~~0000109380zions:MaturityOrTermExtensionMemberzions:FinancingReceivableNonaccruingMemberzions:CommercialAndIndustrialMemberus-gaap:CommercialPortfolioSegmentMember2021-01-012021-12-31~~0000109380us-gaap:CashFlowHedgingMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:InterestRateSwapMember2023-01-012023-06-30

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 June 30, ~~2022~~2023 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~~844-8208

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 July ~~29, 2022 150,471,375~~31, 2023 148,145,133 shares

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

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GLOSSARY OF ACRONYMS AND ABBREVIATIONS


ACL	Allowance for Credit Losses	IPO	Initial Public Offering
AFS	Available-for-Sale	~~IRS~~LIBOR	~~Internal Revenue Service~~London Interbank Offered Rate
ALLL	Allowance for Loan and Lease Losses	~~LIBOR~~LIHTC	~~London Interbank Offered Rate~~Low-income Housing Tax Credit
Amegy	Amegy Bank, a division of Zions Bancorporation, National Association	Municipalities	State and Local Governments
~~AMERIBOR~~AOCI	~~American Interbank Offered Rate~~Accumulated Other Comprehensive Income or Loss	NAICS	North American Industry Classification System
~~AOCI~~ASC	~~Accumulated Other Comprehensive Income~~Accounting Standards Codification	NASDAQ	National Association of Securities Dealers Automated Quotations
~~ASC~~ASU	Accounting Standards ~~Codification~~Update	NBAZ	National Bank of Arizona, a division of Zions Bancorporation, National Association
~~ASU~~BOLI	~~Accounting Standards Update~~Bank-Owned Life Insurance	NIM	Net Interest Margin
~~BOLI~~bps	~~Bank-Owned Life Insurance~~Basis Points	NM	Not Meaningful
~~bps~~BTFP	~~Basis Points~~Bank Term Funding Program	NSB	Nevada State Bank, a division of Zions Bancorporation, National Association
~~BSBY~~	~~Bloomberg Short-Term Bank Yield~~	~~OCC~~	~~Office of the Comptroller of the Currency~~
CB&T	California Bank & Trust, a division of Zions Bancorporation, National Association	~~OCI~~OCC	~~Other Comprehensive Income~~Office of the Comptroller of the Currency
CECL	Current Expected Credit Loss	~~OREO~~OCI	Other ~~Real Estate Owned~~Comprehensive Income or Loss
CLTV	Combined Loan-to-Value Ratio	~~PEI~~OREO	~~Private Equity Investment~~
~~CMT~~	~~Constant Maturity Treasury~~	~~PPNR~~	~~Pre-provision Net Revenue~~Other Real Estate Owned
CRE	Commercial Real Estate	~~PPP~~PAM	~~Paycheck Protection Program~~Proportional Amortization Method
CVA	Credit Valuation Adjustment	~~ROU~~PEI	~~Right-of-Use~~Private Equity Investment
DTA	Deferred Tax Asset	PPNR	Pre-provision Net Revenue
DTL	Deferred Tax Liability	PPP	Paycheck Protection Program
EaR	Earnings at Risk	ROU	Right-of-Use
EPS	Earnings per Share	RULC	Reserve for Unfunded Lending Commitments
~~EaR~~EVE	~~Earnings at Risk~~Economic Value of Equity	S&P	Standard & Poor's
~~EPS~~FASB	~~Earnings per Share~~Financial Accounting Standards Board	SBA	U.S. Small Business Administration
~~EVE~~FDIC	~~Economic Value of Equity~~Federal Deposit Insurance Corporation	SBIC	Small Business Investment Company
~~FASB~~FHLB	~~Financial Accounting Standards Board~~Federal Home Loan Bank	SEC	Securities and Exchange Commission
~~FDIC~~FICO	~~Federal Deposit Insurance~~Fair Isaac Corporation	SOFR	Secured Overnight Financing Rate
~~FHLB~~FRB	Federal ~~Home Loan Bank~~Reserve Board	TCBW	The Commerce Bank of Washington, a division of Zions Bancorporation, National Association
~~FRB~~FTP	~~Federal Reserve Board~~Funds Transfer Pricing	TDR	Troubled Debt Restructuring
~~FTP~~	~~Funds Transfer Pricing~~	~~U.K.~~	~~United Kingdom~~
GAAP	Generally Accepted Accounting Principles	U.S.	United States
~~HECL~~GCF	~~Home Equity Credit Line~~General Collateral Funding	Vectra	Vectra Bank Colorado, a division of Zions Bancorporation, National Association
~~HTM~~HECL	~~Held-to-Maturity~~Home Equity Credit Line	Zions Bank	Zions Bank, a division of Zions Bancorporation, National Association
~~IMG~~HTM	~~International Manufacturing Group~~Held-to-Maturity

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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:

•~~statements~~Statements 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

•~~statements~~Statements 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-looking~~Forward-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 ~~this~~the 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 elevated 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; 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;

•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~~services, including the impact of digital commerce and artificial intelligence;

•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; ~~the~~

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

•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, including increases in bank fees, insurance assessments, capital standards, and other regulatory requirements;

•The effects of ~~the COVID-19 pandemic (including variants)~~pandemics and ~~associated actions~~other health emergencies that may affect our business, employees, customers, and communities; ~~the~~

•The effects of ~~the ongoing conflict in Eastern Europe~~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 ~~governmental~~our customer's operations and business; and

•Governmental and social responses to environmental, social, and governance issues, ~~and~~including 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.

~~GAAP to NON-GAAP RECONCILIATIONS~~RECENT DEVELOPMENTS

~~This Form 10-Q presents non-GAAP financial measures,~~Beginning in addition to generally accepted accounting principles (“GAAP”) financial measures, to provide investors with additional information. 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 base for period-to-period and company-to-company comparisons. We use these non-GAAP financial measures to assess our performance, financial position, and for presentations of our performance to investors. 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.

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~~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 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. 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) June 30,
2022 March 31,
2022 June 30,
2021
Net earnings applicable to common shareholders, net of tax (a) $ 195 $ 195 $ 345
Average common equity (GAAP) $ 5,582 $ 6,700 $ 7,436
Average goodwill and intangibles (1,015) (1,015) (1,015)
Average tangible common equity (non-GAAP) (b) $ 4,567 $ 5,685 $ 6,421
Number of days in quarter (c) 91 90 91
Number of days in year (d) 365 365 365
Return on average tangible common equity (non-GAAP) (a/b/c)*d 17.1 % 13.9 % 21.6 %

~~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) June 30,
2022 March 31,
2022 June 30,
2021
Total shareholders’ equity (GAAP) $ 5,632 $ 6,294 $ 8,033
Goodwill and intangibles (1,015) (1,015) (1,015)
Tangible equity (non-GAAP) (a) 4,617 5,279 7,018
Preferred stock (440) (440) (440)
Tangible common equity (non-GAAP) (b) $ 4,177 $ 4,839 $ 6,578
Total assets (GAAP) $ 87,784 $ 91,126 $ 87,208
Goodwill and intangibles (1,015) (1,015) (1,015)
Tangible assets (non-GAAP) (c) $ 86,769 $ 90,111 $ 86,193
Common shares outstanding (thousands) (d) 150,471 151,348 162,248
Tangible equity ratio (non-GAAP) (a/c) 5.3 % 5.9 % 8.1 %
Tangible common equity ratio (non-GAAP) (b/c) 4.8 % 5.4 % 7.6 %
Tangible book value per common share (non-GAAP) (b/d) $ 27.76 $ 31.97 $ 40.54

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~~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 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 Six Months Ended Year Ended
(Dollar amounts in millions) June 30,
2022 March 31,
2022 June 30,
2021 June 30,
2022 June 30,
2021 December 31,
2021
Noninterest expense (GAAP) (a) $ 464 $ 464 $ 428 $ 928 $ 863 $ 1,741
Adjustments:
Severance costs 1 — — 1 — 1
Other real estate expense, net — 1 — 1 — —
Amortization of core deposit and other intangibles — — — — — 1
Pension termination-related (income) expense 1
— — — — (5) (5)
SBIC investment success fee accrual 2
— (1) 9 (1) 9 7
Total adjustments (b) 1 — 9 1 4 4
Adjusted noninterest expense (non-GAAP) (a-b)=(c) $ 463 $ 464 $ 419 $ 927 $ 859 $ 1,737
Net interest income (GAAP) (d) $ 593 $ 544 $ 555 $ 1,137 $ 1,100 $ 2,208
Fully taxable-equivalent adjustments (e) 9 8 7 17 15 32
Taxable-equivalent net interest income (non-GAAP) (d+e)=f 602 552 562 1,154 1,115 2,240
Noninterest income (GAAP) g 172 142 205 314 374 703
Combined income (non-GAAP) (f+g)=(h) 774 694 767 1,468 1,489 2,943
Adjustments:
Fair value and nonhedge derivative gain (loss) 10 6 (5) 16 13 14
Securities gains (losses), net 2
1 (17) 63 (16) 74 71
Total adjustments (i) 11 (11) 58 — 87 85
Adjusted taxable-equivalent revenue (non-GAAP) (h-i)=(j) $ 763 $ 705 $ 709 $ 1,468 $ 1,402 $ 2,858
Pre-provision net revenue (non-GAAP) (h)-(a) $ 310 $ 230 $ 339 $ 540 $ 626 $ 1,202
Adjusted PPNR (non-GAAP) (j)-(c) 300 241 290 541 543 1,121
Efficiency ratio (non-GAAP) 3
(c/j) 60.7 % 65.8 % 59.1 % 63.1 % 61.3 % 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, which are excluded from the efficiency ratio through securities gains (losses), net.~~

3 ~~Results for~~ the first quarter of ~~2022 benefited from~~2023 and continuing into the second quarter, the banking industry, particularly regional banks, experienced weakness in bank valuations and a ~~one-time adjustment~~significant withdrawal of ~~approximately $6 million~~predominately uninsured deposits. As a result, several regional banks were closed and placed into receivership with the Federal Deposit Insurance Corporation (“FDIC”). The root causes of the bank closures generally related to weaknesses in ~~commercial account fees. Excluding~~liquidity risk, interest rate risk, and capital management.

During the ~~$6 million adjustment, the efficiency ratio for the first~~second quarter of ~~2022 would have been 66.4%~~2023, we managed the associated risks through the following actions:

•.

Generated deposit growth through a combination of competitive interest rates and expanded utilization of reciprocal and brokered deposit programs;

~~Table~~•Increased total available liquidity sources, which far exceed our level of ~~Contents~~uninsured deposits;

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION~~

•Actively managed our interest rate and market risk exposures through a rebalancing of our accounting hedges for both fixed-rate available-for-sale (“AFS”) securities and variable-rate commercial loans; and

Comparisons noted below are calculated for the current quarter compared 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.•Further strengthened our regulatory capital position through increased retained earnings.

RESULTS OF OPERATIONS

Executive Summary

Our financial results in the second quarter of ~~2022~~2023 reflected solid sequential customer deposit growth and continued strong ~~loan growth, solid~~ credit ~~performance, and increasing revenue, partially offset by a significant reduction in Paycheck Protection Program (“PPP”) revenue.~~quality. Diluted earnings per share (“EPS”) ~~decreased to $1.29,~~was $1.11, compared with ~~$2.08~~$1.29 in the second quarter of ~~2021,~~2022, as an increase in noninterest income was offset by higher noninterest expense and provision for credit losses.

Net interest income remained relatively stable at $591 million, compared with the prior year quarter, ~~benefited from~~as higher earning asset yields were offset by an increase in interest paid on deposits and short-term borrowings. Net interest income was also impacted by a ~~large negative provision for credit losses~~reduction in interest-earning assets and a significant ~~unrealized gain related to our Small Business Investment Company (“SBIC”) investment portfolio.~~

~~Net interest income increased $38 million, or 7%, to $593 million, primarily due to a $3.1 billion~~ increase in ~~average interest-earning assets, a favorable change in earning-asset composition, and a higher interest rate environment.~~interest-bearing liabilities. The net interest margin (“NIM”) was ~~2.87%~~2.92%, compared with ~~2.79% in the second quarter of 2021.~~2.87%.

The provision for credit losses was ~~$41~~$46 million, compared with a ~~$(123)~~$41 million provision in the prior year period, reflecting ~~changes~~deterioration in economic forecasts and loan growth. Net loan and lease charge-offs were $9 million, or 0.07% of average loans (ex-PPP), compared with net recoveries of $2 million, or (0.02)% of average loans (ex-PPP), in the prior year quarter.forecasts.

Total customer-related noninterest income increased ~~$15~~$8 million, or ~~11%~~5%, compared with the prior year period. The increase was driven primarily by ~~increased customer~~improved commercial account activity, ~~across most fee categories, notably~~including treasury management fees, as well as loan syndication, swaps, and other capital markets ~~and foreign exchange fees, other customer-related fees, and commercial account fees.~~income. Total noninterest income ~~decreased $33~~increased $17 million, or ~~16%~~10%, primarily due to a ~~$63~~$13 million ~~unrealized~~ gain ~~during~~on the ~~prior year period relating to our SBIC investment in Recursion Pharmaceuticals, Inc.~~

~~Total noninterest expense increased $36 million, or 8%. The increase was largely driven by~~sale of a $35 million increase in salaries and benefits expense, which was impacted by increased incentive compensation accruals arising from improvements in anticipated full-year profitability, inflationary and competitive labor market pressures on wages and benefits, and increased headcount. Our efficiency ratio was 60.7%, compared with 59.1%.

The growth in average interest-earning assets was driven by an $8.7 billion increase in average available-for-sale (“AFS”) investment securities and a $3.6 billion increase in average commercial loans (non-PPP) as we actively deployed excess liquidity. These increases were partially offset by declines in average PPP loans and average money market investments.

Excluding PPP loans, total loans and leases increased $4.9 billion, or 10%, to $51.8 billion. The increases were primarily in the commercial and industrial, owner-occupied, municipal, and home equity credit line (“HECL”) portfolios. Total loans and leases increased $1.0 billion, or 2%, from the prior year quarter.

Total deposits increased $3.0 billion, or 4%, from the prior year quarter, primarily due to a $2.2 billion increase in noninterest-bearing deposits. At June 30, 2022, total deposits decreased $3.3 billion from the previous quarter, primarily due to deposit attrition driven by a limited number of customers with deposit balances greater than $50 million. Our loan-to-deposit ratio was 66%, compared with 62% in the prior quarter.bank-owned property.

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Total noninterest expense increased $44 million, or 9%, relative to the prior year quarter, driven largely by an increase in salaries and benefits expense of $17 million, or 6%, primarily due to $13 million in severance expense during the current quarter. Our efficiency ratio was 62.5%, compared with 60.7%, as growth in adjusted noninterest expense outpaced growth in adjusted taxable-equivalent revenue.

Average interest-earning assets decreased $1.5 billion, or 2%, from the prior year quarter, driven by declines of $4.5 billion and $2.0 billion in average securities and average money market investments, respectively, and partially offset by an increase of $4.9 billion in average loans and leases. Average interest-bearing liabilities increased $11.2 billion, or 27%, from the prior year quarter, driven by increases of $7.5 billion and $3.7 billion in average short-term borrowings and average federal funds purchased and security repurchase agreements, respectively.

Total loans and leases increased $4.5 billion, or 9%, to $56.9 billion. The increase was primarily in the consumer 1-4 family residential mortgage, commercial and industrial, commercial real estate term, and consumer construction loan portfolios. Nonperforming assets decreased $37 million, or 18%, and classified loans decreased $241 million, or 24%. Net loan and lease charge-offs totaled $13 million, compared with $9 million, in the prior year quarter.

Total deposits decreased $4.7 billion, or 6%, from the prior year quarter, mainly due to decreases in larger-balance and more rate-sensitive deposits during the first quarter of 2023. Total deposits increased $5.1 billion, or 7%, from March 31, 2023, due to increases of $3.1 billion and $2.0 billion in brokered and customer deposits, respectively. At June 30, 2023, total customer deposits included approximately $3.4 billion from reciprocal placement products. Borrowed funds, consisting primarily of secured borrowings from the Federal Home Loan Bank (“FHLB”), increased $4.4 billion from the prior year quarter in response to loan growth and the decline in noninterest-bearing deposits.

Second Quarter ~~2022~~2023 Financial Performance

Net Earnings Applicable to Common Shareholders
(in millions)

Diluted EPS

Adjusted PPNR
(in millions)

Efficiency Ratio

Net earnings applicable to common shareholders decreased from the second quarter of ~~2021.~~2022, primarily due to an increase in noninterest expense, driven largely by severance and higher FDIC insurance costs. This increase was partially offset by growth in noninterest income. The ~~prior year quarter benefited~~decrease from ~~a ($123) million provision for credit losses, compared with $41 million in~~ the ~~second~~first quarter of ~~2022.~~2023 reflected a decrease in interest-earning assets, an increase in interest-bearing liabilities, and an increase in associated funding costs.

Diluted earnings per share declined from the second quarter of ~~2021~~2022 primarily as a result of decreased net earnings ~~the effect of which was partially offset by a 12.2 million decrease in weighted average diluted shares, primarily due~~applicable to ~~share repurchases.~~common shareholders.

Adjusted ~~PPNR increased $10 million~~pre-provision net revenue (“PPNR”) decreased from the second quarter of ~~2021,~~2022, primarily due to ~~growth in customer-related~~higher adjusted noninterest ~~income.~~expense, which was driven largely by higher FDIC insurance costs. This increase was ~~partially~~largely offset by higher adjusted ~~noninterest expense, driven by an increase in salaries and benefits expense.~~taxable-equivalent revenue.

The efficiency ratio increased from the prior year quarter, ~~primarily~~ as growth in adjusted noninterest expense exceeded growth in adjusted taxable-equivalent revenue.

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Net Interest Income and Net Interest Margin

NET INTEREST INCOME AND NET INTEREST MARGIN


		Three Months Ended June 30,						Amount change					Percent change			Three Months Ended June 30,									Amount change			Percent change			Six Months Ended June 30,						Amount change		Percent change
(Dollar amounts in millions)	(Dollar amounts in millions)	2022			2021					(Dollar amounts in millions)		2023					2022										2023				2022

Interest and fees on loans 1	Interest and fees on loans 1	$	468		$	492				$	(24)					(5)		%	Interest and fees on loans 1	$	791			$		468		$	323		69		%	$	1,517		$	905	$	612		68	%
Interest on money market investments	Interest on money market investments	12			4			8					NM		Interest on money market investments	48					12				36			NM			105			18			87		NM
Interest on securities	Interest on securities	128			74			54					73		Interest on securities	138					128				10			8			275			240			35		15
Total interest income	Total interest income	608			570			38					7		Total interest income	977					608				369			61			1,897			1,163			734		63
Interest on deposits	Interest on deposits	7			7			—					—		Interest on deposits	220					7				213			NM			302			13			289		NM
Interest on short- and long-term borrowings	Interest on short- and long-term borrowings	8			8			—					—		Interest on short- and long-term borrowings	166					8				158			NM			325			13			312		NM
Total interest expense	Total interest expense	15			15			—					—		Total interest expense	386					15				371			NM			627			26			601		NM
Net interest income	Net interest income	$	593		$	555		$	38				7	%	Net interest income	$	591				$	593			$	(2)		—		%	$	1,270		$	1,137		$	133	12		%

Average interest-earning assets	Average interest-earning assets	$	84,041		$	80,916		$	3,125				4	%	Average interest-earning assets	$	82,500				$	84,041			$	(1,541)		(2)		%	$	83,161		$	85,061		$	(1,900)	(2)		%
Average interest-bearing liabilities	Average interest-bearing liabilities	$	41,234		$	40,232		$	1,002				2	%	Average interest-bearing liabilities	$	52,453				$	41,234			$	11,219		27		%	$	50,742		$	41,683		$	9,059	22		%
								bps																	bps												bps
Yield on interest-earning assets 2	Yield on interest-earning assets 2	2.94		%	2.86		%	8							Yield on interest-earning assets 2	4.81		%			2.94		%		187						4.65		%	2.80		%	185
Rate paid on total deposits and interest-bearing liabilities 2	Rate paid on total deposits and interest-bearing liabilities 2	0.07		%	0.08		%	(1)							Rate paid on total deposits and interest-bearing liabilities 2	1.88		%			0.07		%		181						1.54		%	0.06		%	148
Cost of total deposits 2	Cost of total deposits 2	0.03		%	0.04		%	(1)							Cost of total deposits 2	1.27		%			0.03		%		124						0.87		%	0.03		%	84
Net interest margin 2	Net interest margin 2	2.87		%	2.79		%	8							Net interest margin 2	2.92		%			2.87		%		5						3.13		%	2.73		%	40

1 Includes interest income recoveries of $4$2 million and $2$4 million for the three months ended, and $4 million and $6 million for the six months ended June 30, ~~2022,~~2023, and ~~2021,~~2022, respectively.

2 Rates are calculated using amounts in thousands; taxable-equivalent rates are used where applicable.

Net interest income accounted for approximately 76% of our net revenue (net interest income plus noninterest income) for the current quarter and remained relatively stable compared with the prior year quarter, as higher earning asset yields were offset by an increase in interest paid on deposits and short-term borrowings. Net interest income was also impacted by a reduction in interest-earning assets and a significant increase in interest-bearing liabilities.

Average interest-bearing liabilities increased $11.2 billion, or 27%, from the prior year quarter, driven by increases of $7.5 billion and $3.7 billion in average short-term borrowings and average federal funds purchased and security repurchase agreements, respectively. The increase in borrowed funds helped to balance loan growth and the decline in noninterest-bearing deposits.

The NIM was 2.92%, compared with 2.87%. The yield on average interest-earning assets was 4.81% in the second quarter of 2023, an increase of 187 basis points (“bps”), reflecting higher interest rates and a favorable mix change from money market investments to loans. The yield on average loans increased 198 basis points to 5.65%, and the yield on average securities increased 59 basis points to 2.56%. The yield on average securities benefited from a decrease in the market value of AFS securities due to rising interest rates. The rate paid on average interest-bearing liabilities increased to 2.95%, compared with 0.14%, reflecting the higher interest rate environment, competitive pricing, and increased borrowed funds.

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Average loans and leases increased $4.9 billion, or 9%, to $56.7 billion, mainly due to growth in average consumer and commercial loans. The yield on total loans increased 198 basis points to 5.65%, reflecting the higher interest rate environment.

Average securities decreased $4.5 billion, or 17%, to $22.0 billion, primarily due to approximately $3.6 billion in principal reductions. 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 held-to-maturity (“HTM”) category to reflect our intent for these securities.

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~~Net interest income accounted for approximately 78% of our net revenue (net interest income plus noninterest income) for the quarter, and increased $38 million,~~Average deposits decreased $11.2 billion, or 7%14%, to ~~$593 million, primarily due to growth in~~$69.7 billion at an average ~~interest-earning assets, a favorable change in earning-asset composition, and a higher interest rate environment.~~

~~Average interest-earning assets increased $3.1 billion, or 4%~~cost of 1.27%, driven by growth of $8.7 billion in AFS securities and $3.6 billion in commercial loans (ex-PPP). These increases were partially offset by a $5.1 billion decline in average PPP loans and $4.6 billion decrease in average money market investments. Average securities increased to 32% of average interest-earning assets, compared with 22%, as we actively deployed excess liquidity.

The NIM was 2.87%, compared with 2.79%. The yield on average interest-earning assets was 2.94% in the second quarter of 2022, an increase of eight basis points (“bps”), primarily due to an increase in the yield on securities. The average rate paid on interest-bearing liabilities remained relatively stable at 0.14%.

Excluding PPP loans, average loans and leases increased $4.2 billion, or 9%, primarily in the commercial and industrial, owner-occupied, municipal, and home equity credit line portfolios. Total average loans and leases decreased $1.0 billion, or 2%, to $51.8 billion, primarily due to the forgiveness of PPP loans.

~~The yield on total loans decreased 10 basis points to 3.67%. The yield on non-PPP loans decreased six basis points, due to lower yields on new originations during the past year arising, in part,~~ from ~~promotional rates on commercial owner-occupied loans and home equity credit lines that we utilized to deploy excess liquidity.~~

During the second quarter of 2022 and 2021, PPP loans totaling $0.6 billion and $2.3 billion, respectively, were forgiven by the Small Business Administration (“SBA”). PPP loans contributed $15 million and $68 million in interest income during the same time periods. The yield on PPP loans was 7.45% and 4.56% for the respective periods, and was positively impacted by accelerated amortization of deferred fees on paid off or forgiven PPP loans. At June 30, 2022 and 2021, the remaining unamortized net deferred fees on PPP loans totaled $11 million and $137 million, respectively.

~~Average total deposits increased $6.3 billion, or 8%, to~~ $80.9 billion at an average cost of 0.03%~~, from $74.6 billion at an average cost of 0.04%~~ in the second quarter of ~~2021.~~2022. Average ~~interest-bearing liabilities increased $1.0 billion, or 2%. The rate paid on~~noninterest-bearing deposits as a percentage of total deposits were 43%, compared with 51% during the same prior year period.

The decrease in average deposits was driven by a decline in average noninterest-bearing deposits as interest rates increased. In recent years, particularly during the COVID-19 pandemic, we experienced a significant influx of deposits, which was impacted by considerable fiscal and ~~interest-bearing liabilities remained relatively stable at 0.07%.~~

~~Table~~monetary policy decisions. During the prior year, with the withdrawal of ~~Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION~~

~~Average AFS securities balances increased $8.7 billion, or 51%, to $25.7 billion, mainly due to an increase in~~stimulus by the federal government, our ~~mortgage-backed securities portfolio. The yield on securities increased 26 basis points to 1.97%, largely due to higher interest rates. We expect our securities portfolio~~deposits began to decline ~~modestly over~~to more normalized levels. This trend accelerated with prominent bank failures during the ~~near term.~~first quarter of 2023 and abated during the second quarter of 2023, with period-end deposits increasing meaningfully from March 31, 2023 to June 30, 2023. Total deposits have remained above pre-pandemic (December 31, 2019) levels during 2023.

Average borrowed funds, ~~decreased $0.7~~consisting primarily of secured borrowings from the FHLB, increased $11.2 billion ~~or 34%, to $1.4 billion, mainly due to a decrease in average long-term debt. The average rate paid on total borrowed funds increased 74 bps~~ from the prior year quarter ~~primarily due~~in response to ~~lower-yielding senior debt that was redeemed or matured over~~loan growth and the ~~past year. The growth of deposits has allowed us~~decline in noninterest-bearing deposits.

For more information on our investments securities portfolio and borrowed funds and how we manage liquidity risk, refer to ~~reduce borrowed funds.~~

the “Investment Securities Portfolio” section on page 16 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 ~~28. For more information on how we manage liquidity risk, refer to the “Liquidity Risk Management” section on page 32.~~27.

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.

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CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES


(Unaudited)	(Unaudited)	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021						(Unaudited)	Three Months Ended June 30, 2023						Three Months Ended June 30, 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 1		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	$	3,113	$	5	0.66	%	$	8,848	$	2	0.11	%	Interest-bearing deposits	$	2,899	$	37	5.08	%	$	3,113	$	5	0.66	%
Federal funds sold and security resell agreements		2,542		7		1.13		1,405		2		0.51
Federal funds sold and securities purchased under agreements to resell														Federal funds sold and securities purchased under agreements to resell	784		11		5.65		2,542		7		1.13
Total money market investments	Total money market investments	5,655		12		0.87		10,253		4		0.17		Total money market investments	3,683		48		5.20		5,655		12		0.87
Securities:	Securities:													Securities:
Held-to-maturity	Held-to-maturity	485		4		2.96		579		4		2.91		Held-to-maturity	10,833		60		2.24		485		4		2.96
Available-for-sale		25,722		123		1.91		17,041		69		1.63
Trading account		357		4		5.07		211		3		4.43
Total securities 2		26,564		131		1.97		17,831		76		1.71
Available-for-sale 2														Available-for-sale 2	11,180		80		2.85		25,722		123		1.91
Trading														Trading	52		1		4.78		357		4		5.07
Total securities														Total securities	22,065		141		2.56		26,564		131		1.97
Loans held for sale	Loans held for sale	38		—		0.72		62		1		2.50		Loans held for sale	73		1		7.08		38		—		0.72
Loans and leases 3
Commercial – excluding PPP loans		28,151		260		3.71		24,560		236		3.85
Commercial – PPP loans		801		15		7.45		5,945		68		4.56
Loans and leases														Loans and leases
Commercial														Commercial	30,650		417		5.46		28,952		275		3.81
Commercial real estate	Commercial real estate	12,098		112		3.69		12,037		103		3.46		Commercial real estate	12,933		225		6.97		12,098		112		3.69
Consumer	Consumer	10,734		87		3.24		10,228		89		3.51		Consumer	13,096		156		4.80		10,734		87		3.24
Total loans and leases	Total loans and leases	51,784		474		3.67		52,770		496		3.77		Total loans and leases	56,679		798		5.65		51,784		474		3.67
Total interest-earning assets	Total interest-earning assets	84,041		617		2.94		80,916		577		2.86		Total interest-earning assets	82,500		988		4.81		84,041		617		2.94
Cash and due from banks	Cash and due from banks	617						579						Cash and due from banks	653						617
Allowance for credit losses on loans and debt securities	Allowance for credit losses on loans and debt securities	(480)						(647)						Allowance for credit losses on loans and debt securities	(619)						(480)
Goodwill and intangibles	Goodwill and intangibles	1,015						1,015						Goodwill and intangibles	1,063						1,015
Other assets	Other assets	4,712						4,094						Other assets	5,524						4,712
Total assets	Total assets	$	89,905					$	85,957					Total assets	$	89,121					$	89,905
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	$	38,325	$	6	0.06	%	$	35,987	$	5	0.06	%	Savings and money market	$	30,325	$	113	1.49	%	$	38,325	$	6	0.06	%
Time	Time	1,488		1		0.24		2,108		2		0.42		Time	9,494		107		4.55		1,488		1		0.24

Total interest-bearing deposits	Total interest-bearing deposits	39,813		7		0.07		38,095		7		0.08		Total interest-bearing deposits	39,819		220		2.22		39,813		7		0.07
Borrowed funds:	Borrowed funds:													Borrowed funds:
Federal funds purchased and other short-term borrowings		743		1		0.70		834		1		0.06
Federal funds and security repurchase agreements														Federal funds and security repurchase agreements	4,423		57		5.11		737		1		0.70
Other short-term borrowings														Other short-term borrowings	7,575		100		5.28		6		—		—
Long-term debt	Long-term debt	678		7		3.79		1,303		7		2.31		Long-term debt	636		9		5.97		678		7		3.79
Total borrowed funds	Total borrowed funds	1,421		8		2.17		2,137		8		1.43		Total borrowed funds	12,634		166		5.26		1,421		8		2.17
Total interest-bearing liabilities	Total interest-bearing liabilities	41,234		15		0.14		40,232		15		0.15		Total interest-bearing liabilities	52,453		386		2.95		41,234		15		0.14
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	41,074						36,545						Noninterest-bearing demand deposits	29,830						41,074
Other liabilities	Other liabilities	1,575						1,200						Other liabilities	1,580						1,575
Total liabilities	Total liabilities	83,883						77,977						Total liabilities	83,863						83,883
Shareholders’ equity:	Shareholders’ equity:													Shareholders’ equity:
Preferred equity	Preferred equity	440						544						Preferred equity	440						440
Common equity	Common equity	5,582						7,436						Common equity	4,818						5,582
Total shareholders’ equity	Total shareholders’ equity	6,022						7,980						Total shareholders’ equity	5,258						6,022
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	89,905					$	85,957					Total liabilities and shareholders’ equity	$	89,121					$	89,905
Spread on average interest-bearing funds	Spread on average interest-bearing funds					2.80	%					2.71	%	Spread on average interest-bearing funds					1.86	%					2.80	%
Net impact of noninterest-bearing sources of funds	Net impact of noninterest-bearing sources of funds					0.07	%					0.08	%	Net impact of noninterest-bearing sources of funds					1.06	%					0.07	%
Net interest margin	Net interest margin			$	602	2.87	%			$	562	2.79	%	Net interest margin			$	602	2.92	%			$	602	2.87	%
Memo: total loans and leases, excluding PPP loans		$	50,983	459		3.61	%	$	46,825	428		3.67	%

Memo: total cost of deposits	Memo: total cost of deposits					0.03	%					0.04	%	Memo: total cost of deposits					1.27	%					0.03	%
Memo: total deposits and interest-bearing liabilities	Memo: total deposits and interest-bearing liabilities	82,308		15		0.07	%	76,777		15		0.08	%	Memo: total deposits and interest-bearing liabilities	$	82,283	386		1.88	%	$	82,308	15		0.07	%

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.~~

2~~Interest on total securities includes $27 million~~ Net of unamortized purchase premiums, discounts, and ~~$29 million~~deferred loan fees and costs.

Table of ~~taxable-equivalent premium amortization~~Contents

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES


	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(Dollar amounts in millions)	Average balance		Amount of interest 1		Average yield/rate 1		Average balance		Amount of interest 1		Average yield/rate 1
ASSETS
Money market investments:
Interest-bearing deposits	$	2,771	$	68	4.98	%	$	4,914	$	8	0.34	%
Federal funds sold and securities purchased under agreements to resell	1,428		37		5.19		2,422		10		0.84
Total money market investments	4,199		105		5.05		7,336		18		0.50
Securities:
Held-to-maturity	10,928		122		2.26		462		7		3.04
Available-for-sale 2	11,500		156		2.73		25,485		229		1.81
Trading	78		1		2.14		370		9		4.91
Total securities	22,506		279		2.50		26,317		245		1.88
Loans held for sale	39		1		6.67		48		—		1.44
Loans and leases
Commercial	30,664		798		5.25		28,725		535		3.76
Commercial real estate	12,904		434		6.78		12,134		213		3.53
Consumer	12,849		300		4.71		10,501		169		3.24
Total loans and leases	56,417		1,532		5.48		51,360		917		3.60
Total interest-earning assets	83,161		1,917		4.65		85,061		1,180		2.80
Cash and due from banks	598						621
Allowance for credit losses on loans and debt securities	(597)						(497)
Goodwill and intangibles	1,064						1,015
Other assets	5,574						4,463
Total assets	$	89,800					$	90,663
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market	$	31,585	$	175	1.12	%	$	38,726	$	11	0.05	%
Time	6,232		127		4.11		1,538		2		0.25

Total interest-bearing deposits	37,817		302		1.61		40,264		13		0.06
Borrowed funds:
Federal funds and security repurchase agreements	5,015		121		4.85		661		1		0.43
Other short-term borrowings	7,266		184		5.09		8		—		—
Long-term debt	644		20		6.42		750		12		3.17
Total borrowed funds	12,925		325		5.07		1,419		13		1.88
Total interest-bearing liabilities	50,742		627		2.49		41,683		26		0.12
Noninterest-bearing demand deposits	32,084						40,980
Other liabilities	1,817						1,422
Total liabilities	84,643						84,085
Shareholders’ equity:
Preferred equity	440						440
Common equity	4,717						6,138
Total shareholders’ equity	5,157						6,578
Total liabilities and shareholders’ equity	$	89,800					$	90,663
Spread on average interest-bearing funds					2.16	%					2.68	%
Net impact of noninterest-bearing sources of funds					0.97	%					0.05	%
Net interest margin			$	1,290	3.13	%			$	1,154	2.73	%
Memo: total cost of deposits					0.87	%					0.03	%
Memo: total deposits and interest-bearing liabilities	$	82,826	627		1.54	%	$	82,663	26		0.06	%

1 Rates are calculated using amounts in thousands and a tax rate of 21% for the ~~second quarters of 2022 and 2021, respectively.~~periods presented.

32 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.

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Six Months Ended
June 30, 2022 Six Months Ended
June 30, 2021
(Dollar amounts in millions) Average
balance
Amount of
interest 1
Average
yield/rate Average
balance
Amount of
interest 1
Average
yield/rate
ASSETS
Money market investments $ 7,336 $ 18 0.50 % $ 9,029 $ 7 0.17 %
Securities:
Held-to-maturity 462 7 3.04 620 9 2.95
Available-for-sale 25,485 229 1.81 16,462 135 1.66
Trading account 370 9 4.91 221 5 4.18
Total securities 2
26,317 245 1.88 17,303 149 1.74
Loans held for sale 48 — 1.44 65 1 2.66
Loans and leases 3
Commercial – excluding PPP loans 27,597 496 3.63 24,646 470 3.84
Commercial – PPP loans 1,128 39 6.93 6,039 128 4.26
Commercial real estate 12,134 213 3.53 12,085 208 3.48
Consumer 10,501 169 3.24 10,445 184 3.55
Total loans and leases 51,360 917 3.60 53,215 990 3.75
Total interest-earning assets 85,061 1,180 2.80 79,612 1,147 2.90
Cash and due from banks 621 597
Allowance for loan losses (497) (710)
Goodwill and intangibles 1,015 1,015
Other assets 4,463 4,012
Total assets $ 90,663 $ 84,526
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market $ 38,726 $ 11 0.05 % $ 35,611 $ 11 0.06 %
Time 1,538 2 0.25 2,299 5 0.49
Total interest-bearing deposits 40,264 13 0.06 37,910 16 0.09
Borrowed funds:
Federal funds purchased and other short-term borrowings 669 1 0.42 971 1 0.06
Long-term debt 750 12 3.17 1,314 15 2.31
Total borrowed funds 1,419 13 1.88 2,285 16 1.35
Total interest-bearing liabilities 41,683 26 0.12 40,195 32 0.16
Noninterest-bearing demand deposits 40,980 35,142
Other liabilities 1,422 1,249
Total liabilities 84,085 76,586
Shareholders’ equity:
Preferred equity 440 555
Common equity 6,138 7,385
Total shareholders’ equity 6,578 7,940
Total liabilities and shareholders’ equity $ 90,663 $ 84,526
Spread on average interest-bearing funds 2.68 % 2.74 %
Net impact of noninterest-bearing sources of funds 0.05 % 0.08 %
Net interest margin $ 1,154 2.73 % $ 1,115 2.82 %
Memo: total loans and leases, excluding PPP loans $ 50,232 878 3.52 % $ 47,176 862 3.68 %
Memo: total interest-earning assets, excluding PPP loans 83,933 1,141 2.74 % 73,573 1,019 2.79 %
Memo: total cost of deposits 0.03 % 0.05 %
Memo: total deposits and interest-bearing liabilities 82,663 26 0.06 % 75,337 32 0.08 %

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.

2 ~~Interest on total securities includes $55 million and $59 million of taxable-equivalent premium amortization for the first six months of 2022 and 2021, respectively.~~

3 ~~Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.~~

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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 ~~$41~~$46 million, compared with ~~$(123)~~$41 million in the second quarter of ~~2021.~~2022. The ACL was $711 million at June 30, 2023, compared with $546 million at June 30, ~~2022, compared with $574 million at June 30, 2021.~~2022. The increase in the ACL ~~increased $32 million from the previous quarter,~~was primarily due to ~~the increased probability of a recession and loan growth. The ACL is informed by our view of~~deterioration in economic ~~forecasts, which have changed over the first six months of 2022.~~forecasts. The ratio of ACL to ~~net~~total loans and leases ~~(ex-PPP)~~ was ~~1.05%~~1.25% and ~~1.22%~~1.04% at June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The provision for securities losses was less than $1 million during the second quarter of ~~2022~~2023 and ~~2021.~~2022.

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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 ~~decreased~~increased the ACL by ~~$16~~$149 million from the prior year quarter.

The third bar represents changes in credit quality factors and includes risk-grade migration and specific reserves against loans, which, when combined, ~~decreased~~increased the ACL by ~~$15~~$3 million, ~~indicating improvements in overall~~reflecting relatively stable credit quality. Nonperforming assets decreased $37 million, or 18%, and classified loans decreased $241 million, or 24%. Net loan and lease charge-offs ~~were~~totaled $13 million, or 0.09% annualized of average loans, compared with net charge-offs of $9 million, or 0.07% annualized of average loans ~~(ex-PPP), in the second quarter of 2022, compared with net recoveries of $2 million, or 0.02% annualized of average loans (ex-PPP),~~ in the prior year quarter.

The fourth bar represents loan portfolio changes, driven primarily by loan growth, ~~(ex-PPP),~~as well as changes in portfolio mix, the aging of the portfolio, and other risk factors; all of which resulted in a $3$13 million increase in the ACL.

See “Credit Risk Management” on page 2120 and Note 6 in our ~~2021~~2022 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~~earned 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 $33~~increased $17 million, or ~~16%~~10%, ~~from $205 million during~~relative to the prior ~~year quarter.~~year. Noninterest income accounted for approximately 24% and 22% ~~and 27%~~ of our net revenue during the second quarter of ~~2022~~2023 and ~~2021,~~2022, respectively. The following schedule presents a comparison of the major components of noninterest income.

NONINTEREST INCOME


	Three Months Ended June 30,				Amount change		Percent change		Six Months Ended June 30,				Amount change		Percent change
(Dollar amounts in millions)	2023		2022						2023		2022

Commercial account fees	$	45	$	37	$	8	22	%	$	88	$	78	$	10	13	%
Card fees	25		25		—		—		49		50		(1)		(2)
Retail and business banking fees	16		20		(4)		(20)		32		40		(8)		(20)
Loan-related fees and income	19		21		(2)		(10)		40		43		(3)		(7)
Capital markets fees	27		21		6		29		44		36		8		22
Wealth management fees	14		13		1		8		29		27		2		7
Other customer-related fees	16		17		(1)		(6)		31		31		—		—
Customer-related noninterest income	162		154		8		5		313		305		8		3

Fair value and nonhedge derivative income	1		10		(9)		(90)		(2)		16		(18)		NM
Dividends and other income (loss)	26		7		19		NM		37		9		28		NM
Securities gains (losses), net	—		1		(1)		NM		1		(16)		17		NM
Noncustomer-related noninterest income	27		18		9		50		36		9		27		NM
Total noninterest income	$	189	$	172	$	17	10	%	$	349	$	314	$	35	11	%

Customer-related Noninterest Income

Total customer-related noninterest income increased $8 million, or 5%, compared with the prior year period. The increase was driven primarily by improved commercial account activity, including treasury management fees, as well as loan syndication, swaps, and other capital markets income. Retail and business banking fees decreased largely as a result of a change in our overdraft and non-sufficient funds practices effected during the third quarter of 2022.

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~~NONINTEREST INCOME~~

Three Months Ended
June 30, Amount
change Percent
change Six Months Ended
June 30, Amount
change Percent
change
(Dollar amounts in millions) 2022 2021 2022 2021
Commercial account fees $ 37 $ 34 $ 3 9 % $ 78 $ 66 $ 12 18 %
Card fees 25 24 1 4 50 45 5 11
Retail and business banking fees 20 18 2 11 40 35 5 14
Loan-related fees and income 21 21 — — 43 46 (3) (7)
Capital markets and foreign exchange fees 21 17 4 24 36 32 4 13
Wealth management fees 13 12 1 8 27 24 3 13
Other customer-related fees 17 13 4 31 31 24 7 29
Customer-related noninterest income 154 139 15 11 305 272 33 12
Fair value and nonhedge derivative income 10 (5) 15 NM 16 13 3 23
Dividends and other income 7 8 (1) (13) 9 15 (6) (40)
Securities gains (losses), net 1 63 (62) (98) (16) 74 (90) NM
Noncustomer-related noninterest income 18 66 (48) (73) 9 102 (93) (91)
Total noninterest income $ 172 $ 205 $ (33) (16) % $ 314 $ 374 $ (60) (16) %

~~Customer-related~~

Total customer-related noninterest income increased $15 million, or 11%, from the prior year quarter, mainly due to increased customer transaction activity across most fee categories, notably capital markets and foreign exchange fees, other customer-related fees, and commercial account fees.

Retail and business banking fees include overdraft and non-sufficient funds fees. Beginning in the third quarter of 2022, we expect to reduce the rate and frequency with which such fees are assessed. Relative to current activity levels, we expect this will reduce our customer-related noninterest income by approximately $5 million per quarter.

Noncustomer-related Noninterest Income

Total noncustomer-related noninterest income ~~decreased $48~~increased $9 million ~~relative to~~from the prior year quarter. ~~Net securities gains~~Dividends and ~~losses decreased $62~~other income increased $19 million, ~~mainly~~primarily due to a ~~large unrealized~~$13 million gain ~~during~~on the ~~prior year period related to the initial public offering (“IPO”)~~sale of ~~our SBIC investment~~a bank-owned property, as well as an increase in ~~Recursion Pharmaceuticals, Inc.~~

~~Fair~~dividends on FHLB stock. These increases were offset by a $9 million decrease in fair value and nonhedge derivative income, ~~increased $15 million from the prior year period. We recognized~~primarily due to a $10 million ~~gain during the quarter related to a~~ credit valuation adjustment (“CVA”) ~~on client-related interest rate swaps, compared with a $5 million CVA loss~~gain in the prior year period.

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Noninterest Expense

The following schedule presents a comparison of the major components of noninterest expense.

NONINTEREST EXPENSE


		Three Months Ended June 30,				Amount change				Percent change				Six Months Ended June 30,									Amount change			Percent change			Three Months Ended June 30,									Amount change		Percent change			Six Months Ended June 30,					Amount change		Percent change
(Dollar amounts in millions)	(Dollar amounts in millions)	2022		2021								2022				2021				(Dollar amounts in millions)		2023								2022						2023							2022

Salaries and employee benefits	Salaries and employee benefits	$	307	$	272			$	35			13	%			$	619			$	560				$	59			11		%	Salaries and employee benefits	$	324			$		307	$	17		6		%	$	663	$	619	$	44		7	%
Technology, telecom, and information processing	Technology, telecom, and information processing	53		49		4				8				105				98					7			7		Technology, telecom, and information processing	58					53				5		9			113			105		8		8
Occupancy and equipment, net	Occupancy and equipment, net	36		39		(3)				(8)				74				78					(4)			(5)		Occupancy and equipment, net	40					36				4		11			80			74		6		8
Professional and legal services	Professional and legal services	14		18		(4)				(22)				28				39					(11)			(28)		Professional and legal services	16					14				2		14			29			28		1		4
Marketing and business development	Marketing and business development	9		7		2				29				17				14					3			21		Marketing and business development	13					9				4		44			25			17		8		47
Deposit insurance and regulatory expense	Deposit insurance and regulatory expense	13		7		6				86				23				17					6			35		Deposit insurance and regulatory expense	22					13				9		69			40			23		17		74
Credit-related expense	Credit-related expense	7		6		1				17				14				12					2			17		Credit-related expense	7					7				—		—			13			14		(1)		(7)
Other real estate expense, net	Other real estate expense, net	—		—		—				NM				1				—					1			NM		Other real estate expense, net	—					—				—		NM			—			1		(1)		NM
Other	Other	25		30		(5)				(17)				47				45					2			4		Other	28					25				3		12			57			47		10		21
Total noninterest expense	Total noninterest expense	$	464	$	428	$	36			8	%			$	928			$	863				$	65		8	%	Total noninterest expense	$	508				$	464			$	44	9		%	$	1,020		$	928	$	92	10		%
Adjusted noninterest expense 1	Adjusted noninterest expense 1	$	463	$	419	$	44			11	%			$	927			$	859				$	68		8	%	Adjusted noninterest expense 1	$	494				$	463			$	31	7		%	$	1,003		$	927	$	76	8		%

1 For information on non-GAAP financial measures, see ~~“GAAP to Non-GAAP Reconciliations”~~“Non-GAAP Financial Measures” on page 4.35.

Total noninterest expense increased ~~$36~~$44 million, or 8%9%, relative to the prior year quarter. Salaries and benefits expense increased ~~$35~~$17 million, or ~~13%~~6%, primarily due to ~~increased incentive compensation accruals arising from improvements~~$13 million in ~~anticipated full-year profitability, inflationary and competitive labor market pressures on wages and benefits, and increased headcount.~~severance expense during the current quarter, reflecting our commitment to manage expenses.

Deposit insurance and regulatory expense increased $6$9 million, or 69%, driven largely by ~~a higher Federal Deposit Insurance Corporation (“FDIC”)~~an increased FDIC insurance ~~assessment as a result of~~base rate beginning in 2023 and changes in balance sheet composition. In May 2023, the FDIC issued a Notice of Proposed Rulemaking, which would implement a special assessment to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank. Using an assessment base equal to the estimated amount of uninsured deposits at December 31, 2022, the FDIC proposed to collect the special assessment at an annual rate of approximately 12.5 bps over eight quarterly periods, beginning the first quarter of 2024. As proposed, we estimate the total impact of the special assessment on our deposit insurance and regulatory expense would be approximately $80 million. At June 30, 2023, we had not accrued for any portion of this estimated amount. The ultimate impact and timing of expense recognition will depend on the final rule, which is not expected until late 2023.

~~Other noninterest~~Technology, telecom, and information processing expense ~~decreased~~increased $5 million, or ~~17%~~9%, primarily due to ~~the success fee accrual~~increases in ~~the prior year period~~application software, maintenance, and related to the IPO of our SBIC investment in Recursion Pharmaceuticals, Inc. Professional and legal services expense decreased $4 million, or 22%, due to reduced third-party assistance associated with PPP loan forgiveness and various other technology-related and outsourced services.

amortization expenses. The efficiency ratio was ~~60.7%~~62.5%, compared with ~~59.1%.~~60.7%, as growth in adjusted noninterest expense outpaced growth in adjusted taxable-equivalent revenue. For information on non-GAAP financial measures, ~~including differences between noninterest expense and adjusted noninterest expense,~~ see page 4.35.

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:

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•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 presents the composition of our technology spend:

TECHNOLOGY SPEND


	Three Months Ended June 30,				Amount change		Percent change		Six Months Ended June 30,				Amount change		Percent change
(In millions)	2023		2022						2023		2022

Technology, telecom, and information processing expense	$	58	$	53	$	5	9	%	$	113	$	105	$	8	8	%
Other technology-related expense	56		51		5		10		110		100		10		10
Technology investments	23		22		1		5		49		44		5		11
Less: related amortization and depreciation	(16)		(13)		(3)		23		(30)		(27)		(3)		11
Total technology spend	$	121	$	113	$	8	7	%	$	242	$	222	$	20	9	%

Total technology spend increased $8 million relative to the prior year quarter, largely due to technology-related compensation, investments in application resiliency, and increases in application software and maintenance expense.

Income Taxes

The following schedule summarizes the income tax expense and effective tax rates for the periods ~~presented:~~presented.

INCOME TAXES


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
(Dollar amounts in millions)	(Dollar amounts in millions)	2022			2021			2022			2021			(Dollar amounts in millions)	2023			2022			2023			2022

Income before income taxes	Income before income taxes	$	260		$	455		$	515		$	866		Income before income taxes	$	226		$	260		$	508		$	515
Income tax expense	Income tax expense	57			101			109			190			Income tax expense	51			57			129			109
Effective tax rate	Effective tax rate	21.9		%	22.2		%	21.2		%	21.9		%	Effective tax rate	22.6		%	21.9		%	25.4		%	21.2		%

The effective tax rate was 22.6% and 21.9% for the three months ended June 30, 2023 and 2022, respectively. See Note 12 of the Notes to Consolidated Financial Statements for more information about the factors that ~~influenced~~impacted the income tax rates, as well as information about deferred income tax assets and ~~liabilities.~~

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liabilities, and valuation allowances.

Preferred Stock Dividends

Preferred stock dividends totaled $8$9 million and $9$8 million for the second quarter of ~~2022~~2023 and ~~2021,~~2022, respectively.

~~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
June 30, Six Months Ended
June 30,
(In millions) 2022 2021 2022 2021
Technology, telecom, and information processing expense $ 53 $ 49 $ 105 $ 98
Other technology-related expense 51 48 100 92
Technology investments 22 24 44 52
Less: related amortization and depreciation (13) (14) (27) (27)
Total technology spend $ 113 $ 107 $ 222 $ 215

~~Total technology spend increased $6 million, or 6%, from the second quarter of 2021, primarily due to increases in application software licensing and maintenance expense.~~

~~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.~~

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.

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Investment Securities Portfolio

We invest in securities to ~~generate interest income and to~~ actively manage liquidity and interest rate risk and ~~credit risk. Refer~~to generate interest income. We primarily own securities that can readily provide us with 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 June 30, 2023, the estimated duration of our securities portfolio decreased to 3.7 years, compared with 4.1 years at December 31, 2022, and 3.9 years at June 30, 2022, primarily due to the addition of certain portfolio layer method fair value hedges. See Note 7 for more information on these fair value hedges. 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 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 ~~32 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.

The following schedule presents the major components of our investment securities portfolio.

INVESTMENT SECURITIES PORTFOLIO


	June 30, 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	$	96	$	96	$	90	$	100	$	100	$	93
Agency guaranteed mortgage-backed securities 1	12,456		10,289		10,335		12,921		10,621		10,772
Municipal securities	368		368		343		404		405		374
Total held-to-maturity	12,920		10,753		10,768		13,425		11,126		11,239
Available-for-sale
U.S. Treasury securities	565		565		475		555		557		393
U.S. Government agencies and corporations:
Agency securities	724		717		677		790		782		736
Agency guaranteed mortgage-backed securities	8,913		8,991		7,647		9,566		9,652		8,367
Small Business Administration loan-backed securities	604		646		619		691		740		712
Municipal securities	1,350		1,480		1,391		1,571		1,732		1,634
Other debt securities	25		25		23		75		75		73
Total available-for-sale	12,181		12,424		10,832		13,248		13,538		11,915


Total HTM and AFS investment securities	$	25,101	$	23,177	$	21,600	$	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. 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 attributable to these securities. The amortization of the unrealized losses will offset the effect of the accretion of the discount created by the transfer. At June 30, 2023, the unamortized discount on the HTM securities totaled approximately $2.2 billion ($1.7 billion after tax).

The amortized cost of total HTM and AFS investment securities decreased $1.5 billion, or 6%, from December 31, 2022, primarily due to payments and maturities. Approximately 8% of the total HTM and AFS investment securities were floating-rate instruments at both June 30, 2023 and December 31, 2022, respectively. Additionally, at June 30, 2023, we have $3.6 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 June 30, 2023, the AFS investment securities portfolio included approximately $243 million of net premium that was distributed across the various security categories. Total taxable-equivalent premium amortization for these investment securities was $22 million for the second quarter of 2023, compared with $27 million for the same prior year period.

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~~The following schedule presents the components of our investment securities portfolio.~~

~~INVESTMENT SECURITIES PORTFOLIO~~
June 30, 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 $ 614 $ 614 $ 578 $ 441 $ 441 $ 443
Available-for-sale
U.S. Treasury securities 555 557 442 155 155 134
U.S. Government agencies and corporations:
Agency securities 908 899 877 833 833 845
Agency guaranteed mortgage-backed securities 23,601 23,768 21,311 20,340 20,549 20,387
Small Business Administration loan-backed securities 818 878 856 867 938 912
Municipal securities 1,658 1,835 1,737 1,489 1,652 1,694
Other debt securities 75 75 74 75 75 76
Total available-for-sale 27,615 28,012 25,297 23,759 24,202 24,048
Total HTM and AFS investment securities $ 28,229 $ 28,626 $ 25,875 $ 24,200 $ 24,643 $ 24,491

~~The amortized cost of total held-to-maturity (“HTM”) and AFS investment securities increased $4.0 billion, or 16%, from December 31, 2021. Approximately 8% and 11% of the total~~In addition to HTM and AFS ~~investment~~securities, we also have a trading securities portfolio ~~were floating rate~~that totaled $32 million at June 30, ~~2022 and~~2023, compared with $465 million at December 31, ~~2021, respectively.~~

~~At June 30, 2022, the investment securities portfolio includes $397~~2022. The prior year-end amount included $395 million of ~~net premium that is distributed across various asset classes. Total premium amortization for our investment securities was $25 million for~~money market mutual sweep accounts. Beginning in the ~~second~~first quarter of ~~2022, compared with $27 million for~~2023, related sweep balances were presented in “Money market investments” on the ~~same prior year period.~~ consolidated balance sheet.

Refer to the “Interest Rate Risk Management” section on page 27, the “Capital Management” section on page 33, and Note 5 of the Notes to Consolidated Financial Statements for more discussion onregarding our investment securities portfolio, swaps, and related unrealized ~~gains/losses.~~

~~At June 30, 2022, based on the GAAP fair value hierarchy, 1.7%~~gains and 98.3% of the $25.3 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.losses.

~~Municipalities~~Municipal Investments and Extensions of Credit

We ~~provide~~support our communities by providing products and services to state and local governments ~~(referred to collectively as “municipalities”~~(“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.

The following schedule summarizes our ~~exposure~~total investments and extensions of credit to ~~state~~municipalities:

MUNICIPAL INVESTMENTS AND EXTENSIONS OF CREDIT


(In millions)	June 30, 2023		December 31, 2022

Loans and leases	$	4,354	$	4,361
Held-to-maturity securities	368		405
Available-for-sale securities	1,391		1,634

Trading securities	32		71
Unfunded lending commitments	361		406
Total	$	6,506	$	6,877

Our municipal loans and ~~local municipalities:~~

~~EXPOSURE TO MUNICIPALITIES~~

(In millions) June 30,
2022 December 31,
2021
Loans and leases $ 4,113 $ 3,658
Held-to-maturity – municipal securities 614 441
Available-for-sale – municipal securities 1,737 1,694
Trading account – municipal securities 287 355
Unfunded lending commitments 285 280
Total direct exposure to municipalities $ 7,036 $ 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.~~

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At June 30, ~~2022,~~2023, we had 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 June 30, ~~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 June 30, 2022~~We provide a wide range of lending products to commercial customers, generally small- and ~~December 31, 2021, the ratio of loans~~medium-sized businesses. We also provide various retail lending products and ~~leases~~services to ~~total assets was 60%~~consumers and ~~55%, respectively. The largest loan category was commercial and industrial loans, which constituted 29% and 27% of our total loan portfolio for the same periods.~~small businesses. The following schedule presents ~~our loans and leases according to major portfolio segment, specific loan class, and percentage~~the composition of ~~total loans:~~

~~LOAN AND LEASE PORTFOLIO~~

June 30, 2022 December 31, 2021
(Dollar amounts in millions) Amount % of
total loans Amount % of
total loans
Commercial:
Commercial and industrial $ 14,989 28.6 % $ 13,867 27.3 %
PPP 534 1.0 1,855 3.6
Leasing 339 0.6 327 0.6
Owner-occupied 9,208 17.6 8,733 17.2
Municipal 4,113 7.9 3,658 7.2
Total commercial 29,183 55.7 28,440 55.9
Commercial real estate:
Construction and land development 2,659 5.1 2,757 5.4
Term 9,477 18.1 9,441 18.6
Total commercial real estate 12,136 23.2 12,198 24.0
Consumer:
Home equity credit line 3,266 6.2 3,016 5.9
1-4 family residential 6,423 12.3 6,050 11.9
Construction and other consumer real estate 787 1.5 638 1.3
Bankcard and other revolving plans 448 0.9 396 0.8
Other 127 0.2 113 0.2
Total consumer 11,051 21.1 10,213 20.1
Total net loans and leases $ 52,370 100.0 % $ 50,851 100.0 %

~~The~~our loan and lease portfolio increased $1.5 billion from December 31, 2021. Excluding PPP loans, commercial loans increased $2.1 billion, or 8%, driven largely by increases in commercial and industrial loans, owner-occupied loans, and municipal loans of $1.1 billion, $475 million, and $455 million, respectively. Consumer loans increased $838 million, primarily due to increases in 1-4 family residential loans, home equity credit lines, and construction and other consumer real estate loans.portfolio.

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LOAN AND LEASE PORTFOLIO


	June 30, 2023				December 31, 2022
(Dollar amounts in millions)	Amount		% of total loans		Amount		% of total loans
Commercial:
Commercial and industrial	$	16,622	29.2	%	$	16,377	29.4	%
Leasing	388		0.7		386		0.7
Owner-occupied	9,328		16.4		9,371		16.8
Municipal	4,354		7.6		4,361		7.8
Total commercial	30,692		53.9		30,495		54.8
Commercial real estate:
Construction and land development	2,498		4.4		2,513		4.5
Term	10,406		18.3		10,226		18.4
Total commercial real estate	12,904		22.7		12,739		22.9
Consumer:
Home equity credit line	3,291		5.8		3,377		6.1
1-4 family residential	7,980		14.0		7,286		13.1
Construction and other consumer real estate	1,434		2.5		1,161		2.1
Bankcard and other revolving plans	466		0.8		471		0.8
Other	150		0.3		124		0.2
Total consumer	13,321		23.4		12,419		22.3
Total loans and leases	$	56,917	100.0	%	$	55,653	100.0	%

At June 30, 2023 and December 31, 2022, the ratio of loans and leases to total assets was 65% and 62%, respectively. The largest loan category was commercial and industrial loans, which constituted 29% of our total loan portfolio at both time periods.

During the first six months of 2023, the loan and lease portfolio increased $1.3 billion, or 2%, to $56.9 billion at June 30, 2023, primarily due to growth of $0.7 billion in consumer 1-4 family residential mortgage loans, driven mainly from an increased demand for adjustable-rate mortgages.

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)	June 30, 2022		December 31, 2021		Amount change		Percent change		(Dollar amounts in millions)	June 30, 2023		December 31, 2022		Amount change		Percent change

Bank-owned life insurance	Bank-owned life insurance	$	541	$	537	$	4	1	%	Bank-owned life insurance	$	549	$	546	$	3	1	%
Federal Home Loan Bank stock	Federal Home Loan Bank stock	11		11		—		—		Federal Home Loan Bank stock	111		294		(183)		(62)
Federal Reserve stock	Federal Reserve stock	70		81		(11)		(14)		Federal Reserve stock	65		68		(3)		(4)
Farmer Mac stock	Farmer Mac stock	18		19		(1)		(5)		Farmer Mac stock	21		19		2		11
SBIC investments	SBIC investments	165		179		(14)		(8)		SBIC investments	177		172		5		3
Other	Other	35		24		11		46		Other	33		31		2		6
Total other noninterest-bearing investments	Total other noninterest-bearing investments	$	840	$	851	$	(11)	(1)	%	Total other noninterest-bearing investments	$	956	$	1,130	$	(174)	(15)	%

Total other noninterest-bearing investments decreased ~~$11~~$174 million, or 1%15%, during the first six months of ~~2022,~~2023, primarily due to a ~~$14~~$183 million decrease in ~~the value~~FHLB stock. We are required to invest approximately 4% of our ~~SBIC investments. This~~FHLB borrowings in FHLB stock to maintain our borrowing capacity. The decrease in FHLB stock was driven ~~largely~~ by ~~negative mark-to-market adjustments associated with our investment~~declines in ~~Recursion Pharmaceuticals, Inc. This investment will continue~~FHLB borrowings during the second quarter of 2023 in response to ~~be marked-to-market until the SBIC fund manager divests~~an increase in total deposits.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

Premises, Equipment, and Software

Net premises, equipment, and software increased $53 million, or 4%, from December 31, 2021, primarily due to capitalized costs related to the construction of a new corporate technology center in Midvale, Utah, which was completed in July 2022, and a new corporate center for Vectra in Denver, Colorado, which is expected to be completed in the fourth quarter of 2022. These new facilities will allow us to achieve efficiencies by eliminating a number of smaller facilities and by reducing related occupancy costs.

We are ~~also~~ in the final phase of a three-phase project to replace our core loan and deposit banking ~~systems, and are on track to convert~~systems. This final phase includes the replacement of our deposit ~~servicing system~~banking systems through multiple affiliate bank conversions, the first of which was completed in the second quarter of 2023. ~~Capitalized~~We expect to complete the remaining affiliate bank conversions in 2024.

The following schedule summarizes the capitalized costs associated with ~~the~~our core system replacement project, ~~generally carry~~which 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


		June 30, 2022									June 30, 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	$	34	$	59	$	178	$	271	Total amount of capitalized costs, less accumulated depreciation	$	25	$	50	$	221	$	296

Deposits

Deposits are aour primary funding source. In recent years, particularly during the COVID-19 pandemic, we experienced a significant influx of deposits, which was impacted by considerable fiscal and monetary policy decisions. During the prior year, with the withdrawal of stimulus by the federal government, our deposits began to decline to more normalized levels. This trend accelerated with prominent bank failures during the first quarter of 2023 and abated during the second quarter of 2023, with period-end deposits increasing meaningfully from March 31, 2023 to June 30, 2023. Total deposits have remained above pre-pandemic (December 31, 2019) levels during 2023.

The following schedule presents the composition of our ~~deposits by category~~deposit portfolio.

DEPOSIT PORTFOLIO


	June 30, 2023					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		Amount			% of total deposits
Deposits by type
Noninterest-bearing demand	$	28,670		38.6	%	$	30,974		44.8	%	$	35,777		49.9	%	$	23,576		41.3	%
Interest-bearing:
Savings and money market	33,303			44.8		30,826			44.5		33,474			46.7		28,249			49.5
Time	3,897			5.2		2,024			2.9		1,484			2.1		2,451			4.3
Brokered	8,453			11.4		5,384			7.8		917			1.3		2,809			4.9
Total deposits	$	74,323		100.0	%	$	69,208		100.0	%	$	71,652		100.0	%	$	57,085		100.0	%
Deposit-related metrics
Estimated amount of insured deposits	$	43,911		59	%	$	37,846		55	%	$	34,018		47	%	$	28,802		50	%
Estimated amount of uninsured deposits	$	30,412		41	%	$	31,362		45	%	$	37,634		53	%	$	28,283		50	%
Estimated amount of collateralized deposits 1	$	2,679		3.6	%	$	2,708		3.9	%	$	2,861		4.0	%	$	1,928		3.4	%
Loan-to-deposit ratio	77		%			81		%			78		%			85		%

1 Includes both insured and ~~percentage of total deposits:~~

~~DEPOSITS~~

June 30, 2022 December 31, 2021
(Dollar amounts in millions) Amount % of
total deposits Amount % of
total deposits
Noninterest-bearing demand $ 40,289 51.0 % $ 41,053 49.6 %
Interest-bearing:
Savings and money market 37,346 47.2 40,114 48.4
Time 1,426 1.8 1,622 2.0
Total deposits $ 79,061 100.0 % $ 82,789 100.0 %
uninsured deposits.

2019

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Total deposits ~~decreased $3.7~~increased $5.1 billion, or 5%7%, from March 31, 2023, and $2.7 billion, or 4%, from December 31, ~~2021,~~2022. These increases were primarily due to ~~a $3.0 billion decrease~~significant growth in ~~interest-bearing~~brokered and customer deposits, and partially offset by a ~~$0.8 billion decrease~~decline in noninterest-bearing ~~deposits. Total~~deposits as interest rates have risen. At June 30, 2023, total customer deposits included ~~$373 million~~approximately $3.4 billion from reciprocal placement products where we distributed our customers’ deposits in a placement network to increase their FDIC insurance and ~~$381 million~~in return we received a matching amount of ~~brokered~~deposits from other network banks.

At June 30, 2023, the estimated total amount of uninsured deposits was $30.4 billion, or 41%, of total deposits, compared with $31.4 billion, or 45%, and $37.6 billion, or 53%, of total deposits at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Our loan-to-deposit ratio was 77%, compared with 81% and 78% for the same time periods.

See “Liquidity Risk Management” on page 3231 for additional information on ~~funding~~liquidity and borrowed funds.

Total United States (“U.S.”) time deposits that exceed the current FDIC insurance limit of $250,000 were $430 million and $563 million at June 30, 2022 and December 31, 2021, respectively. The estimated total amount of uninsured deposits, including related interest accrued and unpaid, was $45 billion and $49 billion at June 30, 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 ~~reduce~~prudently 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, ~~cyber~~cybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by ~~the~~ various management committees ~~of which~~including the Enterprise Risk Management ~~Committee is the focal point.~~Committee. For a more comprehensive discussion of these risks, see “Risk Factors” in our ~~2021~~2022 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 ~~2021~~2022 Form 10-K.

U.S. Government Agency Guaranteed Loans

We participate in various guaranteed lending programs sponsored by United States (“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 June 30, ~~2022, $965~~2023, $593 million of related loans were guaranteed, primarily by the SBA, and ~~include $534~~included $125 million of ~~PPP~~Paycheck 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)	(Dollar amounts in millions)	June 30, 2022		Percent guaranteed		December 31, 2021		Percent guaranteed		(Dollar amounts in millions)	June 30, 2023		Percent guaranteed		December 31, 2022		Percent guaranteed

Commercial	Commercial	$	1,071	89	%	$	2,410	95	%	Commercial	$	703	81	%	$	753	83	%
Commercial real estate	Commercial real estate	17		76		22		73		Commercial real estate	24		79		21		76
Consumer	Consumer	4		100		5		100		Consumer	5		100		5		100
Total loans	Total loans	$	1,092	88	%	$	2,437	94	%	Total loans	$	732	81	%	$	779	83	%

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Commercial Lending

The following schedule provides information regarding lending exposures to certain industries in our commercial lending portfolio.

COMMERCIAL LENDING BY INDUSTRY GROUP 1


		June 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
(Dollar amounts in millions)	(Dollar amounts in millions)	Amount		Percent		Amount		Percent		(Dollar amounts in millions)	Amount		Percent		Amount		Percent

Real estate, rental and leasing		$	2,716	9.3	%	$	2,536	8.9	%
Real estate, rental, and leasing										Real estate, rental, and leasing	$	2,923	9.5	%	$	2,802	9.2	%
Retail trade										Retail trade	2,842		9.3		2,751		9.0
Finance and insurance	Finance and insurance	2,673		9.2		2,303		8.1		Finance and insurance	2,634		8.6		2,992		9.8
Retail trade		2,629		9.0		2,412		8.5
Healthcare and social assistance	Healthcare and social assistance	2,356		8.1		2,349		8.2		Healthcare and social assistance	2,495		8.1		2,373		7.8
Public Administration										Public Administration	2,376		7.7		2,366		7.8
Manufacturing	Manufacturing	2,342		8.0		2,374		8.3		Manufacturing	2,319		7.5		2,387		7.8
Public Administration		2,218		7.6		1,959		6.9
Wholesale trade	Wholesale trade	1,857		6.4		1,701		6.0		Wholesale trade	1,918		6.3		1,880		6.2
Utilities 2	Utilities 2	1,461		5.0		1,446		5.1		Utilities 2	1,590		5.2		1,418		4.6
Transportation and warehousing										Transportation and warehousing	1,501		4.9		1,464		4.8
Mining, quarrying, and oil and gas extraction										Mining, quarrying, and oil and gas extraction	1,326		4.3		1,349		4.4
Educational services										Educational services	1,286		4.2		1,302		4.3
Construction	Construction	1,364		4.7		1,456		5.1		Construction	1,276		4.2		1,355		4.4
Hospitality and food services	Hospitality and food services	1,210		4.1		1,353		4.8		Hospitality and food services	1,186		3.9		1,238		4.1
Educational services		1,194		4.1		1,163		4.1
Mining, quarrying, and oil and gas extraction		1,186		4.1		1,185		4.2
Transportation and warehousing		1,156		4.0		1,273		4.5
Other services (except Public Administration)		1,149		3.9		1,213		4.2
Other Services (except Public Administration)										Other Services (except Public Administration)	1,066		3.5		1,041		3.4
Professional, scientific, and technical services	Professional, scientific, and technical services	1,035		3.5		1,084		3.8		Professional, scientific, and technical services	1,032		3.3		995		3.3
Other 3	Other 3	2,637		9.0		2,633		9.3		Other 3	2,922		9.5		2,782		9.1
Total	Total	$	29,183	100.0	%	$	28,440	100.0	%	Total	$	30,692	100.0	%	$	30,495	100.0	%

1 Industry groups are determined by North American Industry Classification System (“NAICS”) codes.

2 Includes primarily utilities, power, and renewable energy.

3 No other industry group exceeds ~~2.7%~~3.1%.

Commercial Real Estate Loans

~~The following schedules present credit quality information for our commercial real estate (“CRE”) loan portfolio segmented by real estate category and collateral location.~~

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~~COMMERCIAL REAL ESTATE PORTFOLIO BY LOAN TYPE AND COLLATERAL LOCATION~~
(Dollar amounts in millions) June 30, 2022
Collateral Location
Loan type Arizona California Colorado Nevada Texas Utah/
Idaho Wash-ington
Other 1
Total % of total CRE
Commercial term
Balance outstanding $ 1,045 $ 3,110 $ 438 $ 664 $ 1,728 $ 1,597 $ 567 $ 328 $ 9,477 78.1 %
% of loan type 11.0 % 32.8 % 4.6 % 7.0 % 18.2 % 16.9 % 6.0 % 3.5 % 100.0 %
Delinquency rates 2:
30-89 days — % 1.4 % — % — % — % 0.1 % — % — % 0.5 %
≥ 90 days — % — % — % — % 0.3 % — % 0.5 % 0.3 % 0.1 %
Accruing loans past due 90 days or more $ — $ — $ — $ — $ — $ — $ 3 $ — $ 3
Nonaccrual loans $ — $ 4 $ — $ — $ 15 $ — $ — $ 1 $ 20
Commercial construction and land development
Balance outstanding $ 266 $ 457 $ 94 $ 82 $ 289 $ 506 $ 200 $ 46 $ 1,940 16.0 %
% of loan type 13.7 % 23.6 % 4.8 % 4.2 % 14.9 % 26.1 % 10.3 % 2.4 % 100.0 %
Delinquency rates 2:
30-89 days — % — % 24.4 % — % — % — % — % — % 1.2 %
≥ 90 days — % — % — % — % — % — % — % — % — %
Residential construction and land development 3
Balance outstanding $ 75 $ 121 $ 51 $ 3 $ 219 $ 199 $ 9 $ 42 $ 719 5.9 %
% of loan type 10.5 % 16.8 % 7.2 % 0.4 % 30.4 % 27.6 % 1.2 % 5.9 % 100.0 %
Total construction and land development $ 341 $ 578 $ 145 $ 85 $ 508 $ 705 $ 209 $ 88 $ 2,659
Total CRE $ 1,386 $ 3,688 $ 583 $ 749 $ 2,236 $ 2,302 $ 776 $ 416 $ 12,136 100.0 %

(Dollar amounts in millions) December 31, 2021
Collateral Location
Loan type Arizona California Colorado Nevada Texas Utah/
Idaho Wash-ington
Other 1
Total % of total CRE
Commercial term
Balance outstanding $ 1,038 $ 3,331 $ 508 $ 653 $ 1,606 $ 1,408 $ 444 $ 453 $ 9,441 77.4 %
% of loan type 11.0 % 35.3 % 5.4 % 6.9 % 17.0 % 14.9 % 4.7 % 4.8 % 100.0 %
Delinquency rates 2:
30-89 days — % 0.2 % 0.2 % — % — % 0.1 % — % — % 0.1 %
≥ 90 days — % 0.1 % — % — % 0.2 % — % — % — % 0.1 %
Accruing loans past due 90 days or more $ — $ — $ — $ — $ — $ — $ — $ — $ —
Nonaccrual loans $ — $ 3 $ — $ — $ 17 $ — $ — $ — $ 20
Commercial construction and land development
Balance outstanding $ 242 $ 405 $ 94 $ 107 $ 475 $ 543 $ 181 $ 40 $ 2,087 17.1 %
% of loan type 11.6 % 19.4 % 4.5 % 5.1 % 22.8 % 26.0 % 8.7 % 1.9 % 100.0 %
Delinquency rates 2:
30-89 days — % — % — % — % — % — % 13.2 % — % 0.9 %
≥ 90 days — % — % — % — % — % — % — % — % — %
Residential construction and land development 3
Balance outstanding $ 82 $ 167 $ 44 $ 2 $ 162 $ 167 $ 9 $ 37 $ 670 5.5 %
% of loan type 12.3 % 25.0 % 6.6 % 0.2 % 24.2 % 24.9 % 1.3 % 5.5 % 100.0 %
Total construction and land development $ 324 $ 572 $ 138 $ 109 $ 637 $ 710 $ 190 $ 77 $ 2,757
Total CRE $ 1,362 $ 3,903 $ 646 $ 762 $ 2,243 $ 2,118 $ 634 $ 530 $ 12,198 100.0 %

1 ~~No other geography exceeds $61 million and $65 million for all three loan types at~~At June 30, ~~2022~~2023 and December 31, ~~2021, respectively.~~

2 ~~Delinquency rates include nonaccrual loans.~~

3~~At June 30, 2022 and December 31, 2021, there was no meaningful delinquency or nonaccrual activity for residential construction and land development loans.~~

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~~At June 30,~~ 2022, our CRE ~~construction~~loan portfolio totaled $12.9 billion and ~~land development and term loan portfolios represented~~$12.7 billion, respectively, representing approximately 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 19%~~The following schedule presents the geographic distribution of ~~the~~our CRE loan portfolio ~~matures~~based on the location of the primary collateral.

COMMERCIAL REAL ESTATE LENDING BY COLLATERAL LOCATION


	June 30, 2023				December 31, 2022
(Dollar amounts in millions)	Amount		Percent		Amount		Percent

Arizona	$	1,656	13	%	$	1,521	12	%
California	3,772		29		3,805		30
Colorado	639		5		637		5
Nevada	1,030		8		910		7
Texas	2,211		17		2,139		17
Utah/Idaho	2,202		17		2,397		19
Washington/Oregon	912		7		899		7
Other	482		4		431		3
Total CRE	$	12,904	100	%	$	12,739	100	%

Approximately 23% of the total CRE loan portfolio is scheduled to mature in 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. 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 $198 million, or 7%, of the commercial construction~~ Construction and land development ~~portfolio at~~loans generally mature in 18 to 36 months and contain full or partial recourse guarantee structures with

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one- to five-year extension options or roll-to-perm options that often result in term debt. At June 30, ~~2022 consists~~2023, approximately 85% of ~~acquisition~~our CRE loan portfolio was variable-rate, and ~~development loans. Most~~approximately 20% of these ~~land acquisition~~variable-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 loans~~experience 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 ~~2021~~2022 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


	June 30, 2023				December 31, 2022
(Dollar amounts in millions)	Amount		Percent		Amount		Percent
Commercial property
Multi-family	$	3,324	25.7	%	$	3,068	24.1	%
Industrial	2,828		21.9		2,509		19.7
Office	2,157		16.7		2,281		17.9
Retail	1,447		11.2		1,529		12.0
Hospitality	695		5.4		695		5.4
Land	247		1.9		276		2.2
Other 1	1,673		13.0		1,728		13.5
Residential property 2
Single family	289		2.3		340		2.7
Land	73		0.6		75		0.6
Condo/Townhome	28		0.2		13		0.1
Other 1	143		1.1		225		1.8
Total	$	12,904	100.0	%	$	12,739	100.0	%

1 Included in the total amount of the “Other” category was approximately $246 million and $301 million of unsecured loans at June 30, 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.

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 June 30, 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.

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OFFICE CRE LOAN PORTFOLIO


(Dollar amounts in millions)	June 30, 2023			December 31, 2022
Office CRE
Construction and land development	$	193		$	208
Term	1,964			2,073
Total office CRE	$	2,157		$	2,281
Credit quality metrics
Criticized loan ratio	6.4		%	7.2		%
Classified loan ratio	4.8		%	5.8		%
Nonaccrual loan ratio	—		%	—		%
Delinquency ratio	—		%	1.5		%
Net charge-offs, annualized	—		%	—		%
Allowance for credit losses	$	38		$	31
Ratio of allowance for credit losses to office CRE loans, at period end	1.76		%	1.36		%

The following schedules present our office CRE loan portfolio by collateral location for the periods presented.

OFFICE CRE LOAN PORTFOLIO BY COLLATERAL LOCATION


(Dollar amounts in millions)	June 30, 2023
	Collateral Location
Loan type	Arizona			California			Colorado			Nevada			Texas			Utah/ Idaho			Wash-ington			Other 1			Total
Office CRE
Construction and land development	$	—		$	87		$	—		$	1		$	7		$	34		$	64		$	—		$	193
Term	289			449			93			93			182			587			240			31			1,964
Total Office CRE	$	289		$	536		$	93		$	94		$	189		$	621		$	304		$	31		$	2,157
% of total	13.4		%	24.9		%	4.3		%	4.4		%	8.8		%	28.8		%	14.0		%	1.4		%	100.0		%


(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		%

1 No other geography exceeds $18 million at both June 30, 2023 and December 31, 2022.

Consumer Loans

We 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 $694 million, or 10%, to $8.0 billion at June 30, 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.~~lines (“HECLs”). At June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, our HECL portfolio totaled $3.3 billion and ~~$3.0~~$3.4 billion, respectively. ~~The following schedule presents the composition~~Approximately 41% and 44% of our ~~HECL portfolio~~HECLs are secured by ~~lien status.~~first liens for the same time periods.

~~HECL PORTFOLIO BY LIEN STATUS~~

(In millions) June 30,
2022 December 31, 2021
Secured by first liens $ 1,549 $ 1,503
Secured by second (or junior) liens 1,717 1,513
Total $ 3,266 $ 3,016
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At June 30, ~~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~~a Fair Isaac Corporation (“FICO”) credit ~~scores.~~score greater than 700.

Approximately ~~91%~~90% of our HECL portfolio is still in the draw period, and ~~approximately 17%~~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 June 30, ~~2022~~2023 and December 31, ~~2021~~2022 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.

Nonperforming Assets

Nonperforming assets ~~as a percentage of~~include nonaccrual loans ~~and leases~~ and other real estate owned (“OREO”) ~~decreased to 0.38% at June 30, 2022, compared with 0.53% at December 31, 2021.~~

~~Total nonaccrual loans at June 30, 2022 decreased to $201 million from $271 million at December 31, 2021, reflecting credit quality improvements across most of our loan portfolios.~~

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~~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 a period of at least 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.

foreclosed properties. The following schedule presents our nonperforming ~~assets:~~assets.

NONPERFORMING ASSETS


(Dollar amounts in millions)	(Dollar amounts in millions)	June 30, 2022			December 31, 2021			(Dollar amounts in millions)	June 30, 2023			December 31, 2022

Nonaccrual loans 1	Nonaccrual loans 1	$	201		$	271		Nonaccrual loans 1	$	162		$	149
Other real estate owned 2	Other real estate owned 2	—			1			Other real estate owned 2	2			—
Total nonperforming assets	Total nonperforming assets	$	201		$	272		Total nonperforming assets	$	164		$	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	0.38		%	0.53		%	Ratio of nonperforming assets to net loans and leases1 and other real estate owned 2	0.29		%	0.27		%
Accruing loans past due 90 days or more	Accruing loans past due 90 days or more	$	6		$	8		Accruing loans past due 90 days or more	$	7		$	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		%	0.01		%
Nonaccrual loans1 and accruing loans past due 90 days or more	Nonaccrual loans1 and accruing loans past due 90 days or more	$	207		$	279		Nonaccrual loans1 and accruing loans past due 90 days or more	$	169		$	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	0.39		%	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	0.30		%	0.28		%
Accruing loans past due 30-89 days 3		$	123		$	70

Nonaccrual loans1 current as to principal and interest payments	Nonaccrual loans1 current as to principal and interest payments	68.7		%	70.2		%	Nonaccrual loans1 current as to principal and interest payments	70.4		%	57.7		%

1 Includes loans held for sale.

2 Does not include banking premises held for sale.

3 ~~Includes $7 million~~Nonperforming assets as a percentage of loans and ~~$35 million of PPP~~leases and OREO increased to 0.29% at June 30, 2023, compared with 0.27% at December 31, 2022. Total nonaccrual loans at June 30, ~~2022 and~~2023 increased to $162 million from $149 million at December 31, ~~2021, respectively, which we expect will be paid~~2022, primarily due to increases in ~~full by either~~commercial and industrial and owner-occupied nonaccrual loans. See Note 6 of the ~~borrower or the SBA.~~Notes to Consolidated Financial Statements for more information on nonaccrual loans.

~~Troubled Debt Restructured Loans~~Loan 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 June 30, 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”). At June 30, 2022 and December 31, 2021, TDRs~~ totaled $275 million and $326 million, respectively. 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.$148 million.

If ~~the restructured~~a modified loan is on nonaccrual and 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

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principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the ~~restructuring~~modification is taken into account to determine whether a loan should be returned to accrual status.

ACCRUING AND NONACCRUING ~~TROUBLED DEBT RESTRUCTURED~~MODIFIED LOANS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY

(In millions) June 30,
2022 December 31,
2021
Restructured loans – accruing $ 214 $ 221
Restructured loans – nonaccruing 61 105
Total $ 275 $ 326


(In millions)	June 30, 2023

Modified loans – accruing	$	137
Modified loans – nonaccruing	11
Total	$	148

~~Table~~For additional information regarding loan modifications to borrowers experiencing financial difficulty, including information related to TDRs prior to our adoption of ~~Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION~~

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 accruing, is in compliance with its modified terms, and yields a market rate (as determined and documented at the time of the modification or restructure). SeeASU 2022-02, see Note 6 of the Notes to Consolidated Financial ~~Statements for additional information regarding TDRs.~~

~~TROUBLED DEBT RESTRUCTURED LOANS ROLLFORWARD~~

Three Months Ended
June 30, Six Months Ended
June 30,
(In millions) 2022 2021 2022 2021
Balance at beginning of period $ 316 $ 414 $ 326 $ 311
New identified TDRs and principal increases 15 63 27 183
Payments and payoffs (42) (17) (62) (31)
Charge-offs (1) (1) (2) (3)
No longer reported as TDRs (3) — (3) —
Sales and other (10) (1) (11) (2)
Balance at end of period $ 275 $ 458 $ 275 $ 458
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.

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~~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) Six Months Ended
June 30, 2022 Twelve Months Ended
December 31, 2021 Six Months Ended
June 30, 2021
Loans and leases outstanding $ 52,370 $ 50,851 $ 51,398
Average loans and leases outstanding:
Commercial – excluding PPP loans 27,597 25,014 24,646
Commercial – PPP loans 1,128 4,566 6,039
Commercial real estate 12,134 12,136 12,085
Consumer 10,501 10,267 10,445
Total average loans and leases outstanding $ 51,360 $ 51,983 $ 53,215
Allowance for loan and lease losses:
Balance at beginning of period $ 513 $ 777 $ 777
Provision for loan losses 10 (258) (236)
Charge-offs:
Commercial 28 35 23
Commercial real estate — — —
Consumer 7 13 6
Total 35 48 29
Recoveries:
Commercial 15 29 17
Commercial real estate — 3 —
Consumer 5 10 6
Total 20 42 23
Net loan and lease charge-offs 15 6 6
Balance at end of period $ 508 $ 513 $ 535
Reserve for unfunded lending commitments:
Balance at beginning of period $ 40 $ 58 $ 58
Provision for unfunded lending commitments (2) (18) (19)
Balance at end of period $ 38 $ 40 $ 39
Total allowance for credit losses:
Allowance for loan and lease losses $ 508 $ 513 $ 535
Reserve for unfunded lending commitments 38 40 39
Total allowance for credit losses $ 546 $ 553 $ 574
Ratio of allowance for credit losses to net loans and leases, at period end 1
1.04 % 1.09 % 1.12 %
Ratio of allowance for credit losses to nonaccrual loans, at period end 280 % 204 % 188 %
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end 272 % 198 % 184 %
Ratio of total net charge-offs to average loans and leases 2, 3
0.06 % 0.01 % 0.02 %
Ratio of commercial net charge-offs to average commercial loans 3
0.09 % 0.02 % 0.04 %
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 1.05% at June 30, 2022, 1.13% at December 31, 2021, and 1.22% at June 30, 2021.~~

2 ~~The annualized ratio of net charge-offs to average loans and leases (excluding PPP loans) was 0.06% at June 30, 2022, 0.01% at December 31, 2021, and 0.03% at June 30, 2021.~~

3 ~~Ratios are annualized for the periods presented except for the period representing the full twelve months.~~

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~~The total ACL decreased to $546 million, from $553 million, during the first six months of 2022, primarily due changes in economic forecasts and improvements in overall credit quality.~~

The RULC, ~~represents~~ a reserve for potential losses associated with off-balance sheet commitments, ~~and standby letters of credit, and decreased $2 million~~remained stable during the first six 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.

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SUMMARY OF CREDIT LOSS EXPERIENCE


(Dollar amounts in millions)	Six Months Ended June 30, 2023			Twelve Months Ended December 31, 2022			Six Months Ended June 30, 2022

Loans and leases outstanding	$	56,917		$	55,653		$	52,370
Average loans and leases outstanding:
Commercial	30,664			29,225			28,725
Commercial real estate	12,904			12,251			12,134
Consumer	12,849			11,122			10,501
Total average loans and leases outstanding	$	56,417		$	52,598		$	51,360
Allowance for loan and lease losses:
Balance at beginning of period 1	$	572		$	513		$	513
Provision for loan losses	92			101			10
Charge-offs:
Commercial	23			72			28
Commercial real estate	—			—			—
Consumer	6			10			7
Total	29			82			35
Recoveries:
Commercial	12			32			15
Commercial real estate	—			—			—
Consumer	4			11			5
Total	16			43			20
Net loan and lease charge-offs	13			39			15
Balance at end of period	$	651		$	575		$	508
Reserve for unfunded lending commitments:
Balance at beginning of period	$	61		$	40		$	40
Provision for unfunded lending commitments	(1)			21			(2)
Balance at end of period	$	60		$	61		$	38
Total allowance for credit losses:
Allowance for loan and lease losses	$	651		$	575		$	508
Reserve for unfunded lending commitments	60			61			38
Total allowance for credit losses	$	711		$	636		$	546

Ratio of allowance for credit losses to net loans and leases, at period end	1.25		%	1.14		%	1.04		%
Ratio of allowance for credit losses to nonaccrual loans, at period end	439		%	427		%	280		%
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end	421		%	410		%	272		%
Ratio of total net charge-offs to average loans and leases 2	0.05		%	0.07		%	0.06		%
Ratio of commercial net charge-offs to average commercial loans 2	0.07		%	0.14		%	0.09		%
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	0.03		%	(0.01)		%	0.04		%

1 The beginning balance for the six months ended June 30, 2023 for the allowance for loan losses does not agree to the 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 $711 million, from $636 million, during the first six months of 2023, primarily due to deterioration in economic forecasts. 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.

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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. Because 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 ~~2021~~2022 Form 10-K.

Interest Rate Risk

~~Average total deposits increased $6.2 billion, or 8%, from June 30, 2021,~~We strive to position the Bank for interest rate changes and ~~a significant portion~~manage the balance sheet sensitivity to reduce the volatility of the deposits were invested in fixed-rate, medium-duration AFS securities. The investment in these securities relative to short-duration money market funds resulted in higher earning-asset yields, increasedboth net interest income and ~~decreased~~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 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 more significantly than our liabilities. In previous interest rate environments, we have added (1) interest rate swaps to synthetically increase the duration of the loan portfolio, (2) longer-duration securities, and (3) longer-duration loans to reduce the asset sensitivity to ~~rising rates.~~a level where an increase in interest rates of 100 bps would continue to result in a positive change in net interest income, and a decline in interest rates would be more muted. Additionally, we have pay-fixed interest rate swaps to adjust the duration of the investment securities portfolio.

Asset sensitivity measures depend upon the assumptions we use for deposit runoff and repricing ~~behavior, which is more uncertain given the higher level of new deposits.~~behavior. As interest rates 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.

We also assume a correlation, 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-bearing checking accounts are assumed to have a lower correlation. ~~We anticipate~~

With the recent prominent bank failures during the first half of 2023, customer deposit behavior deviated from modeled behaviors, with the latter being informed using data reflecting an extended period of relatively low interest rates. As such, in addition to our historical-based assumptions, we have included adjusted deposit assumptions into our interest risk rate management, which increase the deposit beta for interest-bearing products and increase the percentage of non-interest bearing deposits that ~~changes in~~migrate to interest-bearing products.

The following schedule presents deposit ~~rates will lag changes in reference rates. Our modeled cost of total deposits for June 2023 is approximately 0.38%without the effect of additional Federal Reserve 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, etc. We use our historical experience~~duration assumptions using both historical-based deposit behavior as well as ~~industry data to inform our assumptions. The migration and correlation~~the adjusted assumptions ~~previously~~ discussed ~~result in deposit durations presented in the following schedule:~~previously.

DEPOSIT ASSUMPTIONS


							June 30, 2023				December 31, 2022
		June 30, 2022					Historical-based assumptions		Adjusted assumptions		Historical-based assumptions
Product	Product	Effective duration (unchanged)		Effective duration (+200 bps)		Product	Effective duration (unchanged)	Effective duration (+200 bps)	Effective duration (unchanged)	Effective duration (+200 bps)	Effective duration (unchanged)	Effective duration (+200 bps)

Demand deposits	Demand deposits	2.7	%	2.9	%	Demand deposits	3.9%	3.7%	2.9%	2.7%	3.6%	3.5%
Money market	Money market	1.8	%	1.6	%	Money market	2.2%	2.1%	1.5%	1.3%	2.3%	2.0%
Savings and interest-bearing checking	Savings and interest-bearing checking	2.5	%	2.2	%	Savings and interest-bearing checking	2.9%	2.6%	2.0%	1.6%	3.1%	2.8%

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~~With interest rates forecast to rise~~As more rate-sensitive deposits have runoff, the effective duration of the deposits under the historical-based assumptions has lengthened due to the remaining deposits that are assumed to be less rate sensitive. Conversely, the effective duration of the deposits under the adjusted assumptions has shortened considerably due to ~~higher than expected runoff and migration to more rate-sensitive~~faster deposit ~~products.~~repricing.

~~Additionally,~~As noted previously, we utilize derivatives to manage interest rate risk. The following schedule presents derivatives that are designated in qualifying hedging relationships at June 30, ~~2022.~~2023. 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. Fair value hedges of assets include $2.5 billion in notional of hedges of AFS securities designated under the portfolio layer method that were added during the second quarter of 2023. 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


		2022						2023												2024						3Q24 - 2Q25			3Q25 - 2Q26																2023									2024																2025						3Q25 - 2Q26			3Q26 - 2Q27
(Dollar amounts in millions)	(Dollar amounts in millions)	Third Quarter			Fourth Quarter			First Quarter			Second Quarter			Third Quarter			Fourth Quarter			First Quarter			Second Quarter																(Dollar amounts in millions)		Third Quarter				Fourth Quarter					First Quarter				Second Quarter				Third Quarter				Fourth Quarter				First Quarter				Second Quarter
Cash flow hedges	Cash flow hedges																																															Cash flow hedges
Cash flow asset hedges 1
Cash flow hedges of assets 1,2																																Cash flow hedges of assets 1,2
Average outstanding notional	Average outstanding notional	$	6,033		$	6,766		$	6,700		$	6,233		$	5,933		$	5,633		$	5,200		$	4,866		$	3,633		$	1,971													Average outstanding notional		$	2,550				$	2,250			$	1,817			$	1,483			$	1,050			$	550			$	350		$	350		$	221		$	100
Weighted-average fixed-rate received	Weighted-average fixed-rate received	1.54		%	1.65		%	1.72		%	1.70		%	1.66		%	1.56		%	1.44		%	1.38		%	1.26		%	1.23		%												Weighted-average fixed-rate received		2.37		%			2.24		%		2.05		%		1.96		%		1.82		%		1.96		%		2.34		%	2.34		%	1.94		%	1.65		%
Cash flow hedges of liabilities 3																																Cash flow hedges of liabilities 3
Average outstanding notional																																Average outstanding notional	$	500		$	500			$	500			$	500				$	500			$	500			$	500			$	500			$	—			$	—
Weighted-average fixed-rate paid																																Weighted-average fixed-rate paid	3.67		%	3.67		%		3.67		%		3.67		%			3.67		%		3.67		%		3.67		%		3.67		%		—		%		—		%
		2022 4			2023			2024			2025			2026			2027			2028			2029			2030			2031																2023 4					2024				2025				2026				2027				2028				2029			2030			2031			2032
Fair value hedges	Fair value hedges																																										Fair value hedges
Fair value debt hedges 2, 4
Fair value hedges of assets 4																																Fair value hedges of assets 4
Average outstanding notional																																Average outstanding notional	$	3,172		$	3,444			$	3,558			$	3,562				$	3,558			$	1,928			$	1,049			$	1,044			$	1,037			$	1,001
Weighted-average fixed-rate paid																																Weighted-average fixed-rate paid	3.16		%	3.06		%		3.03		%		3.02		%			3.03		%		2.28		%		1.84		%		1.83		%		1.83		%		1.83		%
Fair value hedges of liabilities 5																																Fair value hedges of liabilities 5
Average outstanding notional	Average outstanding notional	$	500		$	500		$	500		$	500		$	500		$	500		$	500		$	500		$	—		$	—													Average outstanding notional		$	—				$	—			$	—			$	—			$	—			$	—			$	—		$	—		$	—		$	—
Weighted-average fixed-rate received	Weighted-average fixed-rate received	1.70		%	1.70		%	1.70		%	1.70		%	1.70		%	1.70		%	1.70		%	1.70		%	—		%	—		%												Weighted-average fixed-rate received		—		%			—		%		—		%		—		%		—		%		—		%		—		%	—		%	—		%	—		%
Fair value asset hedges 3, 5
Average outstanding notional		$	828		$	827		$	1,099		$	1,212		$	1,217		$	1,213		$	1,208		$	1,203		$	1,198		$	1,192
Weighted-average fixed-rate paid		1.65		%	1.65		%	1.71		%	7.74		%	1.74		%	1.74		%	1.73		%	1.73		%	1.73		%	1.73		%

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 Cash flow hedges of assets fully matures in February 2027. Amounts for 2027 have not been prorated to reflect this hedge maturing during the period.

3 Cash flow hedges of liabilities fully matures in May of 2025.

4 Fair value hedges of assets consist of pay-fixed interest rate swaps hedging AFS fixed-rate securities.

5Fair value hedges of debt ~~hedges~~ consist of receive-fixed swaps hedging fixed-rate debt. The ~~$500 million~~sole fair value hedge of debt ~~hedge matures at~~was terminated during the ~~end~~second quarter 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 two quarters of 2022.~~2023.

Incorporating the historical-based and adjusted 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~~forward-looking net interest income, and our estimated percentage change in economic value of equity (“EVE”). Both EaR and EVE are based on a static balance sheet size under parallel interest rate changes ranging from -100 bps to +300 bps.

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INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY


		June 30, 2022										December 31, 2021											June 30, 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

Historical-based assumptions:																						Historical-based assumptions:
Earnings at Risk (EaR)	Earnings at Risk (EaR)	(5.8)	%	—	%	5.6	%	11.0	%	16.4	%	(5.2)	%	—	%	11.2	%	22.7	%	33.6	%	Earnings at Risk (EaR)	(5.8)	%	—	%	5.9	%	11.8	%	17.7	%	(2.4)	%	—	%	2.4	%	4.8	%	7.1	%
Economic Value of Equity (EVE)	Economic Value of Equity (EVE)	5.9	%	—	%	(3.1)	%	(5.3)	%	(7.3)	%	20.9	%	—	%	0.8	%	(0.5)	%	(1.2)	%	Economic Value of Equity (EVE)	(0.1)	%	—	%	1.9	%	3.5	%	4.8	%	2.0	%	—	%	(1.1)	%	(2.3)	%	(3.7)	%

Adjusted assumptions:																						Adjusted assumptions:
Earnings at Risk (EaR)																						Earnings at Risk (EaR)	(1.3)	%	—	%	1.4	%	2.9	%	4.4	%
Economic Value of Equity (EVE)																						Economic Value of Equity (EVE)	4.8	%	—	%	(4.1)	%	(8.6)	%	(12.9)	%

1 Assumes rates cannot go below zero in the negative rate shift.

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~~The~~Under the historical-based assumptions, the asset sensitivity, as measured by EaR, ~~decreased~~increased during the second quarter of ~~2022,~~2023, primarily due ~~to (1) deposit runoff, (2)~~ an increase in ~~receive fixed-rate~~pay-fixed interest rate swap ~~notionals, and (3) a higher level of “base-case” net interest income, which reduced~~notional, partially offset by deposit migration from low beta products to high beta products. Under the ~~percentage change for the same modeled dollar change in net interest income.~~adjusted deposit assumptions, asset sensitivity decreased significantly due to faster deposit repricing.

For interest-bearing deposits with indeterminate ~~maturity,~~maturities, the weighted average modeled beta is ~~27%. If~~32% under the ~~weighted average deposit beta were to increase to 40%,~~historical-based assumptions, and 55% under the ~~EaR in the +100 bps rate shock would change from 5.6% to 3.9%.~~adjusted assumptions.

The 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 under the historical-based assumptions to be approximately two-thirds of the change associated with the parallel +200 bps rate change.

~~We recognize that~~ EaR 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, ~~(ex-PPP),~~ compared with expected net interest income in the same quarter one year forward.

Latent interest rate sensitivity refers to future changes in net interest income based upon past rate movements that have yet to be fully recognized in revenue but will be recognized over the near term. We expect latent sensitivity to ~~add approximately 15% to~~reduce net interest income by approximately 4% in the second quarter of ~~2023,~~2024, compared with the second quarter of ~~2022 (ex-PPP).~~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 June 30, ~~2022,~~2023, we expect emergent sensitivity to ~~add~~increase net interest income by approximately ~~8% to~~1% from the latent sensitivity level, offor a cumulative 3% reduction in net interest income.

Our focus on business banking also plays a significant role in determining the nature of our asset-liability management posture. At June 30, ~~2022, $23.5~~2023, $25.8 billion of our commercial lending and CRE loan balances were scheduled to reprice in the next six months. Of these variable-rate loans, approximately 95% are tied to either the prime rate, London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), or American Interbank Offered Rate (“AMERIBOR”). For these variable-rate loans, we have executed ~~$6.5~~$2.9 billion of cash flow hedges by receiving fixed rates on interest rate swaps. Additionally, asset sensitivity is reduced due to $0.4 billion of variable-rate commercial and CRE loans being priced at floored rates at June 30, 2022, which were above the “index plus spread” rate by an average of 22 bps. At June 30, ~~2022,~~2023, we also had ~~$3.4~~$3.6 billion of variable-rate consumer loans scheduled to reprice in the next six ~~months, and $0.1 billion were priced at floored~~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 6 bps.~~have risen. See Notes 3 and 7 of the Notes to Consolidated Financial Statements for additional information regarding derivative instruments.

~~LIBOR Exposure~~

LIBOR is being phased out globally, and U.S. banking regulators instructed banks 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 enterprise-wide program to identify, assess, and monitor risks associated with the expected discontinuance or unavailability of LIBOR, which includes active engagement with industry working groups and regulators. This program also includes active involvement of senior management with regular engagement from the Enterprise Risk Management Committee, 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.

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LIBOR Transition

London Interbank Offered Rate (“LIBOR”) has been phased out globally, and banks were required to migrate to alternative reference rates by June 30, 2023. We ~~have~~ implemented processes, procedures, and systems to ~~ensure~~mitigate contract ~~risk is sufficiently mitigated.~~risk. New originations, and any modifications or renewals of LIBOR-based contracts, ~~contain~~contained fallback language to facilitate transition to an alternative reference rate. ~~For our~~Additionally, under the Adjustable Interest Rate (LIBOR) Act of 2022, the Federal Reserve Board (“FRB”) identified benchmark replacement rates for LIBOR contracts ~~that referenced LIBOR and had a duration beyond June 2023, all~~lacking fallback provisions ~~and variations were identified and classified based upon those provisions. By the end of 2021, we had discontinued substantially all new originations and any renewals~~with a clearly defined or ~~modifications referencing LIBOR.~~

~~We have a significant number of assets and liabilities that reference LIBOR.~~practical replacement benchmark rate. At June 30, ~~2022,~~2023, we ~~had $24.9 billion in loans (mainly commercial loans), unfunded lending commitments, and securities referencing LIBOR. The amount of borrowed funds referencing~~have remediated substantially all our LIBOR ~~at June 30, 2022 was less than $1 billion. These amounts exclude derivative assets and liabilities on~~exposure through fallback language, replacement indices, or reliance upon the ~~consolidated balance sheet. At June 30, 2022,~~provisions under the ~~notional amount of our LIBOR-referenced interest rate derivative contracts was $11.0 billion, of which nearly all related to contracts with central counterparty clearinghouses.~~

The adoption of alternative reference rates continues to evolve in the marketplace. We are positioned to support our customers’ needs by accommodating multiple alternative reference rates, including the Constant Maturity Treasury rate (“CMT”), the Federal Home Loan Bank (“FHLB”) rate, AMERIBOR, SOFR, and the Bloomberg Short Term Bank Yield Index (“BSBY”). During the first quarter of 2022, we began to prompt our customers to either voluntarily modify their contracts and migrate to a reference 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.

We expect that customers who voluntarily migrate to an alternative reference rate will do so by the end of this year, and we expect the remaining customers to move to an alternative rate index in accordance with the relevant fallback provisions in their contracts prior to June 2023. For more information on the transition from LIBOR, see Risk Factors in our 2021 Form 10-K.Act.

Market Risk – Fixed Income

We are exposed to market risk through changes in fair value. This includes market risk for trading securities and for interest rate swaps used to hedge interest rate risk. 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 June 30, 2022, we had $304 million of trading assets and $222 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 (loss) (“AOCI”) for each financial reporting period. During the second quarter of ~~2022,~~2023, the $32 million after-tax ~~change~~increase in AOCI ~~attributable~~loss related to investment securities was driven largely by declines in the fair value of the AFS securities ~~decreased $698 million,~~primarily due ~~largely~~ to changes in benchmark interest rates. For more discussion regarding investment securities and AOCI, see the “Capital Management” section on page 33. See also Note 5 of the Notes to Consolidated Financial Statements for further information regarding the accounting for investment securities.

Our noninterest-bearing deposits are more valuable in a rising interest rate environment, ~~compared with a $34 million increase in the prior year period.~~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~~Small Business Investment Company (“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 ~~$165~~approximately $177 million and ~~$179~~$172 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. On occasion, some of the companies within our SBIC investment may issue an ~~IPO.~~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-K~~the Notes to Consolidated Financial Statements for additional information regarding the valuation of our SBIC investments.

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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. We manage our 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 ~~marketable~~ 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 with 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. Advances can be requested under the program through mid-March 2024.

For a more ~~comprehensive discussion of~~information on our liquidity risk management practices, see “Liquidity Risk Management” in our ~~2021~~2022 Form 10-K.

Strong deposit growth over the past year has contributed to a solid overall liquidity position. At June 30, 2022, our investment securities portfolio of $26.2 billion and cash and money market investments of $4.1 billion, collectively comprised 35% 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 that 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~~

For the first six months of ~~2022,~~2023, the primary sources of cash came from a ~~significant~~decrease in investment securities, a decrease in money market investments, and net cash provided by operating activities. Uses of cash during the same period included primarily ~~an increase~~a decrease in ~~investment securities,~~short-term borrowings, an increase in loans and leases, and ~~redemption of long-term debt.~~dividends paid on common and preferred stock. Cash payments for interest reflected in operating expenses were ~~$31~~$546 million and ~~$43~~$31 million for the first six months of ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Total deposits were $79.1 billion at~~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 June 30, ~~2022,~~2023, our total investment in FHLB and FRB stock was $111 million and $65 million, respectively, compared with ~~$82.8~~$294 million and $68 million at December 31, 2022.

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At June 30, 2023, loans with a carrying value of $24.5 billion and $15.3 billion, compared with $23.7 billion and $3.9 billion at December 31, ~~2021. The decrease in deposits was primarily due to a $2.8 billion decrease in savings~~2022, were pledged at the FHLB and ~~money market deposits,~~FRB, respectively, as collateral for current and a $0.8 billion decrease 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 $78.3 billion at June 30, 2022, compared with $81.9 billion at December 31, 2021. potential borrowings.

At June 30, 2023 and December 31, 2022, investment securities with a carrying value of $21.1 billion and $13.5 billion, respectively, were pledged as collateral for potential borrowings. For the same time periods, these pledges included $9.9 billion and $8.3 billion for available use through the GCF repo program, $7.1 billion and $1.0 billion to the FRB, and $4.1 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


	June 30, 2023											December 31, 2022
(In billions)	FHLB		FRB		GCF		BTFP		Total			FHLB		FRB		GCF		BTFP		Total



Total borrowing capacity	$	17.1	$	13.6	$	10.0	$	7.1	$	47.8		$	16.6	$	4.0	$	8.4	$	—	$	29.0
Borrowings outstanding	2.6		—		2.0		—		4.6			7.2		—		2.7		—		9.9
Remaining capacity, at period end	$	14.5	$	13.6	$	8.0	$	7.1	$	43.2		$	9.4	$	4.0	$	5.7	$	—	$	19.1

Cash and due from banks									0.7											0.7
Interest-bearing deposits 1									1.5											1.3
Total available liquidity									$	45.4										$	21.1
Ratio of available liquidity to uninsured deposits									149		%									56		%

1 Represents funds deposited by the Bank primarily at the Federal Reserve Bank.

At June 30, 2023 and December 31, 2022, our ~~loan-to-deposit ratio~~total available liquidity was ~~66%,~~$45.4 billion, compared with ~~61% at December 31, 2021.~~$21.1 billion, respectively. At June 30, 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 ~~received~~we receive from various rating agencies. ~~Our~~The ratings not only influence the costs associated with borrowings, but can also influence the sources of the borrowings. All of the credit ~~ratings are presented~~rating agencies rate our debt at an investment-grade level. During the second quarter of 2023, as a result of broader uncertainty in the banking industry, Standard & Poor's (“S&P”) changed their outlook on our long-term deposit and issuer ratings to “Negative” from “Stable.” Additionally, 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 July 31, ~~2022:~~2023:

Rating agency

Outlook

Long-term issuer/senior
debt rating

Subordinated debt rating

Short-term debt rating

Kroll

Positive

A-

BBB+

S&P

~~Stable~~Negative

BBB+

BBB

Fitch

Stable

BBB+

BBB

Moody's

Stable

~~Baa1~~Baa2

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 June 30, 2022, our total investment in FHLB and Federal Reserve stock was $11 million and $70 million, respectively, compared with $11 million and $81 million at December 31, 2021.

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The amount available for additional FHLB and Federal Reserve borrowings was $19.0 billion at June 30, 2022, compared with $18.3 billion at December 31, 2021. Loans with a carrying value of $27.0 billion and $26.8 billion at June 30, 2022 and December 31, 2021, respectively, were pledged at the FHLB and the Federal Reserve as collateral for potential borrowings. At both June 30, 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 securities pledged as collateral. During the first six months of 2022, our AFS securities balances increased $1.2 billion.

Total borrowed funds decreased $226 million during the first six months of 2022, primarily due to the redemption of $290 million of the 4-year, 3.35% senior notes. The growth of deposits has allowed us to reduce borrowed funds.

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

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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.

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 management objectives include:~~We seek to (1) ~~consistently improving risk-adjusted returns on our shareholders' capital and appropriately managing capital distributions, (2) maintaining~~maintain sufficient capital to support the current needs and growth of our businesses, and ~~(3) fulfilling~~(2) fulfill 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 ~~our~~ Board ~~of Directors (“Board”)~~ and Office of the Comptroller of the Currency (“OCC”) approval. Shares may be repurchased occasionally in the open market or through privately negotiated transactions. For a more comprehensive discussion of our capital risk management, see “Capital Management” in our ~~2021~~2022 Form 10-K.

SHAREHOLDERS' EQUITY


(Dollar amounts in millions)	(Dollar amounts in millions)	June 30, 2022		December 31, 2021		Amount change		Percent change		(Dollar amounts in millions)	June 30, 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	1,845		1,928		(83)		(4)		Common stock and additional paid-in capital	1,722		1,754		(32)		(2)
Retained earnings	Retained earnings	5,447		5,175		272		5		Retained earnings	6,051		5,811		240		4
Accumulated other comprehensive income (loss)		(2,100)		(80)		(2,020)		NM
Accumulated other comprehensive loss										Accumulated other comprehensive loss	(2,930)		(3,112)		182		6
Total shareholders' equity	Total shareholders' equity	$	5,632	$	7,463	$	(1,831)	(25)	%	Total shareholders' equity	$	5,283	$	4,893	$	390	8	%

Total shareholders’ equity ~~decreased $1.8 billion,~~increased $390 million, or ~~25%~~8%, to ~~$5.6~~$5.3 billion at June 30, ~~2022,~~2023, compared with ~~$7.5~~$4.9 billion at December 31, ~~2021.~~2022. Common stock and additional paid-in capital decreased ~~$83~~$32 million, primarily due to common stock ~~repurchases.~~repurchases during the first quarter of 2023. As the macroeconomic environment remained uncertain, we did not repurchase common shares during the second quarter of 2023, nor do we expect to repurchase common shares during the third quarter of 2023.

AOCI was a $2.9 billion loss at June 30, 2023, and, for the first six months of 2023, reflected (1) a $9 million decline in the fair value of fixed-rate AFS securities as a result of higher interest rates, offset by a $103 million increase in amortization of the discount on the securities transferred from AFS to HTM during the fourth quarter of 2022, and (2) an $88 million increase in unrealized holding gains and other adjustments associated with derivative instruments. Absent any sales or credit impairment of the AFS securities, the unrealized losses will not be recognized in earnings. We do not intend to sell any securities with unrealized losses. Although changes in AOCI are reflected in shareholders’ equity, they are excluded from regulatory capital, and therefore do not impact our regulatory ratios.

For more discussion on our investment securities portfolio and related unrealized gains and losses, see Note 5 of the Notes to Consolidated Financial Statements.

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AOCI decreased $2.0 billion, primarily due to decreases in the fair value of fixed-rate AFS securities as a result of changes in interest rates. Absent any sales or credit impairment of these securities, the unrealized losses will revert back to par over the remaining life of the securities. We have not initiated any sales of AFS securities, nor do we currently intend to sell any identified securities with unrealized losses. Additionally, changes in AOCI do not impact our regulatory capital ratios. Refer to Note 5 of the Notes to Consolidated Financial Statements for more discussion on our investment securities portfolio and their unrealized gains/losses.

Common shares outstanding decreased 1.2 million during the first six months of 2022, primarily due to common stock repurchases. During the second quarter of 2022, we repurchased 0.9 million common shares outstanding for $50 million. In July 2022, the Board approved a plan to repurchase up to $50 million of common shares outstanding during the third quarter of 2022.

CAPITAL DISTRIBUTIONS


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except share data)	(In millions, except share data)	2022		2021		2022		2021		(In millions, except share data)	2023		2022		2023		2022
Capital distributions:	Capital distributions:									Capital distributions:
Preferred dividends paid	Preferred dividends paid	$	8	$	9	$	16	$	17	Preferred dividends paid	$	9	$	8	$	15	$	16
Bank preferred stock redeemed		—		126		—		126

Total capital distributed to preferred shareholders	Total capital distributed to preferred shareholders	8		135		16		143		Total capital distributed to preferred shareholders	9		8		15		16
Common dividends paid	Common dividends paid	58		56		116		112		Common dividends paid	61		58		122		116
Bank common stock repurchased 1	Bank common stock repurchased 1	50		101		101		151		Bank common stock repurchased 1	—		50		50		101
Total capital distributed to common shareholders	Total capital distributed to common shareholders	108		157		217		263		Total capital distributed to common shareholders	61		108		172		217
Total capital distributed to preferred and common shareholders	Total capital distributed to preferred and common shareholders	$	116	$	292	$	233	$	406	Total capital distributed to preferred and common shareholders	$	70	$	116	$	187	$	233
Weighted average diluted common shares outstanding (in thousands)	Weighted average diluted common shares outstanding (in thousands)	150,838		163,054		151,264		163,468		Weighted average diluted common shares outstanding (in thousands)	147,696		150,838		147,865		151,264
Common shares outstanding, at period end (in thousands)	Common shares outstanding, at period end (in thousands)	150,471		162,248		150,471		162,248		Common shares outstanding, at period end (in thousands)	148,144		150,471		148,144		150,471

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~~Pursuant to 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 June 30, ~~2022,~~2023, we had ~~$1.4~~$1.7 billion of retained net profits available for distribution.

~~We paid common dividends of $58 million, or $0.38 per share, during~~During the second quarter of ~~2022.~~2023, we paid dividends on preferred stock of $9 million and dividends on common stock of $61 million, or $0.41 per share. In July ~~2022,~~2023, the Board declared a regular quarterly dividend of $0.41 per common share, payable on August ~~25, 2022,~~24, 2023 to shareholders of record on August ~~18, 2022. We also paid dividends on preferred stock of $8 million during the second quarter of 2022.~~17, 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 several~~that include certain minimum regulatory capital ratios. At June 30, ~~2022,~~2023, we ~~met~~exceeded 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. See the “Supervision and Regulation” section and Note 15 of our 2022 Form 10-K for more information about our compliance with the Basel III capital requirements. The following schedule presents our capital amounts, capital ratios, and other selected performance ratios.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

CAPITAL AMOUNTS AND RATIOS


		June 30, 2022		December 31, 2021		June 30, 2021

Tangible common equity ratio 1		4.8	%	6.5	%	7.6	%
Tangible equity ratio 1		5.3		7.0		8.1
Average equity to average assets (three months ended)		6.7		8.3		9.3
Basel III risk-based capital ratios:
(Dollar amounts in millions)								(Dollar amounts in millions)	June 30, 2023			December 31, 2022			June 30, 2022
Basel III risk-based capital amounts:								Basel III risk-based capital amounts:
Common equity tier 1 capital	Common equity tier 1 capital	9.9		10.2		11.3		Common equity tier 1 capital	$	6,692		$	6,481		$	6,257
Tier 1 leverage		7.4		7.2		8.0
Tier 1 risk-based	Tier 1 risk-based	10.6		10.9		12.1		Tier 1 risk-based	7,131			6,921			6,697
Total risk-based	Total risk-based	12.3		12.8		14.2		Total risk-based	8,378			8,077			7,784
Risk-weighted assets								Risk-weighted assets	66,917			66,111			63,424
Basel III risk-based capital ratios:								Basel III risk-based capital ratios:
Common equity tier 1 capital ratio								Common equity tier 1 capital ratio	10.0		%	9.8		%	9.9		%
Tier 1 risk-based ratio								Tier 1 risk-based ratio	10.7			10.5			10.6
Total risk-based ratio								Total risk-based ratio	12.5			12.2			12.3
Tier 1 leverage ratio								Tier 1 leverage ratio	8.0			7.7			7.4
Other ratios:								Other ratios:
Average equity to average assets (three months ended)								Average equity to average assets (three months ended)	5.9		%	5.4		%	6.7		%
Return on average common equity (three months ended)	Return on average common equity (three months ended)	14.0		11.5		18.6		Return on average common equity (three months ended)	13.8			25.4			14.0
Return on average tangible common equity (three months ended) 1	Return on average tangible common equity (three months ended) 1	17.1		13.4		21.6		Return on average tangible common equity (three months ended) 1	10.0			16.9			12.5
Tangible equity ratio 1								Tangible equity ratio 1	8.0			7.6			7.6
Tangible common equity ratio 1								Tangible common equity ratio 1	7.5			7.1			7.1

1 See ~~“GAAP to~~ “Non-GAAP ~~Reconciliations”~~Financial Measures” on page 435 for more information regarding these ratios.

~~Our regulatory tier 1 risk-based capital~~

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 ~~total risk-based capital was $6.7 billion~~provide a meaningful basis for period-to-period comparisons. We use these non-GAAP financial measures to assess our performance and ~~$7.8 billion at June 30, 2022, compared~~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.

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 ~~$6.5 billion and $7.7 billion, respectively, at December 31, 2021. See the “Supervision and Regulation” section and Note 15 of our 2021 Form 10-K for more~~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 ~~compliance with~~use of shareholders’ equity and provide a basis for evaluating the ~~Basel III capital requirements.~~performance of a business more consistently, whether acquired or developed internally.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP)


		Three Months Ended
(Dollar amounts in millions)		June 30, 2023			March 31, 2023			June 30, 2022

Net earnings applicable to common shareholders (GAAP)	(a)	$	166		$	198		$	195
Adjustment, net of tax:
Amortization of core deposit and other intangibles		1			1			—
Net earnings applicable to common shareholders, net of tax	(a)	$	167		$	199		$	195
Average common equity (GAAP)		$	4,818		$	4,614		$	5,582
Average goodwill and intangibles		(1,063)			(1,064)			(1,015)
Average accumulated other comprehensive loss (income)		2,931			3,030			1,702
Average tangible common equity (non-GAAP)	(b)	$	6,686		$	6,580		$	6,269
Number of days in quarter	(c)	91			90			91
Number of days in year	(d)	365			365			365
Return on average tangible common equity (non-GAAP)	(a/b/c)*d	10.0		%	12.3		%	12.5		%

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)		June 30, 2023			March 31, 2023			June 30, 2022

Total shareholders’ equity (GAAP)		$	5,283		$	5,184		$	5,632
Goodwill and intangibles		(1,062)			(1,063)			(1,015)
Accumulated other comprehensive loss (income)		2,930			2,920			2,100
Tangible equity (non-GAAP)	(a)	7,151			7,041			6,717
Preferred stock		(440)			(440)			(440)
Tangible common equity (non-GAAP)	(b)	$	6,711		$	6,601		$	6,277
Total assets (GAAP)		$	87,230		$	88,573		$	87,784
Goodwill and intangibles		(1,062)			(1,063)			(1,015)
Accumulated other comprehensive loss (income)		2,930			2,920			2,100
Tangible assets (non-GAAP)	(c)	$	89,098		$	90,430		$	88,869
Common shares outstanding (in thousands)	(d)	148,144			148,100			150,471
Tangible equity ratio (non-GAAP)	(a/c)	8.0		%	7.8		%	7.6		%
Tangible common equity ratio (non-GAAP)	(b/c)	7.5		%	7.3		%	7.1		%
Tangible book value per common share (non-GAAP)	(b/d)	$	45.30		$	44.57		$	41.72

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 allows 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.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)


		Three Months Ended									Six Months Ended						Year Ended
(Dollar amounts in millions)		June 30, 2023			March 31, 2023			June 30, 2022			June 30, 2023			June 30, 2022			December 31, 2022

Noninterest expense (GAAP)	(a)	$	508		$	512		$	464		$	1,020		$	928		$	1,878
Adjustments:
Severance costs		13			1			1			14			1			1
Other real estate expense, net		—			—			—			—			1			1

Amortization of core deposit and other intangibles		1			2			—			3			—			1


SBIC investment success fee accrual 1		—			—			—			—			(1)			(1)
Total adjustments	(b)	14			3			1			17			1			2
Adjusted noninterest expense (non-GAAP)	(a-b)=(c)	$	494		$	509		$	463		$	1,003		$	927		$	1,876
Net interest income (GAAP)	(d)	$	591		$	679		$	593		$	1,270		$	1,137		$	2,520
Fully taxable-equivalent adjustments	(e)	11			9			9			20			17			37
Taxable-equivalent net interest income (non-GAAP)	(d+e)=f	602			688			602			1,290			1,154			2,557
Noninterest income (GAAP)	g	189			160			172			349			314			632
Combined income (non-GAAP)	(f+g)=(h)	791			848			774			1,639			1,468			3,189
Adjustments:
Fair value and nonhedge derivative gains		1			(3)			10			(2)			16			16
Securities gains (losses), net 1		—			1			1			1			(16)			(15)
Total adjustments 2	(i)	1			(2)			11			(1)			—			1
Adjusted taxable-equivalent revenue (non-GAAP)	(h-i)=(j)	$	790		$	850		$	763		$	1,640		$	1,468		$	3,188
Pre-provision net revenue (non-GAAP)	(h)-(a)	$	283		$	336		$	310		$	619		$	540		$	1,311
Adjusted PPNR (non-GAAP)	(j)-(c)	296			341			300			637			541			1,312
Efficiency ratio (non-GAAP)	(c/j)	62.5		%	59.9		%	60.7		%	61.2		%	63.1		%	58.8		%

1 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.

2 Excluding the $13 million gain on sale of bank-owned premises recorded in dividends and other income, the efficiency ratio for the three months and six months ended June 30, 2023 would have been 63.6% and 61.6%, respectively.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

CONSOLIDATED BALANCE SHEETS


(In millions, shares in thousands)	(In millions, shares in thousands)	June 30, 2022		December 31, 2021		(In millions, shares in thousands)	June 30, 2023		December 31, 2022
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	559	$	595	Cash and due from banks	$	701	$	657
Money market investments:	Money market investments:					Money market investments:
Interest-bearing deposits	Interest-bearing deposits	1,249		10,283		Interest-bearing deposits	1,531		1,340
Federal funds sold and security resell agreements		2,273		2,133
Federal funds sold and securities purchased under agreements to resell						Federal funds sold and securities purchased under agreements to resell	781		2,426
Investment securities:	Investment securities:					Investment securities:
Held-to-maturity, at amortized cost (included $578 and $443 at fair value )		614		441
Held-to-maturity, at amortized cost (fair value: $10,768 and $11,239)						Held-to-maturity, at amortized cost (fair value: $10,768 and $11,239)	10,753		11,126
Available-for-sale, at fair value	Available-for-sale, at fair value	25,297		24,048		Available-for-sale, at fair value	10,832		11,915
Trading account, at fair value		304		372
Trading, at fair value						Trading, at fair value	32		465

Total securities		26,215		24,861
Total investment securities						Total investment securities	21,617		23,506
Loans held for sale	Loans held for sale	42		83		Loans held for sale	36		8
Loans and leases, net of unearned income and fees	Loans and leases, net of unearned income and fees	52,370		50,851		Loans and leases, net of unearned income and fees	56,917		55,653
Less allowance for loan and lease losses	Less allowance for loan and lease losses	508		513		Less allowance for loan and lease losses	651		575
Loans held for investment, net of allowance	Loans held for investment, net of allowance	51,862		50,338		Loans held for investment, net of allowance	56,266		55,078
Other noninterest-bearing investments	Other noninterest-bearing investments	840		851		Other noninterest-bearing investments	956		1,130
Premises, equipment and software, net	Premises, equipment and software, net	1,372		1,319		Premises, equipment and software, net	1,414		1,408
Goodwill and intangibles	Goodwill and intangibles	1,015		1,015		Goodwill and intangibles	1,062		1,065
Other real estate owned	Other real estate owned	—		8		Other real estate owned	3		3
Other assets	Other assets	2,357		1,714		Other assets	2,863		2,924
Total assets	Total assets	$	87,784	$	93,200	Total assets	$	87,230	$	89,545
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Noninterest-bearing demand	Noninterest-bearing demand	$	40,289	$	41,053	Noninterest-bearing demand	$	28,670	$	35,777
Interest-bearing:	Interest-bearing:					Interest-bearing:
Savings and money market	Savings and money market	37,346		40,114		Savings and money market	33,394		33,566
Time	Time	1,426		1,622		Time	12,259		2,309

Total deposits	Total deposits	79,061		82,789		Total deposits	74,323		71,652
Federal funds purchased and other short-term borrowings		1,018		903
Federal funds and other short-term borrowings						Federal funds and other short-term borrowings	5,513		10,417
Long-term debt	Long-term debt	671		1,012		Long-term debt	538		651
Reserve for unfunded lending commitments	Reserve for unfunded lending commitments	38		40		Reserve for unfunded lending commitments	60		61
Other liabilities	Other liabilities	1,364		993		Other liabilities	1,513		1,871
Total liabilities	Total liabilities	82,152		85,737		Total liabilities	81,947		84,652
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock, without par value; authorized 4,400 shares	Preferred stock, without par value; authorized 4,400 shares	440		440		Preferred stock, without par value; authorized 4,400 shares	440		440
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 150,471 and 151,625 shares) and additional paid-in capital		1,845		1,928
Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 148,144 and 148,664 shares) and additional paid-in capital						Common stock ($0.001 par value; authorized 350,000 shares; issued and outstanding 148,144 and 148,664 shares) and additional paid-in capital	1,722		1,754
Retained earnings	Retained earnings	5,447		5,175		Retained earnings	6,051		5,811
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(2,100)		(80)		Accumulated other comprehensive income (loss)	(2,930)		(3,112)

Total shareholders’ equity	Total shareholders’ equity	5,632		7,463		Total shareholders’ equity	5,283		4,893
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	87,784	$	93,200	Total liabilities and shareholders’ equity	$	87,230	$	89,545

See accompanying notes to consolidated financial statements.

3638

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)	(Unaudited)	Three Months Ended June 30,				Six Months Ended June 30,				(Unaudited)	Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except shares and per share amounts)	(In millions, except shares and per share amounts)	2022		2021		2022		2021		(In millions, except shares and per share amounts)	2023		2022		2023		2022
Interest income:	Interest income:									Interest income:
Interest and fees on loans	Interest and fees on loans	$	468	$	492	$	905	$	980	Interest and fees on loans	$	791	$	468	$	1,517	$	905
Interest on money market investments	Interest on money market investments	12		4		18		7		Interest on money market investments	48		12		105		18
Interest on securities	Interest on securities	128		74		240		145		Interest on securities	138		128		275		240
Total interest income	Total interest income	608		570		1,163		1,132		Total interest income	977		608		1,897		1,163
Interest expense:	Interest expense:									Interest expense:
Interest on deposits	Interest on deposits	7		7		13		16		Interest on deposits	220		7		302		13
Interest on short- and long-term borrowings	Interest on short- and long-term borrowings	8		8		13		16		Interest on short- and long-term borrowings	166		8		325		13
Total interest expense	Total interest expense	15		15		26		32		Total interest expense	386		15		627		26
Net interest income	Net interest income	593		555		1,137		1,100		Net interest income	591		593		1,270		1,137
Provision for credit losses:	Provision for credit losses:									Provision for credit losses:
Provision for loan and lease losses	Provision for loan and lease losses	39		(113)		10		(236)		Provision for loan and lease losses	46		39		92		10
Provision for unfunded lending commitments	Provision for unfunded lending commitments	2		(10)		(2)		(19)		Provision for unfunded lending commitments	—		2		(1)		(2)

Total provision for credit losses	Total provision for credit losses	41		(123)		8		(255)		Total provision for credit losses	46		41		91		8
Net interest income after provision for credit losses	Net interest income after provision for credit losses	552		678		1,129		1,355		Net interest income after provision for credit losses	545		552		1,179		1,129
Noninterest income:	Noninterest income:									Noninterest income:
Commercial account fees	Commercial account fees	37		34		78		66		Commercial account fees	45		37		88		78
Card fees	Card fees	25		24		50		45		Card fees	25		25		49		50
Retail and business banking fees	Retail and business banking fees	20		18		40		35		Retail and business banking fees	16		20		32		40
Loan-related fees and income	Loan-related fees and income	21		21		43		46		Loan-related fees and income	19		21		40		43
Capital markets and foreign exchange fees		21		17		36		32
Capital markets fees										Capital markets fees	27		21		44		36
Wealth management fees	Wealth management fees	13		12		27		24		Wealth management fees	14		13		29		27
Other customer-related fees	Other customer-related fees	17		13		31		24		Other customer-related fees	16		17		31		31
Customer-related noninterest income	Customer-related noninterest income	154		139		305		272		Customer-related noninterest income	162		154		313		305
Fair value and nonhedge derivative gain (loss)		10		(5)		16		13
Dividends and other investment income		7		8		9		15
Fair value and nonhedge derivative income										Fair value and nonhedge derivative income	1		10		(2)		16
Dividends and other income (loss)										Dividends and other income (loss)	26		7		37		9
Securities gains (losses), net	Securities gains (losses), net	1		63		(16)		74		Securities gains (losses), net	—		1		1		(16)
Total noninterest income	Total noninterest income	172		205		314		374		Total noninterest income	189		172		349		314
Noninterest expense:	Noninterest expense:									Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits	307		272		619		560		Salaries and employee benefits	324		307		663		619
Technology, telecom, and information processing	Technology, telecom, and information processing	53		49		105		98		Technology, telecom, and information processing	58		53		113		105
Occupancy and equipment, net	Occupancy and equipment, net	36		39		74		78		Occupancy and equipment, net	40		36		80		74
Professional and legal services	Professional and legal services	14		18		28		39		Professional and legal services	16		14		29		28
Marketing and business development	Marketing and business development	9		7		17		14		Marketing and business development	13		9		25		17
Deposit insurance and regulatory expense	Deposit insurance and regulatory expense	13		7		23		17		Deposit insurance and regulatory expense	22		13		40		23
Credit-related expense	Credit-related expense	7		6		14		12		Credit-related expense	7		7		13		14
Other real estate expense, net	Other real estate expense, net	—		—		1		—		Other real estate expense, net	—		—		—		1
Other	Other	25		30		47		45		Other	28		25		57		47
Total noninterest expense	Total noninterest expense	464		428		928		863		Total noninterest expense	508		464		1,020		928
Income before income taxes	Income before income taxes	260		455		515		866		Income before income taxes	226		260		508		515
Income taxes	Income taxes	57		101		109		190		Income taxes	51		57		129		109
Net income	Net income	203		354		406		676		Net income	175		203		379		406

Preferred stock dividends	Preferred stock dividends	(8)		(9)		(16)		(17)		Preferred stock dividends	(9)		(8)		(15)		(16)

Net earnings applicable to common shareholders	Net earnings applicable to common shareholders	$	195	$	345	$	390	$	659	Net earnings applicable to common shareholders	$	166	$	195	$	364	$	390
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)	150,635		162,742		150,958		163,144		Basic shares (in thousands)	147,692		150,635		147,852		150,958
Diluted shares (in thousands)	Diluted shares (in thousands)	150,838		163,054		151,264		163,468		Diluted shares (in thousands)	147,696		150,838		147,865		151,264
Net earnings per common share:	Net earnings per common share:									Net earnings per common share:
Basic	Basic	$	1.29	$	2.08	$	2.56	$	3.98	Basic	$	1.11	$	1.29	$	2.44	$	2.56
Diluted	Diluted	1.29		2.08		2.56		3.98		Diluted	1.11		1.29		2.44		2.56

See accompanying notes to consolidated financial statements.

~~Table of Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(Unaudited)~~

Three Months Ended
June 30, Six Months Ended
June 30,
(In millions) 2022 2021 2022 2021
Net income for the period $ 203 $ 354 $ 406 $ 676
Other comprehensive income (loss), net of tax:
Net unrealized holding gains (losses) on investment securities (698) 34 (1,820) (130)
Net unrealized gains (losses) on other noninterest-bearing investments (1) 1 (1) 3
Net unrealized holding gains (losses) on derivative instruments (50) 3 (184) —
Reclassification adjustment for increase in interest income recognized in earnings on derivative instruments (5) (11) (15) (23)
Other comprehensive income (loss) (754) 27 (2,020) (150)
Comprehensive income (loss) $ (551) $ 381 $ (1,614) $ 526

~~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 March 31, 2022 $ 440 151,348 $ — $ 1,889 $ 5,311 $ (1,346) $ 6,294
Net income for the period 203 203
Other comprehensive loss, net of tax (754) (754)
Bank common stock repurchased (936) (50) (50)
Net activity under employee plans and related tax benefits 59 6 6
Dividends on preferred stock (8) (8)
Dividends on common stock, $0.38 per share (58) (58)
Change in deferred compensation (1) (1)
Balance at June 30, 2022 $ 440 150,471 $ — $ 1,845 $ 5,447 $ (2,100) $ 5,632
Balance at March 31, 2021 $ 566 163,800 $ — $ 2,653 $ 4,566 $ 148 $ 7,933
Net income for the period 354 354
Other comprehensive income, net of tax 27 27
Preferred stock redemption (126) 3 (3) (126)
Bank common stock repurchased (1,735) (101) (101)
Net activity under employee plans and related tax benefits 183 10 10
Dividends on preferred stock (9) (9)
Dividends on common stock, $0.34 per share (56) (56)
Change in deferred compensation 1 1
Balance at June 30, 2021 $ 440 162,248 $ — $ 2,565 $ 4,853 $ 175 $ 8,033

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION~~

(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 406 406
Other comprehensive loss, net of tax (2,020) (2,020)
Bank common stock repurchased (1,714) (101) (101)
Net activity under employee plans and related tax benefits 560 18 18
Dividends on preferred stock (16) (16)
Dividends on common stock, $0.76 per share (116) (116)
Change in deferred compensation (2) (2)
Balance at June 30, 2022 $ 440 150,471 $ — $ 1,845 $ 5,447 $ (2,100) $ 5,632
Balance at December 31, 2020 $ 566 164,090 $ — $ 2,686 $ 4,309 $ 325 $ 7,886
Net income for the period 676 676
Other comprehensive loss, net of tax (150) (150)
Preferred stock redemption (126) 3 (3) (126)
Bank common stock repurchased (2,747) (151) (151)
Net activity under employee plans and related tax benefits 905 27 27
Dividends on preferred stock (17) (17)
Dividends on common stock, $0.68 per share (113) (113)
Change in deferred compensation 1 1
Balance at June 30, 2021 $ 440 162,248 $ — $ 2,565 $ 4,853 $ 175 $ 8,033

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CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In millions) Six Months Ended
June 30,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period $ 406 $ 676
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 8 (255)
Depreciation and amortization 45 (11)
Share-based compensation 22 19
Deferred income tax expense 29 108
Net decrease in trading securities 67 85
Net decrease in loans held for sale 42 6
Change in other liabilities 389 (1)
Change in other assets (205) (259)
Other, net 1 (85)
Net cash provided by operating activities 804 283
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in money market investments 8,895 (4,961)
Proceeds from maturities and paydowns of investment securities held-to-maturity 48 272
Purchases of investment securities held-to-maturity (220) (256)
Proceeds from sales, maturities and paydowns of investment securities available-for-sale 1,915 2,485
Purchases of investment securities available-for-sale (5,773) (5,170)
Net change in loans and leases (1,476) 2,177
Purchases and sales of other noninterest-bearing investments (1) 4
Purchases of premises and equipment (102) (84)
Other, net 11 10
Net cash provided by (used in) investing activities 3,297 (5,523)
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits (3,728) 6,452
Net change in short-term funds borrowed 115 (831)
Cash paid for preferred stock redemption — (126)
Redemption of long-term debt (290) —
Proceeds from the issuance of common stock 8 16
Dividends paid on common and preferred stock (130) (129)
Bank common stock repurchased (101) (151)
Other, net (11) (9)
Net cash (used in) provided by financing activities (4,137) 5,222
Net decrease in cash and due from banks (36) (18)
Cash and due from banks at beginning of period 595 543
Cash and due from banks at end of period $ 559 $ 525
Cash paid for interest $ 31 $ 43
Net cash paid for income taxes 4 427
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 61 27


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022

Net income for the period	$	175	$	203	$	379	$	406
Other comprehensive income (loss), net of tax:
Net unrealized holding gains (losses) on investment securities 1	(32)		(698)		94		(1,820)





Net unrealized losses on other noninterest-bearing investments	—		(1)		—		(1)
Net unrealized holding gains (losses) on derivative instruments	(8)		(50)		21		(184)
Reclassification adjustment for decrease (increase) in interest income recognized in earnings on derivative instruments	30		(5)		67		(15)

Total other comprehensive income (loss), net of tax	(10)		(754)		182		(2,020)
Comprehensive income (loss)	$	165	$	(551)	$	561	$	(1,614)

See accompanying notes to consolidated financial statements.

1 For the three and six months ended June 30, 2023, the amounts include $86 million and $9 million related to the decline in the fair value of fixed-rate AFS securities as a result of higher interest rates, offset by $54 million and $103 million in amortization of the discount on the securities transferred from AFS to HTM during the fourth quarter of 2022, respectively.

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 March 31, 2023	$	440	148,100	$	—	$	1,715	$	5,949		$	(2,920)	$	5,184
Net income for the period								175					175
Other comprehensive loss, net of tax											(10)		(10)



Net activity under employee plans and related tax benefits			44			7							7
Dividends on preferred stock								(9)					(9)
Dividends on common stock, $0.41 per share								(61)					(61)
Change in deferred compensation								(3)					(3)
Balance at June 30, 2023	$	440	148,144	$	—	$	1,722	$	6,051		$	(2,930)	$	5,283

Balance at March 31, 2022	$	440	151,348	$	—	$	1,889	$	5,311		$	(1,346)	$	6,294
Net income for the period								203					203
Other comprehensive loss, net of tax											(754)		(754)

Bank common stock repurchased			(936)			(50)							(50)

Net activity under employee plans and related tax benefits			59			6							6
Dividends on preferred stock								(8)					(8)
Dividends on common stock, $0.38 per share								(58)					(58)
Change in deferred compensation								(1)					(1)
Balance at June 30, 2022	$	440	150,471	$	—	$	1,845	$	5,447		$	(2,100)	$	5,632

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES



(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								379					379
Other comprehensive income, net of tax											182		182
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			433			18							18
Dividends on preferred stock								(15)					(15)
Dividends on common stock, $0.82 per share								(122)					(122)
Change in deferred compensation								(4)					(4)
Balance at June 30, 2023	$	440	148,144	$	—	$	1,722	$	6,051		$	(2,930)	$	5,283

Balance at December 31, 2021	$	440	151,625	$	—	$	1,928	$	5,175		$	(80)	$	7,463
Net income for the period								406					406
Other comprehensive loss, net of tax											(2,020)		(2,020)

Bank common stock repurchased			(1,714)			(101)							(101)

Net activity under employee plans and related tax benefits			560			18							18
Dividends on preferred stock								(16)					(16)
Dividends on common stock, $0.76 per share								(116)					(116)
Change in deferred compensation								(2)					(2)
Balance at June 30, 2022	$	440	150,471	$	—	$	1,845	$	5,447		$	(2,100)	$	5,632

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In millions)	Six Months Ended June 30,
		2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period		$	379	$	406
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses		91		8
Depreciation and amortization		72		45
Share-based compensation		24		22
Deferred income tax expense (benefit)		(13)		29
Net decrease in trading securities		433		67
Net decrease (increase) in loans held for sale		(25)		42
Change in other liabilities		(363)		389
Change in other assets		164		(205)
Other, net		57		1
Net cash provided by operating activities		819		804
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in money market investments		1,454		8,895
Proceeds from maturities and paydowns of investment securities held-to-maturity		526		48
Purchases of investment securities held-to-maturity		(21)		(220)
Proceeds from sales, maturities, and paydowns of investment securities available-for-sale		1,328		1,915
Purchases of investment securities available-for-sale		(301)		(5,773)
Net change in loans and leases		(1,311)		(1,476)
Purchases and sales of other noninterest-bearing investments		176		(1)
Purchases of premises and equipment		(53)		(102)

Other, net		(18)		11
Net cash provided by investing activities		1,780		3,297
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits		2,671		(3,728)
Net change in short-term borrowed funds		(4,904)		115




Redemption of long-term debt		(128)		(290)

Proceeds from the issuance of common stock		2		8
Dividends paid on common and preferred stock		(138)		(130)
Bank common stock repurchased		(50)		(101)
Other, net		(8)		(11)
Net cash used in financing activities		(2,555)		(4,137)
Net increase (decrease) in cash and due from banks		44		(36)
Cash and due from banks at beginning of period		657		595
Cash and due from banks at end of period		$	701	$	559
Cash paid for interest		$	546	$	31
Net cash paid for income taxes		231		4
Noncash activities:

Loans held for investment reclassified to loans held for sale, net		49		61

See accompanying notes to consolidated financial statements.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, ~~2022~~2023

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 and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 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 ~~2021~~2022 Form 10-K. ~~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.~~

Effective for the first quarter of 2022, we made certain financial reporting changes and reclassifications to noninterest expense in our Consolidated Statements of Income. These financial reporting changes were made primarily to improve the presentation and disclosure of certain expenses related 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 expense in the Consolidated Statements of Income, and (3) do not impact net income, net interest income, or noninterest income.

We evaluated events that occurred between June 30, ~~2022~~2023 and the date the accompanying financial statements were issued, and determined that there were no material events that would require adjustments to our consolidated financial statements or significant disclosure in the accompanying Notes. As referenced in Note 147 of the Notes to Consolidated Financial Statements, we ~~purchased 3 Northern Nevada branches and their associated deposit, credit card, and loan accounts~~entered into additional pay-fixed swaps with an aggregate notional amount of $1 billion that were designated as fair value hedges of a defined portfolio of fixed-rate commercial loans in July ~~2022.~~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; 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.

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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 Disclosures~~Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)

This ~~accounting standards update~~Accounting Standards Update (“ASU”) ~~eliminates~~expands the ~~recognition~~optional 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 guidance~~other 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 guidance~~standard is effective for calendar year-end public companies beginning January 1, ~~2023,~~2024, with early adoption permitted.

Periods beginning after December 15, ~~2022~~2023

We do not currently have ~~established an implementation team~~any 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 the~~evaluate 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 ~~also~~ 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 ~~guidance~~standard is effective for calendar year-end public companies beginning January 1, 2024, with early adoption permitted.

Periods beginning after December 15, 2023

The ~~guidance in~~requirements of this ASU isare consistent with our current treatment of equity securities subject to contractual sale restrictions and isare 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 ~~the guidance~~this standard is not expected to have a material impact on our financial statements.

We do not plan to early adopt this new ~~guidance.~~standard.

Standards adopted by the Bank

ASU 2022-02,

Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures

This ASU eliminated the recognition and measurement requirements for troubled debt restructurings (“TDRs”) for creditors that have adopted ASC 326 (“CECL”), eliminated certain TDR disclosures, and required enhanced disclosures about loan modifications for borrowers experiencing financial difficulty.

The new standard also required 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 a modified retrospective basis on January 1, 2023. It did not have a material impact on our financial statements.

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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 ~~2021~~2022 Form 10-K.

~~Quantitative Disclosure by~~ Fair Value Hierarchy

~~Assets~~The following schedule presents assets and liabilities measured at fair value ~~by class~~ on a recurring ~~basis are summarized as follows:~~
(In millions) June 30, 2022
Level 1 Level 2 Level 3 Total
ASSETS
Available-for-sale securities:
U.S. Treasury, agencies and corporations $ 442 $ 23,044 $ — $ 23,486
Municipal securities 0 1,737 0 1,737
Other debt securities 0 74 0 74
Total available-for-sale 442 24,855 — 25,297
Trading account 14 290 0 304
Other noninterest-bearing investments:
Bank-owned life insurance 0 541 0 541
Private equity investments 1
9 0 77 86
Other assets:
Agriculture loan servicing and interest-only strips 0 0 12 12
Deferred compensation plan assets 117 0 0 117
Derivatives:
Derivatives designated as hedges 0 58 0 58
Derivatives not designated as hedges 0 94 0 94
Total assets $ 582 $ 25,838 $ 89 $ 26,509
LIABILITIES
Securities sold, not yet purchased $ 222 $ — $ — $ 222
Other liabilities:
Derivatives:
Derivatives designated as hedges 0 2 0 2
Derivatives not designated as hedges 0 293 0 293
Total liabilities $ 222 $ 295 $ — $ 517
basis:


(In millions)	June 30, 2023
	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale securities:
U.S. Treasury, agencies, and corporations	$	475	$	8,943	$	—	$	9,418
Municipal securities			1,391				1,391

Other debt securities			23				23
Total available-for-sale	475		10,357		—		10,832
Trading securities			32				32
Other noninterest-bearing investments:
Bank-owned life insurance			549				549
Private equity investments 1	3				84		87
Other assets:
Agriculture loan servicing and interest-only strips					17		17
Loans held for sale			20				20
Deferred compensation plan assets	114						114
Derivatives			491				491
Total assets	$	592	$	11,449	$	101	$	12,142
LIABILITIES
Securities sold, not yet purchased	$	347	$	—	$	—	$	347
Other liabilities:
Derivatives			409				409
Total liabilities	$	347	$	409	$	—	$	756

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.

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(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		$	134	$	22,144	$	—	$	22,278
U.S. Treasury, agencies, and corporations										U.S. Treasury, agencies, and corporations	$	393	$	9,815	$	—	$	10,208
Municipal securities	Municipal securities	0		1,694		0		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 PEIs relate to the portion of our SBIC investments that are ~~now~~ publicly traded.

Level 3 Valuations

Our Level 3 ~~holdings~~financial instruments 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 ~~2021~~2022 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								Six Months Ended							Three Months Ended							Six Months Ended
		June 30, 2022				June 30, 2021					June 30, 2022		June 30, 2021									June 30, 2023	June 30, 2022							June 30, 2023				June 30, 2022
(In millions)	(In millions)	Private equity investments		Ag loan servicing & interest only strips		Private equity investments		Ag loan servicing & interest only strips					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			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	$	74	$	12	$	83	$	15				$	66	$	12		$	80	$	16				Balance at beginning of period	$	82	$	18	$	74	$	12		$	81	$	14	$	66	$	12
Unrealized securities gains (losses), net	Unrealized securities gains (losses), net	—		—		68		—					5		—			69		—					Unrealized securities gains (losses), net	(3)		—		—		—			(3)		—		5		—
Other noninterest income (expense)	Other noninterest income (expense)	—		—		—		—					—		—			—		(1)					Other noninterest income (expense)	—		(1)		—		—			—		3		—		—
Purchases	Purchases	3		—		2		—					9		—			6		—					Purchases	5		—		3		—			6		—		9		—
Cost of investments sold	Cost of investments sold	—		—		(4)		—					(3)		—			(6)		—					Cost of investments sold	—		—		—		—			—		—		(3)		—

Transfers out 1	Transfers out 1	—		—		(77)		—					—		—			(77)		—					Transfers out 1	—		—		—		—			—		—		—		—
Balance at end of period	Balance at end of period	$	77	$	12	$	72	$	15				$	77	$	12		$	72	$	15				Balance at end of period	$	84	$	17	$	77	$	12		$	84	$	17	$	77	$	12

1 Represents the transfer of SBIC investments out of Level 3 and into Level 1 because they are ~~now~~ publicly traded.

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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 Six Months Ended
June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Securities gains (losses), net $ — $ (4) $ (2) $ (5)


(In millions)	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022


Securities gains (losses), net	$	—	$	—	$	—	$	(2)

Nonrecurring Fair Value Measurements

Certain assets and liabilities may be ~~recorded~~measured 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 involve~~generally 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 June 30, 2023, we had $10 million of collateral-dependent loans classified in Level 2, and we recognized $4 million of losses from fair value changes related to these loans. At December 31, 2022, we had noan insignificant amount 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 we 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 ~~2021~~2022 Form 10-K.

Fair Value of Certain Financial Instruments

The following schedule ~~summarizes~~presents the carrying values and estimated fair values of certain financial instruments:


		June 30, 2022					December 31, 2021						June 30, 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		$	614	$	578	2	$	441	$	443	2
Held-to-maturity investment securities												Held-to-maturity investment securities	$	10,753	$	10,768	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	51,904		50,184		3	50,421		50,619		3	Loans and leases (including loans held for sale), net of allowance	56,302		53,885		3	55,086		53,093		3
Financial liabilities:	Financial liabilities:											Financial liabilities:
Time deposits	Time deposits	1,426		1,401		2	1,622		1,624		2	Time deposits	12,259		12,187		2	2,309		2,269		2

Long-term debt	Long-term debt	671		660		2	1,012		1,034		2	Long-term debt	538		460		2	651		635		2

~~This summary excludes financial assets and liabilities for which carrying value approximates fair value and~~The previous schedule 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 ~~2021~~2022 Form 10-K.

Fair Value Option for Certain Loans Held for Sale

During the second quarter of 2023, we elected the fair value option for certain commercial real estate loans that are intended for sale or securitization and are hedged with derivative instruments. Electing the fair value option reduces the accounting volatility that would otherwise result from the asymmetry created by accounting for the loans held for sale at the lower of cost or fair value and the derivatives at fair value without the complexity of applying hedge accounting. These loans are presented in “Loans held for sale” on the consolidated balance sheet, and associated gains and losses are presented in “Capital markets fees” on the consolidated statement of income. These commercial real estate loans measured at fair value are generally classified in Level 2 in the fair value hierarchy because their pricing is based on observable market inputs. At June 30, 2023, we had $19.8 million of loans measured at fair value ($20.0 million par value). For the second quarter of 2023, we recognized approximately $2 million of net gains from fair value changes of loans carried at fair value and the associated derivatives.

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4. OFFSETTING ASSETS AND LIABILITIES

~~Gross~~The following schedules present gross and net information for selected financial instruments inon the balance ~~sheet is as follows:~~
June 30, 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 $ 2,273 $ — $ 2,273 $ — $ — $ 2,273
Derivatives (included in other assets) 152 — 152 (9) (40) 103
Total assets $ 2,425 $ — $ 2,425 $ (9) $ (40) $ 2,376
Liabilities:
Federal funds purchased and other short-term borrowings $ 1,018 $ — $ 1,018 $ — $ — $ 1,018
Derivatives (included in other liabilities) 295 — 295 (9) — 286
Total liabilities $ 1,313 $ — $ 1,313 $ (9) $ — $ 1,304
sheet.


		December 31, 2021													June 30, 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	$	868	$	(87)	$	781	$	—	$	—	$	781
Derivatives (included in other assets)	Derivatives (included in other assets)	219		—		219		(16)		(7)		196		Derivatives (included in other assets)	491		—		491		(9)		(470)		12
Total assets	Total assets	$	2,352	$	—	$	2,352	$	(16)	$	(7)	$	2,329	Total assets	$	1,359	$	(87)	$	1,272	$	(9)	$	(470)	$	793
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	$	5,600	$	(87)	$	5,513	$	—	$	—	$	5,513
Derivatives (included in other liabilities)	Derivatives (included in other liabilities)	51		—		51		(16)		(1)		34		Derivatives (included in other liabilities)	409		—		409		(9)		(1)		399
Total liabilities	Total liabilities	$	954	$	—	$	954	$	(16)	$	(1)	$	937	Total liabilities	$	6,009	$	(87)	$	5,922	$	(9)	$	(1)	$	5,912


	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-sale (“AFS”), or trading. HTM securities, which management has the intent and ability to hold until maturity, are ~~carried~~measured 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.

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AFS securities are ~~carried~~measured 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~~measured 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 $8067 million and ~~$65~~$75 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These receivables are presented on the consolidated balance sheet in “Other assets.” See Notes 3 and 5 of our 2022 Form 10-K for more information regarding our process to estimate the fair value and accounting for our investment securities, respectively.

The following schedule presents the amortized cost and estimated fair values of our HTM and AFS securities:


	June 30, 2023
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	96	$	—	$	6	$	90
Agency guaranteed mortgage-backed securities 1	10,289		116		70		10,335
Municipal securities	368		—		25		343
Total held-to-maturity	10,753		116		101		10,768
Available-for-sale
U.S. Treasury securities	565		—		90		475
U.S. Government agencies and corporations:
Agency securities	717		—		40		677
Agency guaranteed mortgage-backed securities	8,991		—		1,344		7,647
Small Business Administration loan-backed securities	646		—		27		619
Municipal securities	1,480		—		89		1,391
Other debt securities	25		—		2		23
Total available-for-sale	12,424		—		1,592		10,832
Total HTM and AFS investment securities	$	23,177	$	116	$	1,693	$	21,600


	December 31, 2022
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	100	$	—	$	7	$	93
Agency guaranteed mortgage-backed securities 1	10,621		165		14		10,772
Municipal securities	405		—		31		374
Total held-to-maturity	11,126		165		52		11,239
Available-for-sale
U.S. Treasury securities	557		—		164		393
U.S. Government agencies and corporations:
Agency securities	782		—		46		736
Agency guaranteed mortgage-backed securities	9,652		—		1,285		8,367
Small Business Administration loan-backed securities	740		1		29		712
Municipal securities	1,732		1		99		1,634
Other debt securities	75		—		2		73
Total available-for-sale	13,538		2		1,625		11,915
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. At June 30, 2023, the unamortized discount on the HTM securities totaled approximately $2.2 billion ($1.7 billion after tax).

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assets.” See Note 5 of our 2021 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 of our process to estimate fair value for investment securities.

~~The following schedule summarizes the amortized cost and estimated fair values of our HTM and AFS securities:~~

June 30, 2022
(In millions) Amortized
cost Gross unrealized gains Gross unrealized losses Estimated
fair value
Held-to-maturity
Municipal securities $ 614 $ — $ 36 $ 578
Available-for-sale
U.S. Treasury securities 557 — 115 442
U.S. Government agencies and corporations:
Agency securities 899 — 22 877
Agency guaranteed mortgage-backed securities 23,768 2 2,459 21,311
Small Business Administration loan-backed securities 878 2 24 856
Municipal securities 1,835 3 101 1,737
Other debt securities 75 — 1 74
Total available-for-sale 28,012 7 2,722 25,297
Total HTM and AFS investment securities $ 28,626 $ 7 $ 2,758 $ 25,875

December 31, 2021
(In millions) Amortized
cost Gross unrealized gains Gross unrealized losses Estimated
fair value
Held-to-maturity
Municipal securities $ 441 $ 4 $ 2 $ 443
Available-for-sale
U.S. Treasury securities 155 — 21 134
U.S. Government agencies and corporations:
Agency securities 833 13 1 845
Agency guaranteed mortgage-backed securities 20,549 108 270 20,387
Small Business Administration loan-backed securities 938 2 28 912
Municipal securities 1,652 46 4 1,694
Other debt securities 75 1 — 76
Total available-for-sale 24,202 170 324 24,048
Total HTM and AFS investment securities $ 24,643 $ 174 $ 326 $ 24,491

Maturities

The following schedule ~~shows~~presents the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at June 30, ~~2022. Actual principal payments may differ from contractual or~~2023. This schedule does not reflect the duration of the portfolio, which would incorporate amortization, expected ~~principal payments because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.~~prepayments, interest rate resets, and fair value hedges.


	June 30, 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
(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
U.S. Government agencies and corporations:
Agency securities	$	96	3.54	%	$	—	—	%	$	—	—	%	$	—	—	%	$	96	3.54	%
Agency guaranteed mortgage-backed securities	10,289		1.84		—		—		—		—		46		2.02		10,243		1.84
Municipal securities 1	368		3.15		27		2.77		135		2.98		168		3.33		38		3.19
Total held-to-maturity securities	10,753		1.90		27		2.77		135		2.98		214		3.05		10,377		1.86
Available-for-sale
U.S. Treasury securities	565		3.12		164		5.01		—		—		—		—		401		2.35
U.S. Government agencies and corporations:
Agency securities	717		2.65		114		1.07		191		3.13		218		2.63		194		3.12
Agency guaranteed mortgage-backed securities	8,991		1.99		21		4.38		233		1.56		1,502		2.09		7,235		1.97
Small Business Administration loan-backed securities	646		5.22		—		—		33		5.84		146		4.30		467		5.46
Municipal securities 1	1,480		2.18		122		2.40		500		2.62		678		1.84		180		2.08
Other debt securities	25		8.53		—		—		—		—		10		9.50		15		7.88
Total available-for-sale securities	12,424		2.28		421		3.15		957		2.58		2,554		2.22		8,492		2.22
Total HTM and AFS investment securities	$	23,177	2.10	%	$	448	3.13	%	$	1,092	2.63	%	$	2,768	2.29	%	$	18,869	2.02	%

1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.

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June 30, 2022
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) Amortized cost Average yield Amortized cost Average yield Amortized cost Average yield Amortized cost Average yield Amortized cost Average yield
Held-to-maturity
Municipal securities 1
$ 614 2.84 % $ 227 2.53 % $ 137 3.19 % $ 190 3.03 % $ 60 2.59 %
Available-for-sale
U.S. Treasury securities 557 2.05 — — — — — — 557 2.05
U.S. Government agencies and corporations:
Agency securities 899 2.33 31 0.84 340 1.92 285 2.39 243 3.03
Agency guaranteed mortgage-backed securities 23,768 1.79 — — 391 1.50 1,810 1.93 21,567 1.78
Small Business Administration loan-backed securities 878 1.50 — — 48 1.51 166 2.41 664 1.27
Municipal securities 1
1,835 2.40 108 2.07 670 2.61 694 2.18 363 2.55
Other debt securities 75 2.82 — — — — 60 2.61 15 3.67
Total available-for-sale securities 28,012 1.84 139 1.79 1,449 2.11 3,015 2.07 23,409 1.80
Total HTM and AFS investment securities $ 28,626 1.86 % $ 366 2.25 % $ 1,586 2.20 % $ 3,205 2.13 % $ 23,469 1.80 %

1 ~~The yields on tax-exempt securities are calculated on a tax-equivalent basis.~~

The following schedule ~~summarizes the amount of~~presents gross unrealized losses for ~~debt~~AFS securities and the estimated fair value by length of time the securities have been in an unrealized loss ~~position:~~position.


		June 30, 2022													June 30, 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		$	14	$	327	$	22	$	96	$	36	$	423

Available-for-sale	Available-for-sale													Available-for-sale
U.S. Treasury securities	U.S. Treasury securities	60		341		55		101		115		442		U.S. Treasury securities	$	—	$	55	$	90	$	311	$	90	$	366
U.S. Government agencies and corporations:	U.S. Government agencies and corporations:													U.S. Government agencies and corporations:
Agency securities	Agency securities	17		729		5		96		22		825		Agency securities	2		33		38		617		40		650
Agency guaranteed mortgage-backed securities	Agency guaranteed mortgage-backed securities	1,827		17,069		632		3,886		2,459		20,955		Agency guaranteed mortgage-backed securities	83		482		1,261		7,140		1,344		7,622
Small Business Administration loan-backed securities	Small Business Administration loan-backed securities	1		84		23		637		24		721		Small Business Administration loan-backed securities	—		21		27		525		27		546
Municipal securities	Municipal securities	86		1,189		15		84		101		1,273		Municipal securities	7		495		82		871		89		1,366
Other	Other	1		14		—		—		1		14		Other	—		—		2		13		2		13

Total available-for-sale		1,992		19,426		730		4,804		2,722		24,230

Total HTM and AFS investment securities		$	2,006	$	19,753	$	752	$	4,900	$	2,758	$	24,653

Total available-for-sale investment securities														Total available-for-sale investment securities	$	92	$	1,086	$	1,500	$	9,477	$	1,592	$	10,563


	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

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December 31, 2021
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 $ 1 $ 88 $ 1 $ 68 $ 2 $ 156
Available-for-sale
U.S. Treasury securities — — 21 134 21 134
U.S. Government agencies and corporations:
Agency securities 1 121 — 1 1 122
Agency guaranteed mortgage-backed securities 231 13,574 39 942 270 14,516
Small Business Administration loan-backed securities — 27 28 749 28 776
Municipal securities 4 327 — 8 4 335
Other — — — — — —
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

~~Approximately~~At June 30, 2023 and December 31, 2022, approximately ~~488~~3,219 and ~~137 HTM and~~ ~~3,528~~ ~~and 1,302~~3,562 AFS investment securities were in an unrealized loss position, ~~at June 30, 2022, and December 31, 2021,~~ respectively.

Impairment

WeOn a quarterly basis, we review our investment securities ~~quarterly~~portfolio for the presence of impairment on an individual security ~~basis for the presence of impairment.~~basis. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our ~~2021~~2022 Form 10-K.

AFS Impairment

We did not recognize any impairment on our AFS investment securities portfolio during the first six 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 June 30, ~~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.

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~~measured at amortized cost. ~~The~~At June 30, 2023, the ACL on HTM securities was less than $1 million, ~~at June 30, 2022.~~ ~~All~~ all HTM securities were risk-graded as “Pass” in terms of credit quality, and none were considered past ~~due at June 30, 2022. The amortized cost basis of HTM securities categorized by year acquired is summarized in the following schedule:~~due.
June 30, 2022
Amortized cost basis by year acquired
(In millions) 2022 2021 2020 2019 2018 Prior Total Securities
Held-to-maturity $ 220 $ 87 $ 117 $ 9 $ — $ 181 $ 614

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Securities Gains and Losses Recognized in Income

The following schedule ~~summarizes~~presents securities gains and losses recognized in the consolidated income ~~statement:~~statement.


		Three Months Ended June 30,								Six Months Ended June 30,										Three Months Ended June 30,											Six Months Ended June 30,
		2022				2021				2022				2021							2023							2022							2023							2022
(In millions)	(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses											(In millions)	Gross gains			Gross losses				Gross gains			Gross losses				Gross gains			Gross losses				Gross gains	Gross losses
																		(In millions)	Gross gains	Gross losses	Gross gains			Gross losses

Available-for-sale																					Available-for-sale	$	71		$	71			$	—			$	—		$	72			$	73		$	—			$	—
Trading																					Trading	7			7				—				—			10				9			—				—
Other noninterest-bearing investments	Other noninterest-bearing investments	$	1	$	—	$	66	$	3	$	5	$	21	$	80	$	6										Other noninterest-bearing investments	10			10				1			—				13			12				5	21

Total gains																					Total gains	88			88				1				—			95				94			5				21
Net gains (losses) 1	Net gains (losses) 1			$	1			$	63			$	(16)			$	74										Net gains (losses) 1				$	—						$	1						$	1				$	(16)

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 June 30,													Three Months Ended June 30,
		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	$	3	$	1	$	4	$	2	$	1	$	3	Held-to-maturity	$	59	$	1	$	60	$	3	$	1	$	4
Available-for-sale	Available-for-sale	109		11		120		61		7		68		Available-for-sale	69		8		77		109		11		120
Trading	Trading	—		4		4		—		3		3		Trading	—		1		1		—		4		4
Total securities	Total securities	$	112	$	16	$	128	$	63	$	11	$	74	Total securities	$	128	$	10	$	138	$	112	$	16	$	128

Six Months Ended June 30,
2022 2021
(In millions) Taxable Nontaxable Total Taxable Nontaxable Total
Investment securities:
Held-to-maturity $ 5 $ 2 $ 7 $ 5 $ 3 $ 8
Available-for-sale 205 19 224 118 14 132
Trading — 9 9 — 5 5
Total $ 210 $ 30 $ 240 $ 123 $ 22 $ 145

~~At June 30, 2022 and December 31, 2021, investment securities with a carrying value of~~ ~~$3.2 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.


	Six Months Ended June 30,
	2023						2022
(In millions)	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	120	$	2	$	122	$	5	$	2	$	7
Available-for-sale	138		14		152		205		19		224
Trading	—		1		1		—		9		9
Total securities	$	258	$	17	$	275	$	210	$	30	$	240

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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)	June 30, 2022		December 31, 2021		(In millions)	June 30, 2023		December 31, 2022

Loans held for sale	Loans held for sale	$	42	$	83	Loans held for sale	$	36	$	8
Commercial:	Commercial:					Commercial:
Commercial and industrial		$	14,989	$	13,867
PPP		534		1,855
Commercial and industrial 1						Commercial and industrial 1	$	16,622	$	16,377
Leasing	Leasing	339		327		Leasing	388		386
Owner-occupied	Owner-occupied	9,208		8,733		Owner-occupied	9,328		9,371
Municipal	Municipal	4,113		3,658		Municipal	4,354		4,361
Total commercial	Total commercial	29,183		28,440		Total commercial	30,692		30,495
Commercial real estate:	Commercial real estate:					Commercial real estate:
Construction and land development	Construction and land development	2,659		2,757		Construction and land development	2,498		2,513
Term	Term	9,477		9,441		Term	10,406		10,226
Total commercial real estate	Total commercial real estate	12,136		12,198		Total commercial real estate	12,904		12,739
Consumer:	Consumer:					Consumer:
Home equity credit line	Home equity credit line	3,266		3,016		Home equity credit line	3,291		3,377
1-4 family residential	1-4 family residential	6,423		6,050		1-4 family residential	7,980		7,286
Construction and other consumer real estate	Construction and other consumer real estate	787		638		Construction and other consumer real estate	1,434		1,161
Bankcard and other revolving plans	Bankcard and other revolving plans	448		396		Bankcard and other revolving plans	466		471
Other	Other	127		113		Other	150		124
Total consumer	Total consumer	11,051		10,213		Total consumer	13,321		12,419

Total loans and leases	Total loans and leases	$	52,370	$	50,851	Total loans and leases	$	56,917	$	55,653

1Commercial and industrial loan balances include Paycheck Protection Program (“PPP”) loans of $126 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 ~~$45~~$38 million and ~~$83~~$49 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Amortized cost basis does not include accrued interest receivables of ~~$163~~$263 million and ~~$161~~$247 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. These receivables are presented in the ~~Consolidated Balance Sheet~~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 ~~$198~~$229 million at June 30, ~~2022~~2023 and ~~$160~~$262 million at December 31, ~~2021.~~2022.

Loans with a carrying value of ~~$27.0~~$39.8 billion at June 30, ~~2022~~2023 and ~~$26.8~~$27.6 billion at December 31, ~~2021~~2022 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.

~~We sold~~At the time of origination, we determine the classification of loans ~~totaling $187 million and $523 million~~as either held for ~~the three and six months ended June 30, 2022, and $436 million and $859 million for the three and six months ended June 30, 2021, that were classified as loans~~investment or held for sale. ~~The sold loans were derecognized from the balance sheet.~~ Loans ~~classified as loans~~ held for sale are measured at fair value or the lower of cost or fair value and primarily consist of (1) commercial real estate loans that are sold into securitization entities, and (2) conforming residential mortgages ~~and the guaranteed portion of Small Business Administration (“SBA”) loans~~ that are ~~primarily~~generally sold to U.S. government ~~agencies or participated to third parties. They do not include~~agencies. The following schedule presents loans ~~from the SBA's Paycheck Protection Program (“PPP”). At times, we have continuing involvement in the sold loans in the form of servicing rights or guarantees. Amounts~~ added to, ~~loans~~or sold from, the held for sale category during ~~these same~~the periods ~~were $190 million and $487 million for the three and six months ended June 30, 2022, and $428 million and $855 million~~presented.

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~~for~~


	Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	2023		2022		2023		2022

Loans added to held for sale	$	220	$	190	$	306	$	487
Loans sold from held for sale	188		187		277		523

Occasionally, we have continuing involvement in the ~~three and six months ended June 30, 2021, respectively. See Note 5 for further information regarding guaranteed securities.~~

sold loans in the form of servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was $3.4 billion and $3.5 billion at June 30, ~~2022,~~2023 and ~~$3.3 billion at~~ December 31, ~~2021.~~2022, respectively. Income from sold loans, ~~sold,~~ excluding servicing, was $2 million and $7 million for the three and six months ended June 30, 2023, and $4 million and $10 million for the three and six months ended June 30, 2022, ~~and $7 million and $18 million for the three and six months ended June 30, 2021,~~ 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 ~~2021~~2022 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~~measured at amortized cost. See Note 5 of our ~~2021~~2022 Form 10-K for further discussion of our methodology used to estimate the ACL on AFS and HTM debt securities.

Changes in the ACL are summarized as follows:


		Three Months Ended June 30, 2022									Three Months Ended June 30, 2023
(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	$	282	$	102	$	94	$	478	Balance at beginning of period	$	313	$	160	$	145	$	618
Provision for loan losses	Provision for loan losses	12		12		15		39		Provision for loan losses	24		21		1		46
Gross loan and lease charge-offs	Gross loan and lease charge-offs	15		—		3		18		Gross loan and lease charge-offs	20		—		2		22
Recoveries	Recoveries	7		—		2		9		Recoveries	6		—		3		9
Net loan and lease charge-offs (recoveries)	Net loan and lease charge-offs (recoveries)	8		—		1		9		Net loan and lease charge-offs (recoveries)	14		—		(1)		13
Balance at end of period	Balance at end of period	$	286	$	114	$	108	$	508	Balance at end of period	$	323	$	181	$	147	$	651
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	$	14	$	12	$	10	$	36	Balance at beginning of period	$	19	$	28	$	13	$	60
Provision for unfunded lending commitments	Provision for unfunded lending commitments	(1)		3		—		2		Provision for unfunded lending commitments	1		1		(2)		—
Balance at end of period	Balance at end of period	$	13	$	15	$	10	$	38	Balance at end of period	$	20	$	29	$	11	$	60
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	$	286	$	114	$	108	$	508	Allowance for loan losses	$	323	$	181	$	147	$	651
Reserve for unfunded lending commitments	Reserve for unfunded lending commitments	13		15		10		38		Reserve for unfunded lending commitments	20		29		11		60
Total allowance for credit losses	Total allowance for credit losses	$	299	$	129	$	118	$	546	Total allowance for credit losses	$	343	$	210	$	158	$	711

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	Six Months Ended June 30, 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	34		29		29		92
Gross loan and lease charge-offs	23		—		6		29
Recoveries	12		—		4		16
Net loan and lease charge-offs (recoveries)	11		—		2		13
Balance at end of period	$	323	$	181	$	147	$	651
Reserve for unfunded lending commitments
Balance at beginning of period	$	16	$	33	$	12	$	61
Provision for unfunded lending commitments	4		(4)		(1)		(1)
Balance at end of period	$	20	$	29	$	11	$	60
Total allowance for credit losses at end of period
Allowance for loan losses	$	323	$	181	$	147	$	651
Reserve for unfunded lending commitments	20		29		11		60
Total allowance for credit losses	$	343	$	210	$	158	$	711


	Three Months Ended June 30, 2022
(In millions)	Commercial		Commercial real estate		Consumer		Total
Allowance for loan losses
Balance at beginning of period	$	282	$	102	$	94	$	478
Provision for loan losses	12		12		15		39
Gross loan and lease charge-offs	15		—		3		18
Recoveries	7		—		2		9
Net loan and lease charge-offs (recoveries)	8		—		1		9
Balance at end of period	$	286	$	114	$	108	$	508
Reserve for unfunded lending commitments


Balance at beginning of period	$	14	$	12	$	10	$	36
Provision for unfunded lending commitments	(1)		3		—		2
Balance at end of period	$	13	$	15	$	10	$	38
Total allowance for credit losses at end of period
Allowance for loan losses	$	286	$	114	$	108	$	508
Reserve for unfunded lending commitments	13		15		10		38
Total allowance for credit losses	$	299	$	129	$	118	$	546

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	Six Months Ended June 30, 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	(12)		7		15		10
Gross loan and lease charge-offs	28		—		7		35
Recoveries	15		—		5		20
Net loan and lease charge-offs (recoveries)	13		—		2		15
Balance at end of period	$	286	$	114	$	108	$	508
Reserve for unfunded lending commitments
Balance at beginning of period	$	19	$	11	$	10	$	40
Provision for unfunded lending commitments	(6)		4		—		(2)
Balance at end of period	$	13	$	15	$	10	$	38
Total allowance for credit losses at end of period
Allowance for loan losses	$	286	$	114	$	108	$	508
Reserve for unfunded lending commitments	13		15		10		38
Total allowance for credit losses	$	299	$	129	$	118	$	546

Three Months Ended June 30, 2021
(In millions) Commercial Commercial real estate Consumer Total
Allowance for loan losses
Balance at beginning of period $ 362 $ 152 $ 132 $ 646
Provision for loan losses (43) (41) (29) (113)
Gross loan and lease charge-offs 5 — 3 8
Recoveries 7 — 3 10
Net loan and lease charge-offs (recoveries) (2) — — (2)
Balance at end of period $ 321 $ 111 $ 103 $ 535
Reserve for unfunded lending commitments
Balance at beginning of period $ 24 $ 17 $ 8 $ 49
Provision for unfunded lending commitments (3) (7) — (10)
Balance at end of period $ 21 $ 10 $ 8 $ 39
Total allowance for credit losses at end of period
Allowance for loan losses $ 321 $ 111 $ 103 $ 535
Reserve for unfunded lending commitments 21 10 8 39
Total allowance for credit losses $ 342 $ 121 $ 111 $ 574

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Six Months Ended June 30, 2021
(In millions) Commercial Commercial
real estate Consumer Total
Allowance for loan losses
Balance at beginning of period $ 464 $ 171 $ 142 $ 777
Provision for loan losses (137) (60) (39) (236)
Gross loan and lease charge-offs 23 — 6 29
Recoveries 17 — 6 23
Net loan and lease charge-offs (recoveries) 6 — — 6
Balance at end of period $ 321 $ 111 $ 103 $ 535
Reserve for unfunded lending commitments
Balance at beginning of period $ 30 $ 20 $ 8 $ 58
Provision for unfunded lending commitments (9) (10) — (19)
Balance at end of period $ 21 $ 10 $ 8 $ 39
Total allowance for credit losses at end of period
Allowance for loan losses $ 321 $ 111 $ 103 $ 535
Reserve for unfunded lending commitments 21 10 8 39
Total allowance for credit losses $ 342 $ 121 $ 111 $ 574

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 ~~status~~loans is summarized as follows:


		June 30, 2022													June 30, 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

Loans held for sale		$	5	$	1			$	6				$	—

Commercial:	Commercial:												Commercial:
Commercial and industrial	Commercial and industrial	$	12	$	74	$	86			$	29		Commercial and industrial		$	11		$	60	$	71		$	33
PPP		—		1		1				—

Owner-occupied	Owner-occupied	25		15		40				1			Owner-occupied		20			9		29			1

Total commercial	Total commercial	37		90		127				30			Total commercial		31			69		100			34
Commercial real estate:	Commercial real estate:												Commercial real estate:

Term	Term	1		19		20				3			Term		7			6		13			1
Total commercial real estate	Total commercial real estate	1		19		20				3			Total commercial real estate		7			6		13			1
Consumer:	Consumer:												Consumer:
Home equity credit line	Home equity credit line	1		9		10				2			Home equity credit line		—			12		12			3
1-4 family residential	1-4 family residential	9		29		38				4			1-4 family residential		2			35		37			5

Bankcard and other revolving plans		—		—		—				—

Total consumer loans	Total consumer loans	10		38		48				6			Total consumer loans		2			47		49			8
Total	Total	$	48	$	147	$	195			$	39		Total		$	40		$	122	$	162		$	43

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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		—		1		1			1

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 collectability 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 and six months ended June 30, ~~2022~~2023 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 reversing~~reversed from interest income during the ~~period~~periods presented is summarized by loan portfolio segment as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)	2023		2022		2023		2022

Commercial	Commercial	$	4	$	4	$	8	$	7	Commercial	$	3	$	4	$	5	$	8
Commercial real estate	Commercial real estate	—		1		—		1		Commercial real estate	—		—		—		—
Consumer	Consumer	—		—		—		—		Consumer	1		—		1		—
Total	Total	$	4	$	5	$	8	$	8	Total	$	4	$	4	$	6	$	8

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:
June 30, 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 $ 14,937 $ 31 $ 21 $ 52 $ 14,989 $ — $ 64
PPP 526 7 1 8 534 — —
Leasing 339 — — — 339 — —
Owner-occupied 9,191 10 7 17 9,208 2 33
Municipal 4,113 — — — 4,113 — —
Total commercial 29,106 48 29 77 29,183 2 97
Commercial real estate:
Construction and land development 2,636 23 — 23 2,659 — —
Term 9,423 45 9 54 9,477 3 15
Total commercial real estate 12,059 68 9 77 12,136 3 15
Consumer:
Home equity credit line 3,260 4 2 6 3,266 — 6
1-4 family residential 6,399 6 18 24 6,423 — 19
Construction and other consumer real estate 787 — — — 787 — —
Bankcard and other revolving plans 446 1 1 2 448 1 —
Other 126 1 — 1 127 — —
Total consumer loans 11,018 12 21 33 11,051 1 25
Total $ 52,183 $ 128 $ 59 $ 187 $ 52,370 $ 6 $ 137
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


	June 30, 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	$	16,594	$	18	$	10	$	28	$	16,622	$	3	$	57
Leasing	388		—		—		—		388		—		—
Owner-occupied	9,320		5		3		8		9,328		—		24
Municipal	4,347		7		—		7		4,354		—		—
Total commercial	30,649		30		13		43		30,692		3		81
Commercial real estate:
Construction and land development	2,497		1		—		1		2,498		—		—
Term	10,385		18		3		21		10,406		3		13
Total commercial real estate	12,882		19		3		22		12,904		3		13
Consumer:
Home equity credit line	3,275		12		4		16		3,291		—		6
1-4 family residential	7,950		10		20		30		7,980		—		14
Construction and other consumer real estate	1,434		—		—		—		1,434		—		—
Bankcard and other revolving plans	463		2		1		3		466		1		—
Other	149		1		—		1		150		—		—
Total consumer loans	13,271		25		25		50		13,321		1		20
Total	$	56,802	$	74	$	41	$	115	$	56,917	$	7	$	114


	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.

5658

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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~~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 ~~$1 million of~~no loans classified as Doubtful at June 30, ~~2022, compared with none at~~2023 and December 31, ~~2021.~~2022.

~~We generally assign internal risk grades to~~For consumer loans and for 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.

~~For consumer loans and for commercial and CRE loans with commitments less 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 ~~classifications~~classification as monitored by ~~management are summarized as follows.~~

~~Table~~management. The schedule also summarizes the current period gross charge-offs by year of ~~Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES~~

June 30, 2022
Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis
Amortized cost basis by year of origination
(In millions) 2022 2021 2020 2019 2018 Prior Total
loans
Commercial:
Commercial and industrial
Pass $ 1,522 $ 2,234 $ 1,116 $ 955 $ 627 $ 409 $ 7,267 $ 181 $ 14,311
Special Mention — 21 15 3 6 44 137 — 226
Accruing Substandard 13 21 18 107 42 75 87 3 366
Nonaccrual 1 12 3 4 1 15 47 3 86
Total commercial and industrial 1,536 2,288 1,152 1,069 676 543 7,538 187 14,989
PPP
Pass — 341 192 — — — — — 533
Nonaccrual — — 1 — — — — — 1
Total PPP — 341 193 — — — — — 534
Leasing
Pass 14 85 66 57 55 50 — — 327
Special Mention — — — 5 1 1 — — 7
Accruing Substandard — — — — — 5 — — 5
Nonaccrual — — — — — — — — —
Total leasing 14 85 66 62 56 56 — — 339
Owner-occupied
Pass 1,242 2,396 1,212 969 750 2,027 164 86 8,846
Special Mention 1 6 12 15 19 24 — 1 78
Accruing Substandard 8 12 43 33 62 80 6 — 244
Nonaccrual — — 3 7 6 20 4 — 40
Total owner-occupied 1,251 2,414 1,270 1,024 837 2,151 174 87 9,208
Municipal
Pass 736 1,263 904 498 174 522 5 — 4,102
Special Mention — — — 8 — — — — 8
Accruing Substandard — — — — — 3 — — 3
Nonaccrual — — — — — — — — —
Total municipal 736 1,263 904 506 174 525 5 — 4,113
Total commercial 3,537 6,391 3,585 2,661 1,743 3,275 7,717 274 29,183
Commercial real estate:
Construction and land development
Pass 188 702 721 213 2 2 720 45 2,593
Special Mention 1 1 — 22 — 24 — — 48
Accruing Substandard 9 — — 9 — — — — 18
Nonaccrual — — — — — — — — —
Total construction and land development 198 703 721 244 2 26 720 45 2,659
Term
Pass 1,472 2,160 1,587 1,253 937 1,429 224 161 9,223
Special Mention — 22 — 16 3 8 — — 49
Accruing Substandard 48 4 36 22 37 38 — — 185
Nonaccrual — — 1 4 1 14 — — 20
Total term 1,520 2,186 1,624 1,295 978 1,489 224 161 9,477
Total commercial real estate 1,718 2,889 2,345 1,539 980 1,515 944 206 12,136

~~Table of Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES~~

June 30, 2022
Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis
Amortized cost basis by year of origination
(In millions) 2022 2021 2020 2019 2018 Prior Total
loans
Consumer:
Home equity credit line
Pass — — — — — — 3,156 98 3,254
Special Mention — — — — — — — — —
Accruing Substandard — — — — — — 2 — 2
Nonaccrual — — — — — — 7 3 10
Total home equity credit line — — — — — — 3,165 101 3,266
1-4 family residential
Pass 989 1,394 985 652 401 1,960 — — 6,381
Special Mention — — — — — — — — —
Accruing Substandard — — — 2 — 2 — — 4
Nonaccrual — 1 3 2 1 31 — — 38
Total 1-4 family residential 989 1,395 988 656 402 1,993 — — 6,423
Construction and other consumer real estate
Pass 167 443 130 31 9 7 — — 787
Special Mention — — — — — — — — —
Accruing Substandard — — — — — — — — —
Nonaccrual — — — — — — — — —
Total construction and other consumer real estate 167 443 130 31 9 7 — — 787
Bankcard and other revolving plans
Pass — — — — — — 444 3 447
Special Mention — — — — — — — — —
Accruing Substandard — — — — — — 1 — 1
Nonaccrual — — — — — — — — —
Total bankcard and other revolving plans — — — — — — 445 3 448
Other consumer
Pass 49 40 16 12 6 4 — — 127
Special Mention — — — — — — — — —
Accruing Substandard — — — — — — — — —
Nonaccrual — — — — — — — — —
Total other consumer 49 40 16 12 6 4 — — 127
Total consumer 1,205 1,878 1,134 699 417 2,004 3,610 104 11,051
Total loans $ 6,460 $ 11,158 $ 7,064 $ 4,899 $ 3,140 $ 6,794 $ 12,271 $ 584 $ 52,370
origination.

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES


		December 31, 2021																			June 30, 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)	2021		2020		2019		2018		2016		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	$	2,561	$	1,309	$	1,179	$	748	$	354	$	239	$	6,594	$	121	$	13,105	Pass	$	1,442	$	2,955	$	1,550	$	758	$	600	$	703	$	8,039	$	177	$	16,224
Special Mention	Special Mention	4		17		9		12		1		3		128		1		175		Special Mention	1		3		7		5		1		49		88		1		155
Accruing Substandard	Accruing Substandard	28		22		99		53		31		65		162		3		463		Accruing Substandard	1		37		3		3		33		28		65		2		172
Nonaccrual	Nonaccrual	14		10		6		3		1		21		51		18		124		Nonaccrual	5		5		2		2		1		1		52		3		71
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	1,449		3,000		1,562		768		635		781		8,244		183		16,622
PPP
Pass		1,317		535		—		—		—		—		—		—		1,852

Nonaccrual		—		3		—		—		—		—		—		—		3
Total PPP		1,317		538		—		—		—		—		—		—		1,855
Gross charge-offs																				Gross charge-offs	—		6		5		—		—		—		7		2		20
Leasing	Leasing																			Leasing
Pass	Pass	46		74		70		64		42		19		—		—		315		Pass	53		146		58		38		54		31		—		—		380
Special Mention	Special Mention	—		1		4		1		1		—		—		—		7		Special Mention	—		1		1		—		—		—		—		—		2
Accruing Substandard	Accruing Substandard	—		—		—		—		—		5		—		—		5		Accruing Substandard	—		2		—		—		—		4		—		—		6
Nonaccrual	Nonaccrual	—		—		—		—		—		—		—		—		—		Nonaccrual	—		—		—		—		—		—		—		—		—
Total leasing	Total leasing	46		75		74		65		43		24		—		—		327		Total leasing	53		149		59		38		54		35		—		—		388
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Owner-occupied	Owner-occupied																			Owner-occupied
Pass	Pass	2,420		1,366		1,028		868		695		1,663		177		69		8,286		Pass	662		2,027		2,077		1,058		761		2,128		199		48		8,960
Special Mention	Special Mention	10		13		19		32		18		50		3		3		148		Special Mention	2		5		66		3		17		13		2		—		108
Accruing Substandard	Accruing Substandard	14		24		41		47		24		79		13		—		242		Accruing Substandard	5		32		51		20		17		102		4		—		231
Nonaccrual	Nonaccrual	—		4		14		9		9		20		1		—		57		Nonaccrual	1		—		1		12		3		11		1		—		29
Total owner-occupied	Total owner-occupied	2,444		1,407		1,102		956		746		1,812		194		72		8,733		Total owner-occupied	670		2,064		2,195		1,093		798		2,254		206		48		9,328
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Municipal	Municipal																			Municipal
Pass	Pass	1,303		963		553		250		327		220		3		—		3,619		Pass	250		1,188		1,194		688		407		575		4		—		4,306
Special Mention	Special Mention	—		—		—		—		—		25		—		—		25		Special Mention	—		38		—		—		—		—		—		—		38
Accruing Substandard	Accruing Substandard	—		9		—		—		—		5		—		—		14		Accruing Substandard	—		—		6		3		1		—		—		—		10
Nonaccrual	Nonaccrual	—		—		—		—		—		—		—		—		—		Nonaccrual	—		—		—		—		—		—		—		—		—
Total municipal	Total municipal	1,303		972		553		250		327		250		3		—		3,658		Total municipal	250		1,226		1,200		691		408		575		4		—		4,354
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Total commercial	Total commercial	7,717		4,350		3,022		2,087		1,503		2,414		7,132		215		28,440		Total commercial	2,422		6,439		5,016		2,590		1,895		3,645		8,454		231		30,692
Total commercial gross charge-offs																				Total commercial gross charge-offs	—		6		5		—		—		—		7		2		20
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	182		667		667		270		36		3		490		118		2,433
Special Mention	Special Mention	—		—		1		—		—		—		—		—		1		Special Mention	5		—		—		12		—		—		15		—		32
Accruing Substandard	Accruing Substandard	—		3		28		—		—		—		—		—		31		Accruing Substandard	—		10		1		—		22		—		—		—		33
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	187		677		668		282		58		3		505		118		2,498
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Term	Term																			Term
Pass	Pass	2,407		1,765		1,491		1,066		529		1,401		239		179		9,077		Pass	876		2,704		1,888		1,673		969		1,639		219		173		10,141
Special Mention	Special Mention	22		39		10		17		8		25		—		4		125		Special Mention	23		17		1		41		2		9		—		—		93
Accruing Substandard	Accruing Substandard	9		9		44		77		14		64		—		2		219		Accruing Substandard	30		23		1		37		27		41		—		—		159
Nonaccrual	Nonaccrual	—		1		5		1		—		13		—		—		20		Nonaccrual	—		—		—		—		4		9		—		—		13
Total term	Total term	2,438		1,814		1,550		1,161		551		1,503		239		185		9,441		Total term	929		2,744		1,890		1,751		1,002		1,698		219		173		10,406
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
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	1,116		3,421		2,558		2,033		1,060		1,701		724		291		12,904
Total commercial real estate gross charge-offs																				Total commercial real estate gross charge-offs	—		—		—		—		—		—		—		—		—

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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES


		December 31, 2021																			June 30, 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)	2021		2020		2019		2018		2016		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	—		—		—		—		—		—		2,903		96		2,999		Pass	—		—		—		—		—		—		3,184		93		3,277
Special Mention	Special Mention	—		—		—		—		—		—		1		—		1		Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	Accruing Substandard	—		—		—		—		—		—		2		—		2		Accruing Substandard	—		—		—		—		—		—		2		—		2
Nonaccrual	Nonaccrual	—		—		—		—		—		—		7		7		14		Nonaccrual	—		—		—		—		—		—		10		2		12
Total home equity credit line	Total home equity credit line	—		—		—		—		—		—		2,913		103		3,016		Total home equity credit line	—		—		—		—		—		—		3,196		95		3,291
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
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	651		1,970		1,664		1,011		620		2,025		—		—		7,941
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		3		4		28		—		—		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	651		1,970		1,666		1,014		624		2,055		—		—		7,980
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
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	74		940		372		27		12		9		—		—		1,434
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	74		940		372		27		12		9		—		—		1,434
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Bankcard and other revolving plans	Bankcard and other revolving plans																			Bankcard and other revolving plans
Pass	Pass	—		—		—		—		—		—		391		3		394		Pass	—		—		—		—		—		—		462		2		464
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	Accruing Substandard	—		—		—		—		—		—		1		—		1		Accruing Substandard	—		—		—		—		—		—		2		—		2
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	—		—		—		—		—		—		464		2		466
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		2		—		2
Other consumer	Other consumer																			Other consumer
Pass	Pass	58		23		17		9		4		2		—		—		113		Pass	61		48		24		8		6		3		—		—		150
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	61		48		24		8		6		3		—		—		150
Gross charge-offs																				Gross charge-offs	—		—		—		—		—		—		—		—		—
Total consumer	Total consumer	1,744		1,279		822		523		698		1,735		3,306		106		10,213		Total consumer	786		2,958		2,062		1,049		642		2,067		3,660		97		13,321
Total consumer gross charge-offs																				Total consumer gross charge-offs	—		—		—		—		—		—		2		—		2
Total loans	Total loans	$	12,539	$	8,182	$	5,938	$	3,865	$	2,776	$	5,654	$	11,327	$	570	$	50,851	Total loans	$	4,324	$	12,818	$	9,636	$	5,672	$	3,597	$	7,413	$	12,838	$	619	$	56,917
Total gross charge-offs																				Total gross charge-offs	$	—	$	6	$	5	$	—	$	—	$	—	$	9	$	2	$	22

~~Modified~~

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	December 31, 2022
	Term loans												Revolving loans amortized cost basis		Revolving loans converted to term loans amortized cost basis
	Amortized cost basis by year of origination
(In millions)	2022		2021		2020		2019		2018		Prior						Total
Commercial:
Commercial and industrial
Pass	$	3,363	$	1,874	$	979	$	876	$	293	$	264	$	8,054	$	182	$	15,885
Special Mention	1		2		10		52		1		2		50		—		118
Accruing Substandard	26		7		17		78		30		67		84		2		311
Nonaccrual	—		8		5		11		1		2		32		4		63
Total commercial and industrial	3,390		1,891		1,011		1,017		325		335		8,220		188		16,377
Leasing
Pass	160		71		47		66		18		19		—		—		381
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		5		—		—		5
Nonaccrual	—		—		—		—		—		—		—		—		—
Total leasing	160		71		47		66		18		24		—		—		386
Owner-occupied
Pass	2,157		2,285		1,143		874		654		1,679		187		74		9,053
Special Mention	1		15		5		8		3		16		1		—		49
Accruing Substandard	16		33		48		20		55		64		9		—		245
Nonaccrual	1		1		2		4		5		10		1		—		24
Total owner-occupied	2,175		2,334		1,198		906		717		1,769		198		74		9,371
Municipal
Pass	1,230		1,220		816		441		168		437		8		—		4,320
Special Mention	32		6		—		—		—		—		—		—		38
Accruing Substandard	—		—		—		—		—		3		—		—		3
Nonaccrual	—		—		—		—		—		—		—		—		—
Total municipal	1,262		1,226		816		441		168		440		8		—		4,361
Total commercial	6,987		5,522		3,072		2,430		1,228		2,568		8,426		262		30,495
Commercial real estate:
Construction and land development
Pass	548		671		455		81		2		2		617		96		2,472
Special Mention	1		1		—		—		—		—		—		—		2
Accruing Substandard	17		—		—		22		—		—		—		—		39
Nonaccrual	—		—		—		—		—		—		—		—		—
Total construction and land development	566		672		455		103		2		2		617		96		2,513
Term
Pass	2,861		2,107		1,686		1,012		666		1,229		276		112		9,949
Special Mention	39		21		11		—		4		1		—		—		76
Accruing Substandard	42		2		34		21		53		35		—		—		187
Nonaccrual	—		—		—		4		1		9		—		—		14
Total term	2,942		2,130		1,731		1,037		724		1,274		276		112		10,226
Total commercial real estate	3,508		2,802		2,186		1,140		726		1,276		893		208		12,739

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	December 31, 2022
	Term loans												Revolving loans amortized cost basis		Revolving loans converted to term loans amortized cost basis
	Amortized cost basis by year of origination
(In millions)	2022		2021		2020		2019		2018		Prior						Total














Consumer:
Home equity credit line
Pass	—		—		—		—		—		—		3,265		98		3,363
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		—		3		—		3
Nonaccrual	—		—		—		—		—		—		8		3		11
Total home equity credit line	—		—		—		—		—		—		3,276		101		3,377
1-4 family residential
Pass	1,913		1,503		1,024		638		381		1,788		—		—		7,247
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		2		—		—		2
Nonaccrual	—		2		2		4		3		26		—		—		37
Total 1-4 family residential	1,913		1,505		1,026		642		384		1,816		—		—		7,286
Construction and other consumer real estate
Pass	583		485		64		19		5		5		—		—		1,161
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		—		—		—		—
Nonaccrual	—		—		—		—		—		—		—		—		—
Total construction and other consumer real estate	583		485		64		19		5		5		—		—		1,161
Bankcard and other revolving plans
Pass	—		—		—		—		—		—		468		2		470
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		—		1		—		1
Nonaccrual	—		—		—		—		—		—		—		—		—
Total bankcard and other revolving plans	—		—		—		—		—		—		469		2		471
Other consumer
Pass	68		30		12		8		4		2		—		—		124
Special Mention	—		—		—		—		—		—		—		—		—
Accruing Substandard	—		—		—		—		—		—		—		—		—
Nonaccrual	—		—		—		—		—		—		—		—		—
Total other consumer	68		30		12		8		4		2		—		—		124
Total consumer	2,564		2,020		1,102		669		393		1,823		3,745		103		12,419
Total loans	$	13,059	$	10,344	$	6,360	$	4,239	$	2,347	$	5,667	$	13,064	$	573	$	55,653

Loan Modifications

On January 1, 2023, we adopted ASU 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and ~~Restructured~~Vintage 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 did not have a 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

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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 generally remain on nonaccrual 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 on nonaccrual. There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2023, which were still in default at period end, and were within 12 months or less of being modified.

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:


	Three Months Ended June 30, 2023
	Amortized cost associated with the following modification types:
(In millions)	Interest rate reduction		Maturity or term extension		Principal forgiveness		Multiple modification types 1		Total 2		Percentage of total loans 3
Commercial:
Commercial and industrial	$	1	$	27	$	—	$	—	$	28	0.2	%
Owner-occupied	—		20		—		—		20		0.2

Total commercial	1		47		—		—		48		0.2
Commercial real estate:
Construction and land development	—		18		—		—		18		0.7
Term	—		34		—		—		34		0.3
Total commercial real estate	—		52		—		—		52		0.4
Consumer:

1-4 family residential	—		—		1		1		2		—

Bankcard and other revolving plans	—		1		—		—		1		0.2

Total consumer loans	—		1		1		1		3		—
Total	$	1	$	100	$	1	$	1	$	103	0.2	%

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	Six Months Ended June 30, 2023
	Amortized cost associated with the following modification types:
(In millions)	Interest rate reduction		Maturity or term extension		Principal forgiveness		Multiple modification types 1		Total 2		Percentage of total loans 3
Commercial:
Commercial and industrial	$	1	$	42	$	—	$	—	$	43	0.3	%
Owner-occupied	4		22		—		—		26		0.3

Total commercial	5		64		—		—		69		0.2
Commercial real estate:
Construction and land development	—		18		—		—		18		0.7
Term	—		58		—		—		58		0.6
Total commercial real estate	—		76		—		—		76		0.6
Consumer:

1-4 family residential	—		—		1		1		2		—

Bankcard and other revolving plans	—		1		—		—		1		0.2

Total consumer loans	—		1		1		1		3		—
Total	$	5	$	141	$	1	$	1	$	148	0.3	%

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 $10 million at June 30, 2023.

3 Amounts less than 0.05% are rounded to zero.

The financial impact of loan modifications to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023, is summarized in the following schedule:


	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
(In millions)	Weighted-average interest rate reduction (in percentage points)		Weighted-average term extension (in months)		Weighted-average interest rate reduction (in percentage points)		Weighted-average term extension (in months)
Commercial:
Commercial and industrial	1.0	%	8		1.0	%	9

Owner-occupied	—		7		4.4		7

Total commercial	1.0		8		3.7		8
Commercial real estate:
Construction and land development	—		6		—		6
Term	—		18		—		17
Total commercial real estate	—		14		—		15
Consumer: 1

1-4 family residential	1.3		110		1.3		110

Bankcard and other revolving plans	—		65		—		61

Total consumer loans	1.3		87		1.3		87
Total weighted average financial impact	1.1	%	12		3.4	%	13

1Primarily relates to one loan within each consumer loan class.

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Loan modifications to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023, resulted in $1 million of principal forgiveness for the total loan portfolio for both periods.

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 June 30, 2023, presented by portfolio segment and loan class.


	June 30, 2023
(In millions)	Current		30-89 days past due		90+ days past due		Total past due		Total amortized cost of loans

Commercial:
Commercial and industrial	$	40	$	3	$	—	$	3	$	43

Owner-occupied	25		—		1		1		26

Total commercial	65		3		1		4		69
Commercial real estate:
Construction and land development	18		—		—		—		18
Term	58		—		—		—		58
Total commercial real estate	76		—		—		—		76
Consumer:

1-4 family residential	2		—		—		—		2

Bankcard and other revolving plans	1		—		—		—		1

Total consumer loans	3		—		—		—		3
Total	$	144	$	3	$	1	$	4	$	148

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 ~~2021~~2022 Form 10-K.

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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:
June 30, 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 $ 15 $ 10 $ — $ — $ 1 $ 31 $ 57
Owner-occupied — 5 — 9 14 9 37
Municipal — 8 — — — — 8
Total commercial 15 23 — 9 15 40 102
Commercial real estate:
Term 1 27 — 27 29 1 85
Total commercial real estate 1 27 — 27 29 1 85
Consumer:
Home equity credit line — 1 5 — — 1 7
1-4 family residential 3 — 2 — 1 14 20
Total consumer loans 3 1 7 — 1 15 27
Total accruing 19 51 7 36 45 56 214
Nonaccruing
Commercial:
Commercial and industrial 1 3 — 10 3 6 23
Owner-occupied 9 — — — — 8 17
Total commercial 10 3 — 10 3 14 40
Commercial real estate:
Term — — — 11 — 4 15
Total commercial real estate — — — 11 — 4 15
Consumer:
Home equity credit line — — 1 — — — 1
1-4 family residential — 1 1 — — 3 5
Total consumer loans — 1 2 — — 3 6
Total nonaccruing 10 4 2 21 3 21 61
Total $ 29 $ 55 $ 9 $ 57 $ 48 $ 77 $ 275

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.~~

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		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

2 Includes TDRs that resulted from a combination of the previous modification types reflected in the schedule.

Unfunded lending commitments onrelated to TDRs totaled ~~$11 million and $10~~$7 million at ~~June 30, 2022 and~~ December 31, ~~2021, respectively.~~2022.

The total amortized cost of all TDRs in which interest rates were modified below market was ~~$87 million at June 30, 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 and six months~~year ended ~~June 30,~~December 31, 2022 ~~and 2021~~ was not significant.

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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.

~~Table~~The amortized cost of ~~Contents~~TDRs 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.

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Collateral-Dependent Loans

When a loan is individually evaluated for expected credit losses, we estimate a specific reserve for the loan based on (1) the projected present value of the loan’s future cash flows discounted at the loan’s effective interest rate, (2) the observable market price of the loan, or (3) 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:

June 30, 2022

June 30, 2023

(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 and industrial

Corporate assets

14%

Commercial and industrial

Accounts Receivable

81%

Owner-occupied

Land

38%

Owner-occupied

Hospital

29%

Commercial real estate:

Term

Multi-family

32%

Term

Hotel, Multi-family

89%

Consumer:

Home equity credit line

Single family residential

15%

1-4 family residential

Single family residential

36%

Total

December 31, 2021

December 31, 2022

(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 and industrial

Corporate assets, Single family residential

55%

Owner-occupied

Office Building

40%

Owner-occupied

Land, Warehouse

29%

Commercial real estate:

Term

Multi-family, Retail

28%

Term

Multi-family

55%

Consumer:

Home equity credit line

Single family residential

45%

Home equity credit line

Single family residential

13%

1-4 family residential

Single family residential

35%

1-4 family residential

Single family residential

41%

Total

1 The fair value is based on the most recent appraisal or other collateral evaluation.

Foreclosed Residential Real Estate

At June 30, ~~2022~~2023 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~~were in the process of foreclosure was ~~$14~~$8 million and $10 million for the same periods, respectively.

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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. Cash receipts and payments from derivatives designated in qualifying hedging relationships are classified in the same category as the cash flows from the items being hedged in the statement of cash flows, and cash flows from undesignated derivatives are classified as operating activities. For a more detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our ~~2021~~2022 Form 10-K.

Fair Value Hedges of Liabilities – ~~At June 30, 2022,~~During the second quarter of 2023, we ~~had 1~~terminated our remaining receive-fixed interest rate swap with a notional amount of $500 million that had been designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively ~~converts~~converted the interest on our fixed-rate debt to ~~floating. During~~floating until it was terminated. Prior to termination, changes in the ~~second quarter~~fair value of ~~2022,~~ derivatives designated as fair value hedges of debt ~~decreased in value by $18 million, which was~~were offset by changes in the fair value of the hedged debt instruments as shown in the schedules ~~below. We had no cumulative~~on the following pages. The unamortized ~~debt~~hedge basis adjustments ~~related to previously~~resulting from the terminated ~~fair value hedges~~hedging relationship will be amortized over the remaining life of ~~debt at June 30, 2022.~~the fixed-rate debt.

Fair Value Hedges of Assets – During the second quarter of 2023, we entered into new fair value hedges of a defined portfolio of AFS securities using pay-fixed, receive-floating swaps with an aggregate notional amount of $2.5 billion that are designated as hedges under the portfolio layer method described in ASU 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method. In July 2023, we entered into additional pay-fixed swaps with an aggregate notional amount of $1 billion that were designated as fair value hedges of a defined portfolio of fixed-rate commercial loans.

At June 30, ~~2022,~~2023, we also had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of ~~$1.2~~$1.1 billion designated as fair value hedges of ~~certain~~specifically identified AFS securities. ~~These swaps~~Fair value hedges of fixed-rate AFS securities effectively convert the fixed interest income to a floating rate on the hedged portion of the securities. ~~During the second quarter~~Changes in fair value of ~~2022,~~ derivatives designated as fair value hedges of fixed-rate AFS securities ~~increased in value by $97 million, which was~~were largely 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.~~on the following pages.

Cash Flow Hedges – At June 30, ~~2022,~~2023, we had ~~$6.8 billion~~receive-fixed interest rate swaps with an aggregate notional amount of ~~receive-fixed interest rate swaps~~$2.9 billion designated as cash flow hedges of pools of floating-rate commercial loans. ~~Also~~During the second quarter of 2023, we terminated cash flow hedging relationships with an aggregate notional amount of $2.8 billion. At June 30, 2023, there was $222 million of losses deferred in AOCI related to terminated cash flow hedges that are 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 $72 million, which was~~were 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~~information on how we incorporate counterparty credit risk in derivative valuations, see Note 3 of our 2022 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our ~~2021~~2022 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~~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~~credit risk-related feature were triggered, such as a downgrade of our credit rating. ~~However, in~~In past situations, not all counterparties have demanded that additional collateral be pledged when provided for by the contractual terms. At June 30, ~~2022,~~2023, the fair value of our derivative liabilities was ~~$295~~$409 million, for which we were required to pledge

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cash collateral of ~~$133~~$2 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 June 30, ~~2022,~~2023, there would likely be ~~less than $1 million of~~no additional collateral required to be pledged.

Derivative Amounts

The following schedule presents information regarding notional amounts and recorded gross fair values at June 30, 2023 and December 31, 2022, and the related gain (loss) of derivative instruments.


	June 30, 2023						December 31, 2022
	Notional amount 1		Fair value				Notional amount		Fair value
(In millions)			Other assets		Other liabilities				Other assets		Other liabilities
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets:


Receive-fixed interest rate swaps	$	2,850	$	—	$	—	$	7,633	$	—	$	1
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	500		—		—		—		—		—
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps	—		—		—		500		—		—
Asset hedges: Pay-fixed interest rate swaps	3,572		80		—		1,228		84		—
Total derivatives designated as hedging instruments	6,922		80		—		9,361		84		1
Derivatives not designated as hedging instruments:
Customer interest rate derivatives 2	13,726		406		407		13,670		296		443
Other interest rate derivatives	3,576		2		—		862		—		—
Foreign exchange derivatives	216		2		2		605		6		7
Purchased credit derivatives	18		1		—		—		—		—
Total derivatives not designated as hedging instruments	17,536		411		409		15,137		302		450
Total derivatives	$	24,458	$	491	$	409	$	24,498	$	386	$	451

1 Centrally cleared swaps originally indexed to London Interbank Offered Rate (“LIBOR”) were divided into short-dated, LIBOR-indexed spot starting swaps and forward starting Secured Overnight Financing Rate (“SOFR”) swaps when the clearing houses transitioned to SOFR. The LIBOR-indexed swaps will fully mature in the third quarter of 2023. The notional amounts above reflect the economic substance of our derivatives and do not include the duplicate notional amounts during the transition period.

2 Customer interest rate derivatives include both customer-facing derivative as well as offsetting derivatives facing other dealer banks. The fair value of these derivatives include a net credit valuation adjustment (“CVA”) of $10 million, reducing the fair value of the liability at June 30, 2023, and $13 million, reducing the fair value of the liability at December 31, 2022.

The amount of derivative gains (losses) from cash flow and fair value hedges that were deferred in other comprehensive income (“OCI”) or recognized in earnings for the three and six months ended June 30, 2023 and 2022 is presented in the schedules below.

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~~Derivative Amounts~~


	Three Months Ended June 30, 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	$	—	$	—	$	—
Received-fixed interest rate swaps	(21)		(41)		—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	11		1		—
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps	—		—		(8)
Basis amortization on terminated hedges2	—				(1)
Asset hedges: Pay-Fixed interest rate swaps	—		—		9
Basis amortization on terminated asset hedges3	—		—		—
Total derivatives designated as hedging instruments	$	(10)	$	(40)	$	—

Certain information with respect to notional amounts and recorded gross fair values at June 30, 2022 and December 31, 2021, and the related gain (loss) of derivative instruments is summarized as follows:
June 30, 2022 December 31, 2021
Notional
amount Fair value Notional
amount Fair value
(In millions) Other
assets Other
liabilities Other
assets Other
liabilities
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets:
Receive-fixed interest rate swaps $ 6,833 $ — $ 2 $ 6,883 $ — $ —
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps 500 — — 500 — —
Asset hedges: Pay-fixed interest rate swaps 1,229 58 — 479 10 —
Total derivatives designated as hedging instruments 8,562 58 2 7,862 10 —
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives 1
6,609 14 284 6,587 192 36
Offsetting interest rate derivatives 2
6,609 298 14 6,587 38 197
Other interest rate derivatives 883 1 — 1,286 6 1
Foreign exchange derivatives 392 4 3 288 3 2
Total derivatives not designated as hedging instruments 14,493 317 301 14,748 239 236
Total derivatives $ 23,055 $ 375 $ 303 $ 22,610 $ 249 $ 236


	Six Months Ended June 30, 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	$	—	$	—	$	—
Received-fixed interest rate swaps	17		(90)		—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	11		1		—
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps	—		—		(5)
Basis amortization on terminated debt hedges 2	—		—		(1)
Asset hedges: Pay-fixed interest rate swaps	—		—		16
Basis amortization on terminated asset hedges 3	—		—		—
Total derivatives designated as hedging instruments	$	28	$	(89)	$	10

1 Customer-facing interest rate derivatives include a net credit valuation adjustment (“CVA”) of $13 million, reducing the fair value of the liability at June 30, 2022, and $3 million, reducing the fair value of the asset at December 31, 2021. These adjustments are required to reflect both our nonperformance risk and that of the respective counterparties.

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 total derivative fair values would be the following:
June 30, 2022 December 31, 2021
(In millions) Other assets Other liabilities Other assets Other liabilities
Offsetting interest rate derivatives $ 75 $ 6 $ 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 six months ended June 30, 2022 and 2021 is shown in the schedules below.


		Three Months Ended June 30, 2022						Three Months Ended June 30, 2022
(In millions)	(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			(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	Cash flow hedges of floating-rate assets:1								Cash flow hedges of floating-rate assets: 1
Purchased interest rate floors	Purchased interest rate floors	$	—	$	—	$	—		Purchased interest rate floors	$	—	$	—	$	—
Interest rate swaps	Interest rate swaps	(66)		6		—			Interest rate swaps	(66)		6		—
Fair value hedges of liabilities:	Fair value hedges of liabilities:								Fair value hedges of liabilities:
Receive-fixed interest rate swaps	Receive-fixed interest rate swaps	—		—		1			Receive-fixed interest rate swaps	—		—		1
Basis amortization on terminated hedges 2, 3		—		—		—
Basis amortization on terminated hedges2									Basis amortization on terminated hedges2	—		—		—
Fair value hedges of assets:	Fair value hedges of assets:								Fair value hedges of assets:
Pay-fixed interest rate swaps	Pay-fixed interest rate swaps	—		—		(1)			Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3		—		—		—
Basis amortization on terminated hedges 2									Basis amortization on terminated hedges 2	—		—		—
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments	$	(66)	$	6	$	—		Total derivatives designated as hedging instruments	$	(66)	$	6	$	—

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	Six Months Ended June 30, 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	(244)		17		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		3
Basis amortization on terminated hedges 2, 3	—		—		1
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(2)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(244)	$	19	$	2

Three Months Ended June 30, 2021
(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 (4) 13 —
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 $ (4) $ 15 $ 4

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Six Months Ended June 30, 2021
(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 $ — $ 6 $ —
Interest rate swaps (9) 25 —
Fair value hedges of liabilities:
Receive-fixed interest rate swaps — — 4
Basis amortization on terminated hedges 2, 3
— — 6
Fair value hedges of assets:
Pay-fixed interest rate swaps — — (1)
Basis amortization on terminated hedges 2, 3
— — —
Total derivatives designated as hedging instruments $ (9) $ 31 $ 9

1 For the 12 months following June 30, ~~2022,~~2023, we estimate that ~~$94~~$106 million of losses will be reclassified from AOCI into interest income, compared with an estimate of ~~$48~~$94 million of ~~gains as of~~losses at June 30, ~~2021.~~2022.

2 ~~Adjustment to interest expense resulting from~~At June 30, 2023, the ~~amortization of the debt basis adjustment on fixed-rate debt previously hedged by terminated receive-fixed interest rate.~~

3 ~~There was no~~total cumulative unamortized basis adjustment ~~from previously~~for terminated ~~or redesignated~~ fair value hedges of debt was $50 million. We did not have any cumulative unamortized basis adjustment for terminated hedges of debt at June 30, 2022. We had $3 million and $7 million of cumulative unamortized basis adjustments from terminated fair value ~~asset~~ hedges of assets at June 30, ~~2022, compared with $5 million~~2023 and ~~$7 million as of June 30, 2021,~~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 June 30, 2022		Six Months Ended June 30, 2022		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		(In millions)	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023		Three Months Ended June 30, 2022		Six Months Ended June 30, 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	$	(143)	$	(411)	$	87	$	(95)	Customer-facing interest rate derivatives	$	10	$	11	$	17	$	30
Offsetting interest rate derivatives		160		441		(89)		117
Other interest rate derivatives	Other interest rate derivatives	(1)		—		(6)		(10)		Other interest rate derivatives	3		3		(1)		—
Foreign exchange derivatives	Foreign exchange derivatives	8		14		6		11		Foreign exchange derivatives	7		15		8		14
Purchased credit derivatives										Purchased credit derivatives	$	(1)	$	(1)	$	—	$	—
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments	$	24	$	44	$	(2)	$	23	Total derivatives not designated as hedging instruments	$	19	$	28	$	24	$	44

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 June 30, 2022 Three Months Ended June 30, 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
$ (18) $ 18 $ — $ 12 $ (12) $ —
Assets: Pay-fixed interest rate swaps 1, 2
97 (97) — (25) 25 —


	Gain/(loss) recorded in income
	Three Months Ended June 30, 2023						Three Months Ended June 30, 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	$	2	$	(2)	$	—	$	(18)	$	18	$	—
Assets: Pay-fixed interest rate swaps 1, 2	66		(67)		(1)		97		(97)		—

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		Gain/(loss) recorded in income													Gain/(loss) recorded in income
		Six Months Ended June 30, 2022						Six Months Ended June 30, 2021							Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(In millions)	(In millions)	Derivatives 2		Hedged items		Total income statement impact		Derivatives 2		Hedged items		Total income statement impact		(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	Debt: Receive-fixed interest rate swaps 1, 2	$	(50)	$	50	$	—	$	(23)	$	23	$	—	Debt: Receive-fixed interest rate swaps 1, 2	$	14	$	(14)	$	—	$	(50)	$	50	$	—
Assets: Pay-fixed interest rate swaps 1, 2	Assets: Pay-fixed interest rate swaps 1, 2	150		(150)		—		23		(23)		—		Assets: Pay-fixed interest rate swaps 1, 2	26		(27)		(1)		150		(150)		—

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.

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
(In millions) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021
Long-term fixed-rate debt $ (500) $ (500) $ (482) $ (507) $ 18 $ (7)
Fixed-rate AFS securities 1,229 479 1,132 435 (97) (44)


	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)	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022

Long-term fixed-rate debt 2	$	—	$	(500)	$	—	$	(435)	$	—	$	65
Fixed-rate assets 3	11,129		1,228		10,898		962		(231)		(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.

2 We terminated the remaining fair value hedge of debt during the second quarter of 2023. The remaining hedge basis adjustments will be amortized over the life of the associated debt.

3 These amounts include the amortized cost basis of defined portfolios of AFS securities used to designate hedging relationships in which the hedged item is the stated amount of assets in the defined portfolio anticipated to be outstanding for the designated hedged period. At June 30, 2023, the amortized cost basis of the defined portfolios used in these hedging relationships was $10.1 billion; the cumulative basis adjustment associated with these hedging relationships was $36.8 million; and the notional amounts of the designated hedging instruments were $2.5 billion.

8. LEASES

We have operating and finance leases for branches, corporate offices, and data centers. At June 30, ~~2022,~~2023, we had ~~413~~412 branches, of which ~~273~~277 are owned and ~~140~~135 are leased. We lease our headquarters in Salt Lake City, Utah. The remaining maturities of our lease commitments range from the year ~~2022~~2023 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 assets,” and “Premises, equipment and software, net,” respectively. The corresponding liabilities for those leases are presented in “Other liabilities,” and “Long-term debt.” For more information about our lease policies, see Note 8 of our ~~2021~~2022 Form 10-K.

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The following schedule presents ROU assets and lease liabilities with associated weighted average remaining life and discount ~~rate:~~rate.

(Dollar amounts in millions) June 30,
2022 December 31, 2021
Operating leases
ROU assets, net of amortization $ 183 $ 195
Lease liabilities 209 222
Financing leases
ROU assets, net of amortization 4 4
Lease liabilities 4 4
Weighted average remaining lease term (years)
Operating leases 8.5 8.5
Finance leases 17.8 18.3
Weighted average discount rate
Operating leases 2.8 % 2.8 %
Finance leases 3.1 % 3.1 %

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(Dollar amounts in millions)	June 30, 2023			December 31, 2022
Operating leases
ROU assets, net of amortization	$	170		$	173
Lease liabilities	195			198
Finance leases
ROU assets, net of amortization	3			4
Lease liabilities	4			4
Weighted average remaining lease term (years)
Operating leases	8.6			8.4
Finance leases	16.9			17.4
Weighted average discount rate
Operating leases	3.1		%	2.9		%
Finance leases	3.1		%	3.1		%

Additional information related to lease expense is presented ~~below:~~in the following schedule.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions)	(In millions)	2022		2021		2022		2021		(In millions)	2023		2022		2023		2022

Lease expense:	Lease expense:									Lease expense:
Operating lease expense	Operating lease expense	$	12	$	12	$	24	$	24	Operating lease expense	$	11	$	12	$	22	$	24

Other expenses associated with operating leases 1	Other expenses associated with operating leases 1	12		12		24		25		Other expenses associated with operating leases 1	16		12		30		24

Total lease expense	Total lease expense	$	24	$	24	$	48	$	49	Total lease expense	$	27	$	24	$	52	$	48

Related cash disbursements from operating leases	Related cash disbursements from operating leases	$	12	$	12	$	25	$	25	Related cash disbursements from operating leases	$	12	$	12	$	24	$	25

1 Other expenses primarily ~~relate to~~include property taxes and building and property maintenance.

~~ROU assets related to new leases totaled~~ ~~$1 million~~ ~~at both June 30, 2022 and December 31, 2021.~~

~~Total~~The 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		$	24
2023		46
2023 1				2023 1	$	24
2024	2024	37		2024	40
2025	2025	27		2025	32
2026	2026	22		2026	27
2027				2027	18
Thereafter	Thereafter	86		Thereafter	87
Total	Total	$	242	Total	$	228

1 Contractual maturities for the six 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 $34 million and $3 million for ~~both~~ the second quarter of 2023 and 2022, respectively, and ~~2021,~~$8 million and $7 million for ~~both~~ the first six months of 2023 and 2022, ~~and 2021.~~respectively.

We originated equipment leases, considered to be sales-type leases or direct financing leases, totaling $~~339~~388 million and ~~$327~~$386 million at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. We recorded income of $34 million and $3 million on these leases for ~~both~~ the second quarter of 2023 and 2022, respectively, and ~~2021,~~$8 million and $6 million for ~~both~~ the first six months of 2023 and 2022, ~~and 2021.~~respectively.

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9. LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY

Long-Term Debt

The long-term debt carrying values presented in the ~~following schedule~~consolidated balance sheet 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. The following schedule presents the components of our long-term debt.

LONG-TERM DEBT


(In millions)	(In millions)	June 30, 2022		December 31, 2021		Amount change		Percent change		(In millions)	June 30, 2023		December 31, 2022

Subordinated notes		$	540	$	590	$	(50)	(8)	%
Subordinated notes 1										Subordinated notes 1	$	534	$	519
Senior notes	Senior notes	127		418		(291)		(70)		Senior notes	—		128

Finance lease obligations	Finance lease obligations	4		4		—		—		Finance lease obligations	4		4
Total	Total	$	671	$	1,012	$	(341)	(34)	%	Total	$	538	$	651

1 The change in the subordinated notes balance is primarily due to a fair value hedge accounting adjustment. See also Note 7.

The decrease in long-term debt was primarily due to the redemption of ~~$290~~$128 million, ~~of the 4-year, 3.35%~~4.50% matured senior notes during the ~~first~~second quarter of ~~2022.~~2023.

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~~Common Stock~~

Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At June 30, ~~2022,~~2023, there were ~~150.5~~148.1 million shares of ~~$0.001~~$0.001 par value common stock outstanding. Common stock and additional paid-in capital ~~totaled $1.8~~decreased $32 million, or 2%, to $1.7 billion at June 30, ~~2022, which decreased $83 million, or 4%,~~2023, from December 31, ~~2021,~~2022, primarily due to common stock ~~repurchases. During~~repurchases during the first ~~six months~~quarter of ~~2022,~~2023. As the macroeconomic environment remained uncertain, we ~~repurchased 1.7 million~~did not repurchase common shares ~~outstanding for $100 million at an average price~~during the second quarter of ~~$58.82 per share.~~2023, nor do we expect to repurchase common shares during the third quarter of 2023.

~~Accumulated Other Comprehensive Income (Loss)~~

~~Accumulated other comprehensive income (loss) decreased to~~AOCI was a $2.9 billionloss ~~of $2.1 billion~~ at June 30, ~~2022, primarily due~~2023. The following schedule presents the changes in AOCI by component.


(In millions)	Net unrealized gains/(losses) on investment securities		Net unrealized gains/(losses) on derivatives and other		Pension and post-retirement		Total
Six Months Ended June 30, 2023
Balance at December 31, 2022	$	(2,800)	$	(311)	$	(1)	$	(3,112)
OCI before reclassifications, net of tax 1	94		21		—		115
Amounts reclassified from AOCI, net of tax	—		67		—		67
Other comprehensive income	94		88		—		182
Balance at June 30, 2023	$	(2,706)	$	(223)	$	(1)	$	(2,930)
Income tax expense included in OCI	$	31	$	28	$	—	$	59
Six Months Ended June 30, 2022
Balance at December 31, 2021	$	(78)	$	—	$	(2)	$	(80)
OCI (loss) before reclassifications, net of tax	(1,820)		(185)		—		(2,005)
Amounts reclassified from AOCI, net of tax	—		(15)		—		(15)
Other comprehensive loss	(1,820)		(200)		—		(2,020)
Balance at June 30, 2022	$	(1,898)	$	(200)	$	(2)	$	(2,100)
Income tax benefit included in OCI (loss)	$	(590)	$	(65)	$	—	$	(655)

1 For the six months ended June 30, 2023, the OCI related to ~~decreases~~net unrealized gains/(losses) on investment securities reflected a $9 million decline in the fair value of fixed-rate ~~available-for-sale~~AFS securities as a result of ~~changes~~higher interest rates, offset by a $103 million increase 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
Six Months Ended June 30, 2022
Balance at December 31, 2021 $ (78) $ — $ (2) $ (80)
OCI (loss) before reclassifications, net of tax (1,820) (185) — (2,005)
Amounts reclassified from AOCI, net of tax — (15) — (15)
Other comprehensive loss (1,820) (200) — (2,020)
Balance at June 30, 2022 $ (1,898) $ (200) $ (2) $ (2,100)
Income tax benefit included in OCI (loss) $ (590) $ (65) $ — $ (655)
Six Months Ended June 30, 2021
Balance at December 31, 2020 $ 258 $ 69 $ (2) $ 325
OCI (loss) before reclassifications, net of tax (130) 3 — (127)
Amounts reclassified from AOCI, net of tax — (23) — (23)
Other comprehensive income (loss) (130) (20) — (150)
Balance at June 30, 2021 $ 128 $ 49 $ (2) $ 175
Income tax benefit included in OCI (loss) $ (42) $ (6) $ — $ (48)

Amounts reclassified from AOCI 1
Statement of income (SI)
(In millions) Three Months Ended
June 30, Six Months Ended
June 30,
Details about AOCI components 2022 2021 2022 2021 Affected line item
Net unrealized gains on derivative instruments $ 6 $ 15 $ 20 $ 31 SI Interest and fees on loans
Income tax expense 2 4 5 8
Amounts reclassified from AOCI $ 4 $ 11 $ 15 $ 23

1 ~~Positive reclassification amounts indicate increases~~amortization of the discount on the securities transferred from AFS to ~~earnings in~~HTM during the ~~income statement.~~fourth quarter of 2022.

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	Amounts reclassified from AOCI 1								Statement of income (SI)
(In millions)	Three Months Ended June 30,				Six Months Ended June 30,
Details about AOCI components	2023		2022		2023		2022			Affected line item











Net unrealized gains (losses) on derivative instruments	$	(40)	$	6	$	(89)	$	20	SI	Interest and fees on loans
Less: Income tax expense (benefit)	(10)		2		(22)		5
Amounts reclassified from AOCI	$	(30)	$	4	$	(67)	$	15

1 Positive reclassification amounts indicate increases to earnings in the income statement.

10. COMMITMENTS, GUARANTEES, AND CONTINGENT LIABILITIES

Commitments and Guarantees

~~Off-balance~~The following schedule presents the contractual amounts related to off-balance sheet financial ~~obligations~~instruments used to meet the financing needs of our ~~customers include the following:~~customers.


(In millions)	(In millions)	June 30, 2022		December 31, 2021		(In millions)	June 30, 2023		December 31, 2022

Unfunded lending commitments 1	Unfunded lending commitments 1	$	27,211	$	25,797	Unfunded lending commitments 1	$	29,731	$	29,628
Standby letters of credit:	Standby letters of credit:					Standby letters of credit:
Financial	Financial	581		597		Financial	579		667
Performance	Performance	199		245		Performance	178		184
Commercial letters of credit	Commercial letters of credit	17		22		Commercial letters of credit	36		11
Mortgage-backed security purchase agreements 2						Mortgage-backed security purchase agreements 2	51		23
Total unfunded commitments	Total unfunded commitments	$	28,008	$	26,661	Total unfunded commitments	$	30,575	$	30,513

1 Net of participations.

~~Our 2021 Form 10-K contains further~~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. At June 30,~~requirements, see Note 16 of our 2022 ~~the liability for the guarantees associated with the standby letters of credit was~~ ~~$4 million, which consisted of~~ ~~$1 million~~ ~~attributable to the RULC, and~~ ~~$3 million~~ ~~of deferred commitment fees.~~Form 10-K.

Legal Matters

We are ~~subject to~~involved 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.

~~In the second quarter of 2022,~~At June 30, 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 four 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 paid the settlement amount under applicable policies. The case was dismissed in May 2022. The settlement did not 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 has been 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

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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.

•2Two 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.~~phases. 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. 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.

•NaN 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. NaNTable of ~~the 5 cases have been dismissed, and 2 remain pending.~~ Contents

ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES

•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 and have similar or overlapping claims:~~ ~~Ward v. Zions Bancorporation, N.A. was brought against us in federal court~~This case is in the ~~District of Arizona in May 2021~~early discovery phase and ~~was dismissed by the court in February 2022. Subsequently, the plaintiff dismissed his appeal of the court’s dismissal of the case.~~ ~~Thornton v. Zions Bancorporation, N.A.~~ ~~was brought against us in federal court in the District of Utah in June 2021 and was dismissed by plaintiff 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, and was dismissed by plaintiff in May 2022. The two remaining cases,~~ ~~Sipple~~ ~~and~~ ~~Christensen,~~ ~~are in early phases of litigation.~~trial has not been scheduled.

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 June 30, ~~2022,~~2023, we estimated that the aggregate range of reasonably possible losses for those matters to be from ~~$0 million~~zero to ~~roughly $10~~approximately $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

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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 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 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 ~~was~~represented approximately ~~76%~~80% of our total revenue in the second 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 ~~2021~~2022 Form 10-K.

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Disaggregation of Revenue

The schedule below presents net revenue by our operating business segments for the three months ended June 30, ~~2022~~2023 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.2022.


		Zions Bank				CB&T				Amegy					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	$	12	$	11	$	7	$	6	$	11	$	10	Commercial account fees	$	14	$	12	$	8	$	7	$	14	$	11
Card fees	Card fees	14		15		5		4		8		7		Card fees	13		14		5		5		8		8
Retail and business banking fees	Retail and business banking fees	6		6		3		3		4		4		Retail and business banking fees	5		6		3		3		4		4

Capital markets and foreign exchange fees		—		—		—		—		—		—
Capital markets fees														Capital markets fees	—		—		—		—		—		—
Wealth management fees	Wealth management fees	6		5		1		1		4		3		Wealth management fees	6		6		1		1		4		4
Other customer-related fees	Other customer-related fees	2		2		2		1		2		1		Other customer-related fees	2		2		2		2		2		2
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	40		39		18		15		29		25		Total noninterest income from contracts with customers (ASC 606)	40		40		19		18		32		29
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	6		7		8		9		13		9		Other noninterest income (non-ASC 606 customer-related)	6		6		14		8		8		13
Total customer-related noninterest income	Total customer-related noninterest income	46		46		26		24		42		34		Total customer-related noninterest income	46		46		33		26		40		42
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	3		—		1		1		—		1		Other noncustomer-related noninterest income	3		3		2		1		15		—
Total noninterest income	Total noninterest income	49		46		27		25		42		35		Total noninterest income	49		49		35		27		55		42

Net interest income	Net interest income	170		158		142		133		120		116		Net interest income	178		170		152		142		116		120
Total net revenue	Total net revenue	$	219	$	204	$	169	$	158	$	162	$	151	Total net revenue	$	227	$	219	$	187	$	169	$	171	$	162

		NBAZ				NSB				Vectra					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	$	2	$	2	$	2	$	2	$	2	$	2	Commercial account fees	$	2	$	2	$	3	$	2	$	2	$	2
Card fees	Card fees	4		3		4		3		2		1		Card fees	4		4		4		4		2		2
Retail and business banking fees	Retail and business banking fees	2		2		3		3		1		1		Retail and business banking fees	2		2		3		3		1		1

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	1		1		1		1		1		—
Other customer-related fees	Other customer-related fees	—		—		—		—		1		1		Other customer-related fees	—		—		—		—		1		1
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	9		8		10		9		6		5		Total noninterest income from contracts with customers (ASC 606)	9		9		11		10		7		6
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	1		2		2		3		2		3		Other noninterest income (non-ASC 606 customer-related)	1		1		—		2		—		2
Total customer-related noninterest income	Total customer-related noninterest income	10		10		12		12		8		8		Total customer-related noninterest income	10		10		11		12		7		8
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	1		1		—		—		—		—		Other noncustomer-related noninterest income	1		1		—		—		—		—
Total noninterest income	Total noninterest income	11		11		12		12		8		8		Total noninterest income	11		11		11		12		7		8

Net interest income	Net interest income	55		53		39		37		35		35		Net interest income	64		55		49		39		38		35
Total net revenue	Total net revenue	$	66	$	64	$	51	$	49	$	43	$	43	Total net revenue	$	75	$	66	$	60	$	51	$	45	$	43

		TCBW				Other				Consolidated Bank					TCBW				Other				Consolidated Bank
(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	$	—	$	—	$	37	$	34	Commercial account fees	$	1	$	1	$	1	$	—	$	45	$	37
Card fees	Card fees	1		—		(2)		—		36		33		Card fees	1		1		—		(2)		37		36
Retail and business banking fees	Retail and business banking fees	—		—		1		(1)		20		18		Retail and business banking fees	—		—		(2)		1		16		20

Capital markets and foreign exchange fees		—		—		1		2		1		2
Capital markets fees														Capital markets fees	—		—		1		1		1		1
Wealth management fees	Wealth management fees	—		—		—		—		13		11		Wealth management fees	—		—		—		—		14		13
Other customer-related fees	Other customer-related fees	—		—		9		8		16		13		Other customer-related fees	—		—		8		9		15		16
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	2		1		9		9		123		111		Total noninterest income from contracts with customers (ASC 606)	2		2		8		9		128		123
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	—		1		(1)		(6)		31		28		Other noninterest income (non-ASC 606 customer-related)	—		—		5		(1)		34		31
Total customer-related noninterest income	Total customer-related noninterest income	2		2		8		3		154		139		Total customer-related noninterest income	2		2		13		8		162		154
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	—		—		13		63		18		66		Other noncustomer-related noninterest income	—		—		6		13		27		18
Total noninterest income	Total noninterest income	2		2		21		66		172		205		Total noninterest income	2		2		19		21		189		172

Net interest income	Net interest income	15		14		17		9		593		555		Net interest income	15		15		(21)		17		591		593
Total net revenue	Total net revenue	$	17	$	16	$	38	$	75	$	765	$	760	Total net revenue	$	17	$	17	$	(2)	$	38	$	780	$	765

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The ~~following~~ schedule below presents ~~the noninterest income and~~ net revenue by our operating business segments for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022.


		Zions Bank				CB&T				Amegy					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	$	27	$	22	$	14	$	12	$	22	$	20	Commercial account fees	$	28	$	27	$	15	$	14	$	28	$	22
Card fees	Card fees	27		27		10		8		16		13		Card fees	26		27		10		10		16		16
Retail and business banking fees	Retail and business banking fees	12		10		6		6		8		8		Retail and business banking fees	9		12		6		6		7		8

Capital markets and foreign exchange fees		—		—		—		—		—		—
Capital markets fees														Capital markets fees	—		—		—		—		—		—
Wealth management fees	Wealth management fees	11		10		2		2		8		6		Wealth management fees	12		11		2		2		8		8
Other customer-related fees	Other customer-related fees	4		4		3		2		3		3		Other customer-related fees	4		4		4		3		3		3
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	81		73		35		30		57		50		Total noninterest income from contracts with customers (ASC 606)	79		81		37		35		62		57
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	11		12		14		17		22		16		Other noninterest income (non-ASC 606 customer-related)	13		11		19		14		17		22
Total customer-related noninterest income	Total customer-related noninterest income	92		85		49		47		79		66		Total customer-related noninterest income	92		92		56		49		79		79
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	3		—		2		2		—		1		Other noncustomer-related noninterest income	7		3		3		2		17		—
Total noninterest income	Total noninterest income	95		85		51		49		79		67		Total noninterest income	99		95		59		51		96		79

Net interest income	Net interest income	326		315		271		263		232		231		Net interest income	363		326		311		271		240		232
Total net revenue	Total net revenue	$	421	$	400	$	322	$	312	$	311	$	298	Total net revenue	$	462	$	421	$	370	$	322	$	336	$	311

		NBAZ				NSB				Vectra					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	$	4	$	4	$	6	$	4	$	4	$	3	Commercial account fees	$	5	$	4	$	7	$	6	$	3	$	4
Card fees	Card fees	7		5		7		6		4		3		Card fees	7		7		8		7		4		4
Retail and business banking fees	Retail and business banking fees	5		4		6		5		2		2		Retail and business banking fees	4		5		5		6		2		2

Capital markets and foreign exchange fees		—		—		—		—		—		—
Capital markets fees														Capital markets fees	—		—		—		—		—		—
Wealth management fees	Wealth management fees	2		1		2		2		1		1		Wealth management fees	2		2		3		2		1		1
Other customer-related fees	Other customer-related fees	1		1		—		—		1		1		Other customer-related fees	1		1		—		—		2		1
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	19		15		21		17		12		10		Total noninterest income from contracts with customers (ASC 606)	19		19		23		21		12		12
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	3		6		4		8		4		6		Other noninterest income (non-ASC 606 customer-related)	1		3		—		4		1		4
Total customer-related noninterest income	Total customer-related noninterest income	22		21		25		25		16		16		Total customer-related noninterest income	20		22		23		25		13		16
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	1		1		—		—		—		—		Other noncustomer-related noninterest income	1		1		—		—		—		—
Total noninterest income	Total noninterest income	23		22		25		25		16		16		Total noninterest income	21		23		23		25		13		16

Net interest income	Net interest income	106		105		77		73		68		68		Net interest income	129		106		99		77		79		68
Total net revenue	Total net revenue	$	129	$	127	$	102	$	98	$	84	$	84	Total net revenue	$	150	$	129	$	122	$	102	$	92	$	84

		TCBW				Other				Consolidated Bank					TCBW				Other				Consolidated Bank
(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	$	—	$	—	$	78	$	66	Commercial account fees	$	1	$	1	$	1	$	—	$	88	$	78
Card fees	Card fees	1		1		—		—		72		63		Card fees	1		1		—		—		72		72
Retail and business banking fees	Retail and business banking fees	—		—		1		—		40		35		Retail and business banking fees	—		—		(1)		1		32		40

Capital markets and foreign exchange fees		—		—		2		3		2		3
Capital markets fees														Capital markets fees	—		—		2		2		2		2
Wealth management fees	Wealth management fees	—		—		—		—		26		22		Wealth management fees	—		—		(1)		—		27		26
Other customer-related fees	Other customer-related fees	—		—		18		13		30		24		Other customer-related fees	1		—		15		18		30		30
Total noninterest income from contracts with customers (ASC 606)	Total noninterest income from contracts with customers (ASC 606)	2		2		21		16		248		213		Total noninterest income from contracts with customers (ASC 606)	3		2		16		21		251		248
Other noninterest income (non-ASC 606 customer-related)	Other noninterest income (non-ASC 606 customer-related)	1		1		(2)		(7)		57		59		Other noninterest income (non-ASC 606 customer-related)	—		1		11		(2)		62		57
Total customer-related noninterest income	Total customer-related noninterest income	3		3		19		9		305		272		Total customer-related noninterest income	3		3		27		19		313		305
Other noncustomer-related noninterest income	Other noncustomer-related noninterest income	—		—		3		98		9		102		Other noncustomer-related noninterest income	—		—		8		3		36		9
Total noninterest income	Total noninterest income	3		3		22		107		314		374		Total noninterest income	3		3		35		22		349		314

Other real estate owned gain from sale														Other real estate owned gain from sale	—		—		—		—		—		—
Net interest income	Net interest income	28		27		29		18		1,137		1,100		Net interest income	31		28		18		29		1,270		1,137
Total net revenue	Total net revenue	$	31	$	30	$	51	$	125	$	1,451	$	1,474	Total net revenue	$	34	$	31	$	53	$	51	$	1,619	$	1,451

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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 ~~typically~~generally not significant.

12. INCOME TAXES

The effective income tax rate was 22.6% for the second quarter of 2023, compared with 21.9% for the second quarter of ~~2022, compared with 22.2% for the same prior year period.~~2022. The effective tax rates for the first six months of 2023 and 2022 were 25.4% and ~~2021 were~~ 21.2% ~~and 21.9%~~, respectively. ~~These~~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 ~~2022~~the first six months of 2023 was ~~lower than the tax rate for~~higher relative to the same prior year period, primarily as a result of a discrete item that affected the ~~proportional increase in nontaxable items and~~reserve for uncertain tax ~~credits relative to pretax book income.~~positions during the first quarter of 2023.

At both June 30, 2023 and December 31, 2022, we had a net deferred tax asset (“DTA”) totaling ~~$722 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.~~

~~There was no valuation allowance at June 30, 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 future~~the following:

•Future reversals of existing deferred tax liabilities ~~which historically~~(“DTLs”) — These DTLs have a reversal pattern generally consistent with ~~DTAs; (3) potential~~DTAs and are used to realize the DTAs.

•Tax planning strategies — We have considered prudent and feasible tax planning ~~strategies; and (4) future~~strategies 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 June 30, 2023 and December 31, 2022.

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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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In millions, except shares and per share amounts)	(In millions, except shares and per share amounts)	2022		2021		2022		2021		(In millions, except shares and per share amounts)	2023		2022		2023		2022
Basic:	Basic:									Basic:
Net income	Net income	$	203	$	354	$	406	$	676	Net income	$	175	$	203	$	379	$	406
Less common and preferred dividends	Less common and preferred dividends	66		65		132		129		Less common and preferred dividends	70		66		138		132
Less impact from redemption of preferred stock		—		3		—		3

Undistributed earnings	Undistributed earnings	137		286		274		544		Undistributed earnings	105		137		241		274
Less undistributed earnings applicable to nonvested shares	Less undistributed earnings applicable to nonvested shares	1		2		2		5		Less undistributed earnings applicable to nonvested shares	1		1		2		2
Undistributed earnings applicable to common shares	Undistributed earnings applicable to common shares	136		284		272		539		Undistributed earnings applicable to common shares	104		136		239		272
Distributed earnings applicable to common shares	Distributed earnings applicable to common shares	57		56		115		111		Distributed earnings applicable to common shares	61		57		121		115
Total earnings applicable to common shares	Total earnings applicable to common shares	$	193	$	340	$	387	$	650	Total earnings applicable to common shares	$	165	$	193	$	360	$	387
Weighted average common shares outstanding (in thousands)	Weighted average common shares outstanding (in thousands)	150,635		162,742		150,958		163,144		Weighted average common shares outstanding (in thousands)	147,692		150,635		147,852		150,958
Net earnings per common share	Net earnings per common share	$	1.29	$	2.08	$	2.56	$	3.98	Net earnings per common share	$	1.11	$	1.29	$	2.44	$	2.56
Diluted:	Diluted:									Diluted:
Total earnings applicable to common shares	Total earnings applicable to common shares	$	193	$	340	$	387	$	650	Total earnings applicable to common shares	$	165	$	193	$	360	$	387
Weighted average common shares outstanding (in thousands)	Weighted average common shares outstanding (in thousands)	150,635		162,742		150,958		163,144		Weighted average common shares outstanding (in thousands)	147,692		150,635		147,852		150,958

Dilutive effect of stock options (in thousands)	Dilutive effect of stock options (in thousands)	203		312		306		324		Dilutive effect of stock options (in thousands)	4		203		13		306
Weighted average diluted common shares outstanding (in thousands)	Weighted average diluted common shares outstanding (in thousands)	150,838		163,054		151,264		163,468		Weighted average diluted common shares outstanding (in thousands)	147,696		150,838		147,865		151,264
Net earnings per common share	Net earnings per common share	$	1.29	$	2.08	$	2.56	$	3.98	Net earnings per common share	$	1.11	$	1.29	$	2.44	$	2.56

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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
June 30, Six Months Ended
June 30,
(In thousands) 2022 2021 2022 2021
Restricted stock and restricted stock units 1,251 1,374 1,289 1,394
Stock options 200 7 155 234


	Three Months Ended June 30,		Six Months Ended June 30,
(In thousands)	2023	2022	2023	2022

Restricted stock and restricted stock units	1,421	1,251	1,378	1,289
Stock options	1,449	200	1,381	155

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, 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. ~~The~~Our 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 ~~eliminations~~certain 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 internal funds transfer pricing (“FTP”) allocation ~~system and~~ process to report results of operations for business ~~segments, which~~segments. 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 June 30, ~~2022,~~2023, Zions Bank operated 95 branches in Utah, 25 branches in Idaho, and 1one branch in Wyoming. CB&T operated 8077 branches in California. Amegy operated 75 branches in Texas. NBAZ operated 56 branches in

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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.

In July 2022, NSB completed the purchase of 3 Northern Nevada branches and their associated deposit, credit card, and loan accounts. The purchase included approximately $430 million in deposits and $95 million in commercial and consumer loans.

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.

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The following schedule presents selected operating segment information for the three months ended June 30, ~~2022~~2023 and ~~2021:~~
Zions Bank CB&T Amegy
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 170 $ 158 $ 142 $ 133 $ 120 $ 116
Provision for credit losses 1 (8) 16 (32) 5 (45)
Net interest income after provision for credit losses 169 166 126 165 115 161
Noninterest income 49 46 27 25 42 35
Noninterest expense 125 113 84 76 88 84
Income (loss) before income taxes $ 93 $ 99 $ 69 $ 114 $ 69 $ 112
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 13,120 $ 13,248 $ 12,895 $ 13,053 $ 11,934 $ 12,452
Total average deposits 25,035 22,862 16,663 15,602 16,253 15,350
NBAZ NSB Vectra
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 55 $ 53 $ 39 $ 37 $ 35 $ 35
Provision for credit losses 6 (14) 3 (12) 10 (11)
Net interest income after provision for credit losses 49 67 36 49 25 46
Noninterest income 11 11 12 12 8 8
Noninterest expense 42 37 37 36 30 29
Income (loss) before income taxes $ 18 $ 41 $ 11 $ 25 $ 3 $ 25
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 4,888 $ 4,950 $ 2,914 $ 3,120 $ 3,527 $ 3,476
Total average deposits 8,447 7,036 7,546 6,552 4,189 4,388
TCBW Other Consolidated Bank
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 15 $ 14 $ 17 $ 9 $ 593 $ 555
Provision for credit losses 1 (1) (1) — 41 (123)
Net interest income after provision for credit losses 14 15 18 9 552 678
Noninterest income 2 2 21 66 172 205
Noninterest expense 6 5 52 48 464 428
Income (loss) before income taxes $ 10 $ 12 $ (13) $ 27 $ 260 $ 455
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 1,579 $ 1,606 $ 927 $ 865 $ 51,784 $ 52,770
Total average deposits 1,547 1,500 1,207 1,350 80,887 74,640
2022:


	Zions Bank				CB&T				Amegy
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	178	$	170	$	152	$	142	$	116	$	120
Provision for credit losses	7		1		15		16		12		5
Net interest income after provision for credit losses	171		169		137		126		104		115
Noninterest income	49		49		35		27		55		42
Noninterest expense	138		125		94		84		100		88
Income (loss) before income taxes	$	82	$	93	$	78	$	69	$	59	$	69
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	14,250	$	13,120	$	14,152	$	12,895	$	12,880	$	11,934
Total average deposits	19,191		25,035		13,333		16,663		11,873		16,253

	NBAZ				NSB				Vectra
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	64	$	55	$	49	$	39	$	38	$	35
Provision for credit losses	4		6		7		3		2		10
Net interest income after provision for credit losses	60		49		42		36		36		25
Noninterest income	11		11		11		12		7		8
Noninterest expense	45		42		42		37		34		30
Income (loss) before income taxes	$	26	$	18	$	11	$	11	$	9	$	3
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	5,243	$	4,888	$	3,427	$	2,914	$	3,998	$	3,527
Total average deposits	6,873		8,447		6,630		7,546		3,271		4,189

	TCBW				Other				Consolidated Bank
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	15	$	15	$	(21)	$	17	$	591	$	593
Provision for credit losses	—		1		(1)		(1)		46		41
Net interest income after provision for credit losses	15		14		(20)		18		545		552
Noninterest income	2		2		19		21		189		172
Noninterest expense	6		6		49		52		508		464
Income (loss) before income taxes	$	11	$	10	$	(50)	$	(13)	$	226	$	260
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	1,689	$	1,579	$	1,040	$	927	$	56,679	$	51,784
Total average deposits	1,099		1,547		7,379		1,207		69,649		80,887

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The following schedule presents selected operating segment information for the six months ended June 30, ~~2022~~2023 and ~~2021:~~2022:

Zions Bank CB&T Amegy
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 326 $ 315 $ 271 $ 263 $ 232 $ 231
Provision for credit losses — (19) 22 (69) (22) (98)
Net interest income after provision for credit losses 326 334 249 332 254 329
Noninterest income 95 85 51 49 79 67
Noninterest expense 248 231 168 156 175 169
Income (loss) before income taxes $ 173 $ 188 $ 132 $ 225 $ 158 $ 227
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 12,969 $ 13,488 $ 12,870 $ 13,052 $ 11,865 $ 12,577
Total average deposits 25,574 22,289 16,566 15,393 16,333 14,800
NBAZ NSB Vectra
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 106 $ 105 $ 77 $ 73 $ 68 $ 68
Provision for credit losses 2 (24) — (30) 6 (11)
Net interest income after provision for credit losses 104 129 77 103 62 79
Noninterest income 23 22 25 25 16 16
Noninterest expense 82 75 74 72 59 57
Income (loss) before income taxes $ 45 $ 76 $ 28 $ 56 $ 19 $ 38
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 4,831 $ 5,029 $ 2,866 $ 3,183 $ 3,463 $ 3,463
Total average deposits 8,201 6,791 7,492 6,312 4,243 4,334
TCBW Other Consolidated Bank
(In millions) 2022 2021 2022 2021 2022 2021
SELECTED INCOME STATEMENT DATA
Net interest income $ 28 $ 27 $ 29 $ 18 $ 1,137 $ 1,100
Provision for credit losses 1 (3) (1) (1) 8 (255)
Net interest income after provision for credit losses 27 30 30 19 1,129 1,355
Noninterest income 3 3 22 107 314 374
Noninterest expense 12 11 110 92 928 863
Income (loss) before income taxes $ 18 $ 22 $ (58) $ 34 $ 515 $ 866
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans $ 1,585 $ 1,590 $ 911 $ 833 $ 51,360 $ 53,215
Total average deposits 1,564 1,449 1,271 1,684 81,244 73,052


	Zions Bank				CB&T				Amegy
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	363	$	326	$	311	$	271	$	240	$	232
Provision for credit losses	31		—		15		22		23		(22)
Net interest income after provision for credit losses	332		326		296		249		217		254
Noninterest income	99		95		59		51		96		79
Noninterest expense	273		248		186		168		198		175
Income (loss) before income taxes	$	158	$	173	$	169	$	132	$	115	$	158
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	14,115	$	12,969	$	14,084	$	12,870	$	12,862	$	11,865
Total average deposits	20,067		25,574		13,985		16,566		12,576		16,333

	NBAZ				NSB				Vectra
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	129	$	106	$	99	$	77	$	79	$	68
Provision for credit losses	4		2		11		—		6		6
Net interest income after provision for credit losses	125		104		88		77		73		62
Noninterest income	21		23		23		25		13		16
Noninterest expense	92		82		82		74		67		59
Income (loss) before income taxes	$	54	$	45	$	29	$	28	$	19	$	19
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	5,197	$	4,831	$	3,377	$	2,866	$	3,990	$	3,463
Total average deposits	7,025		8,201		6,800		7,492		3,488		4,243

	TCBW				Other				Consolidated Bank
(In millions)	2023		2022		2023		2022		2023		2022
SELECTED INCOME STATEMENT DATA
Net interest income	$	31	$	28	$	18	$	29	$	1,270	$	1,137
Provision for credit losses	2		1		(1)		(1)		91		8
Net interest income after provision for credit losses	29		27		19		30		1,179		1,129
Noninterest income	3		3		35		22		349		314
Noninterest expense	13		12		109		110		1,020		928
Income (loss) before income taxes	$	19	$	18	$	(55)	$	(58)	$	508	$	515
SELECTED AVERAGE BALANCE SHEET DATA
Total average loans	$	1,700	$	1,585	$	1,092	$	911	$	56,417	$	51,360
Total average deposits	1,240		1,564		4,720		1,271		69,901		81,244

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Interest rate and market risks are among the~~Our most significant risks ~~regularly undertaken by us, and they are closely monitored as previously discussed. A discussion regarding our management of~~include interest rate and market risk, ~~is included in~~which 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.

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ITEM 4. CONTROLS AND PROCEDURES

Our management, ~~with the participation of~~including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures at June 30, ~~2022.~~2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at June 30, ~~2022.~~2023. There were no changes in our internal control over financial reporting during the second quarter of ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

~~The~~We amend the following two risk factors ~~supplement the risk factors disclosed~~discussed in Part I, Item 1A. Risk Factors in our ~~2021~~2022 Form ~~10-K.~~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 fluctuating in recent quarters in large part due to the increased interest rate environment and prominent bank failures. We, ~~could be negatively affected by adverse economic conditions~~

~~Adverse economic conditions pose significant~~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 institutions offering higher rates or banks deemed “too big to fail,” or removed deposits from the U.S. financial system entirely. Although our deposit levels have stabilized during the most recent quarter, our cost of funds has increased, and the potential for greater volatility remains, 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 FDIC insurance assessments, or otherwise fail to manage liquidity effectively, our ~~business, including our loan~~liquidity, operating margins, financial condition, and ~~investment portfolios, capital levels,~~ 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 ~~condition. Recent indicators~~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 ~~slowing economy including two consecutive quarters~~result of ~~negative GDP growth, rising interest rates, increased volatility~~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 ~~uncertainty related to inflationary pressures, including related changes in monetary policies~~adversely impacted the market price and ~~actions, can increase these risks and lead to lower demand for loans, higher credit losses, decreased values for~~volatility of our ~~investment securities, and lower fee income, among other negative effects.~~

The Russian invasion of Ukraine and the retaliatory measures imposed by the U.S., U.K., European Union and other countries and the responses of Russia to such measures have caused significant disruptions to domestic and foreign economies.

The Russia and Ukraine conflict has created new risks for global 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, interest rates and other components of financial markets; and, if the conflict escalates, cyberattacks that could result in severe costs and disruptions to governmental entities 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.common stock.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~The following schedule summarizes our share repurchases for the second quarter of 2022:~~None.

~~SHARE REPURCHASES~~

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
April 4,775 $ 58.01 —
May 840,107 53.41 839,531
June 91,374 56.51 91,374
Second quarter 936,256 53.73 930,905

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.

~~Table of Contents~~

~~ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES~~

ITEM 6. EXHIBITS

a.Exhibits


Exhibit Number	Description

3.1	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.	*

3.2	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.	*

~~10.1~~	~~Zions Bancorporation 2020-2022 Value Sharing Plan (filed herewith).~~

~~10.2~~	~~Zions Bancorporation 2021-2023 Value Sharing Plan (filed herewith).~~

~~10.3~~	~~Zions Bancorporation 2021-2023 Value Sharing Plan with conditional incentives (filed herewith).~~

~~10.4~~	~~Zions Bancorporation 2022-2024 Value Sharing Plan (filed herewith).~~

~~10.5~~	Ninth Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, effective October 1, 2019 (filed herewith).

~~10.6~~	Eleventh Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, effective November 1, 2020 (filed herewith).

~~10.7~~	Twelfth Amendment to the Zions Bancorporation Payshelter 401(k) and Employee Stock Ownership Plan Trust Agreement between Zions Bancorporation and Fidelity Management Trust Company, effective April 1, 2022 (filed herewith).

~~10.8~~	~~Form of Standard Restricted Stock Award Agreement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

~~10.9~~	~~Form of Restricted Stock Award Agreement subject to holding requirement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

~~10.1~~0	~~Form of Standard Restricted Stock Unit Award Agreement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

~~10.11~~	~~Form of Restricted Stock Unit Award Agreement subject to holding requirement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

~~10.12~~	~~Form of Standard Stock Option Award Agreement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

~~10.13~~	~~Form of Standard Directors Stock Award Agreement, Zions Bancorporation 2022 Omnibus Incentive Plan (filed herewith).~~

31.1	Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

31.2	Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith).

32	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).

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 June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) the Consolidated Statements of Income for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 and the six months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, (iii) the Consolidated Statements of Comprehensive Income for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 and the six months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 and the six months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, (v) the Consolidated Statements of Cash Flows for the six months ended June 30, ~~2022~~2023 and June 30, ~~2021,~~2022, and (vi) the Notes to Consolidated Financial Statements (filed herewith).

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.

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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.



ZIONS BANCORPORATION, NATIONAL ASSOCIATION

/s/ Harris H. Simmons
Harris H. Simmons, Chairman and Chief Executive Officer

/s/ Paul E. Burdiss
Paul E. Burdiss, Executive Vice President and Chief Financial Officer

Date: August 4, ~~2022~~2023

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		~~Page~~
~~PART I. FINANCIAL INFORMATION~~

~~Item 1.~~	~~Financial Statements (Unaudited)~~	36

	~~Consolidated Balance Sheets~~	36
	~~Consolidated Statements of Income~~	37
	~~Consolidated Statements of Comprehensive Income~~ ~~(Loss)~~	38
	~~Consolidated Statements of Changes in Shareholders’ Equity~~	38
	~~Consolidated Statements of Cash Flows~~	40
	~~Notes to Consolidated Financial Statements~~	41

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	4

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	80

~~Item 4.~~	~~Controls and Procedures~~	81

~~PART II. OTHER INFORMATION~~

~~Item 1.~~	~~Legal Proceedings~~	81

~~Item 1A.~~	~~Risk Factors~~	81

~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	82

~~Item 6.~~	~~Exhibits~~	83

~~Signatures~~		84


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	38

	Consolidated Balance Sheets	38
	Consolidated Statements of Income	39
	Consolidated Statements of Comprehensive Income (Loss)	40
	Consolidated Statements of Changes in Shareholders’ Equity	40
	Consolidated Statements of Cash Flows	42
	Notes to Consolidated Financial Statements	43

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	83

Item 4.	Controls and Procedures	84

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	84

Item 1A.	Risk Factors	84

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85

Item 6.	Exhibits	85

Signatures		86


(Dollar amounts in millions, except per share amounts)		June 30, 2022			March 31, 2022			June 30, 2021

Total shareholders’ equity (GAAP)		$	5,632		$	6,294		$	8,033
Goodwill and intangibles		(1,015)			(1,015)			(1,015)
Tangible equity (non-GAAP)	(a)	4,617			5,279			7,018
Preferred stock		(440)			(440)			(440)
Tangible common equity (non-GAAP)	(b)	$	4,177		$	4,839		$	6,578
Total assets (GAAP)		$	87,784		$	91,126		$	87,208
Goodwill and intangibles		(1,015)			(1,015)			(1,015)
Tangible assets (non-GAAP)	(c)	$	86,769		$	90,111		$	86,193
Common shares outstanding (thousands)	(d)	150,471			151,348			162,248
Tangible equity ratio (non-GAAP)	(a/c)	5.3		%	5.9		%	8.1		%
Tangible common equity ratio (non-GAAP)	(b/c)	4.8		%	5.4		%	7.6		%
Tangible book value per common share (non-GAAP)	(b/d)	$	27.76		$	31.97		$	40.54


	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
(Dollar amounts in millions)	Average balance		Amount of interest 1		Average yield/rate		Average balance		Amount of interest 1		Average yield/rate
ASSETS
Money market investments	$	7,336	$	18	0.50	%	$	9,029	$	7	0.17	%
Securities:
Held-to-maturity	462		7		3.04		620		9		2.95
Available-for-sale	25,485		229		1.81		16,462		135		1.66
Trading account	370		9		4.91		221		5		4.18
Total securities 2	26,317		245		1.88		17,303		149		1.74
Loans held for sale	48		—		1.44		65		1		2.66
Loans and leases 3
Commercial – excluding PPP loans	27,597		496		3.63		24,646		470		3.84
Commercial – PPP loans	1,128		39		6.93		6,039		128		4.26
Commercial real estate	12,134		213		3.53		12,085		208		3.48
Consumer	10,501		169		3.24		10,445		184		3.55
Total loans and leases	51,360		917		3.60		53,215		990		3.75
Total interest-earning assets	85,061		1,180		2.80		79,612		1,147		2.90
Cash and due from banks	621						597
Allowance for loan losses	(497)						(710)
Goodwill and intangibles	1,015						1,015
Other assets	4,463						4,012
Total assets	$	90,663					$	84,526
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits:
Savings and money market	$	38,726	$	11	0.05	%	$	35,611	$	11	0.06	%
Time	1,538		2		0.25		2,299		5		0.49

Total interest-bearing deposits	40,264		13		0.06		37,910		16		0.09
Borrowed funds:
Federal funds purchased and other short-term borrowings	669		1		0.42		971		1		0.06
Long-term debt	750		12		3.17		1,314		15		2.31
Total borrowed funds	1,419		13		1.88		2,285		16		1.35
Total interest-bearing liabilities	41,683		26		0.12		40,195		32		0.16
Noninterest-bearing demand deposits	40,980						35,142
Other liabilities	1,422						1,249
Total liabilities	84,085						76,586
Shareholders’ equity:
Preferred equity	440						555
Common equity	6,138						7,385
Total shareholders’ equity	6,578						7,940
Total liabilities and shareholders’ equity	$	90,663					$	84,526
Spread on average interest-bearing funds					2.68	%					2.74	%
Net impact of noninterest-bearing sources of funds					0.05	%					0.08	%
Net interest margin			$	1,154	2.73	%			$	1,115	2.82	%
Memo: total loans and leases, excluding PPP loans	$	50,232	878		3.52	%	$	47,176	862		3.68	%
Memo: total interest-earning assets, excluding PPP loans	83,933		1,141		2.74	%	73,573		1,019		2.79	%
Memo: total cost of deposits					0.03	%					0.05	%
Memo: total deposits and interest-bearing liabilities	82,663		26		0.06	%	75,337		32		0.08	%


(Dollar amounts in millions)	Six Months Ended June 30, 2022			Twelve Months Ended December 31, 2021			Six Months Ended June 30, 2021

Loans and leases outstanding	$	52,370		$	50,851		$	51,398
Average loans and leases outstanding:
Commercial – excluding PPP loans	27,597			25,014			24,646
Commercial – PPP loans	1,128			4,566			6,039
Commercial real estate	12,134			12,136			12,085
Consumer	10,501			10,267			10,445
Total average loans and leases outstanding	$	51,360		$	51,983		$	53,215
Allowance for loan and lease losses:
Balance at beginning of period	$	513		$	777		$	777
Provision for loan losses	10			(258)			(236)
Charge-offs:
Commercial	28			35			23
Commercial real estate	—			—			—
Consumer	7			13			6
Total	35			48			29
Recoveries:
Commercial	15			29			17
Commercial real estate	—			3			—
Consumer	5			10			6
Total	20			42			23
Net loan and lease charge-offs	15			6			6
Balance at end of period	$	508		$	513		$	535
Reserve for unfunded lending commitments:
Balance at beginning of period	$	40		$	58		$	58
Provision for unfunded lending commitments	(2)			(18)			(19)
Balance at end of period	$	38		$	40		$	39
Total allowance for credit losses:
Allowance for loan and lease losses	$	508		$	513		$	535
Reserve for unfunded lending commitments	38			40			39
Total allowance for credit losses	$	546		$	553		$	574

Ratio of allowance for credit losses to net loans and leases, at period end 1	1.04		%	1.09		%	1.12		%
Ratio of allowance for credit losses to nonaccrual loans, at period end	280		%	204		%	188		%
Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end	272		%	198		%	184		%
Ratio of total net charge-offs to average loans and leases 2, 3	0.06		%	0.01		%	0.02		%
Ratio of commercial net charge-offs to average commercial loans 3	0.09		%	0.02		%	0.04		%
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		%	—		%


	June 30, 2022
	Amortized cost basis by year acquired
(In millions)	2022		2021		2020		2019		2018		Prior		Total Securities

Held-to-maturity	$	220	$	87	$	117	$	9	$	—	$	181	$	614


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

April		4,775	$	58.01		—
May		840,107	53.41			839,531
June		91,374	56.51			91,374
Second quarter		936,256	53.73			930,905