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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SeptemberJune 30, 20222023 OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________
COMMISSION FILE NUMBER 001-12307
ZIONS BANCORPORATION, NATIONAL ASSOCIATION
(Exact name of registrant as specified in its charter)
| | | | | |
| United States of America | 87-0189025 |
(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer
Identification No.) |
| One South Main | |
| Salt Lake City, Utah | 84133-1109 |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (801) 844-7637844-8208
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 OctoberJuly 31, 2022 �� 149,617,7542023 148,145,133 shares
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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Table of Contents
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
GLOSSARY OF ACRONYMS AND ABBREVIATIONS
| | | | | | | | | | | |
| ACL | Allowance for Credit Losses | IPO | Initial Public Offering |
| AFS | Available-for-Sale | IRSLIBOR | Internal Revenue ServiceLondon Interbank Offered Rate |
| ALLL | Allowance for Loan and Lease Losses | LIBORLIHTC | London Interbank Offered RateLow-income Housing Tax Credit |
| Amegy | Amegy Bank, a division of Zions Bancorporation, National Association | Municipalities | State and Local Governments |
AMERIBORAOCI | American Interbank Offered RateAccumulated Other Comprehensive Income or Loss | NAICS | North American Industry Classification System |
AOCIASC | Accumulated Other Comprehensive IncomeAccounting Standards Codification | NASDAQ | National Association of Securities Dealers Automated Quotations |
ASCASU | Accounting Standards CodificationUpdate | NBAZ | National Bank of Arizona, a division of Zions Bancorporation, National Association |
ASUBOLI | Accounting Standards UpdateBank-Owned Life Insurance | NIM | Net Interest Margin |
BOLIbps | Bank-Owned Life InsuranceBasis Points | NM | Not Meaningful |
bpsBTFP | Basis PointsBank 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 | OCIOCC | Other Comprehensive IncomeOffice of the Comptroller of the Currency |
| CECL | Current Expected Credit Loss | OREOOCI | Other Real Estate OwnedComprehensive Income or Loss |
| CLTV | Combined Loan-to-Value Ratio | PEIOREO | Private Equity Investment |
CMT | Constant Maturity Treasury | PPNR | Pre-provision Net RevenueOther Real Estate Owned |
| CRE | Commercial Real Estate | PPPPAM | Paycheck Protection ProgramProportional Amortization Method |
| CVA | Credit Valuation Adjustment | ROUPEI | Right-of-UsePrivate 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 |
EaREVE | Earnings at RiskEconomic Value of Equity | S&P | Standard & Poor's |
EPSFASB | Earnings per ShareFinancial Accounting Standards Board | SBA | U.S. Small Business Administration |
EVEFDIC | Economic Value of EquityFederal Deposit Insurance Corporation | SBIC | Small Business Investment Company |
FASBFHLB | Financial Accounting Standards BoardFederal Home Loan Bank | SEC | Securities and Exchange Commission |
FDICFICO | Federal Deposit InsuranceFair Isaac Corporation | SOFR | Secured Overnight Financing Rate |
FHLBFRB | Federal Home Loan BankReserve Board | TCBW | The Commerce Bank of Washington, a division of Zions Bancorporation, National Association |
FRBFTP | Federal Reserve BoardFunds Transfer Pricing | TDR | Troubled Debt Restructuring |
FTP | Funds Transfer Pricing | U.K. | United Kingdom |
| GAAP | Generally Accepted Accounting Principles | U.S. | United States |
HECLGCF | Home Equity Credit LineGeneral Collateral Funding | Vectra | Vectra Bank Colorado, a division of Zions Bancorporation, National Association |
HTMHECL | Held-to-MaturityHome Equity Credit Line | Zions Bank | Zions Bank, a division of Zions Bancorporation, National Association |
| HTM | Held-to-Maturity | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
This quarterly report includes “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and assumptions regarding future events or determinations, all of which are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements, industry trends, and results or regulatory outcomes to differ materially from those expressed or implied. Forward-looking statements include, among others:
•statementsStatements with respect to the beliefs, plans, objectives, goals, targets, commitments, designs, guidelines, expectations, anticipations, and future financial condition, results of operations and performance of Zions Bancorporation, National Association and its subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”); and
•statementsStatements preceded or followed by, or that include the words “may,” “might,” “can,” “continue,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “forecasts,” “expect,” “intend,” “target,” “commit,” “design,” “plan,” “projects,” “will,” and the negative thereof and similar words and expressions.
These forward-lookingForward-looking statements are not guarantees, nor should they be relied upon as representing management’s views as of any subsequent date. Actual results and outcomes may differ materially from those presented. Although thisthe following list is not comprehensive, important factors that may cause material differences include changesinclude:
•The quality and composition of our loan and securities 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 disruption; securitiesdisruptions; 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; changesliquidity and uncertainties in legislationour ability to raise capital;
•The impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and fiscal, monetary, regulatory, trade,liquidity of banks; adverse media and tax policies; changes in interestother expressions of negative public opinion whether directed at us, other banks, the banking industry generally, or otherwise that may adversely affect our reputation and reference rates;that of the quality and composition ofbanking industry;
•The possibility that our loan and securities portfolios;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; ourservices, 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
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 actionsother health emergencies that may affect our business, employees, customers, and communities; the
•The effects of the ongoing conflict in Eastern Europewars and geopolitical conflicts, and other local, national, or international disasters, crises, or conflicts that may occur in the future;
•Natural disasters that may impact our and governmentalour customer's operations and business; and
•Governmental and social responses to environmental, social, and governance issues, andincluding those with respect to climate change. These factors, risks, and uncertainties, among others, are discussed in our 2021 Form 10-K and subsequent filings with the Securities and Exchange Commission (“SEC”).
We caution against the undue reliance on forward-looking statements, which reflect our views only as of the date they are made. Except to the extent required by law, we specifically disclaim any obligation to update any factors or to publicly announce the revisions to any of the forward-looking statements included herein to reflect future events or developments.
RECENT DEVELOPMENTS
Beginning in the first quarter of 2023 and continuing into the second quarter, the banking industry, particularly regional banks, experienced weakness in bank valuations and a significant withdrawal of 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 liquidity risk, interest rate risk, and capital management.
During the second quarter of 2023, we managed the associated risks through the following actions:
4
Table•Increased total available liquidity sources, which far exceed our level of Contentsuninsured deposits;ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES•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
•Further strengthened our regulatory capital position through increased retained earnings.
RESULTS OF OPERATIONS
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.
RESULTS OF OPERATIONS
Executive Summary
Our financial results in the thirdsecond quarter of 20222023 reflected solid sequential customer deposit growth and continued strong revenue growth, which was offset by increases in the provision for credit losses and noninterest expense.quality. Diluted earnings per share (“EPS”) decreased to $1.40,was $1.11, compared with $1.45$1.29 in the thirdsecond quarter of 2021.2022, as an increase in noninterest income was offset by higher noninterest expense and provision for credit losses.
Notwithstanding a $57Net interest income remained relatively stable at $591 million, decreasecompared with the prior year quarter, as higher earning asset yields were offset by an increase in interest income from Paycheck Protection Program (“PPP”) loans, netpaid on deposits and short-term borrowings. Net interest income increased $108 million, or 19%, to $663 million, primarily due towas also impacted by a higher interest rate environmentreduction in interest-earning assets and a favorable changesignificant increase in the composition of interest-earning assets.interest-bearing liabilities. The net interest margin (“NIM”) was 3.24%2.92%, compared with 2.68%2.87%.
Nonperforming assets decreased $173 million, and classified loans decreased $432 million. Net loan and lease charge-offs were $27 million, or 0.21% of average loans (ex-PPP), compared with net recoveries of $1 million, or 0.01% of average loans (ex-PPP), in the prior year quarter. Despite improvements in most of our credit quality metrics, theThe provision for credit losses was $71$46 million, compared with a $(46)$41 million provision in the prior year period, reflecting loan growth and changesdeterioration in economic scenarios.forecasts.
Total customer-related noninterest income increased $5$8 million, or 3%5%, compared with the prior year period. The increase was driven primarily by increases inimproved commercial account activity, including treasury management fees, as well as loan syndication, swaps, and other capital markets and foreign exchange fees, commercial account fees, card fees, and wealth management fees, partially offset by decreases in loan-related fees and retail and business banking fees.income. Total noninterest income increased $26$17 million, or 19%, primarily due to unrealized losses recorded during the prior year period related to our Small Business Investment Company (“SBIC”) investment in Recursion Pharmaceuticals, Inc.
Total noninterest expense increased $50 million, or 12%. The increase was driven largely by a $27 million increase in salaries and benefits expense, which was impacted by inflationary and competitive labor market pressures on wages and benefits, increased headcount, and increased incentive compensation accruals arising from improvements in anticipated full-year profitability. Our efficiency ratio was 57.6%, compared with 59.8%, as growth in net revenue outpaced growth in noninterest expense.
Average interest-earning assets decreased $0.7 billion, or 1%, from the prior year quarter, driven by declines in average money market investments and PPP loans, the effects of which were largely offset by growth in average available-for-sale (“AFS”) investment securities and average loans and leases (ex-PPP).
Excluding PPP loans, total loans and leases increased $6.0 billion, or 13%. The increases were primarily in the commercial and industrial, owner-occupied, municipal, consumer 1-4 family residential mortgage, and home equity credit line (“HECL”) portfolios.
Total deposits decreased $1.9 billion, or 2%10%, primarily due to a $1.7 billion, or 4%, decrease mainly related to more rate-sensitive larger-balance deposits. Total deposits at September 30, 2022 included approximately $400$13 million gain on the sale of deposit balances acquired from the purchase of three Northern Nevada branches during the third quarter of 2022. Our loan-to-deposit ratio was 71%, compared with 65% in the prior year quarter, which continues to afford us flexibility in managing our funding costs.a bank-owned property.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ThirdTotal 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 20222023 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 thirdsecond 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 decrease from the first quarter of 2023 reflected a $117 million unfavorable changedecrease in the provision for credit losses.interest-earning assets, an increase in interest-bearing liabilities, and an increase in associated funding costs. | | Diluted earnings per share declined from the thirdsecond quarter of 20212022 primarily as a result of decreased net earnings the effect of which was partially offset by a 10.7 million decrease in weighted average diluted shares, primarily dueapplicable to share repurchases.common shareholders. | | Adjusted pre-provision net revenue (“PPNR”) increased $61 milliondecreased from the thirdsecond quarter of 2021,2022, primarily due to growth inhigher adjusted net revenue,noninterest expense, which was driven largely by an increase in net interest income.higher FDIC insurance costs. This increase was partiallylargely offset by higher adjusted noninterest expense.taxable-equivalent revenue. | | The efficiency ratio improvedincreased from the prior year quarter, as growth in adjusted revenue outpacednoninterest expense exceeded growth in adjusted noninterest expense, resulting in positive operating leverage.taxable-equivalent revenue. |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Net Interest Income and Net Interest Margin
NET INTEREST INCOME AND NET INTEREST MARGIN
| | | Three Months Ended
September 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 | $ | 551 | | $ | 484 | | $ | 67 | | | 14 | % | 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 | 24 | | 7 | | 17 | | | NM | Interest on money market investments | 48 | | | 12 | | | 36 | | | NM | | 105 | | 18 | | 87 | | | NM |
| Interest on securities | Interest on securities | 132 | | 78 | | 54 | | | 69 | | Interest on securities | 138 | | | 128 | | | 10 | | | 8 | | | 275 | | 240 | | 35 | | | 15 | |
| Total interest income | Total interest income | 707 | | 569 | | 138 | | | 24 | | Total interest income | 977 | | | 608 | | | 369 | | | 61 | | | 1,897 | | 1,163 | | 734 | | | 63 | |
| Interest on deposits | Interest on deposits | 19 | | 7 | | 12 | | | NM | 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 | 25 | | 7 | | 18 | | | NM | Interest on short- and long-term borrowings | 166 | | | 8 | | | 158 | | | NM | | 325 | | 13 | | 312 | | | NM |
| Total interest expense | Total interest expense | 44 | | 14 | | 30 | | | NM | Total interest expense | 386 | | | 15 | | | 371 | | | NM | | 627 | | 26 | | 601 | | | NM |
| Net interest income | Net interest income | $ | 663 | | $ | 555 | | $ | 108 | | | 19 | % | Net interest income | $ | 591 | | | $ | 593 | | | $ | (2) | | | — | % | | $ | 1,270 | | $ | 1,137 | | $ | 133 | | | 12 | % |
| | Average interest-earning assets | Average interest-earning assets | $ | 82,474 | | $ | 83,189 | | $ | (715) | | | (1) | % | 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 | $ | 41,398 | | $ | 40,925 | | $ | 473 | | | 1 | % | 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 | 3.45 | % | | 2.75 | % | | 70 | | | 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 | 0.22 | % | | 0.07 | % | | 15 | | | 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 | 0.10 | % | | 0.03 | % | | 7 | | | Cost of total deposits 2 | 1.27 | % | | 0.03 | % | | 124 | | | 0.87 | % | | 0.03 | % | | 84 | | |
Net interest margin 2 | Net interest margin 2 | 3.24 | % | | 2.68 | % | | 56 | | | Net interest margin 2 | 2.92 | % | | 2.87 | % | | 5 | | | 3.13 | % | | 2.73 | % | | 40 | | |
1 Includes interest income recoveries of $2 million and $1$4 million for the three months ended, Septemberand $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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Net interest income accounted for approximately 80%76% of our net revenue (net interest income plus noninterest income) for the quarter. Notwithstanding a $57 million decreasecurrent quarter and remained relatively stable compared with the prior year quarter, as higher earning asset yields were offset by an increase in interest income from PPP loans, netpaid on deposits and short-term borrowings. Net interest income increased $108 million, or 19%, primarily due towas also impacted by a higher interest rate environmentreduction in interest-earning assets and a favorable changesignificant increase in the composition of interest-earning assets.interest-bearing liabilities.
Average interest-earning assets decreased $0.7$1.5 billion, or 1%2%, from the prior year quarter, driven by declines of $9.0$4.5 billion and $3.4 billion in average money market investments and average PPP loans, respectively. These decreases were largely offset by increases of $6.2 billion and $5.5$2.0 billion in average securities and average money market investments, respectively, and was partially offset by an increase of $4.9 billion in average loans and leases (ex-PPP)leases. The decline in average securities was primarily due to payments and maturities.
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 3.24%2.92%, compared with 2.68%2.87%. The yield on average interest-earning assets was 3.45%4.81% in the thirdsecond quarter of 2022,2023, an increase of 70187 basis points (“bps”), reflecting higher interest rates and a change in thefavorable mix of interest-earning assetschange from money market investments to securities and loans. The yield alsoon 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 average rate paid on average interest-bearing liabilities increased to 0.43%2.95%, compared with 0.13%0.14%, reflecting the higher interest rate environment, competitive pricing, and increased short-term borrowings.
Total average loans and leases increased $2.1 billion, or 4%, to $53.0 billion, and were partially offset by decreases in PPP loans, primarily due to forgiveness of these loans by the Small Business Administration (“SBA”). The yield on total loans increased 35 basis points to 4.17%, reflecting the higher interest rate environment. Excluding PPP loans, average loans and leases increased $5.5 billion, or 12%, primarily in the commercial and industrial, owner-occupied, municipal, 1-4 family residential mortgage, and home equity credit line portfolios. The yield on non-PPP loans increased 57 basis points to 4.16%.
During the third quarter of 2022 and 2021, PPP loans totaling $0.2 billion and $1.5 billion, respectively, were forgiven by the SBA. PPP loans contributed $6 million and $63 million in interest income during the same time periods. The yield on PPP loans was 6.28% and 6.66% for the respective periods, and was positively impacted by accelerated amortization of deferred fees on paid off or forgiven PPP loans. At September 30, 2022 and 2021, the remaining unamortized net deferred fees on PPP loans totaled $5 million and $83 million, respectively.
Average total deposits increased $0.1 billion to $77.5 billion at an average cost of 0.10%, from $77.4 billion at an average cost of 0.03% in the third quarter of 2021. The rate paid on total deposits and interest-bearing liabilities was 0.22%, compared with 0.07%. Average noninterest-bearing deposits as a percentage of total deposits were 51%, upborrowed funds.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
slightly
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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Average deposits decreased $11.2 billion, or 14%, to $69.7 billion at an average cost of 1.27%, from $80.9 billion at an average cost of 0.03% in the second quarter of 2022. Average noninterest-bearing deposits as a percentage of total deposits were 43%, compared with 51% during the same prior year period. Our funding costs were well controlled, reflecting
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 granularityCOVID-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 deposit basedeposits began to decline to more normalized levels. This trend accelerated with prominent bank failures during the first quarter of 2023 and abated during the extentsecond quarter of our noninterest-bearing deposits.
Average AFS securities balances increased $6.1 billion, or 32%,2023, with period-end deposits increasing meaningfully from March 31, 2023 to $24.9 billion, primarily due to an increase in our agency guaranteed mortgage-backed securities portfolio.June 30, 2023. Total deposits have remained above pre-pandemic (December 31, 2019) levels during 2023.
Average borrowed funds, consisting primarily of secured borrowings from the FHLB, increased $1.8$11.2 billion driven by increasesfrom the prior year quarter in short-term borrowings as a result ofresponse to loan growth and declinesthe decline in interest-bearingnoninterest-bearing deposits. These increases were partially offset by a decrease in long-term debt, primarily due
For more information on our investments securities portfolio and borrowed funds and how we manage liquidity risk, refer to the redemption“Investment Securities Portfolio” section on page 16 and maturity of senior notes during the past year.
“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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCE SHEETS, YIELDS AND RATES | | (Unaudited) | (Unaudited) | Three Months Ended
September 30, 2022 | | Three Months Ended
September 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 | $ | 1,233 | | | $ | 7 | | | 2.19 | % | | $ | 10,977 | | | $ | 5 | | | 0.15 | % | Interest-bearing deposits | $ | 2,899 | | | $ | 37 | | | 5.08 | % | | $ | 3,113 | | | $ | 5 | | | 0.66 | % |
| Federal funds sold and security resell agreements | 2,511 | | | 17 | | | 2.66 | | | 1,739 | | | 2 | | | 0.50 | | |
| 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 | 3,744 | | | 24 | | | 2.51 | | | 12,716 | | | 7 | | | 0.20 | | Total money market investments | 3,683 | | | 48 | | | 5.20 | | | 5,655 | | | 12 | | | 0.87 | |
| Securities: | Securities: | | | | | | | | | Securities: | | | | | | | | |
| Held-to-maturity | Held-to-maturity | 560 | | | 4 | | | 2.88 | | | 557 | | | 4 | | | 2.87 | | Held-to-maturity | 10,833 | | | 60 | | | 2.24 | | | 485 | | | 4 | | | 2.96 | |
Available-for-sale 2 | Available-for-sale 2 | 24,892 | | | 129 | | | 2.05 | | | 18,814 | | | 74 | | | 1.56 | | Available-for-sale 2 | 11,180 | | | 80 | | | 2.85 | | | 25,722 | | | 123 | | | 1.91 | |
| Trading account | 288 | | | 3 | | | 4.57 | | | 199 | | | 2 | | | 4.41 | | |
Total securities 3 | 25,740 | | | 136 | | | 2.10 | | | 19,570 | | | 80 | | | 1.63 | | |
| 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 | 37 | | | 1 | | | 5.33 | | | 52 | | | — | | | 3.03 | | Loans held for sale | 73 | | | 1 | | | 7.08 | | | 38 | | | — | | | 0.72 | |
Loans and leases 4 | | |
| Commercial – excluding PPP loans | 28,972 | | | 302 | | | 4.13 | | | 24,854 | | | 235 | | | 3.76 | | |
| Commercial – PPP loans | 408 | | | 6 | | | 6.28 | | | 3,795 | | | 63 | | | 6.66 | | |
| Loans and leases | | Loans and leases | |
| Commercial | | Commercial | 30,650 | | | 417 | | | 5.46 | | | 28,952 | | | 275 | | | 3.81 | |
| Commercial real estate | Commercial real estate | 12,182 | | | 145 | | | 4.73 | | | 12,144 | | | 105 | | | 3.42 | | Commercial real estate | 12,933 | | | 225 | | | 6.97 | | | 12,098 | | | 112 | | | 3.69 | |
| Consumer | Consumer | 11,391 | | | 103 | | | 3.61 | | | 10,058 | | | 86 | | | 3.38 | | Consumer | 13,096 | | | 156 | | | 4.80 | | | 10,734 | | | 87 | | | 3.24 | |
| Total loans and leases | Total loans and leases | 52,953 | | | 556 | | | 4.17 | | | 50,851 | | | 489 | | | 3.82 | | Total loans and leases | 56,679 | | | 798 | | | 5.65 | | | 51,784 | | | 474 | | | 3.67 | |
| Total interest-earning assets | Total interest-earning assets | 82,474 | | | 717 | | | 3.45 | | | 83,189 | | | 576 | | | 2.75 | | Total interest-earning assets | 82,500 | | | 988 | | | 4.81 | | | 84,041 | | | 617 | | | 2.94 | |
| Cash and due from banks | Cash and due from banks | 604 | | | | | 597 | | | | | 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 | (515) | | | (536) | | | Allowance for credit losses on loans and debt securities | (619) | | | (480) | | |
| Goodwill and intangibles | Goodwill and intangibles | 1,021 | | | 1,015 | | | Goodwill and intangibles | 1,063 | | | 1,015 | | |
| Other assets | Other assets | 4,923 | | | 4,291 | | | Other assets | 5,524 | | | 4,712 | | |
| Total assets | Total assets | $ | 88,507 | | | $ | 88,556 | | | 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 | $ | 36,399 | | | $ | 18 | | | 0.20 | % | | $ | 37,262 | | | $ | 5 | | | 0.05 | % | Savings and money market | $ | 30,325 | | | $ | 113 | | | 1.49 | % | | $ | 38,325 | | | $ | 6 | | | 0.06 | % |
| Time | Time | 1,441 | | | 1 | | | 0.32 | | | 1,829 | | | 2 | | | 0.32 | | Time | 9,494 | | | 107 | | | 4.55 | | | 1,488 | | | 1 | | | 0.24 | |
| | Total interest-bearing deposits | Total interest-bearing deposits | 37,840 | | | 19 | | | 0.20 | | | 39,091 | | | 7 | | | 0.07 | | 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 | 2,885 | | | 17 | | | 2.33 | | | 630 | | | — | | | 0.08 | | |
| 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 | 673 | | | 8 | | | 4.83 | | | 1,204 | | | 7 | | | 2.34 | | Long-term debt | 636 | | | 9 | | | 5.97 | | | 678 | | | 7 | | | 3.79 | |
| Total borrowed funds | Total borrowed funds | 3,558 | | | 25 | | | 2.80 | | | 1,834 | | | 7 | | | 1.56 | | Total borrowed funds | 12,634 | | | 166 | | | 5.26 | | | 1,421 | | | 8 | | | 2.17 | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 41,398 | | | 44 | | | 0.43 | | | 40,925 | | | 14 | | | 0.13 | | Total interest-bearing liabilities | 52,453 | | | 386 | | | 2.95 | | | 41,234 | | | 15 | | | 0.14 | |
| Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | 39,623 | | | | | 38,320 | | | | | Noninterest-bearing demand deposits | 29,830 | | | | | 41,074 | | | | |
| Other liabilities | Other liabilities | 1,743 | | | 1,302 | | | Other liabilities | 1,580 | | | 1,575 | | |
| Total liabilities | Total liabilities | 82,764 | | | 80,547 | | | Total liabilities | 83,863 | | | 83,883 | | |
| Shareholders’ equity: | Shareholders’ equity: | | Shareholders’ equity: | |
| Preferred equity | Preferred equity | 440 | | | 440 | | | Preferred equity | 440 | | | 440 | | |
| Common equity | Common equity | 5,303 | | | 7,569 | | | Common equity | 4,818 | | | 5,582 | | |
| Total shareholders’ equity | Total shareholders’ equity | 5,743 | | | 8,009 | | | Total shareholders’ equity | 5,258 | | | 6,022 | | |
| Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 88,507 | | | $ | 88,556 | | | Total liabilities and shareholders’ equity | $ | 89,121 | | | $ | 89,905 | | |
| Spread on average interest-bearing funds | Spread on average interest-bearing funds | | | 3.02 | % | | | | 2.62 | % | 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 | | 0.22 | % | | 0.06 | % | Net impact of noninterest-bearing sources of funds | | 1.06 | % | | 0.07 | % |
| Net interest margin | Net interest margin | | $ | 673 | | | 3.24 | % | | $ | 562 | | | 2.68 | % | Net interest margin | | $ | 602 | | | 2.92 | % | | $ | 602 | | | 2.87 | % |
| Memo: total loans and leases, excluding PPP loans | $ | 52,545 | | | 550 | | | 4.16 | % | | $ | 47,056 | | | 426 | | | 3.59 | % | |
| | Memo: total cost of deposits | Memo: total cost of deposits | | 0.10 | % | | 0.03 | % | Memo: total cost of deposits | | 1.27 | % | | 0.03 | % |
| Memo: total deposits and interest-bearing liabilities | Memo: total deposits and interest-bearing liabilities | 81,021 | | | 44 | | | 0.22 | % | | 79,245 | | | 14 | | | 0.07 | % | 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.
2The fair value of AFS securities at September 30, 2022, and September 30, 2021, was $23.2 billion and $20.5 billion, respectively. In addition to other factors, the yield on AFS securities was positively impacted by the decline in fair value.
3 Interest on total securities includes $27 million and $29 million of taxable-equivalent premium amortization for the third quarter of 2022 and 2021, respectively.
4 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | Nine Months Ended
September 30, 2022 | | Nine Months Ended
September 30, 2021 | | Six Months Ended
June 30, 2023 | | Six Months Ended
June 30, 2022 |
| (Dollar amounts in millions) | (Dollar amounts in millions) | Average
balance | | Amount of interest 1 | | Average
yield/rate | | Average
balance | | Amount of interest 1 | | Average
yield/rate | (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 | $ | 3,674 | | | $ | 15 | | | 0.55 | % | | $ | 8,162 | | | $ | 8 | | | 0.13 | % | Interest-bearing deposits | $ | 2,771 | | | $ | 68 | | | 4.98 | % | | $ | 4,914 | | | $ | 8 | | | 0.34 | % |
| Federal funds sold and security resell agreements | 2,451 | | | 27 | | | 1.47 | | | 2,109 | | | 6 | | | 0.37 | | |
| Federal funds sold and securities purchased under agreements to resell | | Federal funds sold and securities purchased under agreements to resell | 1,428 | | | 37 | | | 5.19 | | | 2,422 | | | 10 | | | 0.84 | |
| Total money market investments | Total money market investments | 6,125 | | | 42 | | | 0.92 | | | 10,271 | | | 14 | | | 0.18 | | Total money market investments | 4,199 | | | 105 | | | 5.05 | | | 7,336 | | | 18 | | | 0.50 | |
| Securities: | Securities: | | | | | | | | | Securities: | | | | | | | | |
| Held-to-maturity | Held-to-maturity | 495 | | | 11 | | | 2.98 | | | 599 | | | 13 | | | 2.92 | | Held-to-maturity | 10,928 | | | 122 | | | 2.26 | | | 462 | | | 7 | | | 3.04 | |
Available-for-sale 2 | Available-for-sale 2 | 25,285 | | | 358 | | | 1.89 | | | 17,255 | | | 209 | | | 1.62 | | Available-for-sale 2 | 11,500 | | | 156 | | | 2.73 | | | 25,485 | | | 229 | | | 1.81 | |
| Trading account | 343 | | | 12 | | | 4.81 | | | 213 | | | 7 | | | 4.25 | | |
Total securities 3 | 26,123 | | | 381 | | | 1.95 | | | 18,067 | | | 229 | | | 1.70 | | |
| Trading | | Trading | 78 | | | 1 | | | 2.14 | | | 370 | | | 9 | | | 4.91 | |
| Total securities | | Total securities | 22,506 | | | 279 | | | 2.50 | | | 26,317 | | | 245 | | | 1.88 | |
| Loans held for sale | Loans held for sale | 44 | | | 1 | | | 2.55 | | | 61 | | | 1 | | | 2.77 | | Loans held for sale | 39 | | | 1 | | | 6.67 | | | 48 | | | — | | | 1.44 | |
Loans and leases 4 | | |
| Commercial – excluding PPP loans | 28,060 | | | 798 | | | 3.80 | | | 24,716 | | | 705 | | | 3.81 | | |
| Commercial – PPP loans | 885 | | | 45 | | | 6.83 | | | 5,283 | | | 191 | | | 4.84 | | |
| Loans and leases | | Loans and leases | |
| Commercial | | Commercial | 30,664 | | | 798 | | | 5.25 | | | 28,725 | | | 535 | | | 3.76 | |
| Commercial real estate | Commercial real estate | 12,151 | | | 358 | | | 3.93 | | | 12,104 | | | 313 | | | 3.46 | | Commercial real estate | 12,904 | | | 434 | | | 6.78 | | | 12,134 | | | 213 | | | 3.53 | |
| Consumer | Consumer | 10,801 | | | 272 | | | 3.37 | | | 10,315 | | | 270 | | | 3.50 | | Consumer | 12,849 | | | 300 | | | 4.71 | | | 10,501 | | | 169 | | | 3.24 | |
| Total loans and leases | Total loans and leases | 51,897 | | | 1,473 | | | 3.79 | | | 52,418 | | | 1,479 | | | 3.77 | | Total loans and leases | 56,417 | | | 1,532 | | | 5.48 | | | 51,360 | | | 917 | | | 3.60 | |
| Total interest-earning assets | Total interest-earning assets | 84,189 | | | 1,897 | | | 3.01 | | | 80,817 | | | 1,723 | | | 2.85 | | Total interest-earning assets | 83,161 | | | 1,917 | | | 4.65 | | | 85,061 | | | 1,180 | | | 2.80 | |
| Cash and due from banks | Cash and due from banks | 615 | | | 597 | | | Cash and due from banks | 598 | | | 621 | | |
| Allowance for loan losses | (503) | | | (651) | | | |
| Allowance for credit losses on loans and debt securities | | Allowance for credit losses on loans and debt securities | (597) | | | (497) | | |
| Goodwill and intangibles | Goodwill and intangibles | 1,017 | | | 1,015 | | | Goodwill and intangibles | 1,064 | | | 1,015 | | |
| Other assets | Other assets | 4,618 | | | 4,106 | | | Other assets | 5,574 | | | 4,463 | | |
| Total assets | Total assets | $ | 89,936 | | | $ | 85,884 | | | Total assets | $ | 89,800 | | | $ | 90,663 | | |
| 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 | $ | 37,942 | | | $ | 29 | | | 0.10 | % | | $ | 36,168 | | | $ | 16 | | | 0.06 | % | Savings and money market | $ | 31,585 | | | $ | 175 | | | 1.12 | % | | $ | 38,726 | | | $ | 11 | | | 0.05 | % |
| Time | Time | 1,505 | | | 3 | | | 0.27 | | | 2,140 | | | 7 | | | 0.44 | | Time | 6,232 | | | 127 | | | 4.11 | | | 1,538 | | | 2 | | | 0.25 | |
| | Total interest-bearing deposits | Total interest-bearing deposits | 39,447 | | | 32 | | | 0.11 | | | 38,308 | | | 23 | | | 0.08 | | Total interest-bearing deposits | 37,817 | | | 302 | | | 1.61 | | | 40,264 | | | 13 | | | 0.06 | |
| Borrowed funds: | Borrowed funds: | | | | | | | | | Borrowed funds: | | | | | | | | |
| Federal funds purchased and other short-term borrowings | 1,415 | | | 18 | | | 1.73 | | | 856 | | | 1 | | | 0.07 | | |
| Federal funds and security repurchase agreements | | Federal funds and security repurchase agreements | 5,015 | | | 121 | | | 4.85 | | | 661 | | | 1 | | | 0.43 | |
| Other short-term borrowings | | Other short-term borrowings | 7,266 | | | 184 | | | 5.09 | | | 8 | | | — | | | — | |
| Long-term debt | Long-term debt | 724 | | | 20 | | | 3.69 | | | 1,277 | | | 22 | | | 2.32 | | Long-term debt | 644 | | | 20 | | | 6.42 | | | 750 | | | 12 | | | 3.17 | |
| Total borrowed funds | Total borrowed funds | 2,139 | | | 38 | | | 2.39 | | | 2,133 | | | 23 | | | 1.41 | | Total borrowed funds | 12,925 | | | 325 | | | 5.07 | | | 1,419 | | | 13 | | | 1.88 | |
| Total interest-bearing liabilities | Total interest-bearing liabilities | 41,586 | | | 70 | | | 0.23 | | | 40,441 | | | 46 | | | 0.15 | | Total interest-bearing liabilities | 50,742 | | | 627 | | | 2.49 | | | 41,683 | | | 26 | | | 0.12 | |
| Noninterest-bearing demand deposits | Noninterest-bearing demand deposits | 40,523 | | | | | 36,213 | | | | | Noninterest-bearing demand deposits | 32,084 | | | | | 40,980 | | | | |
| Other liabilities | Other liabilities | 1,530 | | | 1,267 | | | Other liabilities | 1,817 | | | 1,422 | | |
| Total liabilities | Total liabilities | 83,639 | | | 77,921 | | | Total liabilities | 84,643 | | | 84,085 | | |
| Shareholders’ equity: | Shareholders’ equity: | | Shareholders’ equity: | |
| Preferred equity | Preferred equity | 440 | | | 516 | | | Preferred equity | 440 | | | 440 | | |
| Common equity | Common equity | 5,857 | | | 7,447 | | | Common equity | 4,717 | | | 6,138 | | |
| Total shareholders’ equity | Total shareholders’ equity | 6,297 | | | 7,963�� | | | Total shareholders’ equity | 5,157 | | | 6,578 | | |
| Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 89,936 | | | $ | 85,884 | | | Total liabilities and shareholders’ equity | $ | 89,800 | | | $ | 90,663 | | |
| Spread on average interest-bearing funds | Spread on average interest-bearing funds | | | 2.78 | % | | | | 2.70 | % | Spread on average interest-bearing funds | | | 2.16 | % | | | | 2.68 | % |
| Net impact of noninterest-bearing sources of funds | Net impact of noninterest-bearing sources of funds | | 0.12 | % | | 0.08 | % | Net impact of noninterest-bearing sources of funds | | 0.97 | % | | 0.05 | % |
| Net interest margin | Net interest margin | | $ | 1,827 | | | 2.90 | % | | $ | 1,677 | | | 2.78 | % | Net interest margin | | $ | 1,290 | | | 3.13 | % | | $ | 1,154 | | | 2.73 | % |
| Memo: total loans and leases, excluding PPP loans | $ | 51,012 | | | 1,428 | | | 3.74 | % | | $ | 47,135 | | | 1,288 | | | 3.65 | % | |
| | Memo: total cost of deposits | Memo: total cost of deposits | | 0.05 | % | | 0.04 | % | Memo: total cost of deposits | | 0.87 | % | | 0.03 | % |
| Memo: total deposits and interest-bearing liabilities | Memo: total deposits and interest-bearing liabilities | 82,109 | | | 70 | | | 0.12 | % | | 76,654 | | | 46 | | | 0.15 | % | 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 periods presented. The taxable-equivalent rates used are the rates that were applicable at the time of each respective reporting period.
2 The fair value of AFS securities at September 30, 2022, and September 30, 2021, was $23.2 billion and $20.5 billion, respectively. In addition to other factors, the yield on AFS securities was positively impacted by the decline in fair value.
3 Interest on total securities includes $82 million and $87 million of taxable-equivalent premium amortization for the first nine months of 2022 and 2021, respectively.
4 Net of unamortized purchase premiums, discounts, and deferred loan fees and costs.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Provision for Credit Losses
The allowance for credit losses (“ACL”) is the combination of both the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”). The ALLL represents the estimated current expected credit losses related to the loan and lease portfolio as of the balance sheet date. The RULC represents the estimated reserve for current expected credit losses associated with off-balance sheet commitments. Changes in the ALLL and RULC, net of charge-offs and recoveries, are recorded as the provision for loan and lease losses and the provision for unfunded lending commitments, respectively, in the income statement. The ACL for debt securities is estimated separately from loans.loans and is recorded in investment securities on the consolidated balance sheet.
The provision for credit losses, which is the combination of both the provision for loan and lease losses and the provision for unfunded lending commitments, was $71$46 million, compared with $(46)$41 million in the thirdsecond quarter of 2021.2022. The ACL was $590$711 million at SeptemberJune 30, 2022,2023, compared with $529$546 million at SeptemberJune 30, 2021.2022. The increase in the ACL was primarily due to growth in the loan portfolio, as well as changesdeterioration in economic scenarios, which were driven by the increased probability of a recession, the effects of which were partially offset by improvements in credit quality.forecasts. The ratio of ACL to nettotal loans and leases (ex-PPP) was 1.10%1.25% and 1.11%1.04% at SeptemberJune 30, 20222023 and 2021,2022, respectively. The provision for securities losses was less than $1 million during the thirdsecond quarter of 20222023 and 2021.2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 scenariosforecasts and current economic conditions, which increased the ACL by $11$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, decreasedincreased the ACL by $9$3 million, indicating improvements in overallreflecting relatively stable credit quality. Nonperforming assets decreased $173$37 million, or 53%18%, and classified loans decreased $432$241 million, or 31%24%. Net loan and lease charge-offs were $27totaled $13 million, or 0.21%0.09% annualized of average loans, (ex-PPP), in the third quarter of 2022, compared with net recoveriescharge-offs of $1$9 million, or 0.01%0.07% annualized of average loans (ex-PPP), in the prior year quarter.
The fourth bar represents loan portfolio changes, driven primarily by loan growth, as well as changes in portfolio mix, the aging of the portfolio, and other risk factors; all of which resulted in a $59$13 million increase in the ACL.
See “Credit Risk Management” on page 2120 and Note 6 in our 20212022 Form 10-K for more information on how we determine the appropriate level of the ALLL and the RULC.
Noninterest Income
Noninterest income represents revenue we earnearned 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 increased $26$17 million, or 19%.10%, relative to the prior year. Noninterest income accounted for approximately 20%24% and 22% of our net revenue during both the thirdsecond quarter of 2023 and 2022, and 2021.respectively. The following schedule presents a comparison of the major components of noninterest income.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NONINTEREST INCOME
| | | Three Months Ended
September 30, | | Amount
change | | Percent
change | | Nine Months Ended
September 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 | |
| | Commercial account fees | Commercial account fees | $ | 40 | | | $ | 34 | | | $ | 6 | | | 18 | % | | $ | 118 | | | $ | 100 | | | $ | 18 | | | 18 | % | Commercial account fees | $ | 45 | | | $ | 37 | | | $ | 8 | | | 22 | % | | $ | 88 | | | $ | 78 | | | $ | 10 | | | 13 | % |
| Card fees | Card fees | 27 | | | 25 | | | 2 | | | 8 | | | 77 | | | 70 | | | 7 | | | 10 | | Card fees | 25 | | | 25 | | | — | | | — | | | 49 | | | 50 | | | (1) | | | (2) | |
| Retail and business banking fees | Retail and business banking fees | 17 | | | 20 | | | (3) | | | (15) | | | 57 | | | 55 | | | 2 | | | 4 | | Retail and business banking fees | 16 | | | 20 | | | (4) | | | (20) | | | 32 | | | 40 | | | (8) | | | (20) | |
| Loan-related fees and income | Loan-related fees and income | 18 | | | 27 | | | (9) | | | (33) | | | 61 | | | 73 | | | (12) | | | (16) | | Loan-related fees and income | 19 | | | 21 | | | (2) | | | (10) | | | 40 | | | 43 | | | (3) | | | (7) | |
| Capital markets and foreign exchange fees | 25 | | | 17 | | | 8 | | | 47 | | | 61 | | | 49 | | | 12 | | | 24 | | |
| Capital markets fees | | Capital markets fees | 27 | | | 21 | | | 6 | | | 29 | | | 44 | | | 36 | | | 8 | | | 22 | |
| Wealth management fees | Wealth management fees | 14 | | | 13 | | | 1 | | | 8 | | | 41 | | | 37 | | | 4 | | | 11 | | Wealth management fees | 14 | | | 13 | | | 1 | | | 8 | | | 29 | | | 27 | | | 2 | | | 7 | |
| Other customer-related fees | Other customer-related fees | 15 | | | 15 | | | — | | | — | | | 46 | | | 39 | | | 7 | | | 18 | | Other customer-related fees | 16 | | | 17 | | | (1) | | | (6) | | | 31 | | | 31 | | | — | | | — | |
| Customer-related noninterest income | Customer-related noninterest income | 156 | | | 151 | | | 5 | | | 3 | | | 461 | | | 423 | | | 38 | | | 9 | | Customer-related noninterest income | 162 | | | 154 | | | 8 | | | 5 | | | 313 | | | 305 | | | 8 | | | 3 | |
| | Fair value and nonhedge derivative income | Fair value and nonhedge derivative income | 4 | | | 2 | | | 2 | | | NM | | 20 | | | 15 | | | 5 | | | 33 | | Fair value and nonhedge derivative income | 1 | | | 10 | | | (9) | | | (90) | | | (2) | | | 16 | | | (18) | | | NM |
| Dividends and other income (loss) | Dividends and other income (loss) | (1) | | | 9 | | | (10) | | | NM | | 8 | | | 24 | | | (16) | | | (67) | | Dividends and other income (loss) | 26 | | | 7 | | | 19 | | | NM | | 37 | | | 9 | | | 28 | | | NM |
| Securities gains (losses), net | Securities gains (losses), net | 6 | | | (23) | | | 29 | | | NM | | (10) | | | 51 | | | (61) | | | NM | Securities gains (losses), net | — | | | 1 | | | (1) | | | NM | | 1 | | | (16) | | | 17 | | | NM |
| Noncustomer-related noninterest income | Noncustomer-related noninterest income | 9 | | | (12) | | | 21 | | | NM | | 18 | | | 90 | | | (72) | | | (80) | | Noncustomer-related noninterest income | 27 | | | 18 | | | 9 | | | 50 | | | 36 | | | 9 | | | 27 | | | NM |
| Total noninterest income | Total noninterest income | $ | 165 | | | $ | 139 | | | $ | 26 | | | 19 | % | | $ | 479 | | | $ | 513 | | | $ | (34) | | | (7) | % | Total noninterest income | $ | 189 | | | $ | 172 | | | $ | 17 | | | 10 | % | | $ | 349 | | | $ | 314 | | | $ | 35 | | | 11 | % |
Customer-related Noninterest Income
Total customer-related noninterest income increased $5$8 million, or 3%5%, fromcompared with the prior year quarter,period. The increase was driven primarily by increases inimproved commercial account activity, including treasury management fees, as well as loan syndication, swaps, and other capital markets and foreign exchange fees, commercial account fees, card fees, and wealth management fees. Capital markets and foreign exchange fees benefited from improved customer swap, foreign exchange, and syndication activity. These increases were partially offset by a decrease in loan-related fees, primarily due to an increased proportion of our 1-4 family residential mortgage production being retained versus sold, and a decrease in retailincome. Retail and business banking fees. The latter decrease was duefees decreased largely to previously disclosed changesas a result of a change in our overdraft and non-sufficient funds practices including the rate and frequency with which we assess related fees. These changes were effected early induring the third quarter of 2022.
Noncustomer-related
Total noncustomer-related noninterest income increased $21 million, relative to the prior year quarter. Net securities gains increased $29 million, due largely to unrealized losses recorded during the prior year period related to our SBIC investment in Recursion Pharmaceuticals, Inc. Dividends and other income (loss) decreased $10 million from the prior year period, primarily due to a $6 million valuation loss recognized on one of our equity investments in the current period.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Noncustomer-related Noninterest Income
Total noncustomer-related noninterest income increased $9 million from the prior year quarter. Dividends and other income increased $19 million, primarily due to a $13 million gain on the sale of a bank-owned property, as well as an increase in dividends on FHLB stock. These increases were offset by a $9 million decrease in fair value and nonhedge derivative income, primarily due to a $10 million credit valuation adjustment (“CVA”) gain in the prior year period.
Noninterest Expense
The following schedule presents a comparison of the major components of noninterest expense.
NONINTEREST EXPENSE
| | | Three Months Ended
September 30, | | Amount
change | | Percent
change | | Nine Months Ended
September 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 | $ | 312 | | | $ | 285 | | | $ | 27 | | | 9 | % | | $ | 931 | | | $ | 845 | | | $ | 86 | | | 10 | % | Salaries and employee benefits | $ | 324 | | | $ | 307 | | | $ | 17 | | | 6 | % | | $ | 663 | | | $ | 619 | | | $ | 44 | | | 7 | % |
| Technology, telecom, and information processing | Technology, telecom, and information processing | 53 | | | 50 | | | 3 | | | 6 | | | 158 | | | 148 | | | 10 | | | 7 | | Technology, telecom, and information processing | 58 | | | 53 | | | 5 | | | 9 | | | 113 | | | 105 | | | 8 | | | 8 | |
| Occupancy and equipment, net | Occupancy and equipment, net | 38 | | | 37 | | | 1 | | | 3 | | | 112 | | | 115 | | | (3) | | | (3) | | Occupancy and equipment, net | 40 | | | 36 | | | 4 | | | 11 | | | 80 | | | 74 | | | 6 | | | 8 | |
| Professional and legal services | Professional and legal services | 14 | | | 17 | | | (3) | | | (18) | | | 42 | | | 56 | | | (14) | | | (25) | | Professional and legal services | 16 | | | 14 | | | 2 | | | 14 | | | 29 | | | 28 | | | 1 | | | 4 | |
| Marketing and business development | Marketing and business development | 11 | | | 9 | | | 2 | | | 22 | | | 28 | | | 22 | | | 6 | | | 27 | | Marketing and business development | 13 | | | 9 | | | 4 | | | 44 | | | 25 | | | 17 | | | 8 | | | 47 | |
| Deposit insurance and regulatory expense | Deposit insurance and regulatory expense | 13 | | | 8 | | | 5 | | | 63 | | | 36 | | | 25 | | | 11 | | | 44 | | Deposit insurance and regulatory expense | 22 | | | 13 | | | 9 | | | 69 | | | 40 | | | 23 | | | 17 | | | 74 | |
| Credit-related expense | Credit-related expense | 8 | | | 7 | | | 1 | | | 14 | | | 22 | | | 19 | | | 3 | | | 16 | | 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 | 30 | | | 16 | | | 14 | | | 88 | | | 77 | | | 62 | | | 15 | | | 24 | | Other | 28 | | | 25 | | | 3 | | | 12 | | | 57 | | | 47 | | | 10 | | | 21 | |
| Total noninterest expense | Total noninterest expense | $ | 479 | | | $ | 429 | | | $ | 50 | | | 12 | % | | $ | 1,407 | | | $ | 1,292 | | | $ | 115 | | | 9 | % | Total noninterest expense | $ | 508 | | | $ | 464 | | | $ | 44 | | | 9 | % | | $ | 1,020 | | | $ | 928 | | | $ | 92 | | | 10 | % |
Adjusted noninterest expense 1 | Adjusted noninterest expense 1 | $ | 477 | | | $ | 432 | | | $ | 45 | | | 10 | % | | $ | 1,404 | | | $ | 1,291 | | | $ | 113 | | | 9 | % | Adjusted noninterest expense 1 | $ | 494 | | | $ | 463 | | | $ | 31 | | | 7 | % | | $ | 1,003 | | | $ | 927 | | | $ | 76 | | | 8 | % |
1 For information on non-GAAP financial measures, see “Non-GAAP Financial Measures” on page 33.35.
Total noninterest expense increased $50$44 million, or 12%9%, relative to the prior year quarter. Salaries and benefits expense increased $27$17 million, or 9%6%, due to the impact of inflationary and competitive labor market pressures on wages and benefits, increased headcount, and increased incentive compensation accruals arising from improvements in anticipated full-year profitability.
Other noninterest expense increased $14 million, primarily due to the reversal of a success fee accrual$13 million in the prior year period related to our SBIC investment in Recursion Pharmaceuticals, Inc., as well as increased travel and certain other expenses incurredseverance expense during the current period. quarter, reflecting our commitment to manage expenses.
Deposit insurance and regulatory expense increased $5$9 million, or 69%, driven largely by a higher Federal Deposit Insurance Corporation (“FDIC”)an increased FDIC insurance assessment resulting frombase rate beginning in 2023 and changes in the 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.
ProfessionalTechnology, telecom, and legal servicesinformation processing expense decreased $3increased $5 million, or 18%9%, primarily due to third-party assistance associated with PPP loan forgivenessincreases in application software, maintenance, and other technology-related and outsourced services utilized in the prior year period.
related amortization expenses. The efficiency ratio was 57.6%62.5%, compared with 59.8%60.7%, as growth in net revenueadjusted noninterest expense outpaced growth in noninterest expense.adjusted taxable-equivalent revenue. For information on non-GAAP financial measures, including differences between noninterest expense and adjusted noninterest expense, see page 33.35.
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:
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
•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
September 30, | | Nine Months Ended
September 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 | $ | 278 | | | $ | 311 | | | $ | 793 | | | $ | 1,177 | | Income before income taxes | $ | 226 | | | $ | 260 | | | $ | 508 | | | $ | 515 | |
| Income tax expense | Income tax expense | 61 | | | 71 | | | 170 | | | 261 | | Income tax expense | 51 | | | 57 | | | 129 | | | 109 | |
| Effective tax rate | Effective tax rate | 21.9 | % | | 22.8 | % | | 21.4 | % | | 22.2 | % | 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 influencedimpacted the income tax rates, as well as information about deferred income tax assets and liabilities.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
liabilities, and valuation allowances.Preferred Stock Dividends
Preferred stock dividends totaled $6$9 million and $8 million for both the thirdsecond quarter of 2023 and 2022, and 2021.
Technology Spend
As the banking industry continues to move toward information technology-based products and services, we recognize there are disparate ways of discussing expenditures associated with technology-related investments and operations. We generally describe these expenditures as total technology spend, which includes current period expenses reported on our consolidated statement of income, and capitalized investments, net of related amortization and depreciation, reported on our consolidated balance sheet. We believe these disclosures provide more relevant presentation and discussion regarding our technology-related investments and operations.
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.
The following schedule provides information related to our technology spend:
TECHNOLOGY SPEND
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | | | | | | | | |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Technology, telecom, and information processing expense | $ | 53 | | | $ | 50 | | | $ | 158 | | | $ | 148 | | | | | | | | | | | | | |
| Other technology-related expense | 52 | | | 48 | | | 152 | | | 140 | | | | | | | | | | | | | |
| Technology investments | 21 | | | 28 | | | 65 | | | 80 | | | | | | | | | | | | | |
| Less: related amortization and depreciation | (14) | | | (13) | | | (41) | | | (40) | | | | | | | | | | | | | |
| Total technology spend | $ | 112 | | | $ | 113 | | | $ | 334 | | | $ | 328 | | | | | | | | | | | | | |
Total technology spend remained relatively flat compared with the prior year period, as increases in related expenses were offset by reduced technology investments.respectively.
BALANCE SHEET ANALYSIS
Interest-Earning Assets
Interest-earning assets are assets that have associated interest rates or yields, and generally consist of money market investments, securities, loans, and leases. We strive to maintain a high level of interest-earning assets relative to total assets. For more information regarding the average balances, associated revenue generated, and the respective yields of our interest-earning assets, see the Consolidated Average Balance Sheet on page 11.10.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Investment Securities Portfolio
We invest in securities to generate interest income and to actively manage liquidity and interest rate risk and credit risk. Referto generate interest income. We primarily own securities that can readily provide us 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the components of our investment securities portfolio.
INVESTMENT SECURITIES PORTFOLIO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 423 | | | $ | 423 | | | | | $ | 379 | | | $ | 441 | | | $ | 441 | | | | | $ | 443 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Available-for-sale | | | | | | | | | | | | | | | |
| U.S. Treasury securities | 555 | | | 557 | | | | | 394 | | | 155 | | | 155 | | | | | 134 | |
| U.S. Government agencies and corporations: | | | | | | | | | | | | | | | |
| Agency securities | 859 | | | 851 | | | | | 807 | | | 833 | | | 833 | | | | | 845 | |
| Agency guaranteed mortgage-backed securities | 23,002 | | | 23,162 | | | | | 19,566 | | | 20,340 | | | 20,549 | | | | | 20,387 | |
| Small Business Administration loan-backed securities | 740 | | | 793 | | | | | 766 | | | 867 | | | 938 | | | | | 912 | |
| Municipal securities | 1,611 | | | 1,780 | | | | | 1,626 | | | 1,489 | | | 1,652 | | | | | 1,694 | |
| Other debt securities | 75 | | | 75 | | | | | 74 | | | 75 | | | 75 | | | | | 76 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total available-for-sale | 26,842 | | | 27,218 | | | | | 23,233 | | | 23,759 | | | 24,202 | | | | | 24,048 | |
| Total HTM and AFS investment securities | $ | 27,265 | | | $ | 27,641 | | | | | $ | 23,612 | | | $ | 24,200 | | | $ | 24,643 | | | | | $ | 24,491 | |
The amortized cost of total held-to-maturity (“HTM”) and AFS investment securities increased $3.0 billion, or 12%, from December 31, 2021. Approximately 8% and 11% of the total HTM and AFS investment securities portfolio were floating rate at September 30, 2022 and December 31, 2021, respectively.
At September 30, 2022, the investment securities portfolio includes $376 million of net premium that is distributed across the various asset classes. Total taxable-equivalent premium amortization for our investment securities was $27 million for the third quarter of 2022, compared with $29 million for the same prior year period.
In addition to HTM and AFS securities, we also have a Tradingtrading securities portfolio of $526 million and $372that totaled $32 million at SeptemberJune 30, 2022 and2023, compared with $465 million at December 31, 2021, respectively, which is comprised primarily2022. The prior year-end amount included $395 million of municipal securities and money market mutual sweep transactions for customers. accounts. Beginning in the first quarter of 2023, related sweep balances were presented in “Money market investments” on the 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 regarding our investment securities portfolio, swaps, and related unrealized gains and losses.
In October 2022, we transferred approximately $9.0 billion amortized cost ($7.2 billion fair value)
Municipal Investments and Extensions of pass-through mortgage-backed AFS securities to the HTM category to reflect our new intent for these securities.
MunicipalitiesCredit
We providesupport 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 exposuretotal investments and extensions of credit to statemunicipalities:
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) | September 30,
2022 | | December 31,
2021 |
| | | |
| Loans and leases | $ | 4,224 | | | $ | 3,658 | |
| Held-to-maturity securities | 423 | | | 441 | |
| Available-for-sale securities | 1,626 | | | 1,694 | |
| | | |
| Trading account securities | 302 | | | 355 | |
| Unfunded lending commitments | 337 | | | 280 | |
| Total direct exposure to municipalities | $ | 6,912 | | | $ | 6,428 | |
securities are primarily associated with municipalities located within our geographic footprint. The municipal loan and lease portfolio is primarily secured by general obligations of municipal entities. Other types of collateral also include real estate, revenue pledges, or equipment. Our municipal loans and securities primarily relate to municipalities located within our geographic footprint.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
At SeptemberJune 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 SeptemberJune 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 September 30, 2022We provide a wide range of lending products to commercial customers, generally small- and December 31, 2021, the ratio of loansmedium-sized businesses. We also provide various retail lending products and leasesservices to total assets was 61%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 percentagethe composition of total loans:
LOAN AND LEASE PORTFOLIO
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (Dollar amounts in millions) | Amount | | % of
total loans | | Amount | | % of
total loans |
| Commercial: | | | | | | | |
| Commercial and industrial | $ | 15,656 | | | 29.0 | % | | $ | 13,867 | | | 27.3 | % |
| PPP | 306 | | | 0.6 | | | 1,855 | | | 3.6 | |
| Leasing | 347 | | | 0.7 | | | 327 | | | 0.6 | |
| Owner-occupied | 9,279 | | | 17.2 | | | 8,733 | | | 17.2 | |
| Municipal | 4,224 | | | 7.8 | | | 3,658 | | | 7.2 | |
| Total commercial | 29,812 | | | 55.3 | | | 28,440 | | | 55.9 | |
| Commercial real estate: | | | | | | | |
| Construction and land development | 2,800 | | | 5.2 | | | 2,757 | | | 5.4 | |
| Term | 9,556 | | | 17.7 | | | 9,441 | | | 18.6 | |
| Total commercial real estate | 12,356 | | | 22.9 | | | 12,198 | | | 24.0 | |
| Consumer: | | | | | | | |
| Home equity credit line | 3,331 | | | 6.2 | | | 3,016 | | | 5.9 | |
| 1-4 family residential | 6,852 | | | 12.7 | | | 6,050 | | | 11.9 | |
| Construction and other consumer real estate | 973 | | | 1.8 | | | 638 | | | 1.3 | |
| Bankcard and other revolving plans | 471 | | | 0.9 | | | 396 | | | 0.8 | |
| Other | 123 | | | 0.2 | | | 113 | | | 0.2 | |
| Total consumer | 11,750 | | | 21.8 | | | 10,213 | | | 20.1 | |
| Total net loans and leases | $ | 53,918 | | | 100.0 | % | | $ | 50,851 | | | 100.0 | % |
Theour loan and lease portfolio increased $3.1 billion from December 31, 2021. Excluding PPP loans, commercial loans increased $2.9 billion, or 11%, driven largely by increases in commercial and industrial loans, municipal loans, and owner-occupied loans of $1.8 billion, $566 million, and $546 million, respectively. Consumer loans increased $1.5 billion, primarily due to increases in 1-4 family residential loans, construction and other consumer real estate loans, and home equity credit lines of $802 million, $335 million, and $315 million, respectively.portfolio.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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) | September 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 | $ | 543 | | | $ | 537 | | | $ | 6 | | | 1 | % | Bank-owned life insurance | $ | 549 | | | $ | 546 | | | $ | 3 | | | 1 | % |
| Federal Home Loan Bank stock | Federal Home Loan Bank stock | 151 | | | 11 | | | 140 | | | NM | Federal Home Loan Bank stock | 111 | | | 294 | | | (183) | | | (62) | |
| Federal Reserve stock | Federal Reserve stock | 69 | | | 81 | | | (12) | | | (15) | | Federal Reserve stock | 65 | | | 68 | | | (3) | | | (4) | |
| Farmer Mac stock | Farmer Mac stock | 19 | | | 19 | | | — | | | — | | Farmer Mac stock | 21 | | | 19 | | | 2 | | | 11 | |
| SBIC investments | SBIC investments | 169 | | | 179 | | | (10) | | | (6) | | SBIC investments | 177 | | | 172 | | | 5 | | | 3 | |
| Other | Other | 32 | | | 24 | | | 8 | | | 33 | | Other | 33 | | | 31 | | | 2 | | | 6 | |
| Total other noninterest-bearing investments | Total other noninterest-bearing investments | $ | 983 | | | $ | 851 | | | $ | 132 | | | 16 | % | Total other noninterest-bearing investments | $ | 956 | | | $ | 1,130 | | | $ | (174) | | | (15) | % |
Total other noninterest-bearing investments increased $132decreased $174 million, or 16%15%, during the first ninesix months of 2022,2023, primarily due to a $140$183 million increasedecrease in Federal Home Loan Bank (“FHLB”)FHLB stock. This increaseWe are required to invest approximately 4% of our FHLB borrowings in FHLB stock to maintain our borrowing capacity. The decrease in FHLB stock was driven largely by increasesdeclines in FHLB short-term borrowings during the thirdsecond quarter of 2022 as a result of loan growth and declines2023 in interest-bearingresponse to an increase in total deposits.
Premises, Equipment, and Software
Net premises, equipment, and software increased $69 million, or 5%, 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 Bank Colorado (“Vectra”) in Denver, Colorado, which is expected to be completed in the fourth quarter of 2022.
We are also in the final phase of a three-phase project to replace our core loan and deposit banking systems, and are on track to convert our deposit servicing system in 2023. Capitalized costs associated with the core system replacement project generally carry a useful life of ten years, and are summarized in the following schedule.
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total |
| | | | | | | |
| Total amount of capitalized costs, less accumulated depreciation | $ | 32 | | | $ | 57 | | | $ | 190 | | | $ | 279 | |
Deposits
Deposits are a primary funding source. The following schedule presents our deposits by category and percentage of total deposits:
DEPOSITS
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (Dollar amounts in millions) | Amount | | % of
total deposits | | Amount | | % of
total deposits |
| | | | | | | |
| Noninterest-bearing demand | $ | 39,133 | | | 51.5 | % | | $ | 41,053 | | | 49.6 | % |
| Interest-bearing: | | | | | | | |
| Savings and money market | 35,389 | | | 46.6 | | | 40,114 | | | 48.4 | |
| Time | 1,473 | | | 1.9 | | | 1,622 | | | 2.0 | |
| Total deposits | $ | 75,995 | | | 100.0 | % | | $ | 82,789 | | | 100.0 | % |
Total deposits decreased $6.8 billion, or 8%, from December 31, 2021, primarily due to a $4.9 billion decrease in interest-bearing deposits, and a $1.9 billion decrease in noninterest-bearing deposits. Total deposits included $166
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
millionPremises, Equipment, and $381 millionSoftware
We are in the final phase of a three-phase project to replace our core loan and deposit banking systems. This final phase includes the replacement of our deposit banking systems through multiple affiliate bank conversions, the first of which was completed in the second quarter of 2023. We expect to complete the remaining affiliate bank conversions in 2024.
The following schedule summarizes the capitalized costs associated with our core system replacement project, which are depreciated using a useful life of ten years.
CAPITALIZED COSTS ASSOCIATED WITH THE CORE SYSTEM REPLACEMENT PROJECT
| | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2023 |
| (In millions) | Phase 1 | | Phase 2 | | Phase 3 | | Total |
| | | | | | | |
| Total amount of capitalized costs, less accumulated depreciation | $ | 25 | | | $ | 50 | | | $ | 221 | | | $ | 296 | |
Deposits
Deposits are our 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 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 uninsured deposits.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Total deposits increased $5.1 billion, or 7%, from March 31, 2023, and $2.7 billion, or 4%, from December 31, 2022. These increases were primarily due to significant growth in brokered and customer deposits, and partially offset by a decline in noninterest-bearing deposits as interest rates have risen. At June 30, 2023, total customer deposits included approximately $3.4 billion from reciprocal placement products where we distributed our customers’ deposits in a placement network to increase their FDIC insurance and in return we received a matching amount of 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 September 30, 2022March 31, 2023 and December 31, 2021,2022, respectively. Additionally, total deposits at September 30, 2022 included approximately $400 million of deposit balances acquired fromOur loan-to-deposit ratio was 77%, compared with 81% and 78% for the purchase of three Northern Nevada branches during the third quarter of 2022. same time periods.
See “Liquidity Risk Management” on page 3231 for additional information on fundingliquidity and borrowed funds.
Total time deposits that exceed the current FDIC insurance limit of $250,000 were $420 million and $563 million at September 30, 2022 and December 31, 2021, respectively. The estimated total amount of uninsured deposits, including related interest accrued and unpaid, was $44 billion and $49 billion at September 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 reduceprudently manage the risks to which our operations are exposed, including credit risk, market and interest rate risk, liquidity risk, strategic and business risk, operational risk, technology risk, cybercybersecurity risk, capital/financial reporting risk, legal/compliance risk (including regulatory risk), and reputational risk. These risks are overseen by the various management committees of whichincluding the Enterprise Risk Management Committee is the focal point.Committee. For a more comprehensive discussion of these risks, see “Risk Factors” in our 20212022 Form 10-K.
Credit Risk Management
Credit risk is the possibility of loss from the failure of a borrower, guarantor, or another obligor to fully perform under the terms of a credit-related contract. Credit risk arises primarily from our lending activities, as well as from off-balance sheet credit instruments. Credit policies, credit risk management, and credit examination functions inform and support the oversight of credit risk. Our credit policies emphasize strong underwriting standards and early detection of potential problem credits in order to develop and implement action plans on a timely basis to mitigate potential losses. These formal credit policies and procedures provide us with a framework for consistent underwriting and a basis for sound credit decisions at the local banking affiliate level.
Our overall credit risk management strategy includes diversification of our loan portfolio. Our business activity is conducted primarily within the geographic footprint of our banking affiliates. We strive to avoid the risk of undue concentrations of credit in any particular industry, collateral type, location, or with any individual customer or counterparty. We have actively managed the credit risk in our commercial real estate (“CRE”) portfolio for more than a decade, having reduced CRE loans to 23% of total loans, compared with 33% in late 2008. For a more comprehensive discussion of our credit risk management, see “Credit Risk Management” in our 20212022 Form 10-K.
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 SeptemberJune 30, 2022, $7402023, $593 million of related loans were guaranteed, primarily by the SBA, and included $306$125 million of PPPPaycheck Protection Program (“PPP”) loans. The following schedule presents the composition of U.S. government agency guaranteed loans.
U.S. GOVERNMENT AGENCY GUARANTEED LOANS
| | (Dollar amounts in millions) | (Dollar amounts in millions) | September 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 | $ | 844 | | | 86 | % | | $ | 2,410 | | | 95 | % | Commercial | $ | 703 | | | 81 | % | | $ | 753 | | | 83 | % |
| Commercial real estate | Commercial real estate | 18 | | | 72 | | | 22 | | | 73 | | Commercial real estate | 24 | | | 79 | | | 21 | | | 76 | |
| Consumer | Consumer | 4 | | | 100 | | | 5 | | | 100 | | Consumer | 5 | | | 100 | | | 5 | | | 100 | |
| Total loans | Total loans | $ | 866 | | | 85 | % | | $ | 2,437 | | | 94 | % | Total loans | $ | 732 | | | 81 | % | | $ | 779 | | | 83 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Commercial Lending
The following schedule provides information regarding lending exposures to certain industries in our commercial lending portfolio.
COMMERCIAL LENDING BY INDUSTRY GROUP 1
| | | September 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 | | 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 | $ | 2,853 | | | 9.6 | % | | $ | 2,303 | | | 8.1 | % | Finance and insurance | 2,634 | | | 8.6 | | | 2,992 | | | 9.8 | |
| Real estate, rental and leasing | 2,703 | | | 9.1 | | | 2,536 | | | 8.9 | | |
| Retail trade | 2,663 | | | 8.9 | | | 2,412 | | | 8.5 | | |
| Manufacturing | 2,414 | | | 8.1 | | | 2,374 | | | 8.3 | | |
| Healthcare and social assistance | Healthcare and social assistance | 2,374 | | | 8.0 | | | 2,349 | | | 8.2 | | Healthcare and social assistance | 2,495 | | | 8.1 | | | 2,373 | | | 7.8 | |
| Public Administration | Public Administration | 2,254 | | | 7.5 | | | 1,959 | | | 6.9 | | Public Administration | 2,376 | | | 7.7 | | | 2,366 | | | 7.8 | |
| Manufacturing | | Manufacturing | 2,319 | | | 7.5 | | | 2,387 | | | 7.8 | |
| Wholesale trade | Wholesale trade | 1,908 | | | 6.4 | | | 1,701 | | | 6.0 | | Wholesale trade | 1,918 | | | 6.3 | | | 1,880 | | | 6.2 | |
Utilities 2 | | Utilities 2 | 1,590 | | | 5.2 | | | 1,418 | | | 4.6 | |
| Transportation and warehousing | Transportation and warehousing | 1,387 | | | 4.6 | | | 1,273 | | | 4.5 | | 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 | 1,339 | | | 4.5 | | | 1,456 | | | 5.1 | | Construction | 1,276 | | | 4.2 | | | 1,355 | | | 4.4 | |
Utilities 2 | 1,331 | | | 4.5 | | | 1,446 | | | 5.1 | | |
| Educational services | 1,310 | | | 4.4 | | | 1,163 | | | 4.1 | | |
| Hospitality and food services | Hospitality and food services | 1,243 | | | 4.2 | | | 1,353 | | | 4.8 | | Hospitality and food services | 1,186 | | | 3.9 | | | 1,238 | | | 4.1 | |
| Mining, quarrying, and oil and gas extraction | 1,237 | | | 4.1 | | | 1,185 | | | 4.2 | | |
| Other Services (except Public Administration) | Other Services (except Public Administration) | 1,075 | | | 3.6 | | | 1,213 | | | 4.2 | | Other Services (except Public Administration) | 1,066 | | | 3.5 | | | 1,041 | | | 3.4 | |
| Professional, scientific, and technical services | Professional, scientific, and technical services | 972 | | | 3.3 | | | 1,084 | | | 3.8 | | Professional, scientific, and technical services | 1,032 | | | 3.3 | | | 995 | | | 3.3 | |
Other 3 | Other 3 | 2,749 | | | 9.2 | | | 2,633 | | | 9.3 | | Other 3 | 2,922 | | | 9.5 | | | 2,782 | | | 9.1 | |
| Total | Total | $ | 29,812 | | | 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 2.9%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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
COMMERCIAL REAL ESTATE PORTFOLIO BY LOAN TYPE AND COLLATERAL LOCATION | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollar amounts in millions) | | September 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 | | $ | 1,092 | | $ | 3,147 | | $ | 490 | | $ | 685 | | $ | 1,561 | | $ | 1,600 | | $ | 627 | | $ | 354 | | $ | 9,556 | | 77.3 | % |
| % of loan type | | 11.4 | % | | 32.9 | % | | 5.1 | % | | 7.2 | % | | 16.3 | % | | 16.8 | % | | 6.6 | % | | 3.7 | % | | 100.0 | % | | |
Delinquency rates 2: | | | | | | | | | | | | | | | | | | | | |
| 30-89 days | | — | % | | 0.1 | % | | 0.4 | % | | — | % | | 0.1 | % | | — | % | | — | % | | — | % | | 0.1 | % | | |
| ≥ 90 days | | — | % | | — | % | | — | % | | — | % | | 1.0 | % | | — | % | | — | % | | — | % | | 0.2 | % | | |
| | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 15 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 19 | | | |
| Commercial construction and land development | | | | | | | | | | |
| Balance outstanding | | $ | 226 | | $ | 460 | | $ | 62 | | $ | 79 | | $ | 373 | | $ | 584 | | $ | 252 | | $ | 55 | | $ | 2,091 | | 16.9 | % |
| % of loan type | | 10.8 | % | | 22.0 | % | | 3.0 | % | | 3.8 | % | | 17.9 | % | | 27.9 | % | | 12.0 | % | | 2.6 | % | | 100.0 | % | | |
Delinquency rates 2: | | | | | | | | | | | | | | | | | | | | |
| 30-89 days | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | |
| ≥ 90 days | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | |
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Residential construction and land development 3 | | | | | | | | | | |
| Balance outstanding | | $ | 64 | | $ | 136 | | $ | 46 | | $ | 1 | | $ | 206 | | $ | 204 | | $ | 9 | | $ | 43 | | $ | 709 | | 5.8 | % |
| % of loan type | | 9.0 | % | | 19.1 | % | | 6.5 | % | | 0.2 | % | | 29.0 | % | | 28.8 | % | | 1.3 | % | | 6.1 | % | | 100.0 | % | | |
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| Total construction and land development | | $ | 290 | | $ | 596 | | $ | 108 | | $ | 80 | | $ | 579 | | $ | 788 | | $ | 261 | | $ | 98 | | $ | 2,800 | | |
| Total CRE | | $ | 1,382 | | $ | 3,743 | | $ | 598 | | $ | 765 | | $ | 2,140 | | $ | 2,388 | | $ | 888 | | $ | 452 | | $ | 12,356 | | 100.0 | % |
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| (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 | % | | |
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| 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 | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | — | % | | |
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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 | % | | |
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| 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 $66 million and $65 million for all three loan types at SeptemberAt June 30, 20222023 and December 31, 2021, respectively.
2 Delinquency rates include nonaccrual loans.
3At September 30, 2022, and December 31, 2021, there was no meaningful delinquency or nonaccrual activity for residential construction and land development loans.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
At September 30, 2022 and December 31, 2021, our CRE constructionloan portfolio totaled $12.9 billion and land development and term loan portfolios represented$12.7 billion, respectively, representing approximately 23% and 24% of the total loan portfolio respectively.for both periods. The majority of our CRE loans are secured by real estate which is primarily located within our geographic footprint. At September 30, 2022, approximately 21%The following schedule presents the geographic distribution of theour CRE loan portfolio maturesbased on the location of the primary collateral.
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL LOCATION
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| | 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.
At September 30, 2022 and December 31, 2021, approximately $257 million, or 9%, and $160 million, or 6%, of the commercial construction Construction and land development loans generally mature in 18 to 36 months and contain full or partial recourse guarantee structures with
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
one- to five-year extension options or roll-to-perm options that often result in term debt. At June 30, 2023, approximately 85% of our CRE loan portfolio consisted of land acquisitionwas variable-rate, and development loans, respectively. Mostapproximately 20% of these 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 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 20212022 Form 10-K.
The following schedule provides information regarding lending exposures to certain collateral types in our CRE loan portfolio.
COMMERCIAL REAL ESTATE LENDING BY COLLATERAL TYPE
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| 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
OFFICE CRE LOAN PORTFOLIO
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| (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 | % |
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| (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 | % |
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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 SeptemberJune 30, 20222023 and December 31, 2021,2022, our HECL portfolio totaled $3.3 billion and $3.0$3.4 billion, respectively. The following schedule presents the compositionApproximately 41% and 44% of our HECL portfolioHECLs are secured by lien status.first liens for the same time periods.
HECL PORTFOLIO BY LIEN STATUS
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| (In millions) | September 30,
2022 | | December 31, 2021 |
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| Secured by first liens | $ | 1,517 | | | $ | 1,503 | |
| Secured by second (or junior) liens | 1,814 | | | 1,513 | |
| Total | $ | 3,331 | | | $ | 3,016 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
At SeptemberJune 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 higha Fair Isaac Corporation (“FICO”) credit scores.score greater than 700.
Approximately 91%90% of our HECL portfolio is still in the draw period, and 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 SeptemberJune 30, 20222023 and December 31, 20212022 was (0.03)% and (0.01)%, 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 ofinclude nonaccrual loans and leases and other real estate owned (“OREO”) decreased to 0.28% at September 30, 2022, compared with 0.53% at December 31, 2021.
Total nonaccrual loans at September 30, 2022 decreased to $151 million from $271 million at December 31, 2021, reflecting credit quality improvements across most of our loan portfolios.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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) | September 30,
2022 | | December 31,
2021 | (Dollar amounts in millions) | June 30,
2023 | | | December 31,
2022 |
| Nonaccrual loans 1 | Nonaccrual loans 1 | $ | 151 | | | $ | 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 | $ | 151 | | | $ | 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 | 0.28 | % | | 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 | $ | 20 | | | $ | 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 | 0.04 | % | | 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 | $ | 171 | | | $ | 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 | 0.32 | % | | 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 | $ | 84 | | | $ | 70 | | |
| Nonaccrual loans1 current as to principal and interest payments | Nonaccrual loans1 current as to principal and interest payments | 57.6 | % | | 67.2 | % | 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 $31 millionNonperforming assets as a percentage of loans and $35 million of PPPleases and OREO increased to 0.29% at June 30, 2023, compared with 0.27% at December 31, 2022. Total nonaccrual loans at SeptemberJune 30, 2022 and2023 increased to $162 million from $149 million at December 31, 2021, respectively, which we expect will be paid2022, primarily due to increases in full by eithercommercial 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 LoansLoan Modifications
Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications and restructurings may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. Loans
On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) and their related disclosures. ASU 2022-02 requires enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. At 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 September 30, 2022 and December 31, 2021, TDRs totaled $245 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 restructureda 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
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
principal and interest, the loan may be returned to accrual status. The borrower’s payment performance prior to and following the restructuringmodification is taken into account to determine whether a loan should be returned to accrual status.
ACCRUING AND NONACCRUING TROUBLED DEBT RESTRUCTUREDMODIFIED LOANS TO BORROWERS EXPERIENCING FINANCIAL DIFFICULTY
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| (In millions) | September 30,
2022 | | December 31,
2021 |
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| Restructured loans – accruing | $ | 206 | | | $ | 221 | |
| Restructured loans – nonaccruing | 39 | | | 105 | |
| Total | $ | 245 | | | $ | 326 | |
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| (In millions) | June 30,
2023 | | |
| | | |
| Modified loans – accruing | $ | 137 | | | |
| Modified loans – nonaccruing | 11 | | | |
| Total | $ | 148 | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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
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| Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | |
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| Balance at beginning of period | $ | 275 | | | $ | 458 | | | $ | 326 | | | $ | 311 | | |
| New identified TDRs and principal increases | 15 | | | 17 | | | 42 | | | 200 | | |
| Payments and payoffs | (41) | | | (33) | | | (103) | | | (64) | | |
| Charge-offs | (3) | | | — | | | (5) | | | (3) | | |
| No longer reported as TDRs | — | | | (86) | | | (3) | | | (86) | | |
| Sales and other | (1) | | | (4) | | | (12) | | | (6) | | |
| Balance at end of period | $ | 245 | | | $ | 352 | | | $ | 245 | | | $ | 352 | | |
Allowance for Credit Losses
The ACL includes the ALLL and the RULC. The ACL represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. To determine the adequacy of the allowance, our loan and lease portfolio is segmented based on loan type.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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) | Nine Months Ended
September 30, 2022 | | Twelve Months Ended
December 31, 2021 | | Nine Months Ended
September 30, 2021 |
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| Loans and leases outstanding | $ | 53,918 | | | $ | 50,851 | | | $ | 50,678 | |
| Average loans and leases outstanding: | | | | | |
| Commercial – excluding PPP loans | 28,060 | | | 25,014 | | | 24,716 | |
| Commercial – PPP loans | 885 | | | 4,566 | | | 5,283 | |
| Commercial real estate | 12,151 | | | 12,136 | | | 12,104 | |
| Consumer | 10,801 | | | 10,267 | | | 10,315 | |
| Total average loans and leases outstanding | $ | 51,897 | | | $ | 51,983 | | | $ | 52,418 | |
| Allowance for loan and lease losses: | | | | | |
| Balance at beginning of period | $ | 513 | | | $ | 777 | | | $ | 777 | |
| Provision for loan losses | 70 | | | (258) | | | (281) | |
| Charge-offs: | | | | | |
| Commercial | 65 | | | 35 | | | 27 | |
| Commercial real estate | — | | | — | | | — | |
| Consumer | 8 | | | 13 | | | 10 | |
| Total | 73 | | | 48 | | | 37 | |
| Recoveries: | | | | | |
| Commercial | 21 | | | 29 | | | 24 | |
| Commercial real estate | — | | | 3 | | | — | |
| Consumer | 10 | | | 10 | | | 8 | |
| Total | 31 | | | 42 | | | 32 | |
| Net loan and lease charge-offs | 42 | | | 6 | | | 5 | |
| Balance at end of period | $ | 541 | | | $ | 513 | | | $ | 491 | |
| Reserve for unfunded lending commitments: | | | | | |
| Balance at beginning of period | $ | 40 | | | $ | 58 | | | $ | 58 | |
| Provision for unfunded lending commitments | 9 | | | (18) | | | (20) | |
| Balance at end of period | $ | 49 | | | $ | 40 | | | $ | 38 | |
| Total allowance for credit losses: | | | | | |
| Allowance for loan and lease losses | $ | 541 | | | $ | 513 | | | $ | 491 | |
| Reserve for unfunded lending commitments | 49 | | | 40 | | | 38 | |
| Total allowance for credit losses | $ | 590 | | | $ | 553 | | | $ | 529 | |
| | | | | |
Ratio of allowance for credit losses to net loans and leases, at period end 1 | 1.09 | % | | 1.09 | % | | 1.04 | % |
| Ratio of allowance for credit losses to nonaccrual loans, at period end | 391 | % | | 204 | % | | 164 | % |
| Ratio of allowance for credit losses to nonaccrual loans and accruing loans past due 90 days or more, at period end | 345 | % | | 198 | % | | 162 | % |
Ratio of total net charge-offs to average loans and leases 2, 3 | 0.11 | % | | 0.01 | % | | 0.01 | % |
Ratio of commercial net charge-offs to average commercial loans 3 | 0.20 | % | | 0.02 | % | | 0.01 | % |
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 | (0.02) | % | | 0.03 | % | | 0.03 | % |
1 The ratio of allowance for credit losses to net loans and leases (excluding PPP loans) was 1.10% at September 30, 2022, 1.13% at December 31, 2021, and 1.11% at September 30, 2021.
2 The annualized ratio of net charge-offs to average loans and leases (excluding PPP loans) was 0.11% at September 30, 2022, 0.01% at December 31, 2021, and 0.01% at September 30, 2021.
3 Ratios are annualized for the periods presented except for the period representing the full twelve months.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The total ACL increased to $590 million, from $553 million, during the first nine months of 2022, primarily due to growth in the loan portfolio, as well as changes in economic scenarios, which were driven by the increased probability of a recession, the effects of which were partially offset by improvements in credit quality.
The RULC, represents a reserve for potential losses associated with off-balance sheet commitments, and increased $9 millionremained stable during the first ninesix months of 2022.2023. The reserve is separately recorded on the consolidated balance sheet in “Other liabilities,” and any related increases or decreases in the reserve are recorded on the consolidated income statement in “Provision for unfunded lending commitments.”
The following schedule presents the changes in and allocation of the ACL.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SUMMARY OF CREDIT LOSS EXPERIENCE | | | | | | | | | | | | | | | | | |
| (Dollar amounts in millions) | 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Interest Rate and Market Risk Management
Interest rate risk is the potential for reduced net interest income and other rate-sensitive income resulting from adverse changes in the level of interest rates. Market risk is the potential for loss arising from adverse changes in the fair value of fixed-income securities, equity securities, other earning assets, and derivative financial instruments as a result of changes in interest rates or other factors. 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 20212022 Form 10-K.
Interest Rate Risk
Average total deposits remained relatively flat at $77.5 billion, compared withWe strive to position the prior year period. During 2021, deposits increasedBank for interest rate changes and were primarily invested in fixed-rate, medium-duration AFS securities. The investment in these securities relativemanage the balance sheet sensitivity to short-duration money market funds resulted in higher earning-asset yields, increasedreduce the volatility of both net interest income and decreasedeconomic 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. 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 inmigrate to interest-bearing products.
The following schedule presents deposit rates will lag changes in reference rates. Our modeled cost of total deposits for September 2023 is approximately 0.63%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 experienceduration assumptions using both historical-based deposit behavior as well as industry data to inform our assumptions. The migration and correlationthe adjusted assumptions previously discussed result in deposit durations presented in the following schedule:previously.
DEPOSIT ASSUMPTIONS
| | | | | | | | | | | | | | | June 30, 2023 | | December 31, 2022 |
| | September 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 | | 3.2 | % | | 3.0 | % | 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 | | 2.6 | % | | 2.4 | % | Savings and interest-bearing checking | | 2.9% | | 2.6% | | 2.0% | | 1.6% | | 3.1% | | 2.8% |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
As the more rate sensitiverate-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 stickier and less rate sensitive. Conversely, the effective duration of the deposits under the adjusted assumptions has shortened considerably due to faster deposit 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 SeptemberJune 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 | | 4Q24 - 3Q25 | | 3Q25 - 2Q26 | | | 2023 | | 2024 | | 2025 | | 3Q25 - 2Q26 | | 3Q26 - 2Q27 | |
| (Dollar amounts in millions) | (Dollar amounts in millions) | Fourth Quarter | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | First Quarter | | Second Quarter | | Third 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 | $ | 7,336 | | $ | 7,300 | | $ | 6,833 | | $ | 6,533 | | $ | 6,233 | | $ | 5,800 | | $ | 5,466 | | $ | 5,033 | | $ | 3,737 | | $ | 2,221 | | 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 | 1.77 | % | | 1.84 | % | | 1.83 | % | | 1.79 | % | | 1.71 | % | | 1.61 | % | | 1.57 | % | | 1.50 | % | | 1.57 | % | | 1.68 | % | | 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 | | | |
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 | | | |
| 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 | % | | 1.74 | % | | 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 ratesfloating-rate loans.
2 Fair value debtCash flow hedges consist of receive-fixed swaps hedging fixed-rate debt. The $500 million fair value debt hedgeassets fully matures at the end of July 2029.in February 2027. Amounts for 20292027 have not been prorated to reflect this hedge maturing during the year.period.
3 Cash flow hedges of liabilities fully matures in May of 2025.
4 Fair value hedges of assets hedges consist of pay-fixed interest rate swaps hedging AFS fixed-rate securities. Increases in average outstanding notional are
due to forward-starting interest rate swaps.
4 5RepresentsFair value hedges of debt consist of receive-fixed swaps hedging fixed-rate debt. The sole fair value hedge of debt was terminated during the fourthsecond quarter 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 lookingforward-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.
INCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| | Parallel shift in rates (in bps)1 | | Parallel shift in rates (in bps)1 |
| Repricing scenario | | -100 | | 0 | | +100 | | +200 | | +300 | | -100 | | 0 | | +100 | | +200 | | +300 |
| | | | | | | | | | | | | | | | | | | | |
Earnings at Risk (EaR) | | (4.2) | % | | — | % | | 4.1 | % | | 8.2 | % | | 12.2 | % | | (5.2) | % | | — | % | | 11.2 | % | | 22.7 | % | | 33.6 | % |
Economic Value of Equity (EVE) | | 4.0 | % | | — | % | | (2.0) | % | | (4.1) | % | | (6.1) | % | | 20.9 | % | | — | % | | 0.8 | % | | (0.5) | % | | (1.2) | % |
1 Assumes rates cannot go below zero in the negative rate shift.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
TheINCOME SIMULATION – CHANGE IN NET INTEREST INCOME AND CHANGE IN ECONOMIC VALUE OF EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| | Parallel shift in rates (in bps)1 | | Parallel shift in rates (in bps)1 |
| Repricing scenario | | -100 | | 0 | | +100 | | +200 | | +300 | | -100 | | 0 | | +100 | | +200 | | +300 |
| Historical-based assumptions: | | | | | | | | | | | | | | | | | | |
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) | | (0.1) | % | | — | % | | 1.9 | % | | 3.5 | % | | 4.8 | % | | 2.0 | % | | — | % | | (1.1) | % | | (2.3) | % | | (3.7) | % |
| | | | | | | | | | | | | | | | | | | | |
| Adjusted assumptions: | | | | | | | | | | | | | | | | | | |
Earnings at Risk (EaR) | | (1.3) | % | | — | % | | 1.4 | % | | 2.9 | % | | 4.4 | % | | | | | | | | | | |
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.
Under the historical-based assumptions, the asset sensitivity, as measured by EaR, decreasedincreased during the thirdsecond quarter of 2022,2023, primarily due to (1) deposit runoff, (2) an increase in receive-fixed-ratepay-fixed interest rate swap notional, and (3) a higher level of “base-case” net interest income, which reducedpartially 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 26%. If32% under the weighted average deposit beta were to increase to 36%,historical-based assumptions, and 55% under the EaR in the +100 bps rate shock would change from 4.1% to 3.0%.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 10% toreduce net interest income by approximately 4% in the thirdsecond quarter of 2023,2024, compared with the thirdsecond 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 SeptemberJune 30, 2022,2023, we expect emergent sensitivity to addincrease net interest income by approximately 4% to1% 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 SeptemberJune 30, 2022, $24.32023, $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 97% are tied to either the prime rate, London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), American Interbank Offered Rate (“AMERIBOR”), or Bloomberg Short-term Bank Yield (“BSBY”). For these variable-rate loans, we have executed $7.1$2.9 billion of cash flow hedges by receiving fixed rates on interest rate swaps. At SeptemberJune 30, 2022,2023, we also had $3.5$3.6 billion of variable-rate consumer loans scheduled to reprice in the next six months. The impact on asset sensitivity from commercial or consumer loans with floors has become insignificant as rates 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 ensuremitigate contract risk is sufficiently mitigated.risk. New originations, and any modifications or renewals of LIBOR-based contracts, containcontained fallback language to facilitate transition to an alternative reference rate. For ourAdditionally, 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, alllacking fallback provisions and variations were identified and classified based upon those provisions. By the end of 2021,with a clearly defined or practical replacement benchmark rate. At June 30, 2023, we had discontinuedhave remediated substantially all new originations and any renewalsour LIBOR exposure through fallback language, replacement indices, or modifications referencing LIBOR.
We have a significant number of assets and liabilities that reference LIBOR. At September 30, 2022, we had $20.3 billion in loans (mainly commercial loans), unfunded lending commitments, and securities referencing LIBOR. The amount of borrowed funds referencingreliance upon the provisions under the LIBOR at September 30, 2022 was less than $1 billion. These amounts exclude derivative assets and liabilities on the consolidated balance sheet. At September 30, 2022, the notional amount of our LIBOR-referenced interest rate derivative contracts was $10.0 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 (“CMT”) rate, the FHLB rate, AMERIBOR, SOFR, and BSBY. During the first quarter of 2022, we began to prompt our customers to voluntarily modify their contracts and migrate to a reference rate other than LIBOR. 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 September 30, 2022, we had $526 million of trading assets and $34 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. TheDuring the second quarter of 2023, the $32 million after-tax changeincrease in AOCI attributableloss related to investment securities was driven largely by declines in the fair value of the AFS securities decreased $909 million and $2.7 billion for the three and nine months ended September 30, 2022, respectively,primarily due largely to increasedchanges in benchmark interest rates. Refer toFor 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 discussion regarding our investment securities portfolio and related unrealized gains and losses.
As discussed in the Net Interest Income and NIM section above, our deposit costs are well controlled, reflecting the granularity of our deposit base and the extent of our noninterest-bearing deposits. This funding advantage is more pronouncedvaluable in a rising interest rate environment, 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 SBICSmall 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 $169approximately $177 million and $179$172 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. On occasion, some of the companies within our SBIC investment may issue an initial public offering (“IPO”). In this case, the fund is generally subject to a lockout period before liquidating the investment, which can introduce additional market risk. See Note 3 of the Notes to Consolidated Financial Statements for additional information regarding the valuation of our SBIC investments.
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additional market risk. See Note 3 of our 2021 Form 10-K for additional information regarding the valuation of our SBIC investments.
Liquidity Risk Management
Overview
Liquidity refers to our ability to meet our cash, contractual, and collateral obligations, and to manage both expected and unexpected cash flows without adversely impacting our operations or financial strength. 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. For a more comprehensive discussion of our liquidity risk management, see “Liquidity Risk Management” in our 2021 Form 10-K.
Our AFS investment securities are primarily held as a source of contingent liquidity. We targetprimarily own securities that can be readily turned intoprovide us with cash through repurchase agreements or sales. We manage our short-term funding needsand liquidity through secured borrowing agreements with securities pledged as collateral. At September 30, 2022,
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 $24.2 billionthe FHLB and cashthe GCF program. The BTFP offers loans of up to one year in length to eligible depository institutions pledging U.S. Treasuries, agency debt and money market investments of $4.6 billion, collectively comprised 33% of total assets, compared with $24.9 billion of investmentgovernment mortgage-backed securities, and $13.0 billionother qualifying assets as collateral. Unlike other funding sources, borrowing capacity under the BTFP is based on the par value, not the fair value, of cash and money market investments, collectively comprising 41% of total assets at December 31, 2021.collateral. Advances can be requested under the program through mid-March 2024.
Liquidity Management ActionsFor more information on our liquidity risk management practices, see “Liquidity Risk Management” in our 2022 Form 10-K.
For the first ninesix months of 2022,2023, the primary sources of cash came from a decrease in investment securities, a decrease in money market investments, an increase in short-term funds borrowed, and net cash provided by operating activities. Uses of cash during the same period included primarily an increasea 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 $63$546 million and $61$31 million for the first ninesix months of 20222023 and 2021,2022, respectively.
Total deposits were $76.0 billion at SeptemberThe 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, 2021.2022, were pledged at the FHLB and FRB, respectively, as collateral for current and 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 decrease in depositsfollowing 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 total available liquidity was primarily due to a $4.7$45.4 billion, decrease in savings and money market deposits, and a $1.9 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 $75.5 billion at September 30, 2022, compared with $81.9$21.1 billion, at December 31, 2021.respectively. At SeptemberJune 30, 2022,2023, we had sources of liquidity which exceeded our loan-to-deposit ratio was 71%, compared with 61% at December 31, 2021.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 receivedwe receive from various rating agencies. OurThe ratings not only influence the costs associated with borrowings, but can also influence the sources of the borrowings. All of the credit ratings are presentedrating 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 OctoberJuly 31, 2022:2023: |
| Rating agency | | Outlook | | Long-term issuer/senior
debt rating | | Subordinated debt rating | | Short-term debt rating |
| | | | | | | | |
| Kroll | | Positive | | A- | | BBB+ | | K2 |
| S&P | | StableNegative | | BBB+ | | BBB | | NR |
| Fitch | | Stable | | BBB+ | | BBB | | F1 |
| Moody's | | Stable | | Baa1Baa2 | | NR | | NRP2 |
The FHLB system and Federal Reserve Banks have been, and continue to be, a significant source of back-up liquidity and funding. We are a member of the FHLB of Des Moines, which allows member banks to borrow against their eligible loans and securities to satisfy liquidity and funding requirements. We are required to invest in FHLB and Federal Reserve stock to maintain our borrowing capacity. At September 30, 2022, our total investment in FHLB and Federal Reserve stock was $151 million and $69 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 $15.9 billion at September 30, 2022, compared with $18.3 billion at December 31, 2021. Loans with a carrying value of $27.6 billion and $26.8 billion at September 30, 2022 and December 31, 2021, respectively, were pledged at the FHLB and the Federal Reserve as collateral for current and potential borrowings. At September 30, 2022 we had $3.5 billion of short-term FHLB borrowings outstanding and no Federal Reserve borrowings outstanding. At December 31, 2021, we had no FHLB or Federal Reserve borrowings outstanding.
Total borrowed funds increased $4.1 billion during the first nine months of 2022, driven by increases in short-term borrowings as a result of loan growth and declines in interest-bearing deposits. These increases were partially offset by a decrease in long-term debt primarily due to the redemption of senior notes during the first quarter of 2022.
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) maintainingmaintain 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 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 20212022 Form 10-K.
SHAREHOLDERS' EQUITY
| | (Dollar amounts in millions) | (Dollar amounts in millions) | September 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 | 1,799 | | 1,928 | | (129) | | | (7) | | Common stock and additional paid-in capital | 1,722 | | | 1,754 | | | (32) | | | (2) | |
| Retained earnings | Retained earnings | 5,597 | | 5,175 | | 422 | | | 8 | | Retained earnings | 6,051 | | | 5,811 | | | 240 | | | 4 | |
| Accumulated other comprehensive income (loss) | (3,140) | | (80) | | (3,060) | | | NM | |
| Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (2,930) | | | (3,112) | | | 182 | | | 6 | |
| Total shareholders' equity | Total shareholders' equity | $ | 4,696 | | $ | 7,463 | | $ | (2,767) | | | (37) | % | Total shareholders' equity | $ | 5,283 | | | $ | 4,893 | | | $ | 390 | | | 8 | % |
Total shareholders’ equity decreased $2.8 billion,increased $390 million, or 37%8%, to $4.7$5.3 billion at SeptemberJune 30, 2022,2023, compared with $7.5$4.9 billion at December 31, 2021.2022. Common stock and additional paid-in capital decreased $129$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 decreased $3.1was a $2.9 billion primarily due to decreasesloss 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 available-for-saleAFS securities as a result of changeshigher interest rates, offset by a $103 million increase in interest rates.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 thesethe AFS securities, the unrealized losses will not be recognized in earnings. We do not intend to sell any securities with unrealized losses. Additionally,Although changes in AOCI are reflected in shareholders’ equity, they are excluded from regulatory capital, and therefore do not impact our regulatory capital ratios. Refer to Note 5 of the Notes to Consolidated Financial Statements for
For more discussion on our investment securities portfolio and related unrealized gains and losses.losses, see Note 5 of the Notes to Consolidated Financial Statements.
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Common shares outstanding decreased 2.0 million during the first nine months of 2022, primarily due to common stock repurchases. During the third quarter of 2022, we repurchased 0.9 million common shares outstanding for $50 million. In October 2022, the Board approved a plan to repurchase up to $50 million of common shares outstanding during the fourth quarter of 2022.
CAPITAL DISTRIBUTIONS
| | | Three Months Ended
September 30, | | Nine Months Ended
September 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 | $ | 6 | | $ | 6 | | $ | 22 | | $ | 23 | | Preferred dividends paid | $ | 9 | | $ | 8 | | $ | 15 | | $ | 16 | |
| Bank preferred stock redeemed | — | | — | | — | | 126 | | |
| | Total capital distributed to preferred shareholders | Total capital distributed to preferred shareholders | 6 | | 6 | | 22 | | 149 | | Total capital distributed to preferred shareholders | 9 | | 8 | | 15 | | 16 | |
| Common dividends paid | Common dividends paid | 62 | | 62 | | 178 | | 174 | | Common dividends paid | 61 | | 58 | | 122 | | 116 | |
Bank common stock repurchased 1 | Bank common stock repurchased 1 | 50 | | 325 | | 151 | | 475 | | Bank common stock repurchased 1 | — | | 50 | | 50 | | 101 | |
| Total capital distributed to common shareholders | Total capital distributed to common shareholders | 112 | | 387 | | 329 | | 649 | | 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 | $ | 118 | | $ | 393 | | $ | 351 | | $ | 798 | | 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) | 149,792 | | | 160,480 | | | 150,766 | | | 162,460 | | | 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) | 149,611 | | | 156,530 | | | 149,611 | | | 156,530 | | | 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.
UnderPursuant 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 SeptemberJune 30, 2022,2023, we had $1.6$1.7 billion of retained net profits available for distribution.
During the thirdsecond quarter of 2022,2023, we paid dividends on preferred stock of $6$9 million and dividends on common stock of $62$61 million, or $0.41 per share. In October 2022,July 2023, the Board declared a regular quarterly dividend of $0.41 per common share, payable on November 17, 2022,August 24, 2023 to shareholders of record on November 10, 2022.August 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 severalthat include certain minimum regulatory capital ratios. At SeptemberJune 30, 2022,2023, we 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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CAPITAL AMOUNTS AND RATIOS
| | September 30,
2022 | | December 31,
2021 | | September 30,
2021 | |
| Tangible common equity ratio 1 | 3.7 | % | | 6.5 | % | | 7.2 | % | |
Tangible equity ratio 1 | 4.2 | | | 7.0 | | | 7.7 | | |
| Average equity to average assets (three months ended) | 6.5 | | | 8.3 | | | 9.0 | | |
| 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 | 9.6 | | | 10.2 | | | 10.9 | | Common equity tier 1 capital | $ | 6,692 | | | $ | 6,481 | | | $ | 6,257 | |
| Tier 1 leverage | 7.5 | | | 7.2 | | | 7.6 | | |
| Tier 1 risk-based | Tier 1 risk-based | 10.3 | | | 10.9 | | | 11.6 | | Tier 1 risk-based | 7,131 | | | 6,921 | | | 6,697 | |
| Total risk-based | Total risk-based | 12.0 | | | 12.8 | | | 13.6 | | 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) | 15.8 | | | 11.5 | | | 12.3 | | 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 | 19.5 | | | 13.4 | | | 14.2 | | 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 “Non-GAAP Financial Measures” on page 3335 for more information regarding these ratios.
Our regulatory tier 1 risk-based capital and total risk-based capital was $6.8 billion and $7.9 billion at September 30, 2022, compared with $6.5 billion and $7.7 billion, respectively, at December 31, 2021. See the “Supervision and Regulation” section and Note 15 of our 2021 Form 10-K for more information about our compliance with the Basel III capital requirements.
NON-GAAP FINANCIAL MEASURES
This Form 10-Q presents non-GAAP financial measures, in addition to generally accepted accounting principles (“GAAP”)GAAP financial measures, to provide investors with additional information.measures. The adjustments to reconcile from the applicable GAAP financial measures to the non-GAAP financial measures are presented in the following schedules. We consider these adjustments to be relevant to ongoing operating results and provide a meaningful basis for period-to-period comparisons. We use these non-GAAP financial measures to assess our performance and financial position, and for presentations of our performance to investors.position. We believe that presenting these non-GAAP financial measures permits investors to assess our performance on the same basis as that applied by our management and the financial services industry.
Non-GAAP financial measures have inherent limitations and are not necessarily comparable to similar financial measures that may be presented by other financial services companies. Although non-GAAP financial measures are frequently used by stakeholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.
Tangible Common Equity and Related Measures
Tangible common equity and related measures are non-GAAP measures that exclude the impact of intangible assets and their related amortization.amortization and AOCI. We excluded the effect of AOCI to align with its impact on certain incentive compensation plans that utilize return on tangible common equity as a performance metric. We believe these non-GAAP measures provide useful information about our use of shareholders’ equity and provide a basis for evaluating the performance of a business more consistently, whether acquired or developed internally.
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RETURN ON AVERAGE TANGIBLE COMMON EQUITY (NON-GAAP) | | | Three Months Ended | | Three Months Ended |
| (Dollar amounts in millions) | (Dollar amounts in millions) | | September 30,
2022 | | June 30,
2022 | | | September 30,
2021 | (Dollar amounts in millions) | | June 30,
2023 | | March 31,
2023 | | | June 30,
2022 |
| | | Net earnings applicable to common shareholders (GAAP) | | Net earnings applicable to common shareholders (GAAP) | (a) | $ | 166 | | | $ | 198 | | | | $ | 195 | |
| Adjustment, net of tax: | | Adjustment, net of tax: | | | |
| Amortization of core deposit and other intangibles | | Amortization of core deposit and other intangibles | | 1 | | | 1 | | | | — | |
| Net earnings applicable to common shareholders, net of tax | Net earnings applicable to common shareholders, net of tax | (a) | $ | 211 | | | $ | 195 | | | | $ | 234 | | Net earnings applicable to common shareholders, net of tax | (a) | $ | 167 | | | $ | 199 | | | | $ | 195 | |
| Average common equity (GAAP) | Average common equity (GAAP) | | $ | 5,303 | | | $ | 5,582 | | | | $ | 7,569 | | Average common equity (GAAP) | | $ | 4,818 | | | $ | 4,614 | | | | $ | 5,582 | |
| Average goodwill and intangibles | Average goodwill and intangibles | | (1,021) | | | (1,015) | | | | (1,015) | | Average goodwill and intangibles | | (1,063) | | | (1,064) | | | | (1,015) | |
| Average accumulated other comprehensive loss (income) | | Average accumulated other comprehensive loss (income) | | 2,931 | | | 3,030 | | | | 1,702 | |
| Average tangible common equity (non-GAAP) | Average tangible common equity (non-GAAP) | (b) | $ | 4,282 | | | $ | 4,567 | | | | $ | 6,554 | | Average tangible common equity (non-GAAP) | (b) | $ | 6,686 | | | $ | 6,580 | | | | $ | 6,269 | |
| Number of days in quarter | Number of days in quarter | (c) | 92 | | | 91 | | | | 92 | | Number of days in quarter | (c) | 91 | | | 90 | | | | 91 | |
| Number of days in year | Number of days in year | (d) | 365 | | | 365 | | | | 365 | | Number of days in year | (d) | 365 | | | 365 | | | | 365 | |
| Return on average tangible common equity (non-GAAP) | Return on average tangible common equity (non-GAAP) | (a/b/c)*d | 19.5 | % | | 17.1 | % | | | 14.2 | % | 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) | | September 30,
2022 | | June 30,
2022 | | | | September 30,
2021 |
| | | | | | | | |
| Total shareholders’ equity (GAAP) | | $ | 4,696 | | | $ | 5,632 | | | | | $ | 7,774 | |
| Goodwill and intangibles | | (1,034) | | | (1,015) | | | | | (1,015) | |
| Tangible equity (non-GAAP) | (a) | 3,662 | | | 4,617 | | | | | 6,759 | |
| Preferred stock | | (440) | | | (440) | | | | | (440) | |
| Tangible common equity (non-GAAP) | (b) | $ | 3,222 | | | $ | 4,177 | | | | | $ | 6,319 | |
| Total assets (GAAP) | | $ | 88,474 | | | $ | 87,784 | | | | | $ | 88,306 | |
| Goodwill and intangibles | | (1,034) | | | (1,015) | | | | | (1,015) | |
| Tangible assets (non-GAAP) | (c) | $ | 87,440 | | | $ | 86,769 | | | | | $ | 87,291 | |
| Common shares outstanding (thousands) | (d) | 149,611 | | | 150,471 | | | | | 156,530 | |
| Tangible equity ratio (non-GAAP) | (a/c) | 4.2 | % | | 5.3 | % | | | | 7.7 | % |
| Tangible common equity ratio (non-GAAP) | (b/c) | 3.7 | % | | 4.8 | % | | | | 7.2 | % |
| Tangible book value per common share (non-GAAP) | (b/d) | $ | 21.54 | | | $ | 27.76 | | | | | $ | 40.37 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | |
| (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 allowallows for more consistent comparability across periods. Adjusted noninterest expense provides a measure as to how we are managing our expenses; adjustedexpenses. Adjusted pre-provision net revenue enables management and others to assess our ability to generate capital. Taxable-equivalent net interest income allows us to assess the comparability of revenue arising from both taxable and tax-exempt sources.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
EFFICIENCY RATIO (NON-GAAP) AND ADJUSTED PRE-PROVISION NET REVENUE (NON-GAAP)
| | | Three Months Ended | | Nine Months Ended | | Year Ended | | Three Months Ended | | Six Months Ended | | Year Ended |
| (Dollar amounts in millions) | (Dollar amounts in millions) | | September 30,
2022 | | June 30,
2022 | | September 30,
2021 | | September 30,
2022 | | September 30,
2021 | | December 31,
2021 | (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) | Noninterest expense (GAAP) | (a) | $ | 479 | | | $ | 464 | | | $ | 429 | | | $ | 1,407 | | | $ | 1,292 | | | $ | 1,741 | | Noninterest expense (GAAP) | (a) | $ | 508 | | | $ | 512 | | | $ | 464 | | | $ | 1,020 | | | $ | 928 | | | $ | 1,878 | |
| Adjustments: | Adjustments: | | Adjustments: | |
| Severance costs | Severance costs | | — | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | Severance costs | | 13 | | | 1 | | | 1 | | | 14 | | | 1 | | | 1 | |
| Other real estate expense, net | Other real estate expense, net | | — | | | — | | | — | | | 1 | | | — | | | — | | Other real estate expense, net | | — | | | — | | | — | | | — | | | 1 | | | 1 | |
| | Amortization of core deposit and other intangibles | Amortization of core deposit and other intangibles | | 1 | | | — | | | — | | | 1 | | | — | | | 1 | | Amortization of core deposit and other intangibles | | 1 | | | 2 | | | — | | | 3 | | | — | | | 1 | |
| Pension termination-related (income) expense 1 | | — | | | — | | | — | | | — | | | (5) | | | (5) | | |
SBIC investment success fee accrual 2 | | 1 | | | — | | | (4) | | | — | | | 5 | | | 7 | | |
| SBIC investment success fee accrual 1 | | SBIC investment success fee accrual 1 | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Total adjustments | Total adjustments | (b) | 2 | | | 1 | | | (3) | | | 3 | | | 1 | | | 4 | | Total adjustments | (b) | 14 | | | 3 | | | 1 | | | 17 | | | 1 | | | 2 | |
| Adjusted noninterest expense (non-GAAP) | Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 477 | | | $ | 463 | | | $ | 432 | | | $ | 1,404 | | | $ | 1,291 | | | $ | 1,737 | | Adjusted noninterest expense (non-GAAP) | (a-b)=(c) | $ | 494 | | | $ | 509 | | | $ | 463 | | | $ | 1,003 | | | $ | 927 | | | $ | 1,876 | |
| Net interest income (GAAP) | Net interest income (GAAP) | (d) | $ | 663 | | | $ | 593 | | | $ | 555 | | | $ | 1,800 | | | $ | 1,655 | | | $ | 2,208 | | Net interest income (GAAP) | (d) | $ | 591 | | | $ | 679 | | | $ | 593 | | | $ | 1,270 | | | $ | 1,137 | | | $ | 2,520 | |
| Fully taxable-equivalent adjustments | Fully taxable-equivalent adjustments | (e) | 10 | | | 9 | | | 7 | | | 27 | | | 22 | | | 32 | | Fully taxable-equivalent adjustments | (e) | 11 | | | 9 | | | 9 | | | 20 | | | 17 | | | 37 | |
| Taxable-equivalent net interest income (non-GAAP) | Taxable-equivalent net interest income (non-GAAP) | (d+e)=f | 673 | | | 602 | | | 562 | | | 1,827 | | | 1,677 | | | 2,240 | | Taxable-equivalent net interest income (non-GAAP) | (d+e)=f | 602 | | | 688 | | | 602 | | | 1,290 | | | 1,154 | | | 2,557 | |
| Noninterest income (GAAP) | Noninterest income (GAAP) | g | 165 | | | 172 | | | 139 | | | 479 | | | 513 | | | 703 | | Noninterest income (GAAP) | g | 189 | | | 160 | | | 172 | | | 349 | | | 314 | | | 632 | |
| Combined income (non-GAAP) | Combined income (non-GAAP) | (f+g)=(h) | 838 | | | 774 | | | 701 | | | 2,306 | | | 2,190 | | | 2,943 | | Combined income (non-GAAP) | (f+g)=(h) | 791 | | | 848 | | | 774 | | | 1,639 | | | 1,468 | | | 3,189 | |
| Adjustments: | Adjustments: | | Adjustments: | |
| Fair value and nonhedge derivative gains | Fair value and nonhedge derivative gains | | 4 | | | 10 | | | 2 | | | 20 | | | 15 | | | 14 | | Fair value and nonhedge derivative gains | | 1 | | | (3) | | | 10 | | | (2) | | | 16 | | | 16 | |
Securities gains (losses), net 2 | | 6 | | | 1 | | | (23) | | | (10) | | | 51 | | | 71 | | |
Total adjustments 3 | (i) | 10 | | | 11 | | | (21) | | | 10 | | | 66 | | | 85 | | |
Securities gains (losses), net 1 | | Securities gains (losses), net 1 | | — | | | 1 | | | 1 | | | 1 | | | (16) | | | (15) | |
Total adjustments 2 | | Total adjustments 2 | (i) | 1 | | | (2) | | | 11 | | | (1) | | | — | | | 1 | |
| Adjusted taxable-equivalent revenue (non-GAAP) | Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 828 | | | $ | 763 | | | $ | 722 | | | $ | 2,296 | | | $ | 2,124 | | | $ | 2,858 | | Adjusted taxable-equivalent revenue (non-GAAP) | (h-i)=(j) | $ | 790 | | | $ | 850 | | | $ | 763 | | | $ | 1,640 | | | $ | 1,468 | | | $ | 3,188 | |
| Pre-provision net revenue (non-GAAP) | Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 359 | | | $ | 310 | | | $ | 272 | | | $ | 899 | | | $ | 898 | | | $ | 1,202 | | Pre-provision net revenue (non-GAAP) | (h)-(a) | $ | 283 | | | $ | 336 | | | $ | 310 | | | $ | 619 | | | $ | 540 | | | $ | 1,311 | |
| Adjusted PPNR (non-GAAP) | Adjusted PPNR (non-GAAP) | (j)-(c) | 351 | | | 300 | | | 290 | | | 892 | | | 833 | | | 1,121 | | Adjusted PPNR (non-GAAP) | (j)-(c) | 296 | | | 341 | | | 300 | | | 637 | | | 541 | | | 1,312 | |
| Efficiency ratio (non-GAAP) | Efficiency ratio (non-GAAP) | (c/j) | 57.6 | % | | 60.7 | % | | 59.8 | % | | 61.1 | % | | 60.8 | % | | 60.8 | % | Efficiency ratio (non-GAAP) | (c/j) | 62.5 | % | | 59.9 | % | | 60.7 | % | | 61.2 | % | | 63.1 | % | | 58.8 | % |
1Represents a valuation adjustment related to the termination of our defined benefit pension plan.
2 The success fee accrual is associated with the gains/(losses)gains and losses from our SBIC investments, which are excluded from the efficiency ratio through securities gains (losses), net.
32 Excluding the $6$13 million equity investment valuation lossgain on sale of bank-owned premises recorded in dividends and other income, the efficiency ratio for the three months and ninesix months ended SeptemberJune 30, 20222023 would have been 57.2%63.6% and 61.0%61.6%, respectively.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
CONSOLIDATED BALANCE SHEETS | | (In millions, shares in thousands) | (In millions, shares in thousands) | September 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 | $ | 549 | | | $ | 595 | | Cash and due from banks | $ | 701 | | | $ | 657 | |
| Money market investments: | Money market investments: | | Money market investments: | |
| Interest-bearing deposits | Interest-bearing deposits | 1,291 | | | 10,283 | | Interest-bearing deposits | 1,531 | | | 1,340 | |
| Federal funds sold and security resell agreements | 2,797 | | | 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 $379 and $443 at fair value ) | 423 | | | 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 | 23,233 | | | 24,048 | | Available-for-sale, at fair value | 10,832 | | | 11,915 | |
| Trading account, at fair value | 526 | | | 372 | | |
| Trading, at fair value | | Trading, at fair value | 32 | | | 465 | |
| | Total securities | 24,182 | | | 24,861 | | |
| Total investment securities | | Total investment securities | 21,617 | | | 23,506 | |
| Loans held for sale | Loans held for sale | 25 | | | 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 | 53,918 | | | 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 | 541 | | | 513 | | Less allowance for loan and lease losses | 651 | | | 575 | |
| Loans held for investment, net of allowance | Loans held for investment, net of allowance | 53,377 | | | 50,338 | | Loans held for investment, net of allowance | 56,266 | | | 55,078 | |
| Other noninterest-bearing investments | Other noninterest-bearing investments | 983 | | | 851 | | Other noninterest-bearing investments | 956 | | | 1,130 | |
| Premises, equipment and software, net | Premises, equipment and software, net | 1,388 | | | 1,319 | | Premises, equipment and software, net | 1,414 | | | 1,408 | |
| Goodwill and intangibles | Goodwill and intangibles | 1,034 | | | 1,015 | | Goodwill and intangibles | 1,062 | | | 1,065 | |
| Other real estate owned | Other real estate owned | 3 | | | 8 | | Other real estate owned | 3 | | | 3 | |
| Other assets | Other assets | 2,845 | | | 1,714 | | Other assets | 2,863 | | | 2,924 | |
| Total assets | Total assets | $ | 88,474 | | | $ | 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 | $ | 39,133 | | | $ | 41,053 | | Noninterest-bearing demand | $ | 28,670 | | | $ | 35,777 | |
| Interest-bearing: | Interest-bearing: | | Interest-bearing: | |
| Savings and money market | Savings and money market | 35,389 | | | 40,114 | | Savings and money market | 33,394 | | | 33,566 | |
| Time | Time | 1,473 | | | 1,622 | | Time | 12,259 | | | 2,309 | |
| | Total deposits | Total deposits | 75,995 | | | 82,789 | | Total deposits | 74,323 | | | 71,652 | |
| Federal funds purchased and other short-term borrowings | 5,363 | | | 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 | 647 | | | 1,012 | | Long-term debt | 538 | | | 651 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 49 | | | 40 | | Reserve for unfunded lending commitments | 60 | | | 61 | |
| Other liabilities | Other liabilities | 1,724 | | | 993 | | Other liabilities | 1,513 | | | 1,871 | |
| Total liabilities | Total liabilities | 83,778 | | | 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 149,611 and 151,625 shares) and additional paid-in capital | 1,799 | | | 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 | 5,597 | | | 5,175 | | Retained earnings | 6,051 | | | 5,811 | |
| Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (3,140) | | | (80) | | Accumulated other comprehensive income (loss) | (2,930) | | | (3,112) | |
| | Total shareholders’ equity | Total shareholders’ equity | 4,696 | | | 7,463 | | Total shareholders’ equity | 5,283 | | | 4,893 | |
| Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 88,474 | | | $ | 93,200 | | Total liabilities and shareholders’ equity | $ | 87,230 | | | $ | 89,545 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited) | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (In millions, except shares and per share amounts) | 2022 | | 2021 | | 2022 | | 2021 |
| Interest income: | | | | | | | |
| Interest and fees on loans | $ | 551 | | | $ | 484 | | | $ | 1,456 | | | $ | 1,464 | |
| Interest on money market investments | 24 | | | 7 | | | 42 | | | 14 | |
| Interest on securities | 132 | | | 78 | | | 372 | | | 223 | |
| Total interest income | 707 | | | 569 | | | 1,870 | | | 1,701 | |
| Interest expense: | | | | | | | |
| Interest on deposits | 19 | | | 7 | | | 32 | | | 23 | |
| Interest on short- and long-term borrowings | 25 | | | 7 | | | 38 | | | 23 | |
| Total interest expense | 44 | | | 14 | | | 70 | | | 46 | |
| Net interest income | 663 | | | 555 | | | 1,800 | | | 1,655 | |
| Provision for credit losses: | | | | | | | |
| Provision for loan and lease losses | 60 | | | (45) | | | 70 | | | (281) | |
| Provision for unfunded lending commitments | 11 | | | (1) | | | 9 | | | (20) | |
| | | | | | | |
| Total provision for credit losses | 71 | | | (46) | | | 79 | | | (301) | |
| Net interest income after provision for credit losses | 592 | | | 601 | | | 1,721 | | | 1,956 | |
| Noninterest income: | | | | | | | |
| Commercial account fees | 40 | | | 34 | | | 118 | | | 100 | |
| Card fees | 27 | | | 25 | | | 77 | | | 70 | |
| Retail and business banking fees | 17 | | | 20 | | | 57 | | | 55 | |
| Loan-related fees and income | 18 | | | 27 | | | 61 | | | 73 | |
| Capital markets and foreign exchange fees | 25 | | | 17 | | | 61 | | | 49 | |
| Wealth management fees | 14 | | | 13 | | | 41 | | | 37 | |
| Other customer-related fees | 15 | | | 15 | | | 46 | | | 39 | |
| Customer-related noninterest income | 156 | | | 151 | | | 461 | | | 423 | |
| Fair value and nonhedge derivative income | 4 | | | 2 | | | 20 | | | 15 | |
| Dividends and other income (loss) | (1) | | | 9 | | | 8 | | | 24 | |
| Securities gains (losses), net | 6 | | | (23) | | | (10) | | | 51 | |
| Total noninterest income | 165 | | | 139 | | | 479 | | | 513 | |
| Noninterest expense: | | | | | | | |
| Salaries and employee benefits | 312 | | | 285 | | | 931 | | | 845 | |
| Technology, telecom, and information processing | 53 | | | 50 | | | 158 | | | 148 | |
| Occupancy and equipment, net | 38 | | | 37 | | | 112 | | | 115 | |
| Professional and legal services | 14 | | | 17 | | | 42 | | | 56 | |
| Marketing and business development | 11 | | | 9 | | | 28 | | | 22 | |
| Deposit insurance and regulatory expense | 13 | | | 8 | | | 36 | | | 25 | |
| Credit-related expense | 8 | | | 7 | | | 22 | | | 19 | |
| Other real estate expense, net | — | | | — | | | 1 | | | — | |
| Other | 30 | | | 16 | | | 77 | | | 62 | |
| Total noninterest expense | 479 | | | 429 | | | 1,407 | | | 1,292 | |
| Income before income taxes | 278 | | | 311 | | | 793 | | | 1,177 | |
| Income taxes | 61 | | | 71 | | | 170 | | | 261 | |
| Net income | 217 | | | 240 | | | 623 | | | 916 | |
| | | | | | | |
| | | | | | | |
| Preferred stock dividends | (6) | | | (6) | | | (22) | | | (23) | |
| | | | | | | |
| Net earnings applicable to common shareholders | $ | 211 | | | $ | 234 | | | $ | 601 | | | $ | 893 | |
| Weighted average common shares outstanding during the period: | | | | | | | |
| Basic shares (in thousands) | 149,628 | | | 160,221 | | | 150,510 | | | 162,159 | |
| Diluted shares (in thousands) | 149,792 | | | 160,480 | | | 150,766 | | | 162,460 | |
| Net earnings per common share: | | | | | | | |
| Basic | $ | 1.40 | | | $ | 1.45 | | | $ | 3.96 | | | $ | 5.44 | |
| Diluted | 1.40 | | | 1.45 | | | 3.96 | | | 5.43 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| Net income for the period | $ | 217 | | | $ | 240 | | | $ | 623 | | | $ | 916 | |
| Other comprehensive income (loss), net of tax: | | | | | | | |
| Net unrealized holding losses on investment securities | (909) | | | (95) | | | (2,729) | | | (225) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net unrealized gains (losses) on other noninterest-bearing investments | (1) | | | — | | | (2) | | | 3 | |
| Net unrealized holding losses on derivative instruments | (138) | | | (4) | | | (322) | | | (4) | |
| Reclassification adjustment for decrease (increase) in interest income recognized in earnings on derivative instruments | 8 | | | (12) | | | (7) | | | (35) | |
| | | | | | | |
| Other comprehensive income (loss) | (1,040) | | | (111) | | | (3,060) | | | (261) | |
| Comprehensive income (loss) | $ | (823) | | | $ | 129 | | | $ | (2,437) | | | $ | 655 | |
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 June 30, 2022 | $ | 440 | | | 150,471 | | | $ | — | | | $ | 1,845 | | | $ | 5,447 | | | | $ | (2,100) | | | | $ | 5,632 | |
| Net income for the period | | | | | | | | | 217 | | | | | | | 217 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | | (1,040) | | | | (1,040) | |
| | | | | | | | | | | | | | | |
| Bank common stock repurchased | | | (888) | | | | | (50) | | | | | | | | | (50) | |
| | | | | | | | | | | | | | | |
| Net activity under employee plans and related tax benefits | | | 28 | | | | | 4 | | | | | | | | | 4 | |
| Dividends on preferred stock | | | | | | | | | (6) | | | | | | | (6) | |
| Dividends on common stock, $0.41 per share | | | | | | | | | (61) | | | | | | | (61) | |
| | | | | | | | | | | | | | | |
| Balance at September 30, 2022 | $ | 440 | | | 149,611 | | | $ | — | | | $ | 1,799 | | | $ | 5,597 | | | | $ | (3,140) | | | | $ | 4,696 | |
| | | | | | | | | | | | | | | |
| Balance at June 30, 2021 | $ | 440 | | | 162,248 | | | $ | — | | | $ | 2,565 | | | $ | 4,853 | | | | $ | 175 | | | | $ | 8,033 | |
| Net income for the period | | | | | | | | | 240 | | | | | | | 240 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | | (111) | | | | (111) | |
| | | | | | | | | | | | | | | |
| Bank common stock repurchased | | | (5,772) | | | | | (325) | | | | | | | | | (325) | |
| | | | | | | | | | | | | | | |
| Net activity under employee plans and related tax benefits | | | 54 | | | | | 5 | | | | | | | | | 5 | |
| Dividends on preferred stock | | | | | | | | | (6) | | | | | | | (6) | |
| Dividends on common stock, $0.38 per share | | | | | | | | | (62) | | | | | | | (62) | |
| | | | | | | | | | | | | | | |
| Balance at September 30, 2021 | $ | 440 | | | 156,530 | | | $ | — | | | $ | 2,245 | | | $ | 5,025 | | | | $ | 64 | | | | $ | 7,774 | |
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, 2021 | $ | 440 | | | 151,625 | | | $ | — | | | $ | 1,928 | | | $ | 5,175 | | | | $ | (80) | | | | $ | 7,463 | |
| Net income for the period | | | | | | | | | 623 | | | | | | | 623 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | | (3,060) | | | | (3,060) | |
| | | | | | | | | | | | | | | |
| Bank common stock repurchased | | | (2,602) | | | | | (151) | | | | | | | | | (151) | |
| | | | | | | | | | | | | | | |
| Net activity under employee plans and related tax benefits | | | 588 | | | | | 22 | | | | | | | | | 22 | |
| Dividends on preferred stock | | | | | | | | | (22) | | | | | | | (22) | |
| Dividends on common stock, $1.17 per share | | | | | | | | | (178) | | | | | | | (178) | |
| Change in deferred compensation | | | | | | | | | (1) | | | | | | | (1) | |
| Balance at September 30, 2022 | $ | 440 | | | 149,611 | | | $ | — | | | $ | 1,799 | | | $ | 5,597 | | | | $ | (3,140) | | | | $ | 4,696 | |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | $ | 566 | | | 164,090 | | | $ | — | | | $ | 2,686 | | | $ | 4,309 | | | | $ | 325 | | | | $ | 7,886 | |
| Net income for the period | | | | | | | | | 916 | | | | | | | 916 | |
| Other comprehensive loss, net of tax | | | | | | | | | | | | (261) | | | | (261) | |
| Preferred stock redemption | (126) | | | | | | | 3 | | (3) | | | | | | | (126) | |
| Bank common stock repurchased | | | (8,519) | | | | | (475) | | | | | | | | | (475) | |
| | | | | | | | | | | | | | | |
| Net activity under employee plans and related tax benefits | | | 959 | | | | | 31 | | | | | | | | | 31 | |
| Dividends on preferred stock | | | | | | | | | (23) | | | | | | | (23) | |
| Dividends on common stock, $1.06 per share | | | | | | | | | (174) | | | | | | | (174) | |
| | | | | | | | | | | | | | | |
| Balance at September 30, 2021 | $ | 440 | | | 156,530 | | | $ | — | | | $ | 2,245 | | | $ | 5,025 | | | | $ | 64 | | | | $ | 7,774 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited) | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| (In millions, except shares and per share amounts) | 2023 | | 2022 | | 2023 | | 2022 |
| Interest income: | | | | | | | |
| Interest and fees on loans | $ | 791 | | | $ | 468 | | | $ | 1,517 | | | $ | 905 | |
| Interest on money market investments | 48 | | | 12 | | | 105 | | | 18 | |
| Interest on securities | 138 | | | 128 | | | 275 | | | 240 | |
| Total interest income | 977 | | | 608 | | | 1,897 | | | 1,163 | |
| Interest expense: | | | | | | | |
| Interest on deposits | 220 | | | 7 | | | 302 | | | 13 | |
| Interest on short- and long-term borrowings | 166 | | | 8 | | | 325 | | | 13 | |
| Total interest expense | 386 | | | 15 | | | 627 | | | 26 | |
| Net interest income | 591 | | | 593 | | | 1,270 | | | 1,137 | |
| Provision for credit losses: | | | | | | | |
| Provision for loan and lease losses | 46 | | | 39 | | | 92 | | | 10 | |
| Provision for unfunded lending commitments | — | | | 2 | | | (1) | | | (2) | |
| | | | | | | |
| Total provision for credit losses | 46 | | | 41 | | | 91 | | | 8 | |
| Net interest income after provision for credit losses | 545 | | | 552 | | | 1,179 | | | 1,129 | |
| Noninterest income: | | | | | | | |
| Commercial account fees | 45 | | | 37 | | | 88 | | | 78 | |
| Card fees | 25 | | | 25 | | | 49 | | | 50 | |
| Retail and business banking fees | 16 | | | 20 | | | 32 | | | 40 | |
| Loan-related fees and income | 19 | | | 21 | | | 40 | | | 43 | |
| Capital markets fees | 27 | | | 21 | | | 44 | | | 36 | |
| Wealth management fees | 14 | | | 13 | | | 29 | | | 27 | |
| Other customer-related fees | 16 | | | 17 | | | 31 | | | 31 | |
| Customer-related noninterest income | 162 | | | 154 | | | 313 | | | 305 | |
| Fair value and nonhedge derivative income | 1 | | | 10 | | | (2) | | | 16 | |
| Dividends and other income (loss) | 26 | | | 7 | | | 37 | | | 9 | |
| Securities gains (losses), net | — | | | 1 | | | 1 | | | (16) | |
| Total noninterest income | 189 | | | 172 | | | 349 | | | 314 | |
| Noninterest expense: | | | | | | | |
| Salaries and employee benefits | 324 | | | 307 | | | 663 | | | 619 | |
| Technology, telecom, and information processing | 58 | | | 53 | | | 113 | | | 105 | |
| Occupancy and equipment, net | 40 | | | 36 | | | 80 | | | 74 | |
| Professional and legal services | 16 | | | 14 | | | 29 | | | 28 | |
| Marketing and business development | 13 | | | 9 | | | 25 | | | 17 | |
| Deposit insurance and regulatory expense | 22 | | | 13 | | | 40 | | | 23 | |
| Credit-related expense | 7 | | | 7 | | | 13 | | | 14 | |
| Other real estate expense, net | — | | | — | | | — | | | 1 | |
| Other | 28 | | | 25 | | | 57 | | | 47 | |
| Total noninterest expense | 508 | | | 464 | | | 1,020 | | | 928 | |
| Income before income taxes | 226 | | | 260 | | | 508 | | | 515 | |
| Income taxes | 51 | | | 57 | | | 129 | | | 109 | |
| Net income | 175 | | | 203 | | | 379 | | | 406 | |
| | | | | | | |
| | | | | | | |
| Preferred stock dividends | (9) | | | (8) | | | (15) | | | (16) | |
| | | | | | | |
| Net earnings applicable to common shareholders | $ | 166 | | | $ | 195 | | | $ | 364 | | | $ | 390 | |
| Weighted average common shares outstanding during the period: | | | | | | | |
| Basic shares (in thousands) | 147,692 | | | 150,635 | | | 147,852 | | | 150,958 | |
| Diluted shares (in thousands) | 147,696 | | | 150,838 | | | 147,865 | | | 151,264 | |
| Net earnings per common share: | | | | | | | |
| Basic | $ | 1.11 | | | $ | 1.29 | | | $ | 2.44 | | | $ | 2.56 | |
| Diluted | 1.11 | | | 1.29 | | | 2.44 | | | 2.56 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | (In millions) | (In millions) | | Nine Months Ended
September 30, | (In millions) | | Six Months Ended
June 30, |
| 2022 | | 2021 | (In millions) | | 2023 | | 2022 |
| CASH FLOWS FROM OPERATING ACTIVITIES | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | |
| Net income for the period | Net income for the period | | $ | 623 | | | $ | 916 | | Net income for the period | | $ | 379 | | | $ | 406 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | | Adjustments to reconcile net income to net cash provided by operating activities: | | |
| | Provision for credit losses | Provision for credit losses | | 79 | | | (301) | | Provision for credit losses | | 91 | | | 8 | |
| Depreciation and amortization | Depreciation and amortization | | 79 | | | (22) | | Depreciation and amortization | | 72 | | | 45 | |
| Share-based compensation | Share-based compensation | | 25 | | | 23 | | Share-based compensation | | 24 | | | 22 | |
| Deferred income tax expense | | 15 | | | 108 | | |
| Net increase in trading securities | | (154) | | | (39) | | |
| Net decrease in loans held for sale | | 51 | | | 13 | | |
| Deferred income tax expense (benefit) | | Deferred income tax expense (benefit) | | (13) | | | 29 | |
| Net decrease in trading securities | | Net decrease in trading securities | | 433 | | | 67 | |
| Net decrease (increase) in loans held for sale | | Net decrease (increase) in loans held for sale | | (25) | | | 42 | |
| Change in other liabilities | Change in other liabilities | | 745 | | | 14 | | Change in other liabilities | | (363) | | | 389 | |
| Change in other assets | Change in other assets | | (467) | | | (177) | | Change in other assets | | 164 | | | (205) | |
| Other, net | Other, net | | (20) | | | (72) | | Other, net | | 57 | | | 1 | |
| Net cash provided by operating activities | Net cash provided by operating activities | | 976 | | | 463 | | Net cash provided by operating activities | | 819 | | | 804 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | |
| Net decrease (increase) in money market investments | | 8,328 | | | (4,461) | | |
| Net decrease in money market investments | | Net decrease in money market investments | | 1,454 | | | 8,895 | |
| Proceeds from maturities and paydowns of investment securities held-to-maturity | Proceeds from maturities and paydowns of investment securities held-to-maturity | | 250 | | | 433 | | Proceeds from maturities and paydowns of investment securities held-to-maturity | | 526 | | | 48 | |
| Purchases of investment securities held-to-maturity | Purchases of investment securities held-to-maturity | | (232) | | | (256) | | Purchases of investment securities held-to-maturity | | (21) | | | (220) | |
| Proceeds from sales, maturities and paydowns of investment securities available-for-sale | | 2,743 | | | 3,611 | | |
| Proceeds from sales, maturities, and paydowns of investment securities available-for-sale | | Proceeds from sales, maturities, and paydowns of investment securities available-for-sale | | 1,328 | | | 1,915 | |
| Purchases of investment securities available-for-sale | Purchases of investment securities available-for-sale | | (5,829) | | | (8,730) | | Purchases of investment securities available-for-sale | | (301) | | | (5,773) | |
| Net change in loans and leases | Net change in loans and leases | | (3,026) | | | 2,957 | | Net change in loans and leases | | (1,311) | | | (1,476) | |
| Purchases and sales of other noninterest-bearing investments | Purchases and sales of other noninterest-bearing investments | | (147) | | | 18 | | Purchases and sales of other noninterest-bearing investments | | 176 | | | (1) | |
| Purchases of premises and equipment | Purchases of premises and equipment | | (154) | | | (153) | | Purchases of premises and equipment | | (53) | | | (102) | |
| | Other, net | Other, net | | 21 | | | 8 | | Other, net | | (18) | | | 11 | |
| Net cash provided by (used in) investing activities | | 1,954 | | | (6,573) | | |
| Net cash provided by investing activities | | Net cash provided by investing activities | | 1,780 | | | 3,297 | |
| CASH FLOWS FROM FINANCING ACTIVITIES | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | |
| Net (decrease) increase in deposits | | (6,794) | | | 8,230 | | |
| Net change in short-term funds borrowed | | 4,461 | | | (993) | | |
| Net increase (decrease) in deposits | | Net increase (decrease) in deposits | | 2,671 | | | (3,728) | |
| Net change in short-term borrowed funds | | Net change in short-term borrowed funds | | (4,904) | | | 115 | |
| | Cash paid for preferred stock redemption | | — | | | (126) | | |
| | | Redemption of long-term debt | Redemption of long-term debt | | (290) | | | (281) | | Redemption of long-term debt | | (128) | | | (290) | |
| | Proceeds from the issuance of common stock | Proceeds from the issuance of common stock | | 8 | | | 17 | | Proceeds from the issuance of common stock | | 2 | | | 8 | |
| Dividends paid on common and preferred stock | Dividends paid on common and preferred stock | | (200) | | | (199) | | Dividends paid on common and preferred stock | | (138) | | | (130) | |
| Bank common stock repurchased | Bank common stock repurchased | | (151) | | | (475) | | Bank common stock repurchased | | (50) | | | (101) | |
| Other, net | Other, net | | (10) | | | (9) | | Other, net | | (8) | | | (11) | |
| Net cash (used in) provided by financing activities | | (2,976) | | | 6,164 | | |
| Net decrease in cash and due from banks | | (46) | | | 54 | | |
| Net cash used in financing activities | | Net cash used in financing activities | | (2,555) | | | (4,137) | |
| Net increase (decrease) in cash and due from banks | | Net increase (decrease) in cash and due from banks | | 44 | | | (36) | |
| Cash and due from banks at beginning of period | Cash and due from banks at beginning of period | | 595 | | | 543 | | Cash and due from banks at beginning of period | | 657 | | | 595 | |
| Cash and due from banks at end of period | Cash and due from banks at end of period | | $ | 549 | | | $ | 597 | | Cash and due from banks at end of period | | $ | 701 | | | $ | 559 | |
| Cash paid for interest | Cash paid for interest | | $ | 63 | | | $ | 61 | | Cash paid for interest | | $ | 546 | | | $ | 31 | |
| Net cash paid for income taxes | Net cash paid for income taxes | | 5 | | | 442 | | Net cash paid for income taxes | | 231 | | | 4 | |
| Noncash activities are summarized as follows: | | | |
| Loans held for investment transferred to other real estate owned | | — | | | 22 | | |
| Noncash activities: | | Noncash activities: | | |
| | Loans held for investment reclassified to loans held for sale, net | Loans held for investment reclassified to loans held for sale, net | | 100 | | | 55 | | Loans held for investment reclassified to loans held for sale, net | | 49 | | | 61 | |
See accompanying notes to consolidated financial statements.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
SeptemberJune 30, 20222023
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Zions Bancorporation, National Association and its majority-owned subsidiaries (collectively “Zions Bancorporation, N.A.,” “the Bank,” “we,” “our,” “us”) have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. References to GAAP, including standards promulgated by the Financial Accounting Standards Board (“FASB”), are made according to sections of the Accounting Standards Codification (“ASC”).
The results of operations for the ninethree and six months ended SeptemberJune 30, 20222023 and 20212022 are not necessarily indicative of the results that may be expected in future periods. In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. For further information, refer to the consolidated financial statements and accompanying footnotes included in our 20212022 Form 10-K. Certain prior period amounts have been reclassified to conform with 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 SeptemberJune 30, 20222023 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 57 of the Notes to Consolidated Financial Statements, we transferred pass-through mortgage-backed available-for-sale (“AFS”) securities to the held-to-maturity (“HTM”) category to reflect our new intent for these securitiesentered 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 October 2022.July 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 seven 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
2. RECENT ACCOUNTING PRONOUNCEMENTS
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| Standard | | Description | | Date of adoption | | Effect on the financial statements or other significant matters |
| | | | | | |
| Standards not yet adopted by the Bank |
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ASU 2022-02,2023-02, Financial Instruments—Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage DisclosuresStructures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)
| | This accounting standards updateAccounting Standards Update (“ASU”) eliminatesexpands the recognitionoptional use of the proportional amortization method (“PAM”), previously limited to investments in low-income housing tax credit (“LIHTC”) structures, to any eligible equity investments made primarily for the purpose of receiving income tax credit and measurement guidanceother tax benefits when certain criteria are met. PAM results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of income tax expense (benefit). This ASU allows for an accounting policy election to apply PAM on troubled debt restructurings (“TDRs”)a tax-credit-program-by-tax-credit-program basis. The ASU also includes additional disclosure requirements about equity investments accounted for creditors that have adopted ASC 326 (“CECL”), and eliminates certain existing TDR disclosures while requiring enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The new standard 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.using PAM.
The new standard is effective for calendar year-end public companies beginning January 1, 2023,2024, with early adoption permitted. | | Periods beginning after December 15, 20222023 | | We do not currently have established an implementation teamany additional equity investments that are eligible for PAM under the provisions of this ASU. We will continue to ensure that the necessary data is captured in order to comply with theevaluate its use for new disclosure requirements.investments. The overall effect of this standardthe guidance is not expected to have a material impact on our financial statements. We do not plan to early adopt this new standard. |
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ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
| | This ASU clarifies that contractual restrictions prohibiting the sale of an equity security are not considered part of the unit of account of the equity security, and therefore, are not considered in measuring fair value. The amendments clarify that an entity cannot recognize and measure a contractual sale restriction as a separate unit of account. The amendments in this ASU also require additional qualitative and quantitative disclosures for equity securities subject to contractual sale restrictions.
The new standard is effective for calendar year-end public companies beginning January 1, 2024, with early adoption permitted. | | Periods beginning after December 15, 2023 | | The requirements of this ASU are consistent with our current treatment of equity securities subject to contractual sale restrictions and are not expected to impact the fair value measurements of these securities.
We are evaluating supplementary disclosure requirements and additional data needed to meet these requirements. The overall effect of this standard is not expected to have a material impact on our financial statements.
We do not plan to early adopt this new standard. |
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| Standards adopted by the Bank |
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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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ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
3. FAIR VALUE
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For more information about our valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 3 of our 20212022 Form 10-K.
Quantitative Disclosure by Fair Value Hierarchy
AssetsThe following schedule presents assets and liabilities measured at fair value by class on a recurring basis are summarized as follows:basis:
| | (In millions) | (In millions) | September 30, 2022 | (In millions) | June 30, 2023 |
| 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 | $ | 394 | | | $ | 21,139 | | | $ | — | | | $ | 21,533 | | |
| U.S. Treasury, agencies, and corporations | | U.S. Treasury, agencies, and corporations | $ | 475 | | | $ | 8,943 | | | $ | — | | | $ | 9,418 | |
| Municipal securities | Municipal securities | | 1,626 | | | 1,626 | | Municipal securities | | 1,391 | | | 1,391 | |
| | Other debt securities | Other debt securities | | 74 | | | 74 | | Other debt securities | | 23 | | | 23 | |
| Total available-for-sale | Total available-for-sale | 394 | | | 22,839 | | | — | | | 23,233 | | Total available-for-sale | 475 | | | 10,357 | | | — | | | 10,832 | |
| Trading account | 221 | | | 305 | | | 526 | | |
| Trading securities | | Trading securities | | 32 | | | 32 | |
| Other noninterest-bearing investments: | Other noninterest-bearing investments: | | Other noninterest-bearing investments: | |
| Bank-owned life insurance | Bank-owned life insurance | | 543 | | | 543 | | Bank-owned life insurance | | 549 | | | 549 | |
Private equity investments 1 | Private equity investments 1 | 5 | | | 81 | | | 86 | | Private equity investments 1 | 3 | | | 84 | | | 87 | |
| Other assets: | Other assets: | | Other assets: | |
| Agriculture loan servicing and interest-only strips | Agriculture loan servicing and interest-only strips | | 12 | | | 12 | | Agriculture loan servicing and interest-only strips | | 17 | | | 17 | |
| Loans held for sale | | Loans held for sale | | 20 | | | 20 | |
| Deferred compensation plan assets | Deferred compensation plan assets | 118 | | | 118 | | Deferred compensation plan assets | 114 | | | 114 | |
| Derivatives: | | |
| Derivatives designated as hedges | | 83 | | | 83 | | |
| Derivatives not designated as hedges | | 212 | | | 212 | | |
| Derivatives | | Derivatives | | 491 | | | 491 | |
| Total assets | Total assets | $ | 738 | | | $ | 23,982 | | | $ | 93 | | | $ | 24,813 | | Total assets | $ | 592 | | | $ | 11,449 | | | $ | 101 | | | $ | 12,142 | |
| LIABILITIES | LIABILITIES | | | | | | | | LIABILITIES | | | | | | | |
| Securities sold, not yet purchased | Securities sold, not yet purchased | $ | 34 | | | $ | — | | | $ | — | | | $ | 34 | | Securities sold, not yet purchased | $ | 347 | | | $ | — | | | $ | — | | | $ | 347 | |
| Other liabilities: | Other liabilities: | | Other liabilities: | |
| Derivatives: | | |
| Derivatives designated as hedges | | 2 | | | 2 | | |
| Derivatives not designated as hedges | | 489 | | | 489 | | |
| Derivatives | | Derivatives | | 409 | | | 409 | |
| Total liabilities | Total liabilities | $ | 34 | | | $ | 491 | | | $ | — | | | $ | 525 | | 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | (In millions) | (In millions) | December 31, 2021 | (In millions) | December 31, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Total | Level 1 | | Level 2 | | Level 3 | | Total |
| ASSETS | ASSETS | | | | | | | | ASSETS | | | | | | | |
| Available-for-sale securities: | Available-for-sale securities: | | Available-for-sale securities: | |
| U.S. Treasury, agencies and corporations | $ | 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 | | 1,694 | | | 1,694 | | Municipal securities | | 1,634 | | | 1,634 | |
| | Other debt securities | Other debt securities | | 76 | | | 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 | | | 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 | | 537 | | | 537 | | Bank-owned life insurance | | 546 | | | 546 | |
Private equity investments 1 | Private equity investments 1 | 35 | | | 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 | | 12 | | | 12 | | Agriculture loan servicing and interest-only strips | | 14 | | | 14 | |
| Deferred compensation plan assets | Deferred compensation plan assets | 138 | | | 138 | | Deferred compensation plan assets | 114 | | | 114 | |
| Derivatives: | | |
| Derivatives designated as hedges | | 10 | | | 10 | | |
| Derivatives not designated as hedges | | 209 | | | 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 | | 51 | | | 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 holdingsfinancial 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 20212022 Form 10-K.
Rollforward of Level 3 Fair Value Measurements
The following schedule presents a rollforward of assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs:
| | | Level 3 Instruments | | Level 3 Instruments |
| | Three Months Ended | | | Nine Months Ended | | | Three Months Ended | | | Six Months Ended | |
| | September 30, 2022 | | September 30, 2021 | | | September 30, 2022 | | September 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 | $ | 77 | | | $ | 12 | | | $ | 72 | | | $ | 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 | 2 | | | — | | | 10 | | | — | | | | 7 | | | — | | | 79 | | | — | | | Unrealized securities gains (losses), net | (3) | | | — | | | — | | | — | | | | (3) | | | — | | | 5 | | | — | | |
| Other noninterest income (expense) | Other noninterest income (expense) | — | | | — | | | — | | | (1) | | | | — | | | — | | | — | | | (2) | | | Other noninterest income (expense) | — | | | (1) | | | — | | | — | | | | — | | | 3 | | | — | | | — | | |
| Purchases | Purchases | 2 | | | — | | | 4 | | | — | | | | 11 | | | — | | | 10 | | | — | | | Purchases | 5 | | | — | | | 3 | | | — | | | | 6 | | | — | | | 9 | | | — | | |
| Cost of investments sold | Cost of investments sold | — | | | — | | | (13) | | | — | | | | (3) | | | — | | | (19) | | | — | | | Cost of investments sold | — | | | — | | | — | | | — | | | | — | | | — | | | (3) | | | — | | |
| Transfers out 1 | Transfers out 1 | — | | | — | | | (1) | | | — | | | | — | | | — | | | (78) | | | — | | | Transfers out 1 | — | | | — | | | — | | | — | | | | — | | | — | | | — | | | — | | |
| Balance at end of period | Balance at end of period | $ | 81 | | | $ | 12 | | | $ | 72 | | | $ | 14 | | | | $ | 81 | | | $ | 12 | | | $ | 72 | | | $ | 14 | | | 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 | | Nine Months Ended |
| September 30, 2022 | | September 30, 2021 | | September 30, 2022 | | September 30, 2021 |
| | | | | | | |
| | | | | | | |
| Securities gains (losses), net | $ | — | | | $ | (6) | | | $ | (2) | | | $ | (11) | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| (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 recordedmeasured at fair value on a nonrecurring basis, including impaired loans that have been measured based on the fair value of the underlying collateral, other real estate owned (“OREO”), and nonmarketable equity securities.investments without readily determinable fair values. Nonrecurring fair value adjustments typically involvegenerally include changes in value resulting from observable price changes for equity investments without readily determinable fair values, write-downs of individual assets, or the application of lower of cost or fair value accounting. At SeptemberJune 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 20212022 Form 10-K.
Fair Value of Certain Financial Instruments
The following schedule summarizespresents the carrying values and estimated fair values of certain financial instruments: | | | | September 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: | | | | | | | | | | | | |
| Held-to-maturity investment securities | Held-to-maturity investment securities | $ | 423 | | | $ | 379 | | | 2 | | $ | 441 | | | $ | 443 | | | 2 | | 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 | 53,402 | | | 51,735 | | | 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 | 1,473 | | | 1,433 | | | 2 | | 1,622 | | | 1,624 | | | 2 | | Time deposits | 12,259 | | | 12,187 | | | 2 | | 2,309 | | | 2,269 | | | 2 | |
| | Other short-term borrowings | 3,500 | | | 3,500 | | | 2 | | — | | | — | | | 2 | | |
| | Long-term debt | Long-term debt | 647 | | | 628 | | | 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 andThe 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 20212022 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
4. OFFSETTING ASSETS AND LIABILITIES
GrossThe following schedules present gross and net information for selected financial instruments inon the balance sheet is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 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 | | $ | 2,797 | | | $ | — | | | $ | 2,797 | | | $ | — | | | $ | — | | | $ | 2,797 | |
| Derivatives (included in other assets) | | 295 | | | — | | | 295 | | | (10) | | | (159) | | | 126 | |
| Total assets | | $ | 3,092 | | | $ | — | | | $ | 3,092 | | | $ | (10) | | | $ | (159) | | | $ | 2,923 | |
| Liabilities: | | | | | | | | | | | | |
| Federal funds purchased and other short-term borrowings | | $ | 5,363 | | | $ | — | | | $ | 5,363 | | | $ | — | | | $ | — | | | $ | 5,363 | |
| Derivatives (included in other liabilities) | | 491 | | | — | | | 491 | | | (10) | | | — | | | 481 | |
| Total liabilities | | $ | 5,854 | | | $ | — | | | $ | 5,854 | | | $ | (10) | | | $ | — | | | $ | 5,844 | |
| | | 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 HTM, AFS,held-to-maturity (“HTM”), available-for-sale (“AFS”), or trading. HTM securities, which management has the intent and ability to hold until maturity, are carriedmeasured at amortized cost. The amortized cost amounts represent the original cost of the investments, adjusted for related amortization or accretion of any purchase premiums or discounts, and for any impairment losses, including credit-related impairment. When a security is transferred from AFS to HTM, the difference between its amortized cost basis and fair value at the date of transfer is amortized as a yield adjustment through interest income, and the fair value at the date of transfer results in a discount to the amortized cost basis of the HTM securities. The amortization of the unrealized losses reported in accumulated other comprehensive income (“AOCI”) will offset the effect of the accretion of the discount in interest income that is created by the transfer.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
AFS securities are carriedmeasured 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 carriedmeasured 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 $7667 million and $65$75 million at SeptemberJune 30, 20222023 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).
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
In October 2022, we transferred approximately $9.0 billion amortized cost ($7.2 billion fair value) of pass-through mortgage-backed AFS securities to the HTM category to reflect our new intent for these securities.
See Note 5 of our 2021 Form 10-K for more information regarding 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:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| (In millions) | Amortized
cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated
fair value |
| Held-to-maturity | | | | | | | |
Municipal securities 1 | $ | 423 | | | $ | — | | | $ | 44 | | | $ | 379 | |
| Available-for-sale | | | | | | | |
| U.S. Treasury securities | 557 | | | — | | | 163 | | | 394 | |
| U.S. Government agencies and corporations: | | | | | | | |
| Agency securities | 851 | | | — | | | 44 | | | 807 | |
Agency guaranteed mortgage-backed securities 1 | 23,162 | | | — | | | 3,596 | | | 19,566 | |
| Small Business Administration loan-backed securities | 793 | | | 1 | | | 28 | | | 766 | |
Municipal securities 1 | 1,780 | | | — | | | 154 | | | 1,626 | |
Other debt securities 1 | 75 | | | — | | | 1 | | | 74 | |
| Total available-for-sale | 27,218 | | | 1 | | | 3,986 | | | 23,233 | |
| Total HTM and AFS investment securities | $ | 27,641 | | | $ | 1 | | | $ | 4,030 | | | $ | 23,612 | |
1 Gross unrealized gains for these security categories were less than $1 million.
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 showspresents the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at SeptemberJune 30, 2022. Actual principal payments may differ from contractual or2023. 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 423 | | | 3.11 | % | | $ | 46 | | | 3.65 | % | | $ | 132 | | | 3.20 | % | | $ | 185 | | | 3.08 | % | | $ | 60 | | | 2.59 | % |
| Available-for-sale | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities | 557 | | | 2.05 | | | — | | | — | | | — | | | — | | | — | | | — | | | 557 | | | 2.05 | |
| U.S. Government agencies and corporations: | | | | | | | | | | | | | | | | | | | |
| Agency securities | 851 | | | 2.40 | | | 31 | | | 0.84 | | | 371 | | | 2.08 | | | 239 | | | 2.48 | | | 210 | | | 3.09 | |
| Agency guaranteed mortgage-backed securities | 23,162 | | | 1.82 | | | — | | | — | | | 370 | | | 1.70 | | | 1,725 | | | 1.97 | | | 21,067 | | | 1.81 | |
| Small Business Administration loan-backed securities | 793 | | | 2.58 | | | — | | | — | | | 52 | | | 2.73 | | | 160 | | | 3.02 | | | 581 | | | 2.44 | |
Municipal securities 1 | 1,780 | | | 2.42 | | | 112 | | | 2.18 | | | 650 | | | 2.67 | | | 710 | | | 2.17 | | | 308 | | | 2.56 | |
| Other debt securities | 75 | | | 3.46 | | | — | | | — | | | 50 | | | 1.79 | | | 10 | | | 9.52 | | | 15 | | | 4.98 | |
| Total available-for-sale securities | 27,218 | | | 1.91 | | | 143 | | | 1.89 | | | 1,493 | | | 2.25 | | | 2,844 | | | 2.15 | | | 22,738 | | | 1.86 | |
| Total HTM and AFS investment securities | $ | 27,641 | | | 1.93 | % | | $ | 189 | | | 2.32 | % | | $ | 1,625 | | | 2.33 | % | | $ | 3,029 | | | 2.21 | % | | $ | 22,798 | | | 1.86 | % |
1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.
The following schedule summarizes the amount ofpresents gross unrealized losses for debtAFS securities and the estimated fair value by length of time the securities have been in an unrealized loss position:position.
| | | September 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 | $ | 18 | | | $ | 260 | | | $ | 26 | | | $ | 96 | | | $ | 44 | | | $ | 356 | | |
| | | Available-for-sale | Available-for-sale | | | | | | | | | | | | Available-for-sale | | | | | | | | | | | |
| U.S. Treasury securities | U.S. Treasury securities | 95 | | | 306 | | | 68 | | | 88 | | | 163 | | | 394 | | 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 | 37 | | | 712 | | | 7 | | | 95 | | | 44 | | | 807 | | Agency securities | 2 | | | 33 | | | 38 | | | 617 | | | 40 | | | 650 | |
| Agency guaranteed mortgage-backed securities | Agency guaranteed mortgage-backed securities | 1,865 | | | 12,129 | | | 1,731 | | | 7,429 | | | 3,596 | | | 19,558 | | 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 | 7 | | | 77 | | | 21 | | | 571 | | | 28 | | | 648 | | Small Business Administration loan-backed securities | — | | | 21 | | | 27 | | | 525 | | | 27 | | | 546 | |
| Municipal securities | Municipal securities | 106 | | | 1,375 | | | 48 | | | 230 | | | 154 | | | 1,605 | | Municipal securities | 7 | | | 495 | | | 82 | | | 871 | | | 89 | | | 1,366 | |
| Other | Other | 1 | | | 13 | | | — | | | — | | | 1 | | | 13 | | Other | — | | | — | | | 2 | | | 13 | | | 2 | | | 13 | |
| | Total available-for-sale | 2,111 | | | 14,612 | | | 1,875 | | | 8,413 | | | 3,986 | | | 23,025 | | |
| | Total HTM and AFS investment securities | $ | 2,129 | | | $ | 14,872 | | | $ | 1,901 | | | $ | 8,509 | | | $ | 4,030 | | | $ | 23,381 | | |
| | 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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
ApproximatelyAt June 30, 2023 and December 31, 2022, approximately 5503,219 and 137 HTM and 4,236 and 1,3023,562 AFS investment securities were in an unrealized loss position, at September 30, 2022, and December 31, 2021, respectively.
Impairment
WeOn a quarterly basis, we review our investment securities quarterlyportfolio 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 20212022 Form 10-K.
AFS Impairment
We did not recognize any impairment on our AFS investment securities portfolio during the first ninesix 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 SeptemberJune 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 carriedmeasured at amortized cost. TheAt June 30, 2023, the ACL on HTM securities was less than $1 million, at September 30, 2022. All all HTM securities were risk-graded as “Pass” in terms of credit quality, and none were considered past due at September 30, 2022. The amortized cost basis of HTM securities categorized by year acquired is summarized in the following schedule:due. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Amortized cost basis by year acquired | | |
| (In millions) | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total Securities |
| | | | | | | | | | | | | |
| Held-to-maturity investment securities | $ | 38 | | | $ | 87 | | | $ | 117 | | | $ | 8 | | | $ | — | | | $ | 173 | | | $ | 423 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Securities Gains and Losses Recognized in Income
The following schedule summarizespresents securities gains and losses recognized in the consolidated income statement:statement.
| | | Three Months Ended September 30, | | Nine Months Ended September 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 | $ | 6 | | | $ | — | | | $ | 6 | | | $ | 29 | | | $ | 10 | | | $ | 20 | | | $ | 86 | | | $ | 35 | | | 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 | | | $ | 6 | | | | | $ | (23) | | | | | $ | (10) | | | | | $ | 51 | | | 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 September 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 | $ | 2 | | | $ | 1 | | | $ | 3 | | | $ | 3 | | | $ | 1 | | | $ | 4 | | Held-to-maturity | $ | 59 | | | $ | 1 | | | $ | 60 | | | $ | 3 | | | $ | 1 | | | $ | 4 | |
| Available-for-sale | Available-for-sale | 115 | | | 11 | | | 126 | | | 64 | | | 8 | | | 72 | | Available-for-sale | 69 | | | 8 | | | 77 | | | 109 | | | 11 | | | 120 | |
| Trading | Trading | — | | | 3 | | | 3 | | | — | | | 2 | | | 2 | | Trading | — | | | 1 | | | 1 | | | — | | | 4 | | | 4 | |
| Total securities | Total securities | $ | 117 | | | $ | 15 | | | $ | 132 | | | $ | 67 | | | $ | 11 | | | $ | 78 | | Total securities | $ | 128 | | | $ | 10 | | | $ | 138 | | | $ | 112 | | | $ | 16 | | | $ | 128 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| (In millions) | Taxable | | Nontaxable | | Total | | Taxable | | Nontaxable | | Total |
| Investment securities: | | | | | | | | | | | |
| Held-to-maturity | $ | 7 | | | $ | 3 | | | $ | 10 | | | $ | 8 | | | $ | 4 | | | $ | 12 | |
| Available-for-sale | 320 | | | 30 | | | 350 | | | 182 | | | 22 | | | 204 | |
| Trading | — | | | 12 | | | 12 | | | — | | | 7 | | | 7 | |
| Total securities | $ | 327 | | | $ | 45 | | | $ | 372 | | | $ | 190 | | | $ | 33 | | | $ | 223 | |
At September 30, 2022 and December 31, 2021, investment securities with a carrying value of $4.6 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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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) | September 30,
2022 | | December 31,
2021 | (In millions) | June 30,
2023 | | December 31,
2022 |
| | Loans held for sale | Loans held for sale | $ | 25 | | | $ | 83 | | Loans held for sale | $ | 36 | | | $ | 8 | |
| Commercial: | Commercial: | | | | Commercial: | | | |
| Commercial and industrial | $ | 15,656 | | | $ | 13,867 | | |
| PPP | 306 | | | 1,855 | | |
Commercial and industrial 1 | | Commercial and industrial 1 | $ | 16,622 | | | $ | 16,377 | |
| Leasing | Leasing | 347 | | | 327 | | Leasing | 388 | | | 386 | |
| Owner-occupied | Owner-occupied | 9,279 | | | 8,733 | | Owner-occupied | 9,328 | | | 9,371 | |
| Municipal | Municipal | 4,224 | | | 3,658 | | Municipal | 4,354 | | | 4,361 | |
| Total commercial | Total commercial | 29,812 | | | 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 | 2,800 | | | 2,757 | | Construction and land development | 2,498 | | | 2,513 | |
| Term | Term | 9,556 | | | 9,441 | | Term | 10,406 | | | 10,226 | |
| Total commercial real estate | Total commercial real estate | 12,356 | | | 12,198 | | Total commercial real estate | 12,904 | | | 12,739 | |
| Consumer: | Consumer: | | Consumer: | |
| Home equity credit line | Home equity credit line | 3,331 | | | 3,016 | | Home equity credit line | 3,291 | | | 3,377 | |
| 1-4 family residential | 1-4 family residential | 6,852 | | | 6,050 | | 1-4 family residential | 7,980 | | | 7,286 | |
| Construction and other consumer real estate | Construction and other consumer real estate | 973 | | | 638 | | Construction and other consumer real estate | 1,434 | | | 1,161 | |
| Bankcard and other revolving plans | Bankcard and other revolving plans | 471 | | | 396 | | Bankcard and other revolving plans | 466 | | | 471 | |
| Other | Other | 123 | | | 113 | | Other | 150 | | | 124 | |
| Total consumer | Total consumer | 11,750 | | | 10,213 | | Total consumer | 13,321 | | | 12,419 | |
| | Total loans and leases | Total loans and leases | $ | 53,918 | | | $ | 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 $44$38 million and $83$49 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. Amortized cost basis does not include accrued interest receivables of $196$263 million and $161$247 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. These receivables are presented in the Consolidated Balance Sheetconsolidated 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 $257$229 million at SeptemberJune 30, 20222023 and $160$262 million at December 31, 2021.2022.
Loans with a carrying value of $27.6$39.8 billion at SeptemberJune 30, 20222023 and $26.8$27.6 billion at December 31, 20212022 have been pledged at the Federal Reserve (“FRB”) and the Federal Home Loan Bank (“FHLB”) of Des Moines as collateral for current and potential borrowings.
We soldAt the time of origination, we determine the classification of loans totaling $112 million and $635 millionas either held for the three and nine months ended September 30, 2022, and $0.4 billion and $1.2 billion for the three and nine months ended September 30, 2021, that were classified as loansinvestment 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 primarilygenerally sold to U.S. government agencies or participated to third parties. They do not includeagencies. 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, loansor sold from, the held for sale category during these samethe periods were $96 million and $583 million for the three and nine months ended September 30, 2022, and $0.4presented.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
billion and $1.2 billion 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 nine months ended September 30, 2021, respectively. See Note 5sold loans in the form of the Notes to Consolidated Financial Statements for further information regarding guaranteed securities.
servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was $3.4 billion and $3.5 billion at SeptemberJune 30, 2022,2023 and $3.3 billion at December 31, 2021.2022, respectively. Income from sold loans, sold, excluding servicing, was $2 million and $12$7 million for the three and ninesix months ended SeptemberJune 30, 2022,2023, and $12$4 million and $30$10 million for the three and ninesix months ended SeptemberJune 30, 2021,2022, respectively.
Allowance for Credit Losses
The allowance for credit losses (“ACL”), which consists of the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”), represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. For additional information regarding our policies and methodologies used to estimate the ACL, see Note 6 of our 20212022 Form 10-K.
The ACL for AFS and HTM debt securities is estimated separately from loans. For HTM securities, the ACL is estimated consistent with the approach for loans carriedmeasured at amortized cost. See Note 5 of our 20212022 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 September 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 | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | | Balance at beginning of period | $ | 313 | | | $ | 160 | | | $ | 145 | | | $ | 618 | |
| Provision for loan losses | Provision for loan losses | 41 | | | 17 | | | 2 | | | 60 | | Provision for loan losses | 24 | | | 21 | | | 1 | | | 46 | |
| Gross loan and lease charge-offs | Gross loan and lease charge-offs | 37 | | | — | | | 1 | | | 38 | | Gross loan and lease charge-offs | 20 | | | — | | | 2 | | | 22 | |
| Recoveries | Recoveries | 6 | | | — | | | 5 | | | 11 | | Recoveries | 6 | | | — | | | 3 | | | 9 | |
| Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 31 | | | — | | | (4) | | | 27 | | Net loan and lease charge-offs (recoveries) | 14 | | | — | | | (1) | | | 13 | |
| Balance at end of period | Balance at end of period | $ | 296 | | | $ | 131 | | | $ | 114 | | | $ | 541 | | 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 | $ | 13 | | | $ | 15 | | | $ | 10 | | | $ | 38 | | Balance at beginning of period | $ | 19 | | | $ | 28 | | | $ | 13 | | | $ | 60 | |
| Provision for unfunded lending commitments | Provision for unfunded lending commitments | 3 | | | 7 | | | 1 | | | 11 | | Provision for unfunded lending commitments | 1 | | | 1 | | | (2) | | | — | |
| Balance at end of period | Balance at end of period | $ | 16 | | | $ | 22 | | | $ | 11 | | | $ | 49 | | 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 | $ | 296 | | | $ | 131 | | | $ | 114 | | | $ | 541 | | Allowance for loan losses | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 16 | | | 22 | | | 11 | | | 49 | | Reserve for unfunded lending commitments | 20 | | | 29 | | | 11 | | | 60 | |
| Total allowance for credit losses | Total allowance for credit losses | $ | 312 | | | $ | 153 | | | $ | 125 | | | $ | 590 | | Total allowance for credit losses | $ | 343 | | | $ | 210 | | | $ | 158 | | | $ | 711 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | Nine Months Ended September 30, 2022 | | Six 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 December 31, 2022 | | Balance at December 31, 2022 | $ | 300 | | | $ | 156 | | | $ | 119 | | | $ | 575 | |
| Adjustment for change in accounting standard | | Adjustment for change in accounting standard | — | | | (4) | | | 1 | | | (3) | |
| Balance at beginning of period | Balance at beginning of period | $ | 311 | | | $ | 107 | | | $ | 95 | | | $ | 513 | | Balance at beginning of period | $ | 300 | | | $ | 152 | | | $ | 120 | | | $ | 572 | |
| Provision for loan losses | Provision for loan losses | 29 | | | 24 | | | 17 | | | 70 | | Provision for loan losses | 34 | | | 29 | | | 29 | | | 92 | |
| Gross loan and lease charge-offs | Gross loan and lease charge-offs | 65 | | | — | | | 8 | | | 73 | | Gross loan and lease charge-offs | 23 | | | — | | | 6 | | | 29 | |
| Recoveries | Recoveries | 21 | | | — | | | 10 | | | 31 | | Recoveries | 12 | | | — | | | 4 | | | 16 | |
| Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 44 | | | — | | | (2) | | | 42 | | Net loan and lease charge-offs (recoveries) | 11 | | | — | | | 2 | | | 13 | |
| Balance at end of period | Balance at end of period | $ | 296 | | | $ | 131 | | | $ | 114 | | | $ | 541 | | 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 | $ | 19 | | | $ | 11 | | | $ | 10 | | | $ | 40 | | Balance at beginning of period | $ | 16 | | | $ | 33 | | | $ | 12 | | | $ | 61 | |
| Provision for unfunded lending commitments | Provision for unfunded lending commitments | (3) | | | 11 | | | 1 | | | 9 | | Provision for unfunded lending commitments | 4 | | | (4) | | | (1) | | | (1) | |
| Balance at end of period | Balance at end of period | $ | 16 | | | $ | 22 | | | $ | 11 | | | $ | 49 | | 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 | $ | 296 | | | $ | 131 | | | $ | 114 | | | $ | 541 | | Allowance for loan losses | $ | 323 | | | $ | 181 | | | $ | 147 | | | $ | 651 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 16 | | | 22 | | | 11 | | | 49 | | Reserve for unfunded lending commitments | 20 | | | 29 | | | 11 | | | 60 | |
| Total allowance for credit losses | Total allowance for credit losses | $ | 312 | | | $ | 153 | | | $ | 125 | | | $ | 590 | | Total allowance for credit losses | $ | 343 | | | $ | 210 | | | $ | 158 | | | $ | 711 | |
| | | Three Months Ended September 30, 2021 | | Three Months Ended June 30, 2022 |
| (In millions) | (In millions) | Commercial | | Commercial real estate | | Consumer | | Total | (In millions) | Commercial | | Commercial real estate | | Consumer | | Total |
| Allowance for loan losses | Allowance for loan losses | | | | | | | | Allowance for loan losses | | | | | | | |
| | Balance at beginning of period | Balance at beginning of period | $ | 321 | | | $ | 111 | | | $ | 103 | | | $ | 535 | | Balance at beginning of period | $ | 282 | | | $ | 102 | | | $ | 94 | | | $ | 478 | |
| Provision for loan losses | Provision for loan losses | (25) | | | (10) | | | (10) | | | (45) | | Provision for loan losses | 12 | | | 12 | | | 15 | | | 39 | |
| Gross loan and lease charge-offs | Gross loan and lease charge-offs | 4 | | | — | | | 4 | | | 8 | | Gross loan and lease charge-offs | 15 | | | — | | | 3 | | | 18 | |
| Recoveries | Recoveries | 7 | | | — | | | 2 | | | 9 | | Recoveries | 7 | | | — | | | 2 | | | 9 | |
| Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | (3) | | | — | | | 2 | | | (1) | | Net loan and lease charge-offs (recoveries) | 8 | | | — | | | 1 | | | 9 | |
| Balance at end of period | Balance at end of period | $ | 299 | | | $ | 101 | | | $ | 91 | | | $ | 491 | | Balance at end of period | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
| 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 | $ | 21 | | | $ | 10 | | | $ | 8 | | | $ | 39 | | Balance at beginning of period | $ | 14 | | | $ | 12 | | | $ | 10 | | | $ | 36 | |
| Provision for unfunded lending commitments | Provision for unfunded lending commitments | (2) | | | — | | | 1 | | | (1) | | Provision for unfunded lending commitments | (1) | | | 3 | | | — | | | 2 | |
| Balance at end of period | Balance at end of period | $ | 19 | | | $ | 10 | | | $ | 9 | | | $ | 38 | | Balance at end of period | $ | 13 | | | $ | 15 | | | $ | 10 | | | $ | 38 | |
| 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 | $ | 299 | | | $ | 101 | | | $ | 91 | | | $ | 491 | | Allowance for loan losses | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 19 | | | 10 | | | 9 | | | 38 | | Reserve for unfunded lending commitments | 13 | | | 15 | | | 10 | | | 38 | |
| Total allowance for credit losses | Total allowance for credit losses | $ | 318 | | | $ | 111 | | | $ | 100 | | | $ | 529 | | Total allowance for credit losses | $ | 299 | | | $ | 129 | | | $ | 118 | | | $ | 546 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | Nine Months Ended September 30, 2021 | | Six Months Ended June 30, 2022 |
| (In millions) | (In millions) | Commercial | | Commercial
real estate | | Consumer | | Total | (In millions) | Commercial | | Commercial
real estate | | Consumer | | Total |
| Allowance for loan losses | Allowance for loan losses | | | | | | | | Allowance for loan losses | | | | | | | |
| | Balance at beginning of period | Balance at beginning of period | $ | 464 | | | $ | 171 | | | $ | 142 | | | $ | 777 | | Balance at beginning of period | $ | 311 | | | $ | 107 | | | $ | 95 | | | $ | 513 | |
| Provision for loan losses | Provision for loan losses | (162) | | | (70) | | | (49) | | | (281) | | Provision for loan losses | (12) | | | 7 | | | 15 | | | 10 | |
| Gross loan and lease charge-offs | Gross loan and lease charge-offs | 27 | | | — | | | 10 | | | 37 | | Gross loan and lease charge-offs | 28 | | | — | | | 7 | | | 35 | |
| Recoveries | Recoveries | 24 | | | — | | | 8 | | | 32 | | Recoveries | 15 | | | — | | | 5 | | | 20 | |
| Net loan and lease charge-offs (recoveries) | Net loan and lease charge-offs (recoveries) | 3 | | | — | | | 2 | | | 5 | | Net loan and lease charge-offs (recoveries) | 13 | | | — | | | 2 | | | 15 | |
| Balance at end of period | Balance at end of period | $ | 299 | | | $ | 101 | | | $ | 91 | | | $ | 491 | | Balance at end of period | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | | | | | | | | Reserve for unfunded lending commitments | | | | | | | |
| | Balance at beginning of period | Balance at beginning of period | $ | 30 | | | $ | 20 | | | $ | 8 | | | $ | 58 | | Balance at beginning of period | $ | 19 | | | $ | 11 | | | $ | 10 | | | $ | 40 | |
| Provision for unfunded lending commitments | Provision for unfunded lending commitments | (11) | | | (10) | | | 1 | | | (20) | | Provision for unfunded lending commitments | (6) | | | 4 | | | — | | | (2) | |
| Balance at end of period | Balance at end of period | $ | 19 | | | $ | 10 | | | $ | 9 | | | $ | 38 | | Balance at end of period | $ | 13 | | | $ | 15 | | | $ | 10 | | | $ | 38 | |
| 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 | $ | 299 | | | $ | 101 | | | $ | 91 | | | $ | 491 | | Allowance for loan losses | $ | 286 | | | $ | 114 | | | $ | 108 | | | $ | 508 | |
| Reserve for unfunded lending commitments | Reserve for unfunded lending commitments | 19 | | | 10 | | | 9 | | | 38 | | Reserve for unfunded lending commitments | 13 | | | 15 | | | 10 | | | 38 | |
| Total allowance for credit losses | Total allowance for credit losses | $ | 318 | | | $ | 111 | | | $ | 100 | | | $ | 529 | | Total allowance for credit losses | $ | 299 | | | $ | 129 | | | $ | 118 | | | $ | 546 | |
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 nonaccrual loans is summarized as follows: | | | September 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 |
| | Commercial: | Commercial: | | | | | | | | Commercial: | | | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 10 | | | $ | 42 | | | $ | 52 | | | $ | 19 | | Commercial and industrial | $ | 11 | | | $ | 60 | | | $ | 71 | | | $ | 33 | |
| PPP | 5 | | | — | | | 5 | | | — | | |
| | Owner-occupied | Owner-occupied | 19 | | | 9 | | | 28 | | | 1 | | Owner-occupied | 20 | | | 9 | | | 29 | | | 1 | |
| | Total commercial | Total commercial | 34 | | | 51 | | | 85 | | | 20 | | Total commercial | 31 | | | 69 | | | 100 | | | 34 | |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| | Term | Term | — | | | 20 | | | 20 | | | 8 | | Term | 7 | | | 6 | | | 13 | | | 1 | |
| Total commercial real estate | Total commercial real estate | — | | | 20 | | | 20 | | | 8 | | Total commercial real estate | 7 | | | 6 | | | 13 | | | 1 | |
| Consumer: | Consumer: | | Consumer: | |
| Home equity credit line | Home equity credit line | 1 | | | 9 | | | 10 | | | 1 | | Home equity credit line | — | | | 12 | | | 12 | | | 3 | |
| 1-4 family residential | 1-4 family residential | 7 | | | 29 | | | 36 | | | 4 | | 1-4 family residential | 2 | | | 35 | | | 37 | | | 5 | |
| | Bankcard and other revolving plans | — | | | — | | | — | | | — | | |
| | | Total consumer loans | Total consumer loans | 8 | | | 38 | | | 46 | | | 5 | | Total consumer loans | 2 | | | 47 | | | 49 | | | 8 | |
| Total | Total | $ | 42 | | | $ | 109 | | | $ | 151 | | | $ | 33 | | Total | $ | 40 | | | $ | 122 | | | $ | 162 | | | $ | 43 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | 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 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 ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, there was no interest income recognized on a cash basis during the period the loans were on nonaccrual.
The amount of accrued interest receivables reversed from interest income during the periods presented is summarized by loan portfolio segment as follows:
| | | Three Months Ended
September 30, | | Nine Months Ended
September 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 | $ | 3 | | | $ | 3 | | | $ | 11 | | | $ | 11 | | Commercial | $ | 3 | | | $ | 4 | | | $ | 5 | | | $ | 8 | |
| Commercial real estate | Commercial real estate | 1 | | | 1 | | | 1 | | | 1 | | Commercial real estate | — | | | — | | | — | | | — | |
| Consumer | Consumer | — | | | — | | | — | | | — | | Consumer | 1 | | | — | | | 1 | | | — | |
| Total | Total | $ | 4 | | | $ | 4 | | | $ | 12 | | | $ | 12 | | 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Past due loans (accruing and nonaccruing) are summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 15,597 | | | $ | 26 | | | $ | 33 | | | $ | 59 | | | $ | 15,656 | | | $ | 17 | | | $ | 36 | |
| PPP | 268 | | | 31 | | | 7 | | | 38 | | | 306 | | | 2 | | | — | |
| Leasing | 347 | | | — | | | — | | | — | | | 347 | | | — | | | — | |
| Owner-occupied | 9,264 | | | 10 | | | 5 | | | 15 | | | 9,279 | | | — | | | 21 | |
| Municipal | 4,223 | | | 1 | | | — | | | 1 | | | 4,224 | | | — | | | — | |
| Total commercial | 29,699 | | | 68 | | | 45 | | | 113 | | | 29,812 | | | 19 | | | 57 | |
| Commercial real estate: | | | | | | | | | | | | | |
| Construction and land development | 2,800 | | | — | | | — | | | — | | | 2,800 | | | — | | | — | |
| Term | 9,536 | | | 5 | | | 15 | | | 20 | | | 9,556 | | | — | | | 5 | |
| Total commercial real estate | 12,336 | | | 5 | | | 15 | | | 20 | | | 12,356 | | | — | | | 5 | |
| Consumer: | | | | | | | | | | | | | |
| Home equity credit line | 3,323 | | | 7 | | | 1 | | | 8 | | | 3,331 | | | — | | | 6 | |
| 1-4 family residential | 6,829 | | | 7 | | | 16 | | | 23 | | | 6,852 | | | — | | | 19 | |
| Construction and other consumer real estate | 973 | | | — | | | — | | | — | | | 973 | | | — | | | — | |
| Bankcard and other revolving plans | 468 | | | 3 | | | — | | | 3 | | | 471 | | | 1 | | | — | |
| Other | 122 | | | 1 | | | — | | | 1 | | | 123 | | | — | | | — | |
| Total consumer loans | 11,715 | | | 18 | | | 17 | | | 35 | | | 11,750 | | | 1 | | | 25 | |
| Total | $ | 53,750 | | | $ | 91 | | | $ | 77 | | | $ | 168 | | | $ | 53,918 | | | $ | 20 | | | $ | 87 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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.
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 gradingrisk-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 ofno loans classified as Doubtful at SeptemberJune 30, 2022, compared with none at2023 and December 31, 2021.2022.
We generally assign internal risk grades toFor 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 classificationsclassification as monitored by management are summarized as follows.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 2,640 | | $ | 2,004 | | $ | 941 | | $ | 788 | | $ | 535 | | $ | 364 | | $ | 7,626 | | $ | 182 | | $ | 15,080 | |
| Special Mention | 19 | | 2 | | 11 | | 11 | | 1 | | 42 | | 88 | | — | | 174 | |
| Accruing Substandard | 13 | | 14 | | 17 | | 101 | | 40 | | 71 | | 92 | | 2 | | 350 | |
| Nonaccrual | 1 | | 1 | | 2 | | 1 | | 1 | | 3 | | 39 | | 4 | | 52 | |
| Total commercial and industrial | 2,673 | | 2,021 | | 971 | | 901 | | 577 | | 480 | | 7,845 | | 188 | | 15,656 | |
| PPP | | | | | | | | | |
| Pass | — | | 154 | | 147 | | — | | — | | — | | — | | — | | 301 | |
| | | | | | | | | |
| | | | | | | | | |
| Nonaccrual | — | | — | | 5 | | — | | — | | — | | — | | — | | 5 | |
| Total PPP | — | | 154 | | 152 | | — | | — | | — | | — | | — | | 306 | |
| Leasing | | | | | | | | | |
| Pass | 97 | | 76 | | 50 | | 74 | | 22 | | 23 | | — | | — | | 342 | |
| Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Accruing Substandard | — | | — | | — | | — | | — | | 5 | | — | | — | | 5 | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Total leasing | 97 | | 76 | | 50 | | 74 | | 22 | | 28 | | — | | — | | 347 | |
| Owner-occupied | | | | | | | | | |
| Pass | 1,778 | | 2,346 | | 1,173 | | 909 | | 675 | | 1,827 | | 162 | | 85 | | 8,955 | |
| Special Mention | 3 | | 8 | | 8 | | 11 | | 7 | | 18 | | 1 | | — | | 56 | |
| Accruing Substandard | 15 | | 17 | | 45 | | 32 | | 56 | | 67 | | 8 | | — | | 240 | |
| Nonaccrual | — | | 1 | | 2 | | 4 | | 5 | | 15 | | 1 | | — | | 28 | |
| Total owner-occupied | 1,796 | | 2,372 | | 1,228 | | 956 | | 743 | | 1,927 | | 172 | | 85 | | 9,279 | |
| Municipal | | | | | | | | | |
| Pass | 1,027 | | 1,224 | | 848 | | 472 | | 167 | | 469 | | 6 | | — | | 4,213 | |
| Special Mention | — | | — | | — | | 8 | | — | | — | | — | | — | | 8 | |
| Accruing Substandard | — | | — | | — | | — | | — | | 3 | | — | | — | | 3 | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Total municipal | 1,027 | | 1,224 | | 848 | | 480 | | 167 | | 472 | | 6 | | — | | 4,224 | |
| Total commercial | 5,593 | | 5,847 | | 3,249 | | 2,411 | | 1,509 | | 2,907 | | 8,023 | | 273 | | 29,812 | |
| Commercial real estate: | | | | | | | | | |
| Construction and land development | | | | | | | |
| Pass | 375 | | 814 | | 621 | | 128 | | 2 | | 2 | | 706 | | 85 | | 2,733 | |
| Special Mention | 1 | | 1 | | — | | — | | — | | 25 | | — | | — | | 27 | |
| Accruing Substandard | 17 | | 1 | | — | | 22 | | — | | — | | — | | — | | 40 | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Total construction and land development | 393 | | 816 | | 621 | | 150 | | 2 | | 27 | | 706 | | 85 | | 2,800 | |
| Term | | | | | | | | | |
| Pass | 2,170 | | 1,987 | | 1,661 | | 1,022 | | 810 | | 1,316 | | 239 | | 120 | | 9,325 | |
| Special Mention | — | | 21 | | — | | — | | 3 | | 3 | | — | | — | | 27 | |
| Accruing Substandard | 51 | | 4 | | 35 | | 23 | | 37 | | 34 | | — | | — | | 184 | |
| Nonaccrual | — | | — | | 2 | | 4 | | 1 | | 13 | | — | | — | | 20 | |
| Total term | 2,221 | | 2,012 | | 1,698 | | 1,049 | | 851 | | 1,366 | | 239 | | 120 | | 9,556 | |
| Total commercial real estate | 2,614 | | 2,828 | | 2,319 | | 1,199 | | 853 | | 1,393 | | 945 | | 205 | | 12,356 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | — | | — | | — | | — | | — | | — | | 3,222 | | 97 | | 3,319 | |
| Special Mention | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | |
| Accruing Substandard | — | | — | | — | | — | | — | | — | | 1 | | — | | 1 | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | 8 | | 2 | | 10 | |
| Total home equity credit line | — | | — | | — | | — | | — | | — | | 3,232 | | 99 | | 3,331 | |
| 1-4 family residential | | | | | | | | | |
| Pass | 1,461 | | 1,451 | | 1,010 | | 648 | | 393 | | 1,851 | | — | | — | | 6,814 | |
| Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Accruing Substandard | — | | — | | — | | — | | — | | 2 | | — | | — | | 2 | |
| Nonaccrual | — | | 1 | | 3 | | 3 | | 1 | | 28 | | — | | — | | 36 | |
| Total 1-4 family residential | 1,461 | | 1,452 | | 1,013 | | 651 | | 394 | | 1,881 | | — | | — | | 6,852 | |
| Construction and other consumer real estate | | | | | | | |
| Pass | 357 | | 483 | | 95 | | 22 | | 9 | | 7 | | — | | — | | 973 | |
| Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Accruing Substandard | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Total construction and other consumer real estate | 357 | | 483 | | 95 | | 22 | | 9 | | 7 | | — | | — | | 973 | |
| 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 | 58 | | 34 | | 13 | | 10 | | 5 | | 3 | | — | | — | | 123 | |
| Special Mention | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Accruing Substandard | ��� | | — | | — | | — | | — | | — | | — | | — | | — | |
| Nonaccrual | — | | — | | — | | — | | — | | — | | — | | — | | — | |
| Total other consumer | 58 | | 34 | | 13 | | 10 | | 5 | | 3 | | — | | — | | 123 | |
| Total consumer | 1,876 | | 1,969 | | 1,121 | | 683 | | 408 | | 1,891 | | 3,701 | | 101 | | 11,750 | |
| Total loans | $ | 10,083 | | $ | 10,644 | | $ | 6,689 | | $ | 4,293 | | $ | 2,770 | | $ | 6,191 | | $ | 12,669 | | $ | 579 | | $ | 53,918 | |
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 | — | | — | | — | | — | | — | | — | | — | | — | | — | |
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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
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| 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 RestructuredVintage Disclosures, which eliminated the recognition and measurement of troubled debt restructurings (“TDRs”) and their related disclosures. As a result, we no longer separately measure an allowance for credit losses for TDRs, relying instead on our credit loss estimation models. The adoption of this guidance 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
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
temporary or permanent relief from the original contractual terms of the loan. For loans that have been modified with a borrower experiencing financial difficulty, we use the same credit loss estimation methods that we use for the rest of the loan portfolio. These methods incorporate the post-modification loan terms, as well as defaults and charge-offs associated with historical modified loans. All nonaccruing loans more than $1 million are evaluated individually, regardless of modification.
We consider many factors in determining whether to agree to a loan modification and we seek a solution that will both minimize potential loss to us and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral.
A modified loan on nonaccrual will 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 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 TDRs. For further discussion of our policies and processes regarding TDRs, see Note 6 of our 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Information on TDRs, including the amortized cost on an accruing and nonaccruing basis by loan class and modification type is summarized in the following schedules: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 1 | | | $ | 9 | | | $ | — | | | $ | — | | | $ | 9 | | | $ | 30 | | | $ | 49 | |
| Owner-occupied | 1 | | | 6 | | | — | | | 8 | | | 13 | | | 12 | | | 40 | |
| Municipal | — | | | 8 | | | — | | | — | | | — | | | — | | | 8 | |
| Total commercial | 2 | | | 23 | | | — | | | 8 | | | 22 | | | 42 | | | 97 | |
| Commercial real estate: | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Term | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 1 | | | 84 | |
| Total commercial real estate | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 1 | | | 84 | |
| Consumer: | | | | | | | | | | | | | |
| Home equity credit line | — | | | 1 | | | 5 | | | — | | | — | | | 1 | | | 7 | |
| 1-4 family residential | 2 | | | 1 | | | 2 | | | — | | | — | | | 13 | | | 18 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total consumer loans | 2 | | | 2 | | | 7 | | | — | | | — | | | 14 | | | 25 | |
| Total accruing | 5 | | | 52 | | | 7 | | | 35 | | | 50 | | | 57 | | | 206 | |
| Nonaccruing | | | | | | | | | | | | | |
| Commercial: | | | | | | | | | | | | | |
| Commercial and industrial | 1 | | | — | | | — | | | — | | | 6 | | | 2 | | | 9 | |
| Owner-occupied | 4 | | | — | | | — | | | — | | | — | | | 4 | | | 8 | |
| | | | | | | | | | | | | |
| Total commercial | 5 | | | — | | | — | | | — | | | 6 | | | 6 | | | 17 | |
| 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 | | | 4 | | | 6 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total consumer loans | — | | | 1 | | | 1 | | | — | | | 1 | | | 4 | | | 7 | |
| Total nonaccruing | 5 | | | 1 | | | 1 | | | 11 | | | 7 | | | 14 | | | 39 | |
| Total | $ | 10 | | | $ | 53 | | | $ | 8 | | | $ | 46 | | | $ | 57 | | | $ | 71 | | | $ | 245 | |
1 Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 Includes TDRs that resulted from a combination of the previous modification types reflected in the schedule.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | December 31, 2021 | | December 31, 2022 |
| | Amortized cost resulting from the following modification types: | | | Amortized cost resulting from the following modification types: | |
| (In millions) | (In millions) | Interest
rate below
market | | Maturity
or term
extension | | Principal
forgiveness | | Payment
deferral | | Other 1 | | Multiple modification types 2 | | Total | (In millions) | Interest
rate below
market | | Maturity
or term
extension | | Principal
forgiveness | | Payment
deferral | | Other 1 | | Multiple modification types 2 | | Total |
| Accruing | Accruing | | | | | | | | | | | | | | Accruing | | | | | | | | | | | | | |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | $ | 19 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 7 | | | $ | 31 | | Commercial and industrial | $ | 1 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | 9 | | | $ | 28 | | | $ | 50 | |
| Owner-occupied | Owner-occupied | 5 | | | 4 | | | — | | | 8 | | | 14 | | | 12 | | | 43 | | Owner-occupied | — | | | 1 | | | — | | | 2 | | | 13 | | | 12 | | | 28 | |
| Municipal | Municipal | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | | Municipal | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Total commercial | Total commercial | 24 | | | 15 | | | — | | | 8 | | | 18 | | | 19 | | | 84 | | Total commercial | 1 | | | 13 | | | — | | | 2 | | | 22 | | | 40 | | | 78 | |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| | Construction and land development | | Construction and land development | — | | | — | | | — | | | — | | | — | | | 8 | | | 8 | |
| Term | Term | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | | Term | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 1 | | | 84 | |
| Total commercial real estate | Total commercial real estate | 1 | | | 29 | | | — | | | 27 | | | 41 | | | 8 | | | 106 | | Total commercial real estate | 1 | | | 27 | | | — | | | 27 | | | 28 | | | 9 | | | 92 | |
| Consumer: | Consumer: | | Consumer: | |
| Home equity credit line | Home equity credit line | — | | | 1 | | | 5 | | | — | | | — | | | 2 | | | 8 | | Home equity credit line | — | | | 1 | | | 4 | | | — | | | — | | | 1 | | | 6 | |
| 1-4 family residential | 1-4 family residential | 5 | | | 1 | | | 2 | | | — | | | 1 | | | 14 | | | 23 | | 1-4 family residential | 2 | | | 1 | | | 2 | | | — | | | 1 | | | 15 | | | 21 | |
| | Total consumer loans | Total consumer loans | 5 | | | 2 | | | 7 | | | — | | | 1 | | | 16 | | | 31 | | Total consumer loans | 2 | | | 2 | | | 6 | | | — | | | 1 | | | 16 | | | 27 | |
| Total accruing | Total accruing | 30 | | | 46 | | | 7 | | | 35 | | | 60 | | | 43 | | | 221 | | Total accruing | 4 | | | 42 | | | 6 | | | 29 | | | 51 | | | 65 | | | 197 | |
| Nonaccruing | Nonaccruing | | | | | | | | | | | | | | Nonaccruing | | | | | | | | | | | | | |
| Commercial: | Commercial: | | Commercial: | |
| Commercial and industrial | Commercial and industrial | 1 | | | 4 | | | — | | | 2 | | | 8 | | | 49 | | | 64 | | Commercial and industrial | — | | | — | | | — | | | 3 | | | 9 | | | 3 | | | 15 | |
| Owner-occupied | Owner-occupied | 5 | | | — | | | — | | | 2 | | | — | | | 13 | | | 20 | | Owner-occupied | 4 | | | — | | | — | | | — | | | — | | | 4 | | | 8 | |
| | Total commercial | Total commercial | 6 | | | 4 | | | — | | | 4 | | | 8 | | | 62 | | | 84 | | Total commercial | 4 | | | — | | | — | | | 3 | | | 9 | | | 7 | | | 23 | |
| Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| | Term | Term | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | | Term | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
| Total commercial real estate | Total commercial real estate | — | | | — | | | — | | | 11 | | | 2 | | | 3 | | | 16 | | Total commercial real estate | — | | | 10 | | | — | | | — | | | — | | | — | | | 10 | |
| Consumer: | Consumer: | | Consumer: | |
| Home equity credit line | Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | | Home equity credit line | — | | | — | | | 1 | | | — | | | — | | | — | | | 1 | |
| 1-4 family residential | 1-4 family residential | — | | | 1 | | | — | | | — | | | 3 | | | — | | | 4 | | 1-4 family residential | — | | | 1 | | | — | | | — | | | 1 | | | 2 | | | 4 | |
| | Total consumer loans | Total consumer loans | — | | | 1 | | | 1 | | | — | | | 3 | | | — | | | 5 | | Total consumer loans | — | | | 1 | | | 1 | | | — | | | 1 | | | 2 | | | 5 | |
| Total nonaccruing | Total nonaccruing | 6 | | | 5 | | | 1 | | | 15 | | | 13 | | | 65 | | | 105 | | Total nonaccruing | 4 | | | 11 | | | 1 | | | 3 | | | 10 | | | 9 | | | 38 | |
| Total | Total | $ | 36 | | | $ | 51 | | | $ | 8 | | | $ | 50 | | | $ | 73 | | | $ | 108 | | | $ | 326 | | Total | $ | 8 | | | $ | 53 | | | $ | 7 | | | $ | 32 | | | $ | 61 | | | $ | 74 | | | $ | 235 | |
1 Includes TDRs that resulted from other modification types including, but not limited to, a legal judgment awarded on different terms, a bankruptcy plan confirmed on different terms, a settlement that includes the delivery of collateral in exchange for debt reduction, etc.
2 Includes TDRs that resulted from a combination of the previous modification types reflected in the schedule.
Unfunded lending commitments onrelated to TDRs totaled $6 million and $10$7 million at September 30, 2022 and December 31, 2021, respectively.2022.
The total amortized cost of all TDRs in which interest rates were modified below market was $60 million at September 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 nine monthsyear ended September 30,December 31, 2022 and 2021 was not significant.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
On an ongoing basis, we monitor the performance of all TDRs according to their restructured terms. Subsequent payment default is defined in terms of delinquency, when principal or interest payments are past due 90 days or more for commercial loans, or 60 days or more for consumer loans.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The amortized cost of TDRs that had a payment default during the three and nine monthsyear ended September 30,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 $13 million for both periods, and $2 million and $5 million for the three and nine months ended September 30, 2021, respectively.$10 million.
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, including the type of collateral and the extent to which the collateral secures the loans, is summarized as follows:
| | | September 30, 2022 | | June 30, 2023 |
| (Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
| Commercial: | Commercial: | | | | | | Commercial: | | | | | |
| Commercial and industrial | Commercial and industrial | $ | 1 | | | Corporate assets | | 8% | Commercial and industrial | $ | 10 | | | Accounts Receivable | | 81% |
| | Owner-occupied | Owner-occupied | 2 | | | Land, Warehouse | | 39% | Owner-occupied | 12 | | | Hospital | | 29% |
| | Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| | Term | Term | 3 | | | Multi-family | | 80% | Term | 3 | | | Hotel, Multi-family | | 89% |
| | Consumer: | | |
| Home equity credit line | 1 | | | Single family residential | | 14% | |
| 1-4 family residential | 2 | | | Single family residential | | 37% | |
| | | Total | Total | $ | 9 | | | Total | $ | 25 | | |
| | | December 31, 2021 | | December 31, 2022 |
| (Dollar amounts in millions) | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 | (Dollar amounts in millions) | Amortized cost | | Major types of collateral | | Weighted average LTV 1 |
| Commercial: | Commercial: | | | | | | Commercial: | | | | | |
| Commercial and industrial | $ | 27 | | | Corporate assets, Single family residential | | 55% | |
| | | Owner-occupied | Owner-occupied | 11 | | | Office building | | 40% | Owner-occupied | $ | 2 | | | Land, Warehouse | | 29% |
| | Commercial real estate: | Commercial real estate: | | Commercial real estate: | |
| | Term | Term | 2 | | | Multi-family, Retail | | 28% | Term | 1 | | | Multi-family | | 55% |
| | Consumer: | Consumer: | | Consumer: | |
| Home equity credit line | Home equity credit line | 5 | | | Single family residential | | 45% | Home equity credit line | 1 | | | Single family residential | | 13% |
| 1-4 family residential | 1-4 family residential | 2 | | | Single family residential | | 35% | 1-4 family residential | 3 | | | Single family residential | | 41% |
| | Total | Total | $ | 47 | | | Total | $ | 7 | | |
1 The fair value is based on the most recent appraisal or other collateral evaluation.
Foreclosed Residential Real Estate
At SeptemberJune 30, 20222023 and December 31, 2021,2022, we did not have any foreclosed residential real estate property. The amortized cost basis of consumer mortgage loans collateralized by residential real estate property that arewere in the process of foreclosure was $11$8 million and $10 million for the same periods, respectively.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Objectives and Accounting
Our primary objective for using derivatives is to manage risks, primarily interest rate risk. We use derivatives to manage volatility in interest income, interest expense, earnings, and capital by adjusting our interest rate sensitivity to minimize the impact of fluctuations in interest rates. Derivatives are used to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or liabilities as we consider advisable.liabilities. We also assist clients with their risk management needs through the use of derivatives. 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 20212022 Form 10-K.
Fair Value Hedges of Liabilities – At September 30, 2022,During the second quarter of 2023, we had oneterminated 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 convertsconverted the interest on our fixed-rate debt to floating. Duringfloating until it was terminated. Prior to termination, changes in the third quarterfair value of 2022, derivatives designated as fair value hedges of debt decreased in value by $25 million, which waswere offset by changes in the fair value of the hedged debt instruments as shown in the schedules below. We had no cumulativeon the following pages. The unamortized debthedge basis adjustments related to previouslyresulting from the terminated fair value hedgeshedging relationship will be amortized over the remaining life of debt at September 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 SeptemberJune 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 certainspecifically identified AFS securities. These swapsFair 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 third quarterChanges in fair value of 2022, derivatives designated as fair value hedges of fixed-rate AFS securities increased in value by $67 million, which waswere largely offset by changes in the value of the hedged securities, as shown in the schedules below. At September 30, 2022, we had $10 million of unamortized basis adjustments to AFS securities from previously designated fair value hedges.on the following pages.
Cash Flow Hedges – At SeptemberJune 30, 2022,2023, we had $7.4 billionreceive-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. During the second quarter ourof 2023, we terminated cash flow hedge portfolio decreasedhedging 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 by $172 million, which wasof qualifying cash flow hedges during the quarter 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 detailedinformation 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 20212022 Form 10-K.
Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit-risk-relatedcredit 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-relatedcredit risk-related feature were triggered, such as a downgrade of our credit rating. However, inIn past situations, not all counterparties have demanded that additional collateral be pledged when provided for by the contractual terms. At SeptemberJune 30, 2022,2023, the fair value of our derivative liabilities was $491$409 million, for which we were required to pledge
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
cash collateral of $143$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 SeptemberJune 30, 2022,2023, there would likely be less than $1 million ofno 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.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 September 30, 2022 and December 31, 2021, and the related gain (loss) of derivative instruments is summarized as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 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 | $ | 7,433 | | | $ | — | | | $ | 2 | | | $ | 6,883 | | | $ | — | | | $ | — | |
| Fair value hedges: | | | | | | | | | | | |
| Debt hedges: Receive-fixed interest rate swaps | 500 | | | — | | | — | | | 500 | | | — | | | — | |
| Asset hedges: Pay-fixed interest rate swaps | 1,228 | | | 83 | | | — | | | 479 | | | 10 | | | — | |
| Total derivatives designated as hedging instruments | 9,161 | | | 83 | | | 2 | | | 7,862 | | | 10 | | | — | |
| Derivatives not designated as hedging instruments: | | | | | | | | | | | |
Customer-facing interest rate derivatives 1 | 6,931 | | | 1 | | | 483 | | | 6,587 | | | 192 | | | 36 | |
Offsetting interest rate derivatives 2 | 6,931 | | | 501 | | | 1 | | | 6,587 | | | 38 | | | 197 | |
| Other interest rate derivatives | 905 | | | 1 | | | — | | | 1,286 | | | 6 | | | 1 | |
| Foreign exchange derivatives | 432 | | | 6 | | | 5 | | | 288 | | | 3 | | | 2 | |
| Total derivatives not designated as hedging instruments | 15,199 | | | 509 | | | 489 | | | 14,748 | | | 239 | | | 236 | |
| Total derivatives | $ | 24,360 | | | $ | 592 | | | $ | 491 | | | $ | 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 $17 million, reducing the fair value of the liability at September 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: | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| (In millions) | Other assets | | Other liabilities | | Other assets | | Other liabilities |
| | | | | | | |
| | | | | | | |
| Offsetting interest rate derivatives | $ | 204 | | | $ | 1 | | | $ | 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 nine months ended September 30, 2022 and 2021 is shown in the schedules below.
| | | Three Months Ended September 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 | (183) | | | | (11) | | | — | | | 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 | $ | (183) | | | | $ | (11) | | | $ | — | | | Total derivatives designated as hedging instruments | $ | (66) | | | | $ | 6 | | | $ | — | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 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 | (427) | | | | | 7 | | | — | | | |
| Fair value hedges of liabilities: | | | | | | | | | |
| Receive-fixed interest rate swaps | — | | | | | — | | | 2 | | | |
Basis amortization on terminated hedges 2, 3 | — | | | | | — | | | 1 | | | |
| Fair value hedges of assets: | | | | | | | | | |
| Pay-fixed interest rate swaps | — | | | | | — | | | (1) | | | |
Basis amortization on terminated hedges 2, 3 | — | | | | | — | | | — | | | |
| Total derivatives designated as hedging instruments | $ | (427) | | | | | $ | 9 | | | $ | 2 | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 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 | $ | — | | | | | $ | 3 | | | $ | — | | | |
| 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 | | | | | $ | 16 | | | $ | 4 | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | Nine Months Ended September 30, 2021 | | Six 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 | $ | — | | | | $ | 8 | | | $ | — | | | Purchased interest rate floors | $ | — | | | | $ | 2 | | | $ | — | | |
| Interest rate swaps | Interest rate swaps | (5) | | | | 38 | | | — | | | Interest rate swaps | (244) | | | | 17 | | | — | | |
| 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 | — | | | | — | | | 6 | | | Receive-fixed interest rate swaps | — | | | | — | | | 3 | | |
Basis amortization on terminated hedges 2, 3 | Basis amortization on terminated hedges 2, 3 | — | | | | — | | | 9 | | | Basis amortization on terminated hedges 2, 3 | — | | | | — | | | 1 | | |
| 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 | — | | | | — | | | (2) | | | Pay-fixed interest rate swaps | — | | | | — | | | (2) | | |
Basis amortization on terminated hedges 2, 3 | Basis amortization on terminated hedges 2, 3 | — | | | | — | | | — | | | Basis amortization on terminated hedges 2, 3 | — | | | | — | | | — | | |
| Total derivatives designated as hedging instruments | Total derivatives designated as hedging instruments | $ | (5) | | | | $ | 46 | | | $ | 13 | | | Total derivatives designated as hedging instruments | $ | (244) | | | | $ | 19 | | | $ | 2 | | |
1 For the 12 months following SeptemberJune 30, 2022,2023, we estimate that $173$106 million of losses will be reclassified from AOCI into interest income, compared with an estimate of $42$94 million of gains as of Septemberlosses at June 30, 2021.2022.
2 Adjustment to interest expense resulting fromAt 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 nototal cumulative unamortized basis adjustment from previously terminated or redesignated fair value debt hedges and $10 million offor terminated fair value asset hedges of debt was $50 million. We did not have any cumulative unamortized basis adjustment for terminated hedges of debt at SeptemberJune 30, 2022, compared with $22022. We had $3 million and $7 million as of Septembercumulative unamortized basis adjustments from terminated fair value hedges of assets at June 30, 2021,2023 and 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 September 30, 2022 | | Nine Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 | | Nine Months Ended September 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 | $ | (227) | | | $ | (638) | | | $ | (5) | | | $ | (100) | | | Customer-facing interest rate derivatives | $ | 10 | | | $ | 11 | | | $ | 17 | | | $ | 30 | |
| Offsetting interest rate derivatives | 238 | | | 680 | | | 12 | | | 129 | | | |
| Other interest rate derivatives | Other interest rate derivatives | — | | | — | | | 3 | | | (7) | | | Other interest rate derivatives | 3 | | | 3 | | | (1) | | | — | |
| Foreign exchange derivatives | Foreign exchange derivatives | 8 | | | 21 | | | 6 | | | 17 | | | 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 | $ | 19 | | | $ | 63 | | | $ | 16 | | | $ | 39 | | | 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 September 30, 2022 | | Three Months Ended September 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 | $ | (25) | | | $ | 25 | | | $ | — | | | $ | (4) | | | $ | 4 | | | $ | — | | | | | |
Assets: Pay-fixed interest rate swaps 1, 2 | 67 | | | (67) | | | — | | | 4 | | | (4) | | | — | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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) | | | — | | | | | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | Gain/(loss) recorded in income | | Gain/(loss) recorded in income |
| | Nine Months Ended September 30, 2022 | | Nine Months Ended September 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 | $ | (75) | | | $ | 75 | | | $ | — | | | $ | (27) | | | $ | 27 | | | $ | — | | 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 | 217 | | | (217) | | | — | | | 27 | | | (27) | | | — | | 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) | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
| | | | | | | | | | | |
| Long-term fixed-rate debt | $ | (500) | | | $ | (500) | | | $ | (432) | | | $ | (507) | | | $ | 68 | | | $ | (7) | |
| Fixed-rate AFS securities | 1,228 | | | 479 | | | 969 | | | 435 | | | (260) | | | (44) | |
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| 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) | |
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| | | | | | | | | | | |
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 SeptemberJune 30, 2022,2023, we had 416412 branches, of which 275277 are owned and 141135 are leased. We lease our headquarters in Salt Lake City, Utah. The remaining maturities of our lease commitments range from the year 20222023 to 2062, and some lease arrangements include options to extend or terminate the leases.
All leases with lease terms greater than twelve months are reported as a lease liability with a corresponding right-of-use (“ROU”) asset. We present ROU assets for operating leases and finance leases on the consolidated balance sheet in “Other 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 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents ROU assets and lease liabilities with associated weighted average remaining life and discount rate:rate.
| | | | | | | | | | | |
| (Dollar amounts in millions) | September 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 | 17.6 | | 18.3 |
| Weighted average discount rate | | | |
| Operating leases | 2.8 | % | | 2.8 | % |
| Finance leases | 3.1 | % | | 3.1 | % |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
| | | | | | | | | | | |
| (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 September 30, | | Nine Months Ended September 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 | $ | 11 | | | $ | 12 | | | $ | 35 | | | $ | 35 | | Operating lease expense | $ | 11 | | | $ | 12 | | | $ | 22 | | | $ | 24 | |
| Other expenses associated with operating leases 1 | Other expenses associated with operating leases 1 | 13 | | | 12 | | | 38 | | | 37 | | Other expenses associated with operating leases 1 | 16 | | | 12 | | | 30 | | | 24 | |
| | Total lease expense | Total lease expense | $ | 24 | | | $ | 24 | | | $ | 73 | | | $ | 72 | | Total lease expense | $ | 27 | | | $ | 24 | | | $ | 52 | | | $ | 48 | |
| | Related cash disbursements from operating leases | Related cash disbursements from operating leases | $ | 12 | | | $ | 13 | | | $ | 37 | | | $ | 38 | | Related cash disbursements from operating leases | $ | 12 | | | $ | 12 | | | $ | 24 | | | $ | 25 | |
1 Other expenses primarily relate toinclude property taxes and building and property maintenance.
ROU assets related to new leases totaled $5 million at September 30, 2022 and $1 million at December 31, 2021.
TotalThe following schedule presents the total contractual undiscounted lease payments for operating lease liabilities are summarized in the following schedule by expected due date:date for each of the next five years.
| | (In millions) | (In millions) | Total undiscounted lease payments | (In millions) | Total undiscounted lease payments |
| 2022 1 | $ | 13 | | |
| 2023 | 47 | | |
2023 1 | | 2023 1 | $ | 24 | |
| 2024 | 2024 | 38 | | 2024 | 40 | |
| 2025 | 2025 | 28 | | 2025 | 32 | |
| 2026 | 2026 | 24 | | 2026 | 27 | |
| 2027 | | 2027 | 18 | |
| Thereafter | Thereafter | 92 | | Thereafter | 87 | |
| Total | Total | $ | 242 | | Total | $ | 228 | |
1 Contractual maturities for the threesix 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 thirdsecond quarter of 2023 and 2022, respectively, and 2021,$8 million and $10$7 million for both the first ninesix months of 2023 and 2022, and 2021.respectively.
We originated equipment leases, considered to be sales-type leases or direct financing leases, totaling $347388 million and $327$386 million at SeptemberJune 30, 20222023 and December 31, 2021,2022, respectively. We recorded income of $34 million and $3 million on these leases for both the thirdsecond quarter of 2023 and 2022, respectively, and 2021,$8 million and $9$6 million for both the first ninesix months of 2023 and 2022, and 2021.respectively.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
9. LONG-TERM DEBT AND SHAREHOLDERS’ EQUITY
Long-Term Debt
The long-term debt carrying values presented in the following scheduleconsolidated 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) | September 30,
2022 | | December 31, 2021 | | Amount change | | Percent change | (In millions) | June 30,
2023 | | December 31, 2022 | |
| | | Subordinated notes | $ | 515 | | | $ | 590 | | | $ | (75) | | | (13) | % | |
Subordinated notes 1 | | Subordinated notes 1 | $ | 534 | | | $ | 519 | | |
| Senior notes | Senior notes | 128 | | | 418 | | | (290) | | | (69) | | Senior notes | — | | | 128 | | |
| | Finance lease obligations | Finance lease obligations | 4 | | | 4 | | | — | | | — | | Finance lease obligations | 4 | | | 4 | | |
| Total | Total | $ | 647 | | | $ | 1,012 | | | $ | (365) | | | (36) | % | 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 firstsecond quarter of 2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
2023.Shareholders' Equity
Our common stock is traded on the National Association of Securities Dealers Automated Quotations (“NASDAQ”) Global Select Market. At SeptemberJune 30, 2022,2023, there were 149.6148.1 million shares of $0.001 par value common stock outstanding. Common stock and additional paid-in capital totaleddecreased $32 million, or 2%, to $1.81.7 billion at SeptemberJune 30, 2022, which decreased $129 million, or 7%,2023, from December 31, 2021,2022, primarily due to common stock repurchases. Duringrepurchases during the first nine monthsquarter of 2022,2023. As the macroeconomic environment remained uncertain, we repurchased 2.6 milliondid not repurchase common shares outstanding forduring the second quarter of 2023, nor do we expect to repurchase common shares during the third quarter of 2023.
AOCI was a $150 million at an average price of $58.04 per share.
Accumulated other comprehensive income decreased to a loss of $3.12.9 billion loss at SeptemberJune 30, 2022, primarily due2023. 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 decreasesnet unrealized gains/(losses) on investment securities reflected a $9 million decline in the fair value of fixed-rate available-for-saleAFS securities as a result of changeshigher 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 |
| Nine Months Ended September 30, 2022 | | | | | | | |
| Balance at December 31, 2021 | $ | (78) | | | $ | — | | | $ | (2) | | | $ | (80) | |
| OCI (loss) before reclassifications, net of tax | (2,729) | | | (324) | | | — | | | (3,053) | |
| Amounts reclassified from AOCI, net of tax | — | | | (7) | | | — | | | (7) | |
| Other comprehensive income (loss) | (2,729) | | | (331) | | | — | | | (3,060) | |
| Balance at September 30, 2022 | $ | (2,807) | | | $ | (331) | | | $ | (2) | | | $ | (3,140) | |
| Income tax benefit included in OCI (loss) | $ | (884) | | | $ | (107) | | | $ | — | | | $ | (991) | |
| Nine Months Ended September 30, 2021 | | | | | | | |
| Balance at December 31, 2020 | $ | 258 | | | $ | 69 | | | $ | (2) | | | $ | 325 | |
| OCI (loss) before reclassifications, net of tax | (225) | | | (1) | | | — | | | (226) | |
| Amounts reclassified from AOCI, net of tax | — | | | (35) | | | — | | | (35) | |
| Other comprehensive income (loss) | (225) | | | (36) | | | — | | | (261) | |
| Balance at September 30, 2021 | $ | 33 | | | $ | 33 | | | $ | (2) | | | $ | 64 | |
| Income tax benefit included in OCI (loss) | $ | (73) | | | $ | (12) | | | $ | — | | | $ | (85) | |
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| | Amounts reclassified from AOCI 1 | | Statement of income (SI) | | |
| (In millions) | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | | |
| Details about AOCI components | | 2022 | | 2021 | | 2022 | | 2021 | | | Affected line item |
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| Net unrealized gains (losses) on derivative instruments | | $ | (11) | | | $ | 16 | | | $ | 9 | | | $ | 46 | | | SI | | Interest and fees on loans |
| Income tax expense (benefit) | | (3) | | | 4 | | | 2 | | | 11 | | | | | |
| Amounts reclassified from AOCI | | $ | (8) | | | $ | 12 | | | $ | 7 | | | $ | 35 | | | | | |
1 Positive reclassification amounts indicate increasesamortization of the discount on the securities transferred from AFS to earnings inHTM during the income statement.fourth quarter of 2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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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 |
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| 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-balanceThe following schedule presents the contractual amounts related to off-balance sheet financial obligationsinstruments used to meet the financing needs of our customers include the following:customers.
| | (In millions) | (In millions) | September 30,
2022 | | December 31,
2021 | (In millions) | June 30,
2023 | | December 31,
2022 |
| Unfunded lending commitments 1 | Unfunded lending commitments 1 | $ | 28,959 | | | $ | 25,797 | | Unfunded lending commitments 1 | $ | 29,731 | | | $ | 29,628 | |
| Standby letters of credit: | Standby letters of credit: | | Standby letters of credit: | |
| Financial | Financial | 586 | | | 597 | | Financial | 579 | | | 667 | |
| Performance | Performance | 186 | | | 245 | | Performance | 178 | | | 184 | |
| Commercial letters of credit | Commercial letters of credit | 12 | | | 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 | $ | 29,743 | | | $ | 26,661 | | Total unfunded commitments | $ | 30,575 | | | $ | 30,513 | |
1 Net of participations.
Our 2021 Form 10-K contains further2 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.requirements, see Note 16 of our 2022 Form 10-K.
Legal Matters
We are subject toinvolved in various legal proceedings, which may include litigation in court and arbitral proceedings, as well as 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 third quarter of 2022,At June 30, 2023, we were subject to the following material litigation or governmental inquiries:
•twoTwo civil cases, Lifescan Inc. and Johnson & Johnson Health Care Services v. Jeffrey Smith, et. al., brought against us in the United States District Court for the District of New Jersey in December 2017, and Roche Diagnostics and Roche Diabetes Care Inc. v. Jeffrey C. Smith, et. al., brought against us in the United States District Court for the District of New Jersey in March 2019. In these cases, certain manufacturers and distributors of medical products seek to hold us liable for allegedly fraudulent practices of a borrower of the Bank who filed for bankruptcy protection in 2017. The cases are in early phases, with initial motion practice and discovery underway in the Lifescan case.phases. Trial has not been scheduled in either case.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
•Five civil class action cases have been filed against us by the same plaintiffs’ attorney, seeking to hold the Bank liable for practices relating to, and disclosures in, its deposit agreement pertaining to fees. Three of the five cases have been dismissed, and the following two cases remain pending and are in early phases of litigation: Sipple v. Zions Bancorporation, N.A., was brought against us in the District Court of Clark County, Nevada in February 2021 with respect to foreign transaction fees. Christensen v. Zions Bancorporation, N.A. was brought against us in California state court in November 2021 and removed to federal courtThis case is in the Southern District of California in January 2022.
•In addition, two class action lawsuits, Evans v. CB&T,early discovery phase and Gregory, et. al. v. Zions Bancorporation, were settled in principle earlier in 2022. The parties to those cases are undertaking the procedural and administrative actions, including court approvals of the settlements, necessary to complete the settlements. There can be no assurance that the proposed settlements will receive court approvals or that the conditions to settlements will be met. If completed, these settlements aretrial has not expected to have a significant financial impact on the Bank.been scheduled.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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 SeptemberJune 30, 2022,2023, we estimated that the aggregate range of reasonably possible losses for those matters to be from $0 millionzero to roughly $10approximately $5 million in excess of amounts accrued. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from this estimate. Those matters for which a meaningful estimate is not possible are not included within this estimated range and, therefore, this estimated range does not represent our maximum loss exposure.
Based on our current knowledge, we believe that our current estimated liability for litigation and other legal actions and claims, reflected in our accruals and determined in accordance with applicable accounting guidance, is adequate and that liabilities in excess of the amounts currently accrued, if any, arising from litigation and other legal actions 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 wasrepresented approximately 78%80% of our total revenue in the thirdsecond quarter of 2022.2023. Only noninterest income is considered to be revenue from contracts with customers in scope of ASC 606. For more information about our revenue recognition from contracts, see Note 17 of our 20212022 Form 10-K.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Disaggregation of Revenue
The schedule below presents net revenue by our operating business segments for the three months ended SeptemberJune 30, 20222023 and 2021. Certain prior period amounts have been reclassified to conform with the current period presentation, where applicable. These reclassifications did not affect net income or shareholders’ equity.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 | $ | 13 | | | $ | 12 | | | $ | 7 | | | $ | 7 | | | $ | 12 | | | $ | 10 | | Commercial account fees | $ | 14 | | | $ | 12 | | | $ | 8 | | | $ | 7 | | | $ | 14 | | | $ | 11 | |
| Card fees | Card fees | 14 | | | 15 | | | 5 | | | 4 | | | 8 | | | 8 | | Card fees | 13 | | | 14 | | | 5 | | | 5 | | | 8 | | | 8 | |
| Retail and business banking fees | Retail and business banking fees | 5 | | | 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 | 5 | | | 5 | | | 1 | | | 2 | | | 4 | | | 3 | | Wealth management fees | 6 | | | 6 | | | 1 | | | 1 | | | 4 | | | 4 | |
| Other customer-related fees | Other customer-related fees | 2 | | | 2 | | | 2 | | | 1 | | | 2 | | | 2 | | 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) | 39 | | | 40 | | | 18 | | | 17 | | | 30 | | | 27 | | 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) | 4 | | | 4 | | | 9 | | | 6 | | | 11 | | | 10 | | Other noninterest income (non-ASC 606 customer-related) | 6 | | | 6 | | | 14 | | | 8 | | | 8 | | | 13 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 43 | | | 44 | | | 27 | | | 23 | | | 41 | | | 37 | | Total customer-related noninterest income | 46 | | | 46 | | | 33 | | | 26 | | | 40 | | | 42 | |
| Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 1 | | | (1) | | | 1 | | | 2 | | | — | | | — | | Other noncustomer-related noninterest income | 3 | | | 3 | | | 2 | | | 1 | | | 15 | | | — | |
| Total noninterest income | Total noninterest income | 44 | | | 43 | | | 28 | | | 25 | | | 41 | | | 37 | | Total noninterest income | 49 | | | 49 | | | 35 | | | 27 | | | 55 | | | 42 | |
| | Net interest income | Net interest income | 197 | | | 161 | | | 154 | | | 135 | | | 137 | | | 117 | | Net interest income | 178 | | | 170 | | | 152 | | | 142 | | | 116 | | | 120 | |
| Total net revenue | Total net revenue | $ | 241 | | | $ | 204 | | | $ | 182 | | | $ | 160 | | | $ | 178 | | | $ | 154 | | 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 | | | $ | 3 | | | $ | 3 | | | $ | 2 | | | $ | 2 | | Commercial account fees | $ | 2 | | | $ | 2 | | | $ | 3 | | | $ | 2 | | | $ | 2 | | | $ | 2 | |
| Card fees | Card fees | 4 | | | 3 | | | 4 | | | 3 | | | 2 | | | 2 | | 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 | | | 11 | | | 10 | | | 6 | | | 6 | | 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) | 2 | | | 4 | | | 1 | | | 3 | | | 2 | | | 2 | | Other noninterest income (non-ASC 606 customer-related) | 1 | | | 1 | | | — | | | 2 | | | — | | | 2 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 11 | | | 12 | | | 12 | | | 13 | | | 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 | 12 | | | 13 | | | 12 | | | 13 | | | 8 | | | 8 | | Total noninterest income | 11 | | | 11 | | | 11 | | | 12 | | | 7 | | | 8 | |
| | Net interest income | Net interest income | 64 | | | 50 | | | 50 | | | 38 | | | 41 | | | 34 | | Net interest income | 64 | | | 55 | | | 49 | | | 39 | | | 38 | | | 35 | |
| Total net revenue | Total net revenue | $ | 76 | | | $ | 63 | | | $ | 62 | | | $ | 51 | | | $ | 49 | | | $ | 42 | | 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 | | | $ | — | | | $ | (3) | | | $ | 40 | | | $ | 34 | | Commercial account fees | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 45 | | | $ | 37 | |
| Card fees | Card fees | — | | | — | | | 1 | | | — | | | 38 | | | 35 | | Card fees | 1 | | | 1 | | | — | | | (2) | | | 37 | | | 36 | |
| Retail and business banking fees | Retail and business banking fees | — | | | — | | | (1) | | | 1 | | | 17 | | | 20 | | Retail and business banking fees | — | | | — | | | (2) | | | 1 | | | 16 | | | 20 | |
| | Capital markets and foreign exchange fees | — | | | — | | | 1 | | | 1 | | | 1 | | | 1 | | |
| Capital markets fees | | Capital markets fees | — | | | — | | | 1 | | | 1 | | | 1 | | | 1 | |
| Wealth management fees | Wealth management fees | — | | | — | | | — | | | — | | | 12 | | | 12 | | Wealth management fees | — | | | — | | | — | | | — | | | 14 | | | 13 | |
| Other customer-related fees | Other customer-related fees | — | | | — | | | 8 | | | 8 | | | 15 | | | 14 | | 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) | 1 | | | 1 | | | 9 | | | 7 | | | 123 | | | 116 | | 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 | | | — | | | 3 | | | 6 | | | 33 | | | 35 | | Other noninterest income (non-ASC 606 customer-related) | — | | | — | | | 5 | | | (1) | | | 34 | | | 31 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 2 | | | 1 | | | 12 | | | 13 | | | 156 | | | 151 | | Total customer-related noninterest income | 2 | | | 2 | | | 13 | | | 8 | | | 162 | | | 154 | |
| Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | — | | | — | | | 6 | | | (14) | | | 9 | | | (12) | | Other noncustomer-related noninterest income | — | | | — | | | 6 | | | 13 | | | 27 | | | 18 | |
| Total noninterest income | Total noninterest income | 2 | | | 1 | | | 18 | | | (1) | | | 165 | | | 139 | | Total noninterest income | 2 | | | 2 | | | 19 | | | 21 | | | 189 | | | 172 | |
| | Net interest income | Net interest income | 17 | | | 12 | | | 3 | | | 8 | | | 663 | | | 555 | | Net interest income | 15 | | | 15 | | | (21) | | | 17 | | | 591 | | | 593 | |
| Total net revenue | Total net revenue | $ | 19 | | | $ | 13 | | | $ | 21 | | | $ | 7 | | | $ | 828 | | | $ | 694 | | Total net revenue | $ | 17 | | | $ | 17 | | | $ | (2) | | | $ | 38 | | | $ | 780 | | | $ | 765 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule below presents the noninterest income and net revenue by our operating business segments for the ninesix months ended SeptemberJune 30, 20222023 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 | $ | 40 | | | $ | 34 | | | $ | 21 | | | $ | 19 | | | $ | 33 | | | $ | 30 | | Commercial account fees | $ | 28 | | | $ | 27 | | | $ | 15 | | | $ | 14 | | | $ | 28 | | | $ | 22 | |
| Card fees | Card fees | 41 | | | 42 | | | 15 | | | 12 | | | 24 | | | 21 | | Card fees | 26 | | | 27 | | | 10 | | | 10 | | | 16 | | | 16 | |
| Retail and business banking fees | Retail and business banking fees | 17 | | | 17 | | | 10 | | | 9 | | | 12 | | | 11 | | 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 | 17 | | | 15 | | | 3 | | | 3 | | | 12 | | | 9 | | Wealth management fees | 12 | | | 11 | | | 2 | | | 2 | | | 8 | | | 8 | |
| Other customer-related fees | Other customer-related fees | 6 | | | 5 | | | 4 | | | 3 | | | 5 | | | 5 | | 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) | 121 | | | 113 | | | 53 | | | 46 | | | 86 | | | 76 | | 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) | 15 | | | 16 | | | 23 | | | 24 | | | 33 | | | 27 | | Other noninterest income (non-ASC 606 customer-related) | 13 | | | 11 | | | 19 | | | 14 | | | 17 | | | 22 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 136 | | | 129 | | | 76 | | | 70 | | | 119 | | | 103 | | Total customer-related noninterest income | 92 | | | 92 | | | 56 | | | 49 | | | 79 | | | 79 | |
| Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 3 | | | (1) | | | 3 | | | 4 | | | — | | | 1 | | Other noncustomer-related noninterest income | 7 | | | 3 | | | 3 | | | 2 | | | 17 | | | — | |
| Total noninterest income | Total noninterest income | 139 | | | 128 | | | 79 | | | 74 | | | 119 | | | 104 | | Total noninterest income | 99 | | | 95 | | | 59 | | | 51 | | | 96 | | | 79 | |
| | Net interest income | Net interest income | 523 | | | 476 | | | 425 | | | 398 | | | 369 | | | 348 | | Net interest income | 363 | | | 326 | | | 311 | | | 271 | | | 240 | | | 232 | |
| Total net revenue | Total net revenue | $ | 662 | | | $ | 604 | | | $ | 504 | | | $ | 472 | | | $ | 488 | | | $ | 452 | | 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 | $ | 7 | | | $ | 5 | | | $ | 8 | | | $ | 7 | | | $ | 6 | | | $ | 5 | | Commercial account fees | $ | 5 | | | $ | 4 | | | $ | 7 | | | $ | 6 | | | $ | 3 | | | $ | 4 | |
| Card fees | Card fees | 11 | | | 8 | | | 11 | | | 9 | | | 7 | | | 5 | | Card fees | 7 | | | 7 | | | 8 | | | 7 | | | 4 | | | 4 | |
| Retail and business banking fees | Retail and business banking fees | 7 | | | 7 | | | 8 | | | 8 | | | 3 | | | 3 | | 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 | | | 2 | | | 4 | | | 3 | | | 1 | | | 1 | | Wealth management fees | 2 | | | 2 | | | 3 | | | 2 | | | 1 | | | 1 | |
| Other customer-related fees | Other customer-related fees | 1 | | | 1 | | | 1 | | | — | | | 2 | | | 2 | | 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) | 28 | | | 23 | | | 32 | | | 27 | | | 19 | | | 16 | | 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) | 4 | | | 10 | | | 5 | | | 11 | | | 5 | | | 8 | | Other noninterest income (non-ASC 606 customer-related) | 1 | | | 3 | | | — | | | 4 | | | 1 | | | 4 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 32 | | | 33 | | | 37 | | | 38 | | | 24 | | | 24 | | Total customer-related noninterest income | 20 | | | 22 | | | 23 | | | 25 | | | 13 | | | 16 | |
| Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | 2 | | | 2 | | | — | | | — | | | — | | | — | | Other noncustomer-related noninterest income | 1 | | | 1 | | | — | | | — | | | — | | | — | |
| Total noninterest income | Total noninterest income | 34 | | | 35 | | | 37 | | | 38 | | | 24 | | | 24 | | Total noninterest income | 21 | | | 23 | | | 23 | | | 25 | | | 13 | | | 16 | |
| | Net interest income | Net interest income | 170 | | | 154 | | | 126 | | | 111 | | | 109 | | | 102 | | Net interest income | 129 | | | 106 | | | 99 | | | 77 | | | 79 | | | 68 | |
| Total net revenue | Total net revenue | $ | 204 | | | $ | 189 | | | $ | 163 | | | $ | 149 | | | $ | 133 | | | $ | 126 | | 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 | | | $ | 2 | | | $ | (1) | | | $ | 118 | | | $ | 100 | | Commercial account fees | $ | 1 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 88 | | | $ | 78 | |
| Card fees | Card fees | 1 | | | 1 | | | — | | | — | | | 110 | | | 98 | | Card fees | 1 | | | 1 | | | — | | | — | | | 72 | | | 72 | |
| Retail and business banking fees | Retail and business banking fees | — | | | — | | | (1) | | | — | | | 56 | | | 55 | | Retail and business banking fees | — | | | — | | | (1) | | | 1 | | | 32 | | | 40 | |
| | Capital markets and foreign exchange fees | — | | | — | | | 3 | | | 4 | | | 3 | | | 4 | | |
| Capital markets fees | | Capital markets fees | — | | | — | | | 2 | | | 2 | | | 2 | | | 2 | |
| Wealth management fees | Wealth management fees | — | | | — | | | — | | | 1 | | | 39 | | | 34 | | Wealth management fees | — | | | — | | | (1) | | | — | | | 27 | | | 26 | |
| Other customer-related fees | Other customer-related fees | 1 | | | 1 | | | 25 | | | 21 | | | 45 | | | 38 | | 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) | 3 | | | 3 | | | 29 | | | 25 | | | 371 | | | 329 | | 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) | 2 | | | 1 | | | 3 | | | (3) | | | 90 | | | 94 | | Other noninterest income (non-ASC 606 customer-related) | — | | | 1 | | | 11 | | | (2) | | | 62 | | | 57 | |
| Total customer-related noninterest income | Total customer-related noninterest income | 5 | | | 4 | | | 32 | | | 22 | | | 461 | | | 423 | | Total customer-related noninterest income | 3 | | | 3 | | | 27 | | | 19 | | | 313 | | | 305 | |
| Other noncustomer-related noninterest income | Other noncustomer-related noninterest income | — | | | — | | | 10 | | | 84 | | | 18 | | | 90 | | Other noncustomer-related noninterest income | — | | | — | | | 8 | | | 3 | | | 36 | | | 9 | |
| Total noninterest income | Total noninterest income | 5 | | | 4 | | | 42 | | | 106 | | | 479 | | | 513 | | 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 | 46 | | | 40 | | | 32 | | | 26 | | | 1,800 | | | 1,655 | | Net interest income | 31 | | | 28 | | | 18 | | | 29 | | | 1,270 | | | 1,137 | |
| Total net revenue | Total net revenue | $ | 51 | | | $ | 44 | | | $ | 74 | | | $ | 132 | | | $ | 2,279 | | | $ | 2,168 | | Total net revenue | $ | 34 | | | $ | 31 | | | $ | 53 | | | $ | 51 | | | $ | 1,619 | | | $ | 1,451 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Revenue from contracts with customers did not generate significant contract assets and liabilities. Contract receivables are included in “Other assets” on the consolidated balance sheet. Payment terms vary by services offered, and the timing between completion of performance obligations and payment is typicallygenerally not significant.
12. INCOME TAXES
The effective income tax rate was 21.9%22.6% for the thirdsecond quarter of 2022,2023, compared with 22.8%21.9% for the same prior year period.second quarter of 2022. The effective tax rates for the first ninesix months of 2023 and 2022 were 25.4% and 2021 were 21.4% and 22.2%21.2%, respectively. TheseThe 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 2022the first six months of 2023 was lower than the tax rate forhigher relative to the same prior year period, primarily as a result of a discrete item that affected the proportional increase in nontaxable items andreserve for uncertain tax credits relative to pre-tax book income.positions during the first quarter of 2023.
At Septemberboth June 30, 2023 and December 31, 2022, we had a net deferred tax asset (“DTA”) totaling $1.1 billion, 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 September 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 futurethe following:
•Future reversals of existing deferred tax liabilities which historically(“DTLs”) — These DTLs have a reversal pattern generally consistent with DTAs; (3) potentialDTAs and are used to realize the DTAs.
•Tax planning strategies — We have considered prudent and feasible tax planning strategies; and (4) futurestrategies that we would implement to preserve the value of the DTAs, if necessary.
•Future projected taxable income. income — We expect future taxable income will offset the reversal of remaining net DTAs.
Based on this evaluation, we concluded that a valuation allowance was not required at Septemberboth June 30, 2023 and December 31, 2022.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
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
September 30, | | Nine Months Ended
September 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 | $ | 217 | | | $ | 240 | | | $ | 623 | | | $ | 916 | | Net income | $ | 175 | | | $ | 203 | | | $ | 379 | | | $ | 406 | |
| Less common and preferred dividends | Less common and preferred dividends | 68 | | | 68 | | | 199 | | | 197 | | Less common and preferred dividends | 70 | | | 66 | | | 138 | | | 132 | |
| Less impact from redemption of preferred stock | — | | | — | | | — | | | 3 | | |
| | Undistributed earnings | Undistributed earnings | 149 | | | 172 | | | 424 | | | 716 | | Undistributed earnings | 105 | | | 137 | | | 241 | | | 274 | |
| Less undistributed earnings applicable to nonvested shares | Less undistributed earnings applicable to nonvested shares | 1 | | | 1 | | | 4 | | | 6 | | Less undistributed earnings applicable to nonvested shares | 1 | | | 1 | | | 2 | | | 2 | |
| Undistributed earnings applicable to common shares | Undistributed earnings applicable to common shares | 148 | | | 171 | | | 420 | | | 710 | | Undistributed earnings applicable to common shares | 104 | | | 136 | | | 239 | | | 272 | |
| Distributed earnings applicable to common shares | Distributed earnings applicable to common shares | 61 | | | 61 | | | 176 | | | 172 | | Distributed earnings applicable to common shares | 61 | | | 57 | | | 121 | | | 115 | |
| Total earnings applicable to common shares | Total earnings applicable to common shares | $ | 209 | | | $ | 232 | | | $ | 596 | | | $ | 882 | | Total earnings applicable to common shares | $ | 165 | | | $ | 193 | | | $ | 360 | | | $ | 387 | |
| Weighted average common shares outstanding (in thousands) | Weighted average common shares outstanding (in thousands) | 149,628 | | | 160,221 | | | 150,510 | | | 162,159 | | 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 | $ | 1.40 | | | $ | 1.45 | | | $ | 3.96 | | | $ | 5.44 | | 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 | $ | 209 | | | $ | 232 | | | $ | 596 | | | $ | 882 | | Total earnings applicable to common shares | $ | 165 | | | $ | 193 | | | $ | 360 | | | $ | 387 | |
| Weighted average common shares outstanding (in thousands) | Weighted average common shares outstanding (in thousands) | 149,628 | | | 160,221 | | | 150,510 | | | 162,159 | | 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) | 164 | | | 259 | | | 256 | | | 301 | | 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) | 149,792 | | | 160,480 | | | 150,766 | | | 162,460 | | 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 | $ | 1.40 | | | $ | 1.45 | | | $ | 3.96 | | | $ | 5.43 | | Net earnings per common share | $ | 1.11 | | | $ | 1.29 | | | $ | 2.44 | | | $ | 2.56 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents the weighted average stock awards that were anti-dilutive and not included in the calculation of diluted earnings per share: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| (In thousands) | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| Restricted stock and restricted stock units | 1,245 | | | 1,358 | | | 1,274 | | | 1,382 | |
| Stock options | 305 | | | 294 | | | 170 | | | 227 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 seven 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. TheOur affiliate banks are supported by an enterprise operating segment identified(referred to as the “Other” segment) that provides governance and risk management, allocates capital, establishes strategic objectives, and includes certain non-bank financial service subsidiaries, centralized technology, back-office functions, and eliminationscertain lines of transactions between segments.business not operated through our affiliate banks.
We allocate the cost of centrally provided services to the business segments based upon estimated or actual usage of those services. We also allocate capital based on the risk-weighted assets held at each business segment. We use an internal funds transfer pricing (“FTP”) allocation system and process to report results of operations for business segments, whichsegments. This process is continually refined.subject to change and refinement over time. Total average loans and deposits presented for the business segments include insignificant intercompany amounts between business segments and may also include deposits with the “Other” segment.
At SeptemberJune 30, 2022,2023, Zions Bank operated 95 branches in Utah, 25 branches in Idaho, and one branch in Wyoming. CB&T operated 8077 branches in California. Amegy operated 75 branches in Texas. NBAZ operated 56 branches in
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
Arizona. NSB operated 46 branches in Nevada. Vectra operated 3433 branches in Colorado and one branch in New Mexico. TCBW operated two branches in Washington and one branch in Oregon.
In July 2022, NSB completed the purchase of three Northern Nevada branches and their associated deposit, credit card, and loan accounts. We acquired approximately $430 million in deposits and $95 million in commercial and consumer loans at the time of the purchase.
Transactions between business segments are primarily conducted at fair value, resulting in profits that are eliminated for reporting consolidated results of operations. The following schedule presents average loans, average deposits, and income before income taxes because we use these metrics when evaluating performance and making decisions pertaining to the business segments. The condensed statement of income identifies the components of income and expense which affect the operating amounts presented in the “Other” segment.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents selected operating segment information for the three months ended SeptemberJune 30, 20222023 and 2021: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | CB&T | | Amegy |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 197 | | | $ | 161 | | | $ | 154 | | | $ | 135 | | | $ | 137 | | | $ | 117 | |
| Provision for credit losses | 35 | | | (10) | | | 19 | | | (12) | | | 15 | | | (10) | |
| Net interest income after provision for credit losses | 162 | | | 171 | | | 135 | | | 147 | | | 122 | | | 127 | |
| Noninterest income | 44 | | | 43 | | | 28 | | | 25 | | | 41 | | | 37 | |
| Noninterest expense | 125 | | | 115 | | | 86 | | | 77 | | | 90 | | | 83 | |
| Income (loss) before income taxes | $ | 81 | | | $ | 99 | | | $ | 77 | | | $ | 95 | | | $ | 73 | | | $ | 81 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 13,448 | | | $ | 12,985 | | | $ | 13,100 | | | $ | 12,672 | | | $ | 12,176 | | | $ | 11,865 | |
| Total average deposits | 23,634 | | | 24,399 | | | 16,096 | | | 15,900 | | | 15,531 | | | 15,925 | |
| | | | | | | | | | | |
| NBAZ | | NSB | | Vectra |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 64 | | | $ | 50 | | | $ | 50 | | | $ | 38 | | | $ | 41 | | | $ | 34 | |
| Provision for credit losses | — | | | (5) | | | 1 | | | (5) | | | 2 | | | (4) | |
| Net interest income after provision for credit losses | 64 | | | 55 | | | 49 | | | 43 | | | 39 | | | 38 | |
| Noninterest income | 12 | | | 13 | | | 12 | | | 13 | | | 8 | | | 8 | |
| Noninterest expense | 44 | | | 38 | | | 39 | | | 34 | | | 31 | | | 28 | |
| Income (loss) before income taxes | $ | 32 | | | $ | 30 | | | $ | 22 | | | $ | 22 | | | $ | 16 | | | $ | 18 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 4,913 | | | $ | 4,689 | | | $ | 3,052 | | | $ | 2,892 | | | $ | 3,722 | | | $ | 3,339 | |
| Total average deposits | 8,090 | | | 7,259 | | | 7,479 | | | 6,870 | | | 4,100 | | | 4,362 | |
| | | | | | | | | | | |
| TCBW | | Other | | Consolidated Bank |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 17 | | | $ | 12 | | | $ | 3 | | | $ | 8 | | | $ | 663 | | | $ | 555 | |
| Provision for credit losses | — | | | 1 | | | (1) | | | (1) | | | 71 | | | (46) | |
| Net interest income after provision for credit losses | 17 | | | 11 | | | 4 | | | 9 | | | 592 | | | 601 | |
| Noninterest income | 2 | | | 1 | | | 18 | | | (1) | | | 165 | | | 139 | |
| Noninterest expense | 6 | | | 5 | | | 58 | | | 49 | | | 479 | | | 429 | |
| Income (loss) before income taxes | $ | 13 | | | $ | 7 | | | $ | (36) | | | $ | (41) | | | $ | 278 | | | $ | 311 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 1,633 | | | $ | 1,542 | | | $ | 909 | | | $ | 867 | | | $ | 52,953 | | | $ | 50,851 | |
| Total average deposits | 1,585 | | | 1,552 | | | 948 | | | 1,144 | | | 77,463 | | | 77,411 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
The following schedule presents selected operating segment information for the ninesix months ended SeptemberJune 30, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Zions Bank | | CB&T | | Amegy |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 523 | | | $ | 476 | | | $ | 425 | | | $ | 398 | | | $ | 369 | | | $ | 348 | |
| Provision for credit losses | 35 | | | (29) | | | 40 | | | (81) | | | (7) | | | (108) | |
| Net interest income after provision for credit losses | 488 | | | 505 | | | 385 | | | 479 | | | 376 | | | 456 | |
| Noninterest income | 139 | | | 128 | | | 79 | | | 74 | | | 119 | | | 104 | |
| Noninterest expense | 373 | | | 346 | | | 254 | | | 233 | | | 264 | | | 251 | |
| Income (loss) before income taxes | $ | 254 | | | $ | 287 | | | $ | 210 | | | $ | 320 | | | $ | 231 | | | $ | 309 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 13,130 | | | $ | 13,318 | | | $ | 12,948 | | | $ | 12,924 | | | $ | 11,970 | | | $ | 12,337 | |
| Total average deposits | 24,920 | | | 23,001 | | | 16,407 | | | 15,564 | | | 16,062 | | | 15,179 | |
| | | | | | | | | | | |
| NBAZ | | NSB | | Vectra |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 170 | | | $ | 154 | | | $ | 126 | | | $ | 111 | | | $ | 109 | | | $ | 102 | |
| Provision for credit losses | 2 | | | (29) | | | 1 | | | (35) | | | 8 | | | (15) | |
| Net interest income after provision for credit losses | 168 | | | 183 | | | 125 | | | 146 | | | 101 | | | 117 | |
| Noninterest income | 34 | | | 35 | | | 37 | | | 38 | | | 24 | | | 24 | |
| Noninterest expense | 125 | | | 112 | | | 113 | | | 106 | | | 90 | | | 85 | |
| Income (loss) before income taxes | $ | 77 | | | $ | 106 | | | $ | 49 | | | $ | 78 | | | $ | 35 | | | $ | 56 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 4,859 | | | $ | 4,914 | | | $ | 2,929 | | | $ | 3,085 | | | $ | 3,550 | | | $ | 3,422 | |
| Total average deposits | 8,164 | | | 6,949 | | | 7,487 | | | 6,500 | | | 4,195 | | | 4,344 | |
| | | | | | | | | | | |
| TCBW | | Other | | Consolidated Bank |
| (In millions) | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| SELECTED INCOME STATEMENT DATA | | | | | | | | | | | |
| Net interest income | $ | 46 | | | $ | 40 | | | $ | 32 | | | $ | 26 | | | $ | 1,800 | | | $ | 1,655 | |
| Provision for credit losses | — | | | (3) | | | — | | | (1) | | | 79 | | | (301) | |
| Net interest income after provision for credit losses | 46 | | | 43 | | | 32 | | | 27 | | | 1,721 | | | 1,956 | |
| Noninterest income | 5 | | | 4 | | | 42 | | | 106 | | | 479 | | | 513 | |
| Noninterest expense | 18 | | | 16 | | | 170 | | | 143 | | | 1,407 | | | 1,292 | |
| Income (loss) before income taxes | $ | 33 | | | $ | 31 | | | $ | (96) | | | $ | (10) | | | $ | 793 | | | $ | 1,177 | |
| SELECTED AVERAGE BALANCE SHEET DATA | | | | | | | | | | | |
| Total average loans | $ | 1,601 | | | $ | 1,573 | | | $ | 910 | | | $ | 845 | | | $ | 51,897 | | | $ | 52,418 | |
| Total average deposits | 1,571 | | | 1,484 | | | 1,164 | | | 1,500 | | | 79,970 | | | 74,521 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 theOur most significant risks regularly undertaken by us, and they are closely monitored as previously discussed. A discussion regarding our management ofinclude interest rate and market risk, is included inwhich are closely monitored by management as previously discussed. For more information regarding interest rate and market risk, see the section entitled “Interest Rate and Market Risk Management” section in this Form 10-Q.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation ofincluding our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures at SeptemberJune 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 SeptemberJune 30, 2022.2023. There were no changes in our internal control over financial reporting during the thirdsecond quarter of 20222023 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
TheWe amend the following two risk factors supplement the risk factors discloseddiscussed in Part I, Item 1A. Risk Factors in our 20212022 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 significantlike 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 loanliquidity, 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. Increasing indicatorsinstitutions 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 negative GDP growth, rising interest rates, increased volatilityresult of credit, trading, clearing, or other relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses, or defaults by other institutions. This is sometimes referred to as “systemic risk” and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms, and exchanges, with which we interact on a daily basis, and therefore, could adversely affect us.This phenomenon has been evident in the recent events affecting the banking industry, as financial institutions, like us, have been impacted by concerns regarding the soundness or creditworthiness of other financial institutions. This has caused substantial and cascading disruption within the financial markets, increased expenses, and uncertainty related to inflationary pressures, including related changes in monetary policiesadversely impacted the market price and actions, can increase these risks and lead to lower demand for loans, higher credit losses, decreased values forvolatility 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 lead to increased risks of events such as 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 suppliers, could make it difficult to conduct business activities for us, our customers, or our vendors.common stock.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following schedule summarizes our share repurchases for the third quarter of 2022:
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 | | |
| | | | | | | | | | | | | | |
| July | | | — | | | | $ | — | | | | — | | | | | | |
| August | | | 888,092 | | | | 56.30 | | | | 888,092 | | | | | | |
| September | | | — | | | | — | | | | — | | | | | | |
| Third quarter | | | 888,092 | | | | 56.30 | | | | 888,092 | | | | | | |
1 None.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.ITEM 6. EXHIBITS
a.Exhibits | | | | | | | | | | | |
Exhibit
Number | | Description | |
| | | |
| | 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. | * |
| | | |
| | Second Amended and Restated Bylaws of Zions Bancorporation, National Association, incorporated by reference to Exhibit 3.2 of Form 8-K filed on April 4, 2019. | * |
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| | Ninth Amendment to the Trust Agreement between Fidelity Management Trust Company and Zions Bancorporation for the Deferred Compensation Plans, effective April 1, 2022 (filed herewith). | |
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| | Certification by Chief Executive Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
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| | Certification by Chief Financial Officer required by Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 (filed herewith). | |
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| | Certification by Chief Executive Officer and Chief Financial Officer required by Sections 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 (15 U.S.C. 78m) and 18 U.S.C. Section 1350 (furnished herewith). | |
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| 101 | | Pursuant to Rules 405 and 406 of Regulation S-T, the following information is formatted in Inline XBRL (i) the Consolidated Balance Sheets as of SeptemberJune 30, 20222023 and December 31, 2021,2022, (ii) the Consolidated Statements of Income for the three months ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 and the ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, (iii) the Consolidated Statements of Comprehensive Income for the three months ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 and the ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, (iv) the Consolidated Statements of Changes in Shareholders’ Equity for the three months ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 and the ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, (v) the Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20222023 and SeptemberJune 30, 2021,2022, and (vi) the Notes to Consolidated Financial Statements (filed herewith). | |
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| 104 | | The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL. | |
* Incorporated by reference
Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt are not filed. We agree to furnish a copy thereof to the Securities and Exchange Commission and the Office of the Comptroller of the Currency upon request.
ZIONS BANCORPORATION, NATIONAL ASSOCIATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| ZIONS BANCORPORATION, NATIONAL ASSOCIATION |
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| /s/ Harris H. Simmons |
Harris H. Simmons, Chairman and
Chief Executive Officer |
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| /s/ Paul E. Burdiss |
| Paul E. Burdiss, Executive Vice President and Chief Financial Officer |
Date: November 3, 2022August 4, 2023
