Other, net | | | | (4) | | | 13 | |
Net cash provided by operating activities | | | | 221 | | | 288 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Net decrease in money market investments | | | | 727 | | | 4,979 | |
Proceeds from maturities and paydowns of investment securities held-to-maturity | | | | 237 | | | 20 | |
Purchases of investment securities held-to-maturity | | | | (10) | | | (17) | |
Proceeds from sales, maturities, and paydowns of investment securities available-for-sale | | | | 583 | | | 1,018 | |
Purchases of investment securities available-for-sale | | | | (138) | | | (4,673) | |
Net change in loans and leases | | | | (738) | | | (355) | |
Purchases and sales of other noninterest-bearing investments | | | | (37) | | | 8 | |
Purchases of premises and equipment | | | | (31) | | | (53) | |
| | | | | | |
Other, net | | | | (2) | | | 4 | |
Net cash provided by investing activities | | | | 591 | | | 931 | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Net decrease in deposits | | | | (2,445) | | | (439) | |
Net change in short-term funds borrowed | | | | 1,707 | | | (264) | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Redemption of long-term debt | | | | — | | | (290) | |
| | | | | | |
Proceeds from the issuance of common stock | | | | 2 | | | 6 | |
Dividends paid on common and preferred stock | | | | (69) | | | (66) | |
Bank common stock repurchased | | | | (50) | | | (51) | |
Other, net | | | | (7) | | | (10) | |
Net cash used in financing activities | | | | (862) | | | (1,114) | |
Net increase (decrease) in cash and due from banks | | | | (50) | | | 105 | |
Cash and due from banks at beginning of period | | | | 657 | | | 595 | |
Cash and due from banks at end of period | | | | $ | 607 | | | $ | 700 | |
Cash paid for interest | | | | $ | 224 | | | $ | 11 | |
Net refunds received for income taxes | | | | — | | | (1) | |
Noncash activities: | | | | | | |
| | | | | | |
Loans held for investment reclassified to loans held for sale, net | | | | 47 | | | 34 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 20222023
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Zions Bancorporation, National Association and its majority-owned subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. References to GAAP, including standards promulgated by the Financial Accounting Standards Board (“FASB”), are made according to sections of the Accounting Standards Codification (“ASC”).
The results of operations for the three months ended March 31, 20222023 and 20212022 are not necessarily indicative of the results that may be expected in future periods. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. For further information, refer to the consolidated financial statements and accompanying footnotes included in our 20212022 Form 10-K. Certain prior period amounts have been reclassified to conform with
We evaluated events that occurred between March 31, 2023 and the current period presentation, where applicable. These reclassifications did not affect net income or shareholders’ equity.
Effective fordate the first quarter of 2022, we made certainaccompanying financial reporting changesstatements were issued, and reclassifications to noninterest expense in our Consolidated Statements of Income. These financial reporting changesdetermined that there were made primarily to improve the presentation and disclosure of certain expenses relatedno material events that would require adjustments to our ongoing technology initiatives. Other noninterest expense line items were impacted by these changes and reclassifications. These changes and reclassifications (1) were adopted retrospectively to January 1, 2020, (2) reflect changes only to noninterest expenseconsolidated financial statements or significant disclosure in the accompanying Notes. As referenced in Note 6 of the Notes to Consolidated Financial Statements, an additional $9.4 billion of Income, and (3) do not impact net income, net interest income, or noninterest income.loans were pledged as collateral for potential borrowings in April 2023.
Zions Bancorporation, N.A. is a commercial bank headquartered in Salt Lake City, Utah. We provide a wide range of banking products and related services in 11 Western and Southwestern states through 7seven separately managed bank divisions, which we refer to as “affiliates,” or “affiliate banks,” each with its own local branding and management team. These include Zions Bank, in Utah, Idaho, and Wyoming; Amegy Bank (“Amegy”), in Texas; California Bank & Trust (“CB&T”); Amegy Bank (“Amegy”), in Texas; National Bank of Arizona (“NBAZ”); Nevada State Bank (“NSB”); Vectra Bank Colorado (“Vectra”), in Colorado and New Mexico; and The Commerce Bank of Washington (“TCBW”) which operates under that name in Washington and under the name The Commerce Bank of Oregon in Oregon.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
2. RECENT ACCOUNTING PRONOUNCEMENTS
| | | | | | | | | | | | | | | | | | | | |
Standard | | Description | | Date of adoption | | Effect on the financial statements or other significant matters |
| | | | | | |
Standards not yet adopted by the Bank |
| | | | | | |
ASU 2022-02,2023-02, Financial Instruments—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage DisclosuresStructures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
| | This accounting standards updateAccounting Standards Update (“ASU”) eliminatesexpands the recognitionoptional use of the proportional amortization method (“PAM”), previously limited to investments in low-income housing tax credit (“LIHTC”) structures, to any eligible equity investments made primarily for the purpose of receiving income tax credit and measurement guidanceother tax benefits when certain criteria are met. PAM results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit). This ASU allows for an accounting policy election to apply PAM on troubled debt restructurings (“TDRs”)a tax-credit-program-by-tax-credit-program basis. The ASU also includes additional disclosure requirements about equity investments accounted for creditors that have adopted ASC 326 (“CECL”), and eliminates certain existing TDR disclosures while requiring enhanced disclosures about loan modifications for borrowers experiencing financial difficulty.using PAM. The new guidance also requires public companies to present current-period gross write-offs (on a current year-to-date basis for interim-period disclosures) by year of origination in their vintage disclosures. The new guidancestandard is effective for calendar year-end public companies beginning January 1, 2023,2024, with early adoption permitted.
| | Periods beginning after December 15, 20222023 | | We do not currently have established an implementation teamany additional equity investments that are eligible for PAM under the provisions of this ASU. We will continue to ensure that the necessary data is captured in order to comply with theevaluate its use for new disclosure requirements.investments. The overall effect of the guidance is not expected to have a material impact on our financial statements. We do not plan to early adopt this new guidance.standard. |
| | | | | | |
ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
| | This ASU clarifies that contractual restrictions prohibiting the sale of an equity security are not considered part of the unit of account of the equity security, and therefore, are not considered in measuring fair value. The amendments clarify that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account. The amendments in this ASU also require additional qualitative and quantitative disclosures for equity securities subject to contractual sale restrictions. The new standard is effective for calendar year-end public companies beginning January 1, 2024, with early adoption permitted. | | Periods beginning after December 15, 2023 | | The requirements of this ASU are consistent with our current treatment of equity securities subject to contractual sale restrictions and are not expected to impact the fair value measurements of these securities. We are evaluating supplementary disclosure requirements and additional data needed to meet these requirements. The overall effect of this standard is not expected to have a material impact on our financial statements. We do not plan to early adopt this new standard. |
| | | | | | |
Standards adopted by the Bank during the period |
| | | | | | |
ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures | | This ASU eliminates the recognition and measurement requirements for troubled debt restructurings (“TDRs”) for creditors that have adopted ASC 326 (“CECL”), and eliminates certain TDR disclosures while requiring enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The new standard also requires public companies to present current period gross charge-offs (on a current year-to-date basis for interim-period disclosures) by year of origination in their vintage disclosures. | | Periods beginning after December 15, 2022 | | We adopted this ASU on January 1, 2023. It did not have a material impact on our financial statements.
|
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
3. FAIR VALUE
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For more information about our valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 3 of our 20212022 Form 10-K.
Quantitative Disclosure by Fair Value Hierarchy
Assets and liabilities measured at fair value by class on a recurring basis are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | March 31, 2022 |
Level 1 | | Level 2 | | Level 3 | | Total |
ASSETS | | | | | | | |
Available-for-sale securities: | | | | | | | |
U.S. Treasury, agencies and corporations | $ | 503 | | | $ | 23,799 | | | $ | — | | | $ | 24,302 | |
Municipal securities | 0 | | 1,768 | | | 0 | | 1,768 | |
| | | | | | | |
Other debt securities | 0 | | 75 | | | 0 | | 75 | |
Total available-for-sale | 503 | | | 25,642 | | | — | | | 26,145 | |
Trading account | 15 | | | 367 | | | 0 | | 382 | |
Other noninterest-bearing investments: | | | | | | | |
Bank-owned life insurance | 0 | | 538 | | | 0 | | 538 | |
Private equity investments 1 | 13 | | | 0 | | 74 | | | 87 | |
Other assets: | | | | | | | |
Agriculture loan servicing and interest-only strips | 0 | | 0 | | 12 | | | 12 | |
Deferred compensation plan assets | 131 | | | 0 | | 0 | | 131 | |
Derivatives: | | | | | | | |
Derivatives designated as hedges | 0 | | 29 | | | 0 | | 29 | |
Derivatives not designated as hedges | 0 | | 90 | | | 0 | | 90 | |
Total assets | $ | 662 | | | $ | 26,666 | | | $ | 86 | | | $ | 27,414 | |
LIABILITIES | | | | | | | |
Securities sold, not yet purchased | $ | 101 | | | $ | — | | | $ | — | | | $ | 101 | |
Other liabilities: | | | | | | | |
Derivatives: | | | | | | | |
| | | | | | | |
Derivatives not designated as hedges | 0 | | 179 | | | 0 | | 179 | |
Total liabilities | $ | 101 | | | $ | 179 | | | $ | — | | | $ | 280 | |
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | March 31, 2023 |
Level 1 | | Level 2 | | Level 3 | | Total |
ASSETS | | | | | | | |
Available-for-sale securities: | | | | | | | |
U.S. Treasury, agencies and corporations | $ | 511 | | | $ | 9,612 | | | $ | — | | | $ | 10,123 | |
Municipal securities | | | 1,447 | | | | | 1,447 | |
| | | | | | | |
Other debt securities | | | 24 | | | | | 24 | |
Total available-for-sale | 511 | | | 11,083 | | | — | | | 11,594 | |
Trading securities | | | 12 | | | | | 12 | |
Other noninterest-bearing investments: | | | | | | | |
Bank-owned life insurance | | | 547 | | | | | 547 | |
Private equity investments 1 | 3 | | | | | 82 | | | 85 | |
Other assets: | | | | | | | |
Agriculture loan servicing and interest-only strips | | | | | 18 | | | 18 | |
Deferred compensation plan assets | 109 | | | | | | | 109 | |
Derivatives | | | 369 | | | | | 369 | |
Total assets | $ | 623 | | | $ | 12,011 | | | $ | 100 | | | $ | 12,734 | |
LIABILITIES | | | | | | | |
Securities sold, not yet purchased | $ | 281 | | | $ | — | | | $ | — | | | $ | 281 | |
Other liabilities: | | | | | | | |
Derivatives | | | 353 | | | | | 353 | |
Total liabilities | $ | 281 | | | $ | 353 | | | $ | — | | | $ | 634 | |
1 The Level 1 private equity investments (“PEIs”) relate to the portion of our Small Business Investment Company (“SBIC”) investments that are now publicly traded.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| (In millions) | (In millions) | December 31, 2021 | (In millions) | December 31, 2022 |
Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | | Total |
ASSETS | ASSETS | | | | | | | | ASSETS | | | | | | | |
Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
U.S. Treasury, agencies and corporations | U.S. Treasury, agencies and corporations | $ | 134 | | | $ | 22,144 | | | $ | — | | | $ | 22,278 | | U.S. Treasury, agencies and corporations | $ | 393 | | | $ | 9,815 | | | $ | — | | | $ | 10,208 | |
Municipal securities | Municipal securities | 0 | | 1,694 | | | 1,694 | | Municipal securities | | 1,634 | | | 1,634 | |
| Other debt securities | Other debt securities | 0 | | 76 | | | 0 | | 76 | | Other debt securities | | 73 | | | 73 | |
| Total available-for-sale | Total available-for-sale | 134 | | | 23,914 | | | — | | | 24,048 | | Total available-for-sale | 393 | | | 11,522 | | | — | | | 11,915 | |
Trading account | 14 | | | 358 | | | 0 | | 372 | | |
Trading securities | | Trading securities | 395 | | | 70 | | | 465 | |
Other noninterest-bearing investments: | Other noninterest-bearing investments: | | Other noninterest-bearing investments: | |
Bank-owned life insurance | Bank-owned life insurance | 0 | | 537 | | | 0 | | 537 | | Bank-owned life insurance | | 546 | | | 546 | |
Private equity investments 1 | Private equity investments 1 | 35 | | | 0 | | 66 | | | 101 | | Private equity investments 1 | 4 | | | 81 | | | 85 | |
Other assets: | Other assets: | | Other assets: | |
Agriculture loan servicing and interest-only strips | Agriculture loan servicing and interest-only strips | 0 | | 0 | | 12 | | | 12 | | Agriculture loan servicing and interest-only strips | | 14 | | | 14 | |
Deferred compensation plan assets | Deferred compensation plan assets | 138 | | | 0 | | 0 | | 138 | | Deferred compensation plan assets | 114 | | | 114 | |
Derivatives: | | |
Derivatives designated as hedges | 0 | | 10 | | | 0 | | 10 | | |
Derivatives not designated as hedges | 0 | | 209 | | | 0 | | 209 | | |
Derivatives | | Derivatives | | 386 | | | 386 | |
Total assets | Total assets | $ | 321 | | | $ | 25,028 | | | $ | 78 | | | $ | 25,427 | | Total assets | $ | 906 | | | $ | 12,524 | | | $ | 95 | | | $ | 13,525 | |
LIABILITIES | LIABILITIES | | | | | | | | LIABILITIES | | | | | | | |
Securities sold, not yet purchased | Securities sold, not yet purchased | $ | 254 | | | $ | — | | | $ | — | | | $ | 254 | | Securities sold, not yet purchased | $ | 187 | | | $ | — | | | $ | — | | | $ | 187 | |
Other liabilities: | Other liabilities: | | Other liabilities: | |
Derivatives: | | |
| Derivatives not designated as hedges | 0 | | 51 | | | 0 | | 51 | | |
Derivatives | | Derivatives | | 451 | | | 451 | |
Total liabilities | Total liabilities | $ | 254 | | | $ | 51 | | | $ | — | | | $ | 305 | | Total liabilities | $ | 187 | | | $ | 451 | | | $ | — | | | $ | 638 | |
1 The Level 1 private equity investments (“PEIs”)PEIs relate to the portion of our Small Business Investment Company (“SBIC”)SBIC investments that are now publicly traded.
Level 3 Valuations
Our Level 3 holdings include PEIs, agriculture loan servicing, and interest-only strips. For additional information regarding our Level 3 financial instruments, including the methods and significant assumptions used to estimate their fair value, see Note 3 of our 20212022 Form 10-K.
Rollforward of Level 3 Fair Value Measurements
The following schedule presents a rollforward of assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs:
| | | Level 3 Instruments | | Level 3 Instruments |
| | Three Months Ended | | | Three Months Ended | |
| | March 31, 2022 | | March 31, 2021 | | | March 31, 2023 | | March 31, 2022 | |
(In millions) | (In millions) | Private equity investments | | Ag loan servicing & interest only strips | | Private equity investments | | Ag loan servicing & interest only strips | | (In millions) | Private equity investments | | Ag loan servicing & interest-only strips | | Private equity investments | | Ag loan servicing & interest-only strips | |
| Balance at beginning of period | Balance at beginning of period | $ | 66 | | | $ | 12 | | | $ | 80 | | | $ | 16 | | | Balance at beginning of period | $ | 81 | | | $ | 14 | | | $ | 66 | | | $ | 12 | | |
Unrealized securities gains (losses), net | Unrealized securities gains (losses), net | 5 | | | — | | | 1 | | | — | | | Unrealized securities gains (losses), net | — | | | — | | | 5 | | | — | | |
Other noninterest income (expense) | Other noninterest income (expense) | — | | | — | | | — | | | (1) | | | Other noninterest income (expense) | — | | | 4 | | | — | | | — | | |
Purchases | Purchases | 6 | | | — | | | 4 | | | — | | | Purchases | 1 | | | — | | | 6 | | | — | | |
Cost of investments sold | Cost of investments sold | (3) | | | — | | | (2) | | | — | | | Cost of investments sold | — | | | — | | | (3) | | | — | | |
| Transfers out 1 | | Transfers out 1 | — | | | — | | | — | | | — | | |
Balance at end of period | Balance at end of period | $ | 74 | | | $ | 12 | | | $ | 83 | | | $ | 15 | | | Balance at end of period | $ | 82 | | | $ | 18 | | | $ | 74 | | | $ | 12 | | |
1 Represents the transfer of SBIC investments out of Level 3 and into Level 1 because they are publicly traded.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
During the three months ended March 31, 2022 and 2021, there were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 3 fair value measurements.
The rollforward of Level 3 instruments includes the following realized gains and losses recognized in securities gains (losses) on the consolidated statement of income for the periods presented: | | | | | | | | | | | | | | | |
(In millions) | Three Months Ended | | |
March 31, 2022 | | March 31, 2021 | | | | |
| | | | | | | |
| | | | | | | |
Securities gains (losses), net | $ | (2) | | | $ | (1) | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | |
(In millions) | Three Months Ended | | |
March 31, 2023 | | March 31, 2022 | | | | |
| | | | | | | |
| | | | | | | |
Securities gains (losses), net | $ | — | | | $ | (2) | | | | | |
| | | | | | | |
Nonrecurring Fair Value Measurements
Certain assets and liabilities may be recorded at fair value on a nonrecurring basis, including impaired loans that have been measured based on the fair value of the underlying collateral, other real estate owned (“OREO”), and nonmarketable equity securities.investments without readily determinable fair values. Nonrecurring fair value adjustments typically involvegenerally include changes in value resulting from observable price changes for equity investments without readily determinable fair values, write-downs of individual assets, or the application of lower of cost or fair value accounting. At March 31, 2023, and December 31, 2022, we had noinsignificant amounts of assets or liabilities that had fair value changes measured on a nonrecurring basis. At December 31, 2021, we had $2 million of collateral-dependent loans valued as level 2 measurements, and recognized $3 million of losses from fair value changes related to these loans. The previous fair values may not be current as of the dates indicated, but rather as of the most recent date the fair value change occurred. For additional information regarding the measurement of fair value for impaired loans, collateral-dependent loans, and OREO, see Note 3 of our 20212022 Form 10-K.
Fair Value of Certain Financial Instruments
The following schedule summarizes ofpresents the carrying values and estimated fair values of certain financial instruments: | | | March 31, 2022 | | December 31, 2021 | | | March 31, 2023 | | December 31, 2022 | |
(In millions) | (In millions) | Carrying value | | Fair value | | Level | | Carrying value | | Fair value | | Level | | (In millions) | Carrying value | | Fair value | | Level | | Carrying value | | Fair value | | Level | |
Financial assets: | Financial assets: | | | | | | | | | | | | | Financial assets: | | | | | | | | | | | | |
HTM investment securities | $ | 439 | | | $ | 414 | | | 2 | | $ | 441 | | | $ | 443 | | | 2 | | |
Held-to-maturity investment securities | | Held-to-maturity investment securities | $ | 10,961 | | | $ | 11,210 | | | 2 | | $ | 11,126 | | | $ | 11,239 | | | 2 | |
Loans and leases (including loans held for sale), net of allowance | Loans and leases (including loans held for sale), net of allowance | 50,807 | | | 49,837 | | | 3 | | 50,421 | | | 50,619 | | | 3 | | Loans and leases (including loans held for sale), net of allowance | 55,718 | | | 53,226 | | | 3 | | 55,086 | | | 53,093 | | | 3 | |
Financial liabilities: | Financial liabilities: | | | Financial liabilities: | | |
Time deposits | Time deposits | 1,550 | | | 1,538 | | | 2 | | 1,622 | | | 1,624 | | | 2 | | Time deposits | 7,337 | | | 7,319 | | | 2 | | 2,309 | | | 2,269 | | | 2 | |
| Long-term debt | Long-term debt | 689 | | | 699 | | | 2 | | 1,012 | | | 1,034 | | | 2 | | Long-term debt | 663 | | | 577 | | | 2 | | 651 | | | 635 | | | 2 | |
This summary excludes financial assets and liabilities for which carrying value approximates fair value andThe schedule above does not include certain financial instruments that are recorded at fair value on a recurring basis.basis, as well as certain financial assets and liabilities for which the carrying value approximates fair value. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3 of our 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
4. OFFSETTING ASSETS AND LIABILITIES
GrossThe following schedules present gross and net information for selected financial instruments inon the balance sheet is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 |
| | | | | | | | Gross amounts not offset in the balance sheet | | |
(In millions) | | Gross amounts recognized | | Gross amounts offset in the balance sheet | | Net amounts presented in the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount |
Assets: | | | | | | | | | | | | |
Federal funds sold and security resell agreements | | $ | 2,345 | | | $ | — | | | $ | 2,345 | | | $ | — | | | $ | — | | | $ | 2,345 | |
Derivatives (included in other assets) | | 119 | | | — | | | 119 | | | (8) | | | (65) | | | 46 | |
Total assets | | $ | 2,464 | | | $ | — | | | $ | 2,464 | | | $ | (8) | | | $ | (65) | | | $ | 2,391 | |
Liabilities: | | | | | | | | | | | | |
Federal funds purchased and other short-term borrowings | | $ | 638 | | | $ | — | | | $ | 638 | | | $ | — | | | $ | — | | | $ | 638 | |
Derivatives (included in other liabilities) | | 179 | | | — | | | 179 | | | (8) | | | — | | | 171 | |
Total liabilities | | $ | 817 | | | $ | — | | | $ | 817 | | | $ | (8) | | | $ | — | | | $ | 809 | |
sheet. | | | December 31, 2021 | | March 31, 2023 |
| | | Gross amounts not offset in the balance sheet | | | | Gross amounts not offset in the balance sheet | |
(In millions) | (In millions) | | Gross amounts recognized | | Gross amounts offset in the balance sheet | | Net amounts presented in the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount | (In millions) | | Gross amounts recognized | | Gross amounts offset in the balance sheet | | Net amounts presented in the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount |
Assets: | Assets: | | | | | | | | | | | | | Assets: | | | | | | | | | | | | |
Federal funds sold and security resell agreements | | $ | 2,133 | | | $ | — | | | $ | 2,133 | | | $ | — | | | $ | — | | | $ | 2,133 | | |
Federal funds sold and securities purchased under agreements to resell | | Federal funds sold and securities purchased under agreements to resell | | $ | 688 | | | $ | — | | | $ | 688 | | | $ | — | | | $ | — | | | $ | 688 | |
Derivatives (included in other assets) | Derivatives (included in other assets) | | 219 | | | — | | | 219 | | | (16) | | | (7) | | | 196 | | Derivatives (included in other assets) | | 369 | | | — | | | 369 | | | (23) | | | (326) | | | 20 | |
Total assets | Total assets | | $ | 2,352 | | | $ | — | | | $ | 2,352 | | | $ | (16) | | | $ | (7) | | | $ | 2,329 | | Total assets | | $ | 1,057 | | | $ | — | | | $ | 1,057 | | | $ | (23) | | | $ | (326) | | | $ | 708 | |
Liabilities: | Liabilities: | | | | | | | | | | | | | Liabilities: | | | | | | | | | | | | |
Federal funds purchased and other short-term borrowings | | $ | 903 | | | $ | — | | | $ | 903 | | | $ | — | | | $ | — | | | $ | 903 | | |
Federal funds and other short-term borrowings | | Federal funds and other short-term borrowings | | $ | 12,124 | | | $ | — | | | $ | 12,124 | | | $ | — | | | $ | — | | | $ | 12,124 | |
Derivatives (included in other liabilities) | Derivatives (included in other liabilities) | | 51 | | | — | | | 51 | | | (16) | | | (1) | | | 34 | | Derivatives (included in other liabilities) | | 353 | | | — | | | 353 | | | (23) | | | — | | | 330 | |
Total liabilities | Total liabilities | | $ | 954 | | | $ | — | | | $ | 954 | | | $ | (16) | | | $ | (1) | | | $ | 937 | | Total liabilities | | $ | 12,477 | | | $ | — | | | $ | 12,477 | | | $ | (23) | | | $ | — | | | $ | 12,454 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 |
| | | | | | | | Gross amounts not offset in the balance sheet | | |
(In millions) | | Gross amounts recognized | | Gross amounts offset in the balance sheet | | Net amounts presented in the balance sheet | | Financial instruments | | Cash collateral received/pledged | | Net amount |
Assets: | | | | | | | | | | | | |
Federal funds sold and securities purchased under agreements to resell | | $ | 2,451 | | | $ | (25) | | | $ | 2,426 | | | $ | — | | | $ | — | | | $ | 2,426 | |
Derivatives (included in other assets) | | 386 | | | — | | | 386 | | | (10) | | | (367) | | | 9 | |
Total assets | | $ | 2,837 | | | $ | (25) | | | $ | 2,812 | | | $ | (10) | | | $ | (367) | | | $ | 2,435 | |
Liabilities: | | | | | | | | | | | | |
Federal funds and other short-term borrowings | | $ | 10,442 | | | $ | (25) | | | $ | 10,417 | | | $ | — | | | $ | — | | | $ | 10,417 | |
Derivatives (included in other liabilities) | | 451 | | | — | | | 451 | | | (10) | | | — | | | 441 | |
Total liabilities | | $ | 10,893 | | | $ | (25) | | | $ | 10,868 | | | $ | (10) | | | $ | — | | | $ | 10,858 | |
Security repurchase and reverse repurchase (“resell”) agreements are offset, when applicable, in the balance sheet according to master netting agreements. Security repurchase agreements are included with “Federal funds and other short-term borrowings.” Derivative instruments may be offset under their master netting agreements; however, for accounting purposes, we present these items on a gross basis in our balance sheet. See Note 7 for further information regarding derivative instruments.
5. INVESTMENTS
Investment Securities
Investment securities are classified as held-to-maturity (“HTM”), available-for saleavailable-for-sale (“AFS”), or trading. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. The amortized cost amounts represent the original cost of the investments, adjusted for related amortization or accretion of any purchase premiums or discounts, and for any impairment losses, including credit-related impairment. When a security is transferred from AFS to HTM, the difference between its amortized cost basis and fair value at the date of transfer is amortized as a yield adjustment through interest income, and the fair value at the date of transfer results in a discount to the amortized cost basis of the HTM securities. The amortization of the unrealized losses reported in accumulated other comprehensive income (“AOCI”) will offset the effect of the accretion of the discount in interest income that is created by the transfer.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
AFS securities are carried at fair value, and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to accumulated other comprehensive income (“AOCI”),AOCI, net of related taxes. Trading securities are carried at fair value with gains and losses recognized in current period earnings. The carrying values of our securities do not include accrued interest receivables of $71$65 million and $65$75 million at March 31, 20222023 and December 31, 2021,2022, respectively. These receivables are presented on the consolidated balance sheet in “Other
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
assets.” See NoteNotes 3 and 5 of our 20212022 Form 10-K for more information related to our accounting for investment securities, and see Note 3 of our 2021 Form 10-K for description ofregarding our process to estimate the fair value and accounting for our investment securities.securities, respectively.
The following schedule summarizes the amortized cost and estimated fair values of our HTM and AFS securities:
| | | March 31, 2022 | | March 31, 2023 |
(In millions) | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | Held-to-maturity | | | | | | | | Held-to-maturity | | | | | | | |
U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | | Agency securities | $ | 98 | | | $ | — | | | $ | 6 | | | $ | 92 | |
Agency guaranteed mortgage-backed securities 1 | | Agency guaranteed mortgage-backed securities 1 | 10,471 | | | 281 | | | 2 | | | 10,750 | |
Municipal securities | Municipal securities | $ | 439 | | | $ | — | | | $ | 25 | | | $ | 414 | | Municipal securities | 392 | | | — | | | 24 | | | 368 | |
Total held-to-maturity | | Total held-to-maturity | 10,961 | | | 281 | | | 32 | | | 11,210 | |
Available-for-sale | Available-for-sale | | | | | | | | Available-for-sale | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 557 | | | — | | | 54 | | | 503 | | U.S. Treasury securities | 656 | | | — | | | 145 | | | 511 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | Agency securities | 802 | | | — | | | 10 | | | 792 | | Agency securities | 753 | | | — | | | 37 | | | 716 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 23,626 | | | 9 | | | 1,553 | | | 22,082 | | Agency guaranteed mortgage-backed securities | 9,423 | | | — | | | 1,203 | | | 8,220 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 950 | | | 2 | | | 27 | | | 925 | | Small Business Administration loan-backed securities | 701 | | | 1 | | | 26 | | | 676 | |
Municipal securities | Municipal securities | 1,828 | | | 6 | | | 66 | | | 1,768 | | Municipal securities | 1,517 | | | — | | | 70 | | | 1,447 | |
Other debt securities | Other debt securities | 75 | | | — | | | — | | | 75 | | Other debt securities | 25 | | | — | | | 1 | | | 24 | |
Total available-for-sale | Total available-for-sale | 27,838 | | | 17 | | | 1,710 | | | 26,145 | | Total available-for-sale | 13,075 | | | 1 | | | 1,482 | | | 11,594 | |
Total HTM and AFS investment securities | Total HTM and AFS investment securities | $ | 28,277 | | | $ | 17 | | | $ | 1,735 | | | $ | 26,559 | | Total HTM and AFS investment securities | $ | 24,036 | | | $ | 282 | | | $ | 1,514 | | | $ | 22,804 | |
| | | December 31, 2021 | | December 31, 2022 |
(In millions) | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | (In millions) | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | Held-to-maturity | | | | | | | | Held-to-maturity | | | | | | | |
U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | | Agency securities | $ | 100 | | | $ | — | | | $ | 7 | | | $ | 93 | |
Agency guaranteed mortgage-backed securities 1 | | Agency guaranteed mortgage-backed securities 1 | 10,621 | | | 165 | | | 14 | | | 10,772 | |
Municipal securities | Municipal securities | $ | 441 | | | $ | 4 | | | $ | 2 | | | $ | 443 | | Municipal securities | 405 | | | — | | | 31 | | | 374 | |
Total held-to-maturity | | Total held-to-maturity | 11,126 | | | 165 | | | 52 | | | 11,239 | |
Available-for-sale | Available-for-sale | | | | | | | | Available-for-sale | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 155 | | | — | | | 21 | | | 134 | | U.S. Treasury securities | 557 | | | — | | | 164 | | | 393 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | Agency securities | 833 | | | 13 | | | 1 | | | 845 | | Agency securities | 782 | | | — | | | 46 | | | 736 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 20,549 | | | 108 | | | 270 | | | 20,387 | | Agency guaranteed mortgage-backed securities | 9,652 | | | — | | | 1,285 | | | 8,367 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 938 | | | 2 | | | 28 | | | 912 | | Small Business Administration loan-backed securities | 740 | | | 1 | | | 29 | | | 712 | |
Municipal securities | Municipal securities | 1,652 | | | 46 | | | 4 | | | 1,694 | | Municipal securities | 1,732 | | | 1 | | | 99 | | | 1,634 | |
Other debt securities | Other debt securities | 75 | | | 1 | | | — | | | 76 | | Other debt securities | 75 | | | — | | | 2 | | | 73 | |
Total available-for-sale | Total available-for-sale | 24,202 | | | 170 | | | 324 | | | 24,048 | | Total available-for-sale | 13,538 | | | 2 | | | 1,625 | | | 11,915 | |
| Total HTM and AFS investment securities | Total HTM and AFS investment securities | $ | 24,643 | | | $ | 174 | | | $ | 326 | | | $ | 24,491 | | Total HTM and AFS investment securities | $ | 24,664 | | | $ | 167 | | | $ | 1,677 | | | $ | 23,154 | |
1 During the fourth quarter of 2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of mortgage-backed AFS securities to the HTM category to reflect our intent for these securities. The transfer of these securities from AFS to HTM at fair value resulted in a discount to the amortized cost basis of the HTM securities equivalent to the $2.4 billion ($1.8 billion after-tax) of unrealized losses in AOCI. The amortization of the unrealized losses will offset the effect of the accretion of the discount created by the transfer.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Maturities
The following schedule shows the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at March 31, 2022.2023. Actual principal payments and maturities may differ from contractual or expected principal payments and maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | March 31, 2022 | | March 31, 2023 |
| | Total debt securities | | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years | | Total debt securities | | Due in one year or less | | Due after one year through five years | | Due after five years through ten years | | Due after ten years |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | (Dollar amounts in millions) | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield | | Amortized cost | | Average yield |
Held-to-maturity | Held-to-maturity | | | | | | | | | | | | | | | | | | | | Held-to-maturity | | | | | | | | | | | | | | | | | | | |
U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | | Agency securities | $ | 98 | | | 3.51 | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | — | | | — | % | | $ | 98 | | | 3.51 | % |
Agency guaranteed mortgage-backed securities | | Agency guaranteed mortgage-backed securities | 10,471 | | | 1.84 | | | — | | | — | | | — | | | — | | | 48 | | | 2.00 | | | 10,423 | | | 1.84 | |
Municipal securities 1 | Municipal securities 1 | $ | 439 | | | 3.02 | % | | $ | 29 | | | 2.71 | % | | $ | 139 | | | 3.19 | % | | $ | 176 | | | 2.71 | % | | $ | 95 | | | 3.41 | % | Municipal securities 1 | 392 | | | 3.17 | | | 34 | | | 3.36 | | | 135 | | | 3.06 | | | 180 | | | 3.31 | | | 43 | | | 2.80 | |
Total held-to-maturity securities | | Total held-to-maturity securities | 10,961 | | | 1.90 | | | 34 | | | 3.36 | | | 135 | | | 3.06 | | | 228 | | | 3.04 | | | 10,564 | | | 1.86 | |
Available-for-sale | Available-for-sale | | | | | | | | | | | Available-for-sale | | | | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | 557 | | | 2.05 | | | — | | | — | | | — | | | — | | | — | | | — | | | 557 | | | 2.05 | | U.S. Treasury securities | 656 | | | 2.43 | | | 99 | | | 4.56 | | | — | | | — | | | — | | | — | | | 557 | | | 2.05 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | Agency securities | 802 | | | 2.06 | | | 31 | | | 0.84 | | | 317 | | | 1.50 | | | 292 | | | 2.37 | | | 162 | | | 2.83 | | Agency securities | 753 | | | 2.63 | | | 18 | | | 5.22 | | | 313 | | | 2.23 | | | 224 | | | 2.54 | | | 198 | | | 3.12 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 23,626 | | | 1.70 | | | — | | | — | | | 442 | | | 1.49 | | | 1,824 | | | 1.84 | | | 21,360 | | | 1.69 | | Agency guaranteed mortgage-backed securities | 9,423 | | | 1.96 | | | 24 | | | 4.32 | | | 268 | | | 1.55 | | | 1,559 | | | 2.06 | | | 7,572 | | | 1.94 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | 950 | | | 1.38 | | | — | | | — | | | 47 | | | 1.30 | | | 184 | | | 2.18 | | | 719 | | | 1.18 | | Small Business Administration loan-backed securities | 701 | | | 4.80 | | | — | | | — | | | 39 | | | 5.31 | | | 151 | | | 4.14 | | | 511 | | | 4.96 | |
Municipal securities 1 | Municipal securities 1 | 1,828 | | | 2.37 | | | 106 | | | 2.18 | | | 683 | | | 2.59 | | | 638 | | | 2.10 | | | 401 | | | 2.47 | | Municipal securities 1 | 1,517 | | | 2.19 | | | 119 | | | 2.49 | | | 517 | | | 2.62 | | | 680 | | | 1.86 | | | 201 | | | 2.05 | |
Other debt securities | Other debt securities | 75 | | | 2.17 | | | — | | | — | | | — | | | — | | | 60 | | | 1.99 | | | 15 | | | 2.91 | | Other debt securities | 25 | | | 8.27 | | | — | | | — | | | — | | | — | | | 10 | | | 9.50 | | | 15 | | | 7.45 | |
Total available-for-sale securities | Total available-for-sale securities | 27,838 | | | 1.75 | | | 137 | | | 1.88 | | | 1,489 | | | 1.99 | | | 2,998 | | | 1.97 | | | 23,214 | | | 1.70 | | Total available-for-sale securities | 13,075 | | | 2.21 | | | 260 | | | 3.63 | | | 1,137 | | | 2.35 | | | 2,624 | | | 2.20 | | | 9,054 | | | 2.16 | |
Total HTM and AFS investment securities | Total HTM and AFS investment securities | $ | 28,277 | | | 1.77 | % | | $ | 166 | | | 2.02 | % | | $ | 1,628 | | | 2.09 | % | | $ | 3,174 | | | 2.01 | % | | $ | 23,309 | | | 1.71 | % | Total HTM and AFS investment securities | $ | 24,036 | | | 2.07 | % | | $ | 294 | | | 3.60 | % | | $ | 1,272 | | | 2.43 | % | | $ | 2,852 | | | 2.26 | % | | $ | 19,618 | | | 2.00 | % |
1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.
The following schedule summarizes the amount of gross unrealized losses for debtAFS securities and the estimated fair value by length of time the securities have been in an unrealized loss position:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
| Less than 12 months | | 12 months or more | | Total |
(In millions) | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | | | | | | | | | | | |
Municipal securities | $ | 12 | | | $ | 224 | | | $ | 13 | | | $ | 92 | | | $ | 25 | | | $ | 316 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Available-for-sale | | | | | | | | | | | |
U.S. Treasury securities | 15 | | | 386 | | | 39 | | | 117 | | | 54 | | | 503 | |
U.S. Government agencies and corporations: | | | | | | | | | | | |
Agency securities | 10 | | | 660 | | | — | | | — | | | 10 | | | 660 | |
Agency guaranteed mortgage-backed securities | 1,152 | | | 17,185 | | | 401 | | | 3,874 | | | 1,553 | | | 21,059 | |
Small Business Administration loan-backed securities | — | | | 27 | | | 27 | | | 693 | | | 27 | | | 720 | |
Municipal securities | 55 | | | 1,067 | | | 11 | | | 89 | | | 66 | | | 1,156 | |
Other | — | | | 15 | | | — | | | — | | | — | | | 15 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total available-for-sale | 1,232 | | | 19,340 | | | 478 | | | 4,773 | | | 1,710 | | | 24,113 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total HTM and AFS investment securities | $ | 1,244 | | | $ | 19,564 | | | $ | 491 | | | $ | 4,865 | | | $ | 1,735 | | | $ | 24,429 | |
position.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | December 31, 2021 | | March 31, 2023 |
| | Less than 12 months | | 12 months or more | | Total | | Less than 12 months | | 12 months or more | | Total |
(In millions) | (In millions) | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value | (In millions) | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value |
Held-to-maturity | | | | | | | | | | | | |
Municipal securities | $ | 1 | | | $ | 88 | | | $ | 1 | | | $ | 68 | | | $ | 2 | | | $ | 156 | | |
| | Available-for-sale | Available-for-sale | | | | | | | | | | | | Available-for-sale | | | | | | | | | | | |
U.S. Treasury securities | U.S. Treasury securities | — | | | — | | | 21 | | | 134 | | | 21 | | | 134 | | U.S. Treasury securities | $ | — | | | $ | — | | | $ | 145 | | | $ | 412 | | | $ | 145 | | | $ | 412 | |
U.S. Government agencies and corporations: | U.S. Government agencies and corporations: | | U.S. Government agencies and corporations: | |
Agency securities | Agency securities | 1 | | | 121 | | | — | | | 1 | | | 1 | | | 122 | | Agency securities | 11 | | | 216 | | | 26 | | | 500 | | | 37 | | | 716 | |
Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 231 | | | 13,574 | | | 39 | | | 942 | | | 270 | | | 14,516 | | Agency guaranteed mortgage-backed securities | 58 | | | 1,118 | | | 1,145 | | | 7,074 | | | 1,203 | | | 8,192 | |
Small Business Administration loan-backed securities | Small Business Administration loan-backed securities | — | | | 27 | | | 28 | | | 749 | | | 28 | | | 776 | | Small Business Administration loan-backed securities | 6 | | | 102 | | | 20 | | | 494 | | | 26 | | | 596 | |
Municipal securities | Municipal securities | 4 | | | 327 | | | — | | | 8 | | | 4 | | | 335 | | Municipal securities | 4 | | | 509 | | | 66 | | | 873 | | | 70 | | | 1,382 | |
Other | Other | — | | | — | | | — | | | — | | | — | | | — | | Other | — | | | — | | | 1 | | | 14 | | | 1 | | | 14 | |
| Total available-for-sale | 236 | | | 14,049 | | | 88 | | | 1,834 | | | 324 | | | 15,883 | | |
| Total HTM and AFS investment securities | $ | 237 | | | $ | 14,137 | | | $ | 89 | | | $ | 1,902 | | | $ | 326 | | | $ | 16,039 | | |
| Total available-for-sale investment securities | | Total available-for-sale investment securities | $ | 79 | | | $ | 1,945 | | | $ | 1,403 | | | $ | 9,367 | | | $ | 1,482 | | | $ | 11,312 | |
Approximately 455 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| Less than 12 months | | 12 months or more | | Total |
(In millions) | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value | | Gross unrealized losses | | Estimated fair value |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Available-for-sale | | | | | | | | | | | |
U.S. Treasury securities | $ | 94 | | | $ | 308 | | | $ | 70 | | | $ | 85 | | | $ | 164 | | | $ | 393 | |
U.S. Government agencies and corporations: | | | | | | | | | | | |
Agency securities | 39 | | | 634 | | | 7 | | | 102 | | | 46 | | | 736 | |
Agency guaranteed mortgage-backed securities | 447 | | | 4,322 | | | 838 | | | 4,042 | | | 1,285 | | | 8,364 | |
Small Business Administration loan-backed securities | 8 | | | 101 | | | 21 | | | 524 | | | 29 | | | 625 | |
Municipal securities | 63 | | | 1,295 | | | 36 | | | 256 | | | 99 | | | 1,551 | |
Other | 2 | | | 13 | | | — | | | — | | | 2 | | | 13 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total available-for-sale investment securities | $ | 653 | | | $ | 6,673 | | | $ | 972 | | | $ | 5,009 | | | $ | 1,625 | | | $ | 11,682 | |
At March 31, 2023 and 137 HTMDecember 31, 2022, approximately 3,240 and 3,059 and 1,3023,562 AFS investment securities were in an unrealized loss position, at March 31, 2022, and December 31, 2021, respectively.
Impairment
We review investment securities quarterly on an individual security basis for the presence of impairment. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our 20212022 Form 10-K.
AFS Impairment
We did not recognize any impairment on our AFS investment securities portfolio during the first three months of 2022.2023. Unrealized losses primarily relate to changes in interest rates subsequent to purchase and are not attributable to credit.credit; as such, absent any future sales, we would expect to receive the full principal value at maturity. At March 31, 2022,2023, we had not initiated any sales of AFS securities, nor did we have an intent to sell any identified securities with unrealized losses. We do not believe it is more likely than not that we would be required to sell such securities before recovery of their amortized cost basis.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
HTM Impairment
For HTM securities, the allowance for credit losses (“ACL”) is assessed consistent with the approach described in Note 6 for loans and leases carried at amortized cost. The ACL on HTM securities was less than $1 million at March 31, 2022. 2023. All HTM securities were risk-graded as "Pass"“Pass” in terms of credit quality, and none were past due at March 31, 2022. The amortized cost basis of HTM securities categorized by year acquired is summarized in the following schedule:2023. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
| Amortized cost basis by year acquired | | |
(In millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total Securities |
| | | | | | | | | | | | | |
Held-to-maturity | $ | 17 | | | $ | 101 | | | $ | 122 | | | $ | 10 | | | $ | — | | | $ | 189 | | | $ | 439 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Securities Gains and Losses Recognized in Income
The following schedule summarizes securities gains and losses recognized in the income statement:statement.
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
| | 2022 | | 2021 | | | 2023 | | 2022 | |
(In millions) | (In millions) | Gross gains | | Gross losses | | Gross gains | | Gross losses | | (In millions) | Gross gains | | Gross losses | | Gross gains | | Gross losses | |
| (In millions) | Gross gains | | Gross losses | | Gross gains | | Gross losses | |
| | Available-for-sale | | Available-for-sale | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | |
Trading | | Trading | 3 | | | 3 | | | — | | | — | | |
Other noninterest-bearing investments | Other noninterest-bearing investments | $ | 3 | | | $ | 20 | | | $ | 14 | | | $ | 3 | | | Other noninterest-bearing investments | 4 | | | 3 | | | 3 | | | 20 | | |
| Total gains | | Total gains | 8 | | | 7 | | | 3 | | | 20 | | |
Net gains (losses) 1 | Net gains (losses) 1 | | | $ | (17) | | | | | $ | 11 | | | Net gains (losses) 1 | | | $ | 1 | | | | | $ | (17) | | |
|
1 Net gains (losses) were recognized in securities gains (losses) in the income statement.
The following schedule presents interest income by security type:type.
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
(In millions) | (In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total | (In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total |
Investment securities: | Investment securities: | | | | | | | | | | | | Investment securities: | | | | | | | | | | | |
Held-to-maturity | Held-to-maturity | $ | 2 | | | $ | 1 | | | $ | 3 | | | $ | 3 | | | $ | 2 | | | $ | 5 | | Held-to-maturity | $ | 60 | | | $ | 1 | | | $ | 61 | | | $ | 2 | | | $ | 1 | | | $ | 3 | |
Available-for-sale | Available-for-sale | 96 | | | 8 | | | 104 | | | 57 | | | 7 | | | 64 | | Available-for-sale | 69 | | | 6 | | | 75 | | | 96 | | | 8 | | | 104 | |
Trading | Trading | — | | | 5 | | | 5 | | | — | | | 2 | | | 2 | | Trading | 1 | | | — | | | 1 | | | — | | | 5 | | | 5 | |
Total securities | Total securities | $ | 98 | | | $ | 14 | | | $ | 112 | | | $ | 60 | | | $ | 11 | | | $ | 71 | | Total securities | $ | 130 | | | $ | 7 | | | $ | 137 | | | $ | 98 | | | $ | 14 | | | $ | 112 | |
At March 31, 2022 and December 31, 2021, investment securities with a carrying value of approximately $3.0 billion and $3.1 billion, respectively, were pledged to secure public and trust deposits, advances, and for other purposes as required by law. Securities are also pledged as collateral for security repurchase agreements.
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6. LOANS, LEASES, AND ALLOWANCE FOR CREDIT LOSSES
Loans, Leases, and Loans Held for Sale
Loans and leases are summarized as follows according to major portfolio segment and specific loan class:
| (In millions) | (In millions) | March 31, 2022 | | December 31, 2021 | (In millions) | March 31, 2023 | | December 31, 2022 |
| Loans held for sale | Loans held for sale | $ | 43 | | | $ | 83 | | Loans held for sale | $ | 5 | | | $ | 8 | |
Commercial: | Commercial: | | | | Commercial: | | | |
Commercial and industrial | $ | 14,356 | | | $ | 13,867 | | |
PPP | 1,081 | | | 1,855 | | |
Commercial and industrial 1 | | Commercial and industrial 1 | $ | 16,500 | | | $ | 16,377 | |
Leasing | Leasing | 318 | | | 327 | | Leasing | 385 | | | 386 | |
Owner-occupied | Owner-occupied | 9,026 | | | 8,733 | | Owner-occupied | 9,317 | | | 9,371 | |
Municipal | Municipal | 3,944 | | | 3,658 | | Municipal | 4,374 | | | 4,361 | |
Total commercial | Total commercial | 28,725 | | | 28,440 | | Total commercial | 30,576 | | | 30,495 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
Construction and land development | Construction and land development | 2,769 | | | 2,757 | | Construction and land development | 2,313 | | | 2,513 | |
Term | Term | 9,325 | | | 9,441 | | Term | 10,585 | | | 10,226 | |
Total commercial real estate | Total commercial real estate | 12,094 | | | 12,198 | | Total commercial real estate | 12,898 | | | 12,739 | |
Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | 3,089 | | | 3,016 | | Home equity credit line | 3,276 | | | 3,377 | |
1-4 family residential | 1-4 family residential | 6,122 | | | 6,050 | | 1-4 family residential | 7,692 | | | 7,286 | |
Construction and other consumer real estate | Construction and other consumer real estate | 692 | | | 638 | | Construction and other consumer real estate | 1,299 | | | 1,161 | |
Bankcard and other revolving plans | Bankcard and other revolving plans | 410 | | | 396 | | Bankcard and other revolving plans | 459 | | | 471 | |
Other | Other | 110 | | | 113 | | Other | 131 | | | 124 | |
Total consumer | Total consumer | 10,423 | | | 10,213 | | Total consumer | 12,857 | | | 12,419 | |
| Total loans and leases | Total loans and leases | $ | 51,242 | | | $ | 50,851 | | Total loans and leases | $ | 56,331 | | | $ | 55,653 | |
1Commercial and industrial loan balances include Paycheck Protection Program (“PPP”) loans of $159 million and $197 million for the respective periods presented.
Loans and leases are measured and presented at their amortized cost basis, which includes net unamortized purchase premiums, discounts, and deferred loan fees and costs totaling $59$43 million and $83$49 million at March 31, 20222023 and December 31, 2021,2022, respectively. Amortized cost basis does not include accrued interest receivables of $157$254 million and $161$247 million at March 31, 20222023 and December 31, 2021,2022, respectively. These receivables are presented in the Consolidated Balance Sheet within the “Other assets”“Other assets” line item.
Municipal loans generally include loans to state and local governments (“municipalities”) with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment.
Land acquisition and development loans included in the construction and land development loan portfolio were $176$226 million at March 31, 20222023 and $160$262 million at December 31, 2021.2022.
Loans with a carrying value of $26.8$30.2 billion at both March 31, 20222023 and $27.6 billion at December 31, 20212022 have been pledged at the Federal Reserve (“FRB”) and the Federal Home Loan Bank (“FHLB”) of Des Moines as collateral for current and potential borrowings. In April 2023, an additional $9.4 billion of loans were pledged as collateral for potential borrowings.
We sold loans totaling $89 million for the three months ended March 31, 2023, and $336 million for the three months ended March 31, 2022, and $423 million for the three months ended March 31, 2021, that were classified as loans held for sale. The sold loans were derecognized from the balance sheet. Loans classified as loans held for sale primarily consist of conforming residential mortgages and the guaranteed portion of Small Business Administration (“SBA”) loans that are primarily sold to U.S. government agencies or participated to third parties. They do not consist of loans from the SBA's Paycheck Protection Program (“PPP”). At times,Occasionally, we have continuing involvement in the sold loans in the form of servicing rights or guarantees. Amounts added to loans held for sale during these same periods were $297$86 million for the three months ended March 31, 2023, and $426 million, respectively. See Note 5 for further information regarding guaranteed securities.$297
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
million for the three months ended March 31, 2022, respectively. See Note 5 of the Notes to Consolidated Financial Statements for further information regarding guaranteed securities.
The principal balance of sold loans for which we retain servicing was approximately $3.5$3.4 billion at March 31, 2022,2023, and $3.3$3.5 billion at December 31, 2021.2022. Income from loans sold, excluding servicing, was $6 million and $11$5 million for the three months ended March 31, 2022,2023, and 2021,$6 million for the three months ended March 31, 2022, respectively.
Allowance for Credit Losses
The allowance for credit losses (“ACL”), which consists of the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”), represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. For additional information regarding our policies and methodologies used to estimate the ACL, see Note 6 of our 20212022 Form 10-K.
The ACL for AFS and HTM debt securities is estimated separately from loans. For HTM securities, the ACL is estimated consistent with the approach for loans carried at amortized cost. See Note 5 of our 2022 Form 10-K for further discussion of our methodology used to estimate of expected credit lossesthe ACL on AFS securities and disclosures related to AFS and HTM debt securities.
Changes in the ACL are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
(In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | | | | | | | |
Balance at December 31, 2022 | $ | 300 | | | $ | 156 | | | $ | 119 | | | $ | 575 | |
Adjustment for change in accounting standard | — | | | (4) | | | 1 | | | (3) | |
Balance at beginning of period | 300 | | | 152 | | | 120 | | | 572 | |
Provision for loan losses | 10 | | | 8 | | | 28 | | | 46 | |
Gross loan and lease charge-offs | 3 | | | — | | | 4 | | | 7 | |
Recoveries | 6 | | | — | | | 1 | | | 7 | |
Net loan and lease charge-offs (recoveries) | (3) | | | — | | | 3 | | | — | |
Balance at end of period | $ | 313 | | | $ | 160 | | | $ | 145 | | | $ | 618 | |
Reserve for unfunded lending commitments | | | | | | | |
Balance at beginning of period | $ | 16 | | | $ | 33 | | | $ | 12 | | | $ | 61 | |
Provision for unfunded lending commitments | 3 | | | (5) | | | 1 | | | (1) | |
Balance at end of period | $ | 19 | | | $ | 28 | | | $ | 13 | | | $ | 60 | |
Total allowance for credit losses at end of period | | | | | | | |
Allowance for loan losses | $ | 313 | | | $ | 160 | | | $ | 145 | | | $ | 618 | |
Reserve for unfunded lending commitments | 19 | | | 28 | | | 13 | | | 60 | |
Total allowance for credit losses | $ | 332 | | | $ | 188 | | | $ | 158 | | | $ | 678 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
(In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | | | | | | | |
| | | | | | | |
| | | | | | | |
Balance at beginning of period | $ | 311 | | | $ | 107 | | | $ | 95 | | | $ | 513 | |
Provision for loan losses | (24) | | | (5) | | | — | | | (29) | |
Gross loan and lease charge-offs | 13 | | | — | | | 4 | | | 17 | |
Recoveries | 8 | | | — | | | 3 | | | 11 | |
Net loan and lease charge-offs (recoveries) | 5 | | | — | | | 1 | | | 6 | |
Balance at end of period | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
Reserve for unfunded lending commitments | | | | | | | |
| | | | | | | |
| | | | | | | |
Balance at beginning of period | $ | 19 | | | $ | 11 | | | $ | 10 | | | $ | 40 | |
Provision for unfunded lending commitments | (5) | | | 1 | | | — | | | (4) | |
Balance at end of period | $ | 14 | | | $ | 12 | | | $ | 10 | | | $ | 36 | |
Total allowance for credit losses at end of period | | | | | | | |
Allowance for loan losses | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
Reserve for unfunded lending commitments | 14 | | | 12 | | | 10 | | | 36 | |
Total allowance for credit losses | $ | 296 | | | $ | 114 | | | $ | 104 | | | $ | 514 | |
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| | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2022 |
(In millions) | (In millions) | Commercial | | Commercial real estate | | Consumer | | Total | (In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
Allowance for loan losses | Allowance for loan losses | | | | | | | | Allowance for loan losses | | | | | | | |
| Balance at beginning of period | Balance at beginning of period | $ | 464 | | | $ | 171 | | | $ | 142 | | | $ | 777 | | Balance at beginning of period | $ | 311 | | | $ | 107 | | | $ | 95 | | | $ | 513 | |
Provision for loan losses | Provision for loan losses | (94) | | | (19) | | | (10) | | | (123) | | Provision for loan losses | (24) | | | (5) | | | — | | | (29) | |
Gross loan and lease charge-offs | Gross loan and lease charge-offs | 18 | | | — | | | 3 | | | 21 | | Gross loan and lease charge-offs | 13 | | | — | | | 4 | | | 17 | |
Recoveries | Recoveries | 10 | | | — | | | 3 | | | 13 | | Recoveries | 8 | | | — | | | 3 | | | 11 | |
Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 8 | | | — | | | — | | | 8 | | Net loan and lease charge-offs (recoveries) | 5 | | | — | | | 1 | | | 6 | |
Balance at end of period | Balance at end of period | $ | 362 | | | $ | 152 | | | $ | 132 | | | $ | 646 | | Balance at end of period | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | | | | | | | | Reserve for unfunded lending commitments | | | | | | | |
| Balance at beginning of period | Balance at beginning of period | $ | 30 | | | $ | 20 | | | $ | 8 | | | $ | 58 | | Balance at beginning of period | $ | 19 | | | $ | 11 | | | $ | 10 | | | $ | 40 | |
Provision for unfunded lending commitments | Provision for unfunded lending commitments | (6) | | | (3) | | | — | | | (9) | | Provision for unfunded lending commitments | (5) | | | 1 | | | — | | | (4) | |
Balance at end of period | Balance at end of period | $ | 24 | | | $ | 17 | | | $ | 8 | | | $ | 49 | | Balance at end of period | $ | 14 | | | $ | 12 | | | $ | 10 | | | $ | 36 | |
Total allowance for credit losses at end of period | Total allowance for credit losses at end of period | | | | | | | | Total allowance for credit losses at end of period | | | | | | | |
Allowance for loan losses | Allowance for loan losses | $ | 362 | | | $ | 152 | | | $ | 132 | | | $ | 646 | | Allowance for loan losses | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 24 | | | 17 | | | 8 | | | 49 | | Reserve for unfunded lending commitments | 14 | | | 12 | | | 10 | | | 36 | |
Total allowance for credit losses | Total allowance for credit losses | $ | 386 | | | $ | 169 | | | $ | 140 | | | $ | 695 | | Total allowance for credit losses | $ | 296 | | | $ | 114 | | | $ | 104 | | | $ | 514 | |
Nonaccrual Loans
Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well-secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain.
A nonaccrual loan may be returned to accrual status when (1) all delinquent interest and principal become current in accordance with the terms of the loan agreement, (2) the loan, if secured, is well-secured, (3) the borrower has paid according to the contractual terms for a minimum of six months, and (4) an analysis of the borrower indicates a reasonable assurance of the borrower's ability and willingness to maintain payments.
The amortized cost basis of loans on nonaccrual statusloans is summarized as follows: | | | March 31, 2022 | | March 31, 2023 |
| | Amortized cost basis | | Total amortized cost basis | | | Amortized cost basis | | Total amortized cost basis | |
(In millions) | (In millions) | with no allowance | | with allowance | | Related allowance | (In millions) | with no allowance | | with allowance | | Related allowance |
| Commercial: | Commercial: | | | | | | | | Commercial: | | | | | | | |
Commercial and industrial | Commercial and industrial | $ | 20 | | | $ | 92 | | | $ | 112 | | | $ | 38 | | Commercial and industrial | $ | 8 | | | $ | 69 | | | $ | 77 | | | $ | 45 | |
PPP | — | | | 2 | | | 2 | | | — | | |
| Owner-occupied | Owner-occupied | 33 | | | 20 | | | 53 | | | 2 | | Owner-occupied | 20 | | | 13 | | | 33 | | | 1 | |
| Total commercial | Total commercial | 53 | | | 114 | | | 167 | | | 40 | | Total commercial | 28 | | | 82 | | | 110 | | | 46 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Term | Term | 5 | | | 15 | | | 20 | | | 3 | | Term | 4 | | | 12 | | | 16 | | | 3 | |
Total commercial real estate | Total commercial real estate | 5 | | | 15 | | | 20 | | | 3 | | Total commercial real estate | 4 | | | 12 | | | 16 | | | 3 | |
Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | 4 | | | 9 | | | 13 | | | 1 | | Home equity credit line | — | | | 11 | | | 11 | | | 3 | |
1-4 family residential | 1-4 family residential | 8 | | | 43 | | | 51 | | | 5 | | 1-4 family residential | 5 | | | 29 | | | 34 | | | 5 | |
| Bankcard and other revolving plans | — | | | 1 | | | 1 | | | 1 | | |
| | Total consumer loans | Total consumer loans | 12 | | | 53 | | | 65 | | | 7 | | Total consumer loans | 5 | | | 40 | | | 45 | | | 8 | |
Total | Total | $ | 70 | | | $ | 182 | | | $ | 252 | | | $ | 50 | | Total | $ | 37 | | | $ | 134 | | | $ | 171 | | | $ | 57 | |
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| | | December 31, 2021 | | December 31, 2022 |
| | Amortized cost basis | | Total amortized cost basis | | | Amortized cost basis | | Total amortized cost basis | |
(In millions) | (In millions) | with no allowance | | with allowance | | Related allowance | (In millions) | with no allowance | | with allowance | | Related allowance |
| Commercial: | Commercial: | | | | | | | | Commercial: | | | | | | | |
Commercial and industrial | Commercial and industrial | $ | 30 | | | $ | 94 | | | $ | 124 | | | $ | 34 | | Commercial and industrial | $ | 8 | | | $ | 55 | | | $ | 63 | | | $ | 27 | |
PPP | 2 | | | 1 | | | 3 | | | — | | |
| Owner-occupied | Owner-occupied | 37 | | | 20 | | | 57 | | | 3 | | Owner-occupied | 13 | | | 11 | | | 24 | | | 1 | |
| Total commercial | Total commercial | 69 | | | 115 | | | 184 | | | 37 | | Total commercial | 21 | | | 66 | | | 87 | | | 28 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Term | Term | 6 | | | 14 | | | 20 | | | 3 | | Term | — | | | 14 | | | 14 | | | 2 | |
Total commercial real estate | Total commercial real estate | 6 | | | 14 | | | 20 | | | 3 | | Total commercial real estate | — | | | 14 | | | 14 | | | 2 | |
Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | 4 | | | 10 | | | 14 | | | 2 | | Home equity credit line | 1 | | | 10 | | | 11 | | | 2 | |
1-4 family residential | 1-4 family residential | 9 | | | 43 | | | 52 | | | 5 | | 1-4 family residential | 9 | | | 28 | | | 37 | | | 3 | |
| Bankcard and other revolving plans | Bankcard and other revolving plans | — | | | 1 | | | 1 | | | 1 | | Bankcard and other revolving plans | — | | | — | | | — | | | — | |
| Total consumer loans | Total consumer loans | 13 | | | 54 | | | 67 | | | 8 | | Total consumer loans | 10 | | | 38 | | | 48 | | | 5 | |
Total | Total | $ | 88 | | | $ | 183 | | | $ | 271 | | | $ | 48 | | Total | $ | 31 | | | $ | 118 | | | $ | 149 | | | $ | 35 | |
For accruing loans, interest is accrued and interest payments are recognized into interest income according to the contractual loan agreement. For nonaccruing loans, the accrual of interest is discontinued, any uncollected or accrued interest is reversed or written-off from interest income in a timely manner (generally within one month), and any payments received on these loans are not recognized into interest income, but are applied as a reduction to the principal outstanding. When the collectibility of the amortized cost basis for a nonaccrual loan is no longer in doubt, then interest payments may be recognized in interest income on a cash basis. For the three months ended March 31, 20222023 and 2021,2022, there was no interest income recognized on a cash basis during the period the loans were on nonaccrual.
The amount of accrued interest receivables written-off by reversingreversed from interest income during the periodperiods presented is summarized by loan portfolio segment as follows:
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
(In millions) | (In millions) | 2022 | | 2021 | | (In millions) | 2023 | | 2022 | |
| Commercial | Commercial | $ | 4 | | | $ | 3 | | | Commercial | $ | 2 | | | $ | 4 | | |
Commercial real estate | Commercial real estate | — | | | 1 | | | Commercial real estate | 1 | | | — | | |
Consumer | Consumer | — | | | — | | | Consumer | — | | | — | | |
Total | Total | $ | 4 | | | $ | 4 | | | Total | $ | 3 | | | $ | 4 | | |
Past Due Loans
Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credits, such as bankcard and other revolving credit plans, are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semi-annual, etc.), single payment, and demand notes, are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more.
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Past due loans (accruing and nonaccruing) are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans | | Accruing loans 90+ days past due | | Nonaccrual loans that are current 1 |
| | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 14,285 | | | $ | 49 | | | $ | 22 | | | $ | 71 | | | $ | 14,356 | | | $ | 1 | | | $ | 89 | |
PPP | 1,053 | | | 26 | | | 2 | | | 28 | | | 1,081 | | | — | | | — | |
Leasing | 317 | | | 1 | | | — | | | 1 | | | 318 | | | — | | | — | |
Owner-occupied | 9,001 | | | 13 | | | 12 | | | 25 | | | 9,026 | | | — | | | 40 | |
Municipal | 3,944 | | | — | | | — | | | — | | | 3,944 | | | — | | | — | |
Total commercial | 28,600 | | | 89 | | | 36 | | | 125 | | | 28,725 | | | 1 | | | 129 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,769 | | | — | | | — | | | — | | | 2,769 | | | — | | | — | |
Term | 9,320 | | | 1 | | | 4 | | | 5 | | | 9,325 | | | 1 | | | 17 | |
Total commercial real estate | 12,089 | | | 1 | | | 4 | | | 5 | | | 12,094 | | | 1 | | | 17 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,083 | | | 3 | | | 3 | | | 6 | | | 3,089 | | | — | | | 10 | |
1-4 family residential | 6,090 | | | 11 | | | 21 | | | 32 | | | 6,122 | | | — | | | 21 | |
Construction and other consumer real estate | 692 | | | — | | | — | | | — | | | 692 | | | — | | | — | |
Bankcard and other revolving plans | 408 | | | 1 | | | 1 | | | 2 | | | 410 | | | 1 | | | — | |
Other | 109 | | | 1 | | | — | | | 1 | | | 110 | | | — | | | — | |
Total consumer loans | 10,382 | | | 16 | | | 25 | | | 41 | | | 10,423 | | | 1 | | | 31 | |
Total | $ | 51,071 | | | $ | 106 | | | $ | 65 | | | $ | 171 | | | $ | 51,242 | | | $ | 3 | | | $ | 177 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans | | Accruing loans 90+ days past due | | Nonaccrual loans that are current 1 |
| | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 13,822 | | | $ | 17 | | | $ | 28 | | | $ | 45 | | | $ | 13,867 | | | $ | 2 | | | $ | 91 | |
PPP | 1,813 | | | 35 | | | 7 | | | 42 | | | 1,855 | | | 5 | | | — | |
Leasing | 327 | | | — | | | — | | | — | | | 327 | | | — | | | — | |
Owner-occupied | 8,712 | | | 7 | | | 14 | | | 21 | | | 8,733 | | | — | | | 42 | |
Municipal | 3,658 | | | — | | | — | | | — | | | 3,658 | | | — | | | — | |
Total commercial | 28,332 | | | 59 | | | 49 | | | 108 | | | 28,440 | | | 7 | | | 133 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,757 | | | — | | | — | | | — | | | 2,757 | | | — | | | — | |
Term | 9,426 | | | 10 | | | 5 | | | 15 | | | 9,441 | | | — | | | 15 | |
Total commercial real estate | 12,183 | | | 10 | | | 5 | | | 15 | | | 12,198 | | | — | | | 15 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,008 | | | 4 | | | 4 | | | 8 | | | 3,016 | | | — | | | 10 | |
1-4 family residential | 6,018 | | | 6 | | | 26 | | | 32 | | | 6,050 | | | — | | | 24 | |
Construction and other consumer real estate | 638 | | | — | | | — | | | — | | | 638 | | | — | | | — | |
Bankcard and other revolving plans | 393 | | | 2 | | | 1 | | | 3 | | | 396 | | | 1 | | | — | |
Other | 112 | | | 1 | | | — | | | 1 | | | 113 | | | — | | | — | |
Total consumer loans | 10,169 | | | 13 | | | 31 | | | 44 | | | 10,213 | | | 1 | | | 34 | |
Total | $ | 50,684 | | | $ | 82 | | | $ | 85 | | | $ | 167 | | | $ | 50,851 | | | $ | 8 | | | $ | 182 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans | | Accruing loans 90+ days past due | | Nonaccrual loans that are current 1 |
| | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 16,436 | | | $ | 53 | | | $ | 11 | | | $ | 64 | | | $ | 16,500 | | | $ | 1 | | | $ | 64 | |
Leasing | 385 | | | — | | | — | | | — | | | 385 | | | — | | | 1 | |
Owner-occupied | 9,305 | | | 9 | | | 3 | | | 12 | | | 9,317 | | | — | | | 28 | |
Municipal | 4,374 | | | — | | | — | | | — | | | 4,374 | | | — | | | — | |
Total commercial | 30,500 | | | 62 | | | 14 | | | 76 | | | 30,576 | | | 1 | | | 93 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,308 | | | 5 | | | — | | | 5 | | | 2,313 | | | — | | | — | |
Term | 10,582 | | | 1 | | | 2 | | | 3 | | | 10,585 | | | — | | | 14 | |
Total commercial real estate | 12,890 | | | 6 | | | 2 | | | 8 | | | 12,898 | | | — | | | 14 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,265 | | | 8 | | | 3 | | | 11 | | | 3,276 | | | — | | | 5 | |
1-4 family residential | 7,665 | | | 14 | | | 13 | | | 27 | | | 7,692 | | | — | | | 14 | |
Construction and other consumer real estate | 1,299 | | | — | | | — | | | — | | | 1,299 | | | — | | | — | |
Bankcard and other revolving plans | 455 | | | 3 | | | 1 | | | 4 | | | 459 | | | 1 | | | — | |
Other | 130 | | | 1 | | | — | | | 1 | | | 131 | | | — | | | — | |
Total consumer loans | 12,814 | | | 26 | | | 17 | | | 43 | | | 12,857 | | | 1 | | | 19 | |
Total | $ | 56,204 | | | $ | 94 | | | $ | 33 | | | $ | 127 | | | $ | 56,331 | | | $ | 2 | | | $ | 126 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans | | Accruing loans 90+ days past due | | Nonaccrual loans that are current 1 |
| | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 16,331 | | | $ | 24 | | | $ | 22 | | | $ | 46 | | | $ | 16,377 | | | $ | 4 | | | $ | 45 | |
Leasing | 386 | | | — | | | — | | | — | | | 386 | | | — | | | — | |
Owner-occupied | 9,344 | | | 20 | | | 7 | | | 27 | | | 9,371 | | | 1 | | | 15 | |
Municipal | 4,361 | | | — | | | — | | | — | | | 4,361 | | | — | | | — | |
Total commercial | 30,422 | | | 44 | | | 29 | | | 73 | | | 30,495 | | | 5 | | | 60 | |
Commercial real estate: | | | | | | | | | | | | | |
Construction and land development | 2,511 | | | 2 | | | — | | | 2 | | | 2,513 | | | — | | | — | |
Term | 10,179 | | | 37 | | | 10 | | | 47 | | | 10,226 | | | — | | | 4 | |
Total commercial real estate | 12,690 | | | 39 | | | 10 | | | 49 | | | 12,739 | | | — | | | 4 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | 3,369 | | | 5 | | | 3 | | | 8 | | | 3,377 | | | — | | | 6 | |
1-4 family residential | 7,258 | | | 9 | | | 19 | | | 28 | | | 7,286 | | | — | | | 16 | |
Construction and other consumer real estate | 1,161 | | | — | | | — | | | — | | | 1,161 | | | — | | | — | |
Bankcard and other revolving plans | 467 | | | 3 | | | 1 | | | 4 | | | 471 | | | 1 | | | — | |
Other | 124 | | | — | | | — | | | — | | | 124 | | | — | | | — | |
Total consumer loans | 12,379 | | | 17 | | | 23 | | | 40 | | | 12,419 | | | 1 | | | 22 | |
Total | $ | 55,491 | | | $ | 100 | | | $ | 62 | | | $ | 162 | | | $ | 55,653 | | | $ | 6 | | | $ | 86 | |
1 Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is still not expected.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Credit Quality Indicators
In addition to the nonaccrual and past due criteria, we also analyze loans using loan risk-grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definition of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications.
•Pass – A Pass asset is higher-quality and does not fit any of the other categories described below. The likelihood of loss is considered low.
•Special Mention – A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in our credit position at some future date.
•Substandard – A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well-defined weaknesses and are characterized by the distinct possibility that we may sustain some loss if deficiencies are not corrected.
•Doubtful – A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable.
There were 0no loans classified as Doubtful at both March 31, 20222023 and December 31, 2021.
We generally assign internal risk grades to commercial and commercial real estate (“CRE”) loans with commitments greater than $1 million based on financial and statistical models, individual credit analysis, and loan officer experience and judgment. For these larger loans, we assign one of multiple risk grades within the Pass classification or one of the risk classifications described previously. We confirm our internal risk grades quarterly, or as soon as we identify information that affects the credit risk of the loan.2022.
For consumer loans and for commercial and CRE loans with commitments lessgreater than or equal to $1 million, we generally assign internal risk grades similar to those described previously based on automated rules that depend on refreshed credit scores, payment performance, and other risk indicators. These are generally assigned either a Pass, Special Mention, or Substandard grade, and are reviewed as we identify information that might warrant a grade change.
The following schedule presents the amortized cost basis of loans and leases categorized by year of origination and by credit quality classificationsclassification as monitored by management are summarized as follows.management. The schedule also summarizes the current period gross charge-offs by year of origination.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | March 31, 2022 | | March 31, 2023 |
| | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | | | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |
| | Amortized cost basis by year of origination | | | Amortized cost basis by year of origination | |
(In millions) | (In millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total loans | (In millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | | Commercial and industrial | |
Pass | Pass | $ | 669 | | $ | 2,455 | | $ | 1,257 | | $ | 1,095 | | $ | 700 | | $ | 452 | | $ | 6,851 | | $ | 158 | | $ | 13,637 | | Pass | $ | 678 | | $ | 3,181 | | $ | 1,689 | | $ | 899 | | $ | 751 | | $ | 577 | | $ | 8,050 | | $ | 186 | | $ | 16,011 | |
Special Mention | Special Mention | — | | 5 | | 13 | | 4 | | 13 | | 45 | | 97 | | 1 | | 178 | | Special Mention | — | | 3 | | 3 | | 6 | | 39 | | 2 | | 63 | | — | | 116 | |
Accruing Substandard | Accruing Substandard | — | | 30 | | 21 | | 115 | | 44 | | 87 | | 124 | | 8 | | 429 | | Accruing Substandard | 4 | | 27 | | 6 | | 13 | | 87 | | 67 | | 90 | | 2 | | 296 | |
Nonaccrual | Nonaccrual | — | | 13 | | 9 | | 6 | | 1 | | 19 | | 49 | | 15 | | 112 | | Nonaccrual | — | | 1 | | 8 | | 5 | | 10 | | 2 | | 47 | | 4 | | 77 | |
Total commercial and industrial | Total commercial and industrial | 669 | | 2,503 | | 1,300 | | 1,220 | | 758 | | 603 | | 7,121 | | 182 | | 14,356 | | Total commercial and industrial | 682 | | 3,212 | | 1,706 | | 923 | | 887 | | 648 | | 8,250 | | 192 | | 16,500 | |
PPP | | |
Pass | — | | 778 | | 301 | | — | | — | | — | | — | | — | | 1,079 | | |
| Nonaccrual | — | | — | | 2 | | — | | — | | — | | — | | — | | 2 | | |
Total PPP | — | | 778 | | 303 | | — | | — | | — | | — | | — | | 1,081 | | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | 1 | | 2 | | — | | 3 | |
Leasing | Leasing | | Leasing | |
Pass | Pass | 2 | | 55 | | 70 | | 64 | | 60 | | 55 | | — | | — | | 306 | | Pass | 25 | | 155 | | 64 | | 42 | | 61 | | 34 | | — | | — | | 381 | |
Special Mention | Special Mention | — | | — | | — | | 5 | | 1 | | 1 | | — | | — | | 7 | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | 5 | | — | | — | | 5 | | Accruing Substandard | — | | — | | — | | — | | — | | 4 | | — | | — | | 4 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total leasing | Total leasing | 2 | | 55 | | 70 | | 69 | | 61 | | 61 | | — | | — | | 318 | | Total leasing | 25 | | 155 | | 64 | | 42 | | 61 | | 38 | | — | | — | | 385 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Owner-occupied | Owner-occupied | | Owner-occupied | |
Pass | Pass | 602 | | 2,447 | | 1,311 | | 1,013 | | 810 | | 2,183 | | 193 | | 70 | | 8,629 | | Pass | 390 | | 2,079 | | 2,182 | | 1,098 | | 808 | | 2,227 | | 165 | | 48 | | 8,997 | |
Special Mention | Special Mention | — | | 8 | | 12 | | 20 | | 22 | | 65 | | 3 | | 3 | | 133 | | Special Mention | 1 | | 4 | | 20 | | 3 | | 8 | | 18 | | — | | — | | 54 | |
Accruing Substandard | Accruing Substandard | 5 | | 6 | | 28 | | 29 | | 47 | | 91 | | 5 | | — | | 211 | | Accruing Substandard | 4 | | 28 | | 44 | | 31 | | 18 | | 104 | | 4 | | — | | 233 | |
Nonaccrual | Nonaccrual | — | | — | | 2 | | 13 | | 9 | | 25 | | 4 | | — | | 53 | | Nonaccrual | — | | — | | 2 | | 14 | | 3 | | 12 | | 2 | | — | | 33 | |
Total owner-occupied | Total owner-occupied | 607 | | 2,461 | | 1,353 | | 1,075 | | 888 | | 2,364 | | 205 | | 73 | | 9,026 | | Total owner-occupied | 395 | | 2,111 | | 2,248 | | 1,146 | | 837 | | 2,361 | | 171 | | 48 | | 9,317 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Municipal | Municipal | | Municipal | |
Pass | Pass | 428 | | 1,279 | | 939 | | 529 | | 208 | | 527 | | 4 | | — | | 3,914 | | Pass | 129 | | 1,187 | | 1,203 | | 799 | | 418 | | 591 | | 9 | | — | | 4,336 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | 25 | | — | | — | | 25 | | Special Mention | — | | 32 | | 6 | | — | | — | | — | | — | | — | | 38 | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | 5 | | — | | — | | 5 | | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total municipal | Total municipal | 428 | | 1,279 | | 939 | | 529 | | 208 | | 557 | | 4 | | — | | 3,944 | | Total municipal | 129 | | 1,219 | | 1,209 | | 799 | | 418 | | 591 | | 9 | | — | | 4,374 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total commercial | Total commercial | 1,706 | | 7,076 | | 3,965 | | 2,893 | | 1,915 | | 3,585 | | 7,330 | | 255 | | 28,725 | | Total commercial | 1,231 | | 6,697 | | 5,227 | | 2,910 | | 2,203 | | 3,638 | | 8,430 | | 240 | | 30,576 | |
Total commercial gross charge-offs | | Total commercial gross charge-offs | — | | — | | — | | — | | — | | 1 | | 2 | | — | | 3 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
Construction and land development | Construction and land development | | Construction and land development | |
Pass | Pass | 75 | | 695 | | 811 | | 386 | | 61 | | 27 | | 674 | | 36 | | 2,765 | | Pass | 115 | | 616 | | 607 | | 219 | | 39 | | 3 | | 571 | | 105 | | 2,275 | |
Special Mention | Special Mention | — | | — | | — | | 1 | | — | | — | | — | | — | | 1 | | Special Mention | | — | | 5 | | — | | — | | — | | — | | — | | 5 | |
Accruing Substandard | Accruing Substandard | — | | — | | 3 | | — | | — | | — | | — | | — | | 3 | | Accruing Substandard | — | | 10 | | 1 | | — | | 22 | | — | | — | | — | | 33 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and land development | Total construction and land development | 75 | | 695 | | 814 | | 387 | | 61 | | 27 | | 674 | | 36 | | 2,769 | | Total construction and land development | 115 | | 626 | | 613 | | 219 | | 61 | | 3 | | 571 | | 105 | | 2,313 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Term | Term | | Term | |
Pass | Pass | 627 | | 2,297 | | 1,604 | | 1,297 | | 994 | | 1,795 | | 189 | | 215 | | 9,018 | | Pass | 714 | | 2,723 | | 2,002 | | 1,697 | | 1,026 | | 1,777 | | 191 | | 175 | | 10,305 | |
Special Mention | Special Mention | — | | 22 | | — | | — | | — | | 15 | | — | | 1 | | 38 | | Special Mention | 19 | | 17 | | — | | 41 | | — | | 5 | | — | | — | | 82 | |
Accruing Substandard | Accruing Substandard | 8 | | 9 | | 39 | | 43 | | 95 | | 55 | | — | | — | | 249 | | Accruing Substandard | 13 | | 44 | | 9 | | 46 | | 26 | | 42 | | 2 | | — | | 182 | |
Nonaccrual | Nonaccrual | — | | — | | 1 | | 5 | | 1 | | 13 | | — | | — | | 20 | | Nonaccrual | — | | — | | — | | — | | 4 | | 12 | | — | | — | | 16 | |
Total term | Total term | 635 | | 2,328 | | 1,644 | | 1,345 | | 1,090 | | 1,878 | | 189 | | 216 | | 9,325 | | Total term | 746 | | 2,784 | | 2,011 | | 1,784 | | 1,056 | | 1,836 | | 193 | | 175 | | 10,585 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total commercial real estate | Total commercial real estate | 710 | | 3,023 | | 2,458 | | 1,732 | | 1,151 | | 1,905 | | 863 | | 252 | | 12,094 | | Total commercial real estate | 861 | | 3,410 | | 2,624 | | 2,003 | | 1,117 | | 1,839 | | 764 | | 280 | | 12,898 | |
Total commercial real estate gross charge-offs | | Total commercial real estate gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | March 31, 2022 | | March 31, 2023 |
| | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | | | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |
| | Amortized cost basis by year of origination | | | Amortized cost basis by year of origination | |
(In millions) | (In millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total loans | (In millions) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total |
| | | Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | | Home equity credit line | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 2,982 | | 91 | | 3,073 | | Pass | — | | — | | — | | — | | — | | — | | 3,167 | | 95 | | 3,262 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | | Accruing Substandard | — | | — | | — | | — | | — | | — | | 3 | | — | | 3 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 7 | | 6 | | 13 | | Nonaccrual | — | | — | | — | | — | | — | | — | | 9 | | 2 | | 11 | |
Total home equity credit line | Total home equity credit line | — | | — | | — | | — | | — | | — | | 2,992 | | 97 | | 3,089 | | Total home equity credit line | — | | — | | — | | — | | — | | — | | 3,179 | | 97 | | 3,276 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
1-4 family residential | 1-4 family residential | | 1-4 family residential | |
Pass | Pass | 470 | | 1,384 | | 982 | | 677 | | 428 | | 2,128 | | — | | — | | 6,069 | | Pass | 381 | | 1,916 | | 1,594 | | 1,034 | | 628 | | 2,103 | | — | | — | | 7,656 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | 1 | | — | | 1 | | — | | — | | 2 | | Accruing Substandard | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | 1 | | 3 | | 4 | | 2 | | 41 | | — | | — | | 51 | | Nonaccrual | — | | 2 | | 2 | | 2 | | 5 | | 23 | | — | | — | | 34 | |
Total 1-4 family residential | Total 1-4 family residential | 470 | | 1,385 | | 985 | | 682 | | 430 | | 2,170 | | — | | — | | 6,122 | | Total 1-4 family residential | 381 | | 1,918 | | 1,596 | | 1,036 | | 633 | | 2,128 | | — | | — | | 7,692 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
Construction and other consumer real estate | Construction and other consumer real estate | | Construction and other consumer real estate | |
Pass | Pass | 55 | | 382 | | 186 | | 43 | | 18 | | 8 | | — | | — | | 692 | | Pass | 22 | | 775 | | 440 | | 35 | | 18 | | 9 | | — | | — | | 1,299 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and other consumer real estate | Total construction and other consumer real estate | 55 | | 382 | | 186 | | 43 | | 18 | | 8 | | — | | — | | 692 | | Total construction and other consumer real estate | 22 | | 775 | | 440 | | 35 | | 18 | | 9 | | — | | — | | 1,299 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Bankcard and other revolving plans | Bankcard and other revolving plans | | Bankcard and other revolving plans | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 401 | | 6 | | 407 | | Pass | — | | — | | — | | — | | — | | — | | 455 | | 1 | | 456 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | 1 | | 3 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total bankcard and other revolving plans | Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 404 | | 6 | | 410 | | Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 457 | | 2 | | 459 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | |
Other consumer | Other consumer | | Other consumer | |
Pass | Pass | 20 | | 45 | | 19 | | 14 | | 7 | | 5 | | — | | — | | 110 | | Pass | 30 | | 54 | | 27 | | 9 | | 7 | | 4 | | — | | — | | 131 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total other consumer | Total other consumer | 20 | | 45 | | 19 | | 14 | | 7 | | 5 | | — | | — | | 110 | | Total other consumer | 30 | | 54 | | 27 | | 9 | | 7 | | 4 | | — | | — | | 131 | |
Gross charge-offs | | Gross charge-offs | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total consumer | Total consumer | 545 | | 1,812 | | 1,190 | | 739 | | 455 | | 2,183 | | 3,396 | | 103 | | 10,423 | | Total consumer | 433 | | 2,747 | | 2,063 | | 1,080 | | 658 | | 2,141 | | 3,636 | | 99 | | 12,857 | |
Total consumer gross charge-offs | | Total consumer gross charge-offs | — | | — | | — | | — | | — | | 2 | | 2 | | — | | 4 | |
Total loans | Total loans | $ | 2,961 | | $ | 11,911 | | $ | 7,613 | | $ | 5,364 | | $ | 3,521 | | $ | 7,673 | | $ | 11,589 | | $ | 610 | | $ | 51,242 | | Total loans | $ | 2,525 | | $ | 12,854 | | $ | 9,914 | | $ | 5,993 | | $ | 3,978 | | $ | 7,618 | | $ | 12,830 | | $ | 619 | | $ | 56,331 | |
Total gross charge-offs | | Total gross charge-offs | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 3 | | $ | 4 | | $ | — | | $ | 7 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | December 31, 2021 | | December 31, 2022 |
| | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | | | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |
| | Amortized cost basis by year of origination | | | Amortized cost basis by year of origination | |
(In millions) | (In millions) | 2021 | 2020 | 2019 | 2018 | 2016 | Prior | Total loans | (In millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | | Commercial and industrial | |
Pass | Pass | $ | 2,561 | | $ | 1,309 | | $ | 1,179 | | $ | 748 | | $ | 354 | | $ | 239 | | $ | 6,594 | | $ | 121 | | $ | 13,105 | | Pass | $ | 3,363 | | $ | 1,874 | | $ | 979 | | $ | 876 | | $ | 293 | | $ | 264 | | $ | 8,054 | | $ | 182 | | $ | 15,885 | |
Special Mention | Special Mention | 4 | | 17 | | 9 | | 12 | | 1 | | 3 | | 128 | | 1 | | 175 | | Special Mention | 1 | | 2 | | 10 | | 52 | | 1 | | 2 | | 50 | | — | | 118 | |
Accruing Substandard | Accruing Substandard | 28 | | 22 | | 99 | | 53 | | 31 | | 65 | | 162 | | 3 | | 463 | | Accruing Substandard | 26 | | 7 | | 17 | | 78 | | 30 | | 67 | | 84 | | 2 | | 311 | |
Nonaccrual | Nonaccrual | 14 | | 10 | | 6 | | 3 | | 1 | | 21 | | 51 | | 18 | | 124 | | Nonaccrual | — | | 8 | | 5 | | 11 | | 1 | | 2 | | 32 | | 4 | | 63 | |
Total commercial and industrial | Total commercial and industrial | 2,607 | | 1,358 | | 1,293 | | 816 | | 387 | | 328 | | 6,935 | | 143 | | 13,867 | | Total commercial and industrial | 3,390 | | 1,891 | | 1,011 | | 1,017 | | 325 | | 335 | | 8,220 | | 188 | | 16,377 | |
PPP | | |
Pass | 1,317 | | 535 | | — | | — | | — | | — | | — | | — | | 1,852 | | |
| Nonaccrual | — | | 3 | | — | | — | | — | | — | | — | | — | | 3 | | |
Total PPP | 1,317 | | 538 | | — | | — | | — | | — | | — | | — | | 1,855 | | |
Leasing | Leasing | | Leasing | |
Pass | Pass | 46 | | 74 | | 70 | | 64 | | 42 | | 19 | | — | | — | | 315 | | Pass | 160 | | 71 | | 47 | | 66 | | 18 | | 19 | | — | | — | | 381 | |
Special Mention | Special Mention | — | | 1 | | 4 | | 1 | | 1 | | — | | — | | — | | 7 | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | 5 | | — | | — | | 5 | | Accruing Substandard | — | | — | | — | | — | | — | | 5 | | — | | — | | 5 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total leasing | Total leasing | 46 | | 75 | | 74 | | 65 | | 43 | | 24 | | — | | — | | 327 | | Total leasing | 160 | | 71 | | 47 | | 66 | | 18 | | 24 | | — | | — | | 386 | |
Owner-occupied | Owner-occupied | | Owner-occupied | |
Pass | Pass | 2,420 | | 1,366 | | 1,028 | | 868 | | 695 | | 1,663 | | 177 | | 69 | | 8,286 | | Pass | 2,157 | | 2,285 | | 1,143 | | 874 | | 654 | | 1,679 | | 187 | | 74 | | 9,053 | |
Special Mention | Special Mention | 10 | | 13 | | 19 | | 32 | | 18 | | 50 | | 3 | | 3 | | 148 | | Special Mention | 1 | | 15 | | 5 | | 8 | | 3 | | 16 | | 1 | | — | | 49 | |
Accruing Substandard | Accruing Substandard | 14 | | 24 | | 41 | | 47 | | 24 | | 79 | | 13 | | — | | 242 | | Accruing Substandard | 16 | | 33 | | 48 | | 20 | | 55 | | 64 | | 9 | | — | | 245 | |
Nonaccrual | Nonaccrual | — | | 4 | | 14 | | 9 | | 9 | | 20 | | 1 | | — | | 57 | | Nonaccrual | 1 | | 1 | | 2 | | 4 | | 5 | | 10 | | 1 | | — | | 24 | |
Total owner-occupied | Total owner-occupied | 2,444 | | 1,407 | | 1,102 | | 956 | | 746 | | 1,812 | | 194 | | 72 | | 8,733 | | Total owner-occupied | 2,175 | | 2,334 | | 1,198 | | 906 | | 717 | | 1,769 | | 198 | | 74 | | 9,371 | |
Municipal | Municipal | | Municipal | |
Pass | Pass | 1,303 | | 963 | | 553 | | 250 | | 327 | | 220 | | 3 | | — | | 3,619 | | Pass | 1,230 | | 1,220 | | 816 | | 441 | | 168 | | 437 | | 8 | | — | | 4,320 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | 25 | | — | | — | | 25 | | Special Mention | 32 | | 6 | | — | | — | | — | | — | | — | | — | | 38 | |
Accruing Substandard | Accruing Substandard | — | | 9 | | — | | — | | — | | 5 | | — | | — | | 14 | | Accruing Substandard | — | | — | | — | | — | | — | | 3 | | — | | — | | 3 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total municipal | Total municipal | 1,303 | | 972 | | 553 | | 250 | | 327 | | 250 | | 3 | | — | | 3,658 | | Total municipal | 1,262 | | 1,226 | | 816 | | 441 | | 168 | | 440 | | 8 | | — | | 4,361 | |
Total commercial | Total commercial | 7,717 | | 4,350 | | 3,022 | | 2,087 | | 1,503 | | 2,414 | | 7,132 | | 215 | | 28,440 | | Total commercial | 6,987 | | 5,522 | | 3,072 | | 2,430 | | 1,228 | | 2,568 | | 8,426 | | 262 | | 30,495 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
Construction and land development | Construction and land development | | Construction and land development | |
Pass | Pass | 640 | | 736 | | 515 | | 94 | | 24 | | 2 | | 650 | | 64 | | 2,725 | | Pass | 548 | | 671 | | 455 | | 81 | | 2 | | 2 | | 617 | | 96 | | 2,472 | |
Special Mention | Special Mention | — | | — | | 1 | | — | | — | | — | | — | | — | | 1 | | Special Mention | 1 | | 1 | | — | | — | | — | | — | | — | | — | | 2 | |
Accruing Substandard | Accruing Substandard | — | | 3 | | 28 | | — | | — | | — | | — | | — | | 31 | | Accruing Substandard | 17 | | — | | — | | 22 | | — | | — | | — | | — | | 39 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and land development | Total construction and land development | 640 | | 739 | | 544 | | 94 | | 24 | | 2 | | 650 | | 64 | | 2,757 | | Total construction and land development | 566 | | 672 | | 455 | | 103 | | 2 | | 2 | | 617 | | 96 | | 2,513 | |
Term | Term | | Term | |
Pass | Pass | 2,407 | | 1,765 | | 1,491 | | 1,066 | | 529 | | 1,401 | | 239 | | 179 | | 9,077 | | Pass | 2,861 | | 2,107 | | 1,686 | | 1,012 | | 666 | | 1,229 | | 276 | | 112 | | 9,949 | |
Special Mention | Special Mention | 22 | | 39 | | 10 | | 17 | | 8 | | 25 | | — | | 4 | | 125 | | Special Mention | 39 | | 21 | | 11 | | — | | 4 | | 1 | | — | | — | | 76 | |
Accruing Substandard | Accruing Substandard | 9 | | 9 | | 44 | | 77 | | 14 | | 64 | | — | | 2 | | 219 | | Accruing Substandard | 42 | | 2 | | 34 | | 21 | | 53 | | 35 | | — | | — | | 187 | |
Nonaccrual | Nonaccrual | — | | 1 | | 5 | | 1 | | — | | 13 | | — | | — | | 20 | | Nonaccrual | — | | — | | — | | 4 | | 1 | | 9 | | — | | — | | 14 | |
Total term | Total term | 2,438 | | 1,814 | | 1,550 | | 1,161 | | 551 | | 1,503 | | 239 | | 185 | | 9,441 | | Total term | 2,942 | | 2,130 | | 1,731 | | 1,037 | | 724 | | 1,274 | | 276 | | 112 | | 10,226 | |
Total commercial real estate | Total commercial real estate | 3,078 | | 2,553 | | 2,094 | | 1,255 | | 575 | | 1,505 | | 889 | | 249 | | 12,198 | | Total commercial real estate | 3,508 | | 2,802 | | 2,186 | | 1,140 | | 726 | | 1,276 | | 893 | | 208 | | 12,739 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | December 31, 2021 | | December 31, 2022 |
| | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | | | Term loans | Revolving loans amortized cost basis | Revolving loans converted to term loans amortized cost basis | |
| | Amortized cost basis by year of origination | | | Amortized cost basis by year of origination | |
(In millions) | (In millions) | 2021 | 2020 | 2019 | 2018 | 2016 | Prior | Total loans | (In millions) | 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Total |
| | | Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | | Home equity credit line | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 2,903 | | 96 | | 2,999 | | Pass | — | | — | | — | | — | | — | | — | | 3,265 | | 98 | | 3,363 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 2 | | — | | 2 | | Accruing Substandard | — | | — | | — | | — | | — | | — | | 3 | | — | | 3 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 7 | | 7 | | 14 | | Nonaccrual | — | | — | | — | | — | | — | | — | | 8 | | 3 | | 11 | |
Total home equity credit line | Total home equity credit line | — | | — | | —�� | | — | | — | | — | | 2,913 | | 103 | | 3,016 | | Total home equity credit line | — | | — | | — | | — | | — | | — | | 3,276 | | 101 | | 3,377 | |
1-4 family residential | 1-4 family residential | | 1-4 family residential | |
Pass | Pass | 1,391 | | 1,021 | | 728 | | 484 | | 681 | | 1,691 | | — | | — | | 5,996 | | Pass | 1,913 | | 1,503 | | 1,024 | | 638 | | 381 | | 1,788 | | — | | — | | 7,247 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | 1 | | — | | — | | 1 | | — | | — | | 2 | | Accruing Substandard | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
Nonaccrual | Nonaccrual | — | | 3 | | 3 | | 3 | | 9 | | 34 | | — | | — | | 52 | | Nonaccrual | — | | 2 | | 2 | | 4 | | 3 | | 26 | | — | | — | | 37 | |
Total 1-4 family residential | Total 1-4 family residential | 1,391 | | 1,024 | | 732 | | 487 | | 690 | | 1,726 | | — | | — | | 6,050 | | Total 1-4 family residential | 1,913 | | 1,505 | | 1,026 | | 642 | | 384 | | 1,816 | | — | | — | | 7,286 | |
Construction and other consumer real estate | Construction and other consumer real estate | | Construction and other consumer real estate | |
Pass | Pass | 295 | | 232 | | 73 | | 27 | | 4 | | 7 | | — | | — | | 638 | | Pass | 583 | | 485 | | 64 | | 19 | | 5 | | 5 | | — | | — | | 1,161 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total construction and other consumer real estate | Total construction and other consumer real estate | 295 | | 232 | | 73 | | 27 | | 4 | | 7 | | — | | — | | 638 | | Total construction and other consumer real estate | 583 | | 485 | | 64 | | 19 | | 5 | | 5 | | — | | — | | 1,161 | |
Bankcard and other revolving plans | Bankcard and other revolving plans | | Bankcard and other revolving plans | |
Pass | Pass | — | | — | | — | | — | | — | | — | | 391 | | 3 | | 394 | | Pass | — | | — | | — | | — | | — | | — | | 468 | | 2 | | 470 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | | Accruing Substandard | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total bankcard and other revolving plans | Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 393 | | 3 | | 396 | | Total bankcard and other revolving plans | — | | — | | — | | — | | — | | — | | 469 | | 2 | | 471 | |
Other consumer | Other consumer | | Other consumer | |
Pass | Pass | 58 | | 23 | | 17 | | 9 | | 4 | | 2 | | — | | — | | 113 | | Pass | 68 | | 30 | | 12 | | 8 | | 4 | | 2 | | — | | — | | 124 | |
Special Mention | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | | Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Accruing Substandard | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | | Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Nonaccrual | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | | Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
Total other consumer | Total other consumer | 58 | | 23 | | 17 | | 9 | | 4 | | 2 | | — | | — | | 113 | | Total other consumer | 68 | | 30 | | 12 | | 8 | | 4 | | 2 | | — | | — | | 124 | |
Total consumer | Total consumer | 1,744 | | 1,279 | | 822 | | 523 | | 698 | | 1,735 | | 3,306 | | 106 | | 10,213 | | Total consumer | 2,564 | | 2,020 | | 1,102 | | 669 | | 393 | | 1,823 | | 3,745 | | 103 | | 12,419 | |
Total loans | Total loans | $ | 12,539 | | $ | 8,182 | | $ | 5,938 | | $ | 3,865 | | $ | 2,776 | | $ | 5,654 | | $ | 11,327 | | $ | 570 | | $ | 50,851 | | Total loans | $ | 13,059 | | $ | 10,344 | | $ | 6,360 | | $ | 4,239 | | $ | 2,347 | | $ | 5,667 | | $ | 13,064 | | $ | 573 | | $ | 55,653 | |
ModifiedLoan Modifications
On January 1, 2023, we adopted ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and RestructuredVintage Disclosures, which eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) and their related disclosures. As a result, we no longer separately measure an allowance for credit losses for TDRs, relying instead on our credit loss estimation models. The adoption of this guidance had no material impact on our financial statements.
ASU 2022-02 requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications may also occur when the borrower experiences financial difficulty and needs
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
temporary or permanent relief from the original contractual terms of the loan. For loans that have been modified with a borrower experiencing financial difficulty, we use the same credit loss estimation methods that we use for the rest of the loan portfolio. These methods incorporate the post-modification loan terms, as well as defaults and charge-offs associated with historical modified loans. All nonaccruing loans more than $1 million are evaluated individually, regardless of modification.
We consider many factors in determining whether to agree to a loan modification and we seek a solution that will both minimize potential loss to us and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.
A modified loan on nonaccrual will remain on nonaccrual status until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains classified as a nonaccrual loan.
The amortized cost of loans to borrowers experiencing financial difficulty that were modified during the period, by loan class and modification type, is summarized in the following schedule:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
| Amortized cost associated with the following modification types: | | | | |
(In millions) | Interest rate reduction | | Maturity or term extension | | | | | | | | Multiple modification types 1 | | Total 2 | | Percentage of total loans 3 |
Commercial: | | | | | | | | | | | | | | | |
Commercial and industrial | $ | — | | | $ | 36 | | | | | | | | | $ | — | | | $ | 36 | | | 0.2 | % |
Owner-occupied | 4 | | | 6 | | | | | | | | | — | | | 10 | | | 0.1 | |
| | | | | | | | | | | | | | | |
Total commercial | 4 | | | 42 | | | | | | | | | — | | | 46 | | | 0.2 | |
Commercial real estate: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Term | — | | | 49 | | | | | | | | | — | | | 49 | | | 0.5 | |
Total commercial real estate | — | | | 49 | | | | | | | | | — | | | 49 | | | 0.4 | |
Consumer: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
1-4 family residential | — | | | — | | | | | | | | | 1 | | | 1 | | | — | |
| | | | | | | | | | | | | | | |
Bankcard and other revolving plans | — | | | 1 | | | | | | | | | — | | | 1 | | | 0.2 | |
| | | | | | | | | | | | | | | |
Total consumer loans | — | | | 1 | | | | | | | | | 1 | | | 2 | | | — | |
Total | $ | 4 | | | $ | 92 | | | | | | | | | $ | 1 | | | $ | 97 | | | 0.2 | % |
1 Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications.
2 Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $8 million at March 31, 2023.
3 Amounts less than 0.05% are rounded to zero.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The financial impact of loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023, is summarized in the following schedule:
| | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 |
(In millions) | Weighted-average interest rate reduction (in percentage points) | | Weighted-average term extension (in months) | | |
Commercial: | | | | | |
Commercial and industrial | — | % | | 10 | | |
| | | | | |
Owner-occupied | 4.4 | | | 5 | | |
| | | | | |
Total commercial | 4.4 | | | 9 | | |
Commercial real estate: | | | | | |
Construction and land development | — | | | 6 | | |
Term | — | | | 9 | | |
Total commercial real estate | — | | | 9 | | |
Consumer: 1 | | | | | |
| | | | | |
1-4 family residential | 1.3 | | | 110 | | |
| | | | | |
Bankcard and other revolving plans | — | | | 65 | | |
| | | | | |
Total consumer loans | 1.3 | | | 84 | | |
Total weighted average financial impact | 4.0 | % | | 10 | | |
1 Primarily relates to one loan within each consumer loan class.
Loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023, did not result in principal forgiveness for any class of loans.
The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after January 1, 2023 (the date we adopted ASU 2022-02) through March 31, 2023, presented by portfolio segment and loan class.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 |
(In millions) | Current | | 30-89 days past due | | 90+ days past due | | Total past due | | Total loans |
| | | | | | | | | |
Commercial: | | | | | | | | | |
Commercial and industrial | $ | 20 | | | $ | 16 | | | $ | — | | | $ | 16 | | | $ | 36 | |
| | | | | | | | | |
Owner-occupied | 10 | | | — | | | — | | | — | | | 10 | |
| | | | | | | | | |
Total commercial | 30 | | | 16 | | | — | | | 16 | | | 46 | |
Commercial real estate: | | | | | | | | | |
| | | | | | | | | |
Term | 49 | | | — | | | — | | | — | | | 49 | |
Total commercial real estate | 49 | | | — | | | — | | | — | | | 49 | |
Consumer: | | | | | | | | | |
| | | | | | | | | |
1-4 family residential | — | | | 1 | | | — | | | 1 | | | 1 | |
| | | | | | | | | |
Bankcard and other revolving plans | 1 | | | — | | | — | | | — | | | 1 | |
| | | | | | | | | |
Total consumer loans | 1 | | | 1 | | | — | | | 1 | | | 2 | |
Total | $ | 80 | | | $ | 17 | | | $ | — | | | $ | 17 | | | $ | 97 | |
Troubled Debt Restructuring Disclosures Prior to Our Adoption of ASU 2022-02
Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. Loans that have been modified to accommodate a borrower who is experiencing financial difficulties, and for which we have granted a concession that we would not otherwise consider, are considered troubled debt restructurings (“TDRs”).TDRs. For further discussion of our policies and processes regarding TDRs, see Note 6 of our 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Information on TDRs, including the amortized cost on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
| Amortized cost resulting from the following modification types: | | |
(In millions) | Interest rate below market | | Maturity or term extension | | Principal forgiveness | | Payment deferral | | Other 1 | | Multiple modification types 2 | | Total |
Accruing | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | $ | 19 | | | $ | 10 | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 4 | | | $ | 37 | |
Owner-occupied | 1 | | | 4 | | | — | | | 9 | | | 14 | | | 9 | | | 37 | |
Municipal | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
Total commercial | 20 | | | 24 | | | — | | | 9 | | | 18 | | | 13 | | | 84 | |
Commercial real estate: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Term | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | |
Total commercial real estate | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | — | | | — | | | 5 | | | — | | | — | | | 2 | | | 7 | |
1-4 family residential | 3 | | | 1 | | | 2 | | | — | | | 1 | | | 12 | | | 19 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total consumer loans | 3 | | | 1 | | | 7 | | | — | | | 1 | | | 14 | | | 26 | |
Total accruing | 24 | | | 54 | | | 7 | | | 36 | | | 60 | | | 35 | | | 216 | |
Nonaccruing | | | | | | | | | | | | | |
Commercial: | | | | | | | | | | | | | |
Commercial and industrial | 1 | | | 3 | | | — | | | 11 | | | 7 | | | 36 | | | 58 | |
Owner-occupied | 9 | | | — | | | — | | | — | | | — | | | 12 | | | 21 | |
| | | | | | | | | | | | | |
Total commercial | 10 | | | 3 | | | — | | | 11 | | | 7 | | | 48 | | | 79 | |
Commercial real estate: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Term | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | |
Total commercial real estate | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | |
Consumer: | | | | | | | | | | | | | |
Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
1-4 family residential | — | | | 1 | | | — | | | — | | | — | | | 3 | | | 4 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total consumer loans | — | | | 1 | | | 1 | | | — | | | — | | | 3 | | | 5 | |
Total nonaccruing | 10 | | | 4 | | | 1 | | | 22 | | | 9 | | | 54 | | | 100 | |
Total | $ | 34 | | | $ | 58 | | | $ | 8 | | | $ | 58 | | | $ | 69 | | | $ | 89 | | | $ | 316 | |
1 Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 Includes TDRs that resulted from a combination of the previous modification types reflected in the schedule.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | December 31, 2021 | | December 31, 2022 |
| | Amortized cost resulting from the following modification types: | | | Amortized cost resulting from the following modification types: | |
(In millions) | (In millions) | Interest rate below market | | Maturity or term extension | | Principal forgiveness | | Payment deferral | | Other 1 | | Multiple modification types 2 | | Total | (In millions) | Interest rate below market | | Maturity or term extension | | Principal forgiveness | | Payment deferral | | Other 1 | | Multiple modification types 2 | | Total |
Accruing | Accruing | | | | | | | | | | | | | | Accruing | | | | | | | | | | | | | |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | $ | 19 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 7 | | | $ | 31 | | Commercial and industrial | $ | 1 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | 9 | | | $ | 28 | | | $ | 50 | |
Owner-occupied | Owner-occupied | 5 | | | 4 | | | — | | | 8 | | | 14 | | | 12 | | | 43 | | Owner-occupied | — | | | 1 | | | — | | | 2 | | | 13 | | | 12 | | | 28 | |
Municipal | Municipal | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | | Municipal | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total commercial | Total commercial | 24 | | | 15 | | | — | | | 8 | | | 18 | | | 19 | | | 84 | | Total commercial | 1 | | | 13 | | | — | | | 2 | | | 22 | | | 40 | | | 78 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Construction and land development | | Construction and land development | — | | | — | | | — | | | — | | | — | | | 8 | | | 8 | |
Term | Term | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | | Term | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 1 | | | 84 | |
Total commercial real estate | Total commercial real estate | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | | Total commercial real estate | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 9 | | | 92 | |
Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | — | | | 1 | | | 5 | | | — | | | — | | | 2 | | | 8 | | Home equity credit line | — | | | 1 | | | 4 | | | — | | | — | | | 1 | | | 6 | |
1-4 family residential | 1-4 family residential | 5 | | | 1 | | | 2 | | | — | | | 1 | | | 14 | | | 23 | | 1-4 family residential | 2 | | | 1 | | | 2 | | | — | | | 1 | | | 15 | | | 21 | |
| Total consumer loans | Total consumer loans | 5 | | | 2 | | | 7 | | | — | | | 1 | | | 16 | | | 31 | | Total consumer loans | 2 | | | 2 | | | 6 | | | — | | | 1 | | | 16 | | | 27 | |
Total accruing | Total accruing | 30 | | | 46 | | | 7 | | | 35 | | | 60 | | | 43 | | | 221 | | Total accruing | 4 | | | 42 | | | 6 | | | 29 | | | 51 | | | 65 | | | 197 | |
Nonaccruing | Nonaccruing | | | | | | | | | | | | | | Nonaccruing | | | | | | | | | | | | | |
Commercial: | Commercial: | | Commercial: | |
Commercial and industrial | Commercial and industrial | 1 | | | 4 | | | — | | | 2 | | | 8 | | | 49 | | | 64 | | Commercial and industrial | — | | | — | | | — | | | 3 | | | 9 | | | 3 | | | 15 | |
Owner-occupied | Owner-occupied | 5 | | | — | | | — | | | 2 | | | — | | | 13 | | | 20 | | Owner-occupied | 4 | | | — | | | — | | | — | | | — | | | 4 | | | 8 | |
| Total commercial | Total commercial | 6 | | | 4 | | | — | | | 4 | | | 8 | | | 62 | | | 84 | | Total commercial | 4 | | | — | | | — | | | 3 | | | 9 | | | 7 | | | 23 | |
Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Term | Term | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | | Term | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
Total commercial real estate | Total commercial real estate | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | | Total commercial real estate | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
1-4 family residential | 1-4 family residential | — | | | 1 | | | — | | | — | | | 3 | | | — | | | 4 | | 1-4 family residential | — | | | 1 | | | — | | | — | | | 1 | | | 2 | | | 4 | |
| Total consumer loans | Total consumer loans | — | | | 1 | | | 1 | | | — | | | 3 | | | — | | | 5 | | Total consumer loans | — | | | 1 | | | 1 | | | — | | | 1 | | | 2 | | | 5 | |
Total nonaccruing | Total nonaccruing | 6 | | | 5 | | | 1 | | | 15 | | | 13 | | | 65 | | | 105 | | Total nonaccruing | 4 | | | 11 | | | 1 | | | 3 | | | 10 | | | 9 | | | 38 | |
Total | Total | $ | 36 | | | $ | 51 | | | $ | 8 | | | $ | 50 | | | $ | 73 | | | $ | 108 | | | $ | 326 | | Total | $ | 8 | | | $ | 53 | | | $ | 7 | | | $ | 32 | | | $ | 61 | | | $ | 74 | | | $ | 235 | |
1 Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 Includes TDRs that resulted from a combination of the previous modification types reflected in the schedule.
Unfunded lending commitments on TDRs totaled $4 million and $10$7 million at March 31, 2022 and December 31, 2021, respectively.2022.
The total amortized cost of all TDRs in which interest rates were modified below market was $92 million at March 31, 2022 and $100$63 million at December 31, 2021.2022. These loans are included in the previous schedule in the columns for interest rate below market and multiple modification types.
The net financial impact on interest income due to interest rate modifications below market for accruing TDRs for the three monthsyear ended MarchDecember 31, 2022 and 2021 was not significant.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.
TableThe amortized cost of ContentsTDRs that had a payment default during the year ended December 31, 2022, which were still in default at period end, and were within 12 months or less of being modified as TDRs was approximately $10 million.ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Collateral-Dependent Loans
As discussed previously, whenWhen a loan is individually evaluated for expected credit losses, we estimate a specific reserve for the loan based on the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, the observable market price of the loan, or the fair value of the loan’s underlying collateral.
Select information on loans for which the borrower is experiencing financial difficulties and repayment is expected to be provided substantially through the operation or sale of the underlying collateral, and the borrower is experiencing financial difficulties, including the type of collateral and the extent to which the collateral secures the loans, is summarized as follows:
| | | March 31, 2022 | | March 31, 2023 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
Commercial: | Commercial: | | | | | | Commercial: | | | | | |
Commercial and industrial | $ | 8 | | | Single family residential | | 39% | |
| | Owner-occupied | Owner-occupied | 8 | | | Office building | | 40% | Owner-occupied | $ | 12 | | | Hospital | | 30% |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Term | Term | 2 | | | Multi-family | | 37% | Term | 5 | | | Hotel, Multi-family | | 64% |
| Consumer: | | |
Home equity credit line | 4 | | | Single family residential | | 35% | |
1-4 family residential | 2 | | | Single family residential | | 38% | |
| | Total | Total | $ | 24 | | | Total | $ | 17 | | |
| | | December 31, 2021 | | December 31, 2022 |
(Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
Commercial: | Commercial: | | | | | | Commercial: | | | | | |
Commercial and industrial | $ | 27 | | | Corporate assets, Single family residential | | 55% | |
| | Owner-occupied | Owner-occupied | 11 | | | Office Building | | 40% | Owner-occupied | $ | 2 | | | Land, Warehouse | | 29% |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| Term | Term | 2 | | | Multi-family, Retail | | 28% | Term | 1 | | | Multi-family | | 55% |
| Consumer: | Consumer: | | Consumer: | |
Home equity credit line | Home equity credit line | 5 | | | Single family residential | | 45% | Home equity credit line | 1 | | | Single family residential | | 13% |
1-4 family residential | 1-4 family residential | 2 | | | Single family residential | | 35% | 1-4 family residential | 3 | | | Single family residential | | 41% |
| Total | Total | $ | 47 | | | Total | $ | 7 | | |
1 The fair value is based on the most recent appraisal or other collateral evaluation.evaluation.
Foreclosed Residential Real Estate
At March 31, 20222023 and December 31, 2021,2022, we did not have any foreclosed residential real estate property. The amortized cost basis of consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was $13$5 million and $10 million for the same periods, respectively.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Accounting
Our primary objective for using derivatives is to manage risks, primarily interest rate risk. We use derivatives to manage volatility in interest income, interest expense, earnings, and capital by adjusting our interest rate sensitivity to minimize the impact of fluctuations in interest rates. Derivatives are used to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or liabilities as we consider advisable.liabilities. We also assist clients with their risk management needs through the use of derivatives. For a more detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our 20212022 Form 10-K.
Fair Value Hedges of Liabilities – At March 31, 2022,2023, we had 1one receive-fixed interest rate swap with a notional amount of $500 million designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively converts the interest on our fixed-rate debt to floating. DuringChanges in the first quarterfair value of 2022, derivatives designated as fair value hedges of debt decreased in value by $7 million which waswere offset by changes in the fair value of the hedged debt instruments as shown in the schedules below. During the first quarter of 2022, we fully amortized the remaining $1 million of cumulative unamortized debt basis adjustments related to previously terminated fair value hedges of debt.
Fair Value Hedges of Assets – At March 31, 2022,2023, we had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $990 million$1.2 billion designated as fair value hedges of certain AFS securities. These swaps effectively convert the fixed interest income to a floating rate on the hedged portion of the securities. During the first quarterChanges in fair value of 2022, derivatives designated as fair value hedges of fixed-rate AFS securities increased in value by $52 million, which waswere offset by changes in the value of the hedged securities, as shown in the schedules below. We had $7 million of unamortized basis adjustments to AFS securities from previously designated fair value hedges.
Cash Flow Hedges – At March 31, 2022,2023, we had $6 billionreceive-fixed interest rate swaps with an aggregate notional amount of receive-fixed interest rate swaps$4.4 billion designated as cash flow hedges of pools of floating-rate commercial loans. AlsoDuring the first quarter of 2023, swaps designated as cash flow hedges with an aggregate notional amount of $300 million matured. Additionally, during the first quarter of 2023, we terminated cash flow hedging relationships with an aggregate notional amount of $2.9 billion. At March 31, 2023, there was $153 million of losses deferred in AOCI related to the terminated cash flow hedges that is expected to be fully amortized by October 2027. Changes in the fair value of qualifying cash flow hedges during the quarter our cash flow hedge portfolio decreased in value by $192 million, which waswere recorded in AOCI.AOCI as shown in the schedule below. The amounts deferred in AOCI are reclassified into earnings in the periods in which the hedged interest receipts occur (i.e., when the hedged forecasted transactions affect earnings).
Collateral and Credit Risk
Exposure to credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For a more detailed discussion of collateral and credit risk relatedcredit-risk-related to our derivative contracts, see Note 7 of our 20212022 Form 10-K.
Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit-risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit-risk-related feature were triggered, such as a downgrade of our credit rating. However, inIn past situations, not all counterparties have demanded that additional collateral be pledged when provided for by the contractual terms. At March 31, 2022,2023, the fair value of our derivative liabilities was $179$353 million, for which we were required to pledge cash collateral of $118less than $1 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at March 31, 2022,2023, there would likely be $1 million ofno additional collateral required to be pledged.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Derivative Amounts
Certain information with respect to notional amounts and recorded gross fair values at March 31, 20222023 and December 31, 2021,2022, and the related gain (loss) of derivative instruments is summarized as follows: | | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Notional amount | | Fair value | | Notional amount | | Fair value | | Notional amount | | Fair value | | Notional amount | | Fair value |
(In millions) | (In millions) | Other assets | | Other liabilities | | Other assets | | Other liabilities | (In millions) | Other assets | | Other liabilities | | Other assets | | Other liabilities |
Derivatives designated as hedging instruments: | Derivatives designated as hedging instruments: | | | | | | | | | | | | Derivatives designated as hedging instruments: | | | | | | | | | | | |
Cash flow hedges of floating-rate assets: | Cash flow hedges of floating-rate assets: | | Cash flow hedges of floating-rate assets: | |
| Receive-fixed interest rate swaps | Receive-fixed interest rate swaps | $ | 6,041 | | | $ | — | | | $ | — | | | $ | 6,883 | | | $ | — | | | $ | — | | Receive-fixed interest rate swaps | $ | 4,433 | | | $ | — | | | $ | — | | | $ | 7,633 | | | $ | — | | | $ | 1 | |
Fair value hedges: | Fair value hedges: | | Fair value hedges: | |
Debt hedges: Receive-fixed interest rate swaps | Debt hedges: Receive-fixed interest rate swaps | 500 | | | — | | | — | | | 500 | | | — | | | — | | Debt hedges: Receive-fixed interest rate swaps | 500 | | | — | | | — | | | 500 | | | — | | | — | |
Asset hedges: Pay-fixed interest rate swaps | Asset hedges: Pay-fixed interest rate swaps | 990 | | | 29 | | | — | | | 479 | | | 10 | | | — | | Asset hedges: Pay-fixed interest rate swaps | 1,227 | | | 69 | | | — | | | 1,228 | | | 84 | | | — | |
Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | 7,531 | | | 29 | | | — | | | 7,862 | | | 10 | | | — | | Total derivatives designated as hedging instruments | 6,160 | | | 69 | | | — | | | 9,361 | | | 84 | | | 1 | |
Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | | | | | | | | Derivatives not designated as hedging instruments: | | | | | | | | | | | |
Customer-facing interest rate derivatives 1 | 6,604 | | | 41 | | | 170 | | | 6,587 | | | 192 | | | 36 | | |
Offsetting interest rate derivatives 2 | 6,604 | | | 175 | | | 43 | | | 6,587 | | | 38 | | | 197 | | |
Customer interest rate derivatives 1 | | Customer interest rate derivatives 1 | 13,804 | | | 295 | | | 349 | | | 13,670 | | | 296 | | | 443 | |
Other interest rate derivatives | Other interest rate derivatives | 1,067 | | | 6 | | | 1 | | | 1,286 | | | 6 | | | 1 | | Other interest rate derivatives | 2,417 | | | 1 | | | — | | | 862 | | | — | | | — | |
Foreign exchange derivatives | Foreign exchange derivatives | 380 | | | 4 | | | 3 | | | 288 | | | 3 | | | 2 | | Foreign exchange derivatives | 258 | | | 4 | | | 4 | | | 605 | | | 6 | | | 7 | |
Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | 14,655 | | | 226 | | | 217 | | | 14,748 | | | 239 | | | 236 | | Total derivatives not designated as hedging instruments | 16,479 | | | 300 | | | 353 | | | 15,137 | | | 302 | | | 450 | |
Total derivatives | Total derivatives | $ | 22,186 | | | $ | 255 | | | $ | 217 | | | $ | 22,610 | | | $ | 249 | | | $ | 236 | | Total derivatives | $ | 22,639 | | | $ | 369 | | | $ | 353 | | | $ | 24,498 | | | $ | 386 | | | $ | 451 | |
1 Customer-facingCustomer interest rate derivatives include a net credit valuation adjustment (“CVA”) of $3$9 million, reducing the fair value of the liability at March 31, 2022,2023, and $3$13 million, reducing the fair value of the assetliability at December 31, 2021. These adjustments are required to reflect both our nonperformance risk and that of the respective counterparty.2022.
2 The fair value amounts for these derivatives do not include the settlement amounts for those trades that are centrally cleared. Once the settlement amounts with the clearing houses are included the derivative fair values would be the following: | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
(In millions) | Other assets | | Other liabilities | | Other assets | | Other liabilities |
| | | | | | | |
| | | | | | | |
Offsetting interest rate derivatives | $ | 39 | | | $ | 5 | | | $ | 8 | | | $ | 12 | |
The amount of derivative gains (losses) from cash flow and fair value hedges that was deferred in other comprehensive income (“OCI”) or recognized in earnings for the three months ended March 31, 20222023 and 20212022 is shown in the schedules below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | Excluded components deferred in AOCI (amortization approach) | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | Hedge ineffectiveness/AOCI reclass due to missed forecast | | |
Cash flow hedges of floating-rate assets:1 | | | | | | | | | | | |
Purchased interest rate floors | $ | — | | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | |
Interest rate swaps | (178) | | | — | | | 12 | | | — | | | — | | | |
Fair value hedges of liabilities: | | | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | — | | | — | | | 2 | | | — | | | |
Basis amortization on terminated hedges 2, 3 | — | | | — | | | — | | | 1 | | | — | | | |
Fair value hedges of assets: | | | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | — | | | — | | | (1) | | | — | | | |
Basis amortization on terminated hedges 2, 3 | — | | | — | | | — | | | — | | | — | | | |
Total derivatives designated as hedging instruments | $ | (178) | | | $ | — | | | $ | 14 | | | $ | 2 | | | $ | — | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | | | |
Cash flow hedges of floating-rate assets:1 | | | | | | | | | | | |
Purchased interest rate floors | $ | — | | | | | $ | — | | | $ | — | | | | | |
Interest rate swaps | 38 | | | | | (49) | | | — | | | | | |
Fair value hedges of liabilities: | | | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | | | — | | | 4 | | | | | |
Basis amortization on terminated hedges2, 3 | — | | | | | — | | | — | | | | | |
Fair value hedges of assets: | | | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | | | — | | | 6 | | | | | |
Basis amortization on terminated hedges3 | — | | | | | — | | | — | | | | | |
Total derivatives designated as hedging instruments | $ | 38 | | | | | $ | (49) | | | $ | 10 | | | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | |
Cash flow hedges of floating-rate assets: 1 | | | | | | | | | |
Purchased interest rate floors | $ | — | | | | | $ | 2 | | | $ | — | | | |
Interest rate swaps | (178) | | | | | 12 | | | — | | | |
Fair value hedges of liabilities: | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | | | — | | | 2 | | | |
Basis amortization on terminated hedges2 | — | | | | | — | | | 1 | | | |
Fair value hedges of assets: | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | | | — | | | (1) | | | |
Basis amortization on terminated hedges 2 | — | | | | | — | | | — | | | |
Total derivatives designated as hedging instruments | $ | (178) | | | | | $ | 14 | | | $ | 2 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
(In millions) | Effective portion of derivative gain/(loss) deferred in AOCI | | Excluded components deferred in AOCI (amortization approach) | | Amount of gain/(loss) reclassified from AOCI into income | | Interest on fair value hedges | | Hedge ineffectiveness/AOCI reclass due to missed forecast |
Cash flow hedges of floating-rate assets: 1 | | | | | | | | | |
Purchased interest rate floors | $ | — | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | |
Interest rate swaps | (5) | | | — | | | 12 | | | — | | | — | |
Fair value hedges of liabilities: | | | | | | | | | |
Receive-fixed interest rate swaps | — | | | — | | | — | | | 2 | | | — | |
Basis amortization on terminated hedges 2, 3 | — | | | — | | | — | | | 3 | | | — | |
Fair value hedges of assets: | | | | | | | | | |
Pay-fixed interest rate swaps | — | | | — | | | — | | | (1) | | | — | |
Basis amortization on terminated hedges 2, 3 | — | | | — | | | — | | | — | | | — | |
Total derivatives designated as hedging instruments | $ | (5) | | | $ | — | | | $ | 15 | | | $ | 4 | | | $ | — | |
1 For the 12 months following March 31, 2022,2023, we estimate that $26$156 million of losses will be reclassified from AOCI into interest income, compared with an estimate of $57$205 million of gainslosses as of March 31, 2021.2022.
2 Adjustment to interest expense resulting from the amortization of the debt basis adjustment on fixed-rate debt previously hedged by terminated receive-fixed interest rate.
3 TheThere was no remaining cumulative unamortized basis adjustment from previouslyfor terminated or redesignated fair value hedges of debt at March 31, 2022 is $02023 and March 31, 2022. There was $10 million and $7 million of terminated fair value debt and asset hedges, respectively, compared with $9 million and $7 million as of March 31, 2021. The remaining basis adjustment for terminated fair value debt hedges was fully amortized during the first quarter of 2022. The amortization of the cumulative unamortized basis adjustmentadjustments from assetterminated or redesignated fair value hedges is not shown in the schedules because it is not significant.of assets at March 31, 2023 and March 31, 2022, respectively.
The amount of gains (losses) recognized from derivatives not designated as accounting hedges is summarized as follows:
| | | Other Noninterest Income/(Expense) | | | Other Noninterest Income/(Expense) | |
(In millions) | (In millions) | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | | (In millions) | Three Months Ended March 31, 2023 | | | Three Months Ended March 31, 2022 | |
Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | | | Derivatives not designated as hedging instruments: | | | | | |
Customer-facing interest rate derivatives | Customer-facing interest rate derivatives | $ | (268) | | | $ | (182) | | | Customer-facing interest rate derivatives | $ | 1 | | | | $ | 13 | | |
Offsetting interest rate derivatives | 281 | | | 206 | | | |
Other interest rate derivatives | Other interest rate derivatives | 1 | | | (4) | | | Other interest rate derivatives | 1 | | | | 1 | | |
| Foreign exchange derivatives | Foreign exchange derivatives | 6 | | | 5 | | | Foreign exchange derivatives | 7 | | | | 6 | | |
Total derivatives not designated as hedging instruments | Total derivatives not designated as hedging instruments | $ | 20 | | | $ | 25 | | | Total derivatives not designated as hedging instruments | $ | 9 | | | | $ | 20 | | |
The following schedule presents derivatives used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the periods presented. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gain/(loss) recorded in income | | | | |
| Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | | | | |
(In millions) | Derivatives 2 | | Hedged items | | Total income statement impact | | Derivatives 2 | | Hedged items | | Total income statement impact | | | | |
| | | | | | | | | | | | | | | |
Debt: Receive-fixed interest rate swaps 1, 2 | $ | (32) | | | $ | 32 | | | $ | — | | | $ | (35) | | | $ | 35 | | | $ | — | | | | | |
Assets: Pay-fixed interest rate swaps 1, 2 | 53 | | | (53) | | | — | | | 48 | | | (48) | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gain/(loss) recorded in income | | | | |
| Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 | | | | |
(In millions) | Derivatives 2 | | Hedged items | | Total income statement impact | | Derivatives 2 | | Hedged items | | Total income statement impact | | | | |
| | | | | | | | | | | | | | | |
Debt: Receive-fixed interest rate swaps 1, 2 | $ | 12 | | | $ | (12) | | | $ | — | | | $ | (32) | | | $ | 32 | | | $ | — | | | | | |
Assets: Pay-fixed interest rate swaps 1, 2 | 40 | | | (40) | | | — | | | 53 | | | (53) | | | — | | | | | |
1 Consists of hedges of benchmark interest rate risk of fixed-rate long-term debt and fixed-rate AFS securities. Gains and losses were recorded in net interest expense or income consistent with the hedged items.
2 The income/expense for derivatives does not reflect interest income/expense from periodic accruals and payments to be consistent with the presentation of the gains/(losses) on the hedged items.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule provides information regarding basis adjustments for hedged items.
| | | Par value of hedged assets/(liabilities) | | Carrying amount of the hedged assets/(liabilities)1 | | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item | | Par value of hedged assets/(liabilities) | | Carrying amount of the hedged assets/(liabilities) 1 | | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item |
(In millions) | (In millions) | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | | March 31, 2022 | | December 31, 2021 | (In millions) | March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 |
| Long-term fixed-rate debt | Long-term fixed-rate debt | $ | (500) | | | $ | (500) | | | $ | (474) | | | $ | (507) | | | $ | 26 | | | $ | (7) | | Long-term fixed-rate debt | $ | (500) | | | $ | (500) | | | $ | (447) | | | $ | (435) | | | $ | 53 | | | $ | 65 | |
Fixed-rate AFS securities | Fixed-rate AFS securities | 990 | | | 479 | | | 894 | | | 435 | | | (96) | | | (44) | | Fixed-rate AFS securities | 1,227 | | | 1228 | | | 1,001 | | | 962 | | | (227) | | | (266) | |
|
1 Carrying amounts displayed above exclude (1) issuance and purchase discounts or premiums, (2) unamortized issuance and acquisition costs, and (3) amounts related to terminated fair value hedges.
8. LEASES
We have operating and finance leases for branches, corporate offices, and data centers. We do not have significant equipment leases. At March 31, 2022,2023, we had 416 412 branches, of which 273277 are owned and 143135 are leased. We lease our headquarters in Salt Lake City, Utah. The remaining maturities of our lease commitments range from the year 20222023 to 2062, and some lease arrangements include options to extend or terminate the leases.
All leases with lease terms greater than twelve months are reported as a lease liability with a corresponding right-of-use (“ROU”) asset. We present ROU assets for operating leases and finance leases on the consolidated balance sheet in “Other“Other assets,” and “Premises,“Premises, equipment and software, net,” respectively. The corresponding liabilities for those leases are presented in “Other“Other liabilities,” and “Long-term debt.“Long-term debt.” For more information about our lease policies, see Note 8 of our 20212022 Form 10-K.
The following schedule presents ROU assets and lease liabilities with associated weighted average remaining life and discount rate:rate.
| (Dollar amounts in millions) | (Dollar amounts in millions) | March 31, 2022 | | December 31, 2021 | (Dollar amounts in millions) | March 31, 2023 | | December 31, 2022 |
Operating leases | Operating leases | | | | Operating leases | | | |
ROU assets, net of amortization | ROU assets, net of amortization | $ | 188 | | $ | 195 | ROU assets, net of amortization | $ | 174 | | $ | 173 |
Lease liabilities | Lease liabilities | 215 | | 222 | Lease liabilities | 199 | | 198 |
Financing leases | | |
Finance leases | | Finance leases | |
ROU assets, net of amortization | ROU assets, net of amortization | 4 | | 4 | ROU assets, net of amortization | 3 | | 4 |
Lease liabilities | Lease liabilities | 4 | | 4 | Lease liabilities | 4 | | 4 |
Weighted average remaining lease term (years) | Weighted average remaining lease term (years) | | Weighted average remaining lease term (years) | |
Operating leases | Operating leases | 8.5 | | 8.5 | Operating leases | 8.6 | | 8.4 |
Finance leases | Finance leases | 18.1 | | 18.3 | Finance leases | 17.1 | | 17.4 |
Weighted average discount rate | Weighted average discount rate | | Weighted average discount rate | |
Operating leases | Operating leases | 2.8 | % | | 2.8 | % | Operating leases | 3.0 | % | | 2.9 | % |
Finance leases | Finance leases | 3.1 | % | | 3.1 | % | Finance leases | 3.1 | % | | 3.1 | % |
Additional information related to lease expense is presented below:in the following schedule.
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
(In millions) | (In millions) | 2022 | | 2021 | | (In millions) | 2023 | | 2022 | |
| Lease expense: | Lease expense: | | | Lease expense: | | | | |
Operating lease expense | Operating lease expense | $ | 12 | | | $ | 12 | | | Operating lease expense | $ | 11 | | | $ | 12 | | |
| Other expenses associated with operating leases 1 | Other expenses associated with operating leases 1 | 12 | | | 12 | | | Other expenses associated with operating leases 1 | 15 | | | 12 | | |
| Total lease expense | Total lease expense | $ | 24 | | | $ | 24 | | | Total lease expense | $ | 26 | | | $ | 24 | | |
| Related cash disbursements from operating leases | Related cash disbursements from operating leases | $ | 12 | | | $ | 12 | | | Related cash disbursements from operating leases | $ | 12 | | | $ | 12 | | |
1 Other expenses primarily relate to property taxes and building and property maintenance.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ROU assets related to new leases totaled $1 million at both March 31, 2022 and December 31, 2021.
TotalThe following schedule presents the total contractual undiscounted lease payments for operating lease liabilities are summarized in the following schedule by expected due date:date for each of the next five years.
| (In millions) | (In millions) | Total undiscounted lease payments | (In millions) | Total undiscounted lease payments |
| 2022 1 | $ | 37 | | |
2023 | 45 | | |
2023 1 | | 2023 1 | $ | 35 | |
2024 | 2024 | 36 | | 2024 | 39 | |
2025 | 2025 | 26 | | 2025 | 31 | |
2026 | 2026 | 21 | | 2026 | 26 | |
2027 | | 2027 | 17 | |
Thereafter | Thereafter | 83 | | Thereafter | 85 | |
Total | Total | $ | 248 | | Total | $ | 233 | |
1 Contractual maturities for the nine months remaining in 2022.2023.
We enter into certain lease agreements where we are the lessor of real estate. Real estate leases are made from bank-owned and subleased property to generate cash flow from the property, including from leasing vacant suites in which we occupy portions of the building. Operating lease income was $3$3 million for both the first quarter of 20222023 and 2021.2022.
We originated equipment leases, considered to be sales-type leases or direct financing leases, totaling $318$385 million and $327$386 million at March 31, 20222023 and December 31, 2021,2022, respectively. We recorded income of$4 million and $3 million on these leases for both the first quarterthree months of 2023 and 2022, and 2021.respectively.
9. LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY
Long-Term Debt
The long-term debt carrying values in the following schedule represent the par value of the debt, adjusted for any unamortized premium or discount, unamortized debt issuance costs, and basis adjustments for interest rate swaps designated as fair value hedges.
LONG-TERM DEBT
| (In millions) | (In millions) | March 31, 2022 | | December 31, 2021 | | Amount change | | Percent change | (In millions) | March 31, 2023 | | December 31, 2022 | |
| | Subordinated notes | $ | 557 | | | $ | 590 | | | $ | (33) | | | (6) | % | |
Subordinated notes 1 | | Subordinated notes 1 | $ | 531 | | | $ | 519 | | |
Senior notes | Senior notes | 128 | | | 418 | | | (290) | | | (69) | | Senior notes | 128 | | | 128 | | |
| Finance lease obligations | Finance lease obligations | 4 | | | 4 | | | — | | | — | | Finance lease obligations | 4 | | | 4 | | |
Total | Total | $ | 689 | | | $ | 1,012 | | | $ | (323) | | | (32) | % | Total | $ | 663 | | | $ | 651 | | |
1 The decreasechange in long-term debt wasthe subordinated notes balance is primarily due to the redemption of $290 million of the 4-year, 3.35% senior notes during the first quarter of 2022.a fair value hedge accounting adjustment. See also Note 7.
Common StockShareholders' Equity
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At March 31, 2022,2023, there were 151.3148.1 million shares of $0.001$0.001 par value common stock outstanding. Common stock and additional paid-in capital totaled $1.9 billion at March 31, 2022, which decreased $39 million, or 2%, to $1.7 billion at March 31, 2023, from December 31, 2021,2022, primarily due to common stock repurchases. During the first three months of 2022,2023, we repurchased 0.80.9 million common shares outstanding for $50$50 million at an average price of $65.31$52.82 per share.
AOCI was $2.9 billion at March 31, 2023, and reflects the decline in the fair value of fixed-rate available-for-sale securities as a result of changes in interest rates. The following schedule summarizes the changes in AOCI by component.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Accumulated Other Comprehensive Income (Loss) | | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | Net unrealized gains/(losses) on investment securities | | Net unrealized gains/(losses) on derivatives and other | | Pension and post-retirement | | Total |
Three Months Ended March 31, 2023 | | | | | | | |
Balance at December 31, 2022 | $ | (2,800) | | | $ | (311) | | | $ | (1) | | | $ | (3,112) | |
OCI before reclassifications, net of tax | 126 | | | 29 | | | — | | | 155 | |
Amounts reclassified from AOCI, net of tax | — | | | 37 | | | — | | | 37 | |
Other comprehensive income | 126 | | | 66 | | | — | | | 192 | |
Balance at March 31, 2023 | $ | (2,674) | | | $ | (245) | | | $ | (1) | | | $ | (2,920) | |
Income tax expense included in OCI | $ | 41 | | | $ | 22 | | | $ | — | | | $ | 63 | |
Three Months Ended March 31, 2022 | | | | | | | |
Balance at December 31, 2021 | $ | (78) | | | $ | — | | | $ | (2) | | | $ | (80) | |
OCI (loss) before reclassifications, net of tax | (1,121) | | | (135) | | | — | | | (1,256) | |
Amounts reclassified from AOCI, net of tax | — | | | (10) | | | — | | | (10) | |
Other comprehensive loss | (1,121) | | | (145) | | | — | | | (1,266) | |
Balance at March 31, 2022 | $ | (1,199) | | | $ | (145) | | | $ | (2) | | | $ | (1,346) | |
Income tax benefit included in OCI (loss) | $ | (363) | | | $ | (47) | | | $ | — | | | $ | (410) | |
Accumulated other comprehensive income (loss) decreased to a loss of $1.3 billion at March 31, 2022, primarily due to decreases in the fair value of fixed-rate available-for-sale securities as a result of changes in interest rates. Changes in AOCI by component are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
(In millions) | Net unrealized gains (losses) on investment securities | | Net unrealized gains (losses) on derivatives and other | | Pension and post-retirement | | Total |
Three Months Ended March 31, 2022 | | | | | | | |
Balance at December 31, 2021 | $ | (78) | | | $ | — | | | $ | (2) | | | $ | (80) | |
OCI (loss) before reclassifications, net of tax | (1,121) | | | (135) | | | — | | | (1,256) | |
Amounts reclassified from AOCI, net of tax | — | | | (10) | | | — | | | (10) | |
Other comprehensive loss | (1,121) | | | (145) | | | — | | | (1,266) | |
Balance at March 31, 2022 | $ | (1,199) | | | $ | (145) | | | $ | (2) | | | $ | (1,346) | |
Income tax benefit included in OCI (loss) | $ | (363) | | | $ | (47) | | | $ | — | | | $ | (410) | |
Three Months Ended March 31, 2021 | | | | | | | |
Balance at December 31, 2020 | $ | 258 | | | $ | 69 | | | $ | (2) | | | $ | 325 | |
OCI (loss) before reclassifications, net of tax | (165) | | | (1) | | | — | | | (166) | |
Amounts reclassified from AOCI, net of tax | — | | | (11) | | | — | | | (11) | |
Other comprehensive income (loss) | (165) | | | (12) | | | — | | | (177) | |
Balance at March 31, 2021 | $ | 93 | | | $ | 57 | | | $ | (2) | | | $ | 148 | |
Income tax benefit included in OCI (loss) | $ | (53) | | | $ | (4) | | | $ | — | | | $ | (57) | |
| | | Amounts reclassified from AOCI 1 | | | Statement of income (SI) | | | Amounts reclassified from AOCI 1 | | Statement of income (SI) | |
(In millions) | (In millions) | | Three Months Ended March 31, | | | (In millions) | | Three Months Ended March 31, | | |
Details about AOCI components | Details about AOCI components | | 2022 | | 2021 | | | Affected line item | Details about AOCI components | | 2023 | | | Statement of income (SI) | | | Affected line item |
| | | Net unrealized gains on derivative instruments | | $ | 14 | | | $ | 15 | | | | SI | | Interest and fees on loans | |
Income tax expense | | 4 | | | 4 | | | | |
Net unrealized gains (losses) on derivative instruments | | Net unrealized gains (losses) on derivative instruments | | $ | (49) | | | $ | 14 | | | | SI | | Interest and fees on loans |
Less: Income tax expense (benefit) | | Less: Income tax expense (benefit) | | (12) | | | 4 | | | |
Amounts reclassified from AOCI | Amounts reclassified from AOCI | | $ | 10 | | | $ | 11 | | | | Amounts reclassified from AOCI | | $ | (37) | | | $ | 10 | | | |
1 Positive reclassification amounts indicate increases to earnings in the income statement.
10. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES
Commitments and Guarantees
Off-balanceThe following schedule presents the contractual amounts related to off-balance sheet financial obligationsinstruments used to meet the financing needs of our customers include the following:customers.
| (In millions) | (In millions) | March 31, 2022 | | December 31, 2021 | (In millions) | March 31, 2023 | | December 31, 2022 |
| Unfunded lending commitments 1 | Unfunded lending commitments 1 | $ | 26,391 | | | $ | 25,797 | | Unfunded lending commitments 1 | $ | 29,907 | | | $ | 29,628 | |
Standby letters of credit: | Standby letters of credit: | | Standby letters of credit: | |
Financial | Financial | 589 | | | 597 | | Financial | 633 | | | 667 | |
Performance | Performance | 255 | | | 245 | | Performance | 169 | | | 184 | |
Commercial letters of credit | Commercial letters of credit | 18 | | | 22 | | Commercial letters of credit | 14 | | | 11 | |
Mortgage-backed security purchase agreements 2 | | Mortgage-backed security purchase agreements 2 | 47 | | | 23 | |
Total unfunded commitments | Total unfunded commitments | $ | 27,253 | | | $ | 26,661 | | Total unfunded commitments | $ | 30,770 | | | $ | 30,513 | |
1 Net of participations.
2 Represents agreements with Farmer Mac to purchase securities backed by certain agricultural mortgage loans.
For more information about these commitments and guarantees including their terms and collateral requirements, see Note 16 of our 2022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Our 2021 Form 10-K contains further information about these commitments and guarantees including their terms and collateral requirements. At March 31, 2022, the liability for the guarantees associated with the standby letters of credit was $4 million, which consisted of $2 million attributable to the RULC, and $2 million of deferred commitment fees.
Legal Matters
We are subject toinvolved in various legal proceedings, which may include litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations, and other actions brought or considered by governmental and self-regulatory agencies. Litigation may relate to lending, deposit and other customer relationships, vendor and contractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. While most matters relate to individual claims, we are also subject to putative class action claims and similar broader claims. Proceedings, investigations, examinations and other actions brought or considered by governmental and self-regulatory agencies may relate to our banking, investment advisory, trust, securities, and other products and services; our customers’ involvement in money laundering, fraud, securities violations and other illicit activities or our policies and practices relating to such customer activities; and our compliance with the broad range of banking, securities and other laws and regulations applicable to us. At any given time, we may be in the process of responding to subpoenas, requests for documents, data and testimony relating to such matters and engaging in discussions to resolve the matters.
At March 31, 2022,2023, we were subject to the following material litigation or governmental inquiries:
•a civil suit, JTS Communities, Inc. et. al v. CB&T, Jun Enkoji and Dawn Satow, brought against us in the Superior Court for Sacramento County, California in June 2017. In this case 4 investors in our former customer, International Manufacturing Group (“IMG”) seek to hold us liable for losses arising from their investments in that company, alleging that we conspired with and knowingly assisted IMG and its principal in furtherance of an alleged Ponzi scheme. In March 2022, the parties participated in mediation, which resulted in a binding settlement agreement. Our insurers are responsible for the payment of the settlement amount under applicable policies. The settlement is not expected to have a significant financial impact on the Bank.
•a civil class action lawsuit, Evans v. CB&T, brought against us in the United States District Court for the Eastern District of California in May 2017. This case was filed on behalf of a class of up to 50 investors in IMG and seeks to hold us liable for losses of class members arising from their investments in IMG, alleging that we conspired with and knowingly assisted IMG and its principal in furtherance of an alleged Ponzi scheme. In December 2017, the District Court dismissed all claims against the Bank. In January 2018, the plaintiff filed an appeal with the Court of Appeals for the Ninth Circuit. The appeal was heard in early April 2019 with the Court of Appeals reversing the trial court’s dismissal. In March 2022, the parties participated in mediation and an agreement was reached in principle. Our insurers are responsible for the payment of the settlement amount under applicable policies. The settlement agreement will be submitted to the court for its preliminary approval of the agreement and notification of the putative class. There can be no assurance that the proposed settlement will result in a definitive agreement, that the conditions to the settlement will be met or the settlement will be approved by the court. If completed, the proposed settlement is not expected to have a significant financial impact on the Bank.
•twoTwo civil cases, Lifescan Inc. and Johnson & Johnson Health Care Services v. Jeffrey Smith, et. al., brought against us in the United States District Court for the District of New Jersey in December 2017, and Roche Diagnostics and Roche Diabetes Care Inc. v. Jeffrey C. Smith, et. al., brought against us in the United States District Court for the District of New Jersey in March 2019. In these cases, certain manufacturers and distributors of medical products seek to hold us liable for allegedly fraudulent practices of a borrower of the Bank who filed for bankruptcy protection in 2017. The cases are in early phases, with initial motion practice and discovery underway in the Lifescan case. Trial has not been scheduled in either case.
•a civil class action lawsuit, Gregory, et. al. v. Zions Bancorporation, brought against us in the United States District Court for Utah in January 2019. This case was filed on behalf of investors in Rust Rare Coin, Inc., alleging that we aided and abetted a Ponzi scheme fraud perpetrated by Rust Rare Coin, a Zions Bank customer.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The case follows civil actions and the establishment of a receivership for Rust Rare Coin by The Commodities Futures Trading Commission and the Utah Division of Securities in November 2018, as well as a separate suit brought by the Securities and Exchange Commission (“SEC”) against Rust Rare Coin and its principal, Gaylen Rust. During the third quarter of 2020, the Court granted our motion to dismiss the plaintiffs' claims in part, dismissing claims relating to fraud and fiduciary duty, but allowing a claim for aiding and abetting conversion to proceed. On January 14, 2022, the parties notified the court they reached a settlement in principle and the parties are preparing to submit a proposed settlement agreement for the court’s preliminary approval of the agreement and notification of the putative class. There can be no assurance that the proposed settlement will result in a definitive agreement, that the conditions to the settlement will be met or the settlement will be approved by the court. If completed, the proposed settlement is not expected to have a significant financial impact on the Bank.
•Five civil class action cases have been filed against us by the same plaintiffs’ attorney, seeking to hold the Bank liable for practices relating to, and disclosures in, its deposit agreement pertaining to fees. Four of the five cases have been dismissed, and the following case remains pending and is in early phases of litigation: Sipple v. Zions Bancorporation,N.A. was, brought against us in the District Court of Clark County, Nevada in February 2021 with respect to foreign transaction fees. The following four cases pertain to insufficient fund fees
•Two class action lawsuits, Evans v. CB&T, and have similar or overlapping claims: WardGregory, et. al. v. Zions Bancorporation N.A. was brought against us, were settled in federal courtprinciple in 2022. The settlement in the District of Arizona in May 2021; thisEvans case was dismissed bycompleted in December 2022 and did not have a significant financial impact on the Bank. The parties to the Gregory case sought and obtained final court in February 2022, butapproval of the plaintiff has appealed. Thornton v. Zions Bancorporation, N.A. was brought against us in federal court in the District of Utahsettlement on April 24, 2023, with payment to occur in June 2021;2023. This settlement is not expected to have a significant financial impact on the attorney bringing this case took action to dismiss this case in February 2022. Christensen v. Zions Bancorporation, N.A. was brought against us in California state court in November 2021 and removed to federal court in the Southern District of California in January 2022. Covell v. Zions Bancorporation, N.A. was brought against us in federal court in the Southern District of California in April 2022. These cases are all in early phases of litigation.Bank.
At least quarterly, we review outstanding and new legal matters, utilizing then available information. In accordance with applicable accounting guidance, if we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. In the absence of such a determination, no accrual is made. Once established, accruals are adjusted to reflect developments relating to the matters.
In our review, we also assess whether we can determine the range of reasonably possible losses for significant matters in which we are unable to determine that the likelihood of a loss is remote. Because of the difficulty of predicting the outcome of legal matters, discussed subsequently, we are able to meaningfully estimate such a range only for a limited number of matters. Based on information available at March 31, 2022,2023, we estimated that the aggregate range of reasonably possible losses for those matters to be from $0 millionzero to roughly $10approximately $5 million in excess of amounts accrued. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which a meaningful estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.
Based on our current knowledge, we believe that our current estimated liability for litigation and other legal actions and claims, reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate and that liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
and claims for which an estimate as previously described is possible, will not have a material impact on our financial condition, results of operations, or cash flows. However, in light of the significant uncertainties involved in these matters, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our financial condition, results of operations, or cash flows for any given reporting period.
Any estimate or determination relating to the future resolution of litigation, arbitration, governmental or self-regulatory examinations, investigations or actions or similar matters is inherently uncertain and involves significant judgment. This is particularly true in the early stages of a legal matter, when legal issues and facts have not been well articulated, reviewed, analyzed, and vetted through discovery, preparation for trial or hearings, substantive and
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
productive mediation or settlement discussions, or other actions. It is also particularly true with respect to class action and similar claims involving multiple defendants, matters with complex procedural requirements or substantive issues or novel legal theories, and examinations, investigations and other actions conducted or brought by governmental and self-regulatory agencies, in which the normal adjudicative process is not applicable. Accordingly, we usually are unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely, or probable, or to estimate the amount or range of a probable or reasonably likely loss, until relatively late in the course of a legal matter, sometimes not until a number of years have elapsed. Accordingly, our judgments and estimates relating to claims will change from time to time in light of developments and actual outcomes will differ from our estimates. These differences may be material.
11. REVENUE RECOGNITION
We derive our revenue primarily from interest income on loans and securities, which wasrepresented approximately 79%80% of our total revenue in the first quarter of 2022.2023. Only noninterest income is considered to be revenue from contracts with customers in scope of ASC 606. For more information about our revenue recognition from contracts, see Note 17 of our 20212022 Form 10-K.
Disaggregation of Revenue
The schedule below presents noninterest income and net revenue by our operating business segments for the three months ended March 31, 20222023 and 2021. Certain prior period amounts have been reclassified to conform with the current period presentation, where applicable. These reclassifications did not affect net income or shareholders’ equity.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | Amegy | | CB&T |
(In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | | | | |
Commercial account fees | $ | 15 | | | $ | 11 | | | $ | 11 | | | $ | 10 | | | $ | 7 | | | $ | 6 | |
Card fees | 13 | | | 13 | | | 8 | | | 6 | | | 5 | | | 4 | |
Retail and business banking fees | 6 | | | 5 | | | 4 | | | 4 | | | 3 | | | 3 | |
| | | | | | | | | | | |
Capital markets and foreign exchange fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | 6 | | | 5 | | | 4 | | | 3 | | | 1 | | | 1 | |
Other customer-related fees | 2 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | |
Total noninterest income from contracts with customers (ASC 606) | 42 | | | 35 | | | 28 | | | 24 | | | 17 | | | 15 | |
Other noninterest income (non-ASC 606 customer-related) | 4 | | | 5 | | | 9 | | | 8 | | | 6 | | | 8 | |
Total customer-related noninterest income | 46 | | | 40 | | | 37 | | | 32 | | | 23 | | | 23 | |
Other noncustomer-related noninterest income | — | | | (1) | | | — | | | — | | | 1 | | | 1 | |
Total noninterest income | 46 | | | 39 | | | 37 | | | 32 | | | 24 | | | 24 | |
Other real estate owned gain from sale | — | | | — | | | — | | | — | | | — | | | — | |
Net interest income | 157 | | | 157 | | | 112 | | | 116 | | | 129 | | | 131 | |
Total income less interest expense | $ | 203 | | | $ | 196 | | | $ | 149 | | | $ | 148 | | | $ | 153 | | | $ | 155 | |
| | | | | | | | | | | |
2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | NBAZ | | NSB | | Vectra | | Zions Bank | | CB&T | | Amegy |
(In millions) | (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Commercial account fees | Commercial account fees | $ | 2 | | | $ | 2 | | | $ | 3 | | | $ | 2 | | | $ | 2 | | | $ | 2 | | Commercial account fees | $ | 14 | | | $ | 15 | | | $ | 7 | | | $ | 7 | | | $ | 14 | | | $ | 11 | |
Card fees | Card fees | 4 | | | 2 | | | 3 | | | 3 | | | 2 | | | 1 | | Card fees | 13 | | | 13 | | | 5 | | | 5 | | | 8 | | | 8 | |
Retail and business banking fees | Retail and business banking fees | 2 | | | 2 | | | 3 | | | 3 | | | 1 | | | 1 | | Retail and business banking fees | 5 | | | 6 | | | 3 | | | 3 | | | 3 | | | 4 | |
| Capital markets and foreign exchange fees | — | | | — | | | — | | | — | | | — | | | — | | |
Capital markets fees | | Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | Wealth management fees | 1 | | | 1 | | | 1 | | | 1 | | | — | | | — | | Wealth management fees | 6 | | | 6 | | | 1 | | | 1 | | | 4 | | | 4 | |
Other customer-related fees | Other customer-related fees | — | | | — | | | — | | | — | | | 1 | | | 1 | | Other customer-related fees | 2 | | | 2 | | | 1 | | | 1 | | | 2 | | | 1 | |
Total noninterest income from contracts with customers (ASC 606) | Total noninterest income from contracts with customers (ASC 606) | 9 | | | 7 | | | 10 | | | 9 | | | 6 | | | 5 | | Total noninterest income from contracts with customers (ASC 606) | 40 | | | 42 | | | 17 | | | 17 | | | 31 | | | 28 | |
Other noninterest income (non-ASC 606 customer-related) | Other noninterest income (non-ASC 606 customer-related) | 1 | | | 4 | | | 2 | | | 4 | | | 2 | | | 3 | | Other noninterest income (non-ASC 606 customer-related) | 7 | | | 4 | | | 5 | | | 6 | | | 8 | | | 9 | |
Total customer-related noninterest income | Total customer-related noninterest income | 10 | | | 11 | | | 12 | | | 13 | | | 8 | | | 8 | | Total customer-related noninterest income | 47 | | | 46 | | | 22 | | | 23 | | | 39 | | | 37 | |
Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 1 | | | — | | | — | | | — | | | — | | | — | | Other noncustomer-related noninterest income | 3 | | | — | | | 2 | | | 1 | | | 2 | | | — | |
Total noninterest income | Total noninterest income | 11 | | | 11 | | | 12 | | | 13 | | | 8 | | | 8 | | Total noninterest income | 50 | | | 46 | | | 24 | | | 24 | | | 41 | | | 37 | |
Other real estate owned gain from sale | — | | | — | | | — | | | — | | | — | | | — | | |
| Net interest income | Net interest income | 51 | | | 52 | | | 37 | | | 37 | | | 33 | | | 34 | | Net interest income | 185 | | | 157 | | | 160 | | | 129 | | | 124 | | | 112 | |
Total income less interest expense | $ | 62 | | | $ | 63 | | | $ | 49 | | | $ | 50 | | | $ | 41 | | | $ | 42 | | |
Total net revenue | | Total net revenue | $ | 235 | | | $ | 203 | | | $ | 184 | | | $ | 153 | | | $ | 165 | | | $ | 149 | |
| | | TCBW | | Other | | Consolidated Bank | | NBAZ | | NSB | | Vectra |
(In millions) | (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Commercial account fees | Commercial account fees | $ | 1 | | | $ | 1 | | | $ | — | | | $ | (2) | | | $ | 41 | | | $ | 32 | | Commercial account fees | $ | 2 | | | $ | 2 | | | $ | 3 | | | $ | 3 | | | $ | 2 | | | $ | 2 | |
Card fees | Card fees | — | | | — | | | 1 | | | — | | | 36 | | | 29 | | Card fees | 4 | | | 4 | | | 4 | | | 3 | | | 2 | | | 2 | |
Retail and business banking fees | Retail and business banking fees | — | | | — | | | — | | | (1) | | | 19 | | | 17 | | Retail and business banking fees | 2 | | | 2 | | | 3 | | | 3 | | | 1 | | | 1 | |
| Capital markets and foreign exchange fees | — | | | — | | | 1 | | | 2 | | | 1 | | | 2 | | |
Capital markets fees | | Capital markets fees | — | | | — | | | — | | | — | | | — | | | — | |
Wealth management fees | Wealth management fees | — | | | — | | | — | | | — | | | 13 | | | 11 | | Wealth management fees | 1 | | | 1 | | | 1 | | | 1 | | | — | | | — | |
Other customer-related fees | Other customer-related fees | — | | | — | | | 9 | | | 7 | | | 14 | | | 11 | | Other customer-related fees | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Total noninterest income from contracts with customers (ASC 606) | Total noninterest income from contracts with customers (ASC 606) | 1 | | | 1 | | | 11 | | | 6 | | | 124 | | | 102 | | Total noninterest income from contracts with customers (ASC 606) | 9 | | | 9 | | | 11 | | | 10 | | | 6 | | | 6 | |
Other noninterest income (non-ASC 606 customer-related) | Other noninterest income (non-ASC 606 customer-related) | — | | | — | | | 3 | | | (1) | | | 27 | | | 31 | | Other noninterest income (non-ASC 606 customer-related) | 1 | | | 1 | | | — | | | 2 | | | 1 | | | 2 | |
Total customer-related noninterest income | Total customer-related noninterest income | 1 | | | 1 | | | 14 | | | 5 | | | 151 | | | 133 | | Total customer-related noninterest income | 10 | | | 10 | | | 11 | | | 12 | | | 7 | | | 8 | |
Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | — | | | — | | | (11) | | | 36 | | | (9) | | | 36 | | Other noncustomer-related noninterest income | — | | | 1 | | | — | | | — | | | — | | | — | |
Total noninterest income | Total noninterest income | 1 | | | 1 | | | 3 | | | 41 | | | 142 | | | 169 | | Total noninterest income | 10 | | | 11 | | | 11 | | | 12 | | | 7 | | | 8 | |
Other real estate owned gain from sale | — | | | — | | | — | | | — | | | — | | | — | | |
| Net interest income | Net interest income | 14 | | | 13 | | | 11 | | | 5 | | | 544 | | | 545 | | Net interest income | 64 | | | 51 | | | 51 | | | 37 | | | 41 | | | 33 | |
Total income less interest expense | $ | 15 | | | $ | 14 | | | $ | 14 | | | $ | 46 | | | $ | 686 | | | $ | 714 | | |
Total net revenue | | Total net revenue | $ | 74 | | | $ | 62 | | | $ | 62 | | | $ | 49 | | | $ | 48 | | | $ | 41 | |
| | | | TCBW | | Other | | Consolidated Bank |
(In millions) | | (In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Commercial account fees | | Commercial account fees | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 43 | | | $ | 41 | |
Card fees | | Card fees | 1 | | | — | | | (1) | | | 1 | | | 36 | | | 36 | |
Retail and business banking fees | | Retail and business banking fees | — | | | — | | | (1) | | | — | | | 16 | | | 19 | |
| Capital markets fees | | Capital markets fees | — | | | — | | | 1 | | | 1 | | | 1 | | | 1 | |
Wealth management fees | | Wealth management fees | — | | | — | | | — | | | — | | | 13 | | | 13 | |
Other customer-related fees | | Other customer-related fees | — | | | — | | | 9 | | | 9 | | | 15 | | | 14 | |
Total noninterest income from contracts with customers (ASC 606) | | Total noninterest income from contracts with customers (ASC 606) | 2 | | | 1 | | | 8 | | | 11 | | | 124 | | | 124 | |
Other noninterest income (non-ASC 606 customer-related) | | Other noninterest income (non-ASC 606 customer-related) | — | | | — | | | 5 | | | 3 | | | 27 | | | 27 | |
Total customer-related noninterest income | | Total customer-related noninterest income | 2 | | | 1 | | | 13 | | | 14 | | | 151 | | | 151 | |
Other noncustomer-related noninterest income | | Other noncustomer-related noninterest income | — | | | — | | | 2 | | | (11) | | | 9 | | | (9) | |
Total noninterest income | | Total noninterest income | 2 | | | 1 | | | 15 | | | 3 | | | 160 | | | 142 | |
| Net interest income | | Net interest income | 16 | | | 14 | | | 38 | | | 11 | | | 679 | | | 544 | |
Total net revenue | | Total net revenue | $ | 18 | | | $ | 15 | | | $ | 53 | | | $ | 14 | | | $ | 839 | | | $ | 686 | |
Revenue from contracts with customers did not generate significant contract assets and liabilities. Contract receivables are included in “Other assets” on the consolidated balance sheet. Payment terms vary by services offered, and the timing between completion of performance obligations and payment is typicallygenerally not significant.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
12. INCOME TAXES
The effective income tax rate was 27.7% for the first quarter of 2023, compared with 20.4% for the first quarter of 2022, compared with 21.7% for the first quarter of 2021. These2022. The tax rates during both periods were reduced by nontaxable municipal interest income and nontaxable income from certain bank-owned life insurance (“BOLI”), and were increased by the non-deductibility of Federal Deposit Insurance Corporation (“FDIC”) premiums, certain executive compensation plans, and other fringe benefits. The tax rate for the first quarter 2022of 2023 was lower than the tax rate forhigher relative to the same prior year period, primarily as a result of a discrete item that affected the proportionalreserve for uncertain tax positions during the current quarter. Discrete items accounted for a four percentage point increase to the effective tax rate during the first quarter of 2023, compared with a two percentage point decrease in nontaxable items and tax credits relative to pretax book income.the prior year quarter.
At both March 31, 2023 and December 31, 2022, we had a net deferred tax asset (“DTA”) totaling $467 million, compared with $96 million at December 31, 2021.$1.1 billion. On the consolidated balance sheet, the net DTA is included in “Other assets.” The increase in the net DTA was driven largely by the increase in unrealized losses in AOCI associated with investment securities and derivative instruments, and was partially offset by the negative provision for credit losses and a decrease in deferred compensation.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
There was no valuation allowance at March 31, 2022 or December 31, 2021. We evaluate DTAs on a regular basis to determine whether a valuation allowance is required. In conducting this evaluation, we consider all available evidence, both positive and negative, based on the more-likely-than-not criteria that such assets will be realized. This evaluation includes, but is not limited to, (1) available carryback potential to prior tax years; (2) potential futurethe following:
•Future reversals of existing deferred tax liabilities which historically(“DTLs”) — These DTLs have a reversal pattern generally consistent with DTAs; (3) potentialDTAs, and are used to realize the DTAs.
•Tax planning strategies — We have considered prudent and feasible tax planning strategies; and (4) futurestrategies that we would implement to preserve the value of the DTAs, if necessary.
•Future projected taxable income. income — We expect future taxable income will offset the reversal of remaining net DTAs.
Based on this evaluation, we concluded that a valuation allowance was not required at both March 31, 2023 and December 31, 2022.
13. NET EARNINGS PER COMMON SHARE
Basic and diluted net earnings per common share based on the weighted average outstanding shares are summarized as follows:
| | | Three Months Ended March 31, | | | Three Months Ended March 31, | |
(In millions, except shares and per share amounts) | (In millions, except shares and per share amounts) | 2022 | | 2021 | | (In millions, except shares and per share amounts) | 2023 | | 2022 | |
Basic: | Basic: | | | | | Basic: | | | | |
Net income | Net income | $ | 203 | | | $ | 322 | | | Net income | $ | 204 | | | $ | 203 | | |
Less common and preferred dividends | Less common and preferred dividends | 66 | | | 64 | | | Less common and preferred dividends | 67 | | | 66 | | |
| Undistributed earnings | Undistributed earnings | 137 | | | 258 | | | Undistributed earnings | 137 | | | 137 | | |
Less undistributed earnings applicable to nonvested shares | Less undistributed earnings applicable to nonvested shares | 1 | | | 2 | | | Less undistributed earnings applicable to nonvested shares | 1 | | | 1 | | |
Undistributed earnings applicable to common shares | Undistributed earnings applicable to common shares | 136 | | | 256 | | | Undistributed earnings applicable to common shares | 136 | | | 136 | | |
Distributed earnings applicable to common shares | Distributed earnings applicable to common shares | 57 | | | 56 | | | Distributed earnings applicable to common shares | 61 | | | 57 | | |
Total earnings applicable to common shares | Total earnings applicable to common shares | $ | 193 | | | $ | 312 | | | Total earnings applicable to common shares | $ | 197 | | | $ | 193 | | |
Weighted average common shares outstanding (in thousands) | Weighted average common shares outstanding (in thousands) | 151,285 | | | 163,551 | | | Weighted average common shares outstanding (in thousands) | 148,015 | | | 151,285 | | |
Net earnings per common share | Net earnings per common share | $ | 1.27 | | | $ | 1.90 | | | Net earnings per common share | $ | 1.33 | | | $ | 1.27 | | |
Diluted: | Diluted: | | | | | Diluted: | | |
Total earnings applicable to common shares | Total earnings applicable to common shares | $ | 193 | | | $ | 312 | | | Total earnings applicable to common shares | $ | 197 | | | $ | 193 | | |
Weighted average common shares outstanding (in thousands) | Weighted average common shares outstanding (in thousands) | 151,285 | | | 163,551 | | | Weighted average common shares outstanding (in thousands) | 148,015 | | | 151,285 | | |
| Dilutive effect of stock options (in thousands) | Dilutive effect of stock options (in thousands) | 402 | | | 336 | | | Dilutive effect of stock options (in thousands) | 23 | | | 402 | | |
Weighted average diluted common shares outstanding (in thousands) | Weighted average diluted common shares outstanding (in thousands) | 151,687 | | | 163,887 | | | Weighted average diluted common shares outstanding (in thousands) | 148,038 | | | 151,687 | | |
Net earnings per common share | Net earnings per common share | $ | 1.27 | | | $ | 1.90 | | | Net earnings per common share | $ | 1.33 | | | $ | 1.27 | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the weighted average stock awards that were anti-dilutive and not included in the calculation of diluted earnings per share:
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In thousands) | 2022 | | 2021 | | | | |
| | | | | | | |
Restricted stock and restricted stock units | 1,339 | | | 1,414 | | | | | |
Stock options | 109 | | | 377 | | | | | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
(In thousands) | 2023 | | 2022 | | | | |
| | | | | | | |
Restricted stock and restricted stock units | 1,334 | | | 1,339 | | | | | |
Stock options | 1,230 | | | 109 | | | | | |
14. OPERATING SEGMENT INFORMATION
We manage our operations with a primary focus on geographic area. We conduct our operations primarily through 7seven separately managed affiliate banks, each with its own local branding and management team, including Zions Bank, Amegy Bank, California Bank & Trust, Amegy Bank, National Bank of Arizona, Nevada State Bank, Vectra Bank Colorado, and The Commerce Bank of Washington. These affiliate banks comprise our primary business segments. Performance assessment and resource allocation are based upon this geographic structure. TheOur affiliate banks are supported by an enterprise operating segment identified(referred to as the “Other” segment) that provides governance and risk management, allocates capital, establishes strategic objectives, and includes certain non-bank financial service subsidiaries, centralized technology, back-office functions, and eliminationscertain lines of transactions between segments.business not operated through our affiliate banks.
We allocate the cost of centrally provided services to the business segments based upon estimated or actual usage of those services. We also allocate capital based on the risk-weighted assets held at each business segment. We use an
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
internal funds transfer pricing (“FTP”) allocation system and process to report results of operations for business segments, whichsegments. This process is continually refined.subject to change and refinement over time. Total average loans and deposits presented for the business segments include insignificant intercompany amounts between business segments and may also include deposits with the “Other” segment.
At March 31, 2022,2023, Zions Bank operated 9695 branches in Utah, 25 branches in Idaho, and 1one branch in Wyoming. CB&T operated 77 branches in California. Amegy operated 75 branches in Texas. CB&T operated 82 branches in California. NBAZ operated 56 branches in Arizona. NSB operated 4346 branches in Nevada. Vectra operated 3433 branches in Colorado and 1one branch in New Mexico. TCBW operated 2two branches in Washington and 1one branch in Oregon.
Transactions between business segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. The following schedule presents average loans, average deposits, and income before income taxes because we use these metrics when evaluating performance and making decisions pertaining to the business segments. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the “Other” segment.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents selected operating segment information for the three months ended March 31, 20222023 and 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | Amegy | | CB&T |
(In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 157 | | | $ | 157 | | | $ | 112 | | | $ | 116 | | | $ | 129 | | | $ | 131 | |
Provision for credit losses | (2) | | | (11) | | | (27) | | | (53) | | | 6 | | | (37) | |
Net interest income after provision for credit losses | 159 | | | 168 | | | 139 | | | 169 | | | 123 | | | 168 | |
Noninterest income | 46 | | | 39 | | | 37 | | | 32 | | | 24 | | | 24 | |
Noninterest expense | 123 | | | 117 | | | 86 | | | 85 | | | 84 | | | 80 | |
Income (loss) before income taxes | $ | 82 | | | $ | 90 | | | $ | 90 | | | $ | 116 | | | $ | 63 | | | $ | 112 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 12,817 | | | $ | 13,730 | | | $ | 11,795 | | | $ | 12,704 | | | $ | 12,845 | | | $ | 13,051 | |
Total average deposits | 26,120 | | | 21,711 | | | 16,413 | | | 14,243 | | | 16,468 | | | 15,183 | |
| | | | | | | | | | | |
| NBAZ | | NSB | | Vectra |
(In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 51 | | | $ | 52 | | | $ | 37 | | | $ | 37 | | | $ | 33 | | | $ | 34 | |
Provision for credit losses | (4) | | | (10) | | | (3) | | | (18) | | | (4) | | | — | |
Net interest income after provision for credit losses | 55 | | | 62 | | | 40 | | | 55 | | | 37 | | | 34 | |
Noninterest income | 11 | | | 11 | | | 12 | | | 13 | | | 8 | | | 8 | |
Noninterest expense | 40 | | | 38 | | | 37 | | | 36 | | | 30 | | | 28 | |
Income (loss) before income taxes | $ | 26 | | | $ | 35 | | | $ | 15 | | | $ | 32 | | | $ | 15 | | | $ | 14 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 4,774 | | | $ | 5,108 | | | $ | 2,817 | | | $ | 3,247 | | | $ | 3,398 | | | $ | 3,451 | |
Total average deposits | 7,953 | | | 6,544 | | | 7,437 | | | 6,069 | | | 4,298 | | | 4,279 | |
| | | | | | | | | | | |
| TCBW | | Other | | Consolidated Bank |
(In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 14 | | | $ | 13 | | | $ | 11 | | | $ | 5 | | | $ | 544 | | | $ | 545 | |
Provision for credit losses | — | | | (3) | | | 1 | | | — | | | (33) | | | (132) | |
Net interest income after provision for credit losses | 14 | | | 16 | | | 10 | | | 5 | | | 577 | | | 677 | |
Noninterest income | 1 | | | 1 | | | 3 | | | 41 | | | 142 | | | 169 | |
Noninterest expense | 6 | | | 6 | | | 58 | | | 45 | | | 464 | | | 435 | |
Income (loss) before income taxes | $ | 9 | | | $ | 11 | | | $ | (45) | | | $ | 1 | | | $ | 255 | | | $ | 411 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 1,591 | | | $ | 1,573 | | | $ | 896 | | | $ | 801 | | | $ | 50,933 | | | $ | 53,665 | |
Total average deposits | 1,581 | | | 1,398 | | | 1,335 | | | 2,019 | | | 81,605 | | | 71,446 | |
2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | CB&T | | Amegy |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 185 | | | $ | 157 | | | $ | 160 | | | $ | 129 | | | $ | 124 | | | $ | 112 | |
Provision for credit losses | 24 | | | (2) | | | — | | | 6 | | | 11 | | | (27) | |
Net interest income after provision for credit losses | 161 | | | 159 | | | 160 | | | 123 | | | 113 | | | 139 | |
Noninterest income | 50 | | | 46 | | | 24 | | | 24 | | | 41 | | | 37 | |
Noninterest expense | 135 | | | 123 | | | 92 | | | 84 | | | 98 | | | 86 | |
Income (loss) before income taxes | $ | 76 | | | $ | 82 | | | $ | 92 | | | $ | 63 | | | $ | 56 | | | $ | 90 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 13,978 | | | $ | 12,817 | | | $ | 14,016 | | | $ | 12,845 | | | $ | 12,844 | | | $ | 11,795 | |
Total average deposits | 20,953 | | | 26,120 | | | 14,644 | | | 16,468 | | | 13,287 | | | 16,413 | |
| | | | | | | | | | | |
| NBAZ | | NSB | | Vectra |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 64 | | | $ | 51 | | | $ | 51 | | | $ | 37 | | | $ | 41 | | | $ | 33 | |
Provision for credit losses | (1) | | | (4) | | | 4 | | | (3) | | | 3 | | | (4) | |
Net interest income after provision for credit losses | 65 | | | 55 | | | 47 | | | 40 | | | 38 | | | 37 | |
Noninterest income | 10 | | | 11 | | | 11 | | | 12 | | | 7 | | | 8 | |
Noninterest expense | 47 | | | 40 | | | 41 | | | 37 | | | 33 | | | 30 | |
Income (loss) before income taxes | $ | 28 | | | $ | 26 | | | $ | 17 | | | $ | 15 | | | $ | 12 | | | $ | 15 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 5,150 | | | $ | 4,774 | | | $ | 3,327 | | | $ | 2,817 | | | $ | 3,983 | | | $ | 3,398 | |
Total average deposits | 7,179 | | | 7,953 | | | 6,972 | | | 7,437 | | | 3,707 | | | 4,298 | |
| | | | | | | | | | | |
| TCBW | | Other | | Consolidated Bank |
(In millions) | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
Net interest income | $ | 16 | | | $ | 14 | | | $ | 38 | | | $ | 11 | | | $ | 679 | | | $ | 544 | |
Provision for credit losses | 2 | | | — | | | 2 | | | 1 | | | 45 | | | (33) | |
Net interest income after provision for credit losses | 14 | | | 14 | | | 36 | | | 10 | | | 634 | | | 577 | |
Noninterest income | 2 | | | 1 | | | 15 | | | 3 | | | 160 | | | 142 | |
Noninterest expense | 6 | | | 6 | | | 60 | | | 58 | | | 512 | | | 464 | |
Income (loss) before income taxes | $ | 10 | | | $ | 9 | | | $ | (9) | | | $ | (45) | | | $ | 282 | | | $ | 255 | |
SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
Total average loans | $ | 1,711 | | | $ | 1,591 | | | $ | 1,144 | | | $ | 896 | | | $ | 56,153 | | | $ | 50,933 | |
Total average deposits | 1,383 | | | 1,581 | | | 2,031 | | | 1,335 | | | 70,156 | | | 81,605 | |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate and market risks are among theOur most significant risks regularly undertaken by us, and they are closely monitored as previously discussed. A discussion regarding our management ofinclude interest rate and market risk, is included inwhich are closely monitored by management as previously discussed. For more information regarding interest rate and market risk, see the section entitled “Interest Rate and Market Risk Management” section in this Form 10-Q.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation ofincluding our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures at March 31, 2022.2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2022.2023. There were no changes in our internal control over financial reporting during the first quarter of 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information contained in Note 10 of the Notes to Consolidated Financial Statements is incorporated by reference herein.
ITEM 1A. RISK FACTORS
We amend the following two risk factors discussed in Part I, Item 1A. Risk Factors in our 2022 Form 10-K:
Changes in levels and sources of liquidity and capital, including the resulting effects of recent events in the banking industry, may limit our operations and potential growth.
Our primary source of liquidity is deposits from our customers, which may be impacted by market-related forces such as increased competition for these deposits and a variety of other factors. Deposits across the banking industry have been declining in recent quarters in large part due to the increased interest rate environment following the collapse of Silicon Valley Bank and Signature Bank. We, like many other banks, experienced some deposit outflows as customers spread deposits among several different banks to maximize their amount of FDIC insurance, moved deposits to banks deemed “too big to fail,” or removed deposits from the U.S. financial system entirely. Customers with uninsured deposits may be more likely to withdraw funds, particularly if there is negative news surrounding us or perceived risks regarding our safety and soundness. If we are unable to continue to fund assets through customer bank deposits or access funding sources on favorable terms, or if we suffer an increase in borrowing costs or otherwise fail to manage liquidity effectively, our liquidity, operating margins, financial condition and results of operations may be materially and adversely affected.
The Federal Reserve's tightened monetary policy may contribute to a decline in the value of our fixed-rate loans and investment securities that are pledged as collateral to support short-term borrowings, and other economic conditions may also affect our liquidity and efforts to manage associated risks. The FHLB system and Federal Reserve have been, and continue to be, a significant source of additional liquidity and funding. Changes in FHLB funding programs could adversely affect our liquidity and management of associated risks.
Problems encountered by other financial institutions could adversely affect financial markets generally and have indirect adverse effects on us.
The soundness and stability of many financial institutions may be closely interrelated as a result of credit, trading, clearing, or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, and exchanges, with which we interact on a daily basis, and therefore, could adversely affect us.This phenomenon has been evident in the recent events affecting the banking industry, as financial institutions, like us, have been impacted by concerns regarding the soundness or creditworthiness of other financial institutions. This has caused substantial and cascading disruption within the financial markets, increased expenses, and adversely impacted the market price and volatility of our common stock.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following risk factor supplements the risk factors discloseddiscussed in Part I, Item 1A. Risk Factors in our 20212022 Form 10-K.10-K:
The Russian invasion of Ukrainedebt ceiling political battle in Washington D.C. may introduce additional volatility in the U.S. economy including capital and credit markets and the retaliatory measures imposed bybanking industry in particular.
The U.S. government is expected to hit its debt ceiling in June 2023, and currently, the U.S., U.K., European Union and other countriesBiden administration and the responsesRepublican-controlled House of RussiaRepresentatives are at a stalemate.Protracted negotiations concerning the debt ceiling, the government’s failure or expected failure to such measures have caused significantraise the ceiling, or the possibility of a government shutdown, including the risk of a U.S. credit rating downgrade or default, may introduce additional volatility in the U.S. economy, including capital and credit markets and the banking industry in particular. This may cause disruptions to domestic and foreign economies.
The Russia and Ukraine conflict has created new risks for globalin the financial markets, trade, economic conditions, cybersecurity, and similar concerns. For example, the conflict could affect the availability and price of commodities and products, adversely affecting supply chains and increasing inflationary pressures; the value of currencies,impact interest rates, and other components of financial markets; and, if the conflict escalates, cyberattacks that could result in severe costsother potential unforeseen consequences. In such an event, our liquidity, operating margins, financial condition and disruptions to governmental entitiesresults of operations may be materially and companies and their operations. The impact of the conflict and retaliatory measures is continually evolving and cannot be predicted with certainty. It is likely that the conflict will continue to affect the global political order and global and domestic markets for a substantial period of time, regardless of when the conflict itself ends.
While these events have not materially interrupted our operations, these or future developments resulting from the Russia and Ukraine conflict, such as cyberattacks on the U.S., us, our customers, or our vendors, could make it difficult to conduct business activities for us, our customers, or our vendors.adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following schedule summarizes our share repurchases for the first quarter of 2022:2023:
SHARE REPURCHASES
| Period | Period | | Total number of shares repurchased 1 | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Period | | Total number of shares repurchased 1 | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | |
| January | January | | 1,742 | | | $ | 68.82 | | | — | | | | January | | 338 | | | $ | 51.63 | | | — | | | |
February | February | | 116,693 | | | 70.03 | | | 107,559 | | | | February | | 952,742 | | | 52.82 | | | 946,644 | | | |
March | March | | 659,813 | | | 64.59 | | | 658,022 | | | | March | | — | | | — | | | — | | | |
First quarter | | 778,248 | | | 65.42 | | | 765,581 | | | | |
First quarter 2023 | | First quarter 2023 | | 953,080 | | | 52.82 | | | 946,644 | | | |
1 Includes common shares acquired in connection with our stock compensation plan. Shares were acquired from employees to pay for their payroll taxes and stock option exercise cost upon the exercise of stock options under provisions of an employee share-based compensation plan.plan.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 6. EXHIBITS
a.Exhibits | | | | | | | | | | | |
Exhibit Number | | Description | |
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| | Second Amended and Restated Articles of Association of Zions Bancorporation, National Association, incorporated by reference to Exhibit 3.1 of Form 8-K filed on October 2, 2018. | * |
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| | Second Amended and Restated Bylaws of Zions Bancorporation, National Association, incorporated by reference to Exhibit 3.2 of Form 8-K filed on April 4, 2019. | * |
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| | Zions Bancorporation 2023-2025 Value Sharing Plan (filed herewith). | |
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| | Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
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| | Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
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| | Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith). | |
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101 | | Pursuant to Rules 405 and 406 of Regulation S-T, the following information is formatted in Inline XBRL (i) the Consolidated Balance Sheets as of March 31, 20222023 and December 31, 2021,2022, (ii) the Consolidated Statements of Income for the three months ended March 31, 20222023 and March 31, 2021,2022, (iii) the Consolidated Statements of Comprehensive Income for the three months ended March 31, 20222023 and March 31, 2021,2022, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 20222023 and March 31, 2021,2022, (v) the Consolidated Statements of Cash Flows for the three months ended March 31, 20222023 and March 31, 2021,2022, and (vi) the Notes to Consolidated Financial Statements (filed herewith). | |
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104 | | The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL. | |
* Incorporated by reference
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt are not filed. We agree to furnish a copy thereof to the Securities and Exchange Commission and the Office of the Comptroller of the Currency upon request.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ZIONS BANCORPORATION, NATIONAL ASSOCIATION |
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/s/ Harris H. Simmons |
Harris H. Simmons, Chairman and Chief Executive Officer |
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/s/ Paul E. Burdiss |
Paul E. Burdiss, Executive Vice President and Chief Financial Officer |
Date: May 6, 20225, 2023